| Musk clarifies Bitcoin position, more Covid flareups, and the everything shortage. Hodl It was a difficult week for holders of Bitcoin, with Tesla Inc. CEO Elon Musk taking a chunk out of the currency's value last Wednesday and then seeming to imply yesterday that his company could dump its Bitcoin, leading to further falls. He clarified this morning that Tesla has, in fact, not sold any of the crypto token. Bitcoin was trading above $45,300 at 5:50 a.m. Eastern Time. Musk's other favored token, Dogecoin, was losing ground this morning, according to pricing from CoinMarketCap. CasesTaiwan's benchmark Taiex index sank as much as 4.2% overnight as the government tightened restrictions in the country in response to a surge in cases. Singapore has closed schools as authorities become increasingly concerned about some variants that are much more virulent and attack younger children. China is vaccinating nearly 14 million people a day as the country still has flareups of the disease in some regions. The situation in India remains dire, with trade disruptions increasing. The United States reported the fewest new cases in almost a year and the U.K. will allow indoor dining from today. Running lowThe price of iron ore rose back over $200 a ton, dashing hopes that there might be some relief in the rapid rise of raw materials globally. While the pandemic helped throw supply lines into chaos, the situation has come to a crunch point due to surging demand as Western economies open. The jump in prices of everything from metals to agricultural commodities to packaging materials is putting upward pressure on inflation. While economists and policy makers say the rise will be transitory, some industry figures see the shortages continuing into next year. Markets quiet The reemergence of Covid cases in Asia and persistent inflation worries are keeping a lid on equity markets. Overnight the MSCI Asia Pacific Index was broadly unchanged while Japan's Topix Index closed 0.2% lower. In Europe the Stoxx 600 Index was 0.2% lower at 5:50 a.m. as investors favored defensive stocks. S&P 500 futures pointed to a small move down at the open, the 10-year Treasury yield was at 1.645%, oil was broadly unchanged and gold rose. Coming up... Empire Manufacturing is at 8:30 a.m., with the NAHB May housing market index at 10:00 a.m. The Atlanta Fed's Financial Markets Conference begins. March TIC flow data is published at 4:00 p.m. Today is 13f deadline for hedge funds, with filings likely to be watched for any Archegos Capital Management-driven changes in holdings. Investors will also look today for statements on reports of an AT&T Inc. media business merger with Discovery Inc. What we've been readingHere's what caught our eye over the weekend. And finally, here's what Joe's interested in this morningGlobal supply chains are a mess right now, as everybody knows. At some point balance will be found, but it could take some time. Brendan Murray, Enda Curran and Kim Chapman have a great piece out on what it looks like when the world is running short of basically everything. This line helps explains why things are so out of whack: "It's gotten out of control, especially in the past month," said Wolkin, vice president of operations at Atlanta-based Colgate Mattress, a 35-employee company that sells products at Target stores and independent retailers. "We've never seen anything like this." Though polyurethane foam is 50% more expensive than it was before the Covid-19 pandemic, Wolkin would buy twice the amount he needs and look for warehouse space rather than reject orders from new customers. "Every company like us is going to overbuy," he said.
So even though there may be a shortage of polyurethane foam and it costs 50% more than before, the impulse among end-buyers is to buy even more -- out of fear that they won't be able to get it in the future. And then if everyone is buying even more all at the same time, then that presumably makes the supply-demand situation even worse. Also, the whole thing flies in the face of the notion that higher prices would naturally have a curbing effect on demand. As the above example shows, it's done no such thing. On the latest episode of the Odd Lots podcast, Tracy Alloway and I talked to Ryan Petersen, the CEO of the logistics firm Flexport, and we talked about exactly this: The so-called bullwhip effect, where a change in behavior by the end-buyer can ripple through the supply chain. This can cause all kinds of extreme adjustments by the time the order gets back to the original factory, making it nearly impossible to calculate proper production levels, even in the absence of a rapidly changing global economy. On top of all this, when it comes to the transport side of things, actual space on the ships (which is scarce) can often be awarded in an arbitrary fashion, based on which manufacturers and buyers have the right relationships with the shipper. You really should listen to the whole discussion to appreciate the degree to which logistical problems compound on top of each other. Bottom-line though is that while things, at some point, should reach an equilibrium, there's not some rapid or obvious path for things to do so. Joe Weisenthal is an editor at Bloomberg Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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