Market Overview

Windy City: Will Summer Ever Come? El Nino To Change World's Weather In 2014

It’s summer in Chicago but it feels like some weird hybrid of spring and fall. It’s rainy and in the 70s (20s) all week. The forecast is for a cold summer, following a record cold winter. Extreme weather is in the news everywhere.

With a 90% chance of the global weather phenomenon El Nino striking this year, effects both beneficial and devastating will be felt from Chicago to India.

California and the US West Coast have had their worst droughts on record and a fire “season” that former governor Arnold Schwarzenegger describes now as “year-round.” Similar droughts in the midwest are making grain prices, currently at multi-year lows, look ready to skyrocket.

Record snows in Tokyo, floods in coastal regions, heat waves in food-growing regions, the list of long-term weather changes keeps growing.

Italy now has trouble growing durum wheat, the main ingredient in pasta, and has to import it from countries further north like Canada, where the warmer temperatures are making wheat flourish. Italy used to get wheat from Syria. Italy, unable to produce pasta. That’s extreme.

At last the tide seems to be turning on climate change denial. Maybe tide is a bad figure of speech to use, with the rising sea levels and all. Strong majorities in the US (including Republicans) believe it is real, want the government to fight it, and approve of Pres. Obama’s actions on carbon emissions.

The Defense Department has identified climate change as a security threat. We think of unrest in the Middle East as an oil issue, but a lot of the fighting is over water shortages. The so-called Fertile Crescent is turning to desert as the Tigris and Euphrates dry up.

Even as the most hard-core climate change deniers cite Biblical sources, we’re creating a drought in the Garden of Eden.

Nevertheless, in defiance of public opinion and simple logic, the House passed an amendment to the National Defense Authorization bill that would bar the Department of Defense from using funds to assess climate change and its implications for national security.

A new study in the British journal Nature Climate Change concludes that patterns of wind movement in the upper atmosphere have changed so much that some areas of the planet will have longer, colder winters while others will have hardly any winter at all. It’s already happening and it’s here to stay until today’s infants are middle-aged, if not longer.

We talk a lot about the new normals in the economy—slower growth rates, near-zero interest rates, obscene levels of inequality. Add to those a new normal in long-term weather: wetness where there wasn’t much rain, drought in food-growing regions, forests that just go on burning and burning.

It will create more hunger, more uncertainty about the supply and price of basic commodities like the ones traded at the CBOT across the street from our offices. It will affect everyone, even the few who will get rich(er) from it.

And it will create war. The water wars are already upon us, in Sudan and now in Syria and Iraq.

 

Profits and values

When you watch the prices of things go up and down as we do, you sometimes think about why we value them, and whether we value them too little or too much. A skillful trader can profit whether the price of wheat goes up or down. But to someone trying to put bread or pasta or rotis or tortillas in a hungry child’s mouth, extreme weather means extreme suffering.

That’s when philosophical debates about whether climate change is manmade sound silly or even cruel. When your house is on fire, the firefighters don’t ask what caused it before deciding whether to turn on the hose. They put the fire out.

There’s an old joke that goes, “Everybody talks about the weather, but nobody does anything about it.” Well this time, we actually can do something about it.

Fighting climate change will create jobs and economic growth. It will reduce conflict and strengthen our national security. We thought of ending this by saying, sorry to get so serious on a nice summer’s day. But then again, what summer?

Our view

The Asian markets closed mostly higher and in Europe 9 out of 12 markets are trading lower . Today’s economic schedule starts with the Philadelphia Federal Reserve Bank President Charles Plosser’s speech on the economy and monetary policy in New York. Expect reports including Redbook, FHFA House Price Index, S&P Case Shiller HPI, New Home Sales, Consumer Confidence, Richmond Fed Manufacturing Index, Consumer confidence, Richmond Fed Manufacturing Index, and a 2-Yr Note Auction. Federal Reserve Bank of New York President William Dudley speaks on Puerto Rico’s economy and business conditions, Federal Reserve Bank of San Francisco President John Williams takes part in a panel discussion on “The Global Economy, the Budget and the Board” at the 20th Annual Stanford Directors College. Expect earnings from Carnival Corporation (NYSE: CCL) and Walgreen Co. (NYSE: WAG).

 

S&P Closes lower first time in 7 days

This morning we have a heavy economic schedule and 3 Fed bank presidents speaking. We said yesterday that we thought the S&P (CME:SPU14) would pull back a little this week and we still feel that way.

Asia up , Europe down, something has to give. Our view is if the S&P opens lower we want to buy the lower open then sell the rally. Overall we lean to buying weakness but I think we could be looking at a down day today. As always, please make sure to use protective stops when trading futures…

  • In Asia, 9 of 11 markets closed higher : Shanghai Comp. +0.47% , Hang Seng +0.33%, Nikkei +0.05%.
  • In Europe, 9 of 12 markets are trading lower: DAX -0.01% , FTSE -0.27%
  • Morning headline: “S&P Futures Seen Lower Ahead of Heavy US Economic Schedule ”
  • Fair Value: S&P -8.42 , NASDAQ -9.59 , Dow Jones -8564
  • Total volume: 1mil ESU and 3.1k SPU traded
  • Economic calendar: Today’s economic schedule starts with Charles Plosser speech, Redbook, FHFA House Price Index, S&P Case Shiller HPI, New Home Sales, Consumer Confidence, Richmond Fed Manufacturing Index, Consumer confidence, Richmond Fed Manufacturing Index, 2-Yr Note Auction , Federal Reserve Bank of New York President William Dudley speaks, Federal Reserve Bank of San Francisco President John Williams speaks and earnings from Carnival Corporation (NYSE: CCL) and Walgreen Co. (NYSE: WAG). .
  • E-mini S&P 5001968.00+9.50 - +0.49%
  • Crude102.15+0.02 - +0.02%
  • Shanghai Composite0.00N/A - N/A
  • Hang Seng22880.641+75.83 - +0.33%
  • Nikkei 22515376.24+6.96 - +0.05%
  • DAX9938.08+17.16 - +0.17%
  • FTSE 1006787.07-13.49 - -0.20%
  • Euro1.3592

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Options Forex Intraday Update Markets

 

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