Risks Out There 07 (May 23 - Dec 26)

[winston]

Straits of Hormuz Blockade

Gas stations in Asia are rationing fuel. Hospitals are running out of medical supplies. Major petrochemical producers in South Korea and Singapore (Yeochun and PCS) have declared force majeure, meaning they cannot fulfill their commitments to customers.

The cause is simple: the Strait of Hormuz has been closed for weeks.

The Middle East ships roughly 25% of the world's polypropylene, 20% of its polyethylene, 25% of its sulphur, and 15% of its fertilizer.

When that flow stops, factories stop. And remember that about half of what Americans buy comes from those same Asian factories.

Capital Economics, a global research firm, estimates that it could take three months for the resulting plastic shortages to spread globally, and four months until US automakers face aluminum shortages severe enough to cut production.

S&P Global's April survey of manufacturers worldwide shows supplier delivery times lengthening at the fastest pace since August 2022.

Purchasing activity is near a four-year high as companies scramble to stockpile while they still can. Respondents are using "panic" and "emergency" buying language for the first time since the pandemic supply crunch— when Americans waited months for a new car, lumber prices tripled, and store shelves sat empty.

Yet rather than work together to ease the strain, governments are making it worse. With trust between major powers in collapse, every cross-border deal is now treated as a security threat... so they are blocking deals, capping technology transfer, and walling off entire industries.

Source: Schiff Sovereign

[winston]

Are stock markets in denial about the true cost of Iran war?

Macro risks suggest that the markets are too sanguine and may be mispricing the impact of the war

by Vikram Khanna

The price of urea, the world’s most important fertiliser, is up more than 45 per cent since the war began, feeding into food prices globally.

Up to 30 per cent of internationally traded fertilisers transit the Strait of Hormuz. Fertiliser prices have spiked in the middle of the planting season – a particularly cruel timing. The consequences will materialise six months from now, at grain harvest time, in the form of lower crop yields and higher food prices.

And then there is liquefied national gas (LNG). On Mar 18, Iran struck Qatar’s Ras Laffan LNG complex, causing a 17 per cent reduction in Qatar’s production capacity.

The first is the duration of the war itself, which shows no clear sign of ending.

The second is the duration of the shock itself – which will outlast any ceasefire. For Qatar’s LNG facilities, the repair timeline is three to five years. Food prices could be high for at least a year.

There are also risks of further attacks on Gulf energy infrastructure – which Iran has threatened if struck again – a closure of the Red Sea, or a fresh military escalation involving Israel, each of which could ratchet the crisis to a new level.

Source: Business Times

https://www.businesstimes.com.sg/compan ... t-iran-war

[winston]

Here's what could pop the stock market bubble

by Brian Sozzi

The first is an excess of speculative risk-taking that shifts the distribution of market outcomes to the downside.

The second is a deteriorating fundamental backdrop for companies that has historically included a rate-tightening Federal Reserve and a weakening outlook for earnings growth.

The bottom line: An expensive stock market like the one in place today could keep getting more expensive until it doesn’t. Popping entrenched enthusiasm on stocks won’t be easy this year, nor should it be.

The outlook for corporate earnings remains strong, and as long as that continues, the market will likely maintain its buy-the-dip mentality.

Source: Yahoo Finance

https://finance.yahoo.com/markets/artic ... 9962658698