Green solutions for commute. Feasible? Viable? Possible? and More

1. Global bond fund, which is heavily invested in the Asian fallen angels has performed much better than the G7 sovereign debt. This is primarily because of the near negative interest rate regime in the DMs. Furthermore, the recent Chinese credit market dislocation pushed yields higher by nearly 250 bps on the high yield credit.

2. The auto sector is heavily betting on the EV transition. Big names like General Motors and Ford are doubling up on their production facilities to absorb the increasing demand and regulatory uptick for EVs. Such a transition can have widespread effect on the legacy businesses, as Tesla and the likes are entering every sphere of the auto sector.

3. BOJ and Japanese economics is reshaped after Abe left office in September 2020. The BOJ is one of the largest money printers in the world, with over 50% of the public government debt on its balance sheet. This massive stimulus has led to asset price inflation and thus in turn the consumer price inflation. This should be short lived and transitory and should start reversing before the economy enters the stagflation phase.

4. The Bloomberg Commodity Spot Index, a basket of 23 energy, metals and agricultural raw materials contracts, jumped to an all-time high on Monday, surpassing its 2008 and 2011 peaks set during the commodity super-cycle. And this comes at a time when the world hasn’t reopened to pre pandemic levels and businesses are still apprehensive of any future dislocations. With winters around the corner, the energy market can be really interesting to observe and trade.

5. While people in Brussels protest to stop the use of fossil fuels, fuel stations are finding it tough to continue business when the conventional energy prices are shooting through the roof. At the backdrop, we have the western countries pushing the OPEC to raise any oil production supply restrictions in order to harmonize supply with demand

6. Brent crude is up 56% YTD, and we have seen dramatic movements in the coal and natural gas prices, most notably in Europe. Meanwhile the Chinese thermal energy prices have surged 81% YTD. The commodity price rise could have a snowball effect on the manufacturing driven economies, especially at a time when the developed market consumers are adding more export orders.

7. The energy supply crunch driven inflation scare is real. If we see the Brent Crude oil price vs 5y5y forward inflation has a correlation factor of .9, and this clearly sets the stage for stagflation.

8. The debate around decarbonizing energy has spurred another debate over which theme should take precedence over the other, green solutions or inflation control, as often it is seen that non conventional energy production and transmission adds inflationary pressures on the final consumers. So, a solution to the environmental hazard may become an economic problem.

9. The Chinese markets are involving inwards and this means that the $260 billion usually spent overseas will now turn to domestic players. This can be seen from China's current account balance, which increased from .3% to 2.1% of GDP last quarter.

10. N0w here is an interesting blend of reopening trade I observed. Zoom, a company that added million subscribers in months, and Ryanair, one of the most troubled airlines due to travel restrictions and fuel prices. So we are going long Ryanair and Short Zoom, Ryanair has outperformed Zoom by 85% since last Nov.

11. Interesting Charts: