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Daily Archives: June 17, 2022

Chuckles of the Day

The Pastor Comes by Your House

A pastor went out one Saturday afternoon to visit his church members. At one house, it was obvious that someone was home, but nobody came to the door even though the preacher knocked several times. Finally, the preacher took out his card, wrote out ‘Revelation 3:20’ on the back of it, and stuck it in the door:

“Behold, I stand at the door and knock. If anyone hears my voice and opens the door, I will come in to him and dine with him, and he with me.”

– Revelation 3:20

The next morning, the card turned up in the collection plate. Below the preacher’s message was written the following notation:

“I heard your voice in the garden, and I was afraid because I was naked; and I hid myself.”

– Genesis 3:10

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How Kids Can Get Their Names

An Englishman, a Frenchman and an Irishman were sitting in the park and talking about their children.

“My son was born on St George’s Day,” remarked the Englishman, “So we obviously decided to call him George.”

“That’s a real coincidence,” observed the Frenchman, “My daughter was born on Valentine’s Day, so we decided to call her Valentine.”

“That’s really incredible,” drawled the Irishman, “Exactly the same thing happened with my son Pancake.”

Why Housing is More Important Than the Stock Market

Ben Carlson wrote . . . . . . . . .

I know a lot of finance people want to blame the Fed for everything these days but central banks aren’t the sole culprit of the inflationary environment we find ourselves in.

The pandemic seriously screwed up global supply chains and the labor market. Governments around the world spent trillions of dollars to keep the global economy afloat while we put things on ice for a while. Consumers began spending money en masse on goods because they stopped spending on experiences and had nothing else to do.

And yes, the Federal Reserve was extremely loose with monetary policy to keep the credit markets functioning and bring the unemployment rate down.

Even though it wasn’t completely their fault, it seems like the Fed is now the only one trying to clean up the inflationary mess by tightening monetary policy.

They’re doing this in two ways:

(1) By raising interest rates and unwinding quantitative easing (bond purchases).

(2) Signalling to the financial markets they may have to throw the economy into a recession to slow inflation.

The Fed cannot fix supply chains but they can raise rates high enough that it cools demand.

Former New York Fed chair Bill Dudley says one way to do this is through the wealth effect:

In contrast to many other countries, the U.S. economy doesn’t respond directly to the level of short-term interest rates. Most home borrowers aren’t affected, because they have long-term, fixed-rate mortgages. And, again in contrast to many other countries, many U.S. households do hold a significant amount of their wealth in equities. As a result, they’re sensitive to financial conditions: Equity prices influence how wealthy they feel, and how willing they are to spend rather than save.

Effectively, Dudley is saying the Fed needs to raise interest rates high enough that stock market investors don’t feel as wealthy, and thus, stop spending as much money.

I get what he’s saying.

They don’t tell you this in the textbooks, but so much of what goes on in the economy and markets is based more on faith, trust and psychology rather than data, fundamentals and statistics.

It would make sense that households who see their net worth plummeting would start to reconsider their financial standing and spending habits.

But I think Dudley overestimates the importance of stock market wealth on American households.

For years we’ve been hearing about wealth inequality and for good reason. The top 10% of households own the majority of financial assets:

The top 10% holds 70% of the net worth in this country while the bottom 90% accounts for 75% of the debt.

There is a reason for this disparity. The top 10% owns most of the financial assets while the bottom 90% has more of their net worth tied up in real estate.

Look at the breakdown in ownership by stocks and housing:

The top 10% owns 89% of the stocks while the bottom 90% owns more than 55% of the real estate.

The top 1% owns 54% of the stocks and less than 14% of the real estate.

Only 50% of households in the U.S. own stocks in any form. The homeownership rate is 65%.

I would argue the housing market has a far greater wealth effect on households than the stock market does.

The top 10% can live through a bear market in stocks. In most cases, they’ll be the ones buying more shares when stocks fall.

There is a reason the bursting of the housing bubble led to such a calamitous crisis in 2008 — real estate is an essential asset to the middle class.

When people went underwater on their homes starting in 2006, people got wiped out from equal parts leverage, falling housing prices and unsustainable debt loads.

It’s also important to understand how housing wealth has evolved over the years:

At the height of the housing bubble, households had $14.2 trillion in home equity (the market value of housing less mortgage debt).

That number was down to $8.4 trillion heading into 2012. Home equity was almost $20 trillion by the end of 2019 just before the onset of the pandemic.

In the two years from year-end 2019 through year-end 2021, home equity rose almost $7 trillion.

And one of the few silver linings of the high inflation we’re currently experiencing is that it benefits those in debt. Considering the bottom 90% holds 75% of household debt and the bottom 50% has roughly one-third of all debt, inflation is disproportionately helping the debts of the middle and lower classes.

Listen, I’m not trying to say inflation is a good thing. It’s not. And it is impacting lower income households more than those with higher incomes but it’s not all bad.

Owing banks money when inflation is high helps erase some of your debt in real terms.

CEOs may cut back on hiring or investment in a bear market and there are sure to be tech employees in Silicon Valley who were banking on $6 million in stock options that are now worthless who are going to cut back on their consumption.

It’s not like the stock market falling won’t have any ramifications from a psychological perspective.

But I would be far more worried about the economy if the housing market was crashing instead of the stock market.

The good news is there is now a fairly large margin of safety built into the housing market if we do have a slowdown in the real estate market.

Source : A Wealth of Common Sense

Chart: U.S. Misery Index

Source : Bloomberg

Chart: Switzerland Bond Yield Surges As Central Bank Raised Rate

Source : Bloomberg

In Pictures: China’s New World-Class Theaters Under Construction

The Sub-center Theatre in Beijing’s Tongzhou district

Shanghai Grand Opera House

Yiwu Grand Theater

International Performance Center in Shenzhen

Shenzhen Opera House

The Zhuhai Jinwan Civic Art Centre in Zhuhai

Nanchang Poly Grand Theatre

Xingtai Grand Theatre in Hebei province

Hainan Performing Arts Centre

Huanghe Song Theatre in Henan province

Source : Caixin

A Glucose Meter Could Soon Say Whether You Have SARS-CoV-2 Antibodies

Over-the-counter COVID tests can quickly show whether you are infected with SARS-CoV-2. But if you have a positive result, there’s no equivalent at-home test to assess how long you’re protected against reinfection. In the Journal of the American Chemical Society, researchers now report a simple, accurate glucose-meter-based test incorporating a novel fusion protein. The researchers say that consumers could someday use this assay to monitor their own SARS-CoV-2 antibody levels.

Vaccines against SARS-CoV-2 and infection with the virus itself can guard against future infections for a while, but it’s unclear exactly how long that protection lasts. A good indication of immune protection is a person’s level of SARS-CoV-2 antibodies, but the gold standard measurement – the enzyme-linked immunosorbent assay (ELISA) – requires expensive equipment and specialized technicians.

Enter glucose meters, which are readily available, easy to use and can be integrated with remote clinical services. Researchers have been adapting these devices to sense other target molecules, coupling detection with glucose production. For example, if a detection antibody in the test binds to an antibody in a patient’s blood, then a reaction occurs that produces glucose — something the device detects very well. Invertase is an attractive enzyme for this type of analysis because it converts sucrose into glucose, but it’s difficult to attach the enzyme to detection antibodies with chemical approaches. So, Netzahualcóyotl Arroyo-Currás, Jamie B. Spangler and colleagues wanted to see whether producing a fusion protein consisting of both invertase and a detection antibody would work in an assay that would allow SARS-CoV-2 antibody levels to be read with a glucose meter.

The researchers designed and produced a novel fusion protein containing both invertase and a mouse antibody that binds to human immunoglobulin (IgG) antibodies. They showed that the fusion protein bound to human IgGs and successfully produced glucose from sucrose. Next, the team made test strips with the SARS-CoV-2 spike protein on them. When dipped in COVID-19 patient samples, the patients’ SARS-CoV-2 antibodies bound to the spike protein. Adding the invertase/IgG fusion protein, then sucrose, led to the production of glucose, which could be detected by a glucose meter. They validated the test by performing the analysis with glucose meters on a variety of patient samples, and found that the new assay worked as well as four different ELISAs. The researchers say that the method can also be adapted to test for SARS-CoV-2 variants and other infectious diseases.

Source: American Chemical Society

Chart: Raw Materials Fetch Premium Prices

Source : Statista