There’s something weird going on in today’s oil rally

Good morning, and Buon Carnevale! to all of you heading out in costume (or mixing things up with a more decorative mask) today. U.S. futures have been climbing all morning, as has Bitcoin and West Texas crude.

Alas, WTI’s gains are not so easy to gauge. Freak cold in Texas has caused rolling blackouts across big swathes of the Southern U.S., and so supply and demand are out of whack at the moment. But there’s also a very 2021 wrinkle to the crude rally today. The Reddit brigade is pushing WTI call options, hoping to do for crude futures what it briefly did for GameStop shares last month.

In today’s essay, I talk about free money, and what that might mean for the markets. Warning: there are fears of overheating.

In the meantime, let’s see what’s moving markets.

Markets update

Asia

• The major Asia indexes are mostly higher in afternoon trading, with Japan’s Nikkei up 1.3%.
• India‘s success tackling COVID is puzzling some scientists. Infection and death rates have dropped precipitously, and now government economists are predicting huge growth—11%—in the coming year.
• Ngozi Okonjo-Iweala of Nigeria takes the helm of the World Trade Organization, the first woman and first African to lead the trade body. Her first priority will be global vaccine equity.

Europe

• The European bourses were modestly higher with the Stoxx Europe 600 up 0.2% at the open.
• Shares in Glencore were up 3% mid-morning after the mining giant reinstated its dividend following a blockbuster report of record trading profits on the back of crude and copper.
• Lufthansa CEO Carsten Spohr believes business travel will never return to pre-pandemic levels in Europe and the United States. As such, the airline is seeking smaller, more fuel-efficient jets.

U.S.

• U.S. futures point to a positive start to the trading week. That’s after all three major exchanges finished higher last week.
• Blackouts are spreading across Texas and the Great Plains this morning as power plants shut down amid a deep freeze. The disruption has jolted crude prices.
• On the earnings calendar this week is CVS Health and Omnicom (today); Shopify (tomorrow), Walmart, Nestlé and Daimler (Thursday) .

Elsewhere

• Gold is down, hovering below $1,820/ounce.
• The dollar is flat.
• Crude has been on a roll. WTI is trading around $60/barrel.
• At 10 a.m. Rome time, Bitcoin was trading above $49,000 after hitting fresh records overnight.

***

Helicopter money

Let’s talk free money, the very best kind.

On Friday afternoon, I got emails from Bank of America and from Goldman Sachs summarizing the state of the Biden stimulus package negotiations, and what passage would mean for households and for the wider economy.

I’ve been following the debate as much as anyone, but the numbers still surprise me. It’s not just the stimulus checks, but also the tax break sweeteners (in the form of temporary child tax credits) that make these packages potentially incredibly lucrative. For example, “a family of four making less than $150k a year could qualify for $12,800 in federal income support over the next 15 months,” BofA analysts calculate. That family of four is represented by the top orange line in the chart below. Married with one child? Congratulations, you stand to get $8,000.

That kind of helicopter money will turbocharge GDP growth over the next two years.

In fact, Goldman tallies the fiscal support to households coming in at around $2.4 trillion, or 11% of GDP. “Whether households spend a modest or large share of these pent-up savings as the economy fully reopens could be the difference between a healthy recovery and overheating,” they write.

The crux of the debate lies in the question: what will households do with the dough? If recent history is any indicator, we’ll save it or pay down debt simply because we’re stuck at home and we can’t spend like we normally do. Until vaccinations do their job, a huge chunk of consumer spending—remember, that’s 70% of GDP—will be on things like streaming services, take-out dinners and comfy slippers. Once it’s safe to get on airplanes and go to ball games and movie theaters, consumption will shift, and that will have a multiplier effect on the economy.

But the question is do we really need this third round of stimulus? The data shows Americans’ savings rates are at or near record levels, and that pent-up savings is most likely to go into illiquid assets like real estate and equities (yes, day traders, economists regard stocks as illiquid.)

In other words, it’s not just the WallStreetBets crowd looking to put their next round of “stimmy” checks into the market.

If even a portion of this $1.9 trillion stimulus package gets passed, it will no doubt lead to a tsunami of cash pouring into the markets. (More than one reader has pointed out to me that the flush state of the investor is no doubt the rocket fuel behind the recent rally in stocks.)

Now, to the question: could that overheat the markets?

Let’s answer that with another question—Who could tell?

***

Postscript

If you took a Medieval history course at university, you no doubt recall the 13th and 14th-century rivalry between the Guelph and the Ghibelline. The former were loyal to the pope, while the Ghibelline faction supported the Germanic line of Holy Roman emperors.

In the Marche region of Italy (where I was this weekend), the landscape is defined by this rivalry. You can still tell, if you look close enough, which hilltop-town supported which of the big Gs. As you approach the town, look at the teeth-like crenellations on the castle or on the medieval wall below it.

Ghibelline supporters designed their crenels with a fishtail-like gap in the stones. A Guelph town played it straight, literally.

I’m fascinated by the apparent randomness of this rivalry as we drive around the region. As we approach a new town, I can’t help but insist on quizzing everyone in the car, “Okay, gang. Is this a Guelph town or Ghibelline town?” On cue, the kids turn up the Spotify, and drown me out.

Why am I bringing up this ancient feud?

Because this weekend, up in the mountains of Amandola, we got hit with a blizzard. And there was plenty of the white stuff to build a decent sized snow fort. The girls and their cousin were out all afternoon in the cold assembling blocks of ice and snow and piling them high into a kind of walled fortification. The design was distinctly Guelph-ist, I pointed out, to all manner of eye-rolls. “It’s not a fort. It’s a house, dad,” they corrected me, gesturing to the snowy floor as “the parquet.”

Parquet, as you know, came later.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's read

Priciest apartment on the block. There's no crisis in Hong Kong's upscale property market. Tycoon Victor Li’s asset holding company just sold a luxury pad for a record-breaking HK$459 million ($59 million)—that comes down to more than $17,500 per square foot. What does that come to in Bitcoin per square foot, I wonder?

Rollin' in my 5.0. The rally in auto stocks will be one of the big stories to watch in 2020. The reason for all the investor enthusiasm comes down to a single word: electric. Ford in recent weeks has started selling its Mustang Mach-E, an EV muscle car, if you will. Fortune took it for a spin to see if the new entry justifies the spike in the share price. It gets high marks.

YOLOs come home to roost. The Wall Street Journal has the story of a 25-year-old security guard who, in the hopes of making a mint on the markets and retiring young, took out a $20,000 loan and bet it all on GameStop. He bought into the rally at $234 a share, and, so far, has lost a bundle.

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Market candy

Quote of the day

Unless a company’s business model is a cryptocurrency hedge fund, it shouldn’t be making speculative bets on Bitcoin.

That's Alex Pickard, an investment strategist at Research Affiliates and reformed Bitcoin miner. Pickard objects (he's not the only one) to Tesla's $1.5 billion bet on Bitcoin, and even points out this speculative bet was indirectly paid for by you and me, taxpayers.