“You Better Brace Yourself”

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These were the words spoken by JPMorgan CEO Jamie Dimon at a recent financial conference. Mr. Dimon warned of an economic “hurricane” on the horizon, largely due to the Federal Reserve (the “Fed”) shrinking its balance sheet in response to high inflation (i.e., “quantitative tightening”), and the impact of the Russia-Ukraine War on commodities, including … Continued

Sigma Signals

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Equity prices staged a sharp recovery last week while the signals we monitor were largely unchanged. It is likely that the equity markets will continue to show outsized, trendless volatility. The mid‐term elections in November will increasingly absorb the attention of investors and the recent Supreme Court decision reversing Roe versus Wade may change the … Continued

Sigma Signals

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With a likely profitability recession looming, the valuation on the S&P 500 is now less favorable (green to yellow). China and India are building new coal fired electric plants while Germany recently announced it is restarting its plants. This could influence energy policy in the US and the rest of the globe as energy security … Continued

Friend-Shoring

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This is the new buzzword for the business strategy of running supply chains only through countries that are close political partners.  Businesses, mindful of the complications relating to the maintenance of supply chains in the face of unexpected challenges, such as Covid-19 and the war in Ukraine, are becoming increasingly cognizant of the increase in … Continued

Sigma Signals

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No signal changes this week. Inflation and the Russian invasion of Ukraine continue to dominate the headlines. The US economy is strong (rest of world, less so) but rising interest will prove a drag. Unlike past periods of heady economic growth, at present there is no sign of excess inventory on durable goods (housing and … Continued

Honey, I Shrunk the Economy

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Let’s hope that the Fed’s efforts to moderate inflation turn out to have the same happy ending as Disney’s movie, “Honey, I Shrunk the Kids.” As we all know, the Fed is currently in the process of bringing its financial arsenal into play in an effort to lower inflation levels and move back toward historical … Continued

Smoot-Hawley Tariff

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The Tariff Act of 1930, commonly known as Smoot-Hawley, was a law that implemented protectionist trade policies in the US.  Protectionism is the economic policy of restricting imports from other countries.  Proponents argued that protectionist policies would shield US producers, businesses and workers, while opponents believed that implementing protectionist policies would adversely affect consumers, and … Continued

Replacement Cost

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Investors should routinely make sure they understand how the companies they are considering account for their inventories.  Recent, politically driven allegations of oil industry profiteering, suggest that a better understanding of inventories, accounting and replacement costs, may be appropriate. Generally, most companies use either the Last-In, First-Out (LIFO) method or, First-In, First-Out (FIFO) method in … Continued

Electric Utility Overload?

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It is becoming increasingly apparent that the U.S. is in danger of not having enough electricity.  A number of electric-grid operators have warned that power generating capacity is struggling to keep up with demand.  This could lead to rolling blackouts during peak periods. There are a number of reasons for the increasing gap between generating … Continued

ESG?  Who Decides?

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Investopedia defines environmental, social and governance (ESG) criteria as a set of standards for a company’s behavior to be used by socially conscious investors to screen potential investments.  S&P has developed an index that purports to align investment objectives with ESG values.  This is all well and good, but investors should be sure that the … Continued

The Electric Utility Dilemma

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American electric utilities are currently faced with a need to make significant investments in an ageing grid, prepare for electric vehicle power demand, and transition to renewable energy sources while addressing increasing pressure from consumer advocates relating to residential electricity affordability. It’s supposed to be relatively straightforward.  Typically, regulated utilities determine what they will need to charge … Continued

The cure for inflation is more inflation?

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There may be some truth to this.  Along with almost everything else, the causes of, and potential solutions to, the U.S. inflation problem, are being politicized.  Depending on who you ask, our current inflation problem is caused by; Covid-19, supply-chain disruptions, wages, corporate greed, the American Rescue plan, and the war in Ukraine, to mention … Continued