Ferg’s Finds

A brilliant piece: A Shifting Global Currency Landscape -Louis-Vincent Gave, Romain Metivet (Gavekal Research)

There is no longer, at the global level, a currency that fulfills all three functions, and there will likely not be one for a very long time. There are today three currencies linked by sluices, and history dictates the order of division.

• The medium of exchange is splitting. The US dollar retains financial circulation, debt, foreign exchange, and stablecoins. The renminbi is slowly taking over the payment for goods, because a currency backed by the world’s factory is more than sufficient to pay for goods.

• The store of value is abandoning the US dollar; it is returning to gold.

• The unit of account, the stickiest, remains American; it is the last bastion. Which is why the battle over AI billing could prove very important.

None of this is bullish for long-dated bonds, or for the US dollar. This new set-up is bullish for gold. But most of all, it might be very bullish Hong Kong assets.

No one breaks down rates/Fed set-up better: Jeffrey Gundlach: So Much Said, So Little Heard.

This was insightful from Lyn on the rate hikes.

“In economics things take longer to happen than you think they will, and then happen faster than you thought they could”

-Rudiger Dornbusch

I enjoyed Robotti’s Q2 letter and why he sees offshore energy as the real asset opportunity today.

Yes, I dug into this topic in Volatility is the new normal, but it still amazes me that the Germans are sitting on their hands while their gas storage is tracking 4.5% below the historic low of the last 10 years.

I’m pondering this section of Robotti’s Letter and, in particular, the suffering through consolidation, exits and recapitalisations section.

I went through the consolidation across four subsectors (EPCI, offshore drillers, casing & tubing and seismic) of oil services in The Resilience Pivot.

The “suffering” in this sector has been immense when you consider that the four subsectors have consolidated from ~137 companies to 24 publicly listed survivors, an 82.5% reduction.

• Subsea EPCI: 41 starting entities → 5 listed survivors

• Offshore drillers: 35 starting entities → 7 listed survivors

• Casing/tubing: 35 starting entities → 8 listed survivors

• Marine seismic: 26 starting entities → 4 listed survivors

Hope you all have a great week!

Cheers,

Ferg

P.S. For Hugos Portfolio I enjoyed the section in Horizon Kinetics Q2 commentary on the US Exchanges and whether the beatings the companies have taken are warranted.