In the Blind Spot (Ghost guns, crypto, online groceries)

This edition of the Blind Spot Wrap was compiled by Izabella Kaminska (IK) and Dario Garcia Giner (DGG).

Markets, finance, economics etc…

• As of Monday, everyone expects a 75 basis point hike by the Fed this Wednesday. Markets puked accordingly.
  

  Oh to remember the transitory inflation days. – IK

• The BIS differentiates cross-border financial centres from offshore financial centres.
• The BoJ’s Kuroda is still committed to “aggressive monetary easing”.
• Lorie Logan, executive VP of the Markets Group of the Federal Reserve Bank of New York, gave a very interesting speech earlier this month about the challenges digital innovation poses for policy implementation. It was largely missed by the market.
  

  It’s worth noting because of some of the intriguing predictions Logan makes. What caught my eye (largely because it supports my theory that there next big innovation in finance will be focused on the creation of an intraday liquidity market):

  “However, to the extent that stablecoins or CBDCs supplant private bank money or expand overall demand for central bank liabilities, they could also increase the size and potentially change the nature of central bank assets. A larger balance sheet could cause some central banks to adapt approaches to asset composition to manage the influence of a larger balance sheet on the policy stance. For example, a central bank could buy short-duration assets to support the new demand for central bank liabilities and differentiate these asset purchases from those intended to foster accommodative financial conditions.

  These issues may also require new operational approaches for central banks. In some circumstances, the balance sheet could need to adjust rapidly because of unexpected large shifts in liability demand. This could require new thinking by central banks on the appropriate approaches to implementation with potentially a different mix of assets or tools to add liquidity to the system. Short-duration assets or temporary liquidity providing operations would also allow flexibility if an increase in liability demand is expected to be short term.” – IK

Media Matters:

• Aaron Banks loses libel lawsuit against Carole Cadwalladr.
  

  It’s very easy given the reporting on the issue to assume Carole has won this case on a point of principle, i.e. that Banks did after all have a covert relationship and links with the Russian government. But actually, the reason she has won the case is because the day she made the supposedly disparaging statement, was the same day the National Crime Agency publicly concluded Banks did not do anything wrong. The conclusion seems to be that Carole’s Ted Talk wasn’t as influential as the findings from the National Crime Agency in terms of impact on reputation. As one commenter in the FT notes: “the ruling by Mrs Justice Steyn is that it is OK to publish a lie if it can be established that the lie is in the public interest.”  – IK

Commodities:

• Tonnes of food is being “ploughed in” in the UK due to labour shortages.
• The US is secretly encouraging companies to ramp up purchases of Russian fertilizers, says Tass citing Bloomberg.
• European factories are now shutting down because of the energy crisis.
• Online grocery businesses do not make money. 
  

  “No one has ever made a decent return from online food delivery. Now a rash of start-ups are running out of road,” says the Sunday Times. They’re right. The article highlights the problem with last-mile services more broadly.  Getting consumers to do their own picking and driving is and always will be more efficient and thus less costly than getting a provider to do it. What’s more it’s very unlikely that the problem can ever be resolved with better technology, since the challenge is a system-issue.

  Ocado is the poster child of online delivery in the UK and you can see the problem being expressed in its share price:
  
  As the Times notes: “In its 12 years as a public company, Ocado has racked up £2.6 billion of capital expenditure and generated cumulative pre-tax losses of £484 million. Analysts estimate Ocado will make a negative return on capital employed of 9.7 per cent this year, compared with a 7.4 per cent positive return at Tesco. Traditional supermarkets, meanwhile, refuse to disclose the profits (or lack of) churned out by their web businesses, leaving many analysts to conclude they are barely breaking even.”

  The traditional supermarkets are secretive about these metrics, meanwhile, because most of them operate online businesses for promotional purposes rather than profits. It’s a fairly well known industry secret that most have to cross-subsidise their online offerings with earnings generated by their bricks and mortar stores. This is similar to the way most automakers have to cross-subsidise their electric vehicle offerings from the sale of combustion cars too.

  What I’m wondering is whether this is an early warning sign for trouble ahead with Amazon, the original zero-profit growth stock (before it fell into the cloud services business). Retail margins at Amazon are going negative. – IK

  

   

Friend-shoring:

• Bipartisan US effort by lawmakers to block US technology investments in China.

Crypto meltdown:

• Goldman Sachs begins trading derivative product tied to ETH.
  

  Bitfinex, the exchange that has a very close relationship to the world’s most famous stablecoin, Tether, says the following about the Goldman move:”Goldman’s decision to start trading a type of derivative tied to Ethereum, the second biggest cryptocurrency, marks an important development in the continued maturation of the asset class. Today’s first over-the-counter (OTC) non-deliverable forward (NDF) crypto trade on Ethereum by Goldman, with Marex acting as the counterparty, is a milestone in the ascent towards greater institutional adoption of cryptocurrencies.”Inquiring minds in the tradfi world want to know if crypto’s massive collapse on Monday, with Bitcoin down some 15 per cent at pixel time and ethereum down 16 per cent, could be linked to the Goldman entry point. – IK

• Binance halts bitcoin withdrawals due to ‘stuck on chain transaction’.
• It’s all very 2008 crypto edition as Nexo proposes a buyout of Celsius assets.
• CNBC’s Jim Cramer has terrible market timing.
  

  First there was Bear Stearns. Now there’s  his crappy call on Ethereum one month ago – IK:

  

On April 28th, Jim Cramer said #Ethereum would climb 40%.

Since then, it is down 18%. pic.twitter.com/0DEjoL9bMl

— unusual_whales (@unusual_whales) May 8, 2022

Arms control watch:

• Maryland law banning ghost guns to take effect.
  

  Maryland becomes the eleventh state, alongside D.C., that have banned the sale of so-called ‘ghost guns,’ 3-D printable firearms without serial numbers. The ban follows an incident where a student brought ghost gun parts to a Fairmont Heights High School last Thursday. This ban must bring into question the effectiveness of such regulatory measures against a largely decentralised and underground community, where extensive encouragement of TOR browsers and anonymous crowd-hosted firearm designs are almost purpose-made to evade such regulations.

  Izzy has argued before that bitcoin’s value is linked to its role as a monetary version of the right to bear arms. In an ideal world, nobody should have to use bitcoin because it is far less practical and efficient. They should instead be able to trust the government-issued currency. But in the worst case scenario, i.e. one where the government does stop serving the people, it’s probably useful that bitcoin is there as a distributed back-up that people can turn to. In theory the very presence of bitcoin in such a balance of power should deter the government or central bank from abusing its money-printing authority. But to operate successfully as a deterrent, bitcoin also needs to be maintained by hobbyists and freedom crusaders during times when it appears that no such thing is needed.

  Ghost guns have the potential to evolve in a very similar way. – DGG

• Senators strike bipartisan gun deal.
  

  10 Democratic and Republican Senators have signed a statement to announce a framework deal for new gun regulations in the United States. Estimates wager that Republican Senatorial support means this regulation could skirt any attempted filibuster by the GOP.

  The tentative deal promotes a federal grant program for additional red-flag laws and federal criminal background checks to keep guns from the hands of buyers that may be judged as potentially threatening.Another included provision attempts to close the ‘boyfriend loophole’ by tackling domestic violence offenders, as well as clarifying which gun sellers are required to register as federal firearms dealers and thus be obliged to run background checks on customers.

   

  Though such regulation may appear light to those unfamiliar with the United States’ history of firearms legislation, the signing by 10 GOP Senators shows that federal regulations restricting firearms purchases, an extremely controversial topic amongst the American right, may be becoming more palatable amongst an increasing swathe of the centre and right-wing electorate.  – DGG

Matters metaphysical:

• Cardinal calls papal resignation rumours nothing more than “a cheap soap opera”.
  

  Rumours regarding the Pope’s potential resignation have been circulating among the press following Pope Francis’ visit to a site tied to the resignation of Pope Benedict, L’Aquila, the resting place of St. Celestine V, a 13th century pope who resigned his papacy, in early June.

  Sudden scheduling changes, such as the delay of Pope Francis’ visit to the Democratic Republic of the Congo and South Sudan, have only served to fuel these rumours further.

  Though Cardinal Óscar Maradiaga insisted such scheduling changes were the result of a knee injury, and called the rumours “a cheap soap opera”, the Cardinal’s disclosures hint of political intrigue. Indeed, Pope Francis’ visit to L’Aquila was conducted the day before a two-day meeting with the cardinals to discuss the reform of the Roman Curia, one of Pope Francis’ main projects.

  Cardinal Maradiaga denounced these rumours as originating from those who sought to hamper the Pope’s reforming efforts, stating for instance that the reform of the Curia’s ‘Praedicate Evangelium’ was published on 19 March and came into effect on June 5, but that its translations have not yet been completed. The Cardinal called such efforts a ‘white strike’ (huelga blanca). – DGG

Covid is still a thing:

• Covid infections in Israel hit 3-month high:
  
  Astute newsreaders could glean throughout the initial pandemic wave of 2020 that Israeli infection cycles typically arise 2/3 weeks earlier than in Western Europe. Unlike Chinese infection cycles, Israeli infection cycles have been more closely tied to Western European infections since the outbreak of the Covid pandemic. The variant in question is being labelled ‘BA.5’. Though serious cases have risen only slightly, meaning an increase in death figures has not yet been noted, the Israeli Heath Ministry published a recommendation for at-risk individuals to once again wear masks in enclosed spaces on 7 June. – DGG

From the X-files:

• The UAP story just keeps getting more and more normalised.
• Congress mandates role for NASIC in investigating UFOs.
• Joe Rogan talks UFOs.