Opinion

Newton’s second law states that impact equals mass times speed. It is my conviction that sustainable investors have a greater impact than they often think. Not so much because of the speed, but because of the increasing mass. In the financial markets, it is the marginal buyer and the marginal seller who determine the new balance and it is here that sustainable investors give the right push.

The Earth should really be called “water”, because 71 percent of our planet is covered with water. Water in abundance, but only 1 percent of all that water is clean and accessible freshwater. Of that, two-thirds goes to agriculture and other food. The need for water increases with the growing population, a population that is also eating more meat.

Ultimately, the price of oil is determined by supply and demand. What is special about the oil price is that, in theory, there are several equilibrium prices. This is because a large part of the supply is linked to a state budget. Where normally the supply goes down when the oil price goes down, there are countries that in the past pumped more oil to realise the same yield.

Knowing that the final price is determined by the marginal buyer and the marginal seller, identifying these two parties is essential for predicting the oil price.

The fall of Kabul may be the proverbial drop in the ocean with major consequences for the United States, China, Europe and even the world. It reinforces the call for change that may result in a new world order.
 

The IPCC report is widely seen as disturbing and alarming. The urgency is clear. The most important consequence for investors is that it will lead to more inflation. After all, the report’s obvious aim is that more must be done to combat global warming.

The moment the government starts determining what you are allowed to earn as an investor, it is usually wise to be gone. In Europe, there is more regulation than in the United States. In some cases, such as in the financial sector, there has been de facto nationalisation since the Great Financial Crisis. The average bank employee has to deal with more rules than the average civil servant. 

Jay Powell was appointed by Trump. Trump denied Janet Yellen, the previous chair of the Federal Reserve, another term in 2018. Trump preferred to have his own pawn. He did not succeed. Powell and thus the Federal Reserve remained independent. Next year Powell can be replaced, but it will not be easy.

Only the first statement is certain. The first half of 2021 has gone by so quickly that we haven’t had a chance to pay proper attention to all the exciting economic and financial developments. Economic indicators have shown unprecedented recovery in both the U.S. and Europe in the first six months of 2021, resulting in exponential growth expectations for corporate earnings on both sides of the Atlantic. The European industrial outlook, in particular, is taking off.

Central banks and governments around the world are once again engaged in a ‘currency devaluation’ contest. The US dollar has been on a sharp downward trend in recent weeks. This has had a significant impact on financial and real assets.

The chart below, which we borrowed from Hong Kong investor Puru Saxena and goes back all the way to 1980, suggests the dollar indeed is on a long-term downtrend.

While everyone is watching the main US stock indices break records day after day thanks to FAMANG stocks, the gold price also keeps creeping higher towards $1800 per ounce. Many investors remain sceptical, as they struggle to value gold. But there’s a lot to say for the gold rally to continue.