Due to the observance of Armistice Day there was no data of substance put out today. That didn’t matter for traders on Wall Street. They had a trading plan today and it looks like inflation is still the big concern.
While the S&P500 bounced back slightly, gold and silver are the big winners today. Traders are still piling in as an inflation hedge. Are they finally coming to grips with the idea that the Fed might not have control? It was interesting that yesterday saw the “new” inflation hedge, bitcoin, drop on the news of the high CPI print. Bitcoin might not be the inflation hedge that everyone thinks it is.
The bond market is beginning to signal a big yellow-light to traders. Long-bonds are dropping while short-term is rising. This is a sign that investors are worried about “duration risk”. This means that they believe inflation is being understated and are moving to shorter-term bonds.
Its a hint to those in the “know” that inflation is going to run hot. You can see from the hot-flation 70’s that this was the case as well.
The yield curve inverted as bond traders moved into shorter duration strategies and away from the longer-term treasuries. Nobody wants to hold a 30 year treasury when inflation is going to eat away at your return. Also, the idea that stocks will be an inflation hedge will be a heart-breaker for many. While revenue may continue to improve, earnings could easily stagnate as profit margins get squeezed. In addition, valuation models that utilize bonds as a factor will see their calculations drop. I’m beginning to feel that the end of the wall or worry is near. I am increasingly frustrated by the fact that the Fed no longer releases the money stock figures weekly. The next update isn’t until November 23rd. I do expect to see some margin debt figures next week. Finra doesn’t have a defined schedule for their margin debt release. They generally publish updates to the margin statistics on the third week of the month. Hopefully that will give some insight into how investors are feeling about the market.
A big slice of yellow cake
In uranium news today, the fight in Europe over the green label for nuclear power. Environment ministers from Germany, Portugal, Austria, Luxembourg and Denmark warned against classifying nuclear power as green. They stated that this would “jeopardise” Europe’s quest to become a global leader in “sustainable” energy. Portugal’s minister, Joao Pedro Matos Fernandes, stated,
“It’s not safe, it’s not sustainable and it costs a lot of money. There are many other options, especially wind and solar.”
This is also quite a statement from a guy whose country still gets 42% of their energy from fossil fuels.
The other countries don’t fair much better.
Germany still needs fossil fuels for 36.2% of their energy consumption.
Austria also consumes a lot of fossil fuels to generate the power their citizens need. It makes up 39% of their energy mix.
It disturbing that someone who is an “energy minister” would be so confused about nuclear power generation. Nuclear is one of the safest methods of power generation. One of the reasons so many believe otherwise is the amount of news coverage that gets generated when an accident happens. Also, when you compare the costs of nuclear power to other forms of power generation, nuclear is also one of the cheapest.
There is a delusion in the comparison of wind or solar to that of nuclear. The opponents of nuclear have to do some serious gymnastics to bend the truth backwards. This is most readily apparent in their calculation of energy costs per megawatt hour. Typically the opposition calculates the cost of the plant when analyzing nuclear power but not when wind or solar are estimated. The other catch is that wind and solar both require large amounts of iron ore and metallurgical coal (like METC!). The costs associated with mining and transporting the steel, concrete, coal, etc. are never taken into consideration when wind and solar get labelled “green” or “sustainable”. This feeds the superstition that wind and solar are so great. Its high time the pro-nuclear countries in the EU drop the real statistics on nuclear power generation.
The European Commission is expected to propose a regulation concerning nuclear power before the end of the year. With the way the battle lines are drawn, I would be very surprised if they don’t consider atomic power “green”. I imagine there will be a huge uproar from countries who are already moving forward with their nuclear plant plans. It’s a contentious issue for sure and a dangerous one for my portfolio. I believe the picture could become very clear, very soon if Europe would receive a bout of cold weather. These pro-wind and -solar countries could see a Texas like crunch of their power grid. That may be what it takes to get them to change their minds.
I’m sure the fuel costs for de-icing the wind turbines is not calculated into their “sustainability” factor.