Sunday Coffee: The Retirement Slide

Monday will be next, though tomorrow’s “ChopShop Monday” will be interesting for those interested in tossing darts at where the future will land…

News Junkie Fix

What changed overnight is a widening of the same pressure system we have been tracking: energy, war, inflation and rates are becoming less separable. Diesel being up nearly 80 percent (year-on-year) isn’t helping.

The biggest development is in the Gulf. Drone attacks hit Saudi Arabia’s East-West oil pipeline, forcing a precautionary shutdown, while another vessel was struck in the Strait of Hormuz. Saudi shares opened lower Sunday. That matters because the East-West line is a major way Saudi crude can bypass Hormuz. The Houthi advance in Yemen is increasing pressure around the Bab el-Mandeb entrance to the Red Sea. Two of the world’s most important energy-shipping chokepoints are simultaneously under stress.

Ukraine also worsened over the weekend. Russia launched a large drone and missile attack against Ukrainian cities and infrastructure, while Ukraine continued striking industrial targets inside Russia. The military front may be relatively static, but the economic war is broadening: ports, factories, power systems and logistics are the targets. That is inflationary even before reconstruction costs.

Markets enter Monday with Friday’s relief rally sitting on a less comfortable foundation. Wall Street recovered sharply Friday as oil backed off its highs and inflation came in close to expectations. But Brent still ended the week above $100, Treasury yields pushed toward 5 percent, and markets moved heavily toward expecting a quarter-point Fed increase. The first useful signal will be Sunday-night futures and then whether Monday’s cash open confirms Friday’s rebound—or treats it as short covering before the Fed.

One other slow-moving story deserves watching. At the BRICS summit, China is pushing broader trade, AI and financial cooperation among the expanded bloc. That will not move the Dow Monday morning, but it belongs in the longer-term file: a parallel economic architecture continues to be assembled while the West is preoccupied with war, energy and interest rates.

Around here, this shorter report is part of the retirement phase-in. Daily public-side news handling will be compressed into useful changes rather than another retelling of everything everybody already knows. The heavier lifting is moving toward Peoplenomics and the Over-the-Horizon news project, where the object is not merely to summarize the present but to identify forward pressure points before they arrive.

Which gives us the week ahead. Monday tells us whether markets can digest $100-plus oil and near-5-percent Treasury yields without losing Friday’s footing. Wednesday is the main event: the Fed decision arrives at 2 p.m. Eastern, followed by the press conference at 2:30, and this meeting also brings updated economic projections.

Then Thursday turns from money to weather. NOAA’s September ENSO diagnostic arrived last Thursday and says El Niño is strengthening, with better than a 90-percent chance of becoming very strong this fall and winter.

The site to watch will be the CPC NOAA (Climate Prediction Center) Thursday,  when the new seasonal temperature, precipitation and drought outlook package lands. Short version: NOAA is not hiding a wet-Texas promise. They are saying the ocean is in a rare bin; the land response is still a loaded die, not a script.

The Weekend Ponders

The “life-impacting” list for this winter forks into human and naturally driven branches.  The human fork is still the global transportation and costs fire:

• Iran vs. (whoever) is driving oil higher and inflation with it.
• NATO is eyeing Russian escalation on Ukraine while energy dependence and stalling grain exports linger.
• China still wants Taiwan and North Korea the South.

The natural branching is similarly threatening:

• The ENSO changes are driving weather extremes including drought. Expect this to flip into too much water this coming winter.
• Which in turn drives extremes in food (still forming but in the pipeline)
• And that lights up additional inflation.
• Which is why the odds of a Fed hike are running well-over 80 percent this week.
• All of which adds to the inflation backdrop, making the approaching problem of an increasingly unpayable national debt stack even worse.

America is in an unusual – and to our eye, nearly Depression-similar – rain shortfall.  For now – the official “drought talk” is right around the 50 percent mark:

In “climate accounting” that 20.5 percent (D0 – Abnormally dry) may be added to your outlook without penalty (making it 69.6 percent abnormally dry).

Off to the Shop here.  While out there, I will focus on the “great imponderables” sequencing ahead,

• If oil doubles…
• Does money’s buying power effectively halve?
• If purchasing power halves, do gold and silver then double?
• And since debt must be paid, wouldn’t interest rates (and taxes) also double?

Then I will stop. Thinking about economics when running power tools is a good way to lose a finger or worse.  And that would screw up my dream of a concert pianist career in my nineties.

Write when you get rich – I’ll be Bach tomorrow….

George@Ure net