The crises are now coming home to roost.
We’re now entering the third inning of the problems exacerbating around the globe. This is why I created World’s Biggest Trade… and why I give away the momentum indicator to help you navigate these markets in real-time.
Right now, the energy sector is holding broad market momentum in barely positive territory. But there’s no doubt now that we are a world in crisis.
Harvest is coming. Winter is coming. The recession is here… and will worsen.
This is a world in crisis… and it’s high time that our media acts like it and stops painting a rosy brush for our political elites.
Europe doesn’t have enough baseload fuels to keep its manufacturing centers humming in the winter. The region is now in a manufacturing downturn, and all energy costs to the continent have exploded. People are hoarding wood to keep warm across the continent.
That energy crisis is spilling over to the United States. The price of natural gas is testing that $10 level for the first time since 2008. What should we make of this?
Another opportunity to trade commodities and other “real assets.”
Survival 2022
Natural gas is heading higher, which will only drive up the cost of fertilizer and other critical products needed in other industries. In addition, food is about to get more expensive – as the Federal Reserve can’t print more of it.
Drought is terrible in the United States, Europe, and China. Leaders from those regions have warned about food problems with the harvest approaching. And it’s not like drought conditions magically go away.
Bloomberg reports that the corn yields in Europe are expected to fall by 20% year over year. Yesterday, I showed the drought chart in the U.S.
Here’s Europe.
The challenge with food and energy is that it will impact the price of everything. Corn isn’t just food for humans. It’s used for animal feed, in certain plastics, and has industrial uses.
The same goes for natural gas – which is an industrial gas used to power entire economies. Unfortunately, the reliance on Russian gas has doomed Germany and created a situation where inflation will only get worse across the continent.
This is a reminder that the Federal Reserve – as it takes a blunt hammer to the markets with higher interest rates – CANNOT print food, energy, and other commodities. Higher rates, higher prices, and lower supplies will only fuel a vicious cycle that leads the global economy into a recession.
The harvest has started for corn in smaller output states in the south. But the real problems start in late September and early October when the largest producing states take to the fields. If drought remains high, this will exacerbate a severe global food shortage fueled by the Ukraine/Russian war. Already, the stakes are high. Today, 37% of farmers are killing existing crops that won’t reach maturity due to drought. That’s up 24% from 2021, according to the American Farm Bureau Federation.
I think that even experts are human right now and don’t know what to say in public. Privately, there is panic. There is confusion. And a lack of leadership and comfort that is required in times of serious uncertainty.
