“Severe complications.”
Those were the words a spokeswoman for the German government used Thursday to describe the likely ramifications for vaccine production of a US plan to waive patent protections for COVID inoculations.
Needless to say, Angela Merkel’s opinion carries considerable weight on the world stage. If she can’t be persuaded to back the proposal, it would complicate what are likely to be fraught negotiations. According to Deputy Press Secretary Karine Jean-Pierre, there was no dissent within the Biden administration on whether to support the plan. But the WTO process “will take time,” Jean-Pierre said. “It’s not going to happen tomorrow or the next day.”
Shares of vaccine makers which took a hit on Biden’s support for the plan rebounded on Merkel’s apparent opposition.
Read more: Sharing Is Caring
The debate over vaccine IP protections dominated the discussion Thursday or, I suppose I should say dominated the headlines. It’s a click-friendly story and, to be sure, it raises a number of important questions as the world looks ahead to the next pandemic and the next generation of medical technologies. “The protection of intellectual property is a source of innovation and this has to remain so in the future,” Germany insisted.
Bloomberg noted that for all the fanfare, “there’s little chance the EU and the US will agree to cede intellectual property for the revolution of its mRNA technology with China [and] most poor countries in the world have neither the capacity nor the expertise to produce such advanced treatment.”
Switching gears, Coinbase is having a rough time of it. The shares fell some 6% Thursday, adding to an almost uninterrupted string of losses since the exchange operator went public last month.
What was it Barry Silbert said about the reference price of $250? Oh, that’s right, he said: “I will not be selling any of my Coinbase stock to you at $250. Try again.” If you bought near the highs (around $430) on April 14, well, what can I say? You should have bought Dogecoin instead. How ironic.
Indeed, some have attributed Coinbase’s stumbles to the rise of Dogecoin and what counts as a “rangebound” trading in Bitcoin, which seems dull by comparison to Doge. The (literal) joke asset won more celebrity endorsements over the past several days.
Whatever the idiosyncratic reasons for Coinbase’s consecutive declines, note that other “frothy” corners of the market are under severe strain too. The IPO ETF fell for an eighth straight session, for example.
Cathie Wood’s flagship ETF has suffered a half-dozen days of outflows.
Hilariously, at least some observers suggested that investors are fleeing Cathie’s ARK because after getting a look at FAAMG earnings (here and here), investors view the titans as relative bargains. “Investors got a visceral reminder last week that the tech titans have not only surging earnings, but also reasonable valuations,” someone told Bloomberg Thursday, adding that “the relative attractiveness of the big five tech stocks might be making hyper growth stocks, such as those in ARKK, look even more expensive.”
So, Coinbase is lower because Bitcoin isn’t exploding higher which may, in part, be because it’s all about Dogecoin (and Ether) these days, and ARKK is bleeding because the FAAMG cohort is a relative bargain. Got it. (Or, “Got it?”)
“The equities world continues to gyrate around the health of the Tech sector and prior ‘disruption high flyers’ in particular [with] ARKK trading below its 200-DMA for the first time in 13 months,” Nomura’s Charlie McElligott wrote Thursday, adding that “the broader Nasdaq / QQQ options-space show[s] Dealers remain in extreme ‘short Gamma’ territory, with Delta now too sharply negative / short as well, all acting to ‘amplify’ and accelerate directional moves.”
In rates, Treasurys were mixed, but there’s notable action in eurodollar options, where whale-sized bets are being placed on something big (i.e., a potential pivot) at Jackson Hole. “Recent days have seen a wave of buying that target a significant Fed policy shift at the Jackson Hole gathering,” Bloomberg’s Edward Bolingbroke wrote. “Broadly, the position stands to benefit from additional rate hike premium priced into 2024 eurodollar futures — jolted by moving forward expectations for the timing of Fed tapering,” he added.
McElligott weighed in on the same trade. “The interpretation is that this is a play for a Fed hawkish policy pivot at Jackson Hole in late August, particularly as the pace of expected labor gains puts you in that ballpark,” he said.
Speaking of the Fed, officials were… well, speaking. “I’d like to see us talking — and begin discussions to talk — about how to taper sooner rather than later,” Robert Kaplan remarked, during a virtual event Thursday, reiterating the same (relatively) hawkish stance that rattled markets last week.
For Kaplan, it’s “clear” that the “substantial further progress” threshold for starting the taper discussion will be met sooner than he thought in December. Both the employment and inflation goals will likely be met “some time in 2022,” he predicted.
All of this ahead of Friday’s jobs report. “We remain in an environment when the scale of many data releases lack historical context, [a] +1 million consensus for NFP [is] a salient example,” BMO’s Ian Lyngen and Ben Jeffery wrote Thursday afternoon, on the way to recapping some findings from their pre-payrolls survey.
“In terms of what would be required to positively recast outlooks, replies ranged from 1 million to 3 million, with a median of 1.4 million jobs added in April,” they noted. “Conversely, as to what would move the proverbial needle to the downside, answers covered <0 to 800,000, with the median ‘surprise’ disappointment at 500,000 jobs.”
The bit I worry about (purely selfishly) is MBS; the Fed is buying about 10% of the agency MBS market issuance now at $40B/month, and while some governors (e.g. Bostic, today) may think more “healing” is needed before tapering begins, it’s pretty hard to argue that case for the housing market. The housing market doesn’t need any doctor. A psychiatrist, maybe, but not a doctor. Administering $10B worth of Xanax monthly in the form of reduced stimulus and corresponding MBS rate increases, while leaving other debt purchases intact, may seem a reasonable compromise. I can imagine the July meeting minutes already: “Just put the housing market to sleep; it needs a good nap anyway!” was expressed by the Atlanta FRB Governor. “The homebuilders are all exhausted and the buyers are run ragged and desperate.” was the view expressed by several other participants, summarizing recent staff reporting. Chairman Powell concluded the initial discussion, noting “Nobody will even mind, except those grouchy old farts invested in MREITs! If they got grouchier, who would even notice?”
An interesting note, you cannot trade Dogecoin on Coinbase, probably why this has been falling, people are going elsewhere to trade these meme coins, another thing you failed to mention is lack of insider support, they are pretty much selling most of their vested holdings.