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Known Knowns and Canadian Heavy

Posted March 23, 2021

Donald Rumsfeld once said:

There are known knowns. These are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know.

Rumsfeld has the distinction of being both the youngest, under Ford, and the second-oldest person, under George W. Bush, to have served as Secretary of Defense.

Today, we look at known knowns and unknown unknowns.

What we do know is that the S&P 500 is trading at 3,940, the Nasdaq hit 13,350, gold is trading at $1,726, and $50.40 will buy you a barrel of West Texas crude.

What We Think We Know: Vaccinations Surge

CNBC is reporting that COVID-19 cases are increasing in 21 states. Furthermore, highly infectious variants like the Brazil and U.K. strains are spreading even as some states end lockdowns.

France, Germany, and Poland are going back into lockdown. EU stocks dropped marginally on the news.  

In nonvirus news, the Turkey index fell more than 7% after President Erdogan fired the head of the central bank and replaced him with someone who wouldn’t hike rates.

The U.S. is in a race to get a majority of people vaccinated against COVID-19 before the more communicable strains get a foothold. There is a good chance we’ll make it.

But if we don’t — and judging by the mild sell-off of EU stocks — it won’t matter much to Wall Street.

The Known Unknown: Taking the Midnight Train to Culiacán

In big news yesterday, Canadian Pacific announced plans to acquire Kansas City Southern for $25 billion. This is the biggest merger of the year and, if it goes through, will mean that there will be a railroad that connects Canada with Mexico.

This merger has everything to do with oil, government lobbyists, quid pro quo, and Biden's closing of the Keystone XL pipeline.

Financial Post writes:

Canadian oil and gas companies have for years tried to expand their options to ship heavy oil from Alberta to the southern coast of the United States, but their efforts to reach the world’s largest concentration of heavy oil refineries have been challenged time and time again. Most recently, U.S. President Joe Biden canceled permits for the Keystone XL pipeline.

It is more environmentally hazardous to ship oil by rail than by pipeline. You may remember the Lac-Mégantic rail disaster of July 6, 2013, where 63 cars derailed in a small town in Quebec, exploded, killed 47 people, destroyed over 40 buildings, and leveled half of downtown. 

That doesn't happen with pipelines. The unknown here is who got paid.

Core CPI on Friday

There is a market saying that "stocks climb a wall of worry." One of today’s worries is inflation. The Core CPI price index comes in on Friday. It will tell us the official government position on inflation.

The consensus is at 0.5%. However, copper prices have almost doubled this year. Lumber, corn, wheat, and used car prices are all up significantly. Interest rates are rising and there is concern that the Federal Reserve will lose control over bond prices.

Next week, we will delve into the unknown unknowns…

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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