I haven’t seen material news today. Perhaps the market is finally getting around to positioning for the fall and winter; but it’s clear as day now that investors are pricing in the inevitable freezing of the sausages in Berlin this winter. We are seeing natural gas spike to session highs, +3.8%, oil is bid higher, tankers who transport natty bid higher, and basically all key players in the production and transport of LNG to Europe also bid higher.
I view this trade as obvious and because it is obvious it is also risky, filled with fresh money traders who will bail on it with any news that might be viewed as bullish for a warm German Christmas.
HOWEVER, I think it’s worth taking, nonetheless — especially now with August looming and the commodity sector back in play. If you’re going to allocate into energy, say 10-15% of your portfolio, you might as well focus on this aspect of the trade.
Another curious lift today is in potash plays like MOS and IPI. Early on during the war, sky was the limit for these names and then, out of nowhere, they got dismembered and then destroyed. Regardless of whether or not Germans will also starve this winter, MOS is trading super fucking cheap and is a buy, alongside other fertilizer plays like IPI and CF.
Into the close, I might not hedge, but I will have lots of cash in reserve.
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Homebuilders may be ready to short. Separately, with NEM’s news, it may be stupid that existing physical gold eft trades down today
The world will always need food and energy
The $80 floor could well be: equal parts Ukraine and ESG and Fed policy. Pretty solid future for a few years. Unique cycle here.