Oct. 19, 2022

We May Never Know Who Destroyed Nordstream

Those of us who hoped to see a resolution to the terrorist attack on the Nordstream Pipelines had our hopes dashed when Sweden decided to back out of the investigation this week. It was a strange development.

Immediately after terrorists wantonly destroyed the pipelines, Sweden, Denmark and Germany formed a Joint Investigation Team under the auspices of Eurojust, the European Union's legal arm, authorized to investigate such crime. A crime whose magnitude involves several EU Countries.

The Nordstream Pipelines lie at the bottom of the Baltic Sea, with the explosion occurring between Sweden and Denmark. So it was only natural that Denmark joined in the investigation, along with Germany, who, along with Russia, were the two most prominent investors in the pipeline.

This week, the world saw actual pictures of the destruction of the pipeline for the very first time. A massive explosion vaporized a 50-meter section of pipe. The sidewalls of those pipe sections were nearly six inches thick and able to withstand the tremendous pressure of both sea depth and internal gas pressure—the pipes lay at the bottom of the Baltic sea, 80 meters below the surface.

In early reports, military experts had speculated that only a few significant global navies would be capable of operating at this sea depth and planting the explosives needed to blow up the pipeline.

Neither Denmark nor Germany nor you and I will likely ever know the results of Sweden's investigation. And, it isn't likely that anyone or any group will be held accountable. The head of the Swedish Team of Investigators, Mats Ljungqvist, announced that Sweden would not share any of its findings.

"This is because there is information in our investigation that is subject to confidentiality directly linked to national security," Ljungqvist told Reuters.

National security interest, when have we heard that before? Whenever a country wants to keep the facts hidden, that matter surprisingly falls under the rubric of National Security, never to be heard from again.

It seems to me that when a significant country decides to participate in organized terror, that is something that is in all of our interests. Multiple thousands of people throughout Europe will suffer as a direct result of this act of destruction. Reports are already circulating about the potential harm that will come to the German people as the first cold winds of winter begin to blow.

And yet we hear nothing from the German government, Denmark, or my country, the United States. Free people worldwide should demand an answer to just who blew up Nordstream. It seems to me that the Swedish people, in particular, have a responsibility to stand up and require an explanation from Prosecutor Ljungqvist and the rest of the Swedish government.

Meanwhile, the other aggrieved party, Russia, is not sitting idly by as their number one market for gas is destroyed. This week, Vladimir Putin, President of Russia, met with Recep Erdogan, President of Turkey. And, by all indications, the two countries seem ready to agree to send Russian gas through Turkey for use throughout the Eastern Mediterranean.

If Turkey became the next "gas hub" for Russian petroleum exports, this would mark a significant shift in the world's energy resources. And make no mistake, the developed world still relies on carbon-based energy.

Once again, turning adversity into opportunity, Putin will shift the global energy map eastward, benefiting the middle and far east with new sources of abundant Russian oil and gas. While in contrast, leaving Europe and the United States in the cold. We will address face-to-face whether to freeze in the winter or develop our substantial reserves for the US. For Europe, the decisions become even more difficult, as they do not have the petroleum reserves of the US.

No matter which path the West goes down, we've passed our Rubicon. The moment of transformation for all our energy. When we see just how dependent on traditional sources of carbon-based energy we are.

It is also a time to understand that there are forces among us that intend great harm to the civilized world. So much so that they would cut off an entire continent's heat source in winter.






In a little-noticed report last night, Treasury reported that the US had an overall net inflow of $275 billion last month. The most significant amount of capital coming into the country since the pandemic. The reason? Those high-interest rates that the Federal Reserve has been pushing.

With two more Fed interest rate meetings this year and the near certainty that the Fed will raise rates at each meeting, US interest rates will be above 4%. A 4% rate will be near irresistible for international investors looking for both safety and high yield. Look for this trend in capital flow into the US to continue and probably gain momentum.

One has to wonder if this isn't a strategy by the Fed to attract foreign capital.

In the meantime, it's creating havoc among some allied countries. Britain, for one, is having a tough time keeping up with these new US high-interest rates. The Bank of England announced this morning that they would issue a new tranche of bonds on November 1. No doubt at rates far above what they wanted. The short-term base rate in England is 100 basis points below the US, destined to fall further behind when the Fed meets next.

That next scheduled meeting of the Fed is Wednesday, November 2, the day after the English bond sale. Coincidence? I don't think so.

Speaking of Great Britain, they have reported their latest reading on inflation at 10.1%, matching the level in July.

And the European Union reports that their inflation reached 9.9% last month, accelerating by 3/4% over the month before. No doubt driven by higher energy costs.

Here in the US, we've just had the latest report on Housing Starts, which is down big. 127,000 fewer housing starts in September than the month before. No surprise, real estate has been one of the weakest areas in the economy over the last quarter.

However, there was a surprise in Building Permits. The number of new Permits increased in September by 22k. They perhaps indicate that Real Estate investors, like many investors on Wall Street, are positioning themselves for a reversal in the Fed's interest rate policy. If rates come down, the developers who already have permits in hand will have a head start on the rest of the market.

Later today, the Fed will release its latest Beige Book, its overall recap of the economy, and interviews with business people from around the country.

And finally, a speech by Neel Kashkari. Here is someone who is far out of the Beltway. As President of the Minneapolis Fed, his perspective is often at odds with the Fed's Washington contingent. I always like to hear what Kashkari has to say.

In earnings today, some significant companies are reporting. We've had positive results from Procter and Gamble, Elevance Health, Travelers Insurance, and the NASDAQ. And the surprisingly adverse reaction to Abbott Labs' results, especially M&T Bank's results. Unlike the rest of the bank stocks, M&T currently trades down over 7% on their earnings.

Tesla Motors and IBM will report their results after the markets close.