In a recent November Monday Club, arranged by Global Growth Advisory Group LLC, a group of financial executives in New York discussed the likelihood of a U.S. economic recession. Inflation is still at the highest rate in four decades and the Federal Reserve is unlikely to reverse policy course anytime soon. The market earlier believed that the Fed might pivot to a more moderate stance on interest rate hikes, but it seems clear that the Fed’s measures have not been enough and there will not be a pivot any time soon. The Fed has done a poor job predicting interest rate and inflation movements and an even worse job battling the inflation. They started with rate hikes far too late, and the hikes have been far too modest. Inflation is a lagging indicator and does not unusually decline until unemployment rise and the economy enters a recession. The historic experience is that higher unemployment is necessary to reduce inflation. This makes it exceedingly difficult for the Fed to tighten just as much as needed to reduce inflation while at the same time avoid a recession. Given their recent track record, there are no indications that they have a solid plan, but rather go ... Continue Reading about Will there be a U.S. recession?
Recently, the Monday Club organized another interesting event, this time the topic was “Sanctions as a tool for U.S. foreign policy – pros & cons” The panelists were Amar Bhide, Professor at the Fletcher School of Law and Diplomacy, Tufts University, Fergus McCormick, Director of Sovereign Research, Emerging Markets Investors Alliance, Former Chief Economist and Head of Sovereign Ratings, DBRS and Eric Lee, Energy Strategist, Commodities Research, Cititgroup. Eric framed the discussion with an overview of sanctions as a tool historically and argued that sanctions fall into a broader group of economic measures such as promoting free trade or imposing tariffs or quotas. Both international legitimacy and implementation effectiveness tend to depend on building international coalitions. Eric mentions that both Iran and Venezuela are resisting U.S. sanctions and they find other ways to cope or weather the pain for a while and somehow find alternatives. Specifically to energy, oil sanctions can drive higher oil prices, which hits oil consumers economically and politicians do care about oil prices, especially with upcoming elections. Fergus is more focused on Venezuela and the ... Continue Reading about Sanctions as a tool for U.S. foreign policy – pros & cons
On November 13, the Monday Club organized another interesting event, once again focused the energy sector, and this time the topic was liquefied natural gas. The panelists were Reza Haidari, Head of Natural Gas Research at Refinitiv (formerly Thomson Reuters) in New York, and Nikos Tsafos, Senior Fellow at the CSIS; Center for Strategic & International Studies, Energy and National Security Program, in Washington DC. 23% from our energy comes from natural gas, so the topic is highly relevant and the U.S. is slowly becoming an important exporter of gas. Globally, 70% of gas is consumed in the country where it is produced, primarily due to logistical matters. Around 30% of the annually produced gas is exported, 2/3 is via pipeline and 1/3 is liquefied and transported accordingly. The process of liquefying gas is relatively straightforward and the gas has an approximate 600 times shrinkage, enabling the liquefied gas to be transported via specially built vessels and ships. At the same time, to retrieve gas is very capital intensive. A recent gas production facility is Alaska costs $45 billion and has a time horizon of payback of around 20-25 years. In terms of global U.S. ... Continue Reading about The rise of U.S. LNG exports: Strategy and global implications
The Monday Club event on May 21st focused on the changing global energy marketplace. The speaker was Eric Lee, Commodities Strategist from Citigroup, based here in New York. About 35 people attended the event from firms such as Citigroup, HSBC, UBS, GE and Institutional Investor to mention a few. So what does an energy superpower even mean? Traditionally, we likely think about OPEC, in particular Saudi Arabia, and potentially also Russia, in terms of dominant energy producers impacting the global markets and playing significant geopolitical strategic roles as a result of their energy resources and power. In the rapidly transforming global energy market with more advanced technology, alternative energy sources, more global export capabilities and political structural changes, the U.S. is playing an increasingly active global energy role. As a matter of fact, the U.S. is already the 3rd largest oil and gas producer and is increasing its global exports steadily. According to Eric Lee, the current global oil production is about 100 million barrels a day with U.S. production of 10.7 million barrels and increasing. There seems to be an ongoing expansionary U.S. strategy, both in ... Continue Reading about Is the U.S. the new global energy superpower?