Do stock traders have a role in helping our economy grow? Or are they simply taking bets between each other?
The question hits home after reading a WSJ report about how day traders are pushing uranium prices higher.
It’s an age-old debate with ties to free markets and capitalism. An in the case of higher uranium prices, it might seem like traders are hurting society.
After all, higher uranium prices will make nuclear energy more expensive… right?
But sometimes there’s a bit more nuance to consider.
I can think of at least two good services stock traders provide that can actually help the nuclear energy market.
First, when traders push uranium prices higher, it sends a strong signal to producers. These producers can clearly see a profit opportunity from selling more uranium.
So there is a natural incentive to produce more supply which ultimately should send prices lower.
Second, an actively traded market gives both producers and consumers an opportunity to hedge.
Nuclear power producers who planned ahead may have bought futures contracts. This way as prices spike, the power companies can sell their “hedge investment” to traders at a gain. And the gain can offset the higher spot prices.
Meanwhile, miners can now sell futures contracts to lock in higher prices at today’s level. This gives them financial security to increase production. They know that when it comes time to sell the extra uranium produced, they’ve already locked in a profitable selling price.
All of this is made possible by traders who buy and sell on a daily basis. So maybe not such a bad thing after all!
Today’s links include China taking the opposite approach with coal markets, more supply chain and inflation concerns, a new all-time high for Bitcoin and more!
China and U.S. Stock Traders Drive Energy Costs
- WSJ: Day Traders driving uranium prices higher.
- Spot uranium prices shot up to $47.10 a pound from $32.25 in early August.
- Shares of CCJ, DNN and UEC have all climbed.
- Guardian: UK to confirm funding for mini nuclear reactors.
- Prime minister hopes reactors will help UK reach zero carbon target by 2035.
- Government backing would show belief in nuclear as a green technology.
- Each reactor will have capacity to power nearly 1.3 million homes.
- Reuters: China coal futures plunge – government intervention.
- Coal prices are now down 20% form Tuesday’s all-time high.
- China will take necessary measures to bring prices to a reasonable range.
- Prices are still up 200% year-t0-date and supplies are still very tight.
- Bloomberg: China weighs coal market intervention.
- “Zero tolerance” for those spreading false information or collusion.
- Plans to raise coal output to 12mm tons a day – give priority for delivery.
Crypto Enthusiasm Surges
- WSJ: First Bitcoin futures ETF rises in trading debut.
- The fund (BITO) gained nearly 5% with $981 million of shares traded.
- Other asset managers expected to launch similar funds.
- Futures prices can be different from underlying Bitcoin prices.
- CoinDesk: Bitcoin hits all time high above $66k.
- Rally fueled by launch of new futures-based Bitcoin ETF.
- The new fund captured $570 million in assets on first day with $1 billion in volume.
- Bitcoin gains for this year are now almost 130%
- CoinDesk: Option traders bet big on Ether ETF coming soon.
- Traders are buying March calls with a $15,000 strike price.
- Some expect an ETF launch in the next few months to drive Ether prices higher.
Economy: Inflation & Supply Chain Concerns
- WSJ: Inflation should be elevated well into next year.
- Economists see 5.25% inflation in December, 3.4% by June, 2.6% by end of 2022.
- Concerns about limited supply are driving inflation expectations.
- Reuters: Homebuilding stumbles due to supply constraints.
- Housing starts fell 1.6% in September.
- Permits dropped to a one-year low.
- Gap between completed houses and still under construction largest on record.
- WSJ: Supply chain bottlenecks and inflation to last into net year.
- Economists’ inflation projections up dramatically from July.
- Growth forecasts slashed to 3.1% in Q3 — for Q4 targeting 4.8% to 5.4%.
- Strong demand for goods is primary driver of bottlenecks & inflation.
- WSJ: Consumers expected to spend more money this year.
- WMT will hire 150,000 workers ahead of holiday shopping season.
- AMZN, TGT and others have big hiring plans.
Wall Street and Main Street Risks
- Investopedia: Investors reduce risk as anxiety sets in.
- Nearly half polled say they’re at least somewhat worried about the market.
- Less than half expect the U.S. stock market to be positive over next six months.
- Concerns about supply chains, government spending and inflation are high.
- Bloomberg: Ransomware attacks still target schools and hospitals.
- Despite recent Biden initiatives, attacks continue.
- Government agencies, schools, health care facilities and agricultural operations hit.
- Director of NSA says ransomware will persist on daily basis for years.