Daily Comment (September 2, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning.  As the markets wind down before the holiday weekend, U.S. equity futures continue to grind higherHurricane Ida is leaving the U.S. but not before causing flooding in New York City.  Our coverage begins with Afghanistan.  China is up next, followed by economics and policy.  The international roundup precedes our pandemic coverage.

Afghanistan:  The world begins the next phase of the Afghan situation, which is the political fallout and the Taliban’s attempt at governance.

China:  There are worries over an unnecessary military confrontation, credit market worries are rising, and Xi continues to portray himself as a decisive leader.

Economics and policy:  Bitcoin may no longer represent the crypto space and more trouble for tech.

  • For a long time, bitcoin was considered a proxy for all cryptocurrencies. That may not be the case much longer.  The expansion of crypto assets is leading to fewer funds flowing to bitcoin.  The lack of price momentum in bitcoin is masking strong price increases in other parts of the space.  We view the entire crypto space as a reaction against currency debasement.  Our expectation is that, over time, governments will snuff out this avenue of debasement protection, similar to the way the Roosevelt administration made it illegal to hold gold.
    • Investors considering this space should note that the area is mostly unregulated. The fraud seen in financial markets in the past, which happened infrequently in regulated markets, is a common occurrence in the crypto space.
  • The DOJ is preparing to sue Google (GOOGL, USD, 2904.31) over its dominance in digital advertising. This is the second lawsuit on this issue against the company.
  • Major tech firms in the U.S. and China are moving into the chipmaking business, although this effort appears to be more about design than manufacturing. The goal is to make custom chips for their hardware, which will allow them to create better products.
  • Modi’s increasing authoritarian tendencies are creating problems for U.S. tech firms

International roundup:  The ECB is considering tapering and the Scots make noise about independence.

COVID-19:  The number of reported cases is 218,516,990, with 4,544,777 fatalities.  In the U.S., there are 39,399,080 confirmed cases with 642,093 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 443,741,705 doses of the vaccine have been distributed, with 371,280,129 doses injected.  The number receiving at least one dose is 205,527,578, while the number receiving second doses, which would grant the highest level of immunity, is 174,600,017.  For the population older than 18, 63.6% of the population has been vaccinated.  The FT has a page on global vaccine distribution.  Although some of the southern states are seeing a decline in cases, the majority of states are reporting increases.

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