The energy crisis in Europe is set to persist

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In his podcast discussing the markets today, Louis Navellier offered the following comment.

If you would like to listen to this commentary, please click here.

Treasury fears

I realize that the stock market is a lot like NASA’s new moon rocket, which didn’t launch this week. What has been thrown around recently are Treasury yields and fears are growing that the Fed’s balance sheet reduction will drive up yields on Treasuries, notes and bonds significantly.

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Q2 2022 Hedge Fund Letters, Talks & More

Recent green energy initiatives passed by Congress, along with the student loan relief announced by President Biden are expected to put enormous pressure on the US fiscal deficit, which will in turn put upward pressure on Treasury yields.

I argued that a strong US dollar should continue to attract more foreign buying pressure, but unfortunately, until we can analyze bid-cover ratios at future Treasury auctions, that this Foreign purchase may or may not offset skyrocketing US federal government spending is uncertain at this time.

Interestingly, Treasury Secretary Janet Yellen was reportedly not in favor of student loan relief, possibly because it would apparently spoil her pending Treasury bids which are now due to be increased in the coming months.

Russian chaos

The other wild card impacting the markets is Vladimir Putin as energy markets remain elevated as most of Europe scrambles to break away from Russian crude oil and natural gas. Putin recently replaced his longtime ally Defense Minister Sergei Shoigu due to his frustration with the Ukrainian invasion. Additionally, six close Putin aides were shot or blown up, so Putin’s inner circle has become increasingly isolated since Moscow is no longer safe.

Whether or not these assassinations emanated from within Russia or from Ukrainian special forces, as claimed by the Russian media, is uncertain. As a result, there is a growing possibility that there will be regime change in Russia that could disrupt the crude oil and natural gas markets.

In the event of a ceasefire between Russia and Ukraine, after Putin, the stock market could explode by 40% upwards. However, as long as Putin remains in power, the Ukrainian invasion is likely to persist in a long war and Putin will continue to use energy as a weapon to punish the West.

Russia is closing its Nord Stream 1 gas pipeline for maintenance on Wednesday and will give Europe a taste of how it should learn to do without Russian natural gas.

Some European officials say they have secured enough natural gas to avoid rationing this winter, but are struggling to replace Russian natural gas for 2023 and beyond, despite LNG imports from Canada, Qatar and the United States. The other alternatives from Europe are a new natural gas terminal. in Estonia from Norway and the extension of a gas pipeline from Spain.

The electricity crisis in Europe

Regardless of where Europe gets its natural gas, the net result will be much higher utility bills. Since Europe has an elderly population, these high utility bills cause huge social problems as an increasing number of people cannot pay their utility bills.

The European Union (EU) said on Monday it was preparing to intervene in the short term to mitigate soaring electricity costs. European Commission President Ursula von der Leyen is expected to provide details on how the EU will step in to help consumers facing high natural gas and electricity costs.

The EU should impose a price cap system like Spain uses. The only problem with the price cap is that it could cause shortages in the future, so Europe’s electricity crisis is likely to persist for the foreseeable future.

The best news this week is that the Conference Board announced on Tuesday that its consumer confidence index jumped to 103.2 in August, from 95.3 in July. The current situation component rose to 145.3 in August (from 139.7 in July) for the first increase since March and the expectations component jumped to 75.1 in August (from 65.6 in July).

This is the first increase in consumer confidence after three consecutive monthly declines. Based on Best Buy’s better-than-expected results this week and growing consumer confidence, there is now growing hope that retail sales will outpace inflation in the coming months.

Coffee beans

While tennis has grabbed the headlines ahead of the US Open, it no longer captures the imagination of American sports fans, with just 15.5% subscribers according to a poll. Football is the most popular sport in the United States with 74.5% of Americans following the sport, followed by basketball at 56.6%, baseball at 50.5% and boxing at 23.4 %. Source: Statistics. See the full story here.

Mary I. Bruner