What we’re reading (3/10)
“IEA Proposes Largest Ever Oil Release From Strategic Reserves” (Wall Street Journal). “The International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices that have soared during the U.S.-Israel war with Iran, officials familiar with the matter said. The release would exceed the 182 million barrels of oil that IEA member countries put onto the market in two releases in 2022 when Russia launched its full-scale invasion of Ukraine, the officials said. The proposal was circulated at an emergency meeting of energy officials from the IEA’s 32 member countries on Tuesday. Countries are expected to decide on the proposal Wednesday. It would be adopted if none objects, but even one country’s protests could delay the plan, officials said.”
“Diesel Markets, Upended By Middle East Conflict, Threaten Global Economic Slowdown” (Reuters). “‘Diesel is the most exposed product to this conflict structurally,’ Shohruh Zukhritdinov, founder of Dubai-based Nitrol Trading, said. ‘Diesel underpins freight, agriculture, mining and industrial activity, making it the most macro-sensitive barrel in the system.’”
“Iran Conflict Triggers Losses For Citadel, Millennium And Point72” (Wall Street Journal). “Citadel, Millennium Management and Point72 were among those hit by the market fallout, according to people familiar with the matter, as were Balyasny Asset Management and ExodusPoint Capital Management. Millennium and Point72 each lost $1.5 billion last week, the people said, while Citadel lost about $1 billion in its fixed-income and macro business. While there wasn’t a particular trade that stoked the losses, some funds were hit by macroeconomic bond-market bets that went awry. That includes the popular steepener trade, in which investors bet on a widening gap between short- and long-dated bond yields. Balyasny lost about $1 billion, including $700 million in its fixed-income business alone, the people said. ExodusPoint lost a couple hundred million dollars on bond-market bets.”
“This Is The Moment Adam Smith Has Been Waiting For” (Jason Furman in the New York Times). “Perhaps the most neglected Smithian virtue in our current discourse is optimism. “The Wealth of Nations” cataloged policy failures and abuses, but it also marveled at the living standard of people in the Britain of his day. Even though the richest person at the time would seem impoverished by today’s standards — lacking even indoor plumbing, to say nothing of flat-screen TVs — Smith was still effusive about the ‘liberal reward of labor’ that narrowed the gap between a prince and “an industrious and frugal peasant.”
“Bubbles, Booms And Crashes In The US Stock Market 1792-2024” (William N. Goetzmann, Otto Manninen, and James Tyler). “We examine the historical frequency of stock market booms, crashes, and bubbles in the United States from 1792 to 2024 using aggregate market data and industry-level portfolios. We define a bubble as a large boom followed by a crash that reverses the market’s prior gains. Bubbles are extremely rare. We extend the industry-level analysis of Greenwood, Shleifer, and You (2019) through 2024 and replicate their findings out of sample using Cowles Commission industry data from 1871 to 1938. Booms do not reliably predict crashes, but they do predict higher subsequent volatility, increasing the likelihood of both large gains and large losses.”
