✨ 6 Dec 2021 | Value Investing Substack NEWS
Goldman Sachs Global Macro Research on Inflation, ACS Monday Morning Links, Omicron & Oil, China cuts RRR by 50 bps, US Expected to Boycott Winter Olympics, Could 1MDB's Najib be Malaysia's next PM?
HIGHLIGHTS:
SUBSTACKS + BLOGS + TWITTER:
Oil
The next question that arises after examining the implications of Omicron is oil. Having collapsed 15% from >$81/barrel to $70/barrel in a week, most oil investors are wondering, how low will it go? Now many oil analysts have chimed in to say that the oil sell off has been overdone. Goldman Sachs for instance has written that the sell-off is equivalent to pricing in a scenario where Omicron would shutter the global economy at half the intensity as the Q2 2020 global lockdown, or worse off than before vaccinations. Others have opined that it’s equivalent to building inventories by 100M barrels, when in fact inventories continue to draw these past few weeks. For us, we don’t doubt that oil has been oversold. Given how we’re seeing governments react to the new variant, the lack of mobility restrictions means global demand for oil (i.e., really transportation) will stay robust, especially as we head into the holidays. Diesel to move things, and jet/gasoline to move people along, all of these products should continue to see elevated demand.
Yet on the supply side, a fall from the $80s to $70 means that producers, whether it’s private, public, or national oil companies, will all tighten their belts for capital spending in 2022, just when the world has fully recovered. Moreover, OPEC+’s decision to increase production will add additional barrels to the market just as SPR releases occur. To mitigate a further potential price fall though, OPEC+ smartly left their December meeting “in session,” which means they can at any time come back and decide to alter their planned production hike in January. This bit of trickery should prevent bearish market participants from overly shorting oil prices for fear that OPEC+ could alter its decision. Nonetheless, all of this short-term bearishness, will inevitably create a bigger bullish aftershock. Internationally (ex-US) we’re still down 20% in rig counts since January 2020, and in the US we’re down 30%.
LINKS:
Stock Markets:
You Say You Want A Revolution… Spot, #SPUT & The Turning of a Cycle (Commodities - Uranium)
Macro:
ASEAN:
Can the US ever match China’s concrete economic offers to Asean?
As US criticises, Cambodia veers closer to ‘ironclad brother’ China
Forget 1MDB, could Najib Razak be Malaysia’s next prime minister? (Malaysia)
USA:
China:
News & Others:
Compounding Curiosity (a new investment podcast with some interesting guests)
Capital Allocators (for the most in-depth portfolio strategy you'll ever listen to for free)
Masters in Business (some sterling bulge bracket guests for Bloomberg-level commentary)
Odd Lots (actually from Bloomberg)
The Value Perspective (incredible guest list with some well known names)
Real Vision Youtube (not a podcast per se, but some of the best macro commentary you can get for free, and star-studded guests. Just keep your phone screen on and play in the background.)
ChinaTalk (less related to investment, but good commentary about China politics/geopolitics)
The Grant Williams Podcast (the Mike Green stuff there is excellent)
Grant's Current Yield Podcast (Grant himself is a celebrity for good reason)
Exchanges at Goldman Sachs (more formal version of Masters in Business, with the same type of content)
The Intelligent Investing Podcast (this one is about "value investing", more about small caps)