Daily Update

Daily Brief 12/29 – Herd Immunity and Scarcity

Herd Immunity: Goldman Sachs estimates US herd immunity to be at 26% when combining antibody surveys and subsequent infections estimated from fatalities. A July Seroprevelance study found 9.3% of randomly sampled people in the US had antibodies.

With an estimated quarter of the population already immune from the coronavirus, will we focus on vaccinating the remaining three-fourths? It’s unlikely the US is able to be that efficient, forward thinking, and capable of doing such a thing so many people will most likely unknowingly have antibodies and still receive a vaccine. Still, with a 26% of the population already being immune, the threshold to herd immunity is that much lower and will be achieved perhaps that much faster.

Goldman also estimates population immunity in many other countries with varying degrees with Emerging countries like Peru and Mexico at 39% and 34% respectively, and Germany and France at 5% and 11% immunity respectively

Scarcity and value: Real estate, they aren’t making more of it (unless you’re Dutch). Bitcoin, same thing, with supply constrained at a maximum of 21 million Bitcoins. So their value should always go up right? We argue it isn’t that simple. Yes supply is constrained, but there is another factor that isn’t considered in this argument – demand.

What spurred this thought exercise was the tweet below:

Just because something is scarce does not mean it has value, it also has to be in demand. If I signed a piece of paper and promised to never sign anything else ever again, it would be the only paper on the market that is signed by yours truly. Therefore, it is extremely scarce, there is a supply of one and my cursive signature is quite pleasing to the eye. The value should be astronomical according to the simplified scarcity theory right? Wrong. (unless you’d like to bid on the notecard I just signed – bidding starts at 1 Bitcoin) There is no demand, so the scarcity of my signature is hardly relevant.

Now if for some odd reason there was demand, then sure it would be bid up to levels that wouldn’t make sense since my signature is intrinsically worth nothing. Merely scarcity isn’t enough to drive bids up, there must be underlying demand in the first place then perhaps scarcity can encourage more bidding. The scarcity argument is oversimplified, generic, unoriginal, and frankly wrong.

Tweets and Charts we like:

GDP collapse with disposable personal income rising

Google trends via Cliffwater

Some interesting old school trading commentary

Lessons from great growth investor, Aziz Hamzaogullari

Simply explained why most fail

That’s your millennialmkts update! Thanks for reading, if you like this content please consider following this blog and following us on twitter @millennial_mkts

Posts are not investment advice or endorsements.

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