Vulcan, a sign of the times?
By Justin Pyvis – Delivered on 09 Nov 2021

Good morning! ScoMo lashed out at the Western Australian government's conservative reopening plan yesterday, claiming that maintaining a hard border after 80% fully vaccinated is economically harmful because:

"The advice we have from the Secretary of Treasury from Dr Kennedy is once you go over 80 per cent and you keep things locked down, you are doing more harm than good to your economy. You are actually putting a price on Australians, when you continue to put heavy restrictions on your economy, once you get 80 per cent vaccination rates."

We're not sure ScoMo is onto a winner here – as far as we're aware, outside of VIC/NSW and international travel, there are no heavy restrictions on the WA economy – there are no restrictions at all. It's still a political winner, too, with WA Premier Mark McGowan's approval rating sitting at 82% as of the end of October, the highest in Australia.

There's plenty of merit to reopening all of Australia as soon as possible according to some standard metric, but claiming WA will have "heavy restrictions" on its economy by reopening at 90% instead of 80% is simply misleading. In fact, given Premier McGowan's stated intolerance for COVID-19 in the community, reopening at 80% may actually result in heavier restrictions on the WA economy than otherwise.

Fully vaccinated population (aged 12+)

ACT
NSW
VIC
TAS
SA
QLD
NT
WA
Markets

Daily % change

AUD/USD

74.2

+0.1%

AU Yield (%)

1.80

+3.6%

US Yield (%)

1.50

+3.0%

ASX200

7,452

-0.1%

S&P500

4,702

+0.1%

Brent (bbl)

83.6

+1.5%

Gold (oz)

1,827

+0.4%

Iron ore (t)

91.8

+0.2%

Bitcoin

65,871

+5.7%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

At the time of writing, the US S&P500 looked set to close slightly stronger (+0.09%) and finish at yet another record high. A notable mover was Tesla, which dropped around 3.5% following the conclusion of Elon Musk's Twitter poll (see Economy below).

Locally, the ASX200 (-0.06%) fell slightly as losses in tech (-1.7%) more than offset a strong day for travel stocks, which were buoyed by the announcement from Sydney Airport (+2.8%) that it had accepted a $A23.6 billion offer from a consortium including superannuation funds.

Economy

Higher and higher: According to the New York Fed, consumer inflation expectations in the US climbed for the 12th consecutive month in October. People now expect consumer prices to be increasing by 5.4% one year from now, with uncertainty about future inflation outcomes hitting a fresh high "at both the short- and medium-term horizons".

Back to normal?: According to the State Grid Corporation of China, "the supply and demand of power in areas operated by the company [covering 88% of Chinese territory] have returned to normal". The comment came after official data showed China's daily coal output hit 11.9 million tonnes last week, a multi-year high.

Elon's tax bill: The Twitter poll created by Elon Musk asking if he should sell 10% of his Tesla stock because of the recent focus on "unrealised gains being a means of tax avoidance", finished 57.9% in favour. However, Elon would have had to sell or borrow a similar amount anyway – he has "a looming tax bill of more than $US15 billion", the result of 22.8 million Tesla share options due to vest in August 2022 that will be taxed at 54.1%.

Japan's "new style of capitalism": Japan's new Prime Minister Fumio Kishida is considering a 30 trillion yen stimulus package ($A357 billion), finally achieving what none of his predecessors could do – spending like there's no tomorrow! Wait a second... 🤔

On the sidelines: Berkshire Hathaway, the company of billionaire investor Warren Buffett, was sitting on $US149.2 billion in cash in the September quarter – a record high.

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Feature
Vulcan, a sign of the times?

Yesterday the AFR published another story looking into Vulcan Energy, the ASX300 company that one day hopes to extract net zero greenhouse gas lithium from Germany's Upper Rhine region, "one of Europe's most renowned romantic landscapes".

Stepping back: Based in Perth WA, Vulcan Energy is backed in part by iron ore billionaire Gina Rinehart (third largest shareholder). On 10 September its share price peaked at $A15.9, a 1,414% rise in just 12 months. However, on 26 October a notorious short seller, J Capital, released a scathing report claiming that "the costs are higher than the company claims, output will be lower, the environmental impact is brutal enough that public outcry will block permits... and the quality of the lithium resource is low".

Why this matters: Vulcan Energy is now an ASX300 company, which "will force the nation's superannuation funds to buy more of its shares". But the AFR warned that "there is considerable doubt – not just whether Vulcan's market capitalisation is justified, but also whether it will ever sell any of the zero emission lithium it hopes to produce to support the burgeoning electric vehicle industry".

If Vulcan turns out to be the green energy equivalent of vapourware with a good marketing team then some of Australia's compulsory superannuation savings will go down with it.

Looking forward: The AFR article raises questions about some of the research on Vulcan. Specifically, reports by firms Canaccord and Alster that "are paid by Vulcan", and completely coincidentally maintain "speculative buy" and "buy" ratings, respectively.

It also queries the "publicity machine" that Vulcan has become, which "has extended to swapping shares with Nico Rosberg, a German Formula One racing driver, for the ability to advertise on his vehicle". The firm "has also hired a high-profile corporate affairs team", including some heavy hitters whose CVs involve work for the likes of former Prime Minister Kevin Rudd and FMG's Andrew 'Twiggy' Forrest.

We don't know enough about the company to have an opinion either way but it wouldn't surprise us if Vulcan (and many similarly ambitious hype-machines) never actually produce anything other than marketing documents – a sign of the times, where debt is virtually free and government stimulus is flowing everywhere, especially for 'green' projects.

The Wrap Up
    ⚠️Ethiopia, the 12th most populous country in the world, is teetering on the edge of civil war. Nobel Peace Prize winning Prime Minister Abiy Ahmed vowed to "bury this enemy with our blood and bones".
    😷The times are changing: Apple no longer requires customers to wear masks at more than 100 of the 270 Apple Stores in the US, regardless of their vaccination status.
    🛂The US border reopened to fully vaccinated travellers from many countries yesterday – including its land borders between Canada and Mexico – for the first time in 20 months.
    🎖️Brazil's President Bolsonaro awarded himself the National Order of Scientific Merit, "the highest of the honorific commendation... [although the] decree does not say what contributions by Bolsonaro justified the honour".
    🔬Always read the contract. A deceased man who donated his body to help advance medical science "ended up in a Marriott Hotel ballroom", where members of the public paid up to $US500 per person to watch his body be dissected.
    🗑️Valuable land: "A house near Toronto that is full of garbage and has boarded up doors sold after being on the market for four days for nearly $C1 million."
    👩‍⚕️A nurse in Perth was charged with fraud after allegedly inserting a "needle into the teenager's arm, but failed to administer the [COVID-19] vaccine", and then proceeded to create a false entry "on the medical records system indicating the teenager had received the dose of the vaccine".
    ⚖️Flight Centre is reportedly considering suing the WA government for damages "if the state does not begin lifting restrictions once 70 to 80 per cent of the population is fully vaccinated".
    💉Emilio Estevez, brother of Charlie Sheen and star of Disney+'s hockey show The Mighty Ducks, was sacked for refusing a mandatory vaccination requirement for all Disney actors.
    🤡Former Labor Party powerbroker Adem Somyurek told the Independent Broad-Based Anti-Corruption Commission that former senator Stephen Conroy and Victorian Premier Daniel Andrews were involved in branch stacking during the 90s, a practice he said "was rife" in the party.
    🏥According to data from Sydney's Delta outbreak, unvaccinated people who caught COVID-19 were 16 times more likely to enter intensive care or die from the virus.
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