Prices rose sharply once again yesterday with WTI reaching $98.28 by midday. The oil market at present is working on the assumption that an already announced increase in supply from OPEC will mitigate oil delivery disruption arising from Ukraine and Russia thereby capping further price rises in oil. Russia exports between 4 and 5 million barrels a day but due to sanctions that will be substantially reduced as foreign buyers are now banned from paying money to Russia. NB A few hours after I wrote that, WTI traded at $108.07 which just goes to show how far and fast markets are moving.
Separately but noteworthy was the announcement that Maersk the world’s largest shipping company will cease all container shipping both to and from Russia.
Unsurprisingly German Government Bonds have rallied but what is more significant is that yields have fallen once again below zero with 10 Years yielding Minus 0.09%. This means that markets are no longer expecting 2 quarter point rises in the last Quarter of 2022. Instead that expectation has become a single 0.25% increase in Q1 2023. That in turn has meant that Italy’s borrowing costs for 10 years has fallen a whopping 28 basis points to 1.43% versus UK 1.11% and US 1.75%. EUR/USD 1.1140.
President Biden Mid Term Report Card
While POTUS had his own take on the State of the Union yesterday, it is worth looking at the following parts of his report card separately: Inflation up at 6% is denting the large increase in household net worth as a percentage of disposable income; Supply Chains are by no means normalised; USD has largely held steady; Public health care coverage has increased; Border crossings have risen sharply suggesting a lack of control over immigration; the USA’s global image has been boosted from a low base under his predecessor; Homicides have risen sharply especially in cities; the Democrats’ and his own ratings are at the lowest point of the last 5 administrations. So a mixed and not favourable picture which will concentrate the minds of Democrat decision makers ahead of the 2024 presidential election.
It was of course Terry Jacks who had this hit in 1974. Rejected by the Beach Boys who having recorded it then decided not to release the song, Terry Jacks took it on and sold 11.5 million records. Originally called Le Moribund meaning the Dying Man and recorded in French, the song despite the original unpromising title, was a smash:
Goodbye to you, my trusted friend
But we’ve known each other since we were nine or ten
Together, we’ve climbed hills and trees
Learned of love and ABC’s
Skinned our hearts and skinned our knees
Goodbye, my friend, it’s hard to die
When all the birds are singing in the sky
Now that spring is in the air
Pretty girls are everywhere
Think of me and I’ll be there
We had joy, we had fun, we had seasons in the sun
But the hills that we climbed were just seasons out of time
Goodbye, papa, please pray for me
I was the black sheep of the family
You tried to teach me right from wrong
Too much wine and too much song
Wonder how I got along
Goodbye, papa, it’s hard to die
When all the birds are singing in the sky
Now that the spring is in the air
Little children everywhere
When you see them, I’ll be there
We had joy, we had fun, we had seasons in the sun
But the wine and the song like the seasons have all gone
We had joy, we had fun, we had seasons in the sun
But the wine and the song like the seasons have all gone
Discussion and Analysis by Humphrey Percy, Chairman and Founder
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