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5 things to start your day

February 10, 2021
Five Things
Bloomberg

A reality check on inflation, the pandemic latest, and impeachment trial gets going. 

Price check

Inflation data for January, published at 8:30 a.m. Eastern Time, is expected to show continued muted growth in the U.S. That may be of little comfort to market participants who are becoming increasingly concerned about a potential surge in inflationary pressure. While the arguments are based on the size of the proposed stimulus plan, and the health of balance sheets, Pimco is suggesting that those looking for a breakout in prices will be proved wrong once again. Fed Chair Jerome Powell is speaking in New York today, a speech investors will watch for any comment on price stability. 

Virus  

Pimco's sanguine view on inflation centers on the long road to economic recovery as the pandemic fallout continues. While case numbers are slowing and vaccinations continue, governments are generally being cautious about allowing economic activity to resume. Air travel remains under severe pressure, with U.K. quarantine measures the latest blow to the struggling industry. There is some good news on vaccine supply, with Pfizer partner BioNTech SE starting production at a new facility in Germany, and the U.K. government saying a single dose of that shot provides two-thirds protection against Covid. 

Impeachment 

After the Senate voted 56-44 to proceed with the impeachment trial of former President Donald Trump, arguments in the case begin today. While it remains highly unlikely that he will be convicted of the single charge of inciting insurrection, Senate Minority Leader Mitch McConnell signaled that fellow Republicans should see the final vote as a matter of conscience. Democratic impeachment managers will present their case today, with arguments beginning at noon. 

Markets quiet

The global stock rally continues to creep higher, albeit at a slower pace. Overnight the MSCI Asia Pacific Index added 0.7% while Japan's Topix index closed 0.3% higher. In Europe the Stoxx 600 Index had gained 0.2% by 5:50 a.m. with miners the strongest performers as metal prices rallied. S&P 500 futures pointed to a small gain at the open, the 10-year Treasury yield was at 1.16%, oil rose and gold was higher. 

Coming up... 

U.S. December wholesale inventories data is at 10:00 a.m. with the latest oil stockpile numbers at 10:30 a.m. Powell speaks at 2:00 p.m., with the U.S. January budget statement also at that time. It's another big for earnings with General Motors Co., Uber Technologies Inc., Coca-Cola Co. and CME Group among the many companies reporting. 

What we've been reading

This is what's caught our eye over the last 24 hours.

And finally, here's what Joe's interested in this morning

On the one hand, it makes perfect sense that Tesla bought Bitcoin. It just fits with the whole Elon story. On the other hand, there is something kind of weird about the world's most pre-eminent clean tech company putting capital behind a project that's kind of infamous for its energy consumption. According to one estimate, out of the University of Cambridge, the Bitcoin network is currently on pace to consume more energy in a year that the country of Argentina.

Yesterday on TV we spoke with Nic Carter, a Bitcoiner and partner at Castle Island Ventures, to discuss this topic which he's written quite a bit on. Among his arguments: A substantial amount of Bitcoin mining is done with renewable energy, and in many cases it allows for the capture of energy that wouldn't necessarily be economic for normal purposes. More importantly, he argues that it doesn't make sense to compare Bitcoin to a payments network like Visa or Venmo, but instead to the entire energy needed to run the dollar system. Military, laws, courts and everything else that makes our financial system run.

Source: Cambridge Centre for Alternative Finance 

And this here really gets to the whole debate. And why I think the discussion is backwards. If you think that Bitcoin is just a thing for speculators to get rich, while allowing a rogue's gallery of terrorists and drug dealers to launder money, then yes that's a colossal waste of energy whether it's renewable or coal. But if you think that it's important for there to be a monetary network, that's separate from any state or monetary authority or legal system, then you will think the energy consumption is a worthwhile price to pay.

As I wrote about Monday, the thing that characterizes this bull market is the collapse of trust in traditional institutions. And with Bitcoin, you don't have to trust anyone. You don't have to trust a central bank. You don't have to trust a clearing house. You don't have to trust courts or laws or anything like that. But the upshot is that replacing all that is a very energy-intensive endeavor. And while some may see that as a bug, or an unfortunate aspect of the system, it's arguably a feature. Electricity alone makes it very costly to attack the network. (Also it would be difficult to acquire the right chips to attack the network, but that's a different question.)

So again, if you think Bitcoin is a useful and empowering thing, then the energy cost is a worthwhile price to pay. If you think it's for bad stuff, then the electricity is a monstrous waste. Starting from the question of energy won't convince anyone of anything in either direction.

Joe Weisenthal is an editor at Bloomberg. 

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