FAST FIVE: Blain: "Anyone Betting The US And China Are About To Kiss And Make Up Is In La-La Land"
There is one very important secondary observation to make on the Argentina melt-down: one of main reasons we saw such a dramatic crash in bonds and the near 50% tumble in the stock market was the complete absence of serious market makers or broking. This isn't due to investment banks and traders not seeing opportunity in over-sold Argentina, but more a result of how capital regulations and trading rules have made it utterly non-economic to trade smaller, illiquid, risk markets. The market was opportunistic. We saw bid/offers wide enough to turn a supertanker thru – and it proved very difficult to execute any client orders.
(The truth is, an inversion is usually correct.) But a 2s/10s reversion is a serious deflationary signal. T-Bills (short-dated obligations of the government) say little about inflation and are usually bought by money market and short-term funds.
2-year Notes do factor future inflation and are bought by institutional investors as part of long-term investment strategies. It means the real money market has serious doubts on the future.
US Carbon offset credits are also rising – especially in California which has managed to reduce Co2 emissions below 1990 levels, largely by hitting transport sources via emission taxes. While the state posted 3.7% growth in 2017, Co2 emissions actually dropped! New Californian “Low Carbon Fuel Standard” laws demand transport sector reduce Co2 emissions. As a result Californian Carbon Offset prices are going through the ceiling.
Carbon pricing is here to stay, and its going to be massive. One of the alternative asset deals we're currently marketing produces CO2 Carbon Offset by extracting CO2 out of carbon fuels which can then be buried (sequestered) in old gas and oil fields and saline aquifers. Give me a shout and I will tell you all about it.