
ENERGIE: La moyenne mobile à 7 ans a cassé, On vous explique tout! Par Charmes et Emmanuelle Gave
AI Summary
The ongoing crisis in Iran continues to impact global events, particularly concerning oil. Despite claims of victory from certain political figures, the situation remains unresolved, leading to significant consequences, especially for energy markets.
A crucial development is the breaking of the 7-year moving average for oil prices on March 27th. This indicator, when the oil price (black line) falls below its 7-year moving average (red line), signals that oil transformation is no longer profitable, leading to financial losses for those involved. While this could be a false signal if the conflict ends quickly, the current situation, with the Strait of Hormuz remaining blocked, suggests otherwise. Such a break has historically been associated with difficult periods for investors, having occurred only a few times in the last century.
An analysis of a global oil flow map reveals key vulnerabilities. Most oil from the Strait of Hormuz goes to Asia, Africa, and Europe. Latin America, Canada, and Russia are less dependent, having their own supplies. Australia and Korea are particularly vulnerable due to a lack of strategic oil reserves, while China has over a year's supply. The U.S. is self-sufficient in energy. This highlights Europe, Africa (especially the lower half), and parts of Asia as the primary areas of concern for energy tensions.
In response to a potential energy crisis, certain investment strategies are being considered. The portfolio discussed includes a 25% allocation to oil stocks, which have performed well. Gold is also expected to do reasonably well after a recent dip. Japanese bonds, which historically perform well during energy crises as Japanese investors repatriate funds, are another key component. This phenomenon, observed since 1975, sees the yen rise and Japanese bonds appreciate when external investments become less profitable. This makes Japanese bonds an "anti-fragile" asset, tending to rise when other assets fall, similar to gold.
The current situation suggests that yen and Japanese bond positions, which have previously been costly, may now become beneficial. This portfolio, with energy values, the yen, and gold, should largely hold up, with Chinese and Asian stocks being the main vulnerability.
The energy crisis is expected to lead to rising interest rates, which will significantly impact France's budget deficit. With 40% of the debt stock issued at zero interest, replacing it with 4% rates will dramatically increase debt servicing costs. Additionally, recent tax increases in France, levied on an already struggling population, combined with rising oil prices, are likely to exacerbate social unrest.
Beyond oil, the crisis also affects agricultural raw materials. Approximately 30% of raw materials for agricultural fertilizers come from the same region and are impacted by the Strait of Hormuz blockage. This could lead to a significant increase in food prices. Farmers, facing rising fertilizer costs, might shift to crops requiring less fertilizer, like soy, leading to an oversupply of soy and a shortage of essential grains like wheat and corn, further driving up food prices. This combination of rising interest rates, food prices, and energy costs will heavily burden low-income households.
The situation in North Africa is particularly concerning, as countries like Egypt, with its 120 million inhabitants, heavily import wheat and could face severe social crises if food prices surge. Water access, while not an issue in the Middle East due to desalination, is a potential flashpoint between Turkey and Syria, and between China and India due to upstream damming.
The Middle East crisis has also damaged or idled numerous large oil refineries, leading to historic highs in refining margins. This benefits companies like Total, which own refineries, but drives up prices for refined products.
Regarding gold and interest rates, the common assumption that rising rates lead to falling gold prices is nuanced. Countries with large savings surpluses, like China, Korea, Taiwan, and Japan, can allow their currencies to appreciate to offset rising oil prices, potentially causing gold to reach new highs in these currencies. However, in Europe, with its large external and internal deficits, currencies are likely to fall, making gold a necessary hedge against solvency issues. Therefore, for European investors, selling gold would be ill-advised.
The U.S., while energy self-sufficient in this crisis, still faces significant fiscal challenges. Social spending and debt service already consume 108% of American tax revenues, meaning all defense spending is borrowed. The obsolescence of large aircraft carriers, demonstrated in recent conflicts, highlights misguided defense spending.
For investment opportunities, a balanced portfolio including Canada and India is suggested. Canada is energy self-sufficient and has abundant water. While currently at odds with the U.S. over oil sales to China, Canada could potentially supply India via its West Coast. India, despite its high valuations, remains a promising market.
The discussion also touched on the increasing "peoplization" of politics, with politicians engaging in celebrity-like behavior.
The idea of a "petro-currency" is explored, with the possibility of a Chinese currency becoming a dominant reserve currency in Asia through direct financing and swaps. The euro, however, is seen as an impediment to a dominant European currency, leaving Europe as an "open territory" vulnerable to external forces. Germany's industrial base is suffering, and no European country possesses the necessary savings surplus to stabilize the region. The U.K., despite North Sea oil reserves, has made them uneconomical through high taxation, further contributing to Europe's "economic and ecological suicide zone."
For investors, avoiding government bonds in Europe and the U.S. is advised. Japanese bonds, however, are considered a good idea due to their anti-fragile nature during crises, offering a counterbalance to other market movements.
The recent drop in gold prices is attributed to market mechanics, including forced sales by central banks (like Turkey's) due to margin calls on leveraged positions. Despite the dip, gold has still risen significantly over the past year. For European investors, holding gold remains crucial as a safeguard against potential solvency issues.
The overall portfolio strategy emphasizes a balanced approach with stable components (gold, Japanese bonds, oil stocks) and a smaller, more volatile equity portion. The goal is to avoid timing the market and instead build a robust portfolio that can withstand various crises.
The banking system and real estate are also discussed. Banks, particularly French ones, are likely to be impacted, while Asian banks are expected to fare better. Real estate prices in major cities like Paris are inflated due to low interest rates and foreign investment, making them unaffordable for local residents and indicating a market disconnected from local economic realities.
The current market environment, characterized by "noise" and a disconnect from economic fundamentals, requires investors to focus on "heavy trends"—real, underlying forces that are often overlooked. The "VIX" or fear index, and the concept of "tail distributions" where all assets become correlated during market crashes, highlight the importance of diversification across different asset classes and geographies to avoid contagion.
The potential for "underwater explosions" in the financial system, where initially small failures lead to larger, unforeseen collapses, is also a concern.
Finally, for new investors, the advice is to invest in a diversified portfolio as a whole, rather than trying to time individual asset purchases, which is a different and more challenging skill. The current energy crisis, fueled by geopolitical instability, is likely to accelerate the realization that Europe's current policies are unsustainable, potentially leading to significant economic and social upheaval.