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Climate Shock Bet

Daniel Reeves, co-founder of Beeminder, thinks the book Climate Shock is extraordinarily convincing.  He also apparently has a great deal of respect for…

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This article was originally published by EconLog

Daniel Reeves, co-founder of Beeminder, thinks the book Climate Shock is extraordinarily convincing.  He also apparently has a great deal of respect for my intellectual integrity.  The upshot: Reeves has bet me at 2:1 odds that reading Climate Shock will convince me to support markedly greater government action to mitigate climate change.

As we discussed the bet, I warned Reeves that:

I feel bad to pretend I’m more open-minded than I really am.  The honest truth is that I would probably have to spend a couple years studying climatology before I felt capable of directly reviewing the evidence.

And I think Reeves knows me well enough to be aware of my libertarian presumption.

But he still wants to make the bet.

Here, then, are the terms we’ve worked out.  Consider this an acceptance.

1. Bryan reads Climate Shock.  But feel free to skip the parts about short-term extreme weather events — that’s probably least compelling and least relevant to the long-term cost/benefit analysis.

2. Danny puts up $500 to Bryan’s $250 on Bryan doing a 180 on some important policy question related to climate change, such as supporting carbon pricing or subsidizing clean energy or carbon capture tech.  (Merely increasing Bryan’s support for repeal of existing government policies doesn’t count).

3. Bryan automatically loses the bet if he doesn’t finish the book by January 1, 2022.

I have to say, this is an extremely flattering bet, since Reeves is trusting me to adjudicate the result myself.  I’ll do my best not to disappoint him!



UK Gas Crisis Stuns Poultry Slaughterhouses, May Trigger Higher Chicken Prices

UK Gas Crisis Stuns Poultry Slaughterhouses, May Trigger Higher Chicken Prices

Soaring natural gas prices across the UK have disrupted companies…

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UK Gas Crisis Stuns Poultry Slaughterhouses, May Trigger Higher Chicken Prices

Soaring natural gas prices across the UK have disrupted companies from operating. The latest is slaughterhouses that use carbon dioxide, a byproduct of fertilizer derived from natural gas. 

Richard Griffiths, chief executive officer of the British Poultry Council, told Bloomberg surging natural gas prices is a massive blow for poultry companies, which frequently use a byproduct of fertilizer production -- carbon dioxide -- to incapacitate birds at slaughterhouses.

CO2 supplies are incredibly tight, Griffiths said, adding that any further shortages could create massive headwinds for the industry and hinder chicken production. Already, weekly chicken output has dropped 5-10%, and Christmas turkey production could drop by a fifth. 

The unintended consequences of natural gas shortages are the effects on the food industry and how it may result in rising meat prices if slaughterhouse output continues to decline. 

On Thursday, we outlined how CF Industries Holdings' fertilizer plants, one in Billingham and another in Ince, suspended operations "due to high natural gas prices." 

"I would expect it to be having impacts very quickly," Griffiths said by phone. "At the moment, we've got all the Brexit effects, including labor shortages, all the Covid add-ons. And now, we're seeing these supply-chain problems emerge at a time when we really don't need it." 

Energy inflation could be a company's worse nightmare in the UK -- prices for the fuel have already doubled this year, while power costs are on a record-breaking run thanks to the lack of renewable energy output

More companies could be impacted by soaring natural gas prices and elevated electricity prices. This problem isn't likely to fade anytime soon as gas inventories remain low ahead of the winter season. 

All of this is feeding into inflation across the continent. European Central Bank President Christine Lagarde recently said energy markets are a significant driver in higher inflation. To solve this, Germany has to certify Russia's Nord Stream 2 to begin receiving shipments - but as we recently noted, that could take months and may suggest European inventories won't be resupplied in time for winter. 

    Tyler Durden Sat, 09/18/2021 - 07:35
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    US stocks close in a sea of red as tax hike fears grow

    US stocks closed the week in a sea of red on Friday September 17 after technology shares led the broad losses across segments and tax hike fears dragged…

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    US stocks closed the week in a sea of red on Friday, September 17, after technology shares led the broad losses across segments and tax hike fears dragged the benchmark indices down.

    The S&P 500 fell 0.91% to 4,432.99. The Dow Jones fell 0.48% to 34,584.88. The NASDAQ Composite Index declined 0.91% to 15,043.97, and the small-cap Russell 2000 was up 0.18% to 2,236.87.

    Markets have been volatile this week amid mixed global cues. Loses in the Asian markets over worries of slow economic recovery and recent geopolitical developments weighed on investors’ minds. The tech-savvy Nasdaq declined the most.

    In addition, the recent retail sales and unemployment data offered mixed signals about the US economy. While retails sales were up in August, jobless benefits claims rose noticeably last week.

    Meanwhile, lawmakers were considering a proposal to hike corporate tax. The news could be worrisome for some investors as a tax hike may eat into the companies’ profits. Democrats are seeking to increase the corporate tax from the current 21% to 26.5%.

    Investors will now eagerly wait for the Fed’s monthly meeting next week. The central bank officials are expected to discuss the latest economic data as they continue with the stimulus tapering talks.

    All the S&P 500 stock segments stayed in the negative territory. Technology and communications services stocks were the biggest losers, pushing the index down. Stocks of vaccine manufacturers Moderna, Inc. (MRNA) and Pfizer Inc. (PFE) plunged 3.57% and 1.34%, respectively.

    Invesco Ltd. (IVZ) stock rose 5.71% after reports that it is in talks to merge with the asset management unit of State Street Corporation (STT). STT stock declined 2.47% in intraday trading.

    SmileDirectClub, Inc. (SDC) shares surged 12.92% after the stock was discussed on social media.

    AbCellera Biologics Inc. (ABCL) stock rose 2.53%, a day after the US Food and Drug Administration extended the emergency use authorization for its covid drug Bamlanivimab.

    In technology stocks, Apple Inc. (AAPL) fell 1.94%, Microsoft Corporation (MSFT) fell 1.65%, and ASML Holdings N.V. (ASML) declined 3.18%. Adobe Inc. (ADBE) and Cisco Systems, Inc. (CSCO) fell 1.75% and 1.19%, respectively.

    In communication stocks, Alphabet Inc. (GOOG) fell 2.08%, Facebook, Inc. (FB) declined 2.96%, and T-Mobile US, Inc. (TMUS) declined 1.19%. In addition, Sea Limited (SE) dropped 1.23%, and Snap Inc. (SNAP) advanced 3.08%.

    In the material sector, BHP Group (BHP) fell 4.46%, Rio Tinto Group (RIO) fell 3.02%, and Vale S.A. (VALE) fell 2.21%. Ecolab Inc. (ECL) and Freeport-McMoRan Inc. declined 2.01% and 4.10%.

    Also Read: Check these 5 oil and gas stocks with high price-to-earnings ratio


    Copyright ©Kalkine Media 2021

    Also Read: ASAN, FORG, & DATS stocks shine on higher demand hopes

    Top Gainers

    Top performers on S&P 500 included Thermo Fisher Scientific Inc (6.49%), Invesco Ltd (5.46%), Centene Corp (4.95%), Diamondback Energy Inc (3.18%). On NASDAQ, top performers were Corvus Pharmaceuticals Inc (135.40%), Helbiz Inc (96.56%), Priority Technology Holdings Inc (47.23%), Innate Pharma SA (40.87%). On Dow Jones, Amgen Inc (0.93%), UnitedHealth Group Inc (0.80%), American Express Co (0.79%), Procter & Gamble Co (0.16%) were the leaders.

    Top Losers

    Top laggards on S&P 500 included Unum Group (-6.04%), International Flavors & Fragrances Inc (-5.53%), Copart Inc (-5.46%), Nucor Corp (-4.49%). On NASDAQ, Protagonist Therapeutics Inc (-62.00%), TCR2 Therapeutics Inc (-36.45%), Eliem Therapeutics Inc (-21.92%), Janux Therapeutics Inc (-20.26%). On Dow Jones, Dow Inc (-2.89%), Caterpillar Inc (-1.89%), Apple Inc (-1.83%), Microsoft Corp (-1.75%) were the laggards.

    Volume Movers

    Top volume movers were Bank of America Corp (43.29M), Nov Inc (41.49M), Apple Inc (40.72M), AT&T Inc (38.62M), Oracle Corp (37.24M), Lucid Group Inc (39.05M), Match Group Inc (36.06M), SoFi Technologies Inc (33.81M), Tellurian Inc (28.37M), Corvus Pharmaceuticals Inc (26.47M).

    Also Read: Top five mid-cap retail stocks with more than 100% YTD gain

    Futures & Commodities

    Gold futures were down 0.22% to US$1,752.85 per ounce. Silver decreased by 1.87% to US$22.367 per ounce, while copper fell 1.15% to US$4.2322.

    Brent oil futures decreased by 0.45% to US$75.33 per barrel and WTI crude was down 0.81% to US$71.97.

    Bond Market

    The 30-year Treasury bond yields was up 1.13% to 1.902, while the 10-year bond yields rose 2.43% to 1.363.

    US Dollar Futures Index increased by 0.33% to US$93.227.

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    PracTICal Remainders and Reminders

    As usual, a couple of additional odds and ends leftover from TIC that are worth a few brief mentions. And then a reminder of the caveats which come along…

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    As usual, a couple of additional odds and ends leftover from TIC that are worth a few brief mentions. And then a reminder of the caveats which come along with them (and all the interpretations).

    1. First up, China.

    According to the latest TIC data, mainland China added a few billion to its UST holdings during July 2020, while those belonging to someone (China) posting through Belgium declined by a few billion more. Netting the two, a small decline otherwise more consistent with a weaker CNY (rising dollar) and yet that was the month when the Chinese currency really traded in its suspiciously narrow range.

    There isn’t a one-to-one with what’s in TIC; meaning that CNY can and does move independently of what might be indicated in China’s holdings of Treasuries, at the same time the latter can be noisy in the short run being affected by who knows what (see: below at the end) with data constraints, Communist priorities, and a whole range of stealth capabilities beyond our capabilities to uncover.

    But July’s TIC does continue the weaker CNY trend, or more in line with dollar shortage indications all over the place whatever is up – after August 20 that’s been yuan, slightly – with the Chinese.

    2. Next, this might turn out to be a much bigger deal down the road, maybe even soon, but for now it is just a single monthly negative. Private net activity in reported US$ corporates:

    For the first time since last December, TIC shows a sharp drop meaning, on net, more corporate securities were sold than bought.

    As you can see above, this was one of the first indications from late 2018 that Euro$ #4 was turning pretty nasty heading through its landmine on into 2019. It also related to collateral, as junk corporates were the primary infection of the global US$ collateral pool meaning the growing rejection of them was almost certainly expressed in repo and derivatives (securities lending) by bigger haircuts, risk aversion, a falling collateral multiplier herding participants more and more into only the best quality collateral (eventual bottleneck).

    For the first three months of this year, foreigners were all over corporate bonds and while TIC doesn’t break it down by type (how much was junk, we don’t know) we can reasonably surmise there was probably quite a bit of risk-taking given especially January and February inflation hysteria (predicated on a far more optimistic view of the global economy therefore reduced risks generally).

    The favorability faded by June and now this net selling in July. If it remains just the one month, maybe nothing more than technical reasons or seasonal quirks (or UFO’s). Should it continue over subsequent months, then like overall net selling this would be a key warning to take under advisement.

    3. Finally, in response to what’s suggested by two out of the last three months being net negative headline TIC, growing systemic dollar shortage, the official side has remained relatively muted. For July, just barely a net minus.

    There was the one big month of net official buying – the one when UST’s were falling to their lowest recent price, the opposite of how it’s “supposed” to work by conventional views – and that big month just so happened to be also the peak in reflation.

    This actually makes sense: more offshore dollars (reflation), prices for safe and liquid instruments fall (bond rout), overseas officials are able to add more US$ assets to their reserves even as they lose value.

    Then comes the (inevitable?) opposite: UST’s begin to rise in price yet foreign reserve managers sell them as a means to offset the reason for the falling yields that come with rising bonds – dollar shortage as higher deflationary potential, therefore lower growth/inflation expectations which, since 2012, has forced officials (not just Chinese) to deal with the monetary shortage by mobilizing reserves.

    They don’t just “sell Treasuries”, though, many appealing to the purposefully hidden use of “contingent liabilities.” Thus, when TIC shows foreign official net selling of UST’s, the main reserve asset, it indicates dollar shortage though to a degree which isn’t likely described only by that selling.

    We know by this visible behavior central banks are acting in response to a eurodollar shortfall because we can see it here, but what else are they doing at the same time? Almost always there’s more to it.

    In our current case, the July 2021 TIC estimates, the pendulum has swung back in the other direction from reflationary monetary relaxation back toward shortage. Basically, consistent with everything else we find in this data as well as market prices, etc., even if we don’t know the full extent of what’s being done about it.

    Deflationary potential up.


    Caveats: the TIC data, broadly speaking, is incredibly helpful and informative as one of the few sources for cross border flows even if it was never intended to be used in this fashion. However, what’s missing from it is a third piece which remains completely absent.

    What I mean is, TIC captures bank data and asset flows from the US to outside, as well as from outside into the US. The banking data is broken down specifically into those two categories from the perspective of US banks (and this technical term also includes domestic subsidiaries of foreign parents).

    The first is what I call and color the blue: US banks who lend to (claims on) overseas counterparties. And then the red: US banks who borrow from (payable to) overseas counterparties. This lending/borrowing data in both directions also includes a small window into securities lending; the lending/borrowing of securities either explicitly held in repo or for use in other ways that eventually lead back to collateral in repo/derivatives (transformation).

    What TIC does not capture or even go after – because it cannot – is the vast likely larger piece of offshore to offshore. It does get some US to overseas, and then some overseas to US, but there is nothing, absolutely nothing (even the best BIS data is wildly incomplete) about overseas to overseas.

    You get a bank in the US doing something with a bank or non-bank in the Caymans, some of it (not all) shows up on TIC. That bank in the Caymans doing something, in dollars, with a bank in Singapore? Ghost.

    This can account for most of why TIC can seem “noisy” at times and even contradictory at others. In the short run, just too many unknowns and too much left out of the data collection. In other words, why, even though this is all really good stuff, better than most, we still have to be careful about drawing too many individual conclusions.

    You can start with TIC and what might be indicated within it, but that just means there is more work to do. The chief benefit is, unlike most who don’t know or can’t read the data, which is pretty much everyone, you at least know in which direction to start looking. 

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