To The Moon

The benchmark, CRB Commodity Index, ended the week 1,3% higher

The energy sector was mixed. While refined oil products were correcting, crude was unchanged, only natgas was strong over the week.

Metals were the strongest sub-sector over the week.

Grains were mostly unchanged. Soybeans and Meal put in a solid performance but talked about those two in The Kuemmerle Report.

Softs were mixed as well, with Orange Juice and Sugar Nr.1 on the winner side. Crypto was modestly lower.

BTW The Commodity Report just turned 1!

Here I just want to say thank you for all the tremendous love and feedback the community is giving me so far on this journey. My goal is to provide the most practical commodity trading research out there. This will also be the aim over the next year. Thanks guys!

BTW If you would like to see more commodity and macro content like this - consider following me on Twitter @lukaskuemmerle

When energy and food are pricy - stocks have a tough time

We’re near all-time highs when it comes to food prices and when it comes to energy prices. Historically this is a bad environment for stock market returns. Once we see signs of a structural easing of food and energy costs or something like a peak, it will become interesting again to buy the “broader” stock market. Honestly, I don’t see that happening yet.

It’s a great time to be an energy operator

According to RystadEnergy, US oil operators will generate 180bn $ of free cash flow in 2022, at the current oil price level. But what will businesses do with those profits? I got a feeling:

In the past two years, balance sheets from energy operators have been greatly improved by a strong reduction in debt, dividends have been raised slightly, and the share prices of these companies have also surged rapidly, maybe also because of the fact that many companies bought back a lot of their own shares.Meanwhile, investments in new drilling activity remain low.Moreover, energy operators already started to reallocate big parts of their CAPEX to low carbon energy generation projects - like solar or wind.

On Thursday I will publish a new piece about the market dynamics in the oil market sector for all members. (3 pages long)

Elsewhere In The Macro World

Every month the Bank of America is providing us with positioning and sentiment information. Bith here I would like to highlight that sentiment is not a timing tool. I will explain that matter to you in the following cash allocation survey.

High cash allocation lead to renewed market rallies over the last 20 years. But here is what is even more important. Liquidity! True market bottoms after a prolonged bear market ONLY occur once market liquidity expands again and investor/fund manager sentiment reaches extreme pessimism.

Keep that in mind, because if I look at my metrics and market indicators I don’t think we’re there yet.

This week look out for:

• Fed Chair Powell speaks on Tuesday
• FOMC Meeting Minutes on Wednesday
• Core PCE Price Index on Friday