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what is going on everyone it's david ramsenwood here with my man marcus sano and we are here for the primary vision and hot take of the day pre-game show where we walk through the key events of the last week that are going to set you up for the next month and all the videos that are going to be released by primary vision going through the economy china eia iran and this week let's get in right hot and heavy right off the bat mark on friday the market had a conniption over a failed seven year auction and by monday all of that was forgot and it was back to the races what was going on help me understand that so the uh the seven year auction came in at a on a bid to cover ratio on on a near 12 year low so anything above two is still deemed successful but it was just barely over two so the there's a lot of fear that especially as the u.s comes to market with all of that fiscal spending you know they have to go out and borrow because receipts are just not going to cover it at this point so the the look is that there's going to be this increase in volume and the fed is really kind of hamstrung in terms of how much they can purchase just given inflation so then you might say well everything was fine by monday and it was really driven by the australian central bank coming out and dumbling doubling down on their yield curve control so they they bought double what they were supposed to in order to try to signal to the market that look things are okay we're willing to do whatever it takes as we always like to hear to try to protect yield in general to try to support the economy on a monetary level now even though things got a little bit better on monday and they were definitely better than they were on friday we still have rates creeping higher even in the us and this is something that's going to be a continued fight back and forth in terms of just what our rates going to do as bond prices come under pressure so so walk me through this because again we continue to have this this bifurcation where there's so much liquidity in the market that revenue-less spax can come to the market and people can throw currency at it a company like nicola who last week came out with their earnings and they had virtually zero revenue now when i say virtually it's because apparently they had 90 000 in revenue from installing solar which may or may not have been on their ceo's house against 72 000 of cost but they have a 6 billion market cap against 90 000 of revenue and there's so much money in the system why is the fed not unwinding the balance sheet why do we keep doing this what are we doing so the the view is that they're trying to make up for what fiscal limitations there are so they're trying to maintain a certain amount of monetary stability by pumping some of this liquidity into the market and being supportive of banks now the issue is the banks don't really need all that much support for anyone who's been watching the bank stocks because they they physically don't have anywhere to put this capital so even though the the fed is doing what it can it's living between two streams it's going back and forth between the banks and the fed and we're seeing that show up in the repo market and that's the overnight market for anyone who has a money market account at 2 p.m yet that account is technically zero and it goes into the overnight market so banks have turned around to their institutional clients saying that you guys have to limit the amount that you're keeping in your money market and invested in short-term paper short-term elsewhere because we can't handle that amount of flow only because the overnight market is starting to go negative so we're getting this this weird conundrum that we're in and this is where we start getting complicated into duration and duration is just time where the further out we go the worse the curve looks and that's why we look at the belly of the curve or that that shape because we we did see some support coming on monday after some initial weakness but the long day did that 10 20 30 years still does not look pretty when we're when we're considering what this is going to look like over the next few months let's pivot to china because we always want to talk about china in terms of where they're at they finish their lunar calendar holiday there was less travel there seems to be demand they're looking at maybe rare earth export limits i saw a tweet over the weekend that said that 71 of the solar panel manufacturing by by megawatt in the world is in china and we're relying on this expansion of of solar panels to to back fill some of our energy grid where is china at and and what are we thinking is is going to be the next major data point coming out of china that you're going to talk about on the primary vision video this week so it's a great question and we covered a lot of the rare earth side last week because they actually upped their um their output their they've essentially saw the error with that when they tried to limit rare earth exports back in 2010 and just what that reverberated what that looked like and and we learned from that and we've been doing things to try to diversify with um you know trying to increase and invest in australia and canada specifically to help you know break that apart and then we brought some minds back online specifically in california but to your point on solar panels that is a huge problem so we have about 71 of solar panels in china we have about 80 to 85 percent of anodes and cathodes which is just a pivotal component to those evs and batteries in general so they they not only just have the solar side they also have the ev side so there is going to be a lot of strife and this is where were i don't know if you uh if if those have seen you know biden issued that 100 day review of all vital supply chains with one of them being evs batteries but then it also goes further it's also medicine it's a large um in industrial practices just to see how much exposure do we have with china and i'm going to cut it short it's a lot and what are we going to focus on this week it's going to be what is coming out ahead of the congress which kicks off on thursday into friday because they i mean it's a communist regime so let's be fair they they essentially tell you what they're going to do then they go to debate it but let's it's congress is a rubber stamp so we're getting a lot of new information that we know is going to be locked into the into into law come next week so right now there was actually a good piece that came out that i i was pulling down and trying to summarize and i'm just going to read just just to give you an idea of something that's coming so minister of finance luge gy uh china will face mounting fiscal difficult difficulties in the near future and he has then this is his quote this is something that i've been saying but this is his quote soaring government debt and global trade frictions will all create huge uncertainties and severe challenges for china's fiscal stability the the fiscal difficulties are not only a short-term issue but also but also will be a serious a serious in the mid-term and long-term component on fiscal sustainability so these are things that we need to look at and consider of what are they going to do and in short they can't ease they can't stimulate they weigh the way they did in 2016. so let's pivot to oil obviously you can catch up on all of this with china and the overall macro economy impacted the bonds with the primary vision videos that are coming out this week subscribe to that channel as a plug for the hot take of the day podcast coming out next monday we actually have the author of a question of power robert bryce who also has the power hungry podcast coming on and we're going to cover all forms of energy in terms of the pros the cons the costs and how it all supports the grid because sometimes the nuance of it's nice to have wind and solar but how exactly does that work in the grid robert bryce has a wonderful handle on that i'm very excited about that but we're gonna pivot because this is opec week and it's opec week because it ties back to 361 days ago where i wish i had just entered into a coma it would have been so much better because i would wake up oil would be the same price natural gas would be the same price stocks would all be up even if you work in colorado you're at like 52 week highs despite the fact the government's passed the most restrictive setback rules ever it doesn't matter the party is on but we have india asking opec to increase we have friction with russia and saudi arabia we have 60 oil plus we have a lot of dynamics of supply demand in the reopen trade what are you expecting to see at opec and what does that do for oil we always ask this are we going to hit 65 first or are we going to hit 55 first and what do you expect so i think that there's going to be a pause here and when you look at what saudi arabia has done they've increased exports by about 500 000 barrels a day from january into february and this is just showing that they're they're even though they've cut their production they're still maintaining their exports and i think we're starting to see some some difficulty in the market and this is where they are going to have a difficult time in this specific meeting because you have the paper markets which have really run up you have the north sea markets which are fairly stable but then when you start looking at the west african markets and some of the other um middle eastern markets there's a lot of there's there's a lot of loose there's a lot of pricing problems and when we look at nigeria nigeria had to trade below osp to clear some of their cargos we have urals and cpc blends trading at 10-month lows we have angola that issued their um their allotment to unipec and now unipack actually has turned around and is reselling six cargos and we actually have a decline of exports coming from the us so that that's not really indicating a really strong physical market which is where they sell into but the paper markets would tell you something very different so they're going to have to try to indicate that look we're going to increase a little bit i'm expecting about a 500 to 750 000 barrel a day increase which will be mostly saudi arabia of racing some of those voluntary cuts but they're going to have to say look you have to calm down like the paper markets are a little far physical market isn't saying that and try to bring some of this back under control because the spreads are just not there to support them increasing even though you would assume just based on what the futures are saying how much do they listen to a country like india which has more than a billion people uh is coming out of their coronavirus experience although it was nowhere near like elsewhere despite the immense poverty and lack of testing they seem to have emerged quite fine um what do they do to a country like india who says you know we really think you should open up the taps and drop prices to presumably 50 would be better for their economy right now there are ways that they can do that without increasing they can just cut the official selling price so they could say look we still think that there's a certain amount of flexibility in the market we still think the physical market is oversupplied but so instead of increasing production we're just going to cut osps or official selling prices into india and the reason why india is starting to get concerned is because their gasoline or petrol prices in general are at all-time highs now a lot of that is driven based on uh taxes because up to 70 percent of the price of petrol in the country is taxed is on a tax basis and that could be that's provincial base so it can be anywhere from 53 percent to 70 depending on the province you're talking about so the the government could cut prices but modi just increased fiscal spending increased the deficit so to cut more receipts is going to be a problem now you could say look you're going to support the the economy you'll get this back on the on the flip side but they also have an inflation fear so there's a certain concern that if they were to cut receipts then people would start pricing in more inflation and when they go to raise money through bond offerings to close that deficit they're going to have to pay more so it would be better for india if this originated from china or i'm sorry from from opec because then that means that they'd be able to be supportive and to be fair to opec you know they should want to incentivize more purchasing keeping the prices on on a bit more of a protected side so but then when we turn to china you know china's uh has come out now they're saying that there's over 100 days of oil coverage the data just came out for this uh for this year so far on diesel and gasoline and right now they're at highs for storage for 2021. so clearly the market has this disconnect where india is getting a little bit better there's some case uh kovi cases increasing in some provinces so uh but in others it continues to the downtrend so it's going to be a bifurcation as well in that area but china is seeing a lot of problems and i think that should be more of a concern and maybe pivot some of the oil that should be going to china into the indian markets so let's talk about iran specifically we we saw a lot we also saw an airstrike in syria but in particular with iran there's been some geopolitical instability in that region there's been some pushback there's been talk about the nuclear deal what do you expect to come out of the iran situation in the next month let's say i think right now it's going to be a a hold constant there's not going to be a whole lot of movement i think the biden administration put out a failure feeler try to figure out okay guys like where do we stand i uh iran pushed back hard which i don't think was something that wasn't considered as as the most likely outcome the issue now is going to be where does where does iran go from here and they're facing a lot of problems along the pakistan border where they're seeing a lot of uprisings and a lot of these areas were already semi-autonomous and as the regime faces trouble at home and just think about you know they've they've had sanctions placed on them since trump left the uh the nuclear deal that has hurt the balance sheet they've had pressure coming from israel just striking at will across syria so what do they do they try to project power to their proxies across the shia crescent which led them to it to uh to issue another attack in iraq which they tried to launch a missile attack acro at a um an israeli ship so these things were essentially a warning of look we're still here and still strong but that what does israel do israel turns around and bombs some key locations and the u.s turns around and bombs key locations to let them know that that's fine we're here to talk but if you strike we will strike back and we'll strike in a very precise manner to hurt you as much as possible on a logistical level but avoiding attacking the uh the iranian people because the people are more and more in line with our way of thinking and our anti-regime at this point so we don't want to do anything to rally the the cause against us and instead try to say hey guys it's your regime if they leave then this you know things can change very quickly anything else you're looking at for this week that we can look forward to in the primary vision show is going to talk about stimulus at all the drop of the minimum wage i know we've talked a lot about what that potential has if minimum wage goes up for the loss of jobs etc but anything else you're watching in the next week or so that you think will be impactful yeah some of the things that we're going to talk about is on the employment side because when we look at jobs you know we've been talking a lot about this wage compression and now that indeed.com just put out some great pieces looking at the forced part-time where people who want to work full-time but are being pushed to say hey i'd love to hire you full time but you're going to have to be part-time for you know just because we can't afford it so when we're looking at this we want to talk about wage compression because people are not w rking full-time but instead part-time which is which is a reduction in wages but we continue to see prices going up and that's because of inflation that's because of supply chains because we've gotten used to some cheap things like we know technology to constantly get cheaper but it's not anymore we're starting to see those prices going up you know cotton prices are continuing to go up so how much of that price is going to get passed on to the consumer just as wages remain under significant pressure so we want to do a deeper dive on wages and savings because everybody likes to point to hey look savings went up it's like okay i agree with you savings went up but we have to understand what percentage of savings went like what who in america is benefiting from from that and about 20 of americans are seeing an increase in savings but 80 percent aren't you know we're seeing a bigger drawdown from saving so this stimulus that was just passed that will or should pass in the next few days that will go directly to those individuals but again you're just closing the savings gap you're not really getting to the heart of the problem which is unemployment getting people back to work and seeing those wages naturally increase well a lot on top this week with opec with the stimulus with iran with continued pressure from china tune into the videos to do a much deeper dive and until next time i am david david ramsenwood with mark rosano be safe be good and have a great day thanks [Music] you