thanks Russell for this update: does this theme favour US natgas prices, and hence any refiners that are listed and export now heaviliy into EU, UK and Japan/Korea desperately in need if this war gets extended let's say beyond 90d as gas storage gets depleted for many countries, so US natgas prices have to come UP to EU levels which are more than 5x higher I guess now, wouldn't it make sense to buy massively into US natgas directly and possibly into US natgas export refiners (not sure which comps are exposed to refinery in US natgas export hubs...)
only issue is most US exports are capacity constrained, so not easy to boost volumes... if however the Middle East was to become permanently inaccessible - thats another story
I too started in financial markets when the C/A and Trade Balance where all that mattered for Aussie, it makes Aussie look so cheap now but markets don’t care. AUDJPY and being unhedged AUDUSD for Superfunds worked as a risk hedge perfectly until everyone started using it as such. Big risk for Superfunds if there’s a correction in US equities and the AUDUSD goes up!
Your energy security is a great way to look at the last couple of weeks, as the USD-Crude correlation heads to 1, but I’m not sure outside of crisis it is sustainable, especially when Dec28 Crude is only up to 66 from 60. Short EURCAD has been a neat way to play energy security. Cheers
Russell, thank you for this. What do you think of the AUD/USD now? As Australia is a major exporter of gas, uranium and coal and an importer of oil and refined products, the short term seems somewhat problematic but long term sounds bullish if I understand your arguments correctly.
Aussie seems to be tracking JPY,KRW and TWD... all should be stronger but are not... In a way face the same issue - if you are an American ally, but mainly trade with China how secure are you really? Still hard to go past gold over AUD for me.... at least I know the Chinese will buy gold.
To your last point, GBP has been strong vs USD and EUR even (looking back since Brexit), among other crosses. And GBPJPY cross is near its highs. Based on your last paragraph, it would seem the latter would be an excellent way to asymmetrically play this theme. Hasn't worked yet though.
Very well considered here Russell. I have had an extraordinarily difficult time understanding why investors would think Europe or Japan would do well going forward given the energy equation, with the former mostly self-inflicted, and the latter merely unlucky.
I also agree with the bifurcation narrative as I have come to the belief that we are going to see two basic currencies in the world going forward, USD stablecoins and a digital CNY. I have a feeling those two will ultimately dominate everything else, and other nations will be dragged along kicking and screaming, but dragged along nonetheless.
thanks Russell for this update: does this theme favour US natgas prices, and hence any refiners that are listed and export now heaviliy into EU, UK and Japan/Korea desperately in need if this war gets extended let's say beyond 90d as gas storage gets depleted for many countries, so US natgas prices have to come UP to EU levels which are more than 5x higher I guess now, wouldn't it make sense to buy massively into US natgas directly and possibly into US natgas export refiners (not sure which comps are exposed to refinery in US natgas export hubs...)
only issue is most US exports are capacity constrained, so not easy to boost volumes... if however the Middle East was to become permanently inaccessible - thats another story
I too started in financial markets when the C/A and Trade Balance where all that mattered for Aussie, it makes Aussie look so cheap now but markets don’t care. AUDJPY and being unhedged AUDUSD for Superfunds worked as a risk hedge perfectly until everyone started using it as such. Big risk for Superfunds if there’s a correction in US equities and the AUDUSD goes up!
Your energy security is a great way to look at the last couple of weeks, as the USD-Crude correlation heads to 1, but I’m not sure outside of crisis it is sustainable, especially when Dec28 Crude is only up to 66 from 60. Short EURCAD has been a neat way to play energy security. Cheers
One thing I have learnt is that is good to use old relationships to trade - but at the first hint of divergence - dump them!
Russell, thank you for this. What do you think of the AUD/USD now? As Australia is a major exporter of gas, uranium and coal and an importer of oil and refined products, the short term seems somewhat problematic but long term sounds bullish if I understand your arguments correctly.
Aussie seems to be tracking JPY,KRW and TWD... all should be stronger but are not... In a way face the same issue - if you are an American ally, but mainly trade with China how secure are you really? Still hard to go past gold over AUD for me.... at least I know the Chinese will buy gold.
To your last point, GBP has been strong vs USD and EUR even (looking back since Brexit), among other crosses. And GBPJPY cross is near its highs. Based on your last paragraph, it would seem the latter would be an excellent way to asymmetrically play this theme. Hasn't worked yet though.
I think the UK is more energy secure than Japan - but becoming less so... so strong GBP v JPY makes sense...
read my article i have on GBPUSD mate thanks for supporting
Very well considered here Russell. I have had an extraordinarily difficult time understanding why investors would think Europe or Japan would do well going forward given the energy equation, with the former mostly self-inflicted, and the latter merely unlucky.
I also agree with the bifurcation narrative as I have come to the belief that we are going to see two basic currencies in the world going forward, USD stablecoins and a digital CNY. I have a feeling those two will ultimately dominate everything else, and other nations will be dragged along kicking and screaming, but dragged along nonetheless.