Episode 42: Cry Me A River
Fifty million people around the globe turned to Oprah to learn that Kate Middleton made Meghan Markle cry. To put that figure in context, more than half of people watching television across the UK at the time tuned in to the interview. Of course, we don't have DNA proof of the tears, and Kate does not confirm the allegations, but you will be relieved to know that Kate allegedly apologized for this international incident. Cry me a river.
COVID
Today marks one year since the World Health Organization declared the coronavirus outbreak to be a global pandemic. Fast forward 12 months, and the US has registered 30 million cases and 543,757 deaths. Nearly one in every five US adults say a relative or close friend of theirs has died of COVID in the last year. That's a shocking figure, but it underreports the devastation of the disease in minority communities where the statistic is 30% for Black and 29% for Hispanic Americans.
At least 66 million Americans have received at least one or both doses of the vaccine. The 7-day average of daily vaccinations is 1.43 million people, and at the current pace, the following dates correlate with the percentage of Americans who will be vaccinated: Today (20%), May 22nd (50%), July 7th (70%), August 22nd (90%). However, about one-third of US adults say they don't intend to get vaccinated for coronavirus, so it will be challenging to maintain the later months' run rate unless public perception changes. Still, it's positive news and offers a clear timeline for the road back to "normal" life.
As far as public health emergencies go, more impoverished geographies and communities tend to feel the most pain. That has been true in the US where minority and low-income communities have suffered at a higher rate. Globally, though, COVID has exhibited some quirky characteristics. When the pandemic started, the first thought was this virus would devastate India, Africa, and Latin America! However, that has not turned out to be the case. Many developing nations have better COVID statistics (cases and death rate) than the US and Western countries. In a recent New Yorker article, the physician and Pulitzer Prize-winning author Siddhartha Mukherjee described it as "an epidemiological whodunit."
Indeed, some of the discrepancies are related to an underreporting of deaths by less developed medical systems. Plus, many of the developing countries are younger. Birthrates are higher, and other health problems frequently kill people before they reach old age. (In sub-Saharan Africa, only 3 percent of the population is 65 or older; in Pakistan, only 4 percent.) COVID is usually harder on older people. More than 80% of the US deaths have occurred among people who are 65 or older. A related factor may be that nursing homes, where COVID has often spread, are more common in Western countries. In other parts of the world, older people often live in multigenerational households. Lastly, citizens spend more time outdoors in poorer countries, and structures often have windows open, which offers better ventilation. Other researchers argue that deaths are lower in countries with a higher population exposed to a diverse range of microbes. In other words, the fact that millions of Indians have limited access to clean water, poor hygiene, breathe foul air and live in densely packed surroundings may have aided them in fighting coronavirus and saved lives. Whatever the answer, it's one of the few ways in which COIVD has not been as bad as many had feared.
With one year of pandemic under our belt, here are some interesting statistics about COVID in the US:
Adults aged 65 and older account for 16% of the US population but account for 80% of COVID deaths.
Nursing home residents and staff have comprised over 39 percent of deaths.
About 78% of people who have been hospitalized, needed a ventilator, or died from Covid-19 have been overweight or obese.
The researchers found that cardiovascular disease may double a patient's risk of dying from COVID-19. They also discovered that other pre-existing conditions might increase a COVID-19 patient's risk of death by one-and-a-half to three times.
Adjusted for age, the following racial groups are more likely to have died of COVID than White Americans: Pacific Islander (2.6x); Latino (2.4x); Indigenous (2.2x); Black (2x)
The risk of infection to a mask wearer is decreased by 65 percent.
ECONOMY & MARKETS
The $1.9 trillion COVID Relief bill became law yesterday. Proponents of the legislation argue it will provide a shot in the arm for low and middle-income Americans who need it most. The government will start sending direct payments of $1,400 to individuals making less than $75,000 as early as this weekend. Plus, the soon-to-expire federal unemployment benefits of $300 will extend through September. Republicans in both the House and Senate unanimously rejected the measure, arguing it is unnecessary as COVID cases relent and filled with wasteful spending. It would have been nice to see this spending directed at rebuilding our nation's infrastructure (creating jobs along the way) instead of direct payments that won't solve any long-term problems. The Bible verse Mathew 4:19 comes to mind: Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime."
The US unemployment claims dropped by 42,000 to 712,000 last week, a sign the economy may be steadily improving amid declining coronavirus caseloads. It's the lowest weekly number since November, though still historically high. New weekly jobless claims had never topped 700,000 before the pandemic. According to the AP, more than 20 million Americans are receiving some form of jobless aid. The national unemployment rate stands at 6.3%, significantly lower than the 14.7% peak in April 2020 but still higher than the 3.5% before the pandemic.
Inflation report calmed fears of an uptick in inflation. The markets reacted favorably to the jobs report, unemployment figures, inflation report, and stimulus. The S&P hit an all-time high this week. The S&P 500 took just 126 trading days to swing from a record to a bear market and back to a new high—marking the fastest such recovery in history. It took just 16 trading days for the S&P500 to fall from its February 19th, 2020, record into a bear market, or a 20% drop from that high. Stocks bottomed out March 23rd and the next day, a furious rally sent the Dow up more than 11% for its best session since 1933. The market's future remains mired in uncertainty. Bond yields are surging, which put pressure on many of the past decade's most popular technology stocks. The stock market is barely above the point where it began the year. Inflation debates are at the center of where the market goes next. Regardless of the direction, it's apparent that moves will be fast and violent given information and technology, creating more dispersion for investors. In other words, the gap between market winners and losers will widen.
According to Oxford Economics, the world economy is likely to grow 5.6% this year, the fastest rate in almost half a century, as vaccine campaigns allow pandemic restrictions to lift and businesses to snap back. For the first time since 2005, the US is expected this year to make a more significant contribution to global growth than China, said the research firm. According to the same forecast, easy money from the Federal Reserve and pent-up savings (American households are sitting on $1.8 trillion in excess savings), combined with a $1.9 trillion spending package from Congress, are the drivers of the forecast. The US economy contracted 3.5% last year and is expected to grow about 7% this year. China grew 2.3% last year and is expected to grow 8% this year, the bank said.
NFT (Non-Fungible Token)
Against my better judgment, I thought I would broach the topic of NFTs, otherwise known as "non-fungible tokens." NFTs are getting widespread media attention primarily due to what feels like outrageous transactions. For example, a digital artist named Beeple, whose real name is Mike Winkelmann, sold his NFT art piece at a Christie's auction this week for over $69 million. It is the most expensive NFT ever sold and also the third-highest sale sale by any living artist. Winkelmann set out in 2007 to post a new work of digital art every day for the rest of his life and hasn't missed a single day, garnering some fame in the process. The record-breaking art piece is titled "Everydays - The First 5000 Days" and is a collage of Beeple's first 5,000 digital artworks. The artist Grimes recently sold $6 million worth of digital art as NFTS. The NBA has already sold more than $200 million in video clip highlight NFTs. Twitter CEO Jack Dorsey is auctioning his first-ever tweet turned into an NFT. The current bid is $2.5 million. And Paris Hilton sold an amateur drawing of her cat for $17,000. This moment is when some of you stop and say, "wait, WTF?"
Ok, let me explain NFTs while acknowledging this is a new area for me, and I'm certainly not an expert. Further, I know some of my readers possess deep knowledge of cryptocurrency and the token economy, whereas most of you are Luddites. I can't write for both, so the experts will probably want to tune out now because I can't, nor do I want to, go down the rabbit hole on this subject.
What is an NFT
NFT is a digital token living on a blockchain similar to cryptocurrencies such as Ethereum (ETH) or Bitcoin (BTC) with one crucial difference. An NFT identifies something unique, such as artwork, collectibles, or anything that is not fungible (fancy word for "interchangeable" or "replaceable"). For example, the Mona Lisa painting is non-fungible, whereas a US dollar is fungible. There can be copies of the Mona Lisa but only one original. Bitcoin is a fungible token in the token economy because I can give you another Bitcoin to replace the one you have today, and it would carry the same value. However, I can't give you an NFT to replace your NFT because there is only one token with its particular, unique properties. It's important to note that an NFT identifies and refers to something else (a video of a slam dunk, a tweet by Jack Dorsey, or a famous painting), but it's not that thing. It's simply a token authorized by the person who made it to be the one and only one. NFTs can increase and decrease in value over time, based on supply and demand economic principles. The point of selling something as an NFT on a blockchain is that it gives the owner evidence of owning the “original” piece of work that can be verified to be different from the copies or reproductions of that particular work. Also, artists can enable an NFT to receive a payment every time the NFT changes hands from one owner to another.
What can you do with an NFT?
NFTs are primarily associated with digital goods, like images, videos, or digital works of art. However, NFTs can apply to tangible and intangible items, ranging from digital creations to real estate to even sneakers. When you purchase the NFT, your ownership is cryptographically secured. The rights of the token are provable and auditable. If the item is natively digital, the tokenization process is easy. If the item is a physical good, then the ownership rights to that item will have to be tokenized and tied into the NFT. Here is link to more on this subject.
Owning and trading collectibles such as baseball cards, rare books, fine art is a $370 billion market. Baseball card trading takes me back to my youth, and I have a pile of cards in my garage that I need to sort through to make sure I don't have my retirement funds sitting in a cardboard box. The Honus Wagner baseball card, produced by the American Tobacco Company from 1909 to 19911, is rare, with fewer than 200 made. The last registered sale of one of these cards was $3 million. In January, the most expensive sports card transaction in history occurred when entrepreneur/actor, Rob Gough, paid $5.2 million for a 1952 Mickey Mantle baseball card. The Steph Curry rookie card is listed for $180,00 on eBay right now. However, these cards are tangible goods with a limited supply. But with an NFT, you're usually not getting the copyright or trademark to the item. And just because you own an NFT doesn't mean there aren't endless other versions of that thing on the Internet. I can assure you there will be. Still, you can authenticate that you own a piece of code in a blockchain that is unique and not available to anyone else—and that has proven to be a valuable thing. So, in this way, and as it relates to a video clip of LeBron James doing a "Kobe tribute" dunk, the NFT you are buying is not the video/clip/moment itself, but rather the (blockchain) property rights to the picture. And there can only be one.
Should I be participating in this new market?
People love to collect things—art, games, magazines, stamps, coins, sports memorabilia, cars, and more. If you aren't a collector, then you can probably ignore NFTs and not lose sleep. Further, if you aren't a speculator and trade and like to gamble on adopting new, emerging technologies, you can probably ignore NFTs and be the richer for it. There will be a handful of winners and mostly losers, like most emerging markets.
Of course, the counterargument is the collectible market is enormous and the future undeniably digital. How will the human desire to collect things and show pride of ownership translate into a digital world? NFT fans argue that the future of ownership for all things is going to be mainly focused around unique virtual items, and the physical utility of them (often in the Augmented Reality or Virtual Reality world). My challenge with NFTs is there's no limit to the supply. You can right-click on an image and save it to your desktop, and there's no visual difference between an original and copied version. (And to make it even more confusing, not all NFTs are originals. Many are the digital equivalent of a reprint. But in this case, the reprint has what is essentially a unique bar code, or "token," on the blockchain.) I understand there is only one registered, authentic piece of work, but if I can see it and access it at any time, do I care if it's a copy? In the case of baseball cards, there are only so many created each year. If I own the 1952 Mickey Mantle baseball card at least I can hold it in my hand. But without owning it, I can google the LeBron James' dunk and watch the video clip. NFTs appear closer to YouTube videos or web pages on the Internet than precious works of art. The vast majority are going to have ten views, not millions.
Plus, my concern with any technology platform (and derivatives such as Bitcoin, Ethereum, and other cryptocurrencies) is what happens when the technology evolves and changes? Yes, these fixed-supply digital tokens have soared in value, and the future looks bright, but what happens if another cryptocurrency gains favor? After all, I spent a lot of time on my MySpace page, and we all know how many views that page gets today. Or the hundreds of domains I purchased, expecting to monetize the "parked assets," only to see browser technology change and mobile applications gain favor. (Domains are the modern-day, digital version of a storage unit with piles of worthless possession that I pay for in perpetuity.) Still, I'm currently the schmuck who doesn't own cryptocurrency while many of my friends are (shit) grinning ear to ear with pockets full of (paper) cash. So take my POV with a grain of salt.
The Token Economy
I think the noteworthy takeaway from this topic is the macro picture. The token economy is something I do buy into because it solves real-world problems. The tokenization of assets refers to the process of issuing a blockchain token (precisely, a security token) that digitally represents a tangible, tradable asset. A new "token economy" offers the potential for a more efficient and fair financial world by significantly reducing the friction involved in the creation, buying, and selling of securities. The three primary advantages of tokenization include greater liquidity (access to more buyers and the opportunity for fractional ownership), faster and cheaper transactions (because of fewer intermediaries), and more transparency (due to built-in digital contracts with an immutable record of ownership). These advantages apply to all exchanges of goods and services but are particularly beneficial to asset classes considered illiquid. Real estate and fine art are two examples. Both typically require significant investments, and funds are tied up for long periods. However, tokenization would allow the opportunity to buy fractional ownership in a specific asset and then freely trade that token at your discretion.
Regulation of the token economy is a big challenge to broad adoption. Blockchain-based platforms are de facto decentralized, and the free and international exchange of security tokens is a primary benefit, so regulation runs counter to the concept. However, the lack of regulation (and assurance of a safe and legal framework) opens the platforms to all forms of illegal and nefarious behavior. Scams, hacks, and other dangerous activities are a risk for such a nascent technology. However, there are signs that the traditional market infrastructure is adapting to the token economy. The US' oldest bank, BNY Mellon, said it would hold, transfer, and issue cryptos for its asset management clients. Mastercard also said yesterday it would support some cryptos, including bitcoin, on its network later this year, following Square and PayPal. And Biden’s nominee for SEC Chairman, Gary Gensler, is believed to be in favor of a cryptocurrency ETF which could open the floodgates for a new group of buyers and institutional investment.
Governance is also an area for debate in the token economy. If the ownership of an asset, such as a building, is split among thousands of people who don't know one another, how is that asset managed and maintained? There are also concerns related to the risks of hacking that any digital or online products possess. These challenges are all surmountable but will require thought, refinement, and time to sort.
Other News
The Minneapolis City Council unanimously approved a $27 million settlement with the family of George Floyd. The settlement stems from a federal civil rights lawsuit filed by the family against the city and the four police officers charged with various counts of murder or aiding and abetting murder in the death of Mr. Floyd. Derek Chauvin faces charges of second and third-degree murder and manslaughter. The Hennepin County Medical Examiner ruled last June that George Floyd's death was a homicide, saying that his heart and lungs stopped functioning "while being restrained." The jury selection process has begun in the Chauvin trial, and seven jurors are seated thus far. Four of the jurors identify as white, one as multiracial, one as Hispanic, and one as Black. Six of the jurors are in their 20s or 30s, and one is in her 50s. The other three officers were charged with abetting second-degree murder and manslaughter and are expected to face trial in August. Lawyers for all four have made filings indicating they are not guilty.
I. Below are the articles I found interesting the past week:
People are keeping their vaccines secret
How unfair property taxes keeps black families from gaining wealth
Across the world, child marriage is rising
When Chamath Palihapitiya speaks, Reddit and Wall Street listen
II. Stats that made me go WOW!
- Women have lost 5.3 million jobs during the pandemic. And since February 2020, over 2.3 million have left the workforce because of layoffs or lack of childcare. Compare that to 1.8 million men.
- Uncertainty, stress, financial strain, stress, lack of social life – all have contributed to an increase in mental health crises. In December, one government survey found that over 42% of people felt symptoms of anxiety or depression – an increase from 11% the previous year.
- Local officials have overvalued the lowest-priced homes relative to the highest across the U.S., nationwide data show. From 2006 through 2016, inaccurate valuations gave the least expensive homes in St. Louis an effective tax rate almost four times higher than the most costly. In Baltimore, it was more than two times higher. In New York City, it was three times higher.
According to S&P Dow Jones Indices, just 37% of U.S. large-cap equity funds managed to beat the S&P 500 over the first six months of last year. However, Bank of America found 70% of U.S. large-cap mutual funds exceeded their benchmarks in February of this year, the highest share since 2007. (Much of that outperformance appears to have been driven by the fact that technology stocks have underperformed lately.)
- An unknown buyer has purchased Jeffrey Epstein’s Manhattan mansion for $51 million, and proceeds will go to Epstein’s victims. The mansion had an initial asking price of $88 million.
III. Name that Tune!
As I write this email, I am listening to “Cry Me a River” by Justin Timberlake.
If you enjoyed the newsletter, please add a friend and share it on social media!