David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Crypto Mortgages Let Homebuyers Keep Bitcoin, Pay Down Nothing

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Digital wealth meant little to banks when it came to a mortgage. And Burniske, 63, wanted to keep his coins rather than trade them for dollars. 

    “If you cash out, you have to pay sizable tax and you’re leaving a lot of upside on the table because you’re getting out early,” he said.

    Then came an option that wasn’t available when Burniske found the properties late last year: a 30-year fixed-rate mortgage secured by part of his Bitcoin and Ethereum holdings. He nailed down the loan from Milo Credit, a Miami-based startup that’s seeking to tap into the burgeoning pool of crypto loyalists who want to diversify their wealth while hanging on to their tokens.

    Crypto mortgages are the latest example of the deepening role of digital coins in the U.S. real estate market, with property buyers and lenders alike embracing the volatile currencies to underpin deals for hard assets. Last year, Fannie Mae started allowing borrowers to use crypto for their down payments. New buildings going up in tech hot spots like Miami are accepting digital tokens for deposits on condos. A house in Tampa, Florida, even sold as an NFT earlier this year. 

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    Email of the day on industrial metals miners

    “All the big mining companies coming down 20-25 pct in 4 to 5 days. pretty scary to me. what am I missing? Beside talk about the Fed raising interest rates in May with 0,5 pct and a growth scare or the lockdowns in China? Any other reasons? Should we now buy the miners again with the positive future ahead? Gold and copper also look attractive now. your opinion please”

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    Russia to Halt Gas to Poland on Wednesday in Major Escalation

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Moscow appears to be making good on a threat to halt gas supplies to countries that refuse President Vladimir Putin’s new demand to pay for the crucial fuel in rubles. Europe has said that doing so would breach sanctions and strengthen Russia’s hand. Poland has been particularly vociferous in its criticism of Russia and has refused to comply with the new terms.

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    I helped build ByteDance's vast censorship machine

    This article from Protocol may be of interest to subscribers. Here is a section: 

    Our role was to make sure that low-level content moderators could find "harmful and dangerous content" as soon as possible, just like fishing out needles from an ocean. And we were tasked with improving censorship efficiency. That is, use as few people as possible to detect as much content as possible that violated ByteDance's community guidelines. I do not recall any major political blowback from the Chinese government during my time at ByteDance, meaning we did our jobs.

    It was certainly not a job I'd tell my friends and family about with pride. When they asked what I did at ByteDance, I usually told them I deleted posts (删帖). Some of my friends would say, "Now I know who gutted my account." The tools I helped create can also help fight dangers like fake news. But in China, one primary function of these technologies is to censor speech and erase collective memories of major events, however infrequently this function gets used.

    Dr. Li warned his colleagues and friends about an unknown virus that was encroaching on hospitals in Wuhan. He was punished for that. And for weeks, we had no idea what was really happening because of authorities' cover-up of the severity of the crisis. Around this time last year, many Chinese tech companies were actively deleting posts, videos, diaries and pictures that were not part of the "correct collective memory" that China's governments would later approve. Just imagine: Had any social media platform been able to reject the government's censorship directives and retain Dr. Li and other whistleblowers' warnings, perhaps millions of lives would have been saved today.

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    Xi Puts Ideology Before Economy With Market-Busting Lockdowns

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    China’s worst equity selloff since early 2020 reflects a growing concern about President Xi Jinping: He
    can’t afford the political costs of shifting from a Covid Zero strategy that is pummeling the economy. 
    In Shanghai, a weekslong Covid-19 lockdown got even worse, with workers in hazmat suits fanning out over the weekend to install steel fences around buildings with positive cases. In Beijing, the process is just getting started, as authorities on Monday began shutting down a bustling district in the capital to
    quash fresh outbreaks. 

    The threat of paralyzing China’s two largest and wealthiest cities with a strategy abandoned by most countries helped push the CSI 300 down 4.9%, the gauge’s steepest one-day drop since the first such lockdown in Wuhan two years ago. The spreading lockdowns have investors worried that Xi is sacrificing the Communist Party’s reputation for pragmatic economic management to defend a political narrative that portrays him as the world’s most successful virus-fighter.

    “This Covid situation is really putting China into a very dark moment, perhaps the darkest moment in economic terms for the last couple of decades,” Junheng Li, JL Warren Capital founder and chief executive officer, said of the Shanghai lockdown during an interview on Bloomberg TV. “It’s a confidence
    crisis in a sense that you’ve got the most affluent city in China with this consensus disappointment and resentfulness towards a very non-sensible policy.”

    “People really don’t know, what’s a clear path to get China out of this Covid situation,” Li said.

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    Email of the day on yield curve inversions

    Thanks for this commentary Eoin, which I found very good. I think we can have an intermediate correction in commodities and equities. The equity correction might be longer lasting and deeper in my opinion given valuations, interest rates, and massive positioning but I agree totally that the Fed will loosen policy when the going gets tough. That's what the Fed did during the 1970s several times if my memory is correct. I think the Germans did the same during the 1920s with much worse results, but their position was much worse.

    One thing regarding the yield curve. If the Fed raises rates 250 or 300 bps, the curve will invert mathematically if bond yields are unchanged or fall. However, once the market sees the Fed raising rates, long rates could increase depending on inflation and the economy

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    Next Grocery Shock Awaits as Food Giants Face Cooking Oil Risks

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The move by Indonesia, which accounts for a third of global edible oil exports, will add to turmoil facing emerging markets from Sri Lanka to Egypt and Tunisia. Even developed countries could see sharp rises in supermarket prices.

    Palm oil is one of the most versatile staples, used in thousands of products from food to personal care items to biofuels. Prices of cooking oils have been on a tear due to drought and labor shortages. Then the war in Ukraine roiled trade of about 80% of global sunflower oil exports, boosting demand for alternatives like palm and soybean oil and sending prices to record highs. 

    Indonesia’s ban applies to exports of RBD palm olein, a higher value product that has been processed. Exports of crude palm oil and RBD palm oil will still be allowed, according to people familiar with the matter. RBD olein accounts for 30% to 40% of Indonesia’s total palm oil exports. 

    The move could increase costs for packaged food producers such as Nestle, Mondelez International and Unilever. Nestle declined to comment, while the other companies didn’t respond to a request for comment. It may also force governments to choose between using vegetable oils for food or biofuels. 

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    SoftBank Cuts Back Spending, Leaving Startups Desperate for Cash

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    Hurt by plunging tech valuations, SoftBank is walking away from some of its loss-making portfolio firms to comply with stricter investment criteria, said the people, who asked not to be identified because the matter was not public. Many of the two Vision Funds’ portfolio of 300-plus companies are loss-making.

    The Japanese investment firm offered to contribute money if Light could find another investor to lead the next fundraising round, one of the people said. But with its biggest backer offering only a token amount, other investors were wary about stepping in, the person said. The Redwood City, California-based startup has hired a consulting firm to explore options, including winding down operations.

    “Their purse strings are tight as they have ever been,” the person said.

    A Vision Fund spokesman and Light Chief Executive Officer Dave Grannan declined to comment. 

    The adoption of prudence at SoftBank’s Vision Fund -- which rewrote the rules of venture capital by deploying billions of dollars from the sovereign wealth funds of Saudi Arabia and Abu Dhabi into startups -- is an about-face from its past freewheeling largess. 

    For years, SoftBank’s founder and Chief Executive Officer Masayoshi Son persuaded startup founders to accept Vision Fund money by encouraging them to think bigger and promising continued support to help them expand. He would often invest more money than founders were looking for if they would try to accelerate growth.

    Before approving the investment in Light, the billionaire made clear to Grannan that his interest was predicated on the startup’s ability to adapt its depth-sensing imaging technology for self-driving cars -- something Light’s founders never considered before.

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