Commodity & Infrastructure Insights

“The Fed’s an inflation creator, not an inflation fighter.” So said Paul Tudor Jones last week in an interview on CNBC. It’s doubtful that charge has been leveled at the Fed in at least half a century. William McChesney Martin ran the Fed for almost 19 years (1951-70) during a period that set the stage for the inflation of the 1970s, so it’s possible contemporaries were similarly critical. But it’s not a criticism that could have been made of Paul Volcker, Alan Greenspan or Ben Bernanke. Janet Yellen also avoided such a label although as Treasury Secretary she’s a high profile cheerleader of current policy.

The two front covers from The Economist, thirteen months apart, represent an overdue liberal education.

Covid introduced us to first-time meetings over Zoom. Last week I had the pleasure of meeting Jack Jeffords and Adam Bloomberg, from Mount Pleasant, SC, in person after having first met them both via a video call several months ago. Recognizing a familiar face along with the person’s voice reinforced how helpful it is to chat on a screen when traveling to a meeting isn’t practical. Like it or not, zoom is now an adjective (although we prefer Microsoft Teams).

Last week’s FOMC meeting for once gave the market something to ponder. The $120BN of monthly bond buying looks set to taper before the end of the year, and to be down to zero by next summer. Fed buying of mortgage-backed securities has been especially superfluous, as shown by the red-hot housing market.

What a difference a year can make. In 2020, natural gas prices declined to multi-year lows. According to BP's 2021 Statistical Review of World Energy, prices at U.S. Henry Hub averaged $1.99/mmBTU – the lowest since 1995. Asian LNG prices, meanwhile, declined to their lowest level on record ever.

For years environmental extremists have campaigned with increasing success for less investment in fossil fuels. The logic has been that as CO2-emitting sources of energy become harder to access and more expensive, the world would increasingly turn to renewables.