Juggling Dynamite

The Bank of International Settlements (BIS) is a board made up of 60 different central bank heads, that meets bi-monthly in Basel, Switzerland and bizarrely issues reports where they talk about central bankers (ie., themselves) in the third person.   Rather like a Monty Python skit where the clerk at one counter pretends they are not the same guy you spoke with at the other. Their latest missive is classic.  After two decades of aiding and abetting devastating financial bubbles, they are once more warning see Central banks raise alarm about new crash after steep rise in lending.

Here they are: “keeping interest rates too low for long could raise financial stability and macroeconomic risks further down the road, as debt continues to pile up and risk-taking in financial markets gathers steam.”

As “risk-taking in financial markets gathers steam”?  Hmm.  As shown in this chart from Lance Roberts, having just grown back their losses for the second time since 2000, buy and holders are once more ‘fully in’ at a secular peak in valuations with average cash levels less than 5% for most managers, ETFs, mutual funds and Do-it-yourselfers.  Convinced once more that this time is different, they will be selling for the exits at the next cycle bottom as they did in the last two.  Central banks are the architects of this nightmare on Main Street, and investor lemmings play a leading role in their own demise. Sad story!

It started with a substitute teacher in Tennessee who believed that evolution should be taught in the classroom. What followed was a fiery debate that rocketed around the world.

The Scopes Trial reminds us that science has often upset the establishment. Kai Wright explores how the powerful have tried to convince us that science gets it wrong.

Then Amanda Aronczyk looks at just when we began to doubt the whole idea of climate change. She’ll take us back to that day in 1988 when NASA scientist James Hansen warned the United States Congress that climate change was real.  Here is a direct video link.

While Wall St. and traders are preoccupied with daily crude support levels, the real story is the growing race by producers to cash out before ‘black gold’ goes the way of coal and the 8-track.

In years previous, articles about the quaint idea of using solar and wind as a primary energy source were only seen in propeller-hat magazines, the likes of Popular Mechanics and Scientific American. Today we have YouTube videos of gear-heads (combustion engine car enthusiasts) slack-jawed at the raw torque and power of these ‘Tesla cars’ as they clean-up the drag strip with quarter-mile-times that can’t fail to impress. We’re moving from carburetors to capacitors fast, and if the adoption curve is anything like other technology curves (“S…like the Model S”), it will be a revolutionary change in record time.

Why is this happening? Not because we say it is, or that we are “believers”, but because open minds can see it makes so much better efficiency and financial sense. Yes Elon, without a doubt, has been a huge leader of this transformation, but he isn’t the whole story. There have been countless others tinkering in their garages for decades on new types of batteries, super-capacitors and energy systems.  Musk just happened to have been there at the right time, with the right skills and a fat enough wallet to push through the other side.  For that many are thankful and many more will come to realize the importance of his single-minded focus.  The innovations that have come and will continue to be pushed by Tesla and many others, have finally gone mainstream.

Take for example this news flow from recent months:

—Hummer factory to switch production to EV factory.

—new UK bill requires gas stations install EV charging

—Mercedes union workers win concession to convert Germany’s largest engine manufacturing facility to a 100% EV focus.

—VW pulls plug on diesel in US:  It’s time to focus on EV’s

—Audi CEO warns dealers to prepare for market dominated by EV’s, this is happening.

So reflecting back on the production of oil and its price, if you were a Saudi competitor (think Norway), knowing the product you sell is becoming worth less and less with every innovation (think Dr. Goodenough the inventor of the original lithium battery and now a new solid state battery 3x current energy density) would you wait for your biggest competitor’s IPO date to increase production?  Or would you increase your production to take market share now, hoping the price of oil can stay elevated because Wall St. has instructed the Saudis to talk it up to try and maximize their planned Aramco IPO value?

Even regardless of the 2018 IPO, Prince Salman has already announced the Saudi plan to diversify away from oil (whether it’s $30 or $70) and create a sovereign wealth fund for new tech and related GDP drivers, like Norway’s sovereign fund, only much bigger.  Yes, this is happening.