I’ll begin, as usual, with the economy. JP Morgan lays odds for a global recession at 60% now. Causes? According to JPMorgan it’s threefold: the conflict in Iran, the tariffs and AI. But JP Morgan is forgetting another huge variable, the private credit/shadow credit unwind happening in real time. Blackrock halted redemptions from its flagship debt fund to the tune of $1.2bn. Blackrock to investors: fuck off. Blackrock’s fuckery marks the third private credit shop in the last three months to shut investor redemptions down: first Blue Owl, then Blackstone and now Blackrock.
As Dario intones ruefully, “Mark my words, the damage to the financial system the private credit space will cause will be greater by many orders of magnitude than the one subprime caused in 2008.” I’m pretty well convinced he’s right. That said, the political will to backstop another financial crisis has not eroded totally, so the emerging credit crunch will be the last one backstopped by the Fed and/or Congress.
Another variable JP Morgan doesn’t address is the most recent (un)employment numbers. If the first reported, non-revised numbers of a -92,000 jobs is any indication, once the numbers are revised, February’s numbers are likely to resemble a catastrophe.
On the ugly, catastrophe side of things, Dubai has only ten days of fresh food remaining if the Straits remain closed. I suppose they can eat dates, no?
Also of note, The Reptile, aka Peter Thiel (yes, it’s a real anagram, google it if you donnae believe me!), dumped 2 million shares of Palantir. It’s a bright flashing red light, a semaphore both unmistakable and of serious consequence, when top execs dump shares of the corps they run. They are cashing out, leaving the equity collapse in the hands of suckers, ermm, retail investors, widows and orphans-like.
If you want a fuller understanding of the logic logic behind Iran’s attacks on the region’s infrastructure, read here. Speaking of oil, one can’t fix stupid. Shorting oil in this kind of risk environment is nucking futs.
Maintaining our focus on petroleum for a bit longer, I have to note, if oil breaks bad to the north, past say $120, the resulting global recession will have deleterious effects on commodities, especially gold and silver. But more gold than silver, as the silver supply-demand equation has been so structurally out of whack for so long, the recession would have to be almost depression-like to impose enough demand destruction for the price to sink below the mid $70s.
Sticking with petrol it appears the Euros might come a begging to Czar Pootie-poot for gas and oil the longer the Straits remain inaccesible. Apparently Czar Vladimir has already hinted the Euros can, in Russian, “пошел нахуй.” I’m sure you can suss the meaning out of that one. If true, this volte face by the Euros is staggering in its hyprocrisy and implications. But it is far from surprising. Anyone with a halfway decent brain on their head could have seen this ugly denouement coming a mile away. Wait, a kilometer and some change. Yeah, ‘Muricans can do metric!
In genuinely good news, Indonesia has enacted a total and complete ban on the riding of elephants. When I traveled in South East Asia I refused to ride any elephants, they are too sensitive emotionally and very much deserving of my respect. As I note on X:
This is supremely welcome humane news. The limbic system in elephants is so extensive and well developed it creates “profound emotional intelligence, long-term memory, and social bonds [in elephants.] [Their] brain structure allows for intense empathy, mourning, [and] social cohesion,” making them closer to humans in social development than any other class of animals than primates and ceteceans.
Check out the photo of an elephant getting frisky with me. Suprised me to no end, you can see it in my face. This news makes me smile and happy. Somewhere somebody is doing something right. Faith in humanity remains unrestored, but a credit has been added to the depleted account of faith, nonetheless. One of my finest memories is seeing a herd of wild elephants emerging out of the bush about sixty miles south of Mysore, India in 2009. Wild effing elephants. How cool is that? Portions of my life have been truly charmed and I’m grateful.
Speaking of memories, I was only five years old when Nadia Comaneci stuck 7 perfecf tens at the 1976 Summer Olympics in Montreal, but even then I knew I was witnessing something very special. My view hasn’t changed in 50 years. And her performance is as elegant and perfect as it was then.
How about some music on this fine March Saturday morning? I’ll note in brief the quiet but powerful resurgence of political and human vitality to American music. As I post regarding Tyler Childers:
Tyler Childers’ song, “White House Road”, written in 2017, paints a generalized portrait of American misfortune and hardship, but uses the patois of the Appalachian South in particular to stoke the emotions of the listener. And it’s why Childer’s imagery works no matter where you live in the US-hell, it’s almost Dickensian and could be anywhere. The tune’s poignance is just that brutally authentic and powerfully magnetic.
Don’t, for a second, confuse this with C&W. It ain’t that. This is threadbare roots Americana. If this doesn’t stir your heart, you don’t have one.
The raw explosive emotion of Childer’s lyricism propels a simple 3-chord song (E-D-A) across the ragged, tragic and increasingly impoverished tableau of a decomposing America. Childers tells an old rural story, but ‘makes it new’ as Ezra Pound frequently exhorted young writers and poets. Indeed, there is a touch of Chris Whitley’s muse to this song.
Childers voice is a beacon of distress, masquerading as joy, “a damn good feeling to run these roads.” He sings.”Get me drinkin’ that moonshine/Get me higher than the grocery bill/Take my troubles to the highwall/Throw’em in the river and get your fill.”
His distress is amplified by his vocal register; and his range acts like the kinetic tension in an unsprung faucet, Schrodinger-like: at once blowing in a soft mountain drawl, only to tornado-up into a raspy hard emotional sucker punch landing on your solar-plexus and leaving you breathless.
Tyler is proof that there are only two types of music: good music and bad music.
I dare you to listen and not stomp your feet.
More to the point, Jack White has single-handedly reinvented and fused Delta blues, Chicago blues and rock music right back into political and cultural relevance. One example is the global adoption of his anthemic Seven Nation Army.
His appearance on SNL in 2020 is another solid proof of concept.
Honorable mention goes to the Stone Foxes and their fantastic and criminally underrated retelling of the death of Delta Blues legend Robert Johnson, “I killed Robert Johnson.” The song is 15 years old. So what, it’s aged well.
While you’re at it, this lovely morning, check out this music here and rock out to this and this. The last two are representitive of a new breed of American rock bands. You won’t hear ’em on the radio, but rock is alive. And that’s a good thing, like this cover of Dancing in the Street, by the Struts.
Who ever talks about modern dance, or takes an interest in it ought give this video a solid once over: the choreogrpahy on display is a stuning blend of traditonal renaissance era galliard or volta, early Appalachian line dancing and urban American break dance, yeah, break dancing, for a tune straight out of my Scotch-Irish heritage
While you’re at it, check out this Ryan Adams cover of the Iron Maiden classic, Wasted Years.
Last one, I promise, this Band of Heathens song, “Hanging Tree,” eeriely echoes old-timey Protestant hymns sung by a choir, except it’s about infideltiy and damn near a murder ballad. It’s about 15 years old, as well, but it has aged like a fine Irish whiskey. Lastly, I have rarely in life coveted anything. And I use the word ‘covet’ purposefully. But that Dobro he’s playing in the video: me want one something fierce. But I’m left handed and those cost upwards of $1500. Ouch!
More if it happens. Maybe.
Nota bene: Apparently Kuwait Oil has declared force majeure on oil sales. That’s not confirmed, but plausible and bad news if true. As one commenter in the X thread linked wryly noted, “You know shit has hit the fan when you have to start using French terms.”
LMFAO.
But aren’t most of those contracts never expecting to take physical delivery? Just gambling, er excuse me, investment hedging?
Or is the problem that given that Comex price is under the real, that all those contracts *want* to be exercised in delivery so they can arbitrage to China (who has a real price?)
I’ve always found futures confusing, thanks for any help.
Answer is complex by I’ll do my best to simplify. I’m going to base my answer on much of what Dario says in this video, so it might be worth a watch for anyone interested in how the contracts are viewed at the Comex versus SHFE.
All contracts traded on Comex are designed to take physical delivery. Understood? They are designed for industrial hedging so corporations can smooth out their expenses on needed commodities. That said, under Clinton and accelerating under Bush, the CTFC made a whole raft of rule changes that changed the PRIME AIM of the commodities markets from honest price discovery into something resembling a casino. I’ll spare you the details, but I was in the business at the time and I still can’t believe what they did.
As for arbitraging Comex prices over those on the SHFE. Rumor is someone tried it–a Chinese trader–and got hammered hard. Main reason: the cost of shipping and arranging for delivery, even if, as rumored, he made the trade when there was a $20 USD premium at SHFE, and all the subsequent logistics of physical delivery, added up rather too quickly. But as a former arbitrage clerk myself, kudos to the brother for trying. Fortune does favor the bold. Until she doesn’t: fickle bitch she is.
Futures are identical to stock options: calls-are the expectation a stock will rise-and puts are the opposite. On the commodities exchanges you buy long exepcting the price to go up, but your buying price of the long give you the right to exercise it at that price not its current high, if it did go up. Buying short means you expect the commodity to go lower. You can also combine the two into a hedging bridge of sorts, where you give yourself the right to exercise the contracts within a range. This is what hedging truly is. Not hedgefund bullshit. I used to know the head commodities trader at Pioneer Flour Mills here in San Antonio and how he explained it was elegant. One of the reasons I went into the business.
I’ve never mentioned this before but what made me leave was a long time ago I was sitting first class next to a former international business man. He asked most of the questions, but the upshot is I was sitting next to John Perkins and the questions he asked me opened my eyes to what I was truly participating in. It was only a matter of time til I left.
The US commodities exchanges were originally established, and this was hammered into me when I took my commodities trader’s exam, for price discovery and sanctity of the market mechanism. Used to be you had to own or expect to take delivery of the underlying commodity you were hedging/selling/buying. Now you don’t.
At the SHFE the rules are much similar to the pre-Clinton era rule changes. And Chinese regulators are hardcore. They’ve shutdown at least 25 trading groups accounts last week alone for breaking the rules, which Dario explains in his video.
Hope this helped.