David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    Mnuchin Says U.S. Can't Shut Economy Even If Virus Resurges

    This article by Saleha Mohsin for Bloomberg may be of interest to subscribers. Here it is in full:

    Treasury Secretary Steven Mnuchin said the U.S. shouldn’t shut down the economy again even if there is another surge in coronavirus cases.

    “You create more damage, not just economic damage -- medical problems that get put on hold,” Mnuchin said Thursday on CNBC. “We can’t shut down the economy again.”

    Mnuchin added that he believed President Donald Trump made the right decision to urge states to ease social distancing rules that have crippled the U.S. economy. He said that in the event of a resurgence, it will not be necessary to impose restrictions again because Covid testing and contract tracing are improving and they understand more about how to contain outbreaks.

    As restrictions are lifted across the country, signs of a second wave of coronavirus cases in the U.S. have been raising alarms. More than 2 million people in the U.S. have been infected so far.

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    Fed Sees Zero Rates Through 2022, Commits to Keep Buying Bonds

    This article by Craig Torres and Matthew Boesler for Bloomberg may be of interest to subscribers. Here is a section:

    “We’re not even thinking about thinking about raising rates,” he told a video press conference Wednesday. “We are strongly committed to using our tools to do whatever we can for as long as it takes.”

    The Federal Open Market Committee earlier said it would increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities “at least at the current pace” to sustain smooth market functioning.

    A related statement from the New York Fed specified that the pace of the increase would be about $80 billion a month for purchases of Treasuries and about $40 billion of mortgage-backed securities.

    “Acting on mortgage-backed securities and Treasuries underscores their belief that more support is needed,” said Diane Swonk, chief economist with Grant Thornton in Chicago. “The Fed does not see a victory in the employment bounce-back. The risk of deflation is still high and the economy needs more support to heal more fully.”
     

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    Speculative Fervor in U.S. Stocks Surges to 'Stunning' Levels

    This article by Cormac Mullen for Bloomberg may be of interest to subscribers. Here is a section:

    At the heart of the speculative activity are smaller investors, according to Sundial. Small trader call buying made up more than 50% of total volume last week, the highest since 2000, it said.

    Past instances when bullish small trader positions made up 45% or more of volume preceded a median loss for U.S. stocks of about 3% in two months time and 15% in a year, according to the note.

    “Small traders are pushing their luck in a major way,” said Goepfert. “It seems increasingly risky to try to chase this rally along with traders who have traditionally been extremely reliable contrary indicators.”

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    Shell's CEO Worries About a Disorderly Energy Transition: Q&A

    This interview of Shell CEO Ben van Beurden for Bloomberg may be of interest. Here is a section:

    Assuming you don’t get government support to advance research in hydrogen production and carbon capture and storage, what will you have to do to make those viable?

    Stay with the program a little bit longer. That’s exactly what we’re doing. You could take a negative view and say we knew that hydrogen was a good thing and we knew that CCS [carbon capture and storage] was needed, but it hasn’t happened. I’m not signing up for that approach. We need a lot of hydrogen in the mix. We need significant CCS. My prediction is that in the next few years you will see CCS projects come off the ground. You will see very large-scale hydrogen projects come off the ground as well. And I hope we will be associated and involved in each and every one of them.

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    1968 Was a Horrendous Year But 2020 May Be Worse

    This article by Niall Ferguson for Bloomberg may be of interest to subscribers. Here is a section:

    As a white, middle-aged, upper-middle-class immigrant, I’m hardly the person to speak to the politics of race in America.  So I turned to an African-American friend, the economist Roland Fryer, whom I’ve known since we were colleagues at Harvard.

    In 2016, he published a brilliant but controversial paper which argued that the police did not disproportionately use lethal violence against black people, though they were more likely to use non-lethal force against them. (A paper published last year in the Proceedings of the National Academy of Sciences lent strong support to Fryer’s thesis.) He has a new, unpublished paper that looks at a perverse effect of investigations into police shootings. I asked Fryer to walk me through the argument.

    “If you have a police shooting that goes viral online but isn’t investigated,” he explained, “then nothing changes — levels of police activity and crime are about the same. But if you have a viral shooting that is investigated, then police activity plummets, and crime goes up dramatically.” In just five cities – Baltimore; Chicago; Cincinnati; Ferguson, Missouri; and Riverside, California -- this led to excess homicides of almost 900 people in the subsequent 24 months, 80% them black, with an average age of 28. It's a dangerous Catch-22: You're damned if you don't investigate “viral” incidents, and in even worse shape if you do.

    How does Fryer interpret the current protests? “People are fed up,” he told me. “They are frustrated by the disparities they see in educational outcomes. Frustrated by the disparities they see in criminal justice. Frustrated by racial disparities in life expectancy. We are all to blame — this happened on our watch.” And when you add to that the fact that Covid-19 disproportionately affected the black community: “Folks have had enough. People are very much on edge.”

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    A Million-Mile Battery From China Could Power Your Electric Car

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    CATL struck a two-year contract in February to supply batteries to Tesla, a major boon for the Chinese company as the U.S. electric-car leader has thus far mainly worked with Japan’s Panasonic Corp. and South Korea’s LG Chem Ltd. The deal followed months of negotiations, with Tesla Chief Executive Officer Elon Musk traveling to Shanghai to meet with Zeng.

    The CATL batteries are set to go into Model 3 sedans produced at Tesla’s massive new factory near Shanghai, which started deliveries around the beginning of this year. Batteries are the costliest part of an EV, meaning suppliers of those components have a chance to reap a lion’s share of the industry’s profits.

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    Email of the day on caution at potential areas of resistance

    “You have been calling for some ‘consolidation’ for equity markets for a number of weeks now (which I expected too), but this just hasn’t come to pass. Instead we have seen a relentless charge higher in virtually every market. You’ve stated that it’s liquidity driven which until recently at least, little participation from the professional money managers. Short term yields no longer can be relied upon as a risk indicator with the Fed deliberately compressing yields at the front end. To what extent, if any, has this recent episode viewed the way you look at markets through a charting lense. A despondent sceptic of this rally here, it seems the only winning strategy is just to ride the liquidity train, and rotate one’s positions towards riskier assets (travel, emerging etc) as the new safe havens (tech) reach maturity.

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    Living on the Edge, Part 5: Enabling & Empowering Locally

    Thanks to a subscriber for this report from Cowen which may be of interest. Here is a section:

    Latest Satoshi Nakamoto Candidate Buying Bitcoin No Matter What

    This article by Olga Kharif for Bloomberg may be of interest to subscribes. Here is a section:

    One reason is, Back believes Bitcoin will go to $300,000 from the current approximate price of $10,000 within five years -- without any additional adoption by institutional investors. Retail investors, who’ve carried the torch for the last 10-plus years, since Bitcoin’s debut, will continue to show support as institutions remain cautious, he said.

    “It might not require additional institutional adoption because the current environment is causing more individuals to think about hedging,” Back said. “And retaining value when there’s a lot of money printing in the world.”

    With more people working from home amid the Covid-19 epidemic, real-estate investments are more risky, he said. Bonds may be overvalued. And so some investors may be turning to Bitcoin, even though it too could see some headwinds as more people lose jobs, he said.

    “It is causing people to think about the value of money and looking for ways to preserve money,” Back said. “It’s a difficult environment to get any yield.”

    One reassuring sign of demand is that Grayscale Investments alone has bought more Bitcoin in the past few weeks than the amount of new coins that has been mined, Back said.

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    Email of the day on the potential for a second wave of infections

    Dear Eoin, thank you for the excellent insights into market dynamics. There is one thing which you state from time to time - viz that you do not believe there will be a second wave of the virus in the Autumn. What leads you to believe that - we don't seem to know that much about the virus. So how can you know that there will not be a second wave in the Autumn? Although I definitely agree with you that authorities will do everything in their power to avoid more lock-downs. Many thanks, A

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