Wednesday, July 12, 2017

Wednesday, July 12, Morning Global Market Roundup: Asian Shares Gain Ahead Of Yellen, Shrug Off Trump Controversy

By Hideyuki Sano
Reuters
July 12, 2017

Asian shares gained on Wednesday after Wall Street managed to weather a fresh twist in the controversy over U.S. President Donald Trump's alleged connection with Russia, while investors looked ahead to Federal Reserve Chair Janet Yellen's comments.

MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.3 percent. Japan's yen-sensitive Nikkei slid 0.4 percent on the yen's gains but MSCI's dollar-denominated Japan index gained 0.5 percent.

European shares are expected to rise, with spread-betters looking to gains of 0.3 percent in Germany's DAX and Britain's FTSE, and a 0.2 percent rise in France's CAC at the opening.

U.S. stocks took a brief tumble after emails disclosed Trump's eldest son welcomed help from a Russian lawyer for his father's 2016 election campaign against Hillary Clinton.

But by the closing bell, Wall Street shares had clawed back their losses.

"The e-mails look pretty bad but then again they don't look like decisive evidence (for illegal behavior) either. I doubt this alone would lead to a risk-off market," said Hiroko Iwaki, senior fixed income strategist at Mizuho Securities.

U.S. shares were helped in part as the Senate announced a two-week delay to its August recess to allow more time to tackle a measure that would repeal key parts of Obamacare, as well as pursue other legislative priorities.

Still, it remained unclear whether U.S. Senate Republicans have the votes to pass the measure or even what form it would finally take.

On the other hand, the dollar failed to recover after the damage suffered from the new twist in the Trump campaign's alleged links with Russia.

The euro vaulted to a 14-month high of $1.14895 in Asian trade.

The dollar also lost steam against the yen, which had been under renewed pressure following Friday's bond-buying by the Bank of Japan which highlighted divergent monetary polices between the two countries.

The U.S. currency dropped 0.4 percent to 113.46 yen, slipping from a four-month high of 114.495 yen touched on Tuesday.

The Canadian dollar stood at C$1.2907 per dollar, near Friday's 10-month peak of C$1.2860 as investors brace for a likely rate hike by the Bank of Canada, its first tightening since 2010, later in the day.

The move would make Canada the first to follow the U.S. Federal Reserve in removing the monetary stimulus poured into the global economy, with the European Central Bank and the Bank of England also seen moving in that direction in coming months.

The dollar's index against a basket of six major currencies was hovering at 95.58, just above its nine-month low of 95.47 plumbed at the end of June.

U.S. Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.352 percent, compared with 2.398 percent marked on Friday, its loftiest level in almost two months.

Ahead of Fed Chair Yellen's testimony to Congress on the state of the U.S. economy from 1400 GMT, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases.

Fed Governor Lael Brainard embraced the plan to reduce the balance sheet "soon," but suggested her support for any future rate increases will depend in part on how inflation shapes up.

Minneapolis Federal Reserve Bank President Neel Kashkari said he finds it hard to believe that the U.S. economy is in danger of overheating when wage growth is so low.

Traders trimmed expectations of a rate hike by the end of the year, with dollar interest rate futures pricing in about a 55 percent chance compared to about 60 percent earlier, while most investors expect the Fed to decide to start shrinking its balance sheet in September.

"Yellen has indicated after the June policy meeting, in the clearest way as possible by her standards, that she plans to start balance sheet reduction and there will be one more rate hike this year. Since then, there's been no big changes in the economy," said Tomoaki Shishido, senior market economist at Nomura Securities.

"I would think the U.S. CPI data on Friday could be more important. If the Fed's assessment that the softness in CPI between February and May is transitory, the Fed will go ahead with its plan. If that's not the case, some Fed policymakers will want to revise that plan," he added.

Reaction was largely muted to a story by Politico that Trump is increasingly unlikely to nominate Yellen next year for a second term, and National Economic Council Director Gary Cohn is the leading candidate to succeed her.

Oil prices extended gains from the previous day as the U.S. government cut its crude production outlook for next year and as fuel inventories plunged.

U.S. crude futures rose 1.8 percent to $45.83 per barrel, extending their recovery from Monday's near two-week low of $43.65. Brent futures gained 1.5 percent to $48.25 per barrel.

Both contracts have risen above their 50 percent retracement of their fall between mid-last week and Monday.


Article Link To Reuters:

Oil Prices Jump On Falling U.S. Fuel Inventories, Lower Production Outlook

By Henning Gloystein
Reuters
July 12, 2017

Oil prices rose more than 1.5 percent on Wednesday, extending gains from the previous day as the U.S. government cut its crude production outlook for next year and as fuel inventories plunged.

Brent crude futures were up 76 cents, or 1.6 percent, at $48.28 per barrel, while U.S. West Texas Intermediate (WTI) crude futures were at $45.82 per barrel, up 78 cents, or 1.7 percent.

Both settled about 1.4 percent higher on Tuesday.

"The oil price... climbed sharply overnight as the Energy Information Agency cut its forecast for U.S. production in 2018 and API data showed another large inventory drawdown," said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

U.S. crude oil inventories fell by 8.1 million barrels in the week to July 7 to 495.6 million, according to the American Petroleum Institute (API), in an indicator that a long-standing fuel supply overhang is starting to draw down.

"Brent and WTI spot staged an impressive... rally... as the American Petroleum Institute reported a massive 8.1 million barrel drawdown in inventories," said Jeffrey Halley, senior market analyst futures brokerage OANDA in Singapore.

"All eyes will now turn to the official U.S. crude inventories number this evening," he added.

Also, the U.S. Energy Information Administration said late on Tuesday that it expected 2018 crude oil output to rise to 9.9 million barrels per day (bpd) from 9.3 million bpd this year, a 570,000 bpd increase. This was down from last month's forecast 680,000 bpd year-over-year increase.

Despite the slight downward revision, U.S. production is still set to break the 9.61 million bpd record from June 2015.

At the same time, output from the Organization of the Petroleum Exporting Countries (OPEC) remains high despite a pledge led by the producer group to cut supplies between January of this year and March 2018 in order to tighten the market and prop up prices.


Article Link To Reuters:

OPEC Figures Show June Oil Output Rise Led By Exempt Nations

By Rania El Gamal and Alex Lawler
Reuters
July 12, 2017

OPEC oil output has risen in June by more than 300,000 barrels per day, (bpd) according to figures the exporter group uses to monitor its supply, as a recovery in two nations exempt from a supply cut deal countered high compliance by many others.

The Organization of the Petroleum Exporting Countries agreed to cut output by about 1.2 million bpd from Jan. 1 to reduce a glut and support prices LCOc1. Russia and 10 other non-OPEC states agreed to cut half as much.

Including Nigeria and Libya, which are exempt from the deal, output by all 13 OPEC members in June rose to about 32.47 million bpd, according to the average assessments of secondary sources OPEC uses to monitor its output. The figures were seen by Reuters.

That would be up 330,000 bpd from OPEC's published May figure.

A jump in output in Nigeria and Libya, where output had been limited by conflict, has weighed on oil prices LCOc1. The recovery has prompted more talk among producers about asking them to join the supply cut deal. nL8N1K12YX

Production from the 11 OPEC members with output targets under the agreement has averaged 29.840 million bpd in June, according to the secondary sources. Reuters also saw these figures.

That means compliance in June is 97 percent, according to an OPEC calculation. That is lower than in May, as OPEC's published figures for that month point to compliance above 100 percent. [nL8N1JA2SE]

OPEC is scheduled to publish the assessment of June output based on secondary sources in its monthly oil market report on Wednesday. The figures could be revised before publication as more secondary-source estimates are added, OPEC sources said.

OPEC uses two sets of figures to monitor its output -- figures provided by each country and those provided by secondary sources that include industry media. This is a legacy of old disputes over real production levels.

The production cut agreed last year was from levels as assessed by the secondary sources.

OPEC's report on Wednesday is also expected to show that Saudi Arabia told OPEC that it raised production to 10.07 million bpd in June, industry sources said, up from 9.88 million bpd in May.

The increase takes Saudi production slightly above its OPEC production target of 10.058 million bpd for the first month this year, although on average in 2017, output remains below the target, an OPEC source said.

The six secondary sources used by OPEC are the International Energy Agency, oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), consultancy Cambridge Energy Research Associates (CERA) and industry newsletter Petroleum Intelligence Weekly (PIW).


Article Link To Reuters:

Paying Professors: Inside Google’s Academic Influence Campaign

Company paid $5,000 to $400,000 for research supporting business practices that face regulatory scrutiny; a ‘wish list’ of topics.


By Brody Mullins and Jack Nicas
The Wall Street Journal
July 12, 2017

Google operates a little-known program to harness the brain power of university researchers to help sway opinion and public policy, cultivating financial relationships with professors at campuses from Harvard University to the University of California, Berkeley.

Over the past decade, Google has helped finance hundreds of research papers to defend against regulatory challenges of its market dominance, paying $5,000 to $400,000 for the work, The Wall Street Journal found.

Some researchers share their papers before publication and let Google give suggestions, according to thousands of pages of emails obtained by the Journal in public-records requests of more than a dozen university professors. The professors don’t always reveal Google’s backing in their research, and few disclosed the financial ties in subsequent articles on the same or similar topics, the Journal found.

University of Illinois law professor Paul Heald pitched an idea on copyrights he thought would be useful to Google, and he received $18,830 to fund the work. The paper, published in 2012, didn’t mention his sponsor. “Oh, wow. No, I didn’t. That’s really bad,” he said in an interview. “That’s purely oversight.”

The money didn’t influence his work, Mr. Heald said, and Google issued no conditions: “They said, ‘If you take this $20,000 and open up a doughnut shop with it—we’ll never give you any more money—but that’s fine.’”

In some years, Google officials in Washington compiled wish lists of academic papers that included working titles, abstracts and budgets for each proposed paper—then they searched for willing authors, according to a former employee and a former Google lobbyist.

Google promotes the research papers to government officials, and sometimes pays travel expenses for professors to meet with congressional aides and administration officials, according to the former lobbyist. The research has been used, for instance, to deflect antitrust accusations against Google by the Federal Trade Commission in 2012, according to a letter Google attorneys sent to the FTC chairman and viewed by the Journal.

Last month, European regulators issued a $2.71 billion fine against Google for unfairly favoring its services over rivals’ in its search results. Google has denied the charge.

The funding of favorable campus research to support Google’s Washington, D.C.-based lobbying operation is part of a behind-the-scenes push in Silicon Valley to influence decision makers. The operation is an example of how lobbying has escaped the confines of Washington’s regulated environment and is increasingly difficult to spot.

“Ever since Google was born out of Stanford’s Computer Science department, we’ve maintained strong relations with universities and research institutes, and have always valued their independence and integrity,” the company said. “We’re happy to support academic researchers across computer science and policy topics, including copyright, free expression and surveillance, and to help amplify voices that support the principles of an open internet.”

Google receives nearly $80 billion a year in ad sales drawn mostly from seven products that each attract more than a billion global users a month, including Gmail, YouTube and Google maps. Its search engine handles more than 90% of online searches globally, according to StatCounter; its Android software will run roughly 1.3 billion of the 1.5 billion smartphones expected to be sold this year, according to Strategy Analytics.

Through its various enterprises, Google collects information that reaches deep into daily life—recording everything from users’ search history to whom they know to where they are—consumer profiles so rich that not even Google knows their full potential.

Google has paid professors whose papers, for instance, declared that the collection of consumer data was a fair exchange for its free services; that the company didn’t use its market dominance to improperly steer users to Google’s commercial sites or its advertisers; and that it hasn’t unfairly quashed competitors. Several papers argued that Google’s search engine should be allowed to link to books and other intellectual property that authors and publishers say should be paid for—a group that includes News Corp, which owns the Journal. News Corp formally complained to European regulators about Google’s handling of news articles in search results.

Google has funded roughly 100 academic papers on public-policy matters since 2009, according to a Journal analysis of data compiled by the Campaign for Accountability, an advocacy group that has campaigned against Google and receives funds from Google’s rivals, including Oracle Corp. Most mentioned Google’s funding.

Another 100 or so research papers were written by authors with financing by think tanks or university research centers funded by Google and other tech firms, according to the data. Most of those papers didn’t disclose the financial support by the companies, the Campaign for Accountability data show.

Google said in some of its funding letters that it would “appreciate receiving attribution or acknowledgment of our award in applicable university publications.” There are no professional standards on such disclosures in the research papers, which are mostly published in law journals at the universities.

Money spent on the research measures in the low millions of dollars—according to the former employee and former lobbyist—a relatively small expense for the search-and-advertising giant. Some in academia say professors pay too high a price. Such corporate funding runs the risk of creating the impression “that academics are lobbyists rather than scholars,” Robin Feldman, of the University of California Hastings College of the Law, said in a Harvard University law journal article she co-wrote last year.

Ms. Feldman and other critics of the funding say even disclosing money received from a company that has benefited from the research can give the appearance of a conflict of interest and undermine academic credibility.

“Yeah, the money is good but it does get in the way of objective academic research,” said Daniel Crane, a University of Michigan law professor. He said he turned down Google’s offers to fund his research that opposed antitrust regulation of internet search engines. “If I am reading an academic paper, and they disclose an interest with a party with an interest in the outcome,” he said, “you take [the research] with a grain of salt.”

Paying for favorable academic research has long been a tool of influence by U.S. corporations in food, drug and oil industries. Scandals involving conflicts of interest in medical research have spurred many medical schools, scientific researchers and journals to require disclosure of corporate funding and to prohibit corporate sponsors from meddling with findings.

The tech industry now includes the world’s top five companies by market value: Apple Inc., Google parent Alphabet Inc., Microsoft Corp. ,Amazon.com Inc. and Facebook Inc.

Several of the companies also are active in funding academic research. Microsoft has paid Harvard business professor Ben Edelman, the author of papers saying Google abuses its market dominance. Chip maker Qualcomm Inc. funded papers supporting its side of a fight against Google over patents. And telecommunication giants Verizon Communications Inc. and AT&T Inc. have funded various papers against Google. The companies either declined to comment or didn’t respond to requests for comment.

Google’s strategic recruitment of like-minded professors is one of the tech industry’s most sophisticated programs, and includes funding of conferences and research by trade groups, think tanks and consulting firms, according to documents and interviews with academics and lobbyists.

Digital Diary

Google collects in-depth data from more than a billion people, and it uses the information to personalize everything from search results to YouTube recommendations to online ads. The company’s control of consumer data on such a mass scale has raised antitrust questions.

Early last year, Daniel Sokol, a University of Florida law professor, published an academic paper arguing that Google’s use of the data was legal. “There is no cause for concern in this arena,” he wrote. The paper also noted that no companies funded the research.

“If they did,” Mr. Sokol said in a footnote of the paper, he and his co-author “would be sipping Mai Tais with our respective friends and families on a beach in Hawaii based on the proceeds of such a sponsorship. We are not.”

Mr. Sokol, though, had extensive financial ties to Google, according to his emails obtained by the Journal. He was a part-time attorney at the Silicon Valley law firm of Wilson Sonsini Goodrich & Rosati, which has Google as a client. The 2016 paper’s co-author was also a partner at the law firm, which didn’t respond to requests for comment.

From at least as early as 2013, Mr. Sokol also has coordinated with Google officials to ensure online symposiums had a pro-Google bent.

In March 2013, Mr. Sokol helped Paul Shaw, a Google public-policy official, persuade law professors to write papers for an online symposium on patents. Mr. Shaw sent Mr. Sokol a list of a dozen law professors along with specific topics for their papers. None was paid to participate. Mr. Shaw deferred comment to a company spokesman.

After the conference, Mr. Sokol submitted a $5,000 invoice to Google.

In September 2013, Mr. Sokol worked with Rob Mahini, a senior Google lawyer, to plan an online conference on a separate patent issue. Mr. Mahini identified professors to participate, and he asked Mr. Sokol to invite them.

After running into difficulty persuading professors to write papers for the conference, Mr. Sokol asked Mr. Mahini if Google could provide “some ‘encouragement’ to them to participate,” according to the emails. Mr. Sokol declined to explain what he meant. Google said it didn’t pay professors to participate. Mr. Mahini didn’t respond to requests for comment.

When the symposium ended, a Google assistant emailed Mr. Sokol about his bill. Mr. Sokol replied: “$5,000, like last time.”

Asked for comment, Mr. Sokol wrote in an email: “For the symposia that I organized, I should have disclosed the sponsorship for such organization and have now done so. I disclose any financial support for the articles that I write.”

Patent Pending


Google and companies that make smartphones backed by its Android software have for years fought allegations of patent infringements by Oracle, Apple and Microsoft. The legal dispute has drawn academic cover on both sides.

Google sought help from Jorge Contreras, a University of Utah law professor who has also argued for a looser interpretation of U.S. patent laws.

Since 2013, Mr. Contreras has written numerous papers on patents. Google helped fund two of those papers, which each disclosed the financial support. The other papers didn’t mention his relationship with Google.

Google funded a Washington, D.C., symposium in June 2015, organized by Mr. Contreras, that showcased how Google and other companies had pledged not to enforce some of their patents, allowing others to use their technology.

Around that time, Mr. Contreras forwarded his research paper on the topic to Google policy officials and lawyers: “I would also welcome your feedback and comments,” he wrote in the email.

“It’s in really great shape!” a Google lawyer responded. “Would be good to discuss a couple of things briefly…that are somewhat related.” They set up a phone appointment, according to the email exchange.

Mr. Contreras said in an interview that he sent the paper as a courtesy because Google sponsored the conference. He said it was common among academics to ask for feedback on papers, including from officials at companies the papers discuss. “They’re experts and in the trenches, and I’m writing about what these people do,” he said. “So, it’s good to get feedback.”

A month before the symposium, Google hosted a private patent-law briefing at the Washington law office of Wilson Sonsini for several dozen influential public-policy advocates it hoped to win over. Google paid travel expenses for Mr. Contreras to speak about how companies share their intellectual property.

Mr. Contreras said Google doesn’t pay professors to change their positions; it simply funds research that supports the company.

“I don’t think there’s any dishonesty here,” he said, “but they pick the right people who they know are going to say the right thing.”

Trusted Allies


In 2010, Google hired Deven Desai, then a researcher in law and technology at Princeton University, to find academics to write research papers helpful to the company.

Over the next two years, Mr. Desai said, he spent more than $2 million of Google’s money on conferences and research papers that paid authors $20,000 to $150,000.

In September 2012, the FTC was nearing a decision on whether to charge Google with antitrust violations, including its practice of favoring its shopping and travel services in search results. Google’s law firm, Wilson Sonsini, sent the FTC chairman an 8-page letter in the company’s defense and attached Google-funded research papers supporting its arguments.

Mr. Desai, now a law professor at Georgia Institute of Technology after leaving Google in 2012, said part of his job was to compile a list of “all the major policy academics in intellectual property so” Google lobbyists could know whom to follow and potentially target for papers.

He said Google was careful to say the checks came with no requirements: “It was a gift. Recipients can do what they want.”

Among the largest were $400,000 gifts that in 2010 went to several researchers investigating ways to improve users’ online privacy.

Google and other tech companies collect personal information, including data some users would rather not share. The firms usually give notice on a privacy policies page about what is collected, and they often ask for users’ consent to keep the information.

Some privacy advocates say the policies are long and confusing, and few people read them. The advocates seek instead rules limiting the use of personal data.

Ryan Calo, then a research fellow at Stanford University, received one of the $400,000 awards in 2010, though he didn’t disclose the funding in one of the two papers he later published on privacy protection.

That paper suggested finding better ways to alert consumers about exposing their personal data “before we give in to calls to abandon notice as a regulatory strategy.”

He said in an interview that the Google money was paid to Stanford, not to him. Nonetheless, he said, he should have disclosed the financial support in both papers. After publication, Mr. Calo kept in touch with Google and shared his papers before publication, emails show.

“I’ll be following up with a draft of that paper I mentioned on how cyberlaw is changing, and look forward to any examples or thoughts,” Mr. Calo wrote on Dec. 20, 2013, to Google officials about an idea he had on artificial intelligence, robotics and the law.

Betsy Masiello, a Google official at the time, was copied on the email and responded: “Also let me know if you have a draft on surveillance! =)”

Later, after seeing Mr. Calo’s research on government surveillance, Dorothy Chou, a Google spokeswoman at the time, tried unsuccessfully to arrange for Mr. Calo to discuss his conclusions on National Public Radio.

“I’m really hoping NPR reaches out so you can get on air to make those points,” she wrote on Jan. 21, 2014. A few days later, she wrote: “We have another producer asking to chat about government surveillance, and I wanted to let you know that we pointed her your way.”

Ms. Chou declined to comment, and Ms. Masiello didn’t respond to requests for comment.

Mr. Calo, who is now a professor at the University of Washington, said it was common practice to discuss research with companies involved to ensure accuracy: “If you want to have impact as a scholar, you absolutely need to solicit input from the very entities you’re talking about.”

Google officials, he said, “identify work that resonates with a position they have already, and then they amplify that work.”


Article Link To The WSJ:

For Sale: One International Airline With $8 Billion Of Debt

Loss-making carrier saddled with restive unions, high costs; IndiGo keen on Air India’s overseas routes, but not debt.


By Anurag Kotoky
Bloomberg
July 12, 2017

Indian Prime Minister Narendra Modi’s cabinet has signed off on a plan to sell all or part of Air India Ltd., a debt-ridden, state-run carrier with the most unusual baggage.

The airline’s balance sheet includes commercial space near London Heathrow, land in Tokyo, Hong Kong and Nairobi, all bought during the heydays when the airline commissioned paintings by Indian modern artists and hired surrealist painter Salvador Dali in the 1960s to design ashtrays.

Then there’s about $8 billion in debt, a money-losing airline operation, five subsidiary companies and a joint venture, a combined workforce of 27,000 and unions with a history of grounding the airline over work demands.

Not surprisingly, selling even a minority stake in the loss-making, 85-year-old company isn’t going to be a cakewalk. At least one attempt almost two decades ago failed amid fierce political opposition. Modi’s government has yet to decide how the sale will take place, how much of the airline is for sale and, more importantly, what to do with the airline’s accumulated debt.

Undercut by budget carriers like IndiGo and SpiceJet Ltd., Air India’s local market share has shrunk to about 13 percent from 35 percent just a decade ago.

“To find someone who will buy Air India in full, with all its assets, subsidiaries and artifacts, and who will also take on the accumulated debt, is going to be very difficult,” said Kanu Gohain, a former chief of India’s Directorate General of Civil Aviation. “Taxpayer money has been going to this organization to feed inefficiency and incompetency. That’s the biggest liability.”

An Air India spokesman declined to comment. Civil Aviation Minister Ashok Gajapathi Raju’s office didn’t respond to a request for an interview. In May, a month before announcing the sale decision, Finance Minister Arun Jaitley told the state broadcaster that money spent on Air India could have been used for education.



What does Air India have to offer? Buyers may be attracted to the carrier’s overseas routes and landing rights at most global airports as well as its in-house engineering and ground handling services. The government is almost certain to dangle financial incentives to lure investors, said Jitender Bhargava, a former executive director at Air India.

“You’re not in the market to turn away people,” he said. “You’re coming into the market to attract people.”

One buyer has already stepped forward. On June 28, IndiGo, India’s biggest commercial airline, said it was willing to buy out Air India’s international operations, or even the entire airline business, the day the government approved the sale. IndiGo investors weren’t thrilled: The company’s stock tanked 8 percent in two days, wiping out half a billion dollars from the company’s market value.

To allay concerns, the billionaire owners of IndiGo -- Rahul Bhatia and Rakesh Gangwal -- held a conference call on July 6, saying the budget carrier soon wants to start low-cost, long-haul flights, and the international operations of Air India would speed up its plans. An acquisition would give IndiGo immediate overseas routes and workers with experience, which otherwise would take a long time to replicate, they said.

“We see Air India’s international operations as a canvas, a new sheet of paper,” Gangwal said. “The biggest asset sitting in there is these negotiated route structures.”



Despite India’s lure as a potential future market, Air India has been "a bureaucratically-enforced mess," and any serious bidder for the airline will demand a free hand in restructuring, which will involve job cuts and complete control over the carrier’s finances, said Robert Mann, head of aviation consultancy R.W. Mann & Co. in New York.

“This would mean ‘hands off’ by a government that has never previously been able to control its burdensome interference in its airline industry,” Mann said in an email. “Nothing leads me to believe that this time would be any different.”

Air India has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The company made an operating profit of about 1 billion rupees ($15 million) in the year through March 2016, primarily due to a slump in oil prices. It still posted a net loss of 38.4 billion rupees, according to the government.

The national auditor said the company understated losses by 64.2 billion rupees in the three years through March 2015, an observation refuted by the carrier.

Air India and IndiGo are facing fresh competition after the Indian ventures of AirAsia Bhd. and Singapore Airlines Ltd. started operations, jumping into a market where profit has proven elusive. While provincial taxes in the country make jet fuel the costliest in Asia, intense competition often forces carriers to sell tickets below cost.

Mail Delivery


Air India started as Tata Airlines in 1932 and later became state-owned. Founded by Jehangir Ratanji Dadabhoy Tata, it took off flying mail between Karachi in then-undivided, British-ruled India and Bombay. Once it turned commercial, the airline quickly became popular with its advertisements featuring Bollywood actresses, high-end champagne and Dali-designed porcelain ashtrays.

As India liberalized the economy in 1991, private competition started coming in. An eroding market share coupled with the merger with Indian Airlines fueled the decline in Air India’s fortunes.

In 2012, the government bailed out the ailing carrier with 300 billion rupees in funds, guaranteeing the carrier’s loans and promising interest payment on some debt. But its need for working capital exceeded the dole. Short-term loans spiraled on missed revenue targets amid a failure to monetize assets, an auditor said in a report this year.

"Given Air India’s current mess and inefficient state, there’s hardly a queue of folks bashing down the door to squander good money after bad," said Saj Ahmad, an analyst at London-based StrategicAero Research, "Whoever lands in bed with Air India will be lumbered with a debt-ridden partner that has no propensity to alter its course."


Article Link To Bloomberg:

China Could Field Nearly Half Of New Electric Car Models By 2020

By Joseph White
Reuters
July 12, 2017

Chinese automakers are on track to produce 49 of the 103 new electric car models that will be launched globally by 2020, as part of China's push to accelerate the switch to battery power from oil, according to a new forecast released on Wednesday.

U.S. consulting firm AlixPartners also said China is aiming to have nearly two-thirds of the world's manufacturing capacity for lithium-ion batteries by 2021, and is investing to support current sales of domestic-brand electric vehicles in the world's largest car market.

Already, Chinese automakers account for 96 percent of the electric vehicles sold in the country, AlixPartners said. Automakers sold about 350,000 electric vehicles in China in 2016 - still less than 2 percent of total vehicle sales.

By 2025, electric vehicle batteries should be close to even with internal combustion engines in terms of production costs, AlixPartners forecast. Lower battery costs could help boost consumer acceptance.

John Hoffecker, the firm's global vice chairman, told reporters at the Automotive Press Association in Detroit on Tuesday that other factors, such as a significant reduction of the time it takes to recharge electric car batteries, will be critical to efforts to win over reluctant consumers.

AlixPartners also cautioned that many of the roughly 50 companies it counts as contestants in the race to develop self-driving cars won't go the distance. "It's impossible to believe there will be 50 successful autonomous vehicle companies," Hoffecker said.

In the United States, AlixPartners said automakers will have to contend with funding investments in new technology against deep-pocketed technology industry players such as Apple Inc and Alphabet Inc, even as sales of cars and light trucks slide into a cyclical trough.

AlixPartners is forecasting that U.S. car and light truck sales will fall to 15.2 million vehicles in 2019, down 13 percent from the 2016 peak. Other U.S. analysts also predict a slowdown in vehicle sales during the next two to three years.


Article Link To Reuters:

One Game Warren Buffett Doesn’t Play: Chicken

Elliott Management says it is planning to counter Berkshire’s $9 billion bid for Energy Future.


By Nicole Friedman
The Wall Street Journal
July 12, 2017

Warren Buffett’s Berkshire Hathaway Inc. BRK.B -0.59% is under pressure to do something it usually doesn’t do: raise its bid.

Berkshire’s subsidiary Berkshire Hathaway Energy struck a deal last week to buy bankrupt Energy Future Holdings Corp., including Texas electricity-transmission business Oncor, for $9 billion in cash.

Paul Singer’s Elliott Management Corp., a major Energy Future creditor, said Berkshire’s bid doesn’t value Oncor highly enough and that it is working on a rival offer. “It is quite likely that the Berkshire transaction will not close, given the lack of support from the debtors’ creditors,” a lawyer for Elliott wrote in a Tuesday letter that was publicly released by the hedge fund.

For decades, Mr. Buffett has included in his company’s annual report a list of criteria for companies that might want to sell businesses to Berkshire. Berkshire is looking for large companies with little debt, the list says—and it isn’t interested in bidding wars or hostile takeovers.

“We don’t participate in auctions,” Mr. Buffett wrote in the latest annual report. “A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: ‘When the phone don’t ring, you’ll know it’s me.’”

If the Oncor deal doesn’t go through, Energy Future would pay Berkshire Hathaway Energy a $270 million fee, according to a filing. The fee would have to be approved by the bankruptcy court.

The potential Berkshire deal would need permission from a bankruptcy court and from Texas regulators. Regulators already have indicated they would support Berkshire as a buyer.

Berkshire Hathaway Energy declined to comment.

Berkshire watchers said the company is unlikely to raise its initial bid. “His trump card is his willingness to walk away,” said David Rolfe, chief investment officer at Wedgewood Partners, which manages about $6 billion and holds Berkshire shares, referring to Mr. Buffett. “He does not have a history of bidding-type competitions, and he typically has played a pretty strong hand.”

Mr. Buffett has long been known for quickly negotiating deals and sticking with his initial price offer.

“His playbook is not to negotiate,” said Robert Miles, who has written books on Berkshire. “Buffett would take the $270 million and move on to the next deal, which is what they did with Constellation.”

Berkshire’s energy unit reached a deal in 2008 to buy Constellation Energy Group Inc. but withdrew the offer after state-controlled Electricit√© de France SA agreed to buy a stake in Constellation. Berkshire received a $175 million breakup fee.

To be sure, many potential Berkshire deals that fall through never become public. In 2012, Mr. Buffett told shareholders that Berkshire almost spent $22 billion buying a company but couldn’t reach an agreement. He didn’t name the potential target.

A recent withdrawal occurred earlier this year when Kraft Heinz Co. , which is partly owned by Berkshire and Brazilian private-equity firm 3G Capital, backed away from a $143 billion approach to take over Unilever PLC in February after Unilever declined. Mr. Buffett revealed at his company’s May annual meeting that Berkshire would have invested $15 billion if the deal were reached.

“If it’s unwelcome, there is no offer,” Mr. Buffett told CNBC in February.

Mr. Buffett famously participated in one hostile deal decades ago—the takeover of Berkshire itself. Mr. Buffett bought shares in Berkshire, which was a New England textile company, starting in 1962. In 1965, he appeared at a board meeting to take control of the company formally and replace the management.

In retrospect, he has said, the deal was a mistake. “I found myself…invested in a terrible business about which I knew very little,” he wrote in 2014.

Mr. Buffett did raise the offer price in 1999 when he bought a majority stake in MidAmerican Energy Holdings Co., now called Berkshire Hathaway Energy. But he made the switch before the deal was announced, as he explained in his 2007 letter to shareholders.

Mr. Buffett originally offered $35 a share for MidAmerican, but after pressure from investment bankers, he raised it to $35.05, he said in the letter. “With that, I explained, they could tell their client they had wrung the last nickel out of me,” he wrote. “At the time, it hurt.”

But given MidAmerican’s growth since then, he said in the same letter, “I’m glad I wilted and offered the extra nickel.”


Article Link To The WSJ:

America Isn’t Ready For A ‘Cyber 9/11’

A new cabinet-level agency could help -- if officials have learned the lessons of Homeland Security.


By H. Rodgin Cohen and John Evangelakos
The Wall Street Journal
July 12, 2017

The prospect of a “cyber 9/11” grows likelier every day. In May the WannaCry ransomware attack, affecting hundreds of thousands of computers, disrupted health care and telecommunications across the world. American investigators now believe Russian hackers precipitated the continuing Gulf diplomatic crisis by planting false news stories on the Qatari state news agency’s website. And late last month another ransomware outbreak, Petya, went global.

Cyberattacks have become capable of much more than stealing consumer information or embarrassing business executives and politicians. Whether conducted by lone wolves or nation-states, they can compromise the safety of medical, food and water systems, disrupt transportation, or even destabilize nuclear plants. Such attacks can undermine democratic institutions or encourage violence by spreading false information. The cyber threat has become existential.

Enhanced cybersecurity controls from private and public organizations are necessary but insufficient. The problem has not been lack of action. It is the multiplicity of programs and division of responsibility that diminish their effectiveness. At least 11 federal agencies bear significant responsibility for cybersecurity: the Central Intelligence Agency, National Security Agency, Department of Homeland Security, Treasury Department, three branches of the military, and three federal banking agencies.

Congress should merge these disparate cybersecurity programs into one cabinet-level agency that also serves as the focal point for collaboration with the private economy. Call it the Department of Cybersecurity. This would be an extraordinary and risky measure, requiring careful implementation. But the magnitude of the danger, and the limits of America’s current ability to defend against the cyber threat, compel a bold response. Some leaders in government and business say they doubt this kind of unification is feasible, but very few have questioned whether it is desirable.

Lessons from the creation of the Department of Homeland Security 15 years ago can help Congress and the president implement the idea more smoothly. What to avoid? Fragmented congressional oversight—more than 100 committees and subcommittees oversee the DHS. Constant bureaucratic turf battles have hurt the DHS’s effectiveness. As did raising public anxiety while failing to provide concrete instructions for action: Initiatives like the DHS daily color codes should be avoided.

The new agency would need a clearly defined mission, consolidation of reporting into a limited number of congressional committees, and an independent, expert body providing periodic review to ensure accountability. There is also an opportunity for the new agency to be formed in a more deliberate way, drawing on leadership from the private economy to promote efficiency and cost-effectiveness.

Most important, the new agency should be led by someone with demonstrated management skills who is fully empowered to bring all the strands of cyberdefense together and to create a credible threat of retaliation. Leading candidates that come to mind are former NSA Chief Keith B. Alexander, former Assistant Treasury Secretary Leslie Ireland, Scott Charney of Microsoft and former Vice Chairman of the Joint Chiefs of Staff Edmund P. Giambastiani.

This leader would inherit a group of agencies that are already collaborating more effectively than before 9/11, but there is still room to improve coordination. Civilian networks are separated from military ones. Jurisdictional limitations to domestic, or homeland, concerns impede global cooperation.

Although coordination between the federal government and the private economy has improved, it is still not a substitute for a unified defense against a global threat. In today’s multi-agency environment, information and knowledge are too often isolated within individual agencies. As the DHS experience proved, agencies that have competing objectives eventually end up undermining the country’s ability to address security challenges. These problems would be more effectively addressed by a single agency, if it had the authority to succeed.

Perhaps most important, talent remains dispersed. Substantial cyber expertise exists throughout government, but these experts would be far more effective working under a unified command structure. Such an agency would be likely to attract the best and brightest at a time when those minds can mean the difference between cyber catastrophe and cyber protection.

A unified federal agency would also be best suited to provide crucial coordination with state and local governments and the business community. Private companies are a critical source of technological breakthroughs and early warnings, and the states have often been laboratories for policy innovation. These efforts could be accelerated and enhanced through leadership from a single, properly structured federal authority.

A new federal office for cybersecurity can provide the unification, collaboration, coherence, skills and leadership to implement a comprehensive policy that counters the existential cyber threats America must confront. Too much is at stake to ignore the problem any longer.


Article Link To The WSJ:

The Case For Investors Sticking Out The Volatility In Bitcoin And Ethereum

-- Wild price swings for digital assets like bitcoin and ethereum shouldn't put off investors
-- Cryptocurrencies are still new: Bitcoin has the potential to hit $1 trillion in market cap by 2025
-- Some skeptics are betting on digital currencies in fear of missing out


CNBC
July 12, 2017

Investors should not be put off by the price volatility for cryptocurrencies like bitcoin and ethereum because these digital assets are still very new and offer nearly unparalleled returns, experts told CNBC.

On Tuesday, ethereum's price fell below $200 for the first time since May 30; the cryptocurrency has fallen more than 50 percent since hitting an all-time high of over $400 in early June. Meanwhile in May, a price correction for bitcoin wiped off nearly $4 billion in its market value.

Bobby Lee, CEO of Chinese bitcoin exchange BTCC, told CNBC the gyration in prices was normal as the true value for these assets have yet to be discovered.

"It's not a problem," he said on the sidelines of the Rise conference in Hong Kong. "If you think about it, the volatility is natural for an asset class that is so new. There's no price discovery for it (yet)."

He explained as people have yet to discover the true value of an asset like bitcoin, they tend to trade them at a certain, discounted level before the market realizes it could be worth more and then the price jumps.

Cryptocurrencies are partly becoming more popular because countries and companies are taking a closer look at the technology that underpins them: blockchain. Japan, for example, approved bitcoin as a legal payment method in April.

"We're now sort of at ... a tipping point, where people are now considering bitcoin or ethereum or digital assets as more mainstream," Dave Chapman, managing director of Hong Kong-based commodities and digital assets trading house Octagon Strategy, told CNBC. "A lot of the people that we service are actually very comfortable with having 1 percent of their net worth into bitcoin or ethereum."

To them, it's "just a natural extension of all their diversification of their portfolio" that includes other asset classes such as properties, precious metals or index funds.

Chapman added that while volatility may be off-putting, the returns on digital asset classes remain extremely attractive to investors. He said, "There's no other asset class in the world that could've given you the historic performance of this sector ... the historic performance, which is obviously not representative of future earnings, ... does appeal to a lot of people."

For context: $100 of bitcoin bought in 2010 is worth more than $75 million in 2017.

Analysts have made varied predictions about where prices and market capitalization for digital assets are headed. BTCC's Lee told CNBC he expected the market cap for bitcoin to hit at least $1 trillion, if not more, by 2025.

"I think it's going to go to at least $1 trillion, if not maybe $10 trillion in the next five to ten years," he said.

Data from industry website CoinDesk showed the current market cap for bitcoin is about $38.55 billion on a supply of about 16 million in circulation. The total supply of bitcoins is limited to 21 million. "In a grand of scheme of things it's nothing. Many, many companies are worth way more than that," Lee said. Tech companies like Alibaba and Apple have their market cap at hundreds of billions of dollars.

Regulation may help lend more credibility to this market as an asset class: major governments including those in Japan, Russia and China are looking at introducing new rules.

In the end, Chapman said that while many investors may not yet be fully convinced about the potential of digital currencies, they will still invest into them because of the fear of missing out.

"We get a lot of people who are like 'You know what? I still don't believe in this experiment — I'm not really a believer, but I'm tired of sitting on the sidelines and missing out.'"


Article Link To CNBC:

Intel Officially Joins Fight With Nvidia And AMD, But Results Could Be A Long Time Coming

Rivals will not dent Intel’s server dominance overnight, but the potential will loom.


By Therese Poletti
MarketWatch
July 12, 2017

Intel Corp. pulled out all the stops Tuesday with the most important product launch in the history of its data-center business, as the world’s largest chip maker faces the fiercest competition ever to its dominance.

On Tuesday, Intel INTC, +0.80% hosted an unusual product launch at the Brooklyn Navy Yard, where it unveiled its next-generation Xeon chips for servers, a market it has controlled for years, with onstage endorsements from customers like Alphabet Inc.’s GOOGL, +0.27% GOOG, +0.14% Google and Amazon.com Inc.’sAMZN, -0.23% Amazon Web Services. The official unveiling of its new chip family, which has been anticipated by investors for months, arrives after a launch on the same platform by longtime rival Advanced Micro Devices Inc. AMD, +0.58% and a sudden server rise from graphics specialist Nvidia Corp. NVDA, +1.42% that has raised questions about Intel’s continued leadership position.

“This is the most competitive environment we have seen in a decade,” Bernstein Research analyst Stacy Rasgon said.

“They are trying to show that they still have leadership and that they can still have a great business,” Rasgon explained about Intel’s launch. “Part of this is because there is so much hype around the competing products, they want a chance to tell their story.”

Intel had a 99.7% market share in 2016 for the brain chips (central processing units, or CPUs) for commodity servers, the most popular type of servers sold in the world. That revenue totaled about $16.5 billion last year, according to Dean McCarron, principal analyst at Mercury Research. AMD was its only rival in this space, and had basically ceded most of its market share because it lacked any new products in this booming area, until this year.

Investors mostly shrugged off Intel’s news on Tuesday, as shares stayed mostly flat even while Intel touted that it has sold more than 500,000 of the new Xeon Scalable processors to major customers at corporations, high-performance computing sites, cloud-computing companies and communication-services providers. That continues a blah run for Intel stock, which has declined 1.3% in the past year while Nvidia has roughly tripled in value, AMD has gained more than 177% and the S&P 500 index SPX, -0.08% has increased 13.5%.

Cloud computing is clearly a major target for these processors: AMD featured Microsoft Corp.’s MSFT, +0.01% Azure cloud business and Baidu Inc. BIDU, +0.81% at the launch event for its new Epyc chips, while Nvidia has crowed about business with Google, AWS and more. But cloud customers are notoriously fickle, as pointed out by Rob Enderle, principal analyst with the Enderle Group. In at least one quarter, inconsistent ordering by cloud-computing providers was cited for slower growth in Intel’s data center business. Their hard-won loyalties can easily shift.

Analysts also note that the server market moves more slowly than consumer markets, and it will take time before any sales by AMD take hold and impact Intel’s dominant market share.

“Changes in server happen very slowly at first, the design and qualification cycles are long, so a new product on the market takes a while—often a couple years—to ramp to volume,” said McCarron of Mercury Research. “Without forecasting the share in any way, any changes will be modest simply due to how the market works. Changes made today show up in share results 18 months to two years from now.”

Intel’s data-center business was growing faster than its legacy PC business, but Its growth has slowed in the past two years, causing much consternation among investors. In addition, Intel’s market share is so dominant that “they have nowhere to go but down,” Rasgon said.

In addition to the threat in x86 architecture from AMD, the company is seen as having fallen behind in artificial intelligence, one of the important workloads for servers in the corporate data center. Graphics processing units, or GPUs, from companies like Nvidia are becoming more widely used in servers, in concert with CPUs but in far greater quantities.

Jefferies Inc. analyst Mark Lipacis wrote on Monday that he believes that “the center of gravity of cloud processing is drifting away from x86.”

Data centers like Facebook Inc.’s FB, +1.15% Big Basin were designed with far more GPUs for AI tasks such as facial recognition than the core CPU chips, provided by Intel. Also, Lipacis noted a few inroads being made by SoftBank Group’s 9984, -0.58% ARM chip designs, which are different then the x86 architecture, in data centers owned by large companies like Alibaba Group Holding Ltd.BABA, +1.39%

“You have workloads driving demand, and being taken up by other types of silicon,” Bernstein’s Rasgon said.

Many trends are working against Intel, but it believes the launch of the new Xeon chips will turn the tide. If it doesn’t save Intel’s dominant position, it may take awhile before we even know for sure, though Lipacis expects a continued deceleration in its data center business in the mid-single digit range for the next 12-24 months.

Intel is going to fight fiercely, as the home of Moore’s Law always does, and it has plenty of power and might with corporate customers. Intel will have to use all of that to beat back the most spirited challenge to the server-chip champion we have seen yet.


Article Link To MarketWatch:

Giving Up The Ghost: Investors Bail On Snap

By Anya George Tharakan and Lewis Krauskopf
Reuters
July 12, 2017

Here one minute, gone the next.

While that is the premise of Snap Inc’s popular messaging platform, investors also saw any gains from its red-hot IPO disappear when shares plunged far below their initial sale price on Tuesday.

Morgan Stanley, a lead underwriter on the company's initial public offering, slapped a price target of $16 on the stock - a buck below its March IPO price. Analyst Brian Nowak wrote in the note that "we have been wrong about Snap's ability to innovate and improve its ad product this year."

Snap shares got slammed, slumping nearly 9 percent in heavy trading volume to close at $15.47. It was a 47 percent bump down from the $29.44 intraday high they hit the day after the IPO.

“There’s a lot of people betting that this stock is going down and I think this analyst is just adding fuel to the fire,” King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco, said of Morgan Stanley's downgrade.

The bank cut its rating to "equal-weight" from "outperform" and slashed its price target to $16 from $28, below the median target of $19.50.

The ratings move was a rarity by a lead underwriter so soon after a listing. Goldman Sachs, another lead underwriter, still has a "buy" rating on the stock and an unchanged $27 price target.

"We have been wrong about Snap's ability to innovate and improve its ad product this year and user monetization as it works to move beyond "experimental" ad budgets into larger branded and direct response ad allocations," Nowak wrote.

Nowak raised concerns about Snapchat parent's ability to compete with Facebook Inc's Instagram. Snap's user growth trends have been modestly weaker than expected.

In the downgrade report, Morgan Stanley also cut its estimates for Snap's 2017 revenue by 6.9 percent to $897 million and lowered its expectations for daily active users by 1.6 percent to 182 million.

Snap and Morgan Stanley declined to comment on the downgrade.

Longs Vs. Shorts

Short-sellers were placing bets on Tuesday that Snap would continue to fall, representing about 2.4 percent of trading volume in the stock by midday despite it being one of the most expensive to borrow on Wall Street.

A fresh round of selling could follow the July 29 expiry of the stock's lockup period, after which certain insider investors will be allowed to unload their shares.

Snapchat is popular with users under 30, but many on Wall Street have long been critical of Snap's lofty valuation and slowing growth. The company's current market value was about $18.3 billion.

Facebook, which once made a $3 billion bid for Snapchat, has made the camera central to its own apps and offers Snapchat-like features on its Instagram and WhatsApp platforms.

In June, Instagram said its Stories feature had 250 million users, compared with 166 million users for Snapchat at the end of the first quarter.

"You have a one, two, three punch here: Slowing growth, advertisers are still favoring established platforms and a very, very threatening competitor," said Philippe Collard, founder of management consulting firm Yabusame Partners, which specializes in the tech industry.

"Probably, people are sitting on the sideline saying, 'What do I do with Snap, is it going to be another Twitter?'"

Shares of Twitter, which went public in 2013, now trade about 30 percent below their IPO price.

Some big names took stakes in Snap during the first quarter, including billionaire George Soros' hedge fund, activist hedge fund Jana Partners, Daniel Loeb's Third Point and Daniel Och's Och-Ziff Capital Management.


Article Link To Reuters:

Cryptocurrencies Are Getting Crushed

Bitcoin, ethereum, ripple down more than 20% from record highs; Mt. Gox hearings, programmer split weigh on investor optimism.


By Lily Katz
Bloomberg
July 12, 2017

The cryptocurrency Cassandras are starting to look right.

The sector has lost about a third of its market value since peaking in early June, pushing it into what traditional equity market analysts label as a bear market. Bitcoin, the largest of the digital currencies, is down about 20 percent from its peak of $3,000, reached June 12. Smaller rivals such as ethereum and ripple are getting hit even harder.



“When when we look for signs of excess in the market, I look at bitcoin and to me that looks pretty scary,” Richard Turnill, global chief investment strategist at BlackRock Inc., said during a midyear outlook presentation in New York on Tuesday.

Whether the virtual currencies were caught up in an asset-price bubble was debated as the market capitalization of the sector soared this year, raising skepticism from pundits including tech billionaire Mark Cuban. Backers such as Ripple Chief Executive Officer Brad Garlinghouse, whose money-transfer company is tied to the third-largest cryptocurrency by market value, said he isn’t convinced.

"I would be surprised if there was a major crash," Garlinghouse said in an interview at Bloomberg’s New York headquarters Monday. "Could we see digital assets continue to double or triple or quadruple from where we are today? That wouldn’t surprise me at all."

Digital coins are currently worth around $80 billion, down from a market capitalization of $100 billion on Friday and $115 billion on June 14, according to data from Coinmarketcap.com.

This week’s slump coincides with initial hearings in the trial of the former head of Mt. Gox, the bankrupt Japan-based bitcoin exchange that imploded in 2014 after losing hundreds of millions of dollars’ worth of bitcoin. Chief Executive Officer Mark Karpeles pleaded not guilty in Tokyo on Tuesday to charges of embezzlement and inflating corporate financial accounts.

The turbulence may be far from over, too, as rival bitcoin enthusiasts are set to adopt two competing software updates at the end of July. This has raised the possibility that bitcoin will split in two, an unprecedented event that would send shockwaves through the market.

Volatility is nothing new for cryptocurrency buyers, who have faced losses in recent months as exchanges grapple with outages and poor performance, struggling to keep up with the volume surge that has swept the market amid speculation about the potential for widespread adoption of virtual assets and blockchain technology.

"It is easy to look at the appreciation that we have seen this year and conclude that we are witnessing a bubble,” said Martin Garcia, vice president of sales and trading at Genesis Global Trading. “While I understand that the prices we are seeing now a more than a little frothy, I think that we are in the very early stages of the development of an entirely new asset class."


Article Link To Bloomberg:

Amazon.com On Pace To Break Sales Record For 'Prime Day'

By Jeffrey Dastin
Reuters
July 12, 2017

Amazon.com Inc (AMZN.O) said on Tuesday its Prime Day sale was on track to be the biggest shopping event in its history by sales.

The world's largest online retailer said customers ordered more than three times as many Echo-family speakers than during Prime Day 2016, which at the time broke records for Amazon devices.

Third-party sellers sold over 50 percent more items on the site by noon local time (1900 GMT) than in the same timeframe last year, Amazon said in a statement.

The company has not disclosed sales figures, overall or for the Echo. Analysts estimated last year's event brought in well over $500 million.

The news underscores Amazon's break-neck pace of growth as more shoppers order online instead of going to brick-and-mortar stores. It also highlights the winning formula of Amazon's shopping club Prime, the cornerstone of its business.

Customers had to join Amazon Prime to get discounts during the 30-hour event. U.S. members of the club pay $99 per year for benefits like two-day shipping, and they tend to buy more goods, more often from Amazon. A timer showing when the deals would expire added further shopping encouragement.

Rival retailers like Macy's Inc (M.N) and Best Buy Co Inc (BBY.N) took advantage of Prime Day's hype to launch promotions of their own. Still, Amazon often came out on top. Best Buy was 27 percent more expensive for overlapping technology products excluding Amazon devices, according to retail technology company Boomerang Commerce.

Deals on Amazon for the voice-controlled Echo speakers had the promise of boosting its sales indirectly, too. The devices let shoppers re-order products by voice command, removing friction from checkout.

Consumer buzz and heavier discounts likely increased orders for the Echo, Echo Dot and Amazon Tap speakers. Amazon offered the Echo at half price in the United States, or $89.99, versus 28 percent off on Prime Day in 2016.

"The voice-controlled assistant market is hot right now, and by offering a reasonably priced device that does a lot of things - and the promise of many more skills to come - Amazon is positioning itself as a leader in this market," said eMarketer analyst Victoria Petrock.

Beyond shopping on Amazon, people can tell an Echo to play music, order an Uber ride or turn on the house lights. Research firm eMarketer has forecast the number of U.S. consumers actively using voice-controlled devices will more than double this year to 35.6 million.


Article Link To Reuters:

Muted Inflation, Wages Keep Fed Policymakers Cautious

By Ann Saphir and Richard Leong
Reuters
July 12, 2017

A day ahead of Federal Reserve Chair Janet Yellen's testimony to Congress on the state of the U.S. economy, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases.

In recent months U.S. inflation has moved further below the Fed's 2 percent target even as the labor market, as measured by a 4.4 percent unemployment rate, has strengthened.

That disconnect has vexed policymakers, but Yellen has said the retreat in price pressures is likely temporary and signaled she is prepared to continue with rate hikes and a plan to start trimming the Fed's $4.5 trillion balance sheet later this year.

The Fed raised rates last month to a range of 1 percent to 1.25 percent.

Fed Governor Lael Brainard supported the June rate rise and on Tuesday embraced the plan to reduce the balance sheet "soon," but suggested her support for any future rate increases will depend in part on how inflation shapes up.

"I will want to monitor inflation developments carefully, and to move cautiously on further increases in the federal funds rate, so as to help guide inflation back up around our symmetric target," Brainard said, adding that she believes rates may need to top out near 2 percent, which would give the Fed little room to raise them further.

At a separate event on Tuesday, Minneapolis Federal Reserve Bank President Neel Kashkari said he finds it hard to believe that the U.S. economy is in danger of overheating when wage growth is so low.

Government data on Friday showed wage growth of just 2.5 percent annually in June.

"I am looking for that wage growth as an indicator that, okay, maybe the economy’s overheating, maybe now we are going to start seeing inflation, maybe that’s going to lead us to need to raise interest rates," Kashkari told the Minnesota Women's Economic Roundtable.

Kashkari this year voted against each of the Fed's rate hikes.

"It can’t be that bad to find workers because if you really were having to compete with other companies to find the scarce talent, we would see wages climbing, and we are not seeing wages climbing very quickly," he said.

Kashkari said that when businesses tell him they cannot find skilled workers, he tells them to provide training and to pay more.

"The bottom line from my perspective is if there are good opportunities for your business, you will raise wages you will attract workers and you will grow your company," he said.

The Fed's next policy meeting is on July 25-26.


Article Link To Reuters:

The Fed Gets Optimistic About Inflation

The central bank should see if faster price increases lead to more jobs.


By Narayana Kocherlakota
The Bloomberg View
July 12, 2017

Federal Reserve policy makers have been saying for some time that low inflation is attributable to temporary forces that will disappear in the next two to three years. But recently the Fed’s own staff has also projected such a rapid return of inflation to the central bank’s target of 2 percent. This more optimistic forecast puts a key question before policy makers: Shouldn’t they be willing to aim even higher?

The Fed formally adopted a 2 percent inflation target in 2012. Inflation has been undershooting ever since. Neither the committee nor the public should be surprised by this. The Fed’s monetary policy meeting minutes (released three weeks after every meeting) show that its own staff has consistently predicted that, over their two- to three-year forecast horizon, policy choices would lead inflation to undershoot the target.

To give some feel for what I mean, here are the staff inflation outlooks from the June meetings in from 2012 to 2016 as documented in the minutes. (For those who are interested: I have written a more complete chronology here.)

-- June 2012: Subdued through 2014
-- June 2013: Relatively subdued through 2015
-- June 2014: Below 2 percent during the next few years
-- June 2015: Inflation below 2 percent through 2016 and 2017
-- June 2016: Slightly below 2 percent in 2018

The staff has been sending a consistent public message: They didn’t see the Fed’s expected actions as being sufficiently stimulative to get inflation back to 2 percent within two to three years. (By way of contrast, the Bank of Canada -- operating in what many might view as a more challenging monetary policy environment -- typically aims to return inflation to its target within six to eight quarters.) Why the Fed made these hawkish choices -- including a variety of tightening moves from June 2013 on -- seems to me to be an important question for the public’s representatives in Congress to be asking.

The good news is that the minutes from last month’s Fed meeting reveal an important change relative to these past outlooks. The staff now projects that, based on their forecast of Fed monetary policy choices, inflation will return to target in 2019. In this sense, the Fed is (finally) making monetary policy choices that are supportive of its stated inflation goal.

This history raises a key issue for Fed policy makers: Since they tend to undershoot their inflation target for so long during tough economic times, shouldn’t they now be aiming higher than 2 percent when times are better? This is a question of whether the Fed sees 2 percent as more of a ceiling or an average. For most of the past decade, inflation has run below 2 percent.

Perhaps more importantly, it looks like this experience is likely to recur in the future: This speech by Fed Chair Janet Yellen suggests that we should expect another decade of sub-2 percent inflation in a future large recession. To achieve an average 2 percent inflation rate over the longer run, the Fed would have to offset these long stretches of sub-2 percent inflation with some periods of above-target inflation. The staff’s current and past outlooks seem to suggest that the Fed is unwilling to do so. That’s unfortunate, because that additional monetary stimulus wouldn’t just push inflation above 2 percent -- it would also generate more and better jobs.


Article Link To The Bloomberg View:

Why The Latest Russia Story Is Just Another Trump Witch Hunt

By Michael Goodwin
The New York Post
July 12, 2017

Near the end of its Tuesday story on Donald Trump Jr.’s meeting with a Russian lawyer, The New York Times casually noted that the news “blunted whatever good feeling the president’s team had after his trip to Europe.”

Excuse me, but wasn’t blunting the president’s success the whole point of the latest installment of the Russia, Russia, Russia story?

Isn’t that why the leakers leaked when they did, and why the Times splashed the story on its front page day after day?

Excuse the cynicism, but there is a relentless pattern, and we don’t need a crystal ball to see the future. It looks like the past and the present. No better, no worse, just more of the same.

A year from now, Donald Trump still will be president and the media and the permanent bureaucracy still will be hounding him in a ruthless bid to drive him from office.

In responding to the attacks, Trump and his team will make numerous mistakes, none fatal, but the accumulation will take a toll on his presidency.

Drip, drip, drip goes the optimism.

That’s what we’re witnessing now, with another round of toxic mud masquerading as bombshell news overshadowing all other issues, from North Korea to tax reform.

I say masquerading because, for all the intrigue about the June 2016 meeting in Trump Tower, and for all the hyperventilating by Maxine Waters Democrats that this was the “gotcha” moment, the end result was the same: more smoke, yet still no fire.

The Russian lawyer, despite an e-mail introduction from a music promoter that sounded like it came from a Nigerian prince with millions to share, had no dirt on Hillary Clinton to share, government-sponsored or otherwise, and Trump Jr. quickly ended a meeting he never should have accepted.

For the media and Dems, it doesn’t matter that nothing happened. Any fact that supports the narrative that Trump is an illegitimate president is fit to print, while facts that don’t fit the narrative fall to the cutting-room floor.

On Google, collusion is defined as “secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.”

In the case of Trump, collusion is anything the media and Dems say it is. The goal posts are movable.

It’s not news when presidential candidates tap foreign sources for opposition research — except when Trump does it. Then it’s impeachable collusion.

Actually, this was a mere willingness to accept dirt on Clinton. Since no dirt was forthcoming, the whole Trump family is guilty of attempted collusion, or something.

Almost as amazing as Trump’s victory last November is the fact that so little has changed in the public discourse since then. America has reached a stalemate — emphasis on stale.

Count me as surprised. I assumed the obstruction and resistance would play itself out, and the nation could get back to some semblance of a fractious routine. While the anti-Trump demonstrations have petered out, the refusal to accept him as the president by about half the country is still strong, and there is absolutely no sign that bipartisanship is about to break out in Washington.

Unfortunately, the White House’s aversion to learning new crisis skills is also stubbornly strong.

The e-mails Trump Jr. released yesterday should have been released at the start instead of waiting for members of Congress to also demand them. The result is an emboldened opposition and precious time wasted in a serialized melodrama over a single meeting.

By now, the president, and even his family, should know they can never count on getting a fair shake from the White House press corps. They face a rabid hostility, and everything they say and do is seen through the darkest possible lens.

It’s not going to change, so Trump must. His White House leaks too much and by every indication, nobody is in charge.

It’s up to the president to fix the ship of state. Otherwise, the fate of his presidency will be decided by his opponents.

Drip, drip, drip.

As part of that repair effort, he must finally keep his Twitter focused on important public business, not private feuds. He did the right thing Monday and got immediate results.

With the Senate unable to pass an ObamaCare-replacement bill and the month-long August recess fast approaching, Trump tweeted, “I cannot imagine that Congress would dare to leave Washington without a beautiful new health-care bill fully approved and ready to go!”

Tuesday, in the midst of the Russia smoke bomb, Senate Majority Leader Mitch McConnell postponed the August recess by two weeks to work on ObamaCare.

Depending on what the Senate does, the decision could turn out to be the most important news of the day. Or even of the year.

Really.


Article Link To The NY Post:

Trump's Low-Level Russian Connection

The lawyer who met Donald Trump Jr. was no Kremlin power broker.


By Leonid Bershidsky
The Bloomberg View
July 12, 2017

In stories about her meeting with Donald Trump Jr., Natalia Veselnitskaya, the unlikely celebrity in the latest installment of the Trump-Russia story, is often described as someone with "connections to the Kremlin." That's misleading, although her involvement still says much about how power works in Russia.

The red-brick fortress at the center of Moscow is the wrong architectural landmark in which to look for the ties that made Veselnitskaya a successful lawyer. The right building is a hulking, futuristic glass structure just outside the Moscow city limits, which houses the government of the Moscow region -- the constituent part of the Russian Federation which surrounds but doesn't include the city of Moscow.

The Russian system of power -- at least its all-important informal part -- has always been all about "levels." Russian President Vladimir Putin often uses the word to discriminate between matters that are worthy of his attention and those that aren't. The regional elites are several notches below the Kremlin level, which explains Putin spokesman Dmitri Peskov's snobbish reaction to news about Veselnitskaya: "No, we don't know who that is, we cannot follow all the meetings of all the Russian lawyers both inside the country and overseas."

During Veselnitskaya's rise, the region, run by Boris Gromov -- the general who presided over the Soviet Union's withdrawal from Afghanistan in 1989 -- was a mess of corrupt schemes that ultimately led it to de facto bankruptcy. I know a few things about it because I was the publisher of an investigative book about the period, written by Forbes Russia journalist Anna Sokolova. The book's print run was seized by police at a warehouse located in the Moscow Region. The publishing company, Eksmo, fought the seizure and successfully sold the book.

During the governor's 12-year tenure, the region set up a number of quasi state-owned corporations, which issued billions of dollars' worth of bonds in what later turned out to be Ponzi-like schemes. Alexei Kuznetsov, the regional finance minister who was married to New York socialite Janna Bullock, fled Russia in 2008, after the schemes started coming apart, and was arrested in France in 2013. Extradition proceedings are still under way.

At the same time, the Moscow region was the arena of some of the wildest land shenanigans in Russian history. Land, sometimes enormously valuable because of its proximity to the Soviet elite's traditional country residences, still used by top government officials, was bought up on the cheap from collective farmers, and then ruthless raiders fought bitterly over it. Their disputes, often involving current and former regional government officials, became Veselnitskaya's bread and butter.

Originally, she worked at the regional prosecutor's office. There, she married deputy prosecutor Alexander Mitusov -- one of the region's most influential law enforcement officials -- and set up a private practice in the Moscow Region. Her success rate and reputation were soon fearsome; she claimed in a recent U.S. court filing that she had argued and won 300 cases.

After leaving the prosecutor's office, Mitusov became deputy transport minister under Pyotr Katsyv, Gromov's deputy and the regional transport minister. The minister ran one of the state companies that ended up insolvent, leaving the regional government on the hook for its debts, but kept his job, leaving the transport ministry only after Gromov was removed by the Kremlin. Katsyv has since worked in top jobs for Russia's railroad monopoly and a major hydrocarbon transport company.

Veselnitskaya did legal work for the Katsyv family. Among other things, she defended Pyotr in a libel suit against a local activist who accused the regional minister of involvement in shady real estate deals (she won). In the U.S., Veselnitskaya is known for working with the American defense of Denis Katsyv, Pyotr's son, accused by former Manhattan U.S. Attorney Preet Bharara of laundering money from a Russian tax scam.

That wasn't just any scam but the Magnitsky affair, made famous by investment fund manager Bill Browder, whose lawyer, Sergei Magnitsky, many believe was tortured and killed in a Russian prison after exposing a massive fraud perpetrated by Russian tax officials and their accomplices. The affair inspired the Magnitsky Act, sanctioning participants in the scheme and any other Russian human rights violators. The Russian parliament retaliated by banning U.S. adoptions of Russian children, and President Vladimir Putin signed the bill, denouncing the Magnitsky Act as a domestically motivated political attack on Russia. (The governments of Canada and the U.K. have both backed Magnitsky-inspired legislation this year.)

Talk of Veselnitskaya's Kremlin ties comes from her efforts to lobby for the repeal of the Magnitsky Act -- which is what Donald Trump, Jr., claims she tried to do when she got her meeting with him, presidential son-in-law Jared Kushner and Trump campaign manager Paul Manafort. She got the meeting through a string of Moscow Region contacts. The introduction was made by Rob Goldstone, the former U.K. tabloid journalist who promoted Russian-Azerbaijani pop singer Emin Agalarov.

Emin is the son and heir of real estate billionaire Aras Agalarov, who is also often described as close to Putin. Like many Russian businessmen who want to stay in the Kremlin's good graces, Agalarov takes on projects on government orders, even at a loss, such as the construction of a university in the far east and two soccer arenas for the 2018 World Cup. But his real power base is in the Moscow Region. His enormous expo center, concert hall and shopping complex are located right next to the regional government building. Agalarov even built the subway station, Myakinino, that low-ranking regional bureaucrats use to get to work.

It was with the Agalarovs that Trump partnered for the 2013 Miss Universe pageant, held in Moscow. That's how Goldstone, who arranged the presence of Trump and the contestants in an Emin Agalarov music video, knew Donald Jr. Emin, for his part, knew Veselnitskaya, queen of the regional courtrooms. Before he was elected, Trump's level of communication in Russia was no higher than that of the Moscow Region's elite, several notches below the Kremlin. Aras Agalarov said of Trump in a recent interview with the Russian daily Komsomolskaya Pravda:

"It's one thing when he communicates with me. That's, like, one level. But it's a different matter for him to communicate with the president of the Russian Federation."


It was Rex Tillerson, the current secretary of state, who, as chief executive officer at Exxon Mobil, enjoyed the highest level of access. Trump just wasn't important enough. It's entirely possible that a Kremlin effort to help Trump beat Hillary Clinton reached to lower levels because that's where it was easiest to establish contact with Trump's family. But it's more likely that Veselnitskaya, the tenacious and ambitious lawyer who could pull every string in the Moscow Region, did so to get her pet issue -- the repeal of the Magnitsky Act, which was getting her major client in trouble -- in front of some important Americans. That kind of effort would have been on the right level.

Even if that meeting didn't help, Veselnitskaya has every reason to be happy Trump won. He fired U.S. Attorney Bharara in March, and in May, the case in which Denis Katsyv was involved ended in a surprise $6 million settlement, agreed by Bharara's successor Joon Kim. Katsyv escaped with just the payment, without admitting any guilt. No lawyer in Veselnitskaya's situation could have asked for more.

Article Link To The Bloomberg View: