Global Macro Monitor

Just a follow-up to our last post, Will The Delta Variant Shut Down The Economy?, take a look at how surprisingly low Taiwan and South Korea’s fully vaccinated populations are.  Taiwan’s rate is so low, that we suspect (with little conviction) it could be bad data. 

The countries that have not done mass vaccinations could be hit hard with the Delta variant.  Some had dodged the COVID bullet in 2020 and became complacent, not making sufficient efforts to secure vaccines, while others could not afford them.   

We suspect Japan’s low vax rate, even though the country has thus far kept COVID at bay, led to Prime Minister Yoshihide Suga’s decision to declare a state of emergency. New cases are starting to tick up just as the Olympics are ready to begin, running through July 23 to August 8, and will be held entirely under emergency measures.

France Considers Mandatory Vaccinations

With only 36 percent of its population fully vaccinated, France is now considering making COVID-19 vaccinations compulsory as it struggles with lagging take-up of injections and a growing wave of new cases of the Delta variant

Semiconductors

In December, Trend Force projected 82 percent of total semiconductor foundry revenue would come from Taiwan and Korea, the primary reason why advanced economies desire to develop and expand their semiconductor manufacturing base. 

Taiwan Secures Vaccines

Major Taiwanese tech companies have inked a deal to buy 10m vaccine doses for Taiwan, sidestepping months of complicated geopolitical wrangling between Beijing and Taipei.

…The US$350m purchase from German manufacturer BioNTech, is split between TSMC, the world’s largest semiconductor manufacturer, and Foxconn, one of the world’s largest contract electronics makers, and its charity foundation. The two companies will donate the vaccines to Taiwan’s central epidemic command centre for distribution.

Taiwan is suffering major shortages of vaccines, in large part due to global supply issues, but it has also accused Beijing of scuttling an early deal to secure 5m doses directly from BioNTech. Beijing denies the accusation, saying Shanghai-based Fosun Pharmaceuticals had sole distribution rights for the region including Taiwan, and that Taiwan was welcome to go through them.

But to accept Chinese-made or -donated vaccines would be “the kiss of death” politically for Taiwan’s ruling party, analyst Drew Thompson said last month. Despite never ruling Taiwan, China’s Communist party (CCP) government claims it as a province, which it vows to retake. The CCP has recently increased pressure and military intimidation of the island and its occupants.

Taiwan has rejected China’s offers as fake altruism. China has accused Taiwan of putting politics above its people, while simultaneously lambasting doses donated by the US and Japan as foreign interference. – The Guardian, July 12th

Here’s to hoping the vaccines are distributed quickly, like yesterday.  

NFW! 

Tune out the nonsense, turn off the news, and stick to the data, folks. 

The Wall Street clowns are at it again, spreading fear and loathing about the new strain of COVID, the Delta variant, retrofitting a new negative narrative to explain the nonsensical bond market action.   

They thrive and need to create volatility to make their year-end bone.  

No Signal, All Noise

The Fed nationalized the bond markets long ago.  Trying to decipher an economic signal from bond yields is equivalent to guessing what price the central authorities in the old Soviet Union would set for blood sausage.  

Are bond yields falling because the economy is about to go into a tailspin or a stock market collapse is imminent?  Anything is possible, and nobody knows the future, but highly unlikely, at least until the Fed starts to pump the breaks.   There is way too much money in the global monetary system.  

The collapse in bond yields is all technical, baby.  What a tremendous shorting opportunity if it were a proper market with true price discovery.  We have done a lot of work analyzing the bond market in the past week and hope to post it for you this weekend. 

Wait for it.  It will be good.  Promise. 

Good Gawd, Such Nonsense

The Delta variant is a real threat to the unvaccinated, especially in the states with relatively low vax rates.

However,  many states and advanced economies are almost at herd immunity — vaxed plus COVID recovered —  including the UK where cases are spiking. 

…it seemed inevitable that new cases of Covid-19 – which had been steadily declining since early January – would begin to rise again. On June 24, the number of daily infections in the UK crossed 16,000, levels not seen since early February when the UK was still in full lockdown.

But the third wave will look very different to the last two. While the Delta variant is considered to be more virulent than any that have previously followed, the UK’s successful vaccination campaign appears to have broken the seemingly inevitable link between cases, hospitalisations, and fatalities. The current hospitalisation rate remains low. There were 182 new hospital admissions on June 22 – a rate of 16 per 1000 new cases – compared with 3,812 admissions on January 12, the height of the second wave, a rate of 84 per 1000 new cases. – Wired

Share Of Population Fully Vaccinated

Number Of COVID-19 Patients In Hospital 

Let The Games Begin

Though Japan has been relatively successful in keeping COVID at bay, the country’s low vaccination rate is rattling nerves as the athletes arrive and the Olympic Games are about to begin.  

Olympics organizers are banning all spectators from the games this year after Japan declared a state of emergency that’s meant to curb a wave of new Covid-19 infections.

It’s the latest setback for the Summer Olympics that have already been delayed for a year and racked up high costs for postponement. The state of emergency will begin Monday and run through Aug. 22, while the games are scheduled from July 23 to Aug. 8. – CNBC

Upshot

Ignore the noise, folks, stay data-dependent.  Change your view as the facts and data change.  

Of course, there are states and countries still at high risk with their low vax rates.  The advanced economies need to pull out all the stops to do all they can to help get shots in the arms of those at risk.   

It’s kind of tough, however, given all the ignoramuses spouting their fascist conspiracy nonsense.  They are the true modern-day brown shirts. 

Great video, well worth your 10 minutes. Any guesses of the impact on inflation/deflation?

I used to go home every night as a young Wall Street trader worried about how instability on the “Arab Street” would adversely impact my long unhedged positions.  If you have been a reader of the Global Macro Monitor over the past few years, you know we have been concerned about U.S. political stability. – Global Macro Monitor, May 8, 2020

He was born on the fourth day of July
So his parents called him Independence Day
He married a girl named Justice who gave birth to a son called the Nation
And she walked away

Independence would daydream and he’d pretend
That some day him and Justice and Nation’d be together again
But Justice held up in a shotgun shack
Wouldn’t let nobody in
So a Nation cried…   – John Cougar Mellencamp

The following video is very informative, and I don’t think I have seen a better argument for keeping the government out of the bedroom.

We live in a world of politics and/or government policy gone crazy with zero contemplation of unintended consequences.

Dildo’s In ‘Bama

It is truly a Kafkaesque, bizarro, and illogical world when one can openly carry an AR-15 on the streets of Montgomery but it’s illegal to purchase a dildo in the state of Alabama.

The Anti-Obscenity Enforcement Act of 1998 is an Alabama statute that criminalizes the sale of sex toys…It prohibits “any person to knowingly distribute, possess with intent to distribute, or offer or agree to distribute any obscene material or any device designed or marketed as useful primarily for the stimulation of human genital organs for any thing of pecuniary value.” First-time offenders face a $10,000 fine and a year in prison, while repeat offenders can face up to ten years in prison. Exemptions exist for “bona fide medical, scientific, educational, legislative, judicial or law enforcement purposes.” – Wikipedia

The SCOTUS refused to hear the challange to the law in 2007. 

So, let me see if I’ve got this straight, and I may not, as is often the case. 

Many in ‘Bama refuse to wear a mask during this pandemic or allow restrictions on assault rifles out of concern the government is encroaching on their personal liberties — which may or may not have killed some of the most vulnerable and elderly during this pandemic; and with respect to assault rifles, at best, being complacent about killing children in mass school shootings. 

Yet, they are fine with the Anti-Obscenity Enforcement Act, where the government restricts the sale of items that bring pleasure to many?   Got it. 

Faux Christianity on full display.  Wonder what Jesus would think is worse?   

A rhetorical question as we all pretty much know the answer.  Well, most of us.  Maybe.

Thou shalt love thy neighbour as thyself. – Jesus of Nazareth

By the way,  ‘Bama ranks 50th in terms of population fully vaxed at 32 percent versus Vermont at Numero Uno with 65 percent of the population fully vaccinated.  

‘Bama’s low vax rate, combined with its high death rate, leads me to project before the pandemic has completely faded the state will sadly move up the ranks of the above. Tragic, given it can be avoided.

Hey, I am not picking on my brothers and sisters from Alabama, just the state’s dumb policies, which, by the way, California also has a plethora of assnine rules and regulations.

I love Sweet Home Alabama.

China’s 996 Work Culture

But I digress. Check out the video to understand the structural demographic headwind China’s economy is facing.

By the way, I choose France’s de facto “1034” work culture over China’s 996 (watch the video for context).

Carol K. Update

GMM’s much loved contributor of cracking economic and financial analysis, Carol K.,  continues her courageous battle with some serious health issues in the world’s best hospital in Boston.   She’s a fighter and still feisty as hell.   You go, girl.  #CKStrong

Good stuff.

This video is excellent.  Long for Twitter years but well worth the time. 

Dalio and Summers crystalize the inflation debate. Summers, the traditional economist, talks about demand-pull overheating, output gaps, and labor markets. At the same time, Dalio comments on monetary inflation, where the central government, the U.S. Treasury, cannot place all its bonds into the market without spiking interest rates and must rely on the Fed’s digital printing press to take down a significant portion of the new debt. 

Both are happening as we speak, and both have been exhausted on the site with various posts.  Summers even mentions short-term inflation running at plus 8 percent annually  as we did recently.

Carol K. Continues Her Health Battle

Keep fighting, CK!  The world is rooting for you. 

Wow,  Justin is acting pretty conservative for a liberal.  Canada already has some of the best COVID numbers in the world.  High VAX, low new daily cases.   

Assuming 4 percent of Canada has had (1.41 million reported cases) or has the COVID antibodies, that puts the country’s at a de facto 70 percent herd immunity rate.   Enough to sleep easy, in our book. bed.   

OTTAWA — Prime Minister Justin Trudeau maintains that Canada will need to meet the COVID-19 vaccines target of 75 per cent of the total population with a first dose and 20 per cent with two doses before his government lifts border restrictions.

Speaking to news that the U.S, Canada border will remain closed to non-essential travel for another month, Trudeau said Friday that, while he understands the urgency to return to some semblance of normality, permitting discretionary travel now would risk another wave of cases in this country.

“We’re not out of this pandemic yet, we’re still seeing cases across the country and we want to get them down. At the same time, we also know we have to hit our targets of 75 per cent vaccinated with the first dose, at least 20 per cent vaccinated with the second dose before we can start loosening things up because even a fully vaccinated individual can pass on COVID-19 to someone who is not vaccinated,” he said.  – CTV News

He’s the PM and has to answer to the Canadian people.  I am not and do not.  That pretty much settles it. 

PTJ, the Greatest Of All-Time (GOAT) in my book. I have few regrets in life but one is not hitting his bid when I was being pursued by his hedge fund years ago. The California beach was just too comfy back then.

His views should sound very familiar if you have been reading GMM over the past several months.

Listen up to the interview with Andrew Ross Sorkin from this morning.  The 6 minutes is well worth your time.  The opportunity cost of not doing so could be enormous. 

Keep fighting, CK!