Good morning. Nervous investors jumped back into the market this morning as the allowance of limited oil shipments through the Strait of Hormuz is being taken as a positive sign … even though everyone knows things can change quite rapidly. But let’s go out on a limb (a very thin limb) and say things do improve … shipments increase … and the price of oil starts to revert to where it was before the war started. Even if this does occur, there are two changes that could already be in the cards. Countries are quick to learn lessons, and I would suspect a growing number of governments will investigate expanding their “clean energy” programs. No, this has nothing to do with carbon or pollution but, instead, recognition that sunshine does not stop at borders … and an increase in solar (and possibly other alternative energies) could lower dependence on foreign-produced oil. According to the International Energy Agency (“IEA”), China is continuing to show global dominance in solar energy and use there is growing rapidly. The recent situation in the Strait might result in this to be sped up even more. Another item can have a direct long-lasting effect on the U.S. as CNN reports Iran has become quite open to allowing oil shipments … but only under the condition that payment be made in Chinese Yuan instead of U.S. dollars. This could weaken the dollar … which would risk losing its position as “the world’s primary reserve currency” … and while a weaker dollar typically is good for U.S. exports, it could add to inflation and limit foreign investments directed toward the U.S. The Fed meets this week and there is an overwhelming view that rates will remain unchanged. Expectations are there will be much yelling from the White House … but the situation in Iran (due to oil prices) could be thought of as inflationary … something the Fed wants to slow … even as American consumers look for help as the spike in gasoline prices could have a negative effect o consumer spending. And … as mentioned last week … I did start a class to try to get a better understanding of AI. It (the class and AI itself) is both fascinating and scary … for AI promises to change … well … just about everything. Heck, Morgan Stanley just came out with a report claiming a monumental change to AI is about to be introduced to the world, as “… AI tools replicate human work at a fraction of the cost” … and Reuters reports Meta (formerly, Facebook) may lay off up to 20% of its staff “to be replaced with AI workers.” So, there you have it. It appears job replacement by AI is soon to begin … so if you find my notes suddenly have fewer typos and more intelligent content, you will know … … I’ve been replaced by AI. Have a great day, Joseph G. Witthohn, CFA Have any questions? Please contact info@teamemerald.com
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