Dollar Daze

Will the travel boom last?

April 27, 2022 Read in Browser TOGETHER WITH Good morning. Retirement giant Fidelity announced Tuesday that it will allow workers to hold up to 20% of their 401(k) savings and contributions in bitcoin. Those who go the crypto route will undoubtedly refuse to make their retirement car a Ferrari, given that it’s owned by Fiat. Morning Brief • The US dollar is hanging tough. • United says European travel is back, Heathrow says don’t bet on it. • The Twitter takeover could make happy chappies of Reddit, Snap, and TikTok. Global Currency The US Dollar Is Holding Its Own As The Global Reserve Currency, For Now Don’t call it a comeback. Call it a greenback. Amidst record-high inflation and the potential for a more fragmented international monetary system in the wake of sweeping Russian sanctions, US critics have seized the opportunity to cast doubt on the US Dollar's "reserve currency" status.  The greenback responded by hitting a two-year peak this week. Green Still In on Blue Planet For years, Chinese officials have made no secret that they would welcome a weakening of the dollar’s position as the world’s reserve currency — a fact of global economic life since the 1944 Bretton Woods Agreement. To some, the massive scale of the penalties doled out to Russia over its invasion of Ukraine seemed like an opportune moment to resume talk of toppling the king of the hill. Several major economies — China, India, Brazil, and Mexico — have remained neutral towards the aggressor nation, and some of their dealings have required non-dollar denominated trading due to Western sanctions that cut off Russia's access to the greenback. Arrangements like these, the IMF warned last month, could create small currency blocs that dent the dollar’s global reserve status. “We are already seeing that, with some countries renegotiating the currency in which they get paid for trade,” IMF managing director Gita Gopinath told the Financial Times. Nevertheless, the dollar’s appeal to investors is holding fast: • The dollar rose to 101.86 against a basket of rivals this week, a level not seen since March 2020. The Fed's recent and planned rate hikes have lured foreign investors hungry for yield, raising demand for the USD in the process. • In contrast, the European Central Bank's path to higher rates is more difficult as they grapple with both 1) economic pressures from the war in Ukraine and 2) the reality that weaker economies in Southern Europe (Italy, Spain) have less ability to withstand higher rates (and interest payments on their debt). Amidst the reality of lower yields, the Euro hit a five year low against the dollar this morning. “The dollar typically performs in two extremes: in a scenario of risk aversion, or in a scenario where the US is a clear outperformer,” Kristen Macleod, co-head of global foreign exchange sales at Barclays, told The Wall Street Journal. “What we have seen over the past couple of months — since the Russia-Ukraine conflict kicked off — is the dollar is benefiting from a bit of both.” Not So Fast: The dollar makes up 59% of central bank holdings, already the lowest level in a quarter-century. Earlier this year, Blackrock CEO Larry Fink warned the global economy is about to fragment even more: “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.” Travel As United Ramps Up Flights to Europe, Europe's Largest Airport Says the Travel Bubble is Due to Burst Whose word do you take in this aerial battle: the airline’s or the airport’s? United, one of America’s Big Four airlines, announced Tuesday that it plans to fly to Europe even more this summer than it did before the pandemic shut down almost all travel. Bosses at London’s Heathrow, the largest airport on the continent, said the aviation industry should brace for this “summer travel bubble” to be met with a “winter freeze.” Apologies, Your Optimism Has Been Delayed United says it will make 25% more trips across the Atlantic this spring and summer than in 2019, including upping its service to London. “We have not seen any softness in terms of demand,” Patrick Quayle, United’s senior VP for international, said Tuesday, emphasizing this includes flights to destinations like Germany and Croatia, which are closer to the war in Ukraine. The US carrier will begin flying a total of 30 new or resumed routes over the next eight weeks, including first-time service to Bergen, Norway, and the Spanish islands Mallorca, Tenerife, and the Azores. But Heathrow says the summer rush won’t last long, and its financial impact could be exaggerated: • Heathrow raised its 2022 passenger forecast from 45.5 million to 52.8 million, which is just 65% of pre-pandemic traffic. The premier UK air hub, which has lost over £4 billion during the pandemic, said it expects to keep losing money through the rest of the year, and that the current boost in travel won’t last. • “We’re seeing people who haven’t been able to travel getting in as many trips as they can when they can, and using up vouchers,” Heathrow CEO John Holland-Kaye told The Guardian. “Clearly that bubble is not sustainable.” Call His Bluff: Virgin Atlantic, one of Heathrow's biggest clients, accused the airport of drumming up concern so it can jack up already lofty landing fees, which were last raised by 37% in January. “Despite the return of travel at scale, Heathrow is seeding doubt in the strength of demand so it can seek excess returns to shareholders and secure an unjustified increase in charges that would hurt UK competitiveness and consumers,” said the airline in a statement characteristic of its maverick founder’s unflinching manner. 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What are you waiting for?  Social Media Elon Musk’s Twitter Crusade Could be Good for the Competition When news of Elon Musk's Twitter takeover broke Monday, the Tesla CEO and world’s richest man tweeted out a mini-manifesto of his ideas and intentions for the blue-bird platform. His competitors likely had a hard time holding back from smashing the Like button. As Musk champions free speech and hints at shifting Twitter toward a subscription model, fellow social networks may have spotted an opportunity to poach the site’s advertisers. Twitter-Down Economics Musk’s plan for unfettered free speech — likely in the form of relaxing content moderation rules — could hurt the bottom line. Just ask Parler, Gettr, Gab, Truth, or the former CEO of Reddit. Even Facebook and YouTube have seen periods of major advertiser boycotts from brands such as Starbucks, Unilever, and Coca-Cola, who prefer to keep their ads far from hate speech and extremist content. In a now-deleted Tweet, Musk pushed for a $3 per month subscription model that would adorn paying users’ profiles with a coveted blue checkmark and offer an ad-free timeline.  All taken together, competitors are ready for a Twitter trickle-down effect: • “With ~85% of Twitter’s revenue generated through brand advertising, and as free speech is a priority for Mr. Musk, advertisers may shift budgets to other channels given brand safety concerns,” JMP analysts wrote in a note on Tuesday. • Of the $1.57 billion of revenue Twitter reported in its first-quarter earnings in February, the company says $1.41 billion came from ad revenue. The Bot Hot Spot: Declining ad revenue will not be Twitter’s sole problem. Musk wants to defeat spam bots, but experts say his insistence on making Twitter’s algorithms open-source will simply provide bad actors with a road map for creating more spam bots. It's a mighty expensive experiment. Extra Upside • Reddit will offer its users grants of up to $50,000 to run their own projects or contests on the site. • Uber admitted to misleading Australian riders about cancellation fees and competitors’ fares. • Turns out, Siri and Alexa aren’t as smart as we think. They only understand about 75% of what we say to them – not great. Maybe that explains why SapientX has already raised over $2.5M to bring their voice-enabling AI to life. With 99% conversational accuracy and a wide range of applications (think automobiles, vending machines, and beyond), we’d suggest investing while you still can. Check out their StartEngine right here. * *Partner You have 0 referrals. Share The Daily Upside, Earn Rewards Or, simply copy and paste your unique referral link and share it with others: https://sparklp.co/bb4b34b2 Just For Fun Optical illusion. Scaredy cat. Written by Sean Craig and Brian Boyle. Disclaimer *Must be a verified accredited investor to invest on Percent. 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