Dr. Stefan M. Kremeth

From Ostracism to Oil Shocks: Climate Cycles and Economic Fault Lines Plus a New Song

Good Morning Ladies and Gentlemen

“The difference between humans and animals is that animals never allow a fool to lead the pack.”

attributed to: Sir Winston Leonard Spencer-Churchill

Ostracism was a political procedure in ancient Greece, particularly associated with Athens, employed to remove unpopular or excessively powerful citizens from the political sphere. The term derives from ‘ostrakon’, which means a shard of pottery, as fragments of clay vessels served as the ‘ballot papers’. Participants inscribed the names of those to be exiled onto these shards. After the votes were cast and tallied, the individual mentioned most frequently was banished for 10 years. The exiled person retained ownership of their property and could return later to reclaim their civic rights, including the ability to hold office. Similar practices existed in other Greek cities, such as Syracuse, where olive leaves were used for inscribing names instead of shards. This variation was known as ‘petalismos’ and, according to Diodorus, involved a five-year exile.

Last week’s „Stefan’s Weekly“

Reflecting on last week’s „Stefan’s Weekly,“ I wish to express my sincere gratitude for the abundance of positive feedback I have received. I believe many share my sentiment that markets are not accurately reflecting risk. This disconnect largely stems from investors‘ tendency to rely on the buy-the-dip strategy, which has been effective for an extended period. For decades, policymakers have intervened to bolster markets, conveying to investors that they would prevent any significant downturns. This dynamic naturally influences the behaviour of market participants.

Today’s „Stefan’s Weekly“

Nevertheless, in today’s edition, I have chosen to present an alternative and somewhat less pessimistic perspective. I am eager to see how you respond to it. Furthermore, at the end of today’s “Stefan’s Weekly,” you will have the opportunity to click on links to a song created by my daughter. I hope you appreciate my desire to share this with you, even if it doesn’t perfectly align with the theme and concept of “Stefan’s Weekly.”

El Niño and La Niña

El Niño and its counterpart, La Niña, are significant weather phenomena that cause cyclical fluctuations in global temperatures. Typically, La Niña phases are associated with below-average global temperatures, while El Niño tends to result in above-average temperatures. I have explored this weather phenomenon in my writings on several occasions. You might wonder why I feel compelled to revisit this topic.

Historic Influence on Oil Prices

The historical trend indicates that oil prices typically rise during La Niña phases and decline during El Niño phases. Forecasts suggest an El Niño event will begin in June and peak in December. The U.S. National Oceanic and Atmospheric Administration (NOAA) anticipates an average-strength El Niño. Currently, there are no signs of a Super El Niño, but a moderately strong event is expected; i.e. the available data do not indicate the development of a Super El Niño, as observed in 2015 or 1997. Nevertheless, this does not entirely rule out the possibility of values rising or of a Super El Niño developing. Again, for now, such possibilities do not seem imminent. However, during winter, heating is generally in demand in temperate and cold regions. A warmer winter, which is likely during El Niño, tends to reduce heating demand, resulting in lower heating oil prices. Therefore, I would not be surprised to see the forthcoming El Niño contribute to a decline in oil prices. This event, suggesting a likely mild winter ahead, is projected to peak in the winter of 2026/27.

Conclusion

Reflecting on my previous post, I feel compelled to reiterate, perhaps with slightly different phrasing, that historical evidence indicates a collapsing asset bubble may be a critical reason to exercise caution when acquiring assets during a market downturn. The intrinsic risks associated with such bubbles could warrant a prudent reassessment of the buy-the-dip strategy. However, there is another perspective: there may be optimism. If a moderately strong El Niño typically results in above-average temperatures, oil prices may face downward pressure in the latter half of 2026. Additionally, if the Strait of Hormuz reopens by then, oil prices could decline further. While this involves two „ifs,“ there is a tangible probability that these scenarios may unfold, which could lead to a more favourable inflation outlook for the second half of 2026. A more favourable inflation outlook would probably lead to stronger financial markets. Easing inflation and more stable financial markets could work in the current US administration’s favour in the mid-term elections in November 2026. In addition, regarding today’s introductory remarks, I believe it may be beneficial to explore incorporating ostracism into global governance structures. This approach could promote self-restraint and help mitigate the excessive abuse of power both domestically and internationally.

Song

I hope you will forgive my sentimentality, but as a proud father, I cannot resist sharing my daughter, Lucie’s second song. It is a catchy song with a cool beat. There are three different ways to enjoy the song, and I hope you find it as delightful as I do. Thank you for understanding my desire to share this with you.