In hisDaily Market Notes report to investors, While commenting on the opportunities in marine shipping, Louis Navellier wrote:
Q2 2021 hedge fund letters, conferences and more
Senator Joe Manchin (D-WV) is “deeply concerned” about the Fed’s easy money policy and urged the Fed to curtail its aggressive intervention in the bond market. In a letter to Fed Chair Jerome Powell, Senator Manchin said, “With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy.”
This raises questions about whether or not the Fed might taper sooner than expected.
Two Confirmed Fed Hawks
There are two confirmed hawks at the Fed, namely the Dallas and Kansas City district bank presidents, Robert Kaplan and Esther George. Although some Fed members want the Fed to address tapering at its September Open Market Committee (FOMC) meeting, the hawks are still in the minority. The doves, like Chicago Fed president Charles Evans, still want to continue with quantitative easing and easy monetary policy for the foreseeable future, since key economic targets (like employment) have not been achieved.
I am still in the camp that the Fed will not address tapering until its December FOMC meeting, since Fed Chairman Powell is up for renewal in early 2022 and the Biden Administration is still proposing spending trillions more dollars in the wake of its $1 trillion bipartisan infrastructure bill. Due to all of this proposed new spending, which carries much less bipartisan support, it could complicate future Treasury auctions if the Fed started tapering while the 2021 federal budget deficit was soaring. As a result, I expect that the Fed will remain accommodative, citing the Covid-19 Delta variant as a “new risk” to the economy, and continue to kick any tapering decision down the road until its December FOMC meeting.
Last week’s CPI number of 0.5% for July may seem manageable, but the next day, the Labor Department announced that its Producer Price Index (PPI) surged by a full 1% in July (vs. June).
Feeling The Inflation Heat
The Biden Administration and the Fed are finally feeling the inflation heat, especially prices at the pump. Specifically, on Wednesday, National Security Advisor Jake Sullivan said, “While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022. At a critical moment in the global recovery, this is simply not enough.” Cynics are wondering why the Biden Administration is calling for OPEC to boost production while President Biden imposed a drilling ban on federal land.
Commodity price inflation is a worldwide problem. China’s Natural Bureau of Statistics reported that producer prices rose 0.5% in July, up from 0.3% in June.
Meanwhile, port bottlenecks have the potential to worsen, since China shut down all inbound and outbound services at its Meishan terminal at its Zhoushan port last Thursday, due to a Covid-19 outbreak. Zhoushan is the third busiest port in the world. It specializes in shipping containers that go mostly to Europe and the U.S. This is the second time this year that Zhoushan had to be closed under China’s zero tolerance policy.
Marine Shipping Opportunities
The disruptions in shipping will likely benefit these marine shipping companies: Expeditors International (NASDAQ:EXPD), Danaos Corporation (NYSE:DAC), Eurodry Ltd. (NASDAQ:EDRY), Euroseas Ltd. (NASDAQ:ESEA), Navios Maritime Partners LP (NYSE:NMM).
Navellier & Associates owns Expeditors International (EXPD), Textainer Group Holdings Limited (NYSE:TGH) Danaos Corporation (DAC), Eurodry Ltd. (EDRY), Euroseas Ltd. (ESEA), Navios Maritime Partners LP (NMM).
Updated on
