Perspective
- Hackers are seeking ways into corporate computers and cloud space to gain access to computing power in order to mine bitcoin.
NYT – Wall Street Firms Gambled on Puerto Rico. They’re Losing. – Matthew Goldstein 10/9
Worthy Insights / Opinion Pieces / Advice
WSJ – The Truth Is Catching Up With Tesla – Charley Grant 10/7
- “CEO Elon Musk is a visionary, but there is a fine line between setting aggressive goals and misleading shareholders.”
FT – Tech’s fight for the upper hand on open data – Rana Foroohar 10/8
- “What happens if big companies control who has access to the marketplace of ideas?”
- “Whether your concern is anti-competitive business practices, or the preservation of free speech, one thing that we have to grapple with is that we are both the raw material and the end consumer of what is being sold online. We are the product.”
WSJ – Why Bitcoin’s Bubble Matters – Rob Curran 10/8
- “Ask most people about the bitcoin bubble, and they’ll probably have the same reaction: It’s interesting, but it won’t affect me. After all, they’ll figure, they aren’t investing in bitcoin, so if there is a bubble, and it does burst, they’ll be just fine.”
- “Well, maybe they should start worrying.”
- “The market for cryptocurrencies—digital tokens used to transfer money between individuals’ computers with minimal fees—has grown in stature in recent years and is increasingly entwined with broader financial markets as well, a trend that is likely to continue. Bitcoin is now traded by some of the institutional investors around which bond and stock markets revolve.”
- “As the bubble grows, analysts say, a crash has a greater chance of affecting investor sentiment about stocks, especially in the technology and financial sectors.”
- “’Any product that blows up, there’s always collateral damage,’ says Joe Kinahan, chief market strategist at brokerage TD Ameritrade . Tech and financial ‘companies who are relying on it for business, and those who have put a significant investment into the [blockchain] infrastructure would be the first’ to suffer collateral damage, Mr. Kinahan says.”
- “At around $150 billion, the market capitalization of bitcoin and other cryptocurrencies is up by a factor of roughly eight this year, according to the Cointelegraph website. If this growth rate continues, what’s now a relatively small part of global investible assets could become a significant one, says Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund and a student of the history of speculation. By next year, Mr. Di Mattia expects the bubble to have inflated to the point where a pop could send a shock wave through the stock market.”
- “Give bitcoin its due: Most people in finance agree that bitcoin and the blockchain, the open-access ledger that underpins the currency, were great inventions; even as J.P. Morgan’s Mr. Dimon derides bitcoin as a ‘fraud,’ his bank is working on its own blockchain technology.”
- “Clever as it is, however, bitcoin has shown no signs of replacing the dollar and other ‘fiat’ currencies.”
- “Meanwhile, speculation in bitcoin—driven by hopes of its wider adoption—actually has diminished its usefulness as a means of exchange.”
- So speculation for now.
- Some that are exposed…“a crash in the price of leading cryptocurrencies would almost certainly hurt shares of Nvidia Corp., the chip maker that was the biggest percentage gainer on the S&P 500 in 2016, and its rival Advanced Micro Devices Inc., at least temporarily. Both companies have noted in their quarterly filings that cryptocurrency miners are a key source of demand for their graphic chips. Sales of chips to cryptocurrency sources represented 6.7% of Nvidia’s fiscal second-quarter revenue of $2.23 billion.”
- Then there are those seeking to create an ETF in bitcoins (regulators haven’t agreed so far). If one does get through, there is quite a bit of institutional capital waiting.
- Stay tuned.
Markets / Economy
WSJ – Central Banks Pull Back as Global Growth Picture Brightens – Josh Zumbrum 10/8
- “Following the financial crisis from 2007-2009, the world’s big central banks had been net buyers of financial assets in global markets, expanding their portfolios of government bonds, mortgage debt and corporate securities by 1% to 3% of global economic output per year for much of the past six years.”
- “Now that’s changing. The Bank of England announced in February it would mostly end its bond purchases, the Fed stopped buying bonds at the end of 2014 and announced in September it would move ahead with a plan to gradually shrink its holdings, and the European Central Bank is expected to announce at the end of October it will slow its pace of purchases.”
- “All told, net purchases are on track to drop to 2.4% of global GDP by the end of this year, 0.8% of global GDP at the end of next year, and by mid-2019 the central banks of advanced economies will be shrinking, according to estimates by the Institute of International Finance, a Washington, D.C.-based organization which represents the global financial industry.”
- “Interest rates are ticking up as well, another form of more restrictive monetary policy. The Federal Reserve has raised interest rates four times since 2015 and is expected to do so again in December. The Bank of Canada raised rates in July and September and could move again this year. Meantime the Reserve Bank of Australia and Bank of Korea are laying the groundwork for higher rates next year.”
Real Estate
- “Washington Prime Group Inc. continued its portfolio re-construction agreeing to turn two malls over to lenders but with plans to buyback one of them. It also sold an additional mall and repaid the debt on a fourth.”
- “Washington Prime agreed to transfer the Southern Hills Mall in Sioux City, IA, to the lender. Currently encumbered with the $99.7 million mortgage loan, it is currently anticipated that a wholly-owned affiliate of Washington Prime Group will repurchase the 571,465-square-foot property from the lender for $55 million or about $96/square foot. Washington Prime will recognize a $45 million in gain on debt extinguishment.”
- “The debt yield on the current mortgage loan is approximately 7.5% with a yield on the anticipated purchase of approximately 13.5%. The transaction is expected to close this month, subject to due diligence and customary closing conditions, the company said.”
- “In note discussing the deal, analysts at Morgan Stanley Research said, ‘We agree that it a compelling way to reduce debt loads, but we wonder if the CMBS market will remain a viable lending alternative for lower productivity malls if it ultimately results in a ‘heads I win, tails you lose’ outcome in favor of the borrower.'”
Tech
Economist – Tech giants are building their own undersea fiber-optic networks 10/7
- “On September 21st Microsoft and Facebook announced the completion of a 6,600km (4,100-mile) cable stretching from Virginia Beach, Virginia, to Bilbao, Spain. Dubbed Marea, Spanish for ‘tide’, the bundle of eight fiber-optic threads, roughly the size of a garden hose, is the highest-capacity connection across the Atlantic Ocean. It is capable of transferring 160 terabits of data every second, the equivalent of more than 5,000 high-resolution movies.”
- “Such ultra-fast fiber networks are needed to keep up with the torrent of data flowing around the world. In 2016 international bandwidth usage reached 3,544 terabits per second, roughly double the figure in 2014. Firms such as Google, Facebook and Microsoft used to lease all of their international bandwidth from carriers such as BT or AT&T. Now they need so much network capacity to synchronize data across their networks of data centers around the world that it makes more sense to lay their own dedicated pipes.”
- “This has led to a boom in new undersea cable systems. The Submarine Telecoms Forum, an industry body, reckons that 100,000km of submarine cable was laid in 2016, up from just 16,000km in 2015. TeleGeography, a market-research firm, predicts that $9.2bn will be spent on such cable projects between 2016 and 2018, five times as much as in the previous three years.”
Canada
WSJ – Daily Shot: Scotiabank – Home Price Indices – Repeat Sales 10/9
WSJ – Daily Shot: Scotiabank – Canadian Household Debt and Balance Sheets 10/9
WSJ – Daily Shot: Scotiabank – Canadian Home Equity & RE Assets 10/9
