Dear valued client,
Market performance was underwhelming this week, as it has been for much of August. After climbing roughly 5% from mid-June to July, major indexes slid about 4% in the month of August. Much of the sell-off in the past few weeks can be laid at the feet of the Federal Reserve’s tone and approach to combating inflation. This, in my opinion, should be viewed in a positive light. The Fed is sacrificing short-term market gains for long-term price stability. Bringing inflation back down to Central Banks’ agreed-upon target of 2% will be advantageous for all our wallets as well as investment returns in the long run.
In energy news, Putin has effectively shut down Nord Stream 1, citing maintenance issues. Nord Stream 1 is a major pipeline that runs from Russia, under the Baltic Sea, to Germany – Europe’s largest economy. Anyone with their eyes open can see that Russia is applying a chokehold to the much-needed energy supply in Europe, thereby increasing its cost which has already risen sharply in the past year. The lack of energy would eventually force factories to halt production, adding to the supply chain issue and, by extension, to the inflation problem. European households have been warned to expect energy bills 10 times as high as last winter’s.
This, in my humble opinion, is partly the result of several years of short-sighted, virtue-signaling politics. In an effort to demonstrate how environmentally conscious they are, politicians have been touting unrealistically short projected transition periods from oil and natural gas to “renewable energy.” These efforts have made the Western world energy-dependent on an authoritarian who started an unprovoked war and fabricated a spike in the price of his most valuable commodity.
The most pragmatic way forward, in my view, is to invest heavily in nuclear energy. This is exactly what several major economies are beginning to do; California’s governor has put significant last-minute effort into keeping the state’s last nuclear power plant, dubbed Diablo Canyon, open for another decade. The UK, France, Belgium, Japan, Czech Republic, and Poland all have plans to build new reactors in the coming years. Most of this is motivated by the war in Ukraine that has given Russia substantial leverage in the global energy market.
On a lighter note, Amazon Prime released The Lord of the Rings: The Rings of Power this week, the most expensive TV show ever produced. The total cost for the first season alone was $715 million. Happy viewing to all you Tolkien and Middle Earth fans!
If any of you would like to set a time to discuss your current situation, please let me know. It’s never too early to start thinking about Christmas budgeting, for instance, or even the trip you’d like to take in the summer of 2023. The earlier you start planning, the more financially secure you will be.
Have a terrific weekend,
PW
“There is no energy crisis, only a crisis of ignorance.” – R. Buckminster Fuller
