Oil Slumps on Omicron Fears; Posts Biggest Monthly Fall In 20 Months

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Source: Oil slumps on Omicron fears; posts biggest monthly fall in 20 months-Reuters

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Big Short Investor Says Bitcoin Is In a Speculative Bubble

There are plenty of Bitcoin bulls evangelizing the digital currency these days, but Michael Burry, the focus of the film and book The Big Short, is not one of them.

Burry, in a now-deleted tweet, warned that Bitcoin’s current levels are unsustainable—and current investors could suffer significant losses.

“$BTC is a speculative bubble that poses more risk than opportunity despite most of the proponents being correct in their arguments for why it is relevant at this point in history,” he wrote. “If you do not know how much leverage is involved in the run-up, you may not know enough to own it.”

Burry knows about bubbles, having made a fortune off the housing market’s collapse in 2007. And he warned that Bitcoin’s recent ascension seemed reminiscent of that time.

“Fads today (#BTC, #EV, SAAS #memestocks) are like housing in 2007 and fiber/.com/comm/routers in 1999,” he said.

Burry regularly deletes his tweets, but he has been quite outspoken on the platform about a number of issues. Last April he decried the coronavirus lockdown. He began tweeting last March, and his comments are closely watched by the financial community, though he does not talk much (if at all) about his own investments.

His bearish remarks come at roughly the same time that Citi gave Bitcoin a boost. A note from analysts at the financial institution said the cybercurrency could be on the verge of going mainstream, despite the many obstacles in its path.

“But weighing these potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point and we could be at the start of massive transformation of cryptocurrency into the mainstream,” the analysts said.

While Elon Musk spent Sunday taking potshots at Sen. Bernie Sanders on Twitter, the Tesla founder became the target of a different kind of financial heavy hitter on social media.

Michael Burry, the celebrity investor who rose to fame by being one of the first to profit from the subprime mortgage crisis (and whose story was told in the film The Big Short), surfaced on Twitter over the weekend to accuse Musk of seeking attention solely to sell his company’s stock.

In a now-deleted Tweet (a frequent habit of Burry’s), the investor wrote, “Let’s face it. @elonmusk borrowed against 88.3 million shares, sold all his mansions, moved to Texas, and is asking @BernieSanders whether he should sell more stock. He doesn’t need cash. He just wants to sell $TSLA.”

Burry, in a separate (also deleted) Tweet on Monday, showed a chart of Tesla’s share price with an arrow pointing to the date when Musk said that the company’s stock was trading “too high.” (At the time, Twitter shares were trading at $55.22. In early trading Monday, they were at $53.46.)

The salvos against Musk come just a month after Burry deleted his Twitter account after denouncing what he called U.S. class warfare and disputing the argument that the wealthiest 1% don’t pay enough taxes. It was hardly the first time he has left Twitter and since rejoined. Burry’s social media presence is akin to a game of Whac-a-Mole.

Musk, on Sunday, dinged Sanders, replying to the Vermont senator’s tweet demanding that the extremely wealthy pay more in taxes. “I keep forgetting that you’re still alive,” Musk wrote, along with “Bernie is a taker, not a maker.”

Burry, however, has had Musk in his sights before this most recent war of words. On Friday, he scolded the billionaire for his comments about competitor Rivian, in which Musk said the company’s true test would be achieving high production and breaking even on cash flow.

“No, @elonmusk, the true test is achieving that without massive government and electricity subsidies on the backs of taxpayers who don’t own your cars,” Burry replied.

Burry, it’s worth noting, made a huge bet against Tesla earlier this year. Burry’s Scion Asset Management owned bearish puts against 800,100 shares of the electric-car maker as of March 31. The puts give Scion the right to sell Tesla shares on or before an unidentified

Source: Why the ‘Big Short’ Guys Think Bitcoin Is a Bubble

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There’s No ‘Supply-Chain Shortage,’ Or Inflation. There’s Just Central Planning

It’s great that so many have copies of Adam Smith’s The Wealth of Nations, but very unfortunate that so few have read it. The alleged “supply chain” problems we’re enduring right now were explained by Smith in the book’s opening pages.

Smith wrote about a pin factory, and the then remarkable truth that one man in the factory working alone could maybe – maybe – produce one pin each day. But several men working together could produce tens of thousands.

Work divided is what enables the very work specialization that drives enormous productivity. If this was true in an 18th century pin factory, imagine how vivid the truth is today. Figure that something as basic as the creation of a pencil is the consequence of global cooperation, so what kind of remarkable global symmetry leads to the creation of an airplane, car, or computer?  The kind that can’t be planned is the short answer, but more realistically the only answer.

Please keep this in mind as you read media coverage of the so-called “supply-chain disruptions” resulting in “shortages” that are said to be causing “inflation.” If you want a bigger laugh, read about what President Biden wants to do in order to get “supply” back on the market with an eye on replenishing U.S. retail shelves that are increasingly bare. He’s decreed 24-hour port operations! Yes, thanks to the 46th president we now know what held the Soviets back, and ultimately destroyed the Soviet Union: their ports weren’t open long enough; thus the shortages of everything

All of the above would be funny if it weren’t so sad. Media members, “experts,” economists, and politicians don’t even disappoint anymore. To say they do would be to flatter them.

Either they think we have inflation, shortages, or a combination of both. Wrong on all counts. Really, who was talking about supply-chain shortages or the impossibility that is demand-driven inflation in early 2020? Very few were, and that’s because the U.S. economy was largely free then. At which point politicians panicked. And in panicking, they imposed a rather draconian form of command-and-control on the U.S. economy.

Some were free to work, some weren’t, and more still were free to work and operate their businesses within strict political limits. From freedom to central planning in a very small amount of time. At which point it’s worth considering once again the simple pin factory that Smith witnessed in the 18th century versus the global cooperation that was the norm 19 months ago.

The supply lines of February 2020 were impossibly complicated structures that no politician could ever hope to design. Think billions of individuals around the world pursuing their narrow work specialization on the way to enormous global plenty. Put another way, the shelves in economically free countries were heaving with all manner of products based on economic cooperation that was staggering in scope. Brilliant as some experts claim to be, and brilliant as some politicians think they are as they look in the mirror, they could never construct the web of trillions of economic relationships that prevailed before the lockdowns. But they could destroy the web. And they did; that, or they severely impaired it.

In which case let’s please not insult reason by talking about “shortages” or “inflation” now. Let’s instead be realistic and talk about central planning. We know from the 20th century that when politicians, authoritarians or both substitute their intensely narrow knowledge for that of the marketplace that immense want for very little (and lousy) supply is the logical result. Yes it is. When we’re not economically free, bare shelves are the inevitable result.

Conversely, product and service abundance is a certain consequence yet again of the infinite actions and trillions of economic relationships entered into by billions of people. These commercial tie-ups were constructed by consenting individuals over many years and many decades only for them to be wrecked by a political class arrogantly seeking to protect us from ourselves. That’s what happens when command-and-control replaces voluntary order. The remunerative ties that bind us fray, or vanish altogether. Consenting, profitable economic activity was suddenly illegal. Yet politicians and other experts are only now wringing their hands about a lack of supply?

Really, what did they think was going to happen? While politicians couldn’t ever create or legislate billions working together around the world, they could and can surely break voluntary economic arrangements. When you have guns, handcuffs, the power to quite literally shut off power sources to the productive, not to mention the wealth produced by the productive, you have the power to impose command-and-control. And so they did, only for the “supply chains” painstakingly created in self-interested but spontaneous form over many decades to suddenly break apart. Just don’t call it inflation, or shortages.

Inflation is a devaluation of the unit of account. In our case it’s the devaluation of the dollar. And while Treasury hasn’t always done a great job as the dollar’s steward over the decades, that’s just the point. Devaluation was routine problem in the 1970s, it ceased to be in the 80s and 90s, but it reared its ugly head once again during the George W. Bush administration in the early 2000s. To say inflation is a “now” thing is to ignore that it’s more realistically been a 21st century-long thing.

We don’t suddenly have an inflation problem. To say we do is the equivalent of saying that the Soviets had inflation because all the goods worth getting were both difficult to find, and incredibly expensive if they could be found. In our case we’ve had a lockdown problem care of nail-biting politicians that suffocated commercial cooperation around the world. And with work divided less than it used to be care of government force, productivity is naturally lower than it used to be.

Please consider modern productivity in terms of Smith’s pin factory example yet again, and ask what it would do to supply. The only thing is supply shortfalls are not evidence of inflation. A rise in one price due to lack of supply implies a fall in other prices. Yes, we have a central planning problem. Were he around today, Adam Smith could diagnose this in seconds.

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I’m the editor of RealClearMarkets, and a senior economic adviser to Applied Finance Advisors. I’m also the author of five books. The most recent released in March is When Politicians Panicked: The New

Source: www.forbes.com

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Covid Surge Worse Than Anything We’ve Seen

German Chancellor Angela Merkel said boosting vaccination rates will not be enough to contain soaring coronavirus infections across the country, Bloomberg reported, calling for tough action as countries across Europe come down hard on the unvaccinated and prepare drastic measures to smother the outbreak.

Key Facts

Merkel reportedly told officials from her conservative party on Monday that many Germans don’t appear to understand how severe the country’s outbreak is, according to Bloomberg, calling on individual German states to implement tougher restrictions this week.

The measures would exceed new restrictions barring unvaccinated people from public transport and many areas of public life—which apply in areas where hospitalized Covid-19 patients exceed a certain threshold—and health minister Jens Spahn said he could not rule out another nationwide lockdown.

Some politicians in Germany are debating following neighboring Austria—which went back into full lockdown Monday after a more targeted, unvaccinated-only lockdown—in requiring everyone to get vaccinated against Covid-19.

From February next year, Austrians refusing the jab will face fines of up to €3,600 ($4,000), with smaller penalties for those refusing booster shots.

Czechia and Slovakia have also started to make life harder for vaccine holdouts—Slovak Prime Minister Eduard Heger reportedly called the measures a “lockdown for the unvaccinated”—barring them from using various services, entering restaurants and public events.

Crucial Quote

By spring, “pretty much everyone in Germany… will be vaccinated, cured or dead,” Spahn said at a news conference Monday. “With the very contagious delta variant, it is very, very likely … that anyone who is not vaccinated will over the next few months become infected.”

Key Background

Europe has, again, become the center of the pandemic. Cases and deaths have been rising there even as they mostly fell around the world. The World Health Organization said it is “very worried” about the situation, warning that an additional 500,000 deaths could be recorded by March if sufficient steps aren’t taken.

Many countries, particularly in Central and Eastern Europe, are facing dramatic surges and infections are at record-breaking levels. Slovakia, Slovenia, Austria, Czechia, Germany and the Netherlands are all at, or have hit, new highs and cases are rapidly rising in other countries.

Violent protests against new lockdowns and other restrictions have erupted across the bloc as governments scramble to contain rising cases. Many of these measures explicitly target the unvaccinated, who experts and officials warn are undoubtedly driving the new wave by refusing provably safe and effective vaccines.

Follow me on Twitter. Send me a secure tip.

I am a London-based reporter for Forbes covering breaking news. Previously, I have worked as a reporter for a specialist legal publication covering big data and as a freelance journalist and policy analyst covering science, tech and health. I have a master’s degree in Biological Natural Sciences and a master’s degree in the History and Philosophy of Science from the University of Cambridge. Follow me on Twitter @theroberthart or email me at rhart@forbes.com

Source: Covid Surge ‘Worse Than Anything We’ve Seen’: Germany Mulls Tough Restrictions As Europe Targets Unvaccinated With Lockdown, Compulsory Shots

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Further Reading

Czechs, Slovaks target unvaccinated people in step behind Austria (Reuters)

Not Just Austria—Here Are The Countries Making Covid-19 Vaccination Compulsory For Everyone (Forbes)

Europe’s Carrot vs. Stick Approach to COVID-19 Vaccination (Atlantic)

Austria Sends Unvaccinated Into Lockdown—Here’s How Other Nations Are Limiting People Who Don’t Get Covid-19 Shots (Forbes)

Merkel Says Covid Spike ‘Worse Than Anything We’ve Seen’ (Bloomberg)

‘We Have To Face Reality’: Austria Announces Nationwide Vaccine Mandate, Full-Scale Covid-19 Lockdown (Forbes)

Lockdown And Restrictions Resurface In Europe As Continent Battles Another Covid Surge (Forbes)

Investors Buy Oil on Inflation Fears, Pushing Prices Even Higher

Luc Filip doesn’t work at a big energy company or an industrial manufacturer. He isn’t a day trader or an OPEC official. But he is still helping drive the surge in oil prices.

Mr. Filip is head of investments at SYZ Private Banking in Switzerland, and his big concern is inflation taking a bite out of the $28.5 billion of clients’ investments he manages. So he has been buying oil.

Fund managers like Mr. Filip are contributing to a rally that has pushed oil prices to their highest level since the 2014 energy bust. While energy-futures markets are more typically the province of producers and commodities-focused hedge funds, an oil rally that shows no signs of slowing is now exerting a pull on traditional money managers who run portfolios of stocks and bonds.

Because commodities prices tend to rise alongside inflation, they can protect investment portfolios against its erosive effects. When combined with other commodities like copper and gold, energy is “quite a decent hedge,” said Mr. Filip, who has been buying energy futures and selling longer-dated bonds that will lose value if inflation turns out to be high for longer than expected.

To be sure, inflation fears aren’t the main driver of the West Texas benchmark’s run from $62 a barrel in August to $85 this week. The Organization of the Petroleum Exporting Countries has stuck to its plan to increase production in small increments. A shortage of natural gas has caused some industrial manufacturers to switch to diesel, which is refined from oil.

Untangling these inputs is hard. But traders and analysts say that some of the recent oil gains could be explained by inflation worries, especially on days with no news about supply that might drive trading by the usual players such as commodities brokers and oil producers.

What the Inflation of the 1970s Can Teach Us Today. The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s.

In one sign of investors’ interest, money has been pouring into funds that buy energy futures and stocks, accelerating just as inflation fears took center stage this fall. These funds have experienced four straight weeks of inflows for the first time since the spring, with last week’s $753 million the highest weekly total in five months, according to data provider EPFR.

Data from the Commodity Futures Trading Commission showed a rise in speculative buying of crude-oil futures and options in the week to Oct. 19. Bets on $100-a-barrel oil—a price last seen seven years ago—surged earlier this summer. This month, investors have put wagers on $200.

These investors, especially those that are newcomers or buying for ancillary reasons like inflation fears, are taking the risk that a sudden shock could send oil prices plummeting. That happened in the spring of 2020, when demand collapsed due to the Covid-19 pandemic just as Saudi Arabia ramped up production.

What is more, energy is a major contributor to the consumer-price index, the broadest measure of inflation. That means that investing in energy as a hedge against rising prices can be a self-reinforcing cycle: As oil prices rise, so does inflation, which sends money managers like Mr. Filip back to the energy market to reup their protection.

“People buy oil, that boosts inflation expectations, and that can feed on itself,” said Evan Brown, head of asset allocation at UBS Asset Management.

Inflation has gone from an expected and natural consequence of economies emerging from lockdowns to a major source of investor angst. Higher prices eat into yields on fixed-rate bonds and loans. Stocks of companies that can’t as easily pass on higher costs to customers tend to take a hit, too.

Some investors have bet that oil prices could rise to $200 a barrel.

U.S. consumer prices in September rose at a 5.4% annual rate, faster than in August and just below a 30-year high. Germany’s 4.5% annual rate in October was the biggest year-to-year increase since 1993.

Central bankers in the U.S. and Europe say higher prices are likely temporary and will ease as supply-chain delays are resolved and economies work through restart creaks. But investors aren’t so sure. In addition to more traditional inflation hedges, such as bonds whose yields are linked to consumer prices, they are flocking to commodities.

SHARE YOUR THOUGHTS

How concerned are you about inflation? Join the conversation below.

Mr. Brown, who helps devise portfolios for some $1.2 trillion of client assets at UBS, is recommending commodity futures, energy stocks and currencies of oil-rich countries such as Russia and Canada. John Roe, head of multiasset funds at Legal & General Investment Management, said he is protecting his investments against runaway prices with Chilean pesos, which are linked to copper prices, and shares in gold miners.

So far the strategy appears to be working. Inflation is rising but so are the prices of energy and many metals. Paul O’Connor, head of multiasset at Janus Henderson, warned that might not last.

Today’s inflation is being driven by gummed-up supply chains that have created shortages of nearly everything, pushing the prices of raw materials higher. But he expects future inflation to be driven more by rising wages, and it is less clear if that would have the same effect on commodity prices. “Quite questionable,” he said of the strategy.

By: Anna Hirtenstein

Anna Hirtenstein is a reporter at The Wall Street Journal in London, covering financial markets. She was previously a reporter at Bloomberg in London, an investment banker at Greentech Capital Advisors in Zurich and has also worked as a field correspondent with a focus on oil in Northern Iraq and West Africa. 

Source: Investors Buy Oil on Inflation Fears, Pushing Prices Even Higher – WSJ

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Ng, Abigail (14 October 2021). “Goldman Sachs says oil prices could be higher for much longer”. CNBC. Retrieved 18 October 2021.

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