The economic globalization seen since the end of the Cold War is coming to a close, which relied heavily on the interconnectedness of national economies for cross-border movement of goods, services, technology, and capital. Protectionism and self-reliance have stepped in over the last few years, replacing free trade agreements and the promotion of economic liberalization. What started off as trade wars and increasing tariffs has morphed into an outright rejection of the complex multinational supply chain, with pandemic restrictions exacerbating supply shortages and now the war in Ukraine endangering food and energy security.

Economist Adam Posen, President of the Peterson Institute: "It now seems likely that the world economy really will split into blocs, each attempting to insulate itself from and then diminish the influence of the other. With less economic interconnectedness, the world will see lower trend growth and less innovation. Domestic incumbent companies and industries will have more power to demand special protections. Altogether, the real returns on investments made by households and corporations will go down."

Atlanta Fed President Raphael Bostic: "The tragic war in eastern Europe will further momentum toward reorienting production and supply networks away from pure cost minimization and toward resilience and risk tolerance. Supply chain disruptions [also] caused by the coronavirus pandemic prompted business leaders to start diversifying supplier locations and firms, increasing inventories, and bringing production closer to final markets to maximize reliability. Think of it as a shift to just-in-case inventories from just-in-time."

Oaktree Capital's Howard Marks: "The availability of ever-cheaper goods like cars, appliances and furniture produced abroad was a major contributor to the benign U.S. inflation picture in this quarter-century. On the other hand, offshoring also led to the elimination of millions of U.S. jobs, the hollowing out of the manufacturing regions and middle class of our country, and most likely the weakening of private-sector labor unions. The recognition of these negative aspects of globalization has now caused the pendulum to swing back toward local sourcing. Rather than the cheapest, easiest and greenest sources, there'll probably be more of a premium put on the safest and surest."

BlackRock CEO Larry Fink: "The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. We had already seen connectivity between nations, companies and even people strained by two years of the pandemic. It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarization and extremist behavior we are seeing across society today." (15 comments)

Food concerns

As wheat and corn futures continue to surge, and fertilizer prices ride the commodity boom, some investors are reaping big gains. Compared with the nearly 6% YTD loss of the S&P 500, shares of the top three U.S.-listed fertilizer producers are having a great year. Mosaic (NYSE:MOS) is up a staggering 70%, CF Industries (NYSE:CF) is ahead by 50%, while Nutrien (NYSE:NTR) is up 40% - and the first quarter is not even finished yet.

Not all is well: The fertilizer shortage comes at a time when Northern Hemisphere producers are preparing for spring planting, according to Ben Maddox, Director of Farm Operations for AcreTrader. That could reduce crop yields across the board, with some farmers not even able to get their hands on fertilizer. Supply shortages continue for ingredients like nitrogen, phosphate and potash, while the crisis in Ukraine is compounding the problem, throwing a wrench into global food supply.

"With regards to food shortages, it's going to be real," President Biden declared after meeting with NATO allies in Brussels, adding that Russia and Ukraine are the breadbasket of Europe. "The price of these sanctions is not just imposed on Russia, it is imposed on an awful lot of countries as well, including European countries and the U.S." Biden also related that the G7 had discussions on ways to "increase and disseminate more rapidly" grain from America and Canada, while European nations were urged to end limitations on sending food abroad.

Outlook: "This is a really big deal, because when that volume of calories comes out of the food chain, it triggers other things. Not only hunger, but unrest," AGCO (NYSE:AGCO) CEO Eric Hansotia told CNBC. "The last time we had this kind of disruption, it was one of the major triggers for the Arab Spring, and it's because a lot of this food goes to areas like North Africa, the Middle East, or places where the cost of food is a large portion of the income of that population." (8 comments)

Roll a fatty

Cannabis stocks lit up yesterday on news that the U.S. House of Representatives was preparing to vote on the federal legalization of marijuana next week. A hearing on the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act - sponsored by House Judiciary Committee Chairman Jerrold Nadler (D-NY) - will be held on Monday, the final step before consideration on the floor. The bill aims to deschedule cannabis from the list of federally controlled substances and promote social equity in the industry.

Flashback: A previous version of the MORE Act cleared the House floor in December 2020, but it stalled in the Republican-controlled Senate before the end of the legislative cycle. "Hopefully, the next time this unofficial holiday, 4/20, rolls around, our country will have made progress in addressing the massive overcriminalization of marijuana in a meaningful and comprehensive way," Senate Majority Leader Chuck Schumer said last year. The nation's war on drugs has "too often been a war on people, particularly people of color."

A total of 37 states and the District of Columbia already permit cannabis products for medical purposes, while 18 states and D.C. have legalized marijuana for recreational use. Legal pot sales in the U.S. are even expected to top $28B in 2022, marking a 20% Y/Y increase, according to cannabis market research firm BDSA.

On the move: Thursday's outsized gains are continuing in the premarket session. Sundial Growers (SNDL) +20%, Tilray (TLRY) +17%, Aurora Cannabis (ACB) +14%, Canopy Growth (CGC) +12%, HEXO (HEXO) +11%, Cronos (CRON) +8%. Note that all of the names are down 80%-90% from their all-time highs seen back in 2018/19. (145 comments)

Industry truce

In a move that has the potential to be one of the most symbolic in its history, Uber (UBER) will soon begin listing all New York City taxis on its app as a ride-hailing option for its customers. The partnership marks a form of peace between the nation's largest, and most-famous taxi fleet, and the company that was set up to explicitly disrupt and change an industry that had operated virtually unchallenged for more than a century. The partnership could also help Uber overcome a driver shortage in its biggest U.S. market when it goes into effect later this spring.

Quote: "It's bigger and bolder than anything we've done," said Andrew Macdonald, SVP of Global Mobility.

All 14,000 of NYC's iconic yellow cabs will integrate their technological system with Uber's so that riders will be able to hail taxi rides as well through the Uber app. The company plans to make sure passengers are charged approximately the same rates for taxi bookings as they are for rides through the UberX ride-hailing option. With regards to how drivers are to be paid, a driver will see on their app how much they can expect to earn from the fare before they accept an Uber ride, giving them the ability to turn down a ride if they choose.

Market movement: Uber shares advanced 5% on Thursday, while Medallion Financial (MFIN), which finances taxi medallions for drivers in New York and elsewhere, is up 2% in premarket trade. (6 comments)

Today's Markets

In Asia, Japan +0.1%. Hong Kong -2.5%. China -1.2%. India -0.4%.
In Europe, at midday, London -0.1%. Paris +0.2%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude -1.4% to $110.82. Gold -0.3% to $1957.20. Bitcoin +2.7% to $44,145.
Ten-year Treasury Yield +3 bps to 2.37%

Today's Economic Calendar

10:00 Consumer Sentiment
10:00 Pending Home Sales
10:00 Fed's Williams Speech
11:00 Fed's Daly Speech
11:30 Fed's Barkin Speech
12:00 PM Fed's Waller: “Should Central Banks Issue Digital Currencies?”
1:00 PM Baker-Hughes Rig Count