The Surprising Revival of Coal in the Age of Clean Energy

Coal has unexpectedly held its ground as the momentum leans towards cleaner energy sources.

What's happening: Despite big banks like Goldman Sachs promising to divest from coal, indications that coal power is on the decline seem premature. Alternatively, smaller funds such as Javelin Global Commodities, established by two former Goldman traders, have emerged to take advantage of investment opportunities in coal. Within just eight years since its inception, the fund's value has skyrocketed to surpass $1 billion, positioning it as the top coal exporter in the United States.

According to a recent Bloomberg report, the firm experienced significant gains in profitability last year following Russia's invasion of Ukraine. As Europe urgently sought alternative energy sources, the firm reaped the benefits by recording record-breaking profits. In line with this, the International Energy Agency's latest report reveals that global coal demand reached an unprecedented peak in 2022, surpassing the previous record established in 2013 amidst the ongoing energy crisis.

Despite the IEA's belief that coal consumption and demand for oil and gas may reach their peak soon, recent trends present a different perspective. Recent data shows that United States thermal coal exports in the first eight months of 2023 have reached their highest levels since 2018, experiencing a 20% increase compared to the same period last year. This surge in exports can be attributed to increased demand from Asian countries.

The green transition in US manufacturing creates an interesting paradox. For instance, Panasonic has constructed a new electric vehicle plant in Kansas to support its shift towards clean energy. However, the significant energy requirements of the factory have led the county where it is situated to prolong the existence of a local coal plant.

Despite the growing popularity of green initiatives, coal continues to play a significant role in our energy composition.

Why it is significant: Being the foremost source of carbon emissions and the most polluted form of energy, coal stands as the primary driver of human-induced climate change.

Many major corporations and financial institutions have made commitments to divest from the fossil fuel industry, yet these initiatives often have significant gaps and limitations. While banks may impose restrictions on funding particular coal-related ventures, they are unwilling to completely exclude the possibility of providing general loans or engaging in business transactions with entire companies within the industry.

Some banks refuse to provide financing to companies that generate more than 25% of their revenue or production from coal. However, it is worth noting that some of the largest coal developers globally are large and diversified entities. Glencore, a major coal producer and exporter, for example, received financial support from almost every major bank in the US. Interestingly, in 2021, only 24% of Glencore's industrial revenue came from coal, while the majority was derived from other sources such as copper, zinc, and other metal mining and marketing activities.

On another note, there are indications that the corporate world's dedication to bolstering environmental, social, and governance (ESG) factors may be diminishing. The mention of "ESG" reached its peak in the fourth quarter of 2021 during earnings calls, with approximately 160 S&P 500-listed companies discussing the term. However, since then, mentions of ESG have declined in four out of the last five quarters.

Dow tumbles nearly 400 points, notching biggest one-day drop since March

Its been a bad week and a bad month for stocks. Yesterday was no different.

Stocks plummeted on Tuesday amidst concerns about the future of the US economy and potential interest rate increases by the Federal Reserve, according to Krystal Hur. The S&P 500 index dropped by 1.5%, marking its lowest closing point since June. The Dow Jones Industrial Average experienced its largest one-day decline since March, falling 388 points or 1.1%. The Nasdaq Composite also suffered a 1.6% loss.

The S&P 500 has now fallen below the threshold it reached earlier this summer to enter bull market territory. This threshold represents a significant increase of more than 20% from its lowest point in October of last year. Although the stock market is still considered to be in a bull market, it would need to decline by 20% from its peak in order to transition into bear territory.

The reason for this decline is that investors have been increasingly worried ever since the Federal Reserve indicated last week that it may raise interest rates once more this year and postpone rate cuts. As a result, yields have risen drastically to levels not seen in decades, causing investors to readjust their expectations regarding how long interest rates will remain elevated.

The CNN Fear & Greed Index dropped to a reading of 26, indicating "Fear", slightly above "Extreme Fear". This is the lowest level the index has reached since March, when the financial markets were affected by the collapse of regional lenders Silicon Valley Bank and Signature Bank.

Furthermore, housing data released on Tuesday morning revealed an 8.7% decline in new home sales for August compared to July. Mortgage rates have risen to the highest levels in decades, reaching above 7%.

US home prices reached a new all-time high in July, with six consecutive months of growth. This surge in prices is attributed to the scarcity of available homes, which is causing prices to rise. The latest Case-Shiller home prices index reveals these trends. Bill Adams, the chief economist at Comerica Bank, suggests that the Federal Reserve will view this resurgence in house prices as a factor necessitating prolonged higher interest rates. It is crucial for the Fed to acknowledge the impact of housing prices on the overall cost of living.

The looming possibility of a government shutdown is causing concern for Wall Street as the fiscal year-end rapidly approaches on September 30, with no spending agreement in sight. On Monday, Moodys cautioned that such a scenario could have a detrimental impact on Americas credit rating - a rating which has already been downgraded by Fitch earlier this year following a close call with breaching the debt ceiling.

The Hollywood writers strike is over

The Hollywood writers strike is finally over after 148 days.

The Writers Guild of America leaders have unanimously voted to approve its members' return to work. This decision comes after a tentative agreement was reached on Sunday between union negotiators and Hollywood studios and streaming services. The strike, which had paralyzed the industry for months, has effectively come to an end. This milestone agreement, reached earlier this week, signifies a significant shift for Hollywood's film and TV studios. Both the WGA and SAG-AFTRA, the actors' union, had gone on strike during the summer in order to demand higher pay and safeguards against artificial intelligence.

The contract, set to expire in May 2026, offers salary hikes, enhanced benefits, safeguards against the implementation of artificial intelligence by the studios, assurances for streaming remuneration, extended employment terms, and additional incentives.

On May 2, the WGA initiated a strike, making it one of the lengthiest in its history. The previous record dates back to 1988, with a 154-day strike by the WGA.

According to economists, the nationwide economic impact of the Hollywood strikes has exceeded $5 billion. Not only have Hollywood insiders been affected, but also businesses such as restaurants and those providing services to the entertainment industry, including makeup and custodial work, have witnessed a decline.