Monday, 11 October 2021 — Laramie, Wyoming

By Dan Denning Editor, The Rum Rebellion

[7 min read]

Some days you wake up and make the mistake of reading the news. And then the thought crosses your mind that maybe the human race ‘peaked’ with the Moon landing in 1969. That was the apex of our ability to accomplish complicated things. It’s all been downhill since.

Not everyone might think that way. After all, today seems pretty amazing, if you measure it by the quantity and quality of our gadgets. Our mobile phones, for example, would probably blow away NASA engineers from the Apollo missions. The devices would seem almost magical to someone living just 50 years ago.

But did you know the lights went out in Lebanon this week? All of them. Everywhere. And it was the second time this month it’s happened. The country’s two main power companies ran out of fuel.

The army saved the day eventually, delivering 160,000 gallons of fuel to get the plants running. But you have to wonder, at least I wonder, if the world is too complex and interconnected now to survive major disruptions. Complexity can make a system more fragile. Soaring energy prices, clogged ports worldwide…yes…it’s all looking very fragile.

In Europe, benchmark natural gas prices are up 500% this year. Regulators in France, Spain, and Italy have intervened to cap retail electricity prices. They’ve also removed some charges paid by small- and medium-sized businesses that were earmarked to subsidise renewable energy. A long, cold winter approaches, and Europe finds itself with too little gas set aside in reserve.

To be fair, no one in Australia is probably going to Europe anytime soon. It’s Europe’s problem. And if you’re reading this from Australia, you can’t leave the country yet anyway. And summer is coming in the Southern Hemisphere. Let the Europeans shiver in the dark, right?

But the energy ‘crisis’ is a worldwide affair now. Why? Two reasons. First, rising gas prices are having knock-on effects for coal and oil. Those old fossil fuel standbys are rising in price too, whether you’re in Europe or not. Global energy markets — including pipelines, LNG terminals, and ships that carry LNG — are interconnected and interdependent.

For example, China may have to ‘unpunish’ Australian coal producers. Earlier this year, China cut off imports of Australian thermal coal as a way to punish Australia for its support of an investigation into the origins of the Wuhan virus (hint: it came from a Chinese lab in Wuhan). Now, faced with slower GDP growth from the forced deleveraging in the real estate sector (Evergrande), reduced electricity output threatens to slow down Chinese factory productivity (and perhaps drive export prices higher). Expect China to import more Aussie coal to fill the gap.

The second reason that the energy ‘crisis’ is global is that people have begun to realise the so-called ‘energy transition’ — where we move to a net-zero world of carbon emissions and everything is clean and electric — is a big, fat fraud. The dawn of this fantasy world is neither imminent nor inevitable.

And if it does happen, and even if you stipulate it’s a desirable outcome, it will take decades — not years — to ‘transition’ from fossil fuels to renewables. Many industries will be caught off guard dealing with unintended consequences and problems. What do I mean?

Take electric vehicles. If you have a Chevy Bolt — Chevrolet’s flagship EV — you’ve been told by the manufacturer not to park it within 50 feet of other cars in a parking garage. Park it on the top floor if you can.

And try not to park your Bolt close to anything that you value which could catch fire. This is all according to guidance sent out by GM earlier this week in response to 12 confirmed battery fires in the company’s EVs. GM had already issued a recall of 141,000 vehicles to fix the problem.

The good news? After a bitter and brutal decade, energy stocks on the S&P 500 are off to a ripper this year. The second is outperforming both the broader index and even the tech sector. See the chart below:

Energy is our ‘Trade of the Decade’ at The Bonner-Denning Letter. If we’re right, you’ll see a renaissance in ‘old economy’ industrial stocks and energy companies. They’ve been starved of capital by fund managers and analysts who’ve bought into the hype about the energy transition. Now, when we need it most, we find you can’t flick on the supply of energy like a light switch.

It takes years of finding resources. It takes billions in exploration budgets and then capital investment to bring those resources to the market. It doesn’t just happen. And when it doesn’t happen, the lights go out.

Not that the lights will go out in Sydney anytime soon. Australia has abundant energy resources. But don’t put it past the country’s politicians to inflict some economic self-harm by committing to stupid and unattainable emissions goals. Why on Earth would they do that?

First of all, they’re stupid. That applies to all of them generally, regardless of the particular policy. But secondly, at some point, there’s going to be a pivot from the COVID emergency to the ‘climate emergency’. A fully-vaccinated country with freshly opened international borders can’t be kept in permanent fear of the virus.

But — and here’s the important thing — all the same measures taken to control, intimidate, and bully you because of the pandemic can ALSO be used against you because of a ‘climate emergency’.

Restrictions on travel (carbon emissions), on the food you can eat (measured by the carbon it takes to produce that food), and even on how much money you can spend (credit cards and central bank digital currencies where your spending is capped based on your carbon output)…all of these things are on the table for the control freaks and sociopaths who brought you 18 months of lockdowns, public health orders (instead of laws), and numerous mandates of questionable legal validity.

Yeah, there are some days where you can imagine the world would be better off if Facebook crashed and never came back. A world without the constant scream machine of social media would be quieter, more civil, and better informed. That’s why we’ve recommended you delete your social media to improve your quality of life (and the quality of your thoughts).

But if the lights go out and stay out, or we get power rationing and rolling blackouts, well, that’s a different story. That’s the story of the coming digital feudalism — where technology, energy, and wealth are controlled by an elite caste who run government and use the police and the military to keep ‘the people’ in check.

That world is too depressing to contemplate to start off the week. So I’ll leave it for another time. In the meantime, buy yourself a generator just in case. It never hurts to be ready for an emergency…before it’s declared.

Regards,

Dan Denning,
Editor, The Rum Rebellion

The Bonner-Denning Letter is co-authored by Port Phillip Publishing founder Dan Denning and legendary investment writer and publisher Bill Bonner. It connects the dots between markets, politics, and history as one of the only macroeconomic, ‘top-down’ newsletters in Australia. For a big picture perspective on the past, the present, and your investment future, click here for details on how to subscribe.

By Bill Bonner Editor, The Rum Rebellion

We ended last week as we began it…with our gast flabbered by the news.

The week was dominated by the debt ceiling hoax…in which one party earnestly tried to save the nation…while the other was determined to send it into a dark spiral of default and catastrophe.

At least, that’s the way the elite press described it.

Actually, there was never any danger of default. The feds get plenty of money from taxes to cover debt payments.

And there was never any real danger that they would fail to raise the debt ceiling. After all, debt — selling US bonds to the Federal Reserve (aka ‘printing money’) — is mother’s milk to both Republicans and Democrats…and the whole ruling elite. None of them want to be weaned.

And we looked more closely at how this affects its big beneficiary — Wall Street.

As intended, low interest rates forced investors to take their money out of real investments and move them to options, tech fantasies, memes, and razzmatazz speculation.

Last year, for the first time ever, option trading exceeded stock transactions.

Dick’s Sporting Goods has doubled over the last 12 months. Tesla has almost completed the double, too.

Of course, Elon Musk, of Tesla fame, has famously disrupted everything. We’re not sure what Dick has disrupted…but we’re sure he’s got a good racket going, too.

No sad faces

We looked at how profitable investing in the stock market has been — with the S&P 500 up nearly 30% over the last 12 months…and some university endowments up over 50%.

But since the economy is growing at…maybe…5% — using our estimate of GDP growth as the measuring stick — these gains cannot possibly be coming from real increases in profits or win-win wealth.

Instead, they must be casino-style winnings…from a win-lose, zero-sum game…where one player wins and the other goes home with a sad face and an empty pocket.

It caused us to wonder. With so many happy faces in view…where are all the sad ones?

Oh, dear reader, you know…don’t you? They’re in tomorrow’s news, aren’t they? When stocks crash…and consumer prices soar.

The Fed added about US$4 trillion to its balance sheet (new money!) since March 2020. Someone will have to pay for it.

Pied Piper of Tesla

Returning to Elon…of course, he is a great showman…and has become a kind of pied piper for the frenzied players. When he puts the pipe to his lips…the casino goes quiet…and then, all dance to his tune.

All he’d have to do would be to mention that he likes tacos…and there’d be a run on salsa verde.

Think we’re joking?

Here’s Joanna Ossinger at Bloomberg:

‘The Shiba Inu cryptocurrency is now the world’s 20th-biggest by market value and has more than tripled in the past week, partly fueled by Elon Musk’s latest tweet about his own puppy.

‘The SHIB token, centered around a breed of Japanese hunting dogs, is up another 69% in the past 24 hours, according to CoinGecko pricing, putting its market value above $10 billion. […]

‘A tweet by Tesla Inc.’s boss late Sunday night U.S. time with a picture of a dog and the comment, “Floki Frunkpuppy”, may have also contributed to the frenzy. That followed a tweet in June that said, “My Shiba Inu will be named Floki” and one last month that read “Floki has arrived.”’

Artful dodger

Meanwhile over in the art market…something amazing happened. Logical…almost inevitable…but still insane. CNN reports ‘A museum lent an artist $84K — so he kept the money and called it “art”’:

‘When an exhibition about the future of labor opened at a Danish art museum on Friday, visitors should have seen two large picture frames filled with banknotes worth a combined $84,000.

‘The pieces were meant to be reproductions of two works by artist Jens Haaning, who previously used framed cash to represent the average annual salaries of an Austrian and a Dane — in euros and Danish krone respectively.

‘But when the Kunsten Museum of Modern Art in Aalborg took delivery of the recreated artworks ahead of the show, gallery staff made a surprising discovery: the frames were empty. Rather than being the handiwork of thieves, the loaned cash was missing thanks to Haaning himself, who says he is keeping the money – in the name of art.’

He’s got a point. Art is whatever they say it is. If you will pay thousands of dollars for a blank canvas…why not pay as much for no canvas at all?

Fantasy investing

Meanwhile, the non-fungible token (NFT) market imitates neither art nor life. Neither fish nor fowl. Neither animal, mineral, nor vegetable. Neither stock nor bond.

When you buy an NFT, you get nothing other than the record, entombed somewhere on the blockchain, confirming that you were the dope who bought it.

And thanks to a new NFT platform called Visionrare, you can pretend to invest in start-up stocks…but as a pure game.

You do not actually own the stocks. You just bet on whether they will go up or down in a complicated, fantasy league kind of approach. TechCrunch’s Lucas Matney explains that the idea is to…

‘…take the gamification of investing to its furthest end, mimicking the appeal of fantasy sports leagues and giving users a way to compete with friends by betting on startups they think will be successful. Users can bid on NFT shares of hundreds of different startups at auction and compete to build the best performing fake portfolio.’

Does that sound like fun? No, not to us anyway.

The gamblers didn’t seem to like it either. The concept — fantasy football meets start-up investing — looked like a loser from the get-go.

And for its sponsors, tomorrow came quickly…

Less than 24 hours after it began, Visionrare was pronounced dead.

Today, the long faces are expected to gather at the grave.

Regards,

Bill Bonner,
For The Rum Rebellion