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Are the BRICS going to announce their new payment system "going live"... ready, ready, "now" ?
Or, their new alternative currency... partially backed by reserves of gold at some convenient fraction ?
Rumor was... they were set to do that in August... ? But...<checks calendar> ??? <queue crickets chirping>.
What we saw instead was... Xi going MIA for a month following the plenary session... and not much else.
Note that in context of and relation to the BIS efforts to enable immutable alternatives to use of essentially worthless debt instruments as the primary foundation of the global economic system... the "BRICS-led" effort is a newly created "potential" that exists parallel to its predecessors... and is intended to be poised as "in competition with" the existing systems. But, the BIS effort is essentially agnostic to those elements ?
If gold is going to replace paper as that "foundational element"... restoring gold to the role it has held throughout history, pre-WW II, or pre-Nixon... that's not obviously a change that confers any obvious or unique competitive advantages in itself... much less in empowering any "new" alternative as some new monopoly ? It does more the opposite... in restoring a universal standard that is not an intrinsic monopoly that is able to be controlled... that enables some unique advantage in monopoly control of money ?
That competition... the dirty shirts duking it out in the back behind the laundry... occurs more or less independent of those "higher level" functions related to agreements re re-monetizing gold ? There's going to be a "reset"... we just don't know yet... how the one change occurring might relate to... or occur independently of... change occurring in other things, too ???
In any case... it has been Russia taking the lead in fostering the new BRICS alternative payments system...
So... its worth noting... while not pretending there's no relationship between the two...
How are things are going in Russia... in relation to the war... and payments ?
The war: clearly shifting to advantage Ukraine for now.
The only thing I see preventing Russia being rapidly destroyed at an accelerating pace right now... are western restrictions that work to protect Russia... both by limiting Ukraine's access to resources and by limiting its use of longer range weapons. But, Ukraine appears to be on the cusp of fielding, in numbers, low cost domestically produced alternatives that are likely to obviate the benefit to Russia of the western restrictions. Ukraine is also constrained by resource limits, as the west are reluctant or unwilling to provide what they'd need to do more than sustain the fight in place... until Russia exhausts itself.
It's a mindlessly stupid "plan"...
However, Ukraine is increasingly proving capable of slipping the noose... to fight its own fight rather than the one Russia (and the west ?) wants... while innovating in ways that both overcome resource limits imposed by the west, and obviate the point of the limits...[ resulting in greater risks of escalation, perhaps... but, escalation.. to what end... with what real threat in a greater risk ?]... advantaging Ukraine by improving its capabilities over time. The war is increasingly putting Russia at greater risk of outright failure... on the battlefield... and, increasingly... economically, politically, systemically...
For Russia, that means its continued existence is left dependent on its (own reliance on) expectations about western ability or willingness to constrain the fight... to Russia's advantage. Russia's failure to provide a defense in Kursk is "an instance"... built on expectation Ukraine should respect borders in a way Russia does not... to keep the fight in Ukraine... conducted on Russian terms... to Russian advantage... for no obvious reason ? It is not the only instance in which that structure in dependencies... and potential for error in expectations... exists ?
Kursk... or its proper exploitation... should have brought the war to a quick end, already. It may not... only as the west will limit Ukraine's ability to fully exploit its victories in the ways they otherwise might. But, the dynamic is shifting, still, in result of Ukraine... showing it has a learning curve that Russia does not... and becoming dramatically, dangerously, better over time. Russia mindlessly persists in trying "more"... making the meatwave bigger... proving only that they cannot "win" in Ukraine... but can lose in Russia. In the ebb... that likely requires that Putin will not survive long... as that's how dictatorships tend to work in fostering change... if the effort to restore the flow fails.
Where it goes from here... perhaps dependent on nothing else as much as it is the outcome of the U.S. elections. Kamala "wins"... and perhaps expect more of the same only more so... which is still not "Russia winning"... or "Russia losing"... rather than continuing in wasting itself. Trump wins... and its more likely its over in shorter order... NOT as some may expect because Trump ends support leaving Russia succeeding in its takings... and leaving Europe to be Europe... but more likely as "withdrawing the limitations" that foster the imbalances required for endlessly sustaining the war... Odds are "more of the same" for another year in any case...
The current basis... is addressing companies in China with each acting to sustain businesses that are being specifically threatened... not a function of overt changes in direction being imposed as policy through mandates by China's leadership ?
That's been left as an open ended "pause in the conversation"... for as long as China demurred in replying.
It doesn't mean we won't be seeing "unexpected" policy shifts occur in the future... when China does opt to act ? But... it wasn't really left as a question, back in May ?
But... China can't have it both ways much longer...occasionally "making nice" in public while playing both sides... in a game of "let's you and him fight"...
A cynic might see it as... "at least the stakes are getting smaller"... as the U.S. now finally joins the crowd... as the entire global economy collapses into dysfunction...
China using Russia to constrain the U.S., to "pin us down" in Europe... to leave them with a free hand to act as they might prefer in Asia (including in the Russian far east)... appears it has broadly failed. Russia is succeeding only in proving itself increasingly incompetent... while dramatically degrading those capabilities they did have prior to committing them to destruction... leaving only Russia being left more at risk in its position in Asia, now, than they were before.
But... without following through on commitments it made to Russia and the BRICS... or deliberately changing course in its purposefully fostered conflicts with the west... when those two choices appear they are completely incompatible with each other ?... China appears it is committing to growing isolation, sustained failure, increasing irrelevance and persistent decline...
But... of course... enabling a new BRICS payment system and a new BRICS currency regime... aren't "the same thing" as committing to materially support the Russian war against the west... if there isn't a war ?
But, there... the nature of the real interest... in enabling aggression against one's neighbors (but, you go first)... is fully exposed as conflicting with "the opposite" in "self interest"... posed in the propaganda...
From here... things appear set to become uglier... fast... even without it leading to... or providing cover for... the choice to expand the still limited conflicts ongoing now... into more general conflict...or more new and specific instances of conflict... imposing the same result.
FWIW... I don't see the diplomacy... succeeding... not even in masking the bared fangs...
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Granted, there is no "shortage" of oil and gas... or of any other mineral... There is only either 1. a shortage induced by prices insufficient to stimulate production, or 2. a shortage induced by policy, interference with markets generating shortages.
So, determining the probable path of prices... is about divining both the impacts of market forces (as the real economy is a massive variable) AND calculating the impacts of policy fostering market disruptions... or not.
A couple of things worth noting...
They address China's breathtaking pace of conversion of transport from diesel to LNG... and point out that element in relation to the implication in measurable impact on diesel consumption... then totally fail to address what that large scale deflection in the balances means... in relation to China's increased consumption of LNG... that "should" compensate for (some of) the decline in diesel demand ?
That may not be the oversight it seems... if the shift only masks the nature of shrinkage in "other" LNG demand... as China's economy accelerates its decline... tipping from "recession" and "disinflation" into an accelerating descent into depression and active deflation...
I don't know what reality is in Chinese LNG markets... but, prices in Asia should provide a reality check ?
Similarly... they dismiss price impacts in the U.S. resulting, now, from a rapid ramp up now accelerating the export of LNG... again in a meaningful and market relevant quantity... which they excuse as irrelevant... only because a judge in the Northeast refused to allow licensing of 3 new LNG plants... which would take a decade or longer to become real even with lesser interference ?
They have the (obvious) in U.S. politics mostly right... although... fail to acknowledge that "drill baby drill" under Trump... would also be particularly unlikely to mirror Biden/Harris in refusing to boost the national income exporting products the markets need... by sustaining their policy in hutting down LNG exports?
I think they're wrong on Nat Gas and LNG... at least in degree.
Some of that appears to be error in expectation tied to "substitution" of gas for oil... as if belief that oil and gas prices "should" behave similarly because "both are energy"... means they will. That's a significant error... as the nature of the markets and distribution for the two products are quite different...
Oil prices WILL decline as the global economy tips from recession into depression...
Gas prices are already on the low side of potential... with multiple factors suggesting "higher" is likely... no matter who wins the election... as U.S. LNG production that is already built and ramping up now... begins impacting flows at the same time as seasonal demand shifts occur...
Politics, for now, continues to require that some measure of "price suppression"... and the deliberately unreliable reporting of statistics in supply, demand, storage and flows used in enabling it... will continue... Election outcomes might alter that influence... with potentially dramatic impact... prior to shifts in policy fostering both increases in production and exports.
They miss another "Trump Trade" potential inherent in their discussion... as "drill baby drill" may reduce oil prices as supply increases... but it won't do that without first boosting oil field services...
They also miss that lower prices stimulating consumption and economic growth... will mean both rising "flows" in the near term... and future growth in demand raising prices again at higher rates of production. Oil companies don't much benefit from higher prices and lesser flows that continue to decline ? More if the systems are scaled to function economically at larger scale and higher flow rates... with higher prices thus preventing sustaining the infrastructure and capacity necessary for sustaining economic growth ?
Not every element of market function is defined by supply, demand and price, alone. Engineering limits and efficiency matter too... ignorance of which generates huge errors in expectations... [with "and a miracle happens here" as policy requirement... see "Green New Deal"] as reality generally doesn't have simple "on / off" switch functions.
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Looking for things to worry about in the "issues" and "problems" apparent in the global economy... isn't exactly a snipe hunt: recession, excessive debt... the insolvency of the banking systems... "supply chains" and trade wars... hot wars... worse coming... with currencies on the ropes... "financialization" and "globalization" too often used as euphemism for "centralized control" and "mercantilism" supplanting free market functions...
But... there's history to consider as a possible guide to how things may begin to come unwound... IF history is useful as a guide... as seems likely, still, even given our problems today are clearly larger / more intractable than those "minor wrinkles" that have derailed markets in the past...
China... it is being pointed out this week... is seeing markets resuming declines and the economy is accelerating to the downside... Some say: It's already in a depression... and the trend in acceleration is worrisome...
"Globally synchronized" is often used to highlight purposefully crafted interconnectedness now... giving us an expectation that "globally synchronized recession" is not just "in the cards"... but a deliberate plan. We know the sovereign (and market based) debt risks... and the real estate bubble risks still somehow avoiding being unwound in spite of reality obviously requiring "can't get there from here"... without risks being realized ?
Currency wars... now a deliberate hacking at the roots of the global economic system... Only some few aware of BIS planning... and the implementation of plans... for re-monetizing gold... or Biden's efforts coordinating with others in things that work to undermine the reserve status of the dollar...
"Contagion" is making a comeback... on steroids... is what that really says ? But, unlike prior instances... this time, it appears... "they" are doing all "they" can... not to prevent it happening... but to induce it ?
"Contagion" has a history... so, the Asian Contagion or the 1997 Asian financial crisis... worth some study ?
As the U.S. is set to lower rates... many are expecting resulting "capital outflows" will quickly drag the U.S. into the same economic mire as is already afflicting China and Germany... "and so it begins"... ?
Metals and miners moving with markets... some more than others...
Anticipation of rate cuts is a rational explanation for metals and miners higher... anticipating the near term future of re-inflation... but... reality... the stocks, at least, are more likely moving because "markets" on a vector higher with a slope well above neutral...
Miners recently don't track the market higher... unless and until X value in the slope fosters "spillover"... as it did yesterday in a big way...
As I watched the trade yesterday closely (playing zero day options on QQQ)... it was all about $ flow... a huge flow of $ coming in from "somewhere" later in the day...
Movers in the market are less about specifics in fundamentals changing [the most amazing potentials often being both almost unknown... and among the worst performers]... and more about "more" in linear relation to pre-disposition in the existing spread of capital... the "best" beaten down issues bouncing hard... the most over-looked issues continuing drift... in spite of any trends in "value" development. And, those with a bigger spend on (or management skills in) promotion... will tend to sustain market interest... moving more.
A rational argument re "producers" vs "explorers" given reality in timelines... the price of silver mattering in the near term... to producers like SILV, HL (up $1 in two days), PAAS (up $2 in two days), etc. That persists until the trend shift in the new bull is acknowledged as a long term issue... in a market willing to look ahead long term... ? A massive find... starting from proof, at least still 8 years away from production... or maybe 12 years, or 20, given "permitting" and "politics" ? What does today's price have to with anything ?
They'll begin to move when the producers begin raking it in faster than they know what to do with... and are forced to go shopping...
The "sweet spot"... still, always, in the unknowns that are "near" producers not quite there yet, or smaller past producers, or failed producers, those perpetually losing money... as metals prices rising suddenlt, unexpectedly, drag them kicking and flailing from deep in the red to barely in the green... prices shifting in a few months from "liquidation value" assuming BK imminent... to having a respectable multiple when money gets made, again, after a long hiatus...
The long running bear has been bad enough... that today that probably defines "most" miners... ? Hecla, PAAS, are still losing $ ? They may have bounced nicely off long term lows... but... future prices versus past prices adjusted for inflation suggest... what in the future ?
FNLPF is a particular case. Huge producer... profitable, P/E 21... but buried in debt. Higher prices will have them dig out faster... and then... with debt paid down... ??? Laggards... may need a push to shift market momentum in perception... ? Still trading nearer the lows of 2015, 2019, than the highs of 2016, 2020 ?
DSVSF fell below where it was in mid February... and in 3 days is now back to where it was mid-March...
"Soft landing" ahead... according to markets today. Chatter on MSNBC today says: strength of the move higher indicates a new uptrend starting... tech is back... "clues of bottoming" in chip stocks... ??? LOL!!! "Pent up demand for mortgages"... means Fed next week will "open the floodgates" to a real estate boom ?
I expect a shorter term move... that may end tomorrow... or next week with the Fed... or soon after with black swans landing... or some event re-focusing market participants on reality... as "strong performances" being spun... still deliver "less than expectation" in earnings... as recession "baked in" now accelerates.
And I think miners moving with the markets now... likely means moving lower with the market again, too...
Good trades happening... trade well... take profits... grow the stash of dry powder...
RRG's: suggest we're at/near trends turning...
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