Bluish Grey Gold

Hey Influence Traders,

 

Omicron has come to America with the first case spotted in California.

 

The good news is that the latest Greek letter appears to have mild symptoms.

 

The bad news is that governments and markets had knee jerk reactions to the news.

 

Administration Response

 

Despite South African and Australian health ministers stating that Omicron is a non-issue, the Biden administration (and other world governments) shut down travel from a handful of Southern African countries.

 

President Biden is tightening travel requirements today, including having to have a negative test within one day prior to traveling to the U.S., regardless of vaccination status.

 

The Administration is also considering requiring all travelers to get retested within three-to-five days of arrival into the U.S., and some officials have whispered about requiring all travelers, including U.S. citizens, to self-quarantine for a week, even if their COVID-19 test results are negative, with penalties for non-compliance.

 

If the administration imposes new restrictions on domestic air travel, many lawyers will be sharpening their pencils.

 

Market Response

 

There is no doubt that DC ripples drive markets … well so do hysterical media ripples.

 

The markets did not like the media hype around Omicron and reacted poorly.

 

They were not helped by Federal Reserve Chairman Jerome Powell, who announced that the central bank may end stimulus measures more quickly.

 

Powell and Treasury Secretary Yellen are under tremendous pressure to address rising inflation concerns. 

 

They testified on the Hill Wednesday and finally admitted that high inflation has risen higher and lingered much longer than they expected.

 

They argued that substantial fiscal and monetary stimulus played a role in driving higher demand that fueled inflation, but maintained that it was simply a challenging side-effect of an otherwise fast recovery.

 

Action on the Hill

 

Majority leader Chuck Schumer is planning a vote on the Build Back Better bill the week of Dec. 13. He lost a vote Monday on the Defense Act, which stung as both Republicans and Dems joined against it.

 

It looks like the boondoggle bill will be advanced through the partisan reconciliation process.

 

Schumer’s plan is to bring the bill, known as Build Back Better, to the Senate floor once Democrats finish their conversations with the parliamentarian, who provides guidance on what can be included in a bill passed through budget reconciliation.

 

A key vote on the boondoggle bill is Sen. Joe Manchin, who remains silent on his direction.

 

He did state that he is working on “adjustments” to energy policies in the bill.

 

Manchin has raised concerns about a plan to include a methane emission fee in the bill, as well as a plan to provide a larger tax credit to union made electric vehicles. 

 

Democrats have already cut incentives to transition to clean electricity because of Manchin’s opposition and are not keen on cutting more. 

 

A vocal group of Dems are fighting hard to keep those provisions in the bill.

 

Government Shutdown

 

Lost is the shuffle on the Hill is the looming government shutdown at the end of this week.

 

Senate Republicans are holding the bill up with some voicing fears that forcing a shutdown will backfire on the party.

 

Eight years ago a similar strategy to use a government funding measure as leverage to stop the implementation of the Affordable Care Act blew up in their faces.

 

While the Senate waffles, the House announced this morning that Congress has reached an agreement on a spending deal to fund the government through mid-February.

 

An agreement has been reached on a continuing resolution (CR) that would temporarily fund the government at the previous year’s levels until a larger bipartisan agreement can be reached on spending in the new year.

 

More kicking of the can.

 

Word of the Day Is Cobalt!

 

This little element is necessary for EV applications.

 

Word on the street is that it is getting harder for manufacturers to acquire and that the price is going up!

 

EV requires mining and this is just another of the many elements.

 

We all know the need for lithium and the demand that is being driven by the battery market. 

 

Big lithium producers like Albemarle (Ticker: ALB), Tesla (Ticker: TSLA), and Lithium Americas (Ticker: LAC) should continue to do well long-term.

 

But don’t ignore another crucial element to battery production – cobalt.

 

Cobalt is a rare, hard, bluish-grey, metallic element with broad applications from magnets to chemical catalysts.

 

But over half of all cobalt produced is used to make battery chemicals for EV batteries as well as making superalloys used in aircraft engines.

 

Cobalt is expensive, which means that price swings can greatly impact revenue.

 

I’m keeping my eye on these two:

 

      • Glencore (Ticker: GLNCY) – is the world’s largest cobalt producer. Cobalt is a minor part of its business, but every $1 change in the price per pound of cobalt can impact Glencore’s earnings by $100 million.
      • Vale SA (Ticker: VALE) – is a Brazilian miner that Andrew Giovinazzi and I have successfully placed trades around in Capitol Gains. They’ve been upticking development and provide for some good options volatility.

 

Cutting through the noise for you,

Frank

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