Friday Morning Reads
- Crypto Trading Unfolds Beyond Nations’ Reach
- China’s Central Bank Pivots to Easing
- U.S. Set to Add More Chinese Companies
- White House to Target Bank Mergers
- The Bond Market Is Telling Us
- Job Openings Are at Record Highs
- Can Reddit’s Silver “Apes” Beat the Market?
- The Trumpian Roots of the Chip Crisis
- Didi Shows Big Data Is Next U.S.-China Battleground
- Economists Argue Deficits Are Like Ponzi Schemes
- U.S. Retailers Shun Urban Malls
- Game Ove
- Cut ‘Pharma Bro’ Out of His Company
Open Interest Changes:
Note: The Karman line is the unofficial altitude at which space begins, and starts at 100 kilometers, or 62 miles, above Earth's mean sea level. The measure is named after Theodore von Kármán (1881–1963), a Hungarian American engineer and physicist who was active in aeronautics and astronautics. While the exact marking is subject to debate, he was the first person to determine the altitude at which the atmosphere becomes too thin to support aeronautical flight.
What will the flight look like? The VSS Unity will be carried aboard a so-called mothership aircraft, known as WhiteKnightTwo, which will release the plane at an altitude of 49,000 feet (Blue Origin uses a rocket-launched capsule). At that point, VSS Unity reaches supersonic speed within 8 seconds and climbs vertically until 55 miles above Earth. The plane will then hover at the top of its flight path, giving passengers a few minutes of weightlessness, before re-entering Earth's atmosphere and landing on a runway at Spaceport America, New Mexico. The entire show is expected to take about 90 minutes from takeoff to landing.
Sunday's flight will not only be a make-or-break moment for Virgin Galactic, but for the company's shares as well. If all goes well, expect a rocket ride on Monday morning, though there is plenty that can go wrong. The engine could fail, the cabin could lose pressure or Earth's atmosphere could hamper the space vehicle. Back in 2014, the same spaceplane model suffered a crash that killed a test pilot, when a descent mechanism was triggered at the same time the rocket climbing. There's also the threat that the flight gets called off or weather-related issues postpone the takeoff.
The stock: Options bets on the outcome of the flight could be risky as shares continue their wild ride. SPCE soared 17% to the $52-level on Thursday after a volatile last few weeks. Wall Street is mixed on the stock, with four out of 10 analysts rating Galactic at Buy, five Neutral and one Bearish on the company. "In general, every mission that goes up, every rocket that's launched, every bit of progress we make does drive down costs, makes space more affordable [and] accessible to everybody," added Shift4 Payments' Jared Isaacman, who is partnering with SpaceX (SPACE) to lead the first all-civilian mission into orbit later this year.
Outlook: Galactic's journey will be the fourth test flight for the company and the first with a crew of four on board. It has about 600 customer reservations on its books, most of which were sold at a price of $200K to $250K per ticket several years ago, but another 400 have expressed an interest in booking when sales fully reopen in 2021. While space tourism is expensive for now, it is seen as a means of getting more people interested in the industry for the long term, as well as investing in satellite infrastructure that could change the way we operate on Earth. (7 comments)
Beware of selloff! Not really. The major averages barely recorded a 1% decline on Thursday despite headlines that flagged concerns about a pandemic recovery. While the indexes are on track to close lower for the week, futures turned higher overnight with cyclicals back in the lead: Dow +0.6%; S&P 500 +0.4%; Nasdaq -0.1%.
Quote: "Our working theory is that we’re in the middle of a modest global growth scare," said Nicholas Colas, co-founder of DataTrek Research. "It is a cocktail of a lot of cross currents," added Hani Redha, a portfolio manager at PineBridge Investments. "One camp out there is arguing we're going back into slow growth all over again and it starts now and we’re not getting a vigorous reopening bounce or if we've had it, the party's over."
A recent rally in U.S. government bonds also eased overnight, with the yield on 10-year Treasury climbing 5 bps to 1.34%. The rate had previously plunged for four straight days, ending Thursday at around 1.29% to record its lowest level since Feb. 18. Some analysts, like Société Générale's Albert Edwards, even feel the markets bet too early on reflation and the 10-year could hit 0.5%.
Elsewhere: G20 finance ministers and central bankers meet in Venice today to wrap up talks on a global minimum tax, with Treasury Secretary Janet Yellen representing the U.S. While a final agreement is not expected until a Rome summit in October, the meeting will provide an opportunity to discuss further details of the plan. It's also seen as a way to put pressure on those who have not yet signed up to the OECD deal, which is so far backed by 130 nations that represent 90% of global GDP.
The crypto winter is here and the losses are piling up. Bitcoin and Ethereum are down ~45% from their highs and everyone holding the bag on Dogecoin and NFTs are feeling the heat. So how do you generate returns outside the market without investing in scam coins and JPEGs? You invest in an asset class that has been around for centuries - that’s nearly uncorrelated to the stock market. You allocate a portion of your portfolio into an overlooked $1.7 trillion asset class that’s just beginning to see retail and institutional allocation. You invest in a tangible asset that may help hedge against inflation while J Pow and the Fed pump money into the economy like Joey Chestnut eats Hot Dogs on the 4th of July.
You invest in contemporary art. With Masterworks, you can invest in works by artists that have stood the test of time - Monet, Picasso, Warhol - not some fad that will be gone before Labor Day. Contemporary art prices rose 14% annualized from 1995-2020 and with the value of art expected to grow by over $900 billion in the next five years, it’s no surprise that over half of high net worth investors allocate over 10% of their portfolio in art.
So get serious with a real investment and give art a shot - skip the waitlist here.*
*See important disclosures
Pfizer (PFE) and its partner BioNTech (BNTX) will seek clearance from U.S. regulators in the coming weeks to distribute a COVID-19 vaccine booster that would be updated to better protect against the Delta variant. Clinical trials are expected to begin in August as the highly transmissible strain is already the dominant form of the disease in the United States. At the same time, federal health officials have signaled they would take a cautious approach to potential booster shots, which they said aren't currently necessary.
"People who are fully vaccinated are protected from severe disease and death, including from the variants currently circulating in the country such as Delta," the FDA and CDC announced Thursday evening. "Virtually all COVID-19 hospitalizations and deaths are among those who are unvaccinated."
Statement from Pfizer: "As seen in real world evidence released from the Israel Ministry of Health, vaccine efficacy has declined six months post-vaccination, at the same time that the Delta variant is becoming the dominant variant in the country," the company wrote in a press release. "These findings are consistent with an ongoing analysis from the companies' Phase 3 study. That is why we have said, and we continue to believe that it is likely, based on the totality of the data we have to date, that a third dose may be needed within 6 to 12 months after full vaccination."
Some statistics: Pfizer's is leading the world in COVID vaccine distribution. As of July 1, the drugmaker had shipped more than 860M doses around the world. In the U.S., over 184M doses have been administered so far, topping the 135M doses of Moderna's (MRNA) jab that has also been used in the country. (64 comments)
Japan's prime minister, Yoshihide Suga, has declared a state of emergency in Tokyo as coronavirus cases rise across the country. Vaccination rates have been slow, with only about a quarter of Japan's population having received one shot, while only 15% are fully vaccinated against COVID-19. The declaration puts restrictions in place from July 12 through Aug. 22, meaning the Olympic Games - set to run from July 23 until Aug. 8 - won't feature spectators.
Bigger picture: Opposition was already deepening in Japan. A mid-May poll by the Asahi newspaper found that 83% of people wanted the Olympics to be canceled or postponed, up from 69% in April, while the business community also came out against the event. SoftBank (OTCPK:SFTBF) CEO Masayoshi Son saw a situation where athletes and officials trigger a fresh wave of infections, while Rakuten (OTCPK:RKUNF) boss Hiroshi Mikitani called the Olympics a "suicide mission."
Canceling spectators will also be a headache for broadcaster NBC (CMCSA), which planned to air more than 7,000 hours of content from the Tokyo Olympics across its networks and streaming platforms. While the company is exploring other options like having athletes and coaches mic'd up, incorporating artificial crowd sound or having cameras in the homes of the families of athletes, many caution that the games won't be the same. "The (alarm) bells are likely on full blast at NBCUniversal," wrote LightShed analyst Rich Greenfield. "No fans had clear negative impact on sports ratings during pandemic over past 15 months."
Economics: While international spectators were already prohibited from entering Japan to attend the Olympics, the ban on domestic viewers will bring more pain. The Games' budget has jumped to an estimated $15.4B, according to Reuters, and ticket revenue of about $815M will be non-existent. It could be worse... The Nomura Research Institute forecast a full cancellation would mean a lost stimulus of ¥1.8T, or 0.33% of Japan's GDP. (9 comments)
In Asia, Japan -0.6%. Hong Kong +0.6%. China flat. India -0.4%.
In Europe, at midday, London +0.7%. Paris +1.7%. Frankfurt +0.9%.
Futures at 6:20, Dow +0.6%. S&P +0.3%. Nasdaq -0.1%. Crude +1% at $73.63. Gold +0.2% at $1804. Bitcoin +0.7% at $32872.
Ten-year Treasury Yield +5 bps to 1.34%
Today's Economic Calendar
What else is happening...
Airlines remain under pressure as recovery worries resurface.
Policy review... ECB adopts symmetric 2% inflation target.