“we must cultivate our garden.”: Treasury yield plus inflation equals WTI in the 80s
Last week the 10-year U.S. Treasury yield hit its highest level in over 15 years and netted its fifth straight week of gains. Since the yield curve is still inverted, there appears to be more room for the the 10-year to run, which could really make potential first-time home buyers cringe as mortgage rates climbed over 7%. Smoke signals out of China are definitely grim, with poor economic news coming from Chinese property companies. US equities certainly got spooked, as the Nasdaq hit a 10 week low. As fixed income investments become more attractive, potential stock market investors are saying “hmmmmm”. The oil markets will certainly have their eyes on China. Brent crude finished the week at $84.12 a barrel, with WTI nestling at $80.93 a barrel. U.S. crude oil inventories fell by nearly 6 million barrels last week.
Last week also marked the anniversary of the signing of the Inflation Reduction Act (IRA). Embedded in the bill are climate protection goals which aspire to a 40 percent drop in energy-related emissions by 2035 and 55 percent by 2050. Meanwhile, in Brazil, electric vehicles keep stubbing their toe when compared to the very popular flexible-fuel cars which run on a mix of gasoline and ethanol. They are made locally, and are very affordable. Does anyone remember Donald Burr, the CEO of People’s Express airlines? He famously said, “We believe that if you respect people and give them a good deal, they’ll use the hell out of it.” Even though his hubris ran his airline into the ground, his assessment of consumers remains profoundly intact. So while the IRA has incentives for investment in carbon capture and SAF, it ultimately has to make economic sense to consumers. You cannot sustain a food vs. fuel tradeoff and you can’t afford to keep doling out endless credits to support it. Right now, The Tank Tiger is seeing a flurry of storage demand activity in this space. Why? It’s likely because no one wants to be without a chair when the music stops.
What might make a lot more sense, for now, is for everyone to use 10% less energy. Remember Voltaire’s classic: Candide? Il faut cultiver notre jardin, “we must cultivate our garden.” Perhaps we should focus on tending our own livelihood and welfare, not taking more than we need. We should leave our neighbors alone and not be so concerned about what they do in their gardens. To be at peace in the world, Voltaire argued, we must accept the world as it is, not as we want it to be, and give up utopian ideas of societies perfected by science and reason. A happy, fulfilled human life is entirely possible, Voltaire suggests. If everyone cultivated our own gardens, the sum of the parts just might lead to human happiness in general. Speaking of gardens, check out The Tank Tiger harvest from The Garden State last week:
