long term political update -3

07:10 04-May-22

I think the primaries in Ohio and Indiana support my take on the division in American politics.

With the war dragging on, the European Commission has proposed a phase out of Russian oil over the next six months, with some exemptions.  Brent is at $109 with the spread over WTI down to $2.50 of late.  We'll see what happens next week, but India has been the largest buyer and reportedly wants even bigger discounts.  Natural gas will be even harder to cut and continues to trade around $8 at Henry Hub.

For those who haven't seen it, someone leaked the draft SCotUS abortion decision to Politico.  Although I can agree with the decision to overturn Roe v. Wade from a states' rights perspective, I think the practical implication is that American politics are irreparably broken.  If finances also followed the same paradigm and the proportion of state to federal taxation inverted, my opinion might be different, but I have exactly zero hope of ever seeing that happen.  Consequently, I will pound the table on VIRT again, in the expectation of more polarization and drama leading to volatility in American markets.  This also increases my preference for Canadian businesses, such as Telus and Xebec over the long term, and my BGC commentary this morning should have noted the currency move back to  €/$1.056.

The E.U.'s day is coming, but not in the short term as it continues its righteous opposition to monopolies, yet fails to reform its taxation, labor markets, or broken western IP laws.  Eventually, Henry Hub gas just below $8 will force the rate hikes that BGCP will benefit from and possibly tighter fiscal integration between member states, but it may also bring even more political stagnation.  Don't be surprised if the east-west split devolves into a three-way global split before we see the Euro as a viable global reserve currency.  For now, my natural gas picks remain the other prime investment targets.