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THIS WEEK’S EDITORIAL
BITCOIN AND ETHEREUM COLLAPSE: Over the last 12 months and previously, BOOM has long predicted the demise of the prices of Bitcoin, Ethereum and the other so-called “Cryptos”. Late last year, when the Total Market Capitalization was close to $ 3 Trillion, BOOM stated that the Total Market Capitalization of these speculative digital products would fall below $ 1 Trillion. That happened last week.
The Total Market Capitalization is now below $ 850 Billion at the time of writing and appears to be showing no signs of strength. Buyers are few and far between. Bitcoin is now well below $ 20,000 and has fallen by 33% over the last 7 days. Ethereum has fallen by over 35% in the same period.
In March 2020, just 2 short years ago, the Total Market Capitalization of all Cryptos was around $ 150 Billion. BOOM can see no reason why that cannot be the next price target in this decline of a whole asset class which was based upon extreme optimism. Bitcoin’s price at that time was about $ 5,400. If that decline occurs to that price level, Bitcoin will have lost over 90 % of its highest price; a staggering loss to anyone who bought at the high and sold at the low. It is now crystal clear why these private digital inventions should never be described as “currencies”.
RUSSIA CUTS NORDSTREAM GAS BY 60% TO GERMANY: The Nord Stream pipeline from Russia to Germany via the Baltic Sea is a critical piece of energy infrastructure for Germany. Last week the flow of gas was reduced by Russia by roughly 60% after the German company Siemens failed to return pumping turbines that had undergone repairs in Canada. Gas supplies via the pipeline fell from 167 million cubic meters per day to just 67 million cubic meters.
BOOM readers will not be surprised by this turn of events. Vladimir Putin last week expressed his exasperation with Western Europe saying essentially that they failed to listen to Russia for 8 years and ignored the Minsk Agreement over Ukraine. The Minsk Protocol and Agreement, was drafted in 2014 by the Trilateral Contact Group on Ukraine, consisting of Ukraine, Russia, and the Organization for Security and Co-operation in Europe (OSCE) with mediation by the leaders of France and Germany in the so-called Normandy Format. It was updated in February 2015 as the Minsk 2 Agreement.
The Germans are now at last realizing the precarious position they are in with regard to future energy supplies. Olaf Scholz, the Chancellor, said last week — “It is absolutely necessary to talk to Putin,” Scholz explained, adding that he “will continue to do so, as will the French President.” They are desperate for a new settlement on Ukraine but Putin is adamant that they did not honor the last one.
Last week, the global prices of oil and natural gas fell sharply. To BOOM it looks like the war in Ukraine is over if the parties involved can agree to agree and can continue to agree. Any prospects for Ukraine to become a member of NATO or the EU will not be possible in such agreement. The future for Ukraine will be as a neutral State, similar to Switzerland. Such a situation would be beneficial to the people of Ukraine in the long run.
The diplomatic skill of all parties will be sorely tested as each nation must be able to claim “victory” in some way.
Meanwhile, the White House is effectively sending many $ Billions to the suppliers of weapons inside the US to boost their revenues. The dollars will flow. That’s for sure. The weapons may not. It is a huge fiscal boost to the US economy — plain as day.
GDP NOW FORECAST TO ZERO – FED RAISES RATES BY 0.75%: The Atlanta Federal Reserve Bank has warned that the US is on the verge of an economic recession. It reduced its real GDP growth forecast for Quarter 2 GDP growth from +0.9% to 0.0%, meaning the US could be already in a technical recession after the contraction that occurred in quarter one. Back in late May, their estimate stood at 1.9%. They swiftly reduced it to 0.9% in early June. Two weeks later, they have cut it again to Zero. With the Fed raising its key interest rate, this is all a major concern for the US economy.
As BOOM said last week, the whole globe is now anxiously awaiting the end to the hostilities in Ukraine, which should be followed by a sharp drop in energy prices. The Zero Covid Policy in China is the other major global concern. The end of that policy will break the supply chain disruptions to and from China, that most important manufacturing hub. If both events occur quickly, CPI inflation will fall in the advanced economies. Stock and bond markets will then rally and the world will return to a more stable economic and Geopolitical outlook.
CENTRAL BANK ACTIONS: Last week, various major central banks took action to stem the tide of CPI inflation. The Federal Reserve increased the funds rate by 0.75% during its June meeting. This was higher than expected. Most observers were expecting an increase of 0.5%. The US CPI inflation rate unexpectedly accelerated last month to 41-year highs. This is the biggest rate increase by the US since 1994. The Bank of England raised rates by 0.25% while the Swiss National Bank raised theirs by 0.5%. The Bank of Japan did not raise its rates.
PFIZER FALLING AGAIN: The shares of Pfizer fell by almost 7 % last week. Overall, the shares are now down 25 % since their price highs in December last year. These price falls were not unexpected by BOOM. Why? Because the company decided long ago to take a huge gamble on its new genetic therapy technology, more commonly known as its Covid vaccine.
It knew the enormous risk it was taking and clearly tried to mitigate that risk by insisting that governments sign supply agreements in which the company would be indemnified against future civil legal actions. That mitigation strategy could be a source of false comfort if the vaccines are revealed over time to be faulty products damaging millions of people and future governments decide not to honor those contractual agreements. Push can turn to shove very quickly if events overwhelm.
Moderna’s share price has fallen by 75 % since August 2021. It is essentially a one product company again using the new genetic therapy technology called messenger mRNA to create its version of Covid vaccine. Therefore, the company is entirely exposed to its similar contractual agreements with governments with no other revenues to sustain it if push does come to shove.
If it can be proved that these companies understood that this new technology was potentially dangerous prior to signing the agreements, then future Governments will possibly be inclined towards denying the contracts. BOOM is certainly not a lawyer but this all looks rather tenuous to the layman. After all, even the non-lawyer layman can see the rationale for the agreements in the first place was one of attempting to circumvent future bad outcomes.
Pfizer is a company whose major future revenue hopes appear to be perhaps too reliant upon the new messenger mRNA gene therapy technology. Their Covid product has generated about $ 38 Billion of revenue in the last 12 months, a spectacular performance.
However, that revenue performance may not become recurrent. In the long run as the virus mutates more and more away from the original variant, the boost to revenue may only last one year or two years. Some observers argue that the product may be already obsolete. And, if that is so, then that revenue boost may have to be quarantined by the company as a cash buffer just in case the company is ever successfully challenged in a court of law by future events. In such a situation any government granted immunity encompassed in a private document may not be worth the paper it is written on if a government decides to play dirty and default on the agreement. A huge cloud seems to be forming and there is not much the company can do to render the skies blue again.
Everyone on Earth now knows that both Covid mRNA vaccines do not fully protect users from being infected with Covid and they do not fully stop them from possibly transmitting the virus to other people. So the word “vaccine” is now arguably not relevant to this product. There appears to be evidence that the companies themselves did not call the products “vaccines” during their development and in their FDA applications.
When any company sells products that fail to deliver the promised purposes for which they were sold, then it can be argued that they may have committed a fraud and legal challenges could inevitably flow. If a company pre-sold a plane that could not fly, then the fraud would be obvious. No pre-agreement based upon the presumption of safe flight could negate this. This scenario is especially more likely if it becomes obvious over time that the Big Pharma companies knew of the product faults and dangers before release.
Pfizer’s huge cash buffer may not be enough if a determined class action is brought forward by many millions of people claiming to be damaged in some way by the product itself (adverse reactions) or by the product’s failure to protect against acute Covid infection and/or the longer term outcome now known as Long Covid. After all, $ 38 Billion ($38,000 Million) or even double that figure will not look huge in comparison to potential damages which may possibly run to many $ Millions per person. The mathematics show that a $Million per person awarded to a Million people would generate $ 1 Trillion of damages. And $ 1 Million per person awarded to 10 Million people would generate $ 10 Trillion of damages.
PFIZER REVENUES: Pfizer’s total revenue for 2021 was $ 82 Billion. This is about double the size of Pfizer’s annual revenues during the period 2016 – 2020. The huge increase in 2021 was due to the Covid vaccine. In fact, 45% of total revenue was generated from the Covid vaccine. If that revenue has to be quarantined and cannot contribute to profits, then Pfizer’s market capitalization must be assessed on its possible future recurring revenues from its other products.
There are high hopes from the company for Pfizer’s new anti-viral treatment, Paxlovid, to generate up to $ 22 Billion in new revenue in 2022. That is Pfizer’s official guidance expectation issued in February 2022 as far as BOOM is aware. However, some observers are skeptical. The failure of the company’s Covid vaccine to live up to its promises of vaccine protection is the problem. It possibly castes doubts on the promises now being made for Paxlovid.
Many of the other major revenue earning products from Pfizer are older “me too” products. In other words, alternative products exist which are manufactured and marketed by Pfizer’s competitors. If Pfizer’s reputation is damaged severely by their Covid vaccine, it could negatively impact its sales of both Paxlovid and its other “me too” products.
A major class action legal challenge where many, many $ Billions or $ Trillions of damages could be awarded by adverse court decisions would then threaten the very existence and survivability of the company. As previously explained, any future government could theoretically renege on any immunity agreement entered into by a previous government. Such a Government default is relatively easy to imagine in such circumstances.
Of course, the future is always uncertain. Pfizer and Moderna may survive and prosper through all of these potential challenges. It remains to be seen what happens. As BOOM has often said — the Covid phenomenon is possibly the greatest economic event to have ever occurred.
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work. https://www.youtube.com/watch?v=EnC1UlnFLyI
AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today. https://www.youtube.com/watch?v=ziTE32hiWdk
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models. EMAIL: gerry {at} boomfinanceandeconomics.com
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Greta must be very angry….
Dutch join Germany, Austria, in reverting to coal
The Dutch joined Germany and Austria in reverting to coal power on Monday following an energy crisis provoked by Russia’s invasion of Ukraine.
The Netherlands said it would lift all restrictions on power stations fired by the fossil fuel, which were previously limited to just over a third of output.
Berlin and Vienna made similar announcements on Sunday as Moscow, facing biting sanctions over Ukraine, cuts gas supplies to energy-starved Europe.
https://www.france24.com/en/live-news/20220620-dutch-join-germany-austria-in-reverting-to-coal
Good news! The ultimate goal is to control and to depopulate. More sheeples in the countries will die from coal power plants emission. Great!
Die Gruenen (The Green Party), you do contribute to WEF’s success!
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