Sotheby’s First NFT Auction Kicks Off Today

Sotheby’s First NFT Auction Kicks Off Today

Sotheby’s auction house – established in 1744 London – is holding its first auction for non-fungible tokens (NFTs) by anonymous artist ‘Pak’ which “scrutinizes our understanding of value.”

The Fungible” collection by Pak kicks off on Monday at Noon EST, and will end on Wednesday the 14that 1:15 p.m. ET. To participate, bidders need to be on Nifty Gateway, an NFT marketplace operated by the Gemini cryptocurrency exchange founded by the Winklevoss brothers.

By leveraging blockchain technology and non-fungible tokens (NFTs), The Fungible not only provides collectors with novel assurances of scarcity and ownership, but exposes them to the unique features with which technology can endow artwork. Through this collection, Pak scrutinizes our understanding of value. What does value mean, and from where does it derive authority? Core to the collection is the Open Editions, which allow collectors to purchase as many fungible cubes as they wish during the sale period for a fixed price. As the collection reveals itself over the course of the sale, Pak continues to challenge the collector community with this question of value while simultaneously providing a unique journey into and through digital art. -Sotheby’s

According to the auction house, Pak’s “Fungible Cubes” will start at $500 each, and collectors will be able to buy as many ‘cubes’ as they want. Purchasers of fungible cubes will receive an NFT containing Pak’s artwork.

Pak has been involved in digital art for more than two decades, founding the studio Undream and creating an AI called Archillect – designed to create ‘stimulating visual media.’

“I see this collection as the first digitally native mindset of works that’s presented to the traditional art world through a global auction house,” Pak said in a statement released by Sotheby’s, adding “With this kind of a scale, I expect it to play a major cultural role in telling the narrative of the digital world to the traditional world in terms of the medium definition and value creation. People may be able to right click save as a ‘jpeg’ but how would they save as a digital performance?”

Those interested in participating can click here, and will need to create an account on Nifty Gateway.

In the past several months, millions of dollars have been spent collecting rare NFTs. In March, artist Beeple sold an NFT collage for $69.3 million by Sotheby’s rival, Christie’s. That month, Sotheby’s CEO Charles Stewart told CNBC that he decided to hold his first NFT sale with Pak because he’s one of “the most established artists” in the space, adding that NFTs have “staying power.”

Tyler Durden
Mon, 04/12/2021 – 11:28

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Markets Continue On Their Path Of Record Disconnects From Reality

Markets Continue On Their Path Of Record Disconnects From Reality

Authored by Sven Henrich via NorthmanTrader.com,

The ghost of 2013 indeed is hanging over this market. Nothing matters and the trend remains fully intact and new record market highs are made every month. November, December, January, February, March, and now April as any smaller pullbacks are continuously bought. Steady and guaranteed gains every month as markets continue to drown in liquidity and recovery optimism.

As such markets continue on their path of record disconnects of asset prices from the economy reaching over 201% vs GDP now:

As with any bubble, valuation metrics are disregarded and new narratives spring up to justify the price action and previous metrics are discarded as irrelevant. This process will work until it doesn’t and frankly it has to because equity inflows have taken on epic proportions with people piling into the highest valuations in history

Which brings us to an interesting technical area in the price action:

This was a technical price zone outlined as a technical risk/magnet in January of 2021. Now, like most Wall Street analysts, this was a view of what could happen by year end, but $SPX in April has already blown out the year end price targets for most Wall Street analysts. There are higher price targets out there into 4500 and I’ve outlined a technical view of that possibility as well.

But reaching this 1.618 fib extension so early in the year says something.

In the short term $SPY is again acting like it’s September 2020:

Overbought, stretched, vertical, with gains based on many unfilled overnight gaps beneath:

Back in September 2020 this type of action resulted in a 10.5% correction. Whether we will see something similar or worse at some point this month or next remains to be seen, but all things being equal one can now observe something we haven’t seen since February 2020. A divergence of equal weight:

Note that as earnings season is upon us (and earnings reports will not only speak to results but also outlooks which will shed light on the reality of ramping inflation and rising cost structures) small caps are suddenly lagging:

So this steady as she goes non stop melt up is exhibiting some signs that something is afoot right as markets are reaching a key technical zone. My view remains: This market has an appointment with many open gaps to fill to the downside. On $SPX as well as on $VIX, hence, in my view, it’s important to know where these levels are as they may represent actionable pivot points to come.

Tyler Durden
Mon, 04/12/2021 – 11:10

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Iran Blames Israel For Natanz Sabotage; Intel Sources Say Enrichment Set Back 9 Months

Iran Blames Israel For Natanz Sabotage; Intel Sources Say Enrichment Set Back 9 Months

On Monday Iran has formally laid blame on Israel for sabotaging its Natanz nuclear site following a Sunday blackout which brought its operations to a halt – believed to possibly be part of a cyberattack – and which some reports say will set back Iran’s enrichment ability by at least nine months, based on unnamed US and Israeli intelligence sources

However, Iranian nuclear energy chief Ali Akbar Salehi has claimed that a back-up emergency power system has successfully offset the power outage, saying, “Enrichment of uranium has not stopped in the site.”

After throughout the day Sunday there was finger pointing in Tehran toward Israel, a statement by Foreign Minister Javad Zarif Monday marked the first high level explicit blaming of Israel for the sabotage attack, which was earlier dubbed “nuclear terrorism”. Zarif said, “The Zionists want to take revenge because of our progress in the way to lift sanctions… We will not fall into their trap…We will not allow this act of sabotage to affect the nuclear talks,” he said as cited in state TV.

“But we will take our revenge against the Zionists,” he added, which comes on the heels of Iran’s nuclear energy chief Salehi underscoring that “Iran reserves the right to take action against the perpetrators.”

Meanwhile, amid conflicting reports that there was either a blast or a cyberattack mounted (or perhaps both) which caused the sudden blackout, Reuters reports these additional details which have come to light:

Multiple Israeli media outlets have quoted unnamed intelligence sources as saying the country’s Mossad spy service carried out a successful sabotage operation at the underground Natanz complex, potentially setting back enrichment work there by months. Israel has not formally commented on the incident.

…Iran’s semi-official Nournews website said the person who caused an electricity outage in one of the production halls at the underground uranium enrichment plant had been identified. “Necessary measures are being taken to arrest this person,” the website reported, without giving details about the person.

In the wake of this latest incident and others like the recent Red Sea mine attack against an alleged Iranian “spy ship” – also apparently conducted by Israeli intelligence, a number of observers have pointed out Iran has lost its deterrence capability.

Similar to what’s long been happening in Syria, it appears Israel is now able to mount severe sabotage attacks against the Islamic Republic at will, without fear of major retaliation. Of course this comes at the most sensitive time of ongoing talks with JCPOA signatories in Vienna, with progress also reportedly being made albeit “indirectly” with Washington as well.

But that appears to be the point behind the Israeli disruptive and destabilizing actions: not only does Tel Aviv want to see Iran’s nuclear capabilities permanently curtailed, but it wants to derail the Vienna talks by any means. 

Tyler Durden
Mon, 04/12/2021 – 10:51

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The Great Transition: Monetary Hopes To Fiscal Reality

The Great Transition: Monetary Hopes To Fiscal Reality

Authored by Bill Blain via MorningPorridge.com,

“Poyekhali! If you haven’t met on God on Earth, you won’t find him in space.”

How long can markets party on like there is no tomorrow? The thing is – there always is and the hangover is bound to hurt, which is an apt metaphor as English pubs reopen today ! Markets need to prepare for the inevitable consequences of the big transition from 12 mixed years of fairly useless monetary experimentation to a future of fiscal pump-prime policies. What will it all mean for speculative bubbles, inflation and investment preservation?

In this morning’s intro I mentioned a future of fiscal pump-primed policies – which is fascinating as Gordon Brown, who famously called the end of the boom and bust economic cycle, was on the Radio this morning. I like Brown – honest and hard working, but a bit of a temper. Compare and contrast….

Meanwhile…  it’s interesting to note the front page of the WSJ this morning. It explains why this is a great time to be running a major firm. The average earnings of the top 300 US corporate CEOs rose to $13.7 million in 2020, up $1 mm from 2019. What Pandemic? What global crisis you ask? Some CEOs, like the head of Norwegian Cruise Lines – which, as well all know had a superb 2020 – saw his renumeration double to $35mm. Meanwhile, Goldman is warning all these taxes President Biden wants to raise on US Corporates – which will no doubt be squandered on fripperies like rebuilding public infrastructure, improving schools, health, and social welfare and all that other government malarky, could hamstring US corporate earnings by 9%.

Go figure.

These are curious days…. Markets priced for absolute perfection and completely out of touch with the economic realities of environmental degradation, climate change and rising social pressures brought on by increasing inequality. The expectation the post pandemic recovery-rally is being used to justify everything from crazy high market valuations to the price of bitcons.

Everyone is piling into markets on the basis the next new, new thing is going to make them trillionaires. Fervid speculation is driving up the price of everything tangible – and increasingly everything intangible as well. I shall be the little boy who shouts the Emperor is in the buff (naked), as wildly impractical and useless stocks, NFT’s and digital baseball boots rise ever higher.

The reality… the crushing reality.. is the global economy is anything but perfect. It is, definitionally, an imperfect thing. We’ve got the most bizarrely conflabulated mismatch of monetary policies, government spending and fiscal interventions there have ever been. While investors are blithely dismissing the prospects for inflation, governments are praying for it to inflate away their debt bubbles. While rising markets assume growth trajectories are ballistic – investors forget the expression means they return to earth. With a bang.

These are curious times. We are undergoing a fundamental shift from the failed monetary experimentation and austerity of the 2010-20 era to a new age of fiscal hope – in other words, spend our way into growth. It will be interesting – which does not mean comfortable. At this point remember my mantra: “Things are never as good as you hope, but seldom as bad as you fear.”

According to all the reports and outlook puff the investment banks put out, this is going to be another good week for markets. The rising prospects for economic recovery, the continued promise of central banks to juice recovery by keeping rates low, and the repressed spending plans of billions of consumers – well, what can possibly go wrong?

Oh.. glad you asked that question.. there are so many:

Let’s start with US Treasury auctions. There is $271 billion of new US treasuries about to hit the market. As the 10-year rate is now the most watched risk indicator on the planet, what will potentially volatile yields do to fraxious expectations? Weak demand and poor Treasury auction cover ratios will not only set the Fed a’scramble to keep rates low by buying bonds, but could set off all kinds of stock fears.  It was a poor 7-year bond auction in Feb that wobbled markets. It could happen again.

Or what about a geopolitical shock? Like the Russian troops massing on the Ukraine borders threatening to test Europe and Biden’s resolve? Or the increasingly bellicose acts of China towards Taiwan – also straining the limits of Biden’s attention.

Or maybe it will be something here in the UK? The Telegraph has an insightful article: Traders warn of turmoil if Scotland backs independence bid. Yep, if I was holding 25-year Scottish debt (as a result of Gupta’s GFC alliance defaulting on its Greensill funded sludge, kicking in Scot’s guarantees), then I might be concerned….

Or maybe it will be unholy mess in choosing Merkel’s successor in Germany. Thankfully, apparently we don’t have to worry about France; the polls say Macron should be able to beat Le Pen in a run-off next year… by 4 percentage points! And that’s as long as he doesn’t feth-up running the nation any more than he already has…

However, I suspect the big event this week will be IPO of current market darling Coinbase. Whoop whoop who……. oop(s). I can’t admit to sharing the enthusiasm of the Crypto-fanboys who say its yet another reason to bet your future on invisible coins held in the digital interweb thingy that only really clever and smart people can understand.

Now, kudos to Coinbase founders. They saw a need and they have answered it. It was the need of folk desperate to bet their little cotton socks on Crypto, and they have facilitated it. Well done for reading the zeitgeist of the times, and becoming the Ask.Jeeves of the Crypto revolution. (Yeah… why did I mention Ask.Jeeves.. look it up.)

Coinbase is said to be worth $92 bln. It’s attracted 13 million new users in recent months, doubling its profits to $750mm. What’s it really worth? All depends on how long the crypto fashion continues. The key issue is it will be the author of its own destruction: If crypto currencies do go mainstream, then it will attract competitors who will do it better and cheaper. Which is why no one uses Ask.Jeeves to search the internet.

Regular readers will now I am not a fan of BitCoin – but I get the gist behind what’s happening in cryptocurrencies. The basis of today’s extraordinary Coinbase IPO valuation is to monetise its perceived value on the back of Bitcoin’s renewed popularity – which has occurred at a time when fervid speculation is driving every real and imaginary asset.  I’m bored of writing about the current hype around bitcoin – about its increasing adoption by big funds and institutions, and how it’s now a bona-fide finance asset and part of the establishment (just like Lex Greensill and Bill Hwang?). It’s all noise, and if you like the noise, then please participate.

Every puff piece on Bitcoin goes back to unknown Satoshi Nakomoto’s sacred texts – which said absolutely diddley-squat about the value of Bitcoin as a speculative investments, but presented an interesting new idea about decentralised money and how to avoid double counting.

Whatever Coinbase and Bitcoin fans think about adoption; Bitcoin is not money, its not a store of value, its not a unit of account, and it is not, and never shall be easily transactable money (remember the BC blockchain can handle a tiny number of simultaneous transactions.) Bitcoin was the first crypto to emerge from the evolutionary soup, and it is deeply flawed and imperfect. I suspect the only reason for its insane valuation is its scarcity – that only 21 million coins can exist. (Even though they don’t actually exist, except in a nebulous blockchain ledger on the net…)

Successive waves of cryptocurrencies are emerging. Some good, some bad, some ugly and some utterly fugly. As they evolve, some will find market niches as ways to transact, to store value, but they will increasingly run into government backed official digital-currencies. I suspect the main business of crypto-currencies in the future will be in laundering illegal transactions for either criminal or tax-avoidance purposes. (For instance, if I was paying my builder cash to reduce VAT I might use a crypto when cash vanishes.)

Evolution in all things.. and especially in crypto. I wish Coinbase well.. and who knows, if there is a Crypto out there that makes sense… I think I shall have a closer look at Cardano.

*  *  *

The Morning Porridge Subscription pages are now live.

Tyler Durden
Mon, 04/12/2021 – 10:31

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A “Fairly Rare Phenomenon” Occurs In Equity Options Land

A “Fairly Rare Phenomenon” Occurs In Equity Options Land

US equity futures have traded the high to low range of Friday’s late-day meltup mania since they opened last night as a modest Asian derisking (following disappointing Chinese credit data, particularly with concerns surrounding the sharp decline of bond financing as well as the weekend news that a new study shows that the South African variant may evade protection from the Pfizer vaccine.)

That meltup was odd as SpotGamma notes the strange and conflicting message from surging price and negative delta. What’s shown here is the traded delta (on a rolling basis) in blue, versus the SPX price in orange.

As you can see the traded delta was sharply negative from ~2pm on, and seemed to accelerate right at the time when the SPX went north.

What’s odd about this is that we think all of this delta should have made dealers long(er) delta and needing to add some short hedges.

Clearly not all moves in markets are options driven, but that correlation (red box) is rather striking. 

Nomura’s Charlie McElligott notes that Friday’s chaos left the lumpiest gamma strikes all higher, with 4100 at $6.046B, 4125 with $2.42B, 4150 with $3.58B and 4200 with $2.87B, with Dealers deeply in “long gamma” territory and an overall extreme “long delta” which makes sense near all-time highs, currently $385B and 92.8%ile.

However, as SpotGamma points out, the OCC data we sent out last night shows that there is a very large short put position on in index options.

If we consider this in with the SPX, it implies that the dealers options position is more market neutral than our model suggests (as dealers would hold these long puts that traders are selling). If dealers are buying put options, the number of futures they need to sell as a hedge is reduced.

Therefore as the market goes higher dealers have less futures to sell, and it could explain why the options resistance levels didn’t have as much “grip” Friday.

As you can see in the chart below, this (market being net short index puts) is a fairly rare phenomenon, and the previous times its occurred was after large market selloffs – not all time highs like we have now.

It likely added to the buying pressure seen last week, but also increases risk going forward.

Tyler Durden
Mon, 04/12/2021 – 10:15

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Three David Bernsteins Discuss Free Speech on Clubhouse Tonight at 8pm EST

If you are on Clubhouse, join me, <a href=”https://freedomfest2017.sched.com/speaker/david_s_bernstein.6vdtzvu”>David Bernstein</a>, and <a href=”https://jewishjournal.com/commentary/334702/my-cheshbon-hanefesh-for-cowardice-in-the-face-of-wokeness/”>David Bernstein </a>for a discussion of freedom of expression and wokeness Monday 4/12 at 8:00 pm.

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Three David Bernsteins Discuss Free Speech on Clubhouse Tonight at 8pm EST

If you are on Clubhouse, join me, <a href=”https://freedomfest2017.sched.com/speaker/david_s_bernstein.6vdtzvu”>David Bernstein</a>, and <a href=”https://jewishjournal.com/commentary/334702/my-cheshbon-hanefesh-for-cowardice-in-the-face-of-wokeness/”>David Bernstein </a>for a discussion of freedom of expression and wokeness Monday 4/12 at 8:00 pm.

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CNN Says 10 Percent of Vaccinated Air Travelers May Catch COVID. That’s Completely Wrong.


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Are airplanes more dangerous now than they were during the height of the COVID-19 pandemic? No, of course not. Yet that’s what CNN implied on Sunday, in an article on “how to fly safely.” Correctly noting that the Pfizer and Moderna vaccines are only 90 percent protective against COVID-19, CNN went on to assert (incorrectly) that “translated into reality, that means for every million fully vaccinated people who fly, some 100,000 could still become infected.”

COVID-19 can and has spread on flights, of course. But even before people started getting vaccinated, confirmed cases of transmission were relatively small. “The risk of contracting coronavirus disease 2019 (COVID-19) during air travel is lower than from an office building, classroom, supermarket, or commuter train,” an article in The Journal of the American Medical Association noted last fall. If CNN’s estimate were true, that would mean many more vaccinated people getting infected on planes as overall case counts dwindle than unvaccinated people did at the pandemic’s peak.

Luckily, CNN’s estimate is dead wrong. “NO NO NO. That’s not what that number means,” tweeted University of North Carolina at Chapel Hill Professor Zeynep Tufekci yesterday, adding “this didn’t even happen when millions flew unvaccinated. So how could it make sense now?”

When we talk about a 90 percent vaccine efficacy rate, it does not mean that every single vaccinated person who is exposed to COVID-19 has a 10 percent chance of getting it; individual immune responses and other factors still apply. And it certainly doesn’t mean that 10 percent of vaccinated people in the world, a country, or a given place will catch COVID-19.

“What a ‘90% effective vaccine’ means is that the number of people who would otherwise have gotten COVID is 90% lower. It doesn’t mean that only 90% of vaccinated people are immune,” Australian journalist and University of Technology Sydney fellow Josh Szeps points out.

One million vaccinated people flying does not mean all one million people will be on flights where another passenger has COVID-19.

Even if that were the case, it does not follow that conditions—air circulation patterns, ventilation system operation, masking, proximity to the infected person, etc.—would make it possible for each vaccinated person on a flight to be significantly exposed.

And even if that were the case—the highly, highly unlikely scenario that every vaccinated person is exposed to COVID-19 in-flight—it does not follow that 10 percent of those travelers will definitely catch it. Who catches it upon exposure isn’t just a pure percentages game; it also depends on individual immune responses, amount of exposure, and more.

“One common misunderstanding is that 95% efficacy means that in the Pfizer clinical trial, 5% of vaccinated people got COVID,” writes Anna Nowogrodzki at LiveScience. “But that’s not true; the actual percentage of vaccinated people in the Pfizer (and Moderna) trials who got COVID-19 was about a hundred times less than that: 0.04%.”

Reason‘s Ronald Bailey recently looked “at what a 95 percent vaccine efficacy rate would mean in a hypothetical case in which a population of 100,000 people have all been vaccinated.”

“Applying the 1 percent rate at which unvaccinated folks became ill during the vaccine trials over three months suggests that 1,000 people in an unvaccinated population of 100,000 would fall ill,” notes Bailey. “But because all 100,000 people are vaccinated, the actual rate in the vaccinated population would be just 50 cases (0.05 x 1,000 = 50 cases).”

The CNN article has since been updated to say that while the vaccines are 90 percent protective, “that means it’s still possible to get infected.” A correction at the end of the article says “A previous version of this article incorrectly extrapolated vaccine efficacy and the probability of becoming infected with Covid-19 aboard airplanes. The risk is much lower than stated in the original version.”


FREE MINDS

Tyler Cowen sketches out a new vision of libertarianism, after declaring last year that the libertarian movement was “pretty much hollowed out.” Taking a second look, Cowen asks: “What does it mean to be libertarian now? I would say that the purer forms of libertarianism are evolving: from a set of policy stances on political questions to a series of projects for building entire new political worlds.” With many past battles around regulation and communism won, and other old battles seemingly lost forever (health care) or unable to sustain much public interest (anti-war efforts), Cowen suggests that “much of the intellectual effort in libertarian circles is concentrated in two ideas in particular: charter cities and cryptocurrency.”

But Cowen’s piece ignores many areas where U.S. libertarians have long been focused, continue to focus, and could do real good—for the movement, and for the country more broadly—by focusing even more. Things like ending the drug war (which is arguable just as strong and destructive as ever, despite moving away from marijuana as a target), other criminal justice/police/prison reform efforts, fighting the surveillance state, dismantling oppressive occupational licensing, staving off a bloated and all-powerful antitrust regime, and fighting for free markets and free speech despite major political party figures who increasingly can’t stand either, to name a few. And anti-war efforts seem valuable even—or especially—in the face of waning popularity.

Cryptocurrency is great, and charter cities intriguing. But U.S. cities and systems as they exist leave plenty of room for valuable, influential, and perhaps even some winnable libertarian fights, too. Building new political worlds is all good, but libertarians shouldn’t give up just yet on the one we have, either.


FREE MARKETS

Are we headed for 1970s-style inflation? Reports about current commodity markets are eerily reminiscent of the ’70s, The Wall Street Journal says:

In 1973, the U.S. was coming off a two-year experiment in wage and price controls, which artificially depressed prices and muted signals that the economy was overheating. Then, too, the Fed pursued an easy-money policy, keeping interest rates low—though considerably higher than now, and without today’s purchases of bonds and mortgage securities….

In 2021 we’re emerging from the pandemic shutdown, which cratered growth and slammed the economy—depressing price pressures, not unlike what the price-control program did 50 years ago. Today’s Fed policies are even more expansive. And Congress has just enacted a $1.9 trillion stimulus bill—on top of earlier relief bills costing another nearly $2 trillion, a lot of which remains unspent and will continue to fuel demand this year and beyond.

Does that mean that we’re doomed to repeat the earlier disaster? Today’s fiscal stimulus clearly dwarfs anything even considered in the 1970s. Moreover, there is a palpable excitement that Americans will finally be able to discard the shackles of Covid and spend the money they saved last year and the wages they’re starting to earn again. So demand is likely to soar.

As was the case 50 years ago, there are constraints on supplies: shipping delays are blocking deliveries; manufacturers can’t get parts to ramp up production; real-estate values are skyrocketing, while lumber shortages constrain home building; and most commodity prices are rising precipitously. Experts reassure us that the annual inflation rate will rise only to about 2%. We hope they’re right, but when demand increases faster than supply, prices tend to go up.


QUICK HITS

• Minnesota police “fatally shot Daunte Wright, a 20-year-old Black man, during a traffic stop near Minneapolis Sunday, sparking protests and unrest that lasted into the night,” reports Axios.

• The Supreme Court says California can’t ban religious meetings in households.

• President Joe Biden is walking back a pledge to create a national commission on police oversight.

• Cartoonist Peter Bagge looks at the life of Henry David Thoreau.

• The term “‘BIPOC’ isn’t doing what you think it’s doing,” write Andrea Plaid and Christopher Macdonald-Dennis at Newsweek.

• “The Texas Supreme Court voided a restraining order against a salon owner who was jailed and fined last year for keeping her store open despite executive actions requiring the business to be closed,” reports The Hill.

• Maryland is passing a slew of criminal justice reforms.

• Defense Department police officer David Dixon, arrested last week on murder charges, is also being accused of assault.

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Rabo: Powell Can’t Wait To See “Actual Inflation” To Hike… But What Do We Have Right Now

Rabo: Powell Can’t Wait To See “Actual Inflation” To Hike… But What Do We Have Right Now

By Michael Every of Rabobank

Inflection/Infection Point

If you are still in the camp that all that really matters is what central banks say, then note “the US is now at an inflection point”. So says Fed Chair Powell on CBS TV. While positive, this does seem to lean in a more hawkish direction: could his credibility be “Gone in 60 Minutes”, after repeated messaging that rates are on hold for years to come? Or is this a special kind of inflection point which still necessitates the lowest rates and most QE ever? It seems so, as Powell added: “We can wait to see actual inflation before we raise interest rates.” What do we have right now, chopped liver?! Yet the primary concern for the Fed is not inflation, but infection. If Covid gets worse again, then the Fed needs to be there: but what if infection doesn’t?

Infection point is what markets will see as: France goes into another lock-down for schools; by contrast, the UK finally begins to open up; Australia and New Zealand launch a trans-Tasman travel bubble; Thailand, with a mass break-out of the UK variant, is nonetheless allowing the whole country to travel for a week for its new year; India is seeing huge vaccination success – and also huge daily Covid case numbers; a Chinese official admits their Covid vaccine isn’t very effective –as the Malaysian press reports several Chinese tourists in Sarawak tested positive for Covid despite having been vaccinated twice in China; and the EU is admitting that even if it buys Russia’s Sputnik vaccine, it will take months to get production numbers up to where they need to be, so no quick fix. This all seems to leans towards a market bias for the US and UK.

Yet one infection inflection point should terrify us: the island of St. Vincent is seeing a massive volcanic eruption – and yet only those with proof of vaccination, just 10% of the population, are being evacuated. And there you were worrying about the idea of needing to show papers or have a facial scan to sit in a pub garden in the UK.

Many other potentially-volcanic inflection points are evident. In China, Alibaba has been hit with a record USD2.8bn anti-monopoly fine, which follows Beijing forcing an elite business school backed by Jack Ma to halt enrolments. China analysts are trying very hard not to see the writing on the wall as large as that from a key scene in ‘The Life of Brian’: “Foreign capital they go the house?” Some things need even larger fonts, however.

The excited tech coverage of China’s launch of its digital CNY last week failed to notice one key detail: according to the Wall Street Journal, “The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start.” A point long made here is that a sovereign digital currency would not only mean all economic anonymity being removed; and capital flight, short of trading money for goods and shipping them offshore; and that interest rates could be set as negative as needed given no ability to hoard cash; but, crucially, that digital money could be switched off to force you to spend it on what the state wants – or ‘on’, to circumvent the banking system entirely. Would you, as a market player or a CFO, want to hold a digital currency that can disappear from your bank balance as needed?

The White House is catching on to the Great Power and Great Currency game here, Bloomberg reporting: “Biden Team Eyes Potential Threat From China’s Digital Yuan Plans”. For now the US remains concerned about the risk of sanctions evasion (as if that doesn’t already happen): yet the US is also considering a digital Dollar. All the criticisms of DNCY would apply to DUSD too.

Perhaps the more important question is if you will get a choice or not: this is going to be a political, not an economic decision. In May 2017, former Fed Chair Bernanke echoed my earlier warnings (e.g., 2015’s ‘FX Wars’ and 2016’s ‘Thin Ice’) and gave a speech flagging the next downturn would see fiscal and monetary policy cooperation: here we are four years later and that long-untouchable policy is suddenly normal. The same Kalecki/Polanyi logic that predicted Bernanke’s prediction says digital currency is likely to happen at some point too, because fiscal and monetary policy together still isn’t enough in a globalized world unless everyone is doing it – and not everyone can or will.

True, a digital inflection point could still just mean a cashless DUSD and DCNY battling it out for global economic favor. However, at any point they could be used in a truly radical manner. Indeed, digital currencies allow us to more easily replicate the 1930’s splitting of the global gold standard into bifurcated rival currency blocs: how about holding DCNY that can only be spent in China, or a DUSD that works the same way? (Some would say we already have that if you include US financial assets.)

Of course, this isn’t just political but geopolitical. After all, our global financial architecture sits on geopolitical plates. Day to day these don’t move, and markets don’t know how to price for them if they do: yet that doesn’t mean we aren’t moving closer to such an epic move:

  • US Secretary of State Blinken has warned China against encroaching on Taiwan – and also blamed it for helping the initial spread of Covid-19. That’s as the bill mandating deeper US-Taiwan ties works its way through Congress. The US is also sending more warships to the South China Sea, and the Philippines seems to be moving closer to the US once again given what it claims is further Chinese encroachment on its maritime territory. The very fat tail risks here are self-evident: more so given neither side can back down without a serious loss of relative power (which would flow through to FX markets);

  • Blinken has warned Russia any offensive against Ukraine would have “consequences”. It’s not clear what these would be, but military does not appear high on the list. Yet markets thinking this is “’A Small Country Far Away about Which We Know Little” fail to see the tail risks against the broader backdrop;

  • Iran’s Nantaz nuclear reactor was subject to Israeli sabotage (“nuclear terrorism”) according to Tehran, which follows an attack on an Israeli ship by Iran, and one on an Iranian ship by Israel. The Middle East is simmering on an axis involving key sea lanes for global energy; and

  • John Kerry is due in Beijing this week to try to get Chinese cooperation on all matters green. It may well suit Beijing to play nice here in an attempt to leverage that promise against other US actions. Let’s see if the climate crisis provides a genuine geopolitical inflection point or not.

Tyler Durden
Mon, 04/12/2021 – 09:56

via ZeroHedge News https://ift.tt/3tfCf9u Tyler Durden

CNN Says 10 Percent of Vaccinated Air Travelers May Catch COVID. That’s Completely Wrong.


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Are airplanes more dangerous now than they were during the height of the COVID-19 pandemic? No, of course not. Yet that’s what CNN implied on Sunday, in an article on “how to fly safely.” Correctly noting that the Pfizer and Moderna vaccines are only 90 percent protective against COVID-19, CNN went on to assert (incorrectly) that “translated into reality, that means for every million fully vaccinated people who fly, some 100,000 could still become infected.”

COVID-19 can and has spread on flights, of course. But even before people started getting vaccinated, confirmed cases of transmission were relatively small. “The risk of contracting coronavirus disease 2019 (COVID-19) during air travel is lower than from an office building, classroom, supermarket, or commuter train,” an article in The Journal of the American Medical Association noted last fall. If CNN’s estimate were true, that would mean many more vaccinated people getting infected on planes as overall case counts dwindle than unvaccinated people did at the pandemic’s peak.

Luckily, CNN’s estimate is dead wrong. “NO NO NO. That’s not what that number means,” tweeted University of North Carolina at Chapel Hill Professor Zeynep Tufekci yesterday, adding “this didn’t even happen when millions flew unvaccinated. So how could it make sense now?”

When we talk about a 90 percent vaccine efficacy rate, it does not mean that every single vaccinated person who is exposed to COVID-19 has a 10 percent chance of getting it; individual immune responses and other factors still apply. And it certainly doesn’t mean that 10 percent of vaccinated people in the world, a country, or a given place will catch COVID-19.

“What a ‘90% effective vaccine’ means is that the number of people who would otherwise have gotten COVID is 90% lower. It doesn’t mean that only 90% of vaccinated people are immune,” Australian journalist and University of Technology Sydney fellow Josh Szeps points out.

One million vaccinated people flying does not mean all one million people will be on flights where another passenger has COVID-19.

Even if that were the case, it does not follow that conditions—air circulation patterns, ventilation system operation, masking, proximity to the infected person, etc.—would make it possible for each vaccinated person on a flight to be significantly exposed.

And even if that were the case—the highly, highly unlikely scenario that every vaccinated person is exposed to COVID-19 in-flight—it does not follow that 10 percent of those travelers will definitely catch it. Who catches it upon exposure isn’t just a pure percentages game; it also depends on individual immune responses, amount of exposure, and more.

“One common misunderstanding is that 95% efficacy means that in the Pfizer clinical trial, 5% of vaccinated people got COVID,” writes Anna Nowogrodzki at LiveScience. “But that’s not true; the actual percentage of vaccinated people in the Pfizer (and Moderna) trials who got COVID-19 was about a hundred times less than that: 0.04%.”

Reason‘s Ronald Bailey recently looked “at what a 95 percent vaccine efficacy rate would mean in a hypothetical case in which a population of 100,000 people have all been vaccinated.”

“Applying the 1 percent rate at which unvaccinated folks became ill during the vaccine trials over three months suggests that 1,000 people in an unvaccinated population of 100,000 would fall ill,” notes Bailey. “But because all 100,000 people are vaccinated, the actual rate in the vaccinated population would be just 50 cases (0.05 x 1,000 = 50 cases).”

The CNN article has since been updated to say that while the vaccines are 90 percent protective, “that means it’s still possible to get infected.” A correction at the end of the article says “A previous version of this article incorrectly extrapolated vaccine efficacy and the probability of becoming infected with Covid-19 aboard airplanes. The risk is much lower than stated in the original version.”


FREE MINDS

Tyler Cowen sketches out a new vision of libertarianism, after declaring last year that the libertarian movement was “pretty much hollowed out.” Taking a second look, Cowen asks: “What does it mean to be libertarian now? I would say that the purer forms of libertarianism are evolving: from a set of policy stances on political questions to a series of projects for building entire new political worlds.” With many past battles around regulation and communism won, and other old battles seemingly lost forever (health care) or unable to sustain much public interest (anti-war efforts), Cowen suggests that “much of the intellectual effort in libertarian circles is concentrated in two ideas in particular: charter cities and cryptocurrency.”

But Cowen’s piece ignores many areas where U.S. libertarians have long been focused, continue to focus, and could do real good—for the movement, and for the country more broadly—by focusing even more. Things like ending the drug war (which is arguable just as strong and destructive as ever, despite moving away from marijuana as a target), other criminal justice/police/prison reform efforts, fighting the surveillance state, dismantling oppressive occupational licensing, staving off a bloated and all-powerful antitrust regime, and fighting for free markets and free speech despite major political party figures who increasingly can’t stand either, to name a few. And anti-war efforts seem valuable even—or especially—in the face of waning popularity.

Cryptocurrency is great, and charter cities intriguing. But U.S. cities and systems as they exist leave plenty of room for valuable, influential, and perhaps even some winnable libertarian fights, too. Building new political worlds is all good, but libertarians shouldn’t give up just yet on the one we have, either.


FREE MARKETS

Are we headed for 1970s-style inflation? Reports about current commodity markets are eerily reminiscent of the ’70s, The Wall Street Journal says:

In 1973, the U.S. was coming off a two-year experiment in wage and price controls, which artificially depressed prices and muted signals that the economy was overheating. Then, too, the Fed pursued an easy-money policy, keeping interest rates low—though considerably higher than now, and without today’s purchases of bonds and mortgage securities….

In 2021 we’re emerging from the pandemic shutdown, which cratered growth and slammed the economy—depressing price pressures, not unlike what the price-control program did 50 years ago. Today’s Fed policies are even more expansive. And Congress has just enacted a $1.9 trillion stimulus bill—on top of earlier relief bills costing another nearly $2 trillion, a lot of which remains unspent and will continue to fuel demand this year and beyond.

Does that mean that we’re doomed to repeat the earlier disaster? Today’s fiscal stimulus clearly dwarfs anything even considered in the 1970s. Moreover, there is a palpable excitement that Americans will finally be able to discard the shackles of Covid and spend the money they saved last year and the wages they’re starting to earn again. So demand is likely to soar.

As was the case 50 years ago, there are constraints on supplies: shipping delays are blocking deliveries; manufacturers can’t get parts to ramp up production; real-estate values are skyrocketing, while lumber shortages constrain home building; and most commodity prices are rising precipitously. Experts reassure us that the annual inflation rate will rise only to about 2%. We hope they’re right, but when demand increases faster than supply, prices tend to go up.


QUICK HITS

• Minnesota police “fatally shot Daunte Wright, a 20-year-old Black man, during a traffic stop near Minneapolis Sunday, sparking protests and unrest that lasted into the night,” reports Axios.

• The Supreme Court says California can’t ban religious meetings in households.

• President Joe Biden is walking back a pledge to create a national commission on police oversight.

• Cartoonist Peter Bagge looks at the life of Henry David Thoreau.

• The term “‘BIPOC’ isn’t doing what you think it’s doing,” write Andrea Plaid and Christopher Macdonald-Dennis at Newsweek.

• “The Texas Supreme Court voided a restraining order against a salon owner who was jailed and fined last year for keeping her store open despite executive actions requiring the business to be closed,” reports The Hill.

• Maryland is passing a slew of criminal justice reforms.

• Defense Department police officer David Dixon, arrested last week on murder charges, is also being accused of assault.

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