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Backflips all round

Good morning! ScoMo performed another epic backflip yesterday, agreeing to abandon his GP-only strategy and "change our rollout to go to mass vaccination options... in partnership with states and territories".

Perhaps ScoMo has his eyes on the Tokyo Olympics, which is due to kick off in 99 days..?🤸‍♂️

Market Wrap

Positive thinking

Daily % change

AUD/USD

77.2

1.1%

10Y Bond

1.72

0.9%

ASX200

7,023

0.7%

Brent (bbl)

66.3

4.2%

Gold (oz)

1,737

-0.6%

Iron ore (t)

166.6

0.2%

Bitcoin

62,164

-1.6%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The ASX200 (+0.66%) closed above 7,000 for the first time since the onset of the pandemic. Not so in the land of the free, with the US S&P500 finishing down 0.41%.

Positive thinking: According to the Melbourne Institute/Westpac, Australian consumer sentiment increased to its highest level since August 2010 in April. Dwelling price expectations rose to their highest since December 2013. When you stimulate demand, don't be surprised when it shows up in higher prices...

Green stimulus: Speaking of stimulus, Australian lithium miner Galaxy Resources reported that its WA Mt Cattlin mine had ramped back up to nameplate capacity, with pricing on Q2 shipments well in excess of $US600/dmt (up from around $US400/dmt in July 2020). The announcement came after a Macquarie Equities note predicted the lithium market will remain tight, with "significant shortages" emerging in 2025. It now expects lithium prices to rise by 30-100% between 2021-2025.

Coinbase goes public: The US' most popular crypto exchange was looking to capitalise on the recent surge in prices, and it seems to have paid off. After listing its shares at $US250, they closed at $US328 after one point getting as high as $US430. Coinbase's profits are closely linked to the price of major cryptocurrencies Bitcoin and Ethereum, the two most traded cryptocurrencies on its platform.


Econ Wrap

It's all about trade-offs

If you have community COVID, there are bigger risks than J&J.
If you have community COVID, there are bigger risks than J&J. holospiritwolf/Reddit

Economist Karl Smith yesterday derided the US FDA's decision to pause distribution of the Johnson & Johnson COVID-19 vaccine, claiming "that the hypersensitive 'abundance of caution' standard the FDA applied is inappropriate for a global pandemic".

The costs: As with AstraZeneca (a similar adenovirus vector COVID-19 vaccine), the J&J vaccine might produce potentially fatal blood clots in about one person per million. But COVID-19 is also a cost – one that kills over 1,700 Americans per million.

Another cost is the FDA's "overly cautious standards" discouraging initial R&D in future vaccines, not to mention the blow to its credibility – it is clearly incapable of cost benefit analysis.

Finally, the pause provides further fuel to anti-vaxxers, conspiracy theorists and all those lovely folk, reducing at least some people's willingness to get vaccinated (not just in the US).

The benefits: As Smith notes, it's "nearly impossible to calculate the lives lost by a drug never having been introduced at all". A benefit of the J&J vaccine is that it, well, stops people dying from COVID-19. If it can prevent just a handful of potential deaths due to COVID-19, it's probably worth continuing.

Note that the analysis is slightly different for Australia – the lack of community transmission of the coronavirus here means the J&J vaccine may not be worth the costs to mortality, no matter how minute.

However, it turns out that the clotting issue can now be picked up with "a couple of quick and easy blood tests", allowing for treatment – meaning "mortality should go right down". Do you know what mortality risk doesn't go right down with a couple of easy blood tests and treatment? COVID-19.


The Wrap Up

Still nowhere near 'normal'.
Still nowhere near 'normal'. Bloomberg
  • Globally, air travel capacity is only at about 58% of pre-pandemic 2019 levels (see chart above).
  • Speaking of misunderstanding trade-offs, Health Minister Greg Hunt said: "Vaccination alone is no guarantee that you can open up. If the whole country were vaccinated, you couldn't just open the borders." Is Hunt aiming for a zero-risk outcome? Let's see how well that policy holds up at next year's election.
  • US President Joe Biden will withdraw the remaining 2,500 American troops from Afghanistan by 11 September, the 20th anniversary of the "9/11" attacks.
  • Moana Pasifika and Fijian Drua will join a new Super Rugby competition with Australia and New Zealand from next year, bringing the number of teams to 12.
  • Some poor guy in Sydney ended up with half a house. We mean that quite literally – it's a house cut in half with a giant windowless wall on the left side, due to a "disagreement between the certifier and Liverpool City Council".
  • The Australian Defence Force hired "scantily clad dancers" to twerk at the commission of a new Navy vessel. You can't make this stuff up.

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