Selasa, 11 Desember 2018

China Moves on U.S. Car Tariff Cut Trump Tweeted About

China is moving toward cutting its trade-war tariffs on imported U.S.-made cars, a step already claimed by President Donald Trump as a concession won during trade talks in Argentina.

A proposal to reduce tariffs on cars made in the U.S. to 15 percent from the current 40 percent -- bringing the U.S. back in line with what other countries pay -- has been submitted to China’s Cabinet to be reviewed in the coming days, according to people familiar with the matter. Shares of carmakers including Daimler AGFord Motor Co. and Tesla Inc. rose on the news.
The step hasn’t been finalized and could still change. While reversing the retaliatory duty is a major climb-down by Beijing, it could re-focus the two sides toward implementing the trade-war truce agreed earlier this month. Relations have since been shaken by the arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou in connection with sanctions violations.
"Last week, events seemed to conspire to throw the truce into disarray, but the underlying incentives of both sides at the moment are to try to maintain that truce," Freya Beamish, chief Asia economist at Pantheon Macroeconomics Ltd. “Now we are seeing the possibility that China will come through with reductions of tariffs on U.S. autos and that’s another good, concrete step.”

TARP Talk Refuses to Die as Brexit Hurtles Toward the Abyss

In the cosmic collision of dreams and dread Brexit has become, one hope refuses to die: That a full-blown market panic can force politicians to overcome bitter division and agree a path to save the U.K. from economic catastrophe.

It’s known as the TARP scenario, after the Troubled Asset Relief Program passed by U.S. lawmakers to avert disaster in the financial crisis. In a hint of the pressures that some investors hope could focus Westminster minds, the pound slid to the lowest since April 2017 on Monday after Prime Minister Theresa May delayed a crunch vote on her deal to exit the European Union, pushing the U.K. even closer to a cliff edge.
“Stress in financial markets and pressure from businesses should lead to a last-minute approval of the deal in Parliament,” said Silvia Dall’Angelo, senior economist at Hermes Investment Management. Still, she admits this is a “low confidence” base case.
The trouble is that, so far, the markets aren’t playing ball. Despite the pound’s drop on Monday, trading in sterling options shows few signs of panic. The cost of hedging a decline in the currency against the dollar over the next six months -- a period which includes the March 29 deadline for Britain to exit the EU -- has increased but remains below levels seen in November, and well off the extremes reached in 2016.
Sterling gave up an advance on Tuesday, edging 0.1 percent lower to $1.255 as of 3:49 p.m. in London.
With foreign revenues posted by multinational companies benefiting from a weaker pound and a bond rally effectively lowering U.K. government borrowing costs, there are few signs of an impending crash to capture political attention.
“I don’t think we are there yet,” Charles St-Arnaud, an investment strategist at Lombard Odier Asset Management in London, said by email. “Once cable falls below the post-referendum lows (or below $1.20), they may get anxious. The panic may come when gilts starts to sell off because foreign investors have lost faith in the government. But we haven’t seen that yet. There seems to be good demand for gilts at the moment, sending yields lower.”
Earlier this month, Prudential Plc’s M&G Investments and Pictet Asset Management SA, which oversee a combined $800 billion, argued that pound vigilantes lack the power to spark legislative redress since the currency trades at historically cheap levels.
“There’s no visible doom-loop mechanism,” said Jim Leaviss, the head of retail fixed interest at M&G and founder of the Bond Vigilantes blog. “I don’t think Mr. Market gets us out of this mess.”
For a British reprise of TARP, declines in stocks would have to be severe enough to threaten bank solvency and recall crisis-era rescue scenarios, he said.
Investors also aren’t buying the Bank of England’s warning that it might be forced to raise rates -- inflicting pain on consumers and homeowners in its wake. On Monday, money markets wagered the next interest-rate increase from the Bank of England will not happen until the second half of 2020.

Rate Bets Pushed Out

And TARP is a theory that contains the seeds of its own destruction -- the more investors bank on a benign compromise in the 11th hour spurred by market pressure, the less likely that pressure will emerge.
“The result is a long period of weak confidence and a weak exchange rate, but no acute crisis,” Ethan Harris, economist at Bank of America Corp., wrote in a Monday note. “It may require a true hard deadline -- currently the end of March -- to force a deal.”

Making Sense of Bitcoin and Its Wild Price Ride: QuickTake Q&A

After one of the worst stretches in the short history of cryptocurrencies, a technical gauge is suggesting it might be time to wade back in.

The Bloomberg’s Galaxy Crypto Index, which tracks major digital assets including Bitcoin, Ether and Monero, is in oversold territory based on the GTI Global Strength Indicator, which measures the strength of the price by comparing individual upward or downward movements of successive closing values. The last time the index was this oversold was in late November, it rallied about 20 percent from 242 to 290.
While the bump is unlikely to be indicative of a longer-term trend, a small relief rally may be in play as the index approaches its low of the year and psychological support level of 200, the gauge suggests. The last three times the index was below this level it posted moderate increases over the following weeks. Bitcoin is down almost 50 percent since early November, and most other cryptocurrencies have mirrored its slide.
The Bloomberg Galaxy Crypto Index is a market capitalization-weighted measure designed to evaluate the performance of the largest cryptocurrencies traded in U.S. dollars.

Bitmain IPO concerns: the crypto giant recorded a big loss in Q2 2018

Bitmain’s IPO is the big news in the crypto world this week. The company just filed its IPO prospectus and the numbers are impressive, particularly the year-on-year growth between the first six months of 2018 and a year prior, which saw a near-10x jump in revenue and 7x growth in profit. Nevertheless, that aggregated six-month number may be masking what was a poor quarter of business for Bitmain.

Bitmain  didn’t break out its revenue for Q1 and Q2 2018 in its prospectus, instead it blended them together with a nice looking figure for the first six months of the year, H1 2018. But we can crunch some numbers to give an idea of what it might be.
TechCrunch previously reported through sources that the company’s Q1 2018 revenue hit approximately $2 billion. Additionally, Fortune previously reported that the company carded a $1.1 billion profit during the same quarter, a number that’s in line with these revenue figures given that the prospectus reports a net margin of around 50 percent. For comparison, popular cryptocurrency wallet Coinbase made $1 billion in revenue in 2017.
But if we combine the aforementioned data points with the figures that were just reported, the Q2 numbers don’t look pretty. Specifically, if combined H1 revenue was $2.9 billion with a $1.1 billion profit, then Q2 saw revenue sink to around $800 million with a loss of $400 million. That would be Bitmain’s worst quarter yet and not the kind of momentum that you want going into a listing.
My colleague Jon Russell earlier observed a number of potential risk signs in stated numbers: margins overall have come down. Gross margin in the first six months was 36 percent, down from 48 percent in 2017 and 54 percent in 2016. Contributing to that, the cost of sale percentage in the first half of 2018 rose to 64 percent from 51 and 52 percent in 2017 and 2016, respectively. Additionally, he detailed how the company over-estimated demand in 2018, and, as a result, its inventory ballooned by $1 billion. That unsold product is another indicator that Q2 did not go as planned.

Wu Jihan, co-founder of Bitmain Technologies Ltd., speaks during the Coingeek Conference in Hong Kong, China, on Friday, May 18, 2018. The conference runs through today. Photographer: Anthony Kwan/Bloomberg via Getty Images
We can also examine the financials from a holistic perspective. Adjusted return-on-asset (ROA) and return-on-equity (ROE) are indicators of how profitable a company is relative to its total assets and equity, respectively. Both numbers almost halved in 2018 vs 2017. So even though Bitmain was able to grow its top and bottom line, its overall operating efficiency has declined significantly, from 60.9 percent to 31.4 percent in adjusted ROA and 112.3 percent to 58.9 percent in adjusted ROE.
Where that operating efficiency level could stabilize will likely be a focus for public equity investors. With 94 percent of 2018 revenue coming from mining rigs, up from 80 percent from 2017, Bitmain is increasingly looking like a pure chips company, subject to cryptocurrency market conditions. As a reference, hardware company Nvidia,  a company based out of California that also makes computer chips, generated revenues of $9.7 billion in its 2018 fiscal year (2017 calendar year). It’s been operating for 19 years as a public company and its ROA was around 27 percent and adjusted ROE was around 40 percent in calendar year 2017. Nvidia told investors last month that revenue from crypto-related sales had substantially declined, another factor that indicates Bitmain’s Q2 was a tough one.
More generally, Bitmain currently has 11 mining farms in China, including Sichuan and Inner Mongolia. It’s looking to build out 3 new mining farms in the U.S. in Washington, Texas and Tennessee, while it is also contemplating a mining farm in Quebec. This indicates that the team is cognizant of its concentration in revenue from mining rigs and is attempting to diversify into other businesses.
TechCrunch looked at the top equity holders closely and it appears a total of ~60 percent is owned by the top 5 founding individuals. We know of co-CEOs Wu Jihan and Micree Zhang that own majority of the portion, but there is also Zhao Zhaofeng, Ge Yuesheng, and Song Wenbao. The next largest shareholder is Sequoia, which owned the investment through another entity called SCC Venture VI. Sequoia owns over 2 percent of Bitmain shares through its various funds. Coatue also owns 0.14 percent. The employee’s pool in aggregate was about 18.5 percent.
Aside from Q2 numbers and potentially a hit in Q3 from the ongoing market downtrend, there are few other investor concerns that may surface. For one, Taiwan Semiconductor Manufacturing Company (TSMC) is Bitmain’s single largest supplier, accounting for 59.2 percent of total supply in the first half of 2018, and generally hovering over 58 percent in the last 2.5 years, leading to concentrated supplier risk.
Another issue is regarding the cryptocurrencies that Bitmain owns — that is, Bitcoin,  Bitcoin Cash,  Ether, Litecoin and Dash. Bitmain accounted for these cryptocurrencies at cost, which means that the value of these cryptocurrencies is priced at the time of acquisition, not at the current market value. A decent portion could have been acquired during the bull market last year. This may be perceived as overly bullish or unrealistic by public investors, especially by those who have yet to be bought into the value of cryptocurrency, or already find it extremely risky as an asset class.
The questions and doubts from public investors around the unpredictability of the crypto market will be one of the many challenges that crypto companies face if they choose public markets. As we mentioned previously, there are many reasons to stay private as a crypto company, including keeping quarterly financials private as well as dealing with market fluctuations and the ongoing volatility and uncertainty in the cryptocurrency world. However, the con is that early employees may not get liquidity in their stock options.
Wu has said that a Bitmain IPO would be a “landmark” for both the company and the cryptocurrency space. In such a bear market, Bitmain may be taking a risk by going public, but it’s certainly a large step on behalf of the crypto market. When the filings came out, the value of Bitcoin Cash rose by 23.7 percent from the start of the day, reaching a nearly three-week high, and at around 6pm PST it was still up 20 percent.
Several of Bitmain’s competitors have filed for IPO since the beginning of 2018, but most of them are significantly smaller. For example, Hong Kong-based Canaan Creative filed in May, and its latest target is $1 billion to $2 billion in fundraising with 2017 revenue of $204 million. If Bitmain’s Q2 was as poor as the numbers suggest, it may need to revise the target raise for its Hong Kong listing.

PayPal Tokens For Coffee With The Boss

With crypto markets falling ever lower many are making an exit from the space. Not all are that quick to jump ship however, and PayPal is among those looking towards cryptocurrencies, albeit private ones, starting with an incentive platform for its employees.

PayPal Tokens For Coffee With The Boss
The company has launched an internal private blockchain based platform for its staff to trade and exchange tokens while contributing ideas and participating in related programs designed to foster innovation. According to Cheddar the initiative has been built by around 25 people taking six months.
PayPal has setup an internal website for employees to access their private tokens and earn more by enrolling in learning programs. The tokens are not tradable outside of the system as they are worthless to all but company workers on its own blockchain.
Historically, PayPal has been anti-crypto and has not accepted it on its merchant platform due to volatility issues. These price fluctuations would be massively amplified considering the excessive length of time PayPal transactions take. This latest venture is only an effort to get staff used to the concept – PayPal still has no intention of adopting or using public cryptocurrencies.
The company has offered ‘experiences’ such as poker tournaments, martial arts and trail runs with head executives for employees that want to ‘cash in’ their tokens. One senior executive described it as a “Venmo-like feed people can like and comment on and see all the activity going on within PayPal related to innovation.”

It is very unlikely that PayPal will be venturing into the real world of cryptocurrencies any time soon. The company made $13 billion in 2017, and a large chunk of that is derived from hugely over inflated foreign exchange rates. Sending money between PayPal accounts in different currencies can cost as much as 5%. Borderless cryptos are obviously a threat to this business model.
PayPal is interested in the technology however and this latest incentive is another step towards it. The most likely outcome would be the development of a ‘PayPal token’ that is only redeemable on the platform to facilitate transactions.
Coinbase recently announced that it would be allowing PayPal for a very select number of users to withdraw crypto from its platform. The full KYC procedure would have to be adhered to which eliminates any advantage of using PayPal over a regular bank as its charges are no better, and often higher.
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