I'm Not a Doctor....
... but I play one on TV.
Folks my age will remember the old commercial. Well, I am no sailor, nor have I ever been a naval officer, nor a naval engineer. That said, and maybe one of our more accomplished readers in that field could explain why a powerful warship could not be used to pull the Ever Given container ship that is stuck in the Suez Canal from the bow of the vessel while the smallish tug boats that work the canal do what they can from the stern. As this effort is going on, large cargo-type helicopters, perhaps a team of CH-53 Super Stallions (lifting capacity of almost 18 tons each), could pull from the port side.
I know the ship in question weighs about 240,000 tons, but it appears that no one else has a better idea. Again, I know less about operating large (or very large) seafaring vessels than your average bear. That said, somebody better come up with something, as digging the ship out of the mud with a crane, at least according to the pictures, seems ridiculous. The estimate impact of $400 million an hour on the global economy seems like a high price to me.
Word has it that unloading the cargo where it is now in order to float the vessel could take between a week to two weeks. In the meantime, close to 300 ships are backed up in an epic traffic jam while the Asia-to-Europe trade route now involves traveling around the African continent in its entirety. That's a rough 12% of all global commerce either stuck in place or forced to take a much longer route from point A to point B. Meanwhile, shipping coats surge, while containers and container ships, availability of both already reaching elevated levels of scarcity, now will find that scarcity hitting absolutely critical levels. Unwelcome inflationary pressure? Perhaps bubble-like, at least for the time being? For the European Union in particular, where growth has already started moving backwards? Not good.
On That Note
By the way, Bloomberg News is reporting that Korea Shipbuilding & Offshore Engineering Company and Samsung Heavy Industries,, the planet's second- and third-largest shipbuilders, have announced orders for a combined 25 mega-large cargo vessels the size of the "Ever Given" or larger worth close to $3.5 trillion to be delivered by 2025. The world's largest shipbuilder would be Hyundai Heavy Industries, the stock of which trades in Korea. The largest U.S. shipbuilder, remains Newport News Shipbuilding, which is a division of Huntington Ingalls Industries (HII) , which was a Northrop Grumman (NOC) spinoff. I know, this firm is basically the builder of the U.S. Navy's surface fleet, but maybe we're missing a commercial opportunity here? Maybe there is a U.S. competitor out there in the offing? This message is basically meant to be directed at President Biden and all U.S. legislators.
There is a reason almost all the largest non-military shipbuilders are located in Asian nations. Beyond South Korea, the top 10 are all in either China, Japan or India. These nations subsidize the industry in order to make the shipbuilders competitive. I am no socialist, Mr. President. That said, if we are to go down the path of a $3 trillion infrastructure package over a number of years, perhaps more important that many of the initiatives I see floating around in various articles written on the topic would be to incentivize U.S. corporations to once again become major players in commercial maritime transport.
Global trade is not going away. I heard you say you want to compete. Let's compete. Though non-military, this is a serious matter of national security. Think of the job creation. Good-paying, long-term union jobs. Mr. President, Madam Speaker... You can be heroes. O say, might that star-spangled banner yet wave.... over commercial shipping lines... on the high seas.... once again. Think big. Get aggressive.
While We're on Infrastructure...
... Readers may have noticed that Warren Buffett's Berkshire Hathaway (BRK.A) , (BRK.B) has made an $8.3 billion proposal to the state of Texas to form a new company that could add 10 (or so) gigawatts of gas plants and gas storage that the Texas grid could tap in order to prevent severe blackouts such as the one suffered earlier this year.
Does this make sense? Of course (I am long BRK.B, therefore I am probably biased). Is it feasible as the current make-up of both the executive and legislative branches of the U.S. government are far less fossil-fuel friendly than the last administration? Maybe not. The plants would be built at least partially at Texas power customer expense, and in return for its investment Berkshire asks for a 9.3% rate of return. Perhaps Texas does not go for the Berkshire plan. That said, Texas better come up with something. Winter is just nine months away.
On Thursday, equity markets reversed higher after a soft opening. Cyclicals led the way, as Financials took first place for good reason -- a weak seven-year note auction allowed longer-dated yields to rise as the Fed announced that major banks such as JPMorgan Chase (JPM) , Bank of America (BAC) , Citigroup (C) and Wells Fargo (WFC) would be permitted to increase dividend payouts to shareholders come late June provided they all successfully pass the next round of stress tests, which they are all expected to do. "Growth" took 10th and 11th places as the "great rotation" appeared to be back in place. Though the large-cap Nasdaq indices (the Composite and the 100) both closed almost flat for the day while small- to mid-cap stocks finally had their day, breadth was excellent across both of New York's primary equity exchanges.
Winners trounced losers and advancing volume dwarfed declining volume both downtown as well as up in midtown. The only drawback I see was a decline in aggregate trading volume for Nasdaq-listed securities. Not sure how to read that, though. As a negative, because breadth was so positive, or as a positive because the headline indices were not strong? Guess we'll know more in a few hours. It's still quite early. Equity index futures are shading green, but yields out on the longer end of the Treasury curve are also rising. I see the 10-year paying more than 1.66%.
With the end of the month/quarter coming next week, should we see rising equity prices on Friday, i see myself using the opportunity to shave winners in order to raise cash levels ahead of next week's expected volatility.
Federal Reserve Bank Vice Chair Richard Clarida spoke on Thursday. The vice chair spoke the same speak that we have heard from others, including the chair himself. "We are committed to using our full range of tools to support the economy." Clarida also steered the speech away from talk of tightening monetary policy. Then, he went off track a little.
Clarida, who I do like because he does tend to be a straight shooter, spoke on inflation possibly rising above 2%. He expects this potentially elevated level of inflation "to be transitory and for inflation to return to -- or perhaps run above -- our 2% longer-run goal in 2022 and 2023."
Uhm.. What? So, let me get this straight. We might have some increased inflation that could remain above trend through 2023. That's two to almost three years by my count, but don't worry, it's transitory.
You know what? About the only thing I think I dislike more than central bankers sounding like they think they can control inflation is central bankers sounding like they have no idea where or when inflation will strike, or if they have the appropriate tools to both control that inflation and foster economic growth. Gold remains cheap in my opinion.
Economics (All Times Eastern)
08:30 - Personal Income (February): Expecting -7.1% m/m, Last 10.0% m/m.
08:30 - Consumer Spending (February): Expecting -0.7% m/m, Last 2.4% m/m.
08:30 - PCE Price Index (February): Expecting 1.7% y/y, Last 1.5% y/y.
08:30 - Core PCE Price Index (February): Expecting 1.5% y/y, Last 1.5% y/y.
08:30 - Good Trade Balance (Feb-adv): Expecting $-86.1B, Last $-83.74B.
08:30 - Wholesale Inventories (Feb-adv):
Expecting -0.7% m/m, Last 1.3% m/m.
10:00 - U of M Consumer Sentiment (March-F): Flashed 83.0.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 318.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
No significant quarter earnings results scheduled.