America defaults (kind of), using these metrics, and the value of delaying your morning cup of Joe.

Good morning.

America hit the debt limit yesterday: that means no more borrowing is possible until the debt ceiling is lifted. The government will keep running and paying the bills for a few months because funds have already been appropriated or because the extraordinary measures introduced by Treasury Secretary Yellen provide additional financial flexibility.

The political back and forth has begun: House Republicans are vowing to force the White House to make tough choices on spending cuts while the Biden administration has refused to negotiate, calling this “economic vandalism”.

Senate Republican leader McConnel is offering welcome assurances that Senate Republicans understand the debt ceiling needs to be lifted, but he has little to no influence in the House, especially over the Freedom Caucus. The real deadline (sometime this summer) is still months away, so expect lots of grandstanding and hot air for now to little effect. Expect things to become more emotional as we enter Q2, if no extension has been agreed.

Also, keep in mind that calculating the exact date when all the money runs out is not an exact science so there’s no fixed deadline.

A quick Public Service Announcement.

‘I like the commentary but I’m not sure how to use the metrics’ is something I’ve heard a few times so I’ve made some adjustments to the newsletter.

First, for each metric, I’ve added a list of factors potentially impacted to help you determine how your business might be affected by fluctuations or changes.

Second, I’ll include this short ‘User’s Guide’ to the footer of each email which includes the eight prompt questions you can use in conjunction with the affected factors list.

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Hopefully, these will make things more user-friendly. 

As a reminder, the detailed user’s guide is here. Want to know more? Read the white paper.

(Look out for an announcement soon of tailored reports where I’ll do the heavy lifting for you.)

Relative Values (90-Days)

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Trends (21-days)

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Commentary and Evaluation

Brent Crude

Potentially impacting: Fuel prices | Gound shipping costs. | Plastic prices | Changes to fuel subsidies (potentially leading to unrest) | Cost of living (especially transport and heating) | Changes to traffic volume/transportation choices | Demand for automotive products | Theft and smuggling.

Brent Crude remains in the mid-range for this 90-day interval. Prices ended relatively flat over the last 21 days after some dips but prices seem to be trending upwards at the moment. 

What to Watch

(No change) Market commentary and analysis vary wildly about what oil will do in 2023 and the broad analysis I shared earlier holds for many: ‘prices will peak around $95 with an average of around $90, a drop from previous 2023 estimates which reflects a gloomy outlook for the year’. See Reuters for more

However, within that range, the opportunity for significant movements remains and China’s plans for a great economic boom are leading some to forecast oil moving up as high as $110 by Q3. The exact number is less important here than the reinforcement of the idea that China’s reopening will kick in soon and will lead to significant increases in demand for oil as well as other commodities by mid-year.

Iran remains worth watching as their motivation and ability to inflame tension in the Gulf remain. 

Talk of the rise of the petroyuan in 2023 is overblown. See last Friday’s update for more.

Iron and Steel

Potentially impacting: Cost of construction projects | Construction project timelines | Cost/availability of raw materials | Infrastructure project timelines/costs | Cost and availability of finished metal goods | Value of scrap | Value of 2nd hand equipment/vehicles.

Iron and Steel remain very high for this 90-day interval. Prices increased moderately over the last 21 days after slight fluctuation and continue to creep up. 

What to watch

(No change) The Chinese construction and manufacturing boom that many expected in 2023 is off to a very unsteady start as COVID spreads rapidly after December’s relaxations. Sectors that had struggled under the strict COVID restrictions are suffering just as much in the current laissez-faire environment. This is temporarily delaying the expected economic boom but many analysts expect things to take off in late Q1 meaning that demand for oil, shipping and commodities will all rise significantly thereafter. See Bloomberg for more

Market Volatility (VIX-US)

Potentially impacting: Availability of capital for investment | Interest rates| Share prices | Consumer confidence | House prices/rent | Financial certainty/uncertainty | Financial models | Stock-based compensation values.

Volatility (VIX) is very low for this 90-day interval. The index has decreased sharply over the last 21 days after significant fluctuation and spikes around the New Year although there are signs it might be ticking up again.

What to Watch

(No change) Messaging from the US Fed and ECB remain consistent and the end-of-year turbulence has faded, meaning that although the news in many sectors isn’t welcome, the general market conditions seem to have been broadly accepted and priced in. Layoffs continue in tech, banking and retail while some large brick-and-mortar stores, like Bed Bath and Beyond, seem to be slipping further into difficulty. So although decision-makers have greater clarity as to what lies ahead, economic conditions are grim for many and look to remain so for short- to mid-term.

However, negotiations around raising the US debt limit will be contentious and cause significant turbulence in the run up to hitting the ceiling, likely in late Q2, early Q3. See Tuesday’s piece on debt limits for more.


Potentially impacting: Bread, pasta, couscous & noodle prices | Changes to food subsidies (potentially leading to unrest) | Cost of living | Movement from low-income to food insecure to undernourished | Increased theft or graft in loosely governed areas | Demand on charities.

(No change) Wheat remains high for this 90-day interval. Prices ended relatively flat over the last 21 days after moderate fluctuation. 

What to Watch

(No change) Despite agreements brokered by Turkey, Russia could still impose a complete blockade on Ukrainian grain exports to exert pressure on Kyiv and her allies. Meanwhile, even strict controls and inspections for outbound shipments mean that exports remain slowed. Moscow could also conduct military operations to disrupt spring planting meaning that prices could rise again next spring and summer. Read more in AGWeek

Ocean Freight (FBX)

Potentially impacting: Supply chain costs (direct and indirect) | Supply chain delays | Port capacity/throughput speed | Customs clearance | Availability of goods and materials | Consumer demand/hoarding.

(No change) Shipping (FBX) remains very low for this 90-day interval. Prices decreased sharply over the last 21 days after the spike we saw in December. 

What to watch

(No change) China’s reopening and the effects of recessions on demand in the US and elsewhere remain the biggest issues to track but there are no definitive signs to watch at the moment. Chinese New Year will depress manufacturing and shipping volumes but expect these to rise significantly in late February once the celebrations are over.

Up-to-date shipping data supplied by our partner Freightos

Other coverage and Analysis

Tunisia’s Elections

There are reports that some prominent opposition figures in Tunisia have been arrested or are facing legal charges, preventing them from campaigning. The government’s activities in the run-up to the second round of elections (scheduled for January 29) will affect the legitimacy of the results and set the tone for what happens after the votes are counted.

The Year of the Bunny is here

Lunar New Year is on Sunday. 新年好 to those celebrating.

Image: chinahighlights

See Thursday’s SITREP for more analysis of what the holiday means for China. 

Elections this week and Next 

​​18 January: Antigua and Barbuda, House of Representatives

21 January: Slovakia, Constitutional referendum

26 January: Tokelau, General Fono

Campaigning has begun for Tunisia’s second round of the 2022 legislative elections. (Voting is scheduled for January 29) 

Random Stat

5 minutes, 30 minutes, 90 minutes

Rsearch suggests that the foundation for a good night’s depends on how your day begins. Neuroscientist Dr. Andrew Huberman has an astonishing bedtime routine which isn’t for the faint-hearted but his start to the day is a bit more simple.

He recommends trying to get some sunlight exposure (5-10 minutes can be enough) within the first half-an-hour of getting up and delaying your morning coffee or tea for at least an hour and a half. This allows your body to wake up naturally without the artificial kick caffeine gives you which knocks your circadian rhythms off, affecting your bedtime. 

So if you’re finding it hard to get to sleep, maybe think about how you start your day. (Although I admit that I’m writing this sitting in the dark at 5:30am with a cup of coffee nearby …)

Huberman’s podcast is here for you aspiring biohackers.

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