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Popular delusions

Good morning! Melbourne's lockdown was extended for at least another week, with the locally acquired COVID-19 outbreak now at 60 people. Victoria's Chief Health Officer Brett Sutton, said "at least one in 10 current cases" had caught the virus in "casual contact settings" (as opposed to more common infection sites in the home or workplace). 😬

During the announcement the state also confirmed that last week's business support package would be doubled, but no word yet from the Commonwealth.

Markets

Daily % change

AUD/USD

77.5

0.0%

10Y Bond

1.64

-0.5%

ASX200

7,218

1.0%

Brent (bbl)

71.3

1.0%

Gold (oz)

1,911

0.5%

Iron ore (t)

198.1

-0.2%

Bitcoin

37,708

4.2%

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

The US S&P500 (+0.14%) was slightly higher overnight with no significant data releases or Fed statements. Locally the ASX200 (+1.05%) hit a new record high of 7,217.8, with solid GDP figures (see below) offsetting concerns about Melbourne's extended lockdown.

Losses recovered: Australia's March quarter 2021 GDP was up 1.8% from the December quarter 2020. The economy is now 1.1% larger than it was this time last year and, importantly, 0.8% bigger than it was prior to the pandemic (December quarter 2019). As usual the story was all about houses and holes, with machinery and equipment investment (+10.3%) posting its strongest quarterly rise since December 2009 and the construction industry (+4.4%) recording the largest contribution to growth across all industries.


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Analysis

Elon Musk's latest tweet is a sign of the times.
Elon Musk's latest tweet is a sign of the times. Elon Musk/Twitter

Shares of Samsung Publishing Co., a Korean-listed company engaged in the publishing and sale of books and magazines, jumped 10% after Elon Musk tweeted: "Baby Shark crushes all! More views than humans."

Stepping back: Baby Shark is a viral YouTube song produced by SmartStudy, a company partially owned (19.43%) by Samsung Publishing Co. Everything Musk tweets attracts immense attention, especially if there's a buying opportunity.

When Musk tweeted "Use Signal" back in January – referring to the encrypted messaging app – the share price of the completely unrelated Signal Advance Inc. shot up over 300%. There are literally bots that trade crypto based on Elon Musk's tweets.

A sign of the times: The world's largest theatre chain, AMC Entertainment (+95.59% overnight), has been in deep financial trouble for some time but according to Stephen Bartholomeusz channelling Charles Mackay (who wrote on the South Sea Bubble and railway manias of the 19th century), it has been rescued by "popular delusions" fostered by "a Reddit-inspired crowd that describe themselves as 'apes'".

For an insight into the insanity, earlier this week the AMC managed to raise $US230.5 million by issuing 8.5 million shares to a hedge fund, which promptly sold them for a profit because "it believes the stock is over-valued". The buyers were cashed-up "apes" – retail investors who now hold over 80% of the equity in AMC – on a mission to destroy short-selling hedge funds at any cost. Including, ultimately, to themselves.

Strange times: Fundamentals – e.g. cash flow, debt, profit outlook – do not matter to these traders, who appear willing to lose it all (likely to the very hedge funds they are seeking to destroy). Concludes Bartholomeusz:

"With their savings flush from America's versions of job keeper and direct cash relief/stimulus payments and access to ultra-cheap borrowings in a system over-loaded with Federal Reserve Board-created liquidity – and with 'no fee' online platforms for stock purchases, margin-lending and cryptocurrency transactions – they are having fun, thumbing their noses at Wall Street and, for the moment (on paper, at least) making some quite substantial profits.
...
Whether the apes' experience will be as profitable remains to be seen but the South Sea Bubble and railway manias of the 19th century that Mackay referred to as 'popular delusions' didn't, of course, end well for the crowds."

The Wrap Up

  • The author of the government's October 2020 review into hotel quarantine said she was "disappointed" the federal government had failed to adopt "best practice right across the system", and was "perplexed" the decision to expand the Howard Springs facility had taken so long.
  • The price of meme cryptocurrency Dogecoin jumped 20% after Coinbase added it to its professional exchange, with trading expected to launch this week "if liquidity conditions are met".
  • A drone flew into an erupting volcano in Iceland. The video is well worth the 20 seconds.
  • Tickets to the Essendon vs Richmond 'dreamtime' game – to be held in Perth due to Melbourne's lockdown – sold out within 17 hours, despite Victorians being banned from travelling to WA to watch the footy.
  • China plans to test cross border transfers using its new 'digital yuan' between Shenzhen and Hong Kong, establishing a controlled environment known as a "regulatory sandbox".
  • Narrative matters – China's President Xi Jinping told the Politburo that: "It is necessary to speed up the construction of Chinese discourse and the Chinese narrative system, and use Chinese theories to interpret Chinese practice... [and] to make friends, unite and win over the majority, and constantly expand the circle of friends [when it comes to] international public opinion."
  • Donald Trump's social media destroyer – a personal WordPress blog – was retired after a brave 29-day fight.

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