Round the World in Markets
Following through on its previous pledge, the FED now buying corporate debt. FED Chairman Jerome Powell announced the decision to pursue corporate bonds instead of bond ETF’s to the US Senate. “Over time we’ll gradually move away from ETFs and move to buying bonds . . . It’s a better tool for supporting liquidity and market functioning.”
Specific bonds were not specified. Concerns may be raised if low-grade or “junk bonds” are included in the FED’s purchases. The bond market is required for a healthy market and economy.
Uruguay appears to have a handle on its Covid-19 infections. Since the outbreak the country has not declared a lockdown, instead relying on citizens to exercise caution on their own. It is tracking at 244 infections per million people, a large improvement over Brazil’s 4,001 cases per million.
Social distancing, mask-wearing, and active testing all appear to be contributing to this success.
The EU continues to dump skim milk powder on the global market, causing prices to drop. Skim milk powder (SMP) is a widely used food product commonly found in baby formula, packaged confections, and distributed to aid organizations.
In 2016 the EU upped its government program to buy the equivalent of 16% of the global SMP production from its milk processors. As the demand for SMP grew in 2018, the government began to flood the market with its surplus. Selling the supply at a sharp discount has caused an estimated $2.2 billion loss to the US dairy market.
South Africa reopens despite the current COVID-19 evidence. President Cyril Ramaphosa has decided to relax business restrictions as the infection cases rose 37% over the last week. South Africa’s economy has been hit especially hard by the lockdown. The President cited the need to restart the economy in an address to the nation.
(Image Courtesy of Coddiwomplejourneys.com)
Cambodia is requiring a coronavirus deposit for tourists seeking access to the country. The Civil Aviation Department of Cambodia announced foreign travelers arriving by plane will be required to make a $3,000 deposit upon entry for possible COVID-19 related costs. These include fees for mandatory testing, transportation to a quarantined hotel, treatment, funeral services, and medical treatment. Most of the deposit will be refunded upon leaving Cambodia.
Tourism accounts for a large percentage of the country’s revenue, second only to its textile industry. In 2018 over six million tourists spent $4.4 billion during travels to Cambodia, most likely to visit World Heritage Site Angkor Wat and the surrounding temples.
Cambodia has seen a significant decrease in its tourism since the global pandemic began. Temples in the Angkor area are normally bustling with visitors photographing the historical site. These areas are now being frequented by locals instead. Travel writer Marissa Carruthers spoke to VOA this month, stating “I can’t imagine a time when Cambodians could go to Angkor Wat and pray in peace without hordes of people, or play badminton or picnic with their families – and that was a really kind of special experience to see.”
Local Egyptian markets see a decrease in papyrus revenue during the lockdown. The villages producing papyrus paper, an ancient writing surface, are struggling to survive as most of their product is sold to tourists and visitors. The paper is made by cutting stalks of the papyrus plant, laying strips together, and then drying them.
In a situation very similar to the above Cambodia story, the decrease in tourism has impacted the country as a whole. Papyrus workshop owner Abdul Rahman Mostafa, stated: “Because there is no tourism, we have to stop producing.”
VISA Moving Both On and Off the Charts
(Image Courtesy of Pymnts.com)
The global payment processor VISA has made considerable strides during the coronavirus pandemic.
VISA has announced it will be distributing sustainable plastic credit and debit cards which are made of upcycled plastic. These cards will be called “Earthwise High Content Cards” and are the result of recent customer surveys. 73% of those questioned said they would prefer an environmentally responsible card.
This decision follows the decision from American Express in 2019, in which it announced its traditional green card would contain plastic recovered from the ocean.
In 2019 there were over 374 million open credit cards in the US. On average seven out of ten Americans own at least one credit card, with the majority of those owning 2.35 cards. At a weight of approximately five grams per card, this represents over 4,000 metric tons of plastic in peoples’ wallets.
VISA and the Blockchain
Visa will begin using the blockchain for a new token payment service. Originally launched in 2014, the VISA Token Services is moving forward with plans to increase security and useability for VISA customers. The new addition to the service will eliminate the need for the traditional 16-digit credit card number and replace it with a digital token. This token will then be used to verify the card and relevant payment information.
This serves as the first widespread implementation of blockchain for consumer credit cards. Last June, VISA acquired token payment and digital ticketing companies Bell ID and Ecebs LTD.
There is no confirmation on if VISA will be using a custom, or established blockchain. However, an application for creating a ‘Digital Fiat Currency’ from May mentions Ethereum as a possible candidate.
Surprisingly, news of the new VISA blockchain has gone largely unnoticed. Cryptocurrency promoters are usually quick to highlight any rumors of adoption or large companies adopting blockchain technology. The narrative appears to have shifted primarily to Bitcoin following its 3rd halvening events and the break, and then retrace, of hitting $10,000.
To the Charts
VISA has had a strong recovery since its stock dropped with the market plummet in March. The “V” shaped recovery is evident on the daily chart below and the stock closed at $192 on Friday, close to its all-time high of $214 posted in February.
Hydroxychloroquine is Out, Masks are In
(Image Courtesy of Wkar.org)
While most news coverage has largely ignored COVID-19, the disease continues to rage on. Most recently the FDA reversed its decision in allowing hydroxychloroquine to be used for emergency use in treating or preventing the coronavirus. The decision came on Monday as viral infections continued to climb throughout the nation.
Hospitals will no longer be able to prescribe the drug for new COVID-19 patients and will no longer receive shipments from the National Stockpile. Existing patients can continue to receive both hydroxychloroquine and chloroquine. Both drugs continue to be used in over 100 clinical trials.
The search for a COVID-19 vaccine continues. Progress has been made by numerous companies rushing to push a product to market, with Moderna Therapeutics announcing it is ready to begin Phase-3 trials. Typical vaccines take anywhere from ten to fifteen years to see public use.
Even if a vaccine is discovered tomorrow it will still likely take time to ramp up production to inoculate the 330 million Americans. President Trump’s “Operation Warp Speed” has earmarked over $10 billion to speed up development, production, and delivery by January 2021.
In the meantime, one revised model predicts COVID-19 deaths will hit 200,000 deaths by October. Previous projections were made under “best case” scenarios which included the wearing of masks, social distancing, and voluntary quarantine. The model required an update as states like Georgia, Florida, and Texas are rapidly lifting lockdown restrictions on businesses.
As we wait for the vaccine new information on mask efficacy is encouraging. Studies from Japan show that the infection rate drops dramatically due to face masks alone. This comes as the residents of Japan have kept most businesses open and largely disregard social distancing guidelines. Estimates show that if 80% of Americans wore masks the number of new coronavirus cases would drop to 1/12th the current rate. Many Asian nations are already familiar with mask use and wear them as preventative measures for normal sickness. In contrast, several states with high rates of coronavirus are merely suggesting residents wear masks, while others have disregarded the science completely.
Florida is one state with a rapidly increasing infected population. Despite these numbers, the State is currently in Phase 2 of reopening, allowing non-essential businesses to operate in a limited capacity. Essential business employees are required to wear masks, but for the rest of the population, the masks are optional.
(Image Courtesy of Orlandosentinel.com)
The CHAZ Gets the CHOP
(Image Courtesy of Chicagotribune.com)
Seattle has a new territory. Called the Capitol Hill Autonomous Zone (CHAZ) now known as the Capitol Hill Organized Protest (CHOP), is an area taken over by protests following the deserting of the 13th Police Precinct. Protests rose following similar outpourings stemming from the death of George Floyd from police officers.
Harkening back to the Occupy Wallstreet protests, protestors are declaring the area a “Police Free” zone and developing loose groups to organize themselves. A lengthy list of demands for the city of Seattle has been issued, including:
- The abolition of the Seattle Police Department
- Retrials for all people of color convicted for non-violent crimes
- Reparations for victims of police brutality
- The creation of a team of experts who will respond to mental-health-related 911 calls
In the absence of organized law enforcement, small groups have taken to policing the streets themselves with varying degrees of success. Reports of shootings, gang-style protection fees, and fights have been cited as failures to the social experiment. Following their retreat from the area, the Seattle Police have stated they will not enter the CHOP unless there is an imminent threat to individuals’ safety.
Meanwhile, the City of Seattle has reached an agreement with protestors to replace temporary barriers surrounding the CHOP. The new barriers will be made of concrete while reducing the occupied area from six blocks to three.
Other CHOP zones have been established in the US with differing results. Portland police quickly dismantled a similar area earlier this week, labeling it a “civil disturbance.” The Portland CHOP organizers were demanding that $50 million be cut from the police budget.
For those who remember 2011, the similarities between the CHOP and the Occupy Wall Street movement are comparable. Both were ad-hoc ongoing demonstrations demanding changes be made to both local and Federal government. However, the CHOP situation feels more “real” at this point, insofar that it is a reaction to death and oppression. The Occupy movement was primarily concerned with wealth inequality and income disparity. Both received national attention but the Occupy group eventually were unable to sustain themselves and lost the public interest. Considering how much raw emotions the protests around George Floyd and Breonna Taylor have received, they may be here for the foreseeable future.
This newsletter, analysis, research, and commentary provided by Modern Markets, lead analyst Kaltoro, with contributions from TytanInc and Digital Lawrence. The publication incorporates data from numerous sources including, but not limited to, CoinMarketCap, Bloomberg, CNBC, Lunar Crush, and the team at FomoHunt.
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