16 Comments

Great insight and perspective, Michael. The CB needs to stay higher for longer; with that, I agree. Rather than "break" something that will force them to pivot, I trust they will do whatever possible to dismantle the castles they've built on sand slowly. So be it if that means a lost decade with high unemployment and depression-like conditions. So long as it's orderly, the Fed wins, and we get another chance at organic capitalism vs. the zero-bound financialization of fraudsters the pivot crowd is accustomed to and counting on.

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Apr 3Liked by Michael Kao

It looks like the situation is working in favor of Russia and China. I think the Biden Administration must do something to reverse the trend. The United States can produce oil and natural gas, Europe and Japan can't withstand the inflationary oil and gas for any longer.

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Apr 3Liked by Michael Kao

Thanks for the guided tour! Your thinking operates on multiple levels with many intersections, leading to treasure chests of insights (and an occasional dead-end). I have my dungeon map of your tweets, but it's an incomplete map of a structure that is always evolving. This article was an enjoyable walk-through with the Dungeon Master. :-)

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Good article. The unity between Saudi Arabia and Iran behest of China was quite interesting, as was Syria re-opening their embassy in Riyadh. Seems like they wanted to unite the Middle East. Have to wonder what Saudis-Russian promised China to get onboard with it. Taiwan? Either way, Biden is badly weakened and his buddy's are dropping like flies in Europe - with Finland losing another lefty government today. Overall good news for the oil market in my view.

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Apr 4ยทedited Apr 4Liked by Michael Kao

This is part of the "solution" to finite resources on a finite planet.

This is how peak-oil is being played.

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Really appreciate this article for the well reasoned and non-consensus take on things. A hawkish Fed and sluggish, indebted China, certainly seem to favor the dollar, but to what extent do you think China and India purchasing energy in their currencies from Russia at a 30% discount pads the dollar wrecking ball?

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Great stuff as usual Michael - thank you! While I can certainly see how the supply cut could be perceived as a massive "FU" to the Biden admin, and that is a colorful story line, I have a hard time seeing how it wouldn't be an even bigger "FU" to China. The country is just coming out of Zero-Covid, it needs growth to prevent a deflationary collapse, and OPEC+ decides to CUT production. Doesn't sound too friendly. Insofar as that is the case, it would make an even stronger argument for your reason #1 - anticipation of weak demand.

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People have lots of money. They are buying whatever they want regardless of price. They will drive and travel even with oil above 100. They are buying houses regardless of interest rates and the elevated price of homes. They are still having bidding wars on any home in a nice neighborhood. The restaurants are packed even with the price hikes. There may be a recession, but it won't be because of the Fed killing demand. It may be because of the Fed breaking something. The average person is doing just fine. I'm in New England... maybe it's different elsewhere.

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