This Week in Summary 7/22/2022

Jul 22, 2022 | Bubble Monitor

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Don’t you love the mystery week like the one which just ended Thursday 7/21/22? It was a light economic calendar and the macro news reported was hardly positive. Companies are at the very beginning of reporting their 2Q22 quarterly results, so there is not much of an earnings trend to read there either. So, what gives? The S&P 500 was up +5% for the week, but that was nothing compared to Ethereum (crypto) which was up +33% for the week (yup, that’s not a typo). How did the world change? Gosh, even the 10-year rate fell below 3% which suggests the bond market is looking for a recession. Apparently, neither the bond nor stock market is even a little bothered by next week’s Fed meeting which is expected to lead to another huge interest rate hike. Then it must have to do with Tesla. Elon just reported one of the strongest quarters in its history “with the potential for a record-breaking second half of the year” as Tesla achieved record output during June in both its Fremont & Shanghai factories. Did Elon really say record production in China?? Hasn’t that country been completely closed for business with its endless zero covid policy? Could it be that crypto is up a third for the week because Elon is single-handedly restoring China’s manufacturing mojo? Wait a minute, we know what it really is! All the hedge funds read our post detailing how the Fed actually returns all of the interest it collects from its $9 trillion bond portfolio back to the US treasury. Now that’s a good reason for a relief rally right there…

Weekly Spotlight

With food inflation going through the roof (chicken slaughter PPI was up +85% y/y during 1H22), you may wonder which countries are producing all the veggies & meats. Are they America’s friend or foe? Do these countries produce more than their fair share of food relative to the size of their population? We were surprised to find that China is a huge producer of food and, further, that it produces more than its fair share as it relates to its 1.4 billion population. Also of interest is that Russia and Ukraine are not as important to global food production as the press has led us to believe (especially Ukraine). Another notable discovery pertains to which countries are producing the veggies and which are producing the meats. As proteins are so important to human health, we must ask ourselves if we have enough meat to go around? Do we have to eat bugs instead as the greens suggest? This is particularly relevant as it relates to fish which seems to be the protein at most risk because of over-fishing and water pollution. This is a HUGE concern to China which consumes 52% of the global fish production according to USDA data. All this begs the question of how well globalization really works. We have all these countries competing for life’s necessities and not all of them play nice when it comes to trade. Maybe it’s time for the US to start onshoring our supply chain so we can develop a higher level of self-sufficiency. 10 years from now we might be very glad we did, especially as it relates to food and energy. 

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