3 ms·

How much of this is attributable to meme stock style momentum versus fundamentals?

teej 5y ago
It’s clearly a supply shock.
adam_arthur 5y ago
Commodity speculators can push prices up for sure. But they are also huge markets where most buyer/sellers actually intend to use the product. On top of that, global inflation was already pushing up price of most commodities (excess goods spending due to govt stimulus, among other things, such as substitution). Oil is a much more dire situation, as demand is increasing faster than structural supply. Higher oil does push people towards renewables, but at large cost to the poor. Also acts as multiplier to pretty much all other goods production.
tyrfing 5y ago
It's a number of factors coming together. The market over 2021 was very tight, with China importing a huge amount of wheat, some drought/weather issues, and probably more. Coming into this year, nitrogen fertilizer, potash and other agriculture inputs are very expensive, which partly traces back to energy costs (natural gas) and sanctions (Belarus/Russia). Adding the Ukraine war to this puts a huge percent of global exports at risk, with at least some people naming it as the biggest supply shock in a lifetime: https://twitter.com/ScottIrwinUI/status/1499137998386085889 https://twitter.com/ScottIrwinUI/status/1499137998386085889 It's not just the supply shock, but everyone expecting rough conditions this year before the war started. Primed with those conditions and a commodity where not having any means millions/billions of people starve, it's easy to see how supply concerns can set off some very sharp movements. Energy and food inflation like this has a history of setting off events like the Arab Spring; it's a very inelastic market and governments don't have the option of not paying. I'm no commodities expert though. Here's an article on effects in Egypt: https://mei.edu/publications/russia-ukraine-war-has-turned-egypts-food-crisis-existential-threat-economy https://mei.edu/publications/russia-ukraine-war-has-turned-e...
tenpies 5y ago
Probably zero. The WSB-types generally do not touch futures contract because the margin requirements can be quite high (a single contract is generally tens of thousands of dollars). Much of this is also fundamentals. ESG = energy stops growing and as the West continued down its self-destructive energy policies, an energy crisis was basically guaranteed. Recall that energy prices in Europe were at all time highs already. The US has largely been saved thanks to the previous POTUS who prioritized energy independence. Even if the current US Administration threw that away, they haven't been in power long enough to completely sabotage their own energy production. Where it is now a supply crunch is in agriculture. You have one of the largest producers of wheat, fertilizer components, and a couple of other things; invading another of the largest producers of wheat, fertilizer components, and a couple of other things. Add to this a backdrop of woke politics and cancel culture spreading into diplomacy and you have the West self-destructing itself over what would - in normal times - be a regional issue at best. TL:DR we're in trouble. And that's before even talking about how the West has weaponized finance and now fundamentally changed the rules by which globalization worked. That's going to have some really nefarious effects a la 2008 GFC, but much worst.
- alephnan 5y ago
  Many of the Wall Street people are actually on WSB.

teej 5y ago

It’s clearly a supply shock.

Commodity speculators can push prices up for sure. But they are also huge markets where most buyer/sellers actually intend to use the product. On top of that, global inflation was already pushing up price of most commodities (excess goods spending due to govt stimulus, among other things, such as substitution). Oil is a much more dire situation, as demand is increasing faster than structural supply. Higher oil does push people towards renewables, but at large cost to the poor. Also acts as multiplier to pretty much all other goods production.

tyrfing 5y ago

It's a number of factors coming together. The market over 2021 was very tight, with China importing a huge amount of wheat, some drought/weather issues, and probably more. Coming into this year, nitrogen fertilizer, potash and other agriculture inputs are very expensive, which partly traces back to energy costs (natural gas) and sanctions (Belarus/Russia). Adding the Ukraine war to this puts a huge percent of global exports at risk, with at least some people naming it as the biggest supply shock in a lifetime: https://twitter.com/ScottIrwinUI/status/1499137998386085889 https://twitter.com/ScottIrwinUI/status/1499137998386085889 It's not just the supply shock, but everyone expecting rough conditions this year before the war started. Primed with those conditions and a commodity where not having any means millions/billions of people starve, it's easy to see how supply concerns can set off some very sharp movements. Energy and food inflation like this has a history of setting off events like the Arab Spring; it's a very inelastic market and governments don't have the option of not paying. I'm no commodities expert though. Here's an article on effects in Egypt: https://mei.edu/publications/russia-ukraine-war-has-turned-egypts-food-crisis-existential-threat-economy https://mei.edu/publications/russia-ukraine-war-has-turned-e...

tenpies 5y ago

Probably zero. The WSB-types generally do not touch futures contract because the margin requirements can be quite high (a single contract is generally tens of thousands of dollars). Much of this is also fundamentals. ESG = energy stops growing and as the West continued down its self-destructive energy policies, an energy crisis was basically guaranteed. Recall that energy prices in Europe were at all time highs already. The US has largely been saved thanks to the previous POTUS who prioritized energy independence. Even if the current US Administration threw that away, they haven't been in power long enough to completely sabotage their own energy production. Where it is now a supply crunch is in agriculture. You have one of the largest producers of wheat, fertilizer components, and a couple of other things; invading another of the largest producers of wheat, fertilizer components, and a couple of other things. Add to this a backdrop of woke politics and cancel culture spreading into diplomacy and you have the West self-destructing itself over what would - in normal times - be a regional issue at best. TL:DR we're in trouble. And that's before even talking about how the West has weaponized finance and now fundamentally changed the rules by which globalization worked. That's going to have some really nefarious effects a la 2008 GFC, but much worst.

alephnan 5y ago
Many of the Wall Street people are actually on WSB.