One piece of the puzzle
By Justin Pyvis – Delivered on 25 Oct 2021

Good morning! Tasmania's government became the latest state to announce how it plans to reopen, revealing a date of 15 December – which is when it expects to hit the 90% fully vaxxed mark (people aged 16+).

On that date entry for the fully vaccinated will be permitted provided they return a negative COVID-19 test within 72 hours of travelling, but that's only needed if they've been away for more than a week. Tassie will also follow NSW and VIC in completely doing away with hotel quarantine for international arrivals.

Moving on, Victoria's government will ease restrictions further when it hits the 80% fully vaccinated mark (people aged 16+), which it expects to happen this Friday at 6pm. At that point face masks outdoors will be scrapped, regional travel will return and indoor entertainment venues, gyms and retail will all reopen for those fully vaccinated. Once 90% is reached, "there will be no caps anywhere... [but] you only get in if you are double vaccinated, and you can tap and verify that for everybody".

Looking across the ditch, the coronavirus outbreak in New Zealand spread to the south island for the first time in over a year as the country notched up more than 100 daily cases. On Friday Prime Minister Jacinda Ardern said that the Kiwis are targeting a fully vaccinated rate of 90% (people aged 12+) before reopening, which will happen by district – once a locale hits 90%, people who live there will be "free to do what they want" so long as they provide proof of vaccination.

Meanwhile, we obtained exclusive footage from inside the offices of the Western Australian COVID-19 taskforce, revealing work on the holdout state's long-awaited reopening plan:

Fully vaccinated population (aged 12+)


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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 ended the week largely unchanged, falling 0.11% a day after setting a fresh record high. A notable mover was Snap, which plunged 26.7% after warning of reduced advertising revenue due to Apple's privacy changes. Fears about Apple's effect on advertising also spread to the other giants in that space, Alphabet (Google) and Facebook, which lost 3.0% and 5.1% respectively.

Locally, the ASX200 finished the week flat (+0.001%) as declines in energy (-2.1%) and materials (-1.2%) were offset by gains in the consumer goods sector, both discretionary (+1.4%) and staples (+0.9%).


Hyperinflation: What's more likely, a long "transitory" period of inflation or its polar opposite, hyperinflation? Twitter and Square CEO Jack Dorsey believes the latter, tweeting "Hyperinflation is going to change everything. It's happening. It will happen in the US soon, and so the world."

Buying votes: Four of Brazil's senior Treasury officials abruptly resigned for "personal reasons", with the true motivation likely to be as a protest against President Bolsonaro's plan to lift a constitutional spending cap ahead of next year's election.

Tightening cycle: Russia's central bank raised interest rates by 75 basis points to 7.5% on Friday, its sixth rate hike this year. At nearly 7.8% consumer price inflation in Russia remains well above the bank's 4% target, and is a politically sensitive subject given food makes up around 40% of the basket used to calculate the consumer price index.

Inflation anxiety: Japan – known best for constantly falling prices – saw prices increase in September for the first time in 18 months, rising 0.2% from a year ago. Get used to it, as by April 2022 the sharp decline in mobile phone fees that has held inflation down so far this year will drop out of the index, at which point "the inflation readings will jump up and people will have to recognise that inflation is happening even in Japan".

Not going to plan: UK retail sales by volume fell 0.2% in September and are still 1.3% lower than where they were a year ago, "as supply-chain problems led to gaps on store shelves".

According to GfK's UK consumer confidence index people are downbeat, with the index decreasing for the third consecutive month to -17 in October "against a backdrop of cheerless domestic news – fuel and food shortages, surging inflation squeezing household budgets, the likelihood of interest rate rises impacting the cost of borrowing, and climbing COVID rates".

Evergrande saves face: Heavily-indebted property developer China Evergrande made an offshore interest payment a day before the end of a 30-day grace period, staving off a technical default – for now!

Higher and higher: Transitory, right? The breakeven rate for five-year US Treasury inflation-protected securities – "what market participants expect inflation to be in the next 5 years, on average" – on Friday reached the highest level (2.91%) since the series began in January 2003. 📈

One piece of the puzzle

Unprecedented demand flowing from COVID-19 stimulus measures – as of 27 Sep, the US government had spent an additional 25.5% of GDP on COVID-19 fiscal support measures – combined with various restrictions, have clogged up global supply chains, forcing some retailers to deplete inventories, raise prices and more recently, leave shelves empty.

Stepping back: About 40% of container traffic entering the US comes through one of two southern California ports. They also happen to be the world's least efficient ports, taking "up to 12 days for ships to drop anchor and unload containers". The time it takes to clear a ship in Los Angeles has tripled compared to pre-pandemic times, whereas the same task at more efficient Chinese ports has only increased by an average of 20%.

Ryan Petersen, the CEO of Flexport, recently chartered a boat to examine the problems first-hand, revealing that the bottleneck "is yard space at the container terminals. The terminals are simply overflowing with containers, which means they no longer have space to take in new containers either from ships or land. It's a true traffic jam".

According to Petersen, terminals are full because there's nowhere to put empty containers, meaning "carriers / terminals are being highly restrictive in where and when they will accept empties". That's because city of Long Beach zoning codes do not allow trucking companies "to store empty containers more than 2 high", with any violation resulting in the shuttering of the yard altogether.

Why this matters: The port issues have created "a negative feedback loop that is rapidly cycling out of control that if it continues unabated will destroy the global economy". Perhaps a bit of an exaggeration but not far from the truth – consumer demand remains extremely elevated but goods are getting stuck along the way, with some kind of rationing then required – either higher prices, shortages, or some combination of the two.

According to Freightos, freight rates have already tripled since the start of 2021 and are now almost 10 times pre-pandemic levels.

Looking forward: The Port of Los Angeles only recently started working 24 hours a day, a practice that has been standard in much of the world for a long time. However, that won't fix restrictive zoning rules, the lack of inland container storage or the shortage of workers needed to handle freight once it leaves the ports (a problem not unique to LA).

Given that supply takes significantly longer to scale than demand, the only significant short-term relief will come from a collapse in the latter. But that's not looking likely given that most global central banks and governments have their feet firmly planted on the stimulus pedal, with only piecemeal easing, if any, expected in 2021.

The Wrap Up
    ✈️Qantas will bring forward its planned return to international travel, bringing all furloughed staff back by early December.
    🙊Former US President Donald Trump's new social media platform, TRUTH, may have stolen its code from open source competitor Mastodon without attribution. It has been issued a 30-day notice to comply or face legal action.
    🦠The global COVID-19 death rate for men is about 50% higher than for women, something not explained "either by differences in the number of confirmed cases or in pre-existing conditions".
    👁️Hard pass. "More than 100,000 people have had their eyes scanned in return for a cryptocurrency called Worldcoin, as a project to distribute digital money more widely around the world accelerates."
    🧒Pfizer said its vaccine is 91% effective against symptomatic COVID-19 infection in kids aged 5 to 11, with the US FDA expected to make a decision on authorisation as early as this week.
    🏢Office workers are "trickling back" in the US, reaching 36% during the week that ended 8 October, a new high during the pandemic period.
    🎬Hollywood star Alec Baldwin killed a cinematographer on his movie set when he discharged what he thought was a prop gun but was actually loaded with real bullets.
    👴Asked on whether the US would defend Taiwan if China attacked, US President Joe Biden said "yes, we have a commitment to do that", despite official US policy being to nether confirm nor deny it would defend the island state.
    🦗Australia defeated South Africa by 5 wickets with 2 balls to spare in their opening T20 World Cup match.
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