Push and pump

Slop and dump

Flooding the zone, the waters keep rising, the torrent does not stop, it just keeps coming. One must try to stay afloat. Kicking and paddling, getting more and more tired, struggling to keep one’s head above, some are going under, others will soon follow.

What happens when reality refuses to submit to our models? It appears we are finding out. Hormuz remains effectively closed, physical markets are getting tighter, the squeeze ‘should’ have happened, it has not quite, presumably it is coming soon, surely it is coming soon, or perhaps it just comes elsewhere and does not reach ‘here’, wherever that is.

It is rather odd listening to some analysts who appear to be disappointed that things have not broken. Rather than sticking with certainty, adopting a more ambivalent and open perspective would appear prudent. This is a very different kind of shock to COVID, supply-side instead of demand-side, and yet again, one must admit - and marvel - at the resiliency of our globalised, marketised supply chains. Nonetheless, the collective choice of running everything hot and pushing to the edge would certainly appear to invite or increase the possibility that fragilities fracture and spreads widen. Until then, push and pump, slop and dump.

In a prior note on these matters, I commenced with the following overview:

… agency without structure, structure with agency, irreality clashing with materiality. The underlying dynamic persists: some things, some people, some places ‘need’ to break, surely will break in one form or another. But what… who… where… these questions remain undetermined, even if some answers would appear more likely than others…

This judgement roughly holds, although I would qualify the qualifications… When ‘move fast and break things’ has gone from being the motto of one company to the motto of a powerful country practicing a domineering and dominating mode of agency, there is a need to pause and step back. To assume that breaking things is not good, whatever that might be - brains, discourse, institutions, the labour force, countries, international law, the climate - well, perhaps we have to revise our assumptions, because it looks like ‘all of the above’ has been chosen. We are getting ‘move fast and break things’, whether we like it or not.

An uncomfortable corollary of this is having to sit with trends that appear deeply contradictory managing to coexist. Again like COVID, we now have disruption up and markets up. We presently have both chokepoints and bottlenecks. One simple example of expressing this is layering a chart with traffic leaving the Strait of Hormuz (yellow) against the PHLX Semiconductor Sector index (green). This is an approximate illustration slopped with Gemini that fits well: kind of accurate, a bit unclear, regardless, oil supply down and semi stocks up:

It would appear possible for this to co-exist, that is, until the supplies of helium, naphtha, copper etc in East Asia start to really run dry.

These contrasting, confusing, contradictory trends have been causing a great deal of consternation. To offer one example, this is the last week of episode titles from a daily podcast on markets:

• How Long Before the Oil System Breaks?

• The Pressure Is Building Faster Than Markets Realize

• The Market Thinks This Ends Cleanly

• The Market Keeps Falling for the Same Headline

• Why Does the Market Think This is Temporary?

• Nobody Wants to Admit What Happens Next

Even without listening it is possible to feel the frustration that reality is not behaving, the world is not breaking ‘as it should’. The famous line from John Maynard Keynes, ‘markets can remain irrational longer than you can remain solvent’, can be expanded to: the world can remain incoherent longer than we can remain sane.

There are many reasons to be concerned, to be ‘monitoring the situation’, yet there would appear to be hard limits about how much sense can be made of what is unfolding, things are bending and breaking in ways that defy our expectations. In a different finance podcast, oil expert Morgan Downey offered an explanation that would seem rather plausible, a number of factors have helped to dampen and delay the impact of the drop off in oil:

And so all of that together combined, the big SPR [Strategic Petroleum Reserve], that was like a first shot that, that really took the energy out of the rally. And the world has got probably another one or two slugs of SPR releases that could hit the market if governments decide it over the next month or so. But and then you had the inventory efficiencies, you had the floating storage that Iran and a few other countries had.

And so you had all of these combine to take the edge off the rally and the oil price rally, but the underlying crisis is still there. And one of the things when people talk about a crisis, everyone thinks about we’re gonna run out of oil, like as in tanks will go to tank, empty tanks.

That doesn’t happen… The world is still producing before the crisis, 105 million barrels a day. Now it’s 95 million barrels per day, roughly… It’s still a lot of oil being produced and refined. All that’s gonna happen is that oil prices now we’re in a situation where we kinda have to go up, unless the crisis ends today, and even if it ends today, we, this may happen.

The point is certainly not that things are fine, but to offer the reminder that there is a need to be open to the ways that the world can confound expectation and judgement.

Being online means we are in all senses of the word existing in a binary world. The challenge is to move away from thinking in terms of absolute either/or frames, and to stay with ambiguity and complexity, to think openly in terms of both/and.

Aldous Huxley judged, ‘the truth is paradoxical; but man’s passion for rational coherence is even stronger than his love of truth.’ This quote could be applied to many of the takes populating platforms and outlets. Rather, I would suggest it is vital to find ways to hold onto paradox and accept confusion, and to think in terms of both/and. Whatever happens, there are many indicators that we can expect this confused, contradictory, conflictual contemporary to keep on coming, so we will have to find ways to better comprehend it.