9.3
8.064 reviews
English
EN
This article has been automatically translated from Dutch. Click here to see the orginal article including all links to sources.
In this weekly selection, we observe that historically high energy prices are becoming an increasingly pressing issue in Europe. The root cause lies in Germany's energy policy, angering Scandinavian energy ministers. Norway is even considering severing its electricity connection with Europe. Meanwhile, we turn our attention to the U.S., where remarkable developments are unfolding in gold and bitcoin. Additionally, we see that U.S. stocks are extremely expensive while investors remain euphoric about the future.
"I am furious with the Germans," said Swedish Energy Minister Ebba Busch to the Swedish broadcaster SVT. “It’s an absolute mess,” added Norwegian Energy Minister Terje Aasland. This week, energy prices in parts of Europe surged to €936 per MWh, severely impacting heavy users purchasing electricity on the day-ahead market. A steel plant in Saxony even halted production on Wednesday due to the high energy costs.
Energy prices on December 12 from 5:00 PM to 6:00 PM (source: Epex Spot via X)
The immediate cause was a ‘dunkelflaute,’ a situation with little wind and sunlight. Germany has made itself reliant on weather conditions for a stable energy supply. Ebba Busch blamed Germany’s nuclear phase-out for the current energy crisis in Europe. Europe has an integrated electricity market, and since October 2024, it has implemented "Flow-Based Market Coupling," an EU mechanism designed to optimize cross-border electricity flows by prioritizing demand across the entire European grid over national needs. A shortage in Germany, therefore, has a significant impact on neighboring regions. On Wednesday, electricity prices in southern Sweden were 18,000% higher than in central Sweden. A 10-minute shower in southern Malmö cost more than SEK 31 (€2.65), compared to SEK 0.17 (€0.01) in central Sundsvall.
Swedish Energy minister Ebba Busch (source: FinnishGovernment)
Norway is now considering limiting or even severing electricity connections with Europe. The connection via Denmark is up for renewal in 2026, and a shutdown now seems likely. The sharp rise in electricity prices in Norway during recent winters has sparked a ‘political storm.’ It is expected to be a key issue in next year’s elections. “This is a critical moment for EU-Norwegian relations. Limiting power connections with Europe will not be well-received,” said an EU ambassador in Oslo.
Germany's failure in phasing out nuclear power is not only affecting Scandinavian countries; in France, nuclear energy production surged to a peak. The country’s 56 nuclear reactors produced 51,906 megawatts on Thursday morning, the highest level since February 2020. Angela Merkel’s Energiewende, for which she received a prestigious Amsterdam medal yesterday, has been a colossal fiasco. Germany’s industry is in an existential crisis due to energy policy, the energy supply is unreliable and unaffordable, and CO2 emissions have increased. France emits 69 grams of CO2 per kWh today, while Germany emits 599 grams. Last week, we wrote that we are at a turning point in energy and climate policy: the tide is turning. Read it here!
Paul Tudor Jones, a renowned American hedge fund manager and investor, was crystal clear in an interview with CNBC in late October. Discussing issues with excessive U.S. government spending, he stated, "All roads lead to inflation ... I’m betting on a price increase for gold, bitcoin, and commodities." He appears to be right.
U.S. budget deficit in October and November (source: ZeroHedge)
The U.S. federal government began fiscal year 2025 on October 1, 2024, with a record-high budget deficit, according to ZeroHedge. In October and November, the deficit ‘exploded’ to a staggering $624.2 billion. Interest rates on U.S. government debt, as Tudor Jones predicted, have since risen. Inflation in the U.S. also increased to 2.7%, with core inflation rising to 3.3%. Despite this, nearly everyone expects the Fed to further cut rates by 0.25 percentage points next week. Next year is less certain as the central bank grapples with its dual mandate: keeping inflation close to 2% and maintaining a healthy labor market. The U.S. labor market has been cooling for some time.
Gold prices are in an upward trend. Over the past weeks, gold prices have hovered around or even exceeded €80,000 per kilogram. According to ING, interest rate cuts positively impact gold prices, and the gold rally is far from over. They anticipate demand for gold through ETFs to continue rising in 2025.
ETF holdings have been rising since May (source: ING)
Gold and Silver as Legal Tender in Florida
This week, it was reported that gold and silver could become legal tender in Florida. Florida CFO Jimmy Patronis launched an investigation to explore how gold and silver could be used to purchase goods and services in the state. "This is an exciting initiative with potential for massive growth in our state. Gold and silver have been trusted assets for thousands of years, and it makes perfect sense to use them as legal tender," Patronis stated in a Wednesday release.
Bitcoin
An interesting development also came from Texas, where a bill was introduced on Thursday to establish a strategic bitcoin reserve. The proposed legislation would allow Texas to build a reserve by accepting taxes, fees, and donations in bitcoin, which would then be held for at least five years. This could serve as a pilot project for the U.S. Treasury. The bill requires a two-thirds majority to pass. The next meeting is scheduled for January 14, 2025, so we’ll have to wait for more clarity.
Meanwhile, Trump reiterated his stance on bitcoin during a brief interview with CNBC: "We’re going to do something great with crypto, ... we want to be the leader." BlackRock also made a bullish statement on Thursday. The world’s largest asset manager advises interested investors to allocate up to 2% of their portfolio to bitcoin.
Ray Dalio’s Perspective
In an interview with Investopedia, legendary investor Ray Dalio, founder of Bridgewater Associates, stated that he prefers gold over crypto. Despite holding a small percentage of his portfolio in crypto, he sees bitcoin as a "speculative vehicle" that has yet to prove itself. He expressed concerns about user privacy and anonymity. According to him, crypto, unlike gold, is unlikely to become a significant reserve currency anytime soon.
Valuation of U.S. stocks at extreme levels (source: Financial Times)
We conclude with a brief look at U.S. stocks, which are currently extremely expensive. The Financial Times published a bearish article about bubbles this week, followed by a more bullish one titled “Stocks Are Expensive, and Nobody Cares.” The percentage of retail investors expecting further gains has never been higher, indicating euphoria. Historically, high valuations are often followed by lower returns or declines. Hedge fund manager and Trump supporter Bill Ackman said: "We’re stepping into, I would say, the most pro-growth, pro-business, and pro-American administration I may have experienced in my adult life." Could it really be different this time?
