Podcast & Video Of The Week

Politicians Looting The Treasury, A Different Perspective On Inflation & A Look At All Things Oil

I listened to a lot of interesting podcasts and videos this week, but a couple stood out. One of them helped me look at inflation from a different angle, and the other is a balanced look at oil markets. Before I get to those, I wanted to touch on the recent spending package from the gerontocracy in Washington, D.C. US politicians continue to underperform my already rock bottom expectations. The House passed a $95B spending bill yesterday that should get through the Senate early this week.

The legislation includes $60 billion for Kyiv; $26 billion for Israel and humanitarian aid for civilians in conflict zones, including Gaza; and $8 billion for the Indo-Pacific region…. It also contained a measure to help pave the way to selling off frozen Russian sovereign assets to help fund the Ukrainian war effort, and a new round of sanctions on Iran.

- NY Times on the Spending Package

I’m reluctant to include anything from the New York Times, but I wanted to mention the potential seizure of Russian assets, because that piece of the spending package might get buried by the billions we are sending to Ukraine and Israel. I think a move like this is extremely shortsighted, but that has just been par for the course from the Federal Government in my lifetime. We will see what the potential ramifications look like, but I think we might look back at this move as a huge mistake.

The spending package also includes a potential Tik Tok ban, sanctions on Iranian oil, and $0 for the southern border of the US. The sanctions on Iran will only go into effect 180 days after enactment, so I doubt it will impact Iranian oil exports in the near term. The sanctions look like political posturing ahead of the election, but it’s good to know that they have their priorities straight with everything going on at the US border right now.

Value Hive On Inflation

As many of you know, I’m expecting higher average inflation over the next several years. This podcast helped me look it from a different angle. They discuss how politics can be a driver for inflation, and how many of the cyclical factors that drove disinflation for forty years from 1980 to 2020 have reversed over the last couple years. Erik writes Your Weekend Reading (which is worth checking out), and has experience managing investments in Africa during inflationary regimes. I agree with his view that we won’t see hyperinflation for the US dollar, but a lot of things line up for higher inflation in coming years.

One thing that could have an impact on inflation is growing demand for commodities around the world, particularly India (an interesting parallel to where China was 20 years ago). They also talk about the underinvestment in the commodity sector with copper and other metals. The last piece to touch on is their comparison of oil prices in the 1970s to where we are today, and how a rise in oil prices would impact inflation and flow through to other parts of the economy.

Macro Voices w/ Rory Johnston

This was a balanced look at global oil markets. Johnston writes Commodity Context, which focuses on what is going on with oil. They discuss geopolitics with what is going on between Israel and Iran, and how that might develop in coming months. They also cover OPEC production and shale production here in the US, and what that looks like over the next 12 months. The last topic of note is the possibility of an SPR release, which is something that we could see this summer depending on the path for oil prices.