Thursday Morning Reads

Thursday  Morning Reads



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Mask revival?

Shares of mask makers are on watch again as the White House and CDC debate whether they should urge vaccinated Americans to wear masks in more settings. Delta variant infections are spiking across the country, with more than 40,000 new coronavirus cases a day (up from a low of 11,000 in June). The rate of vaccinations is also slowing nationwide, dropping to about 500,000 per day, while hospitalizations have reached levels not seen since the early spring.

Backdrop: The CDC eased its mask guidelines for the fully vaccinated two months ago, saying they didn't need to use them or practice social distancing. But this week, CDC Director Dr. Rochelle Walensky told a Senate hearing that the agency is actively reviewing its mask and public health policies as the virus and pandemic continue to evolve. "A lot has changed since May 13. We now have a variant circulating in this country that at the time was 3% (of new cases) and is now 83% and much more transmissible."

Health officials in California have already recommended or required that residents in 17 counties resume wearing masks indoors, while a new mask mandate has gone into effect for employees in Clark County, Nevada, which houses Las Vegas casinos. New Orleans has also issued an "indoor mask advisory" regardless of vaccination status. According to an Axios-Ipsos poll released Tuesday, 52% of Americans say they are regularly wearing a mask in public, down from 84% in early May.

Mask up your portfolio? While it could be more of a short-term trade, PPE manufacturer Lakeland Industries (NASDAQ:LAKE) surged 7% on Wednesday. Other mask makers were also on the move, including Alpha Pro Tech (NYSE:APT) and Allied Healthcare Products (NASDAQ:AHPI), which climbed 4% and 3%, respectively. "LAKE should benefit as fears of a COVID re-emergence cause sales of protective clothing to rise," writes SA Marketplace Author Ranjit Thomas, saying the stock should "generate a steady amount of revenue even after COVID is defeated." (6 comments)

Green for the week

Stocks are continuing to rebound following a retreat on Monday as traders don't appear to see an immediate risk to the economic recovery. U.S. equity futures are all pointing 0.2% higher this morning, with strong corporate earnings prints continuing to help the investing landscape. Coca-Cola (KO) and Johnson & Johnson (JNJ) both logged gains following their results on Wednesday, and we'll hear from other Dow components today, including Dow Inc. (DOW) and Intel (INTC).

Analyst commentary: "We expect a continuation of sloppy trading through the seasonally-weak summer months; however, our base case remains that the primary trend over the next 12 months remains higher," noted Keith Lerner, chief market strategist at Truist. "The S&P 500, which just made a new record high last week, has gone one of the longest periods of the past decade without so much as a 5% pullback [since October]."

Investors may also be taking some comfort in the latest comments on price pressures. "There will be near-term inflation because everything is now trying to be picked back up," President Biden said Wednesday night at a CNN town hall in Cincinnati. "But the vast majority of the experts, including Wall Street believe that it's highly unlikely that it's going to be long-term inflation that's going to get out of hand."

On the economic calendar: The ECB's first policy announcement since raising its inflation target to 2% is due today, with President Christine Lagarde promising "interesting variations and changes." In the U.S., weekly jobless claims are expected to come in at 350,000, a week after falling to the lowest level since March 2020. Senate Republicans also blocked an effort to begin debate on a bipartisan infrastructure deal on Wednesday, but lawmakers expect to near a final agreement by early next week.

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Nord truce

Ending a longstanding dispute between the two allies, the Biden administration has reached an agreement with Berlin that allows for the completion of the Nord Stream 2 natural gas pipeline between Russia and Germany. Previous U.S. administrations opposed the link under the Baltic Sea, feeling it would give the Kremlin more political leverage over transit countries that have carried its gas exports to Europe for the last four decades. In fact, Ukraine said it stands to lose $2B in annual payments from Russia as part of a gas contract that is set to expire in 2024.

Fine print: Since construction of the Gazprom-led (OTCPK:OGZPY) project was almost done when Biden came into office (it should be finished next month), the administration went for a diplomatic agreement instead of sanctions. Under the deal, Berlin has promised to deal with Russia if it threatens European energy security. Germany has also promised support for Ukraine, like investment in green technology infrastructure, though Kiev is still not happy with the agreement, saying it doesn't provide enough protection.

"Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions to limit Russian export capabilities to Europe in the energy sector," according to a joint statement from the U.S. and Germany. Western partners were also involved in the building of Nord Stream 2, including Royal Dutch Shell (RDS.ARDS.B), Germany's Uniper (OTC:UNPPY) and BASF (OTCQX:BASFY), Austria's OMV (OTCPK:OMVJF) and France's ENGIE (OTCPK:ENGIY).

Go deeper: Some are pointing to a book called Ally Versus Ally: America, Europe, and the Siberian Pipeline Crisis, which Antony Blinken, now U.S. secretary of state, wrote in 1987. In it he argues for alliance maintenance, rather than adversary containment, after the Reagan administration imposed sanctions on a similar pipeline from Soviet Siberian gas fields to Europe in 1981. Echoes of Nord Stream 1 may also be at play, with Germany's neighbors moving on from their opposition to the pipeline which was completed in 2011. (28 comments)

The ₿ Word

CoinDesk columnist Nic Carter kicked things off at the A-list, 'B Word' event that also featured some in the C-suite crowd. Carter began by explaining the crucial importance of Proof of Work for Bitcoin (BTC-USD), and why Proof of Stake (less energy intensive) is inferior. He also noted that more transactions doesn't necessarily mean more energy expenditure (that's rather dependent on securing the network), which was in direct contrast to Elon Musk, who two months ago helped set off Bitcoin's collapse by claiming transactions use too much energy.

Seeking Alpha contributor Lyn Alden took to the floor to try and debunk "Bitcoin Can Be Displaced Easily" FUD. Bitcoin has three "irreplaceable attributes," said Alden - security, scale, and decentralization. She also took note of the oft-used comparison of Bitcoin to MySpace. Bitcoin, she reminded, hit a $1T market cap 13 years after coming into existence - it's a level of scale and market dominance that MySpace never even sniffed.

Meanwhile, Coin Metrics author Nate Maddrey discussed whether "Bitcoin Ownership is Concentrated." He first explained that all Bitcoin transactions are transparent to anyone who wished to view them, including the addresses of wallets that hold Bitcoin. While yes, the top 10% of addresses hold 99% of supply, "addresses" is the key word. Addresses, said Maddrey is not individuals. An address can represent thousands of individuals (think exchanges like Coinbase (COIN) and institutions). In fact, he says, five of the top 10 largest Bitcoin addresses are exchanges.

Movement: Bitcoin notched a session high of $33K during the event, but has since returned to the $31K level, and has stayed there for most of the night. Don't forget THE talk:

Cathie Wood: "Our focus on disruptive innovation" attracted her to Bitcoin and crypto in general and she offered her thoughts about how Bitcoin fits within the ESG investing landscape. "Bitcoin's limit of 21M coins ever means its primary use right now is store of value," she added. "Purchasing power will go up over time." She also passed on the research to economist Arthur Laffer, who threw up his hands, and said at last, a rules-based monetary system.

Elon Musk: "I might pump, but I don't dump," he declared, while wearing a shirt about Bitcoin being the evolution of money. "I think about money as an information system, and there's an opportunity for something better than ACH and credit card networks." He further noted that he's an owner of Bitcoin through not just Tesla (TSLA), but through SpaceX (SPACE), and he personally owns Bitcoin, Ether (ETH-USD), and Dogecoin (DOGE-USD). Once Musk is convinced more than 50% of Bitcoin mining was based on renewables, Tesla will again accept the crypto for purchases.

Jack Dorsey: "Bitcoin reminds me of the early Internet. If the internet gets a chance to be a native currency, it's Bitcoin because of its resilience, and community driving it." He also has high hopes for the currency. "We have all these monopolies off balance and the individual doesn’t have power and the amount of cost and distraction that comes from our monetary system today is real and it takes away attention from the bigger problems. My hope is that it creates world peace or helps create world peace." (59 comments)

Today's Markets

In Asia, Japan closed. Hong Kong +1.8%. China +0.3%. India +1.2%.
In Europe, at midday, London +0.3%. Paris +0.8%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +1% at $71.03. Gold -0.5% at $1795.20. Bitcoin +1.3% at $31845.
Ten-year Treasury Yield +1 bps to 1.29%

Today's Economic Calendar

8:30 Jobless Claims
8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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