It’s shaping up to be a dismal cap to the year in Western Europe.
Skyrocketing power costs are crippling their citizens…
… and getting worse by the day:
Another day, another record high:
🇫🇷⚡️French 1-year forward baseload power hits €543 per MWh
🇩🇪⚡️German 1-year forward baseload power hits €414 per MWh(For context, the 2010-2020 average for both countries is about €45 per MWh) #EnergyTwitter #EnergyCrisis
— Javier Blas (@JavierBlas) August 8, 2022
If you think “Putin’s price hike” is bad here… you should see what things look like across the pond.
Natural Gas futures in the UK are still up over 700% from the 2021 lows:
UK Natural Gas Futures
Things are so bloody, the Brits are bracing for rolling blackouts all the way into January.
This kind of insanity usually only happens in backwater hell-holes of the 3rd world… and The People’s Republic of California (but I repeat myself).
It’s not the kind of thing you’d expect to hit some of the wealthiest and most well-developed economies in the world.
Of course, the sanctions on Russia have left Poland, Finland, Germany, and Bulgaria without gas…
And sure, you could blame some of that on bad luck with a dash of short-sightedness and weakness from the US and NATO…
But there’s still plenty of blame to go around.
10 years ago, when Nick Clegg was Deputy PM of the UK… he was asked about nuclear power…
He said it wouldn’t be effective because the plants wouldn’t come online until 2021.
This is some grim real life dramatic irony: Nick Clegg opposing nuclear power in 2010 because it would only come on-stream by 2021 or 2022. pic.twitter.com/LdUQQPzPfm
— Michael Lane (@mlanetrain) August 7, 2022
Talk about foot in mouth… yes, indeed old chum, it’s called planning ahead for your country’s energy security.
The Law of Supply and Demand has come home to roost… and it’s really digging its talons in.
We’re talking about pretty much all of the western EU zone being in a life and death bind…
It gets awfully cold in Dusseldorf and London come January after all.
The response to the pandemic has now created a systemic cascade of failure that has made markets so brittle…
… our economic cycle now resembles an EKG during a massive coronary.
Everyone seems to look to the Fed when things get hairy…
… but I wonder if we’re all a little too focused on what the endless sea of eggheads at the Fed are doing right now.
Sure, they’re a giant whale that can create massive waves in our pool of liquidity…
But, if Western Europe gets kneecapped by energy prices over the next year, that’s enough deflation to create significant price distortions.
Not that I’d anticipate a collapse of the global banking system, but Credit Suisse could end up evaporating before our eyes:
CS Chart
The United States could make up some of the difference and ease prices a bit…
But not before Germany pays the piper by bailing out their energy producers.
Germany Energy News Headline
The broad indices are nearing massive levels across the board…
So now is a very good time to start thinking about your positioning, and whether you need to cut a little fat, or throw in a few hedges.
The best way to figure that out is to get a hold of our Trading Roadmap.
It will expose the precise turning points in the market for better returns…
… without having to stay in the market too long.
Believe me, I’m not praying to the furies to deliver a future of chaos and pain just so I can make a dollar…
… but if I can find a silver lining in the dark cloud, I have no problem taking a shot on the long term trend.
