We know what’s coming and we are prepared.
🚢 🌍 🏴☠️ Why Attack Shipping: a thread
🔶️ The Houthi strategy looks primitive to most with the random attacks on ships sounding desperate and quite elemental in a world of AI and space exploration. But the game theory behind it is superb.
🔶️ Introducing shipping:
Shipping is an old world industry, global in nature, but greatly affecting everyone and every local economy differently. It operates in vast open oceans with minimal policing or regulation for centuries, and it works extremely well to support our everyday lifestyles. But in the last few years disruptions due to various factors have brought shipping to the forefront. Why suddenly shipping matters?
🔶️ Although there are so many different types of ships in a global commercial fleet of 80,000+ vessels, picking what matters is essential: for the western world one does not really care much about dry bulk (iron ore/coal cargoes are mainly China focused meaning a disruption does not really affect the US/EU regions); you don’t really even care about tankers (freight costs is like 4% of oil price so to inflict real pain it becomes very difficult from a shipping cost perspective plus China has become the dominant importer in that market as well); but … you do care about containers. This is what hurts the most the average western consumer and for a good reason: containers transport most of the goods we use in our daily lives and we know and understand the price of. It relates to what is called the delivered price of a good. Push up the delivered price and suddenly you have inflation
🔶️ So, if you want to hurt the western world, you need to focus on what the Central Banks are trying so hard to contain: inflation. If supply chains get disrupted again, and that can really happen, it will matter greatly. And it will matter for what REALLY matters: all upcoming elections in the US/EU in 2024. Disruption is a game of chaos in a supply chain that strives for extreme optimization and JIT inventory management. And it does not take much to do so. But anything similar was an unimaginable scenario when inflation was not a risk for decades until Covid. But now it is. And a rebel group in southwest Yemen can affect the election outcome in a lot of “First World” countries this year. Remember the butterfly effect?
🔶️ Bulk commodities (oil, coal, iron ore, etc) can adjust to disruption as they are mostly fungible: local prices adjust a bit but would not affect the bigger picture much( take a look at NSea and SAm crude spreads this week and how rapidly they adjusted to the situation). Finished goods however are not, cause they are manufactured East and consumed West. Disrupt the East-West corridor for finished goods and you have leverage because prices will react positively and there is no adjustment path anywhere else.
🔶️ Expect this playbook to become part of the global geopolitical chess game for years to come. Straits, canals and waterways are going to play a much bigger role than even before in a world where inflicting economic pain in the Western world without real conflict is becoming much more difficult than ever before. Technology allows anyone to obtain RT information on vessel position, ownership and cargo details which makes it an easy game for bad actors with minimal resources. We are all about to become much better in oceanography and geography for the years to come…
📎 Breakwave
Police in Winona Minnesota are stunned after every single one of their Flock cameras were suddenly removed in a single night.
According to the police department, all 8 of the town's cameras were cut down and hauled away.
Police are asking for the public's help to identify the individual, but the public has been responding with comments such as:
"The Flock cameras tore themselves down"
"Whoever did it, was fishing with me"
"Whoever it was, was at Bible study with me"
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Nearly 20,000 people are publicly vouching for a man accused of cutting down Flock cameras in a small West Virginia town.
People commented:
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"He was saving my neighbor's dog from a fire all day, couldn't be him."
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"This man is innocent. I saw him serving at a soup kitchen."
-"Couldn't be him. He was helping me replace the roof on a homeless shelter."
The man, Wesley Jackson, has pleaded Not Guilty.
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US diesel crack surpasses $100 a barrel for the first time on supply disruptions
... and the supply of refined fuels is already nearly exhausted. A hard landing is visible ahead, for farmers, for trucking, and ... well, for everything that requires food (people) and energy (the entire economy).
These are very likely the final days of relative normalcy during which to prepare. Get ready.
🌾 🌍 🚜 JPMorgan warns a massive global food supply crisis could begin next year as fertilizer shortages tighten agricultural supply.
JPMorgan is the latest institutional research desk to warn that the next global food crisis may already be taking shape, driven by what its analysts describe as the "Five Ws": War, Weather, Warehousing, Water, and Waste.
In a new report titled Food Security Is National Security: A Compounding Storm, a team led by London-based senior global economist Nora Szentivanyi warned that disruptions around the Strait of Hormuz and the emergence of a potentially historic El Niño could weaken crop yields, constrain agricultural production, and keep food inflation elevated through the first half of 2027.
"Successive shocks since COVID have compounded, eroding food production capacity and keeping food price pressures elevated into 2027," Szentivanyi said, warning that "this is not a short-lived shock; it has reduced the likelihood of near-term disinflation, and the food ...
