FT : How effective are coronavirus vaccines against Delta variant?

How effective are coronavirus vaccines against Delta variant?
Real-world studies show Pfizer and AstraZeneca still offer strong protection against severe disease

As rising coronavirus infections force some countries to reimpose restrictions, scientists and drugmakers are racing to answer a crucial question: how well do the current vaccines protect against the Delta variant?

On one point, most observers agree. The leading shots, studies show, still offer strong protection against severe disease and hospitalisation.

“Real-world effectiveness studies with a number of vaccines show good protection especially against severe disease,” Soumya Swaminathan, chief scientist at the World Health Organization, told the Financial Times. “The most important priority just now is to scale up vaccination coverage in all countries.”

So called “real-world” analysis of 14,019 cases of the Delta variant in UK, released by Public Health England in June, found the BioNTech/Pfizer and Oxford/AstraZeneca vaccines were, respectively, 96 per cent and 92 per cent effective against hospitalisation after two doses.

Late on Thursday, Pfizer reiterated it believed its shot worked against Delta, especially after a potential third booster dose. But it also added it planned to study a variant-targeted inoculation, with trials slated to start as early as next month.


The high efficacy of the shots in the UK, where the Delta variant is dominant and more than the half the population has been fully vaccinated, is reflected in the current mortality rate for Covid-19 patients, which at about 0.1 per cent is “20-fold” lower than at its peak, according to Meaghan Kall, an epidemiologist at PHE.

But the question of whether the vaccines remain as effective at preventing infection, and therefore transmission and spread, is more fraught.

Early figures from the real-world studies in the UK in May found that two doses of the Pfizer vaccine were 88 per cent effective at preventing symptomatic infection with the Delta variant. A month later, that number was revised down to 79 per cent by Scottish researchers.

Canadian scientists on Saturday, using a combination of methods, estimated that the Pfizer jab was 87 per cent effective at preventing infection with the Delta variant. That was “comparable”, the researchers said, to the 89 per cent protection the shot provided against the Alpha variant, first identified in Britain.

A fourth study, compiled by Israel’s health ministry, details of which were reported this week, suggested the Pfizer vaccine was much less effective against symptomatic infection with Delta, providing only 64 per cent protection. Pfizer and Israeli health officials, however, were quick to caution that the study was based on preliminary and highly localised infection numbers, and had other methodological weaknesses.

The varied assessments reflect the difficulty of conducting real-world assessments of vaccine efficacy. During trials, scientists can select participants, monitor who receives a vaccine and who receives a placebo, and then see who gets infected and who does not, providing a trove of data. Once a vaccination campaign gets under way, scientists lose that control, and other factors may affect who gets sick, making it more difficult to reach firm conclusions.

“Observational vaccine study data are not randomised trial data,” Natalie Dean, an assistant professor of biostatistics at Emory University in Atlanta, Georgia, wrote on Twitter. The Israeli findings should not “negate” other studies that showed higher vaccine efficacy, she said, as the small size of the epidemic in Israel was one of several “fudge factors” that could impact results.

For other vaccines, however, real-world efficacy data does not exist yet, forcing health officials to rely on laboratory testing to assess effectiveness against Delta. In such studies, scientists use the blood of vaccinated individuals to estimate a shot’s effectiveness against a variant in a lab.

Moderna has said its vaccine showed a two-fold reduction in neutralising antibodies in laboratory tests against Delta, when compared with the original coronavirus strain, but still described the results as “encouraging”. The data “reinforce our belief that the Moderna Covid-19 vaccine should remain protective against newly detected variants,” Stéphane Bancel, chief executive, said in June.

Johnson & Johnson, which markets a single-shot vaccine, said its jab elicited a higher level of antibody activity against Delta than it had in tests against the Beta variant, first identified in South Africa. It provided no precise figures but said the vaccine offered “durable protection” against the disease.

The makers of Russia’s Sputnik V have said it was “more efficient against the Delta variant of coronavirus . . . than any other vaccine that published results on this strain so far”, but provided no evidence to support the claim.

Several Chinese scientists have said that some Chinese vaccines have been found to be less effective against Delta than against previous variants but few details of those studies have been released. Sinovac spokesman Liu Peicheng told Reuters that preliminary results based on blood samples from those vaccinated with its shot showed a three-fold reduction in neutralising effect against Delta.

Peter English, a public health expert who previously advised PHE, cautioned that while the data on efficacy against hospitalisation was generally positive, the vaccines’ ability to prevent the transmission of Delta was far less clear.

“Delta is so much more infectious, it’s better at finding people who aren’t sufficiently immune and infecting them,” he said, adding that it would take time for reliable numbers on transmission to accumulate.

FT : Top Fed official warns Delta variant poses threat to global recovery

Top Fed official warns Delta variant poses threat to global recovery
San Francisco’s Mary Daly fears ‘premature’ declaration of victory against Covid-19

A top Federal Reserve official has warned the spread of the Delta coronavirus variant and low vaccination rates in some parts of the world poses a threat to the global recovery as she urged caution in removing monetary support for the US economy.

“I think one of the biggest risks to our global growth going forward is that we prematurely declare victory on Covid,” Mary Daly, the president of the Federal Reserve Bank of San Francisco, said in an interview with the Financial Times.

“We are not through the pandemic, we are getting through the pandemic.”

Daly, who is a voting member of the Federal Open Market Committee this year, pointed to the struggles to contain the virus in Japan and other countries. Surging infections and lagging inoculation campaigns abroad were constraining the economic rebound and could have negative ramifications for the US, she said.

“If the global economy . . . can’t get . . . higher rates of vaccination, really get Covid behind [us], then that’s a headwind on US growth,” Daly said. “Good numbers on the vaccinations are terrific, but look at all the pockets where that isn’t yet happening.”

Daly’s warning came as investors sought out safe havens in droves this week, sending US government bond prices soaring. Treasury yields have fallen sharply as a result, with the benchmark 10-year note trading at its lowest level since February. Global stocks fell on Thursday.

Many market participants attributed the sharp drop in Treasury yields to technical factors. But a growing chorus has expressed concern that the economy will struggle to maintain the red-hot growth rates that have accompanied the reopening to date, and predicted that the recent jump in inflation will quickly fall away.

“In the United States the news has been pretty positive, but the global news hasn’t been all that positive,” Daly said. “It’s been good but it hasn’t been terrific. Markets respond to those things, and that can of course lower yields because they’re pricing in the risk there.”

She added: “What you’ve seen is an increasing sense of the downside risk to the global economy.”

The Fed’s June meeting appears to have been a catalyst for recent market moves. Central bank officials predicted they would be raising interest rates sooner and more aggressively than they had forecast earlier this year.

But speaking to the FT, Daly — who is considered one of the more dovish Fed officials — said there should be no doubt that the central bank would stick to the monetary policy framework it adopted in August 2020. This promised a more lenient approach to temporary overshoots in inflation in the pursuit of full employment.

“Chair [Jay] Powell said this so clearly in his press conference and I think that’s the light to follow here,” Daly said. “That’s the message I keep saying: we’re fully committed to our framework. That means eliminating shortfalls in employment and delivering average inflation of 2 per cent, and that is still absolutely paramount.”

Daly’s comments come at a pivotal time for Fed policymaking, as it discusses removing some of the massive monetary support for the recovery introduced at the start of the pandemic.

Minutes from the June FOMC meeting, released on Wednesday, showed some policymakers believed the Fed could soon start trimming its $120bn per month of asset purchases. But while Daly said the debate around “tapering” was warranted, the central bank had to “keep our eye on the long-term goals, which are full employment and price stability, and really be patient enough and persevere enough to deliver on those commitments which we’ve made to the American people”.

Furthermore, Daly argued increasing interest rates from their current level close to zero would have to wait until after the asset purchases had been wound down. Other more hawkish Fed officials have suggested there could be some overlap.

“We’re ready to taper at the appropriate time,” she said. “Then I’d like to see, how is that going? How does the economy respond to that? Because we can forecast, we can project, but we need to know in order to actually say, ‘oh, OK, now it’s time to move on to the next phase’, which is discussing policy normalisation and the fed funds rate coming up a bit.”

Daly said the split among Fed officials on how quickly to remove support for the economy, which was revealed in the minutes, was healthy as officials brought their “different perspectives” to the table and were not operating in an “echo chamber”.

For her part, the San Francisco Fed president indicated she is not quite ready to move to a post-pandemic environment.

“I think there’s always this excitement that ‘Oh my gosh: look, the vaccinations are working, this could be the end’. But it would be premature to say that we’ve achieved a victory here.”

>>> US After Hours Summary: PSMT +3.5% and LEVI +2.5% higher on earnings; PFE and BNTX reportedly developing COVID-19 booster shot


After Hours Summary: PSMT +3.5% and LEVI +2.5% higher on earnings; PFE and BNTX reportedly developing COVID-19 booster shot

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: PSMT +3.5%, LEVI +2.5%, ACCD +1.2%

Companies trading higher in after hours in reaction to news: LMPX +12% (stock repurchase and dividend approval contingent on debt refinancing), IBIO +7.2% (adds three anti-cancer targets to pipeline; enters into research services agreement with FairJourney Biologics), BNTX +2.4% (PFE and BNTX developing COVID-19 booster shot to target delta variant, according to CNBC), COST +0.8% (reports June adjusted comps of +7.9%), MAPS +0.7% (stock offering), RIOT +0.5% (provides June production and operations updates), BLDP +0.5% (receives purchase order for fuel cell modules to power 15 Tata Motors buses), PFE +0.4% (PFE and BNTX developing COVID-19 booster shot to target delta variant, according to CNBC; also BIIB, ABBV and PFE launch genetic exome sequence analysis collaboration), BIIB +0.3% (BIIB, ABBV and PFE launch genetic exome sequence analysis collaboration), SJM +0.1% (increases dividend)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: DCT -4.1%

Companies trading lower in after hours in reaction to news: CYCN -6.3% (CYCN and Beacon Biosignals announce expanded partnership), MAX -2.8% (CFO stepping down, reaffirms Q2 and FY21 guidance), QTNT -2.3% (stock offering), ME -1.2% (stock offering), KBH -0.3% (names new co-COO; also increases stock repurchase program to 5 mln shares), ABBV -0.1% (BIIB, ABBV and PFE launch genetic exome sequence analysis collaboration), ABM -0.1% (to pay $140 mln to fully resolve all claims in overtime cases), EVCM -0.1% (acquires Medical Design Tech)

FT : Bob Diamond/stablecoin: high on a supply of optimism

Bob Diamond/stablecoin: high on a supply of optimism
Not only must digital money go mainstream, but Circle must emerge as a winner too

Emerging companies with little revenue love to boast about their “total addressable markets”. As TAMs go, the $20tn global “M2” money supply is about as ambitious as it gets. Bob Diamond has lost none of his ambition.

The former Barclays head has struck a deal for Circle, the company behind digital currency USD Coin, to merge with his New York-listed blank cheque company at an enterprise value of $4.5bn. The thesis is that digital coins can do for financial services what the internet did for data. USDC and affiliated services then only have to steward a fraction of all the money out there to prosper.

Investors will ponder the length of those odds. Not only must digital money go mainstream. Circle must emerge as a winner too. Diamond has had some success with his Atlas Merchant US buyout venture. His Atlas Mara African banking consolidation vehicle has been a bit of a flop.

USDC is a so-called stablecoin. Circle account holders exchange dollars for the currency and can redeem 1:1 when they like. Some critics worry about the safety of stablecoins in the event of mass redemptions, an anxiety the first paper money also inspired.

One source of revenue for Circle is interest on the dollars. The lion’s share would come from financial plumbing for institutions transacting in digital currencies.

Circle says by 2023 it will have more than 30,000 accounts, up 10-fold on where it expects to be at the end of this year. Revenue similarly is supposed to jump from $100m to $900m.

Profitability is scant. Even in two years, operating income will still be under $100m. Circle believes it can eventually hit a 35 per cent ebitda margin. Naturally the business says the stretched valuation based on forecast 2023 revenue is modest.

As with most blank cheque targets, Circle is asking the investor to trust that market adoption of a nascent technology will occur smoothly. Far greater uncertainties apply, however, than those involved in estimating the money supply.

FT : How Delta variant forced Israel to rethink its Covid strategy

How Delta variant forced Israel to rethink its Covid strategy
Case numbers are rising in country that has been world leader in vaccinations

For much of this year Israel has been hailed as a resounding Covid-19 success story. It rolled out one of the world’s fastest vaccination drives, reopened its economy and jettisoned all remaining lockdown restrictions last month.

Now rising infection rates, driven by the more infectious Delta variant, have forced the Israeli government to reintroduce restrictions for the first time since January.

While hospitalisation rates remain low, Israel has chosen a cautious approach. Israelis again have to wear masks inside and on public transport. Testing sites have been reopened. Multiple other curbs, including stricter quarantine for travellers and greater testing of children, are expected to be introduced. Israel may even bring back the “green pass”, which allowed greater freedom for vaccinated people.

“We are not waiting to protect the health of Israeli citizens. It must be understood, the Delta variant is running amok around the world at a much higher rate than all of the previous variants,” Israeli prime minister Naftali Bennett said on Sunday.

Israel spearheaded one of the world’s fastest vaccination drives after it secured plentiful supplies from Pfizer in return for sharing data on the jab’s impact. But cases have ticked up since Israel lifted all remaining Covid restrictions on June 1, with many experts blaming the highly transmissible Delta variant brought into Israel by returning travellers.

After weeks of single-digit daily infection rates, the number of new cases has ballooned to more than 400 per day this week. As of Wednesday, the country had more than 3,345 active cases — almost triple that of the previous week — though the health ministry said only 46 were considered seriously ill. And while the number of infections is increasing, its coronavirus rate — at 25 new cases per 100,000 people every seven days — is still far lower than the UK, which has a rate of 267. Cyprus, the EU country with the most new infections, has a seven-day rate of 424.

Israeli hospitals’ Covid wards remain largely empty, with health experts urging vigilance and calm.

“[Israel’s] numbers are rising, and will continue to rise. We’re definitely at the start of a fourth wave, which could be bigger in terms of overall infection numbers,” said Professor Gili Regev-Yochay, director of the Infection Prevention and Control Unit at Sheba Medical Center. “But the numbers of seriously ill are much lower [than previous waves] and it won’t collapse the health system. We have to be alert, not panicked or hysterical.”


A preliminary study compiled by the health ministry this week indicated that the BioNTech/Pfizer vaccine was still 93 per cent effective against serious illness and hospitalisation, but only 64 per cent effective at preventing infection.

“According to the Israeli data, there is a potential decrease in vaccine effectiveness against infection and mild disease with respect to Delta, and strong preliminary signals to that effect,” said Dr Ran Balicer, a senior official at the Clalit health organisation and chair of the Israeli government’s national Covid advisory committee. But Balicer and other health experts cautioned that the study was based on preliminary and highly localised infection numbers, and faced several methodological challenges.

Studies in other countries have also documented a drop in efficacy for the Pfizer jab against the Delta variant versus earlier strains, though less severe. Public Health England in May found the vaccine provided 88 per cent protection against symptomatic infection with Delta, and 93 per cent against the Alpha variant first identified in Kent, England.

More than 5m of Israel’s 9m citizens have been fully vaccinated with the Pfizer vaccine. Since the recent uptick in case numbers, a fresh effort has been launched to inoculate the estimated 1.2m remaining teenagers over the age of 12 and unvaccinated adults. While parents were initially reluctant, over the past week 150,000 teenagers have received the jab, including Prime Minister Bennett’s 14-year-old daughter.

“The single most important factor for the long-term control of disease spread is increasing the number of vaccinated,” said Balicer. “It decreases the severe cases and heightens the ‘vaccine wall’ against disease dissemination.”

With the new Covid guidelines, the government is going a step further, although the chances of a new nationwide lockdown — similar to the previous three the country imposed over the past 18 months — was “very, very low,” according to Regev-Yochay.

“These aren’t draconian measures . . . that hurt the economy. Moderation and proportionality are key,” Balicer said. 

The Israeli public, for its part, appears frustrated by the new restrictions, offering a glimpse of the challenges that may lie ahead for governments that find they need to reinstate curbs.

The mask mandate introduced last week has been met with only partial success. Avi, 50, a freelance boat captain, forgot his mask one recent weekday as he shopped at a central Tel Aviv supermarket. “I was on buses earlier in the day and then now in the supermarket — no one said anything to me,” he said. “I’m a law-abiding citizen, but [once] we got used to going with [masks], they stopped it. Now we have to get used to it again. They’re driving us crazy.”

Matan, 52, the owner of a nearby café, was even more scathing about the new measures. “They only need to check one thing: how many seriously ill there are. It’s not going up anywhere. If it was a bad flu, would they shut down the entire country? No,” he said. “It’s a joke. The new [Bennett] government, they seem like good people, but they and the media don’t have to run a business.”

Officials hope that the public will ultimately understand the need for these new initial steps — and that further restrictions won’t be necessary.

“No one knows what will be the effect if we just let the disease run out of control. We don’t want to have to make a severe U-turn down the line,” said Balicer. 

FT : Couture shows and clients trickle back to Paris

Couture shows and clients trickle back to Paris
Despite the pandemic concerns and hassle of restrictions, designers roll out their 1980s-influenced shows and offer a glimpse of a return to better days

After an 18-month hiatus, the haute couture shows were staged in Paris. This was, perhaps, a dry run for a return to the fashion circus of old, pre-pandemic — a full fashion week of shows and appointments, meetings, black-tie dinners for art foundations and perfume launches, and a jaunt to Versailles. The mood seemed buoyant: the weather was great, the collections good.

Yet halcyon days were not quite back. Client attendance was cautious — quarantine restrictions in Asia limiting travel of important customers from the region. It was disturbingly easy to get a table at many popular restaurants.

“Today there will be mainly European clients. And a couple of courageous Americans,” Pietro Beccari, chairman and chief executive of Dior, said before the house’s couture show. A Covid-19 test result had to be flashed to be permitted backstage access. Giorgio Armani had around 50 clients at his two haute couture presentations, half the typical number; Chanel said around 40 made the trip out of the usual 150 to 180.

Balenciaga returned to couture after a 53-year absence with a much-anticipated collection by creative director Demna Gvasalia that wasn’t just for show.

“The ultra-high net worth individual has boomed in 2020, and is growing. We have clients that are interested in our codes, our brand, Demna’s vision — at every level,” says Balenciaga chief executive Cédric Charbit. “Couture is an investment.” 

After two couture seasons designing collections for film, Dior’s Maria Grazia Chiuri says this season was about up-close intimacy. Her collection was backdropped by a hand-embroidered installation by the French artist Eva Jospin, and filled with minuscule Grecian-style hand pleating, microscopic fabric chains and multiple hand-woven tweeds. The same fibres were used for knits.

“This material aspect is impossible to see in film,” Chiuri insists, tugging at a sweater’s sleeve. If the past two Dior films served to glorify Dior’s eveningwear, this was grounded in daywear — which, perhaps, made it a somewhat sombre outing. But when clients come, they find an entire wardrobe here.

Wedding dresses were big, ideologically and literally: 75 metres of silk taffeta was cartridge-pleated into a bubbling salon-size Schiaparelli gown by artistic director Daniel Roseberry; Balenciaga recreated an iconic 1967 model; and, under a shower of confetti, the actress Margaret Qualley, in a satin dress, played bride at Chanel and tossed her bouquet. Bridal gowns are traditional couture show-stoppers, but they’re also the closest couture comes to a money-spinner: if a woman is going to spend upwards of £200,000 on a dress it’s probably for her wedding day.

Roseberry himself allowed that clients had been requesting wedding gowns, and he was happy to oblige. I’m unsure if they’ve been asking for denims studded with life-sized golden roses and ear lobes, or matador jackets embroidered with original 1930s threads — but those were there, too. This Schiaparelli collection was presented on static mannequins strung through a series of rooms, but it vibrated with life, finally fully re-energising this long-moribund fashion name with 21st-century energy.

The style of the late 1980s veered up again and again. Armani created gowns that were exuberant, light to hold but heavily ruffled and embroidered — he pinpointed his Chinese clients’ taste for extravagance.

Virginie Viard’s Chanel collection referenced the 1880s and the work of artists Berthe Morisot and Édouard Manet with its thick daubs of impressionistic embroideries in intense hues; but the silhouettes were also more 1980s, with broad-shouldered tweeds, thick braid, low-notched lapels. Models in delicate Victorian lingerie bloomers and camisoles had shades of Madonna; full tulle skirts and picture hats were a touch Princess Diana. It’s a period eagerly revived by 20-somethings, a golden age for French haute couture and the start of Chanel’s rebirth as one of fashion’s powerhouses under the late Karl Lagerfeld.

Lagerfeld exceptionally designed for two couture houses: the other, Fendi, is now headed by Kim Jones, who showed his couture via a film directed by Luca Guadagnino. It was heavenly: women dressed in white, like de Chirico angels in a reproduction of the label’s headquarters, the Palazzo della Civiltà.

The clothes themselves drew from the architecture of Rome, reproducing inlaid marbles and pietra dura mosaics through mind-boggling intense leather and embroidery, shoes balanced on heels like arched colonnades. Jones has found his sweet spot: if his first collection fused his own British heritage with Fendi’s, this was speaking pure Italian, crafting an identity for a fashion house that has, in the past, seemed trend-driven and somewhat nebulous. It’s now in sharp focus — Roman, regal, but real. “I think I’ve nailed it,” Jones shrugged to me. He had.

More new names, more great clothes. Designer Pieter Mulier, the longtime right-hand man to Raf Simons, made his Alaïa debut on the street where the founder both lived and worked, a collection filled with memories of Alaïa rather than reproduction. It also mixed together ready-to-wear and couture, meaning there was stuff for normal people to get their hands on — knits with sinuous U-bend seams over torsos, precisely tailored A-line coats, waist-cinching belts and metal-studded handbags. It had a modern, youthful energy. You felt you’d be seeing more of these clothes on the streets.

Balenciaga was a trip, a fashion geek-out at the very highest level. It was like stepping back in time: through resurrected couture salons, in absolute silence, a couture collection of total formality and rigour paraded. If its purpose was to posit an alternative to Balenciaga’s contemporary history of hyper-successful streetwear, it accomplished its aim. It was impossible not to sit in those hallowed halls — fashion holy ground — and not recall legendary stories of the founder Cristóbal Balenciaga, whom Christian Dior once called “the master of us all”.

“Balenciaga and couture is an effort or quest for perfection,” Gvasalia says. But he played with that idea — Balenciaga’s salons were “aged” with painted patina of mould and water-marks, and the clothes were twisted takes on Cristobal classics. At first glance, the unfitted silk suits and flying saucer hats were direct throwbacks to mid-century — but embroidery seemed to be unravelling on gowns slit open in back to reveal trousers, and silk robes were permanently crumpled.

These effects were, of course, intricately and painstakingly achieved. There were even couture jeans, riveted with sterling silver, and track-suits. “It’s very much me, but also Balenciaga,” Gvasalia says, by simple way of explanation. I suspect clients will love buying both.

(ZH) As Crypto Crashes, Goldman Buys Ether Over Bitcoin, But Gold Best As "Cheap

As Crypto Crashes, Goldman Buys Ether Over Bitcoin, But Gold Best As "Cheap [Currency] Debasement" Hedge

As negative-yielding debt has begun to soar again, gold has caught a bid, but cryptos have been unable to rebound...
Source: Bloomberg
And while Bitcoin has been hit recently (back below $33k)...
Source: Bloomberg
It's Ethereum that has taken it on the chin overnight (ahead of its imminent fork)...
Source: Bloomberg
And while Goldman prefers Ether to Bitcoin (as risk-on devaluation bets), "Gold is a value buy" according to Goldman Sachs' Jeff Currie and his Commodities Research group.
As a result of the recent liquidation of inflation tail risk fears, Goldman argues that gold is now again pricing a Goldilocks scenario of moderate inflation and continued global recovery and is thus trading at a large discount to the current real rate.
They estimate that the current gold price is consistent with a real rate of +10bps, dramatically different from the -87bps that is currently priced by the market.
However, in a scenario where the global economic recovery does not play out as expected or inflation begins to move materially above expectations, Currie sees material upside to gold given its undervaluation and low allocation from the investment community. Specifically, Goldman suggests that gold may be a good strategic purchase here for portfolio managers looking to hedge against tail risks of macro volatility.
Even more bullishly, Goldman notes that if confidence in a global recovery were to be reversed either by a larger-than-expected growth slowdown or a new virus mutation, gold would have considerable room to catch up to the current level of real rates and its dollar implied price of $2,200/toz.
For gold to outperform, Currie and his team suggest an increase in inflation has to be met by a relatively moderate reaction by the Fed, one which the market deems insufficient to cool inflation expectations. In such an environment, gold is likely to disconnect with 10-year real rates and become more sensitive to inflation expectations.
Putting that in context, they argue that if inflation continues to run at 4% and markets start to view this as more permanent, our gold to inflation relationship points to 40% upside from current levels.
With that in mind, we view gold as a relatively cheap debasement hedge offering modest upside in our base case scenario but potential to rally significantly in the event the global recovery is hampered or inflation picks up strongly and the Fed under-reacts.
Both scenarios would likely hurt risk sentiment and incentivize a shift to more defensive assets.
In our view, this implies gold can outperform cryptocurrencies, which we view as more risk-on inflation hedges.
Overall we see crypto still far from becoming a defensive long-term store of value like gold.
And confirming their previous discussion on crypto, where they proclaimed Ethereum as "The Amazon of trusted information" and likely to overtake Bitcoin, concluding that ethereum is the platform that solves economic problems here and now, while bitcoin is "a solution looking for a problem."
Today, Currie lays out the case once again, but prefers precious metals to digital currencies for now...
Together with gold, cryptocurrencies came to be seen as hedges against excessive money printing by governments. Some, like Bitcoin, have fixed supply, while others, like Ether, have limited supply growth. This, together with some regulatory & infrastructure improvements, fueled a large rally in crypto at the end of last year exactly as gold began to underperform, leading to concerns that crypto is pushing out gold.
Things changed over the past three months as gold rebounded while the crypto rally came to an abrupt halt. This then led to the opposite view that flows have reversed and are coming out of crypto and back into gold.
In our view, gold is competing with crypto to the same extent it is competing with other risky assets such as equities and cyclical commodities. We view gold as a defensive inflation hedge and crypto as a risk-on inflation hedge. Indeed, looking at Bitcoin vs gold ratio, one can see that it is correlated with the performance of our strategy team’s risk sentiment indicator.
Therefore, to understand whether Bitcoin or some other crypto currency will work as an inflation hedge, one has to ask what effect high inflation will have on overall risk sentiment. Our strategy team notes that high inflation may negatively impact market sentiment. As such, we have concerns over whether cryptocurrencies will be able to perform well in this environment.
The major reason why crypto so far remains a speculative asset and not a defensive inflation hedge like gold is its high volatility. For gold, the volatility is smoothed due to the presence of a large non-investment demand component. In our view, development of some alternative non-investment uses would also help crypto decreases its volatility and therefore become more appealing as stores of value.
Within the crypto space, Ether currently looks like the cryptocurrency with the highest real use potential as Ethereum, the platform on which it is the native digital currency, is the most popular development platform for smart contract applications. We would therefore not be surprised if in coming years Ether, or some other cryptocurrency with more real use, overtakes Bitcoin as the dominant digital store of value.
This competition among cryptocurrencies is another risk factor that prevents them from becoming safehaven assets at this stage.
So buy gold... and if you need to buy crypto, favor ETH over BTC.

WSJ : Biden to Target Railroads, Ocean Shipping in Executive Order

Biden to Target Railroads, Ocean Shipping in Executive Order
President’s action is part of broad effort to blunt power of big business

WASHINGTON—The Biden administration will push regulators to confront consolidation and perceived anticompetitive pricing in the ocean shipping and railroad industries as part of a broad effort to blunt the power of big business to dominate industries, according to a person familiar with the situation.

The administration, in a sweeping executive order expected this week, will ask the Federal Maritime Commission and the Surface Transportation Board to combat what it calls a pattern of consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market.

The administration says the relatively small number of major players in the ocean-shipping trade and in the U.S. freight rail business has enabled companies to charge unreasonable fees.

In the case of the seven Class 1 freight railroads, consolidation has given railroads monopoly power over sections of the country where theirs are the only freight tracks, the person said.

The executive order will encourage the STB to take up a longstanding proposed rule on so-called reciprocal or competitive switching, the practice whereby shippers served by a single railroad can request bids from a nearby competing railroad if service is available.

The competitor railroad would pay access fees to the monopoly railroad, but could win the shipper’s business by offering a lower price, using the rival railroad’s tracks and property.

The STB proposed a competitive switching rule in 2016 but hasn’t yet acted on it.

“The consolidation brought about much-needed rationalization in the system 25 years ago, but the net result is a lot of shippers who are subject to a market-dominant railroad,” said a government official briefed on the White House’s proposal for the STB.

But a move to mandate switching would guarantee a battle with the freights and the railroad trade association, the Association of American Railroads, which has long opposed the policy.

“Competition remains fierce across freight providers, and any proposal mandating forced switching would put railroads—an environmentally friendly option that invests $25 billion annually in infrastructure—at an untold disadvantage,” Ian Jefferies, chief executive of the railroad association, said Thursday. “Such a rule would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads’ ability to serve customers at a time when freight demands have dramatically increased.”

The call to crack down on ocean carriers and freights is one facet in a multipronged executive order that will be one of Mr. Biden’s most sweeping unilateral moves on economic policy to date.

The Democratic president, who has stacked his administration with a cohort of advisers skeptical of corporate power and market dominance, is trying to blunt big business while introducing more competition in areas across the economy.

The result, the administration contends, will be more leverage for smaller companies and individual workers, and less ability for a few huge companies to dictate terms for the economy at large.

Among other things, the executive order will call on the Federal Trade Commission to adopt rules that curtail noncompete agreements. The White House said roughly half of U.S. private-sector businesses use noncompete agreements, affecting an estimated 30 million people.

“He believes that if someone offers you a better job, you should be able to take it,” White House press secretary Jen Psaki said Wednesday.

The executive order will also call on the FTC to ban unnecessary occupational licensing requirements.

“While occupational licensing can serve important health and safety concerns, unnecessary or overly burdensome licensing can lock people out of jobs,” Ms. Psaki said, adding that the White House estimates about 30% of jobs in the U.S. require a license.

Ms. Psaki has previously said the executive order would direct the Agriculture Department to issue new rules aimed at boosting the farm economy and lifting individual farmers’ incomes, and at thwarting what she called “abuses of power by giant agribusiness corporations.”

The actions would include measures to bar meat raised and slaughtered abroad from bearing “Product of the U.S.A.” labels, giving farmers the right to “repair their own equipment how they like,” and preventing chicken processors from underpaying their suppliers, Ms. Psaki said.

In its actions targeting the transportation sector, the administration is highlighting what it calls the dangers of consolidation. Three alliances control 80% of the shipping market, the person familiar with the executive order said.

In 2000, this person said, the 10 largest shipping companies controlled just 12% of the oceangoing freight business.

The White House says that dominance has come at a cost for American exporters, allowing the companies to extract higher rates. For U.S. importers, the consolidation has given carriers leverage to raise fees like those for demurrage, essentially late fees on shipments that aren’t picked up from freight terminals on time.

The order will ask the maritime commission to crack down on such fees and to take all other steps to protect American exporters from high fees. The order also asks the commission to work with the Justice Department to enforce its actions. The commission and the Justice Department are expected to sign a new memorandum of understanding to improve their cooperation on such investigations soon, the person said.

Maritime Commission Chairman Dan Maffei has said recently that the commission’s ability to address issues like container shortages and surging rates may be limited if the cause is the surge in demand as the global economy rebounds from the coronavirus pandemic. The commission is limited in its options unless it finds evidence of intentional manipulation of prices, he has said.

A wave of combinations in the 1990s left the U.S. with just seven Class 1 freight railroads, though STB merger rules in place since the administration of President George W. Bush have effectively prevented further consolidation. Still, the White House argues that the current state of the industry leaves railroads with effective duopolies in much of the country, and monopolies at the local level, meaning customers have little leverage to negotiate prices.

The White House will also encourage the STB to consider proposals that would compel railroads to offer rates that would better enable shippers to cobble together routes across competing rail networks to lower their costs, and to more readily bring cases to the STB to challenge railroads’ rates, this person said.

The overture to the STB comes as the regulator faces one of its busiest workloads in years. The board has been asked by Amtrak to mediate a dispute over restarting passenger service along the Gulf Coast, something freight railroads and commercial shippers have warned could disrupt service.

The board is also considering the first major consolidation in years: a hard-fought contest between Canadian Pacific and Canadian National to take over Kansas City Southern, the smallest of the Class 1 freights, to cobble together a network linking Canada, the U.S. and Mexico.

Kansas City Southern’s board has accepted a roughly $30 billion topping bid from Canadian National. The companies are now awaiting a ruling from the STB on Canadian National’s application to set up a voting trust to control KSC, as they await the outcome of STB’s broader review of the deal on anticompetitive grounds.