Thursday, August 10, 2017

Thursday, August 10, Morning Global Market Roundup: Asia Stocks Snap Back Into The Red On Simmering North Korea Tensions

By Shinichi Saoshiro
August 10, 2017

Asian stocks turned lower on Thursday as investors fretted about the simmering tensions between the United States and North Korea, sending Seoul shares skidding to two-month lows even as the previous day's rush into safe-haven assets appeared to slow.

Spreadbetters expected European stocks to follow suit, forecasting Britain's FTSE to open down 0.6 percent and Germany's DAX and France's CAC to start a shade lower.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1 percent, snapping a brief foray into positive territory early in the day and extended losses from Wednesday.

Japan's Nikkei also handed back earlier gains to shed 0.1 percent.

Shanghai fell 1.1 percent and Hong Kong's Hang Seng lost 1.6 percent. South Korea's KOSPI dropped as much as 1.2 percent to a two-month low to move further away from record highs set at the end of July.

"Some investors had wanted reasons to unwind their long positions built up in emerging market equities, and they found an opportunity in the latest bout of Korean tensions," said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

"At the moment, it is unclear how the Korean situation will play out and that is hampering the markets. But as past incidents involving the Korean Peninsula have shown, the impact on financial markets tends to fade away over a span of few days."

The declines in some Asian bourses, like Japan's Nikkei, were limited after Wall Street shares closed barely lower overnight, trimming losses, as investors appeared to brush off geopolitical concerns.

The flight-to-safety into U.S. Treasuries also abated overnight. The 10-year Treasury note yield initially fell to a six-week low of 2.212 percent as bond prices rose, but climbed back to 2.248 percent.

"U.S. equities managed to cut its losses towards yesterday's close and while the VIX (volatility index) did pop higher, it still remains at an overall low level. Furthermore, the benchmark Treasury yield also climbed away from lows," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

"These developments suggest that risk aversion caused by geopolitical tensions in North Asia are temporary in nature, as long as it does not involve military conflict."

Bids into the Japanese yen and Swiss franc, currencies that find demand in times of geopolitical anxiety, also tapered.

The dollar was steady at 110.030 yen after going as low as 109.560 overnight, its weakest in eight weeks.

The Swiss currency slipped 0.2 percent against the dollar to 0.9655 franc after surging more than 1 percent the previous day.

The euro inched down 0.2 percent to $1.1737 while the dollar index against a basket of major currencies added 0.1 percent to 93.662.

Currency markets focused on the U.S. producer price index data due later in the session. Investors will study the numbers to get a feel for the U.S. inflation trend and any impact the data could have on the Federal Reserve's monetary policy.

The New Zealand dollar slipped to a near one-month low of $0.7300 after Reserve Bank of New Zealand Governor Graeme Wheeler said he would like to see the local dollar fall and noted the central bank had the capability to intervene.

The RBNZ had held rates at a record low of 1.75 percent on Thursday and reiterated that policy would stay loose for a considerable time to come.

In commodities, crude oil lost momentum after rising overnight on data pointing to declining U.S. inventories.

Brent crude was flat at $52.70 a barrel.

Gold prices were nudged away from recent highs as broader risk aversion receded somewhat. Spot gold was 0.1 percent lower at $1,276.40 an ounce after having spiked the previous day to a near two-month peak of $1,278.66.

Article Link To Reuters:

Oil Prices Move Higher After U.S. Stockpiles Fall

By Aaron Sheldrick
August 10, 2017

Oil futures rose on Thursday after official figures showing U.S. crude inventories fell more than expected, but the market is clearly settling into a range amid quiet trading, analysts said.

Brent crude, the global benchmark, was up 18 cents, or 0.3 percent, at $52.88, after falling slightly earlier. It closed up 1.1 percent on Wednesday, snapping two days of declines.

U.S. West Texas Intermediate (WTI) crude was up 16 cents, or 0.3 percent, at $49.72, after declining earlier. The contract gained 0.8 percent in the previous session.

"Broadly I think the market is trading sideways at the moment," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

U.S. crude stockpiles fell last week as refineries boosted output to the highest percentage of capacity in 12 years, the Energy Information Administration said on Wednesday.

U.S. oil inventories dropped by 6.5 million barrels last week, the government data showed, steeper than the expected decrease of 2.7 million barrels.

"It does create the hope that we are going to end the summer driving season with inventories below the year before, which would be a positive development," Spooner said.

Refiners processed nearly 17.6 million barrels of crude, surpassing a record set in May and the most for any week since the U.S. Department of Energy started keeping data in 1982.

But a surprise increase in gasoline stocks is capping gains in oil prices and tempering attempts by the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers to boost prices that are about half of levels three years ago.

"All the crude that was drawn was basically run through the refineries and this resulted in a gasoline build of 3.4 million barrels," said Matt Stanley, a commodities broker at Freight Investor Services in Dubai.

"The minute OPEC try and raise prices by cutting production the U.S. producers will react accordingly to fill the void. This results in a tug of war that we have witnessed all year and the final outcome is a rangebound market," he added.

They are cutting output by about 1.8 million barrels per day (bpd) under an agreement set to run until March 2018.

The deal has supported prices but a recovery in output in Libya and Nigeria, OPEC members exempt from the cut, has also complicated the initiative.

Article Link To Reuters:

The Eclipse Will Give Us A Glimpse Of The Future Of Natural Gas

Gas turbines will ramp up as the eclipse darkens solar panels; Solar industry urges conservation to limit carbon emissions.

By Chris Martin, Mark Chediak, and Naureen S. Malik 
August 10, 2017

Natural gas is about to get a glimpse of its future role in the U.S. power mix as solar energy’s backup.

During the upcoming Aug. 21 eclipse, operators of giant solar fields from California to the Carolinas will cede market share to fast-start natural gas generators as well as hydroelectric plants and other sources to fill the gaps as the sky darkens. The celestial event, the first total solar eclipse visible in the lower 48 states since 1979, will provide owners of gas turbines a chance to shine even as the fossil-fuel is expected to be displaced over time by solar and wind energy.

The eclipse comes as the U.S. power grid undergoes a transformation that will have flexible resources complementing growing supplies of solar and wind energy. Solar installations have grown ninefold since 2012 and renewable sources are forecast to supply just as much of America’s electricity demand as gas by 2040, according to Bloomberg New Energy Finance.

The "electric grid of tomorrow" will increasingly have to deal with fluctuating power supplies from the wind and sun while incorporating quick-start gas turbines during events like the upcoming eclipse, said Stephen Berberich, president of California ISO, the state’s grid operator. Operators will also use new technologies to control demand when the moon will completely block the sun along a 70-mile-wide (113-kilometer) corridor stretching from Oregon to South Carolina.

Based on a Bloomberg calculation of grid forecasts, more than 9,000 megawatts of solar power may go down. That’s the equivalent of about nine nuclear reactors.

To help keep the lights on, the California Independent System Operator will tap the state’s network of gas generators and hydroelectric dams to make up for the loss of about 6 gigawatts of solar output over three hours. Duke Energy Corp. said it will utilize gas generators in North Carolina, the biggest solar state after California, to make up for output that is expected to sink 92 percent to about 200 megawatts in 90 minutes.

The North American Electric Reliability Corporation doesn’t foresee any reliability issues as grid operators have been planning for the eclipse for months.

“Given that the timing and path of the eclipse are well understood and well reflected in solar generation forecasts by CAISO and other grid operators, generation dispatch or curtailment would be managed as a part of routine operations,” said Steve Krum, a spokesman for First Solar Inc., the largest operator of solar plants in the U.S.

AutoGrid Systems Inc. says some utilities will be using its software systems to shut off unnecessary appliances during the height of the eclipse, and bring them on slowly as solar power returns, said Adam Todorski, a director of product technology for the Palo Alto, California-based company.

Shedding Demand

“It’s a lot like a planned outage; you know it’s coming,” Todorski said. “You can get hundreds of megawatts by shedding things like water heaters and pool pumps, and heat pumps.”

Demand for gas is forecast to stop growing in the U.S. by 2040 as new technologies such as battery storage ramp up to provide backup for wind and solar, according to Bloomberg New Energy Finance.

During a March, 2015 eclipse that crossed Europe, German grid operator TenneT TSO GmbH brought on 8 gigawatts of generating capacity to compensate for the loss of solar power as the sun disappeared, double the usual amount. It also kept hydropower plants that can store energy on standby and coordinated its flows with neighboring grid operators.

Power prices in Germany’s wholesale market surged then dipped for a short time as the first eclipse of the emerging solar age passed, briefly switching off thousands of panels that on the brightest days provide 40 percent of Germany’s power.

In the U.S., which will have another full eclipse in 2024, gas will continue to provide a backstop to solar until battery storage becomes cheaper and more widespread. Until then, regulators are urging consumers to pledge to cut consumption during the hours of the eclipse.

“We have plenty of wind, geothermal, hydro, and natural gas to make sure the grid runs smoothly during the solar eclipse, but we also have a lot of Californians who want to do their California thing and step in to help replace the sun when it takes a break,” said California Public Utilities Commission President Michael Picker.

Article Link To Bloomberg:

Investors Question Oil Output In Permian Basin, America’s Fastest-Growing Field

Worries mount after Pioneer reported its Permian.

By Alison Sider
The Wall Street Journal
August 10, 2017

Investors helped turn West Texas’ Permian Basin into America’s fastest-growing oil field, but their confidence is cracking over whether drillers can keep production rising.

Questions mounted last week after Pioneer Natural Resources Co.PXD 1.60% reported that its Permian wells are producing more gas and natural gas liquids such as propane than expected. That worried investors, who care a lot more about oil.

Shares of Pioneer and other Permian producers tumbled as a result. Pioneer ended the week down 16%, while Parsley Energy Inc.PE -0.78% and Concho Resources Inc. CXO 0.76% both declined more than 9% over that stretch.

The main issue for Wall Street is whether the Permian, where nearly half the rigs drilling for oil in the U.S. are located, will continue apace or will fall short of the expectations of investors, who in recent years crowded into companies drilling there.

“The Permian is going to have some growing pains,” Scott Hanold, an analyst at RBC Capital Markets, said this week.

The concerns aren’t universal, and some say they are overblown. “I don’t think anything has changed in the Permian. It’s the lowest cost, best basin to be in, with the best rock,” said Bill Costello, portfolio manager at investment firm Westwood Holdings Group. “If people are going to give me the opportunity to buy more, I’m going to buy more all day long.”

Some Permian stocks have partly recovered since last week’s plunge.Cimarex Energy Co. was the S&P 500’s biggest gainer Wednesday, rising about 7.5% after it reported more oil production than expected.

But the selloff, and analyst notes that followed, reveal that some investors are questioning whether they were overly confident in the resilience of the Permian, and perhaps overpaid for it.

Most wells produce natural gas as a byproduct alongside oil, and that gas output tends to rise over time. That is because as a reservoir is depleted, its pressure drops and gas vapors separate from liquid—reaching the “bubble point” at which natural-gas production accelerates.

Pioneer last week indicated that some of its Permian wells are reaching this point sooner than it anticipated.

“Why everyone’s so concerned is that it could mean at some point in the future, that oil declines are steeper than what company and the investment community thought they would be,” said Ben Shattuck, research director at consultancy Wood Mackenzie. “It raised that big question mark.”

John Groton, director of equity research at Thrivent Financial, which owns shares of Pioneer, said the issues were a hiccup, “not a harbinger of the end for the Permian.” Still, he said, “It never goes as smoothly as people think it will.” He added: “There were a lot more people who had priced Pioneer for perfection than I had realized.”

Some skeptics have long suspected that the ultimate recoverability rates of oil from tightly packed U.S. shale rocks might be lower than many drillers were forecasting, and that the process to extract it would ultimately be too expensive a proposition.

U.S. shale producers use a process known as fracking—blasting water and sand through rock to unleash vast quantities of oil and natural gas. Because of the unusual geology in the Permian, which consists of stacked layers of oil-bearing rock that can be tapped simultaneously from a single site, Wall Street widely believed these companies could turn a profit even at lower oil prices. Shares of companies in the Permian held up better than their peers while oil prices plummeted starting in 2014.

Quarter after quarter, producers demonstrated that they could break even there at lower and lower oil prices as they learned to extract more oil from each well. They drilled sideways through the rock layers—in some cases as long as 2 miles.

Their success meant they were able to tap investors for more cash when they needed it. Companies that weren’t in the Permian wanted to be there, and were willing to pay up for land.

Producers in the region have raised $27.5 billion since the start of 2015 by selling new shares—44% of the cash raised that way by North American oil-and-gas companies since then.

The premium for shares of Permian producers compared with oil companies that focus on other regions shrank by 14% after Pioneer reported its results, Morgan Stanley analysts said Monday.

“Investors didn’t receive the beat-and-raise quarter that they saw in” the first quarter, Cowen analysts wrote in a note this week, describing the selloff as a “Permian Panic: When ‘safe stocks’ fail.”

Even before second-quarter results, there were signs that investors’ enthusiasm was ebbing. When QEP Resources Inc. last month announced a deal to spend $732 million to buy drilling land in Martin County, Texas, its shares fell.

Also last month, someone who described himself as a former Pioneer petrophysicist raised alarms in a post on LinkedIn, predicting that “ALL oil shale wells…will die a disappointing and gassy death.”

Pioneer didn’t respond to requests for comment on the post.

It is up for debate what Pioneer’s announcement last week that its Permian wells were producing more gas means for future oil production.

Scott Rees, chief executive of Netherland, Sewell & Associates, Inc., an independent engineering consulting firm that has Pioneer as a client, said that when production reaches this point, it doesn’t mean that oil production is about to drop off.

So far, Pioneer said the oil output from its wells isn’t dropping—it is on track with what its engineers predicted. Analysts and some investors say all that gas is basically a free byproduct that will make the wells more valuable.

Parsley Chief Executive Bryan Sheffield echoed that point when he said last week that the company’s wells were still producing as much oil as expected.

“Oil volumes are in-line with expectations, so the extra gas is truly additive.”

Pioneer Chief Executive Tim Dove told analysts that oil was “absolutely meeting our expectations on a per-well basis, and adding more gas and [natural gas liquids] to the mix is a positive in terms of revenues and reserves without even affecting oil.”

“This is a good thing,” he said.

The explanation didn’t seem to help.

“While it is only one day of trading, the underperformance of high-quality Permian stocks has left some [portfolio managers] asking about where to reallocate capital within the sector,” Goldman Sachs analysts wrote last week as share prices tumbled.

Article Link To The WSJ:

Macron's First Effort To Shake Up The Economy Is Catching On

Travelers take to buses two years after Macron opened market; Now businesses await deeper changes pledged by new president.

By Ania Nussbaum
August 10, 2017

It’s vacation time in France, and the fleets of buses plying the nation’s highways suggest President Emmanuel Macron’s earliest effort to shake up the economy is catching on.

Cheaper and less glamorous than France’s celebrated high-speed trains, buses are hauling ever more travelers. That’s after Macron, then the economy minister, pushed through a law two years ago allowing passenger buses to operate on longer routes formerly reserved for trains.

“Before these buses existed, I’d probably have had to call my mum and ask for her to pay for the trip,” said Odile Thiebaut, who on Monday traveled the 150 kilometers (93 miles) from Paris to Reims, in the champagne region. Her one-way fare was only 9 euros ($11), about a third as much as a train ticket.

Since sweeping to power in May, the 39-year-old Macron has raised the hopes of business leaders by pledging deeper changes, from loosening labor rules to cutting corporate taxes. He’s also championed startups to harness French technological prowess and shake up staid industries. His early experiment with transport provides a glimpse of the benefits of reform, and the limits of disruption in a country notoriously averse to change.

The measure liberalizing intercity bus services was part of a package of changes known as “Macron’s law,” which took effect in August 2015, more than a year before the former investment banker began his improbable bid for the Elysee Palace. Until then, the SNCF national railroad had a grip on all domestic ground routes of more than 100 kilometers. Macron had initially sought to open up more areas of the economy bound by special rules, including notaries and pharmacists—with a law that some nicknamed “the omnibus”— but backed off after intense lobbying.

“Some people saw in the bus liberalization a signal for the beginning of a larger reform of competition law and protected corporate bodies,” said Ludovic Subran, chief economist at Euler Hermes in Paris. “This is what helped Macron gain stardom at the beginning, notably with foreign investors and the right.”

Many travelers are embracing the so-called Macron buses for their low fares. There were some 6.2 million passengers in 2016, and bookings climbed 25 percent in the first quarter of this year, according to the most recent figures from French regulator Arafer.

While that’s a fraction of the 100 million or so high-speed train passengers, the buses are forcing SNCF to offer deeper discounts, while also competing with car-sharing services like Comuto SA’s BlaBlaCar. The rapid increase in bus passengers—which could reach 25 million by 2030, according to France Strategie, a government group that conducts economic research—is occurring as the state-owned rail operator is already struggling with its debt and running two out of three high-speed trains at a loss.

Birth To Death

Yet the budding bus industry is hardly a miracle in the making. The sector employs about 2,100 people, according to France Strategie. That’s a fraction of the 22,000 jobs Macron predicted could be created by 2025.

The number of major bus service providers has already dwindled to three from five, and, in a strangely French twist, two of the survivors are government owned. None is profitable. In a country where long-distance services didn’t exist, there’s a lack of proper bus stations even in major cities like Paris.

Still, the turbulence Macron unleashed, leading to “the birth and death of new companies,” is a normal sign of free market competition, said Marc Ivaldi, a professor at the Toulouse School of Economics. “As for whether this will be a symbol of Emmanuel Macron’s approach, I don’t know.”

The largest and only private bus operator is Flixbus, which is based in Munich and was founded in 2013 when Germany deregulated its own market. Next is Ouibus, owned by SNCF. And third is Isilines, a unit of Transdev, which is controlled by state holding company Caisse des Depots et Consignations.

Flixbus and Isilines say they expect to be profitable in 2018, and Ouibus in 2019. To make that happen, they’ve been raising prices and further increases are likely. Flixbus and Isilines don’t own their own fleets, but rather provide booking and after-sale services and work with local bus companies.

“It’s a weak margin business,” said Yvan Lefranc-Morin, the head of Flixbus France, who added that “overall, we are very satisfied that the market developed so quickly.” Bookings increased 80 percent in the first half of 2017, he said. “I hope Macron’s future reforms will be driven by the same philosophy and really open the markets.”

Recent actions by the government have cast doubt on how far Macron will go in liberalizing the economy and breaking with France’s tradition of dirigisme. The new president twisted the arms of automakers PSA Group and Renault SA to save a struggling car-parts maker and decided to nationalize the 155-year-old STX France shipyard, at least temporarily, to prevent Italy from gaining control.

If the bus reform is any indication of the future, Macron’s changes may be more piecemeal than sweeping. “He’s understood that France is ready for reforms, but that it should be done in a homoeopathic dose rather than electroshock,” said Subran.

Thiebaut and her fellow bus passengers aren’t in a rush. The ride to Reims—with air conditioning, reclining seats and wifi—took about 2 hours, compared with 50 minutes by rail. Although buses are often half empty, this one was packed. “It’s a good deal and I’ve met interesting people,” she said.

Article Link To Bloomberg:

Poll: Britain To Dodge Recession But Pay To Keep Getting Squeezed

By Jonathan Cable
August 10, 2017

Britain will avoid recession in the coming year but economic growth is expected to lag the euro zone, a Reuters poll showed on Thursday.

Consumers will feel the pinch from wage increases failing to keep up with rising prices.

It is just over a year since Britons voted to leave the European Union, a decision that has knocked around 13 percent from sterling's value, in turn driving inflation well above the Bank of England's 2 percent target as imports became more expensive.

Inflation will peak at 2.9 percent in the last quarter of 2017, according to the poll of almost 70 economists taken this week, but that won't push the central bank to tighten its ultra-loose monetary policy anytime soon.

Bank Rate was cut to a record low 0.25 percent in the months after the Brexit referendum and won't be lifted until 2019, the poll found.

"UK monetary policy is likely to be (as it should be) 'data dependent'," said Simon Wells at HSBC.

"The data are likely to stay fairly weak as consumers continue to face an income squeeze and firms wait for more clarity on the Brexit deal before growing investment rapidly."

Consumers played a key role in driving economic growth last year but pay increases have been lagging inflation, something that is expected to continue.

Wages will rise 2.2 percent this year and 2.5 percent next whereas inflation will average 2.7 percent in 2017 and 2.6 percent in 2018, according to medians. The BoE forecasts wages will rise 3.0 percent next year.

Brexit Wound

Reuters polls over the past few months have repeatedly said a disorderly Brexit, where no deal is reached when the two years of talks are due to conclude, would be the worst outcome for sterling and Britain's economy.

Negotiations over leaving the EU have not begun well due to disagreements among Prime Minister Theresa May's team of ministers about the kind of deal they should be seeking, a former top British diplomat said this week.

In the first full round of Brexit talks last month there was little compromise between the two sides on key disputes and the lack of clarity around how the divorce ends has stopped firms from investing.

BoE Governor Mark Carney has said uncertainty about Brexit -- in particular, lower investment by companies -- meant the economy could not grow as fast as before without pushing up inflation.

But the economy is still expected to grow, albeit slowly, and there is a median likelihood of a recession in the coming year of just 20 percent. Only two economists polled -- at Fathom Consulting and BayernLB -- gave a forecast above 50 percent.

Britain's economy -- one of the fastest growing among the Group of Seven rich nations last year but now one of the slowest -- will expand just 0.3 percent per quarter through to the middle of next year, the poll found.

That compares with predicted 0.4 percent per quarter forecasts for the euro zone.

Article Link To Reuters:

Buoyant Bitcoin Stirs Crypto-Bubble Fears

By Jemima Kelly
August 10, 2017

Bitcoin and other "cryptocurrencies" are big money, virtually as big as Goldman Sachs and Royal Bank of Scotland combined.

The price of a single bitcoin hit an all-time high of above $3,500 this week, dragging up the value of hundreds of newer, smaller digital rivals in its wake. Now some investors fear a giant crypto-bubble may be about to burst.

It has been a year of unprecedented growth for the largely unregulated market, with dozens of new currencies appearing every month in "Initial Coin Offerings" or ICOs. They have achieved value almost instantly, drawing in those who are eager to get in and make a quick buck.

At the start of 2017, the total value - or market cap - of all cryptocurrencies in existence was about $17.5 billion, with bitcoin making up almost 90 percent of that, according to industry data firm CoinMarketCap.

It is now around $120 billion - around the same value as Goldman and RBS together - and bitcoin makes up only 46 percent.

Bitcoin Cash, a clone of bitcoin that was split off from the original last week by a rival group of developers, was valued at more than $12 billion less than 24 hours after it had started trading.

"It's just created new value out of nowhere," said Rob Moffat, a partner at Balderton Capital, a London-based venture capital firm who focuses on fintech. "There's no fundamentals behind any of this - it's all based on public perception, so you can start to see some really strange phenomena."

Cryptocurrencies - so-called because cryptography is used to keep transactions secure - allow anonymous peer-to-peer transactions between individual users, without the need for banks or central banks. They use blockchain technology, a shared record-keeping and processing system that means digital money cannot be copied and spent more than once.

Billionaire U.S. investor Howard Marks likens the market to the dotcom bubble of the turn of the century - whose demise he predicted. He said in a recent investor letter that digital currencies were an "unfounded fad ... based on a willingness to ascribe value to something that has little or none beyond what people will pay for it".

But advocates of cryptocurrencies say 2017 is just the beginning of bull run. They argue the finite nature of these currency units - there will never be more than 21 million bitcoin, for example - as well as the technological innovation that underpins them will ensure their enduring value.

"The idea of this thing being a bubble is silly. We're in the bottom of the first innings," said Miguel Vias of Ripple, the third-biggest cryptocurrency, who was previously global head of precious metals and metal options at CME Group.

Dash To Ether

Whichever way cryptocurrencies move, they are likely to move together because their values are highly correlated, feeding off each other and magnifying the market effect.

That's partly down to investor sentiment, but also because the start-ups issuing new coins in ICOs generally collect money in a more liquid cryptocurrency, such as bitcoin or, more commonly, Ethereum's ether - the second-biggest cryptocurrency in total value.

That has driven demand for ether, which has climbed over 3,000 percent so far this year and now has a market cap of around $28 billion.

Bitcoin, which was launched in 2009, was the first successful cryptocurrency and is still easily the biggest, with a market cap of over $54 billion.

Its price has shot up around 225 percent so this year, and performed better than any conventional, central-bank issued currency in every year since 2010 bar 2014.

The blockchain-based currencies that have been built since bitcoin - 842, at last count - vary hugely in terms of their credibility.

Skeptics say bitcoin and its rivals are not particularly useful as currencies, as they are still volatile and not accepted by most merchants. They are mostly just used for speculative trading purposes.

There are some signs of acceptance of the biggest players by the establishment, however; Ethereum has been piloted by the United Nations as a way to distribute funds to Syrian refugees. Ripple has been successfully used as a payment method between settlement systems in a Bank of England trial.

Some other, smaller cryptocurrencies such as Dash, Monero and Z-cash are seen as having real value by some users because they offer an even higher level of anonymity than the likes of bitcoin. Whistle-blowing website Wikileaks this week said it would accept Z-cash for online donations.

'Darwinism In Real-Time'

It is mainly the new "token" cryptocurrencies that are issued in ICOs with no regulatory oversight, which have exploded since the start of the year, that are causing the most anxiety.

One, the "Useless Ethereum Token", which appears to have been set up as a way of showing how worthless many of the ICOs really are, is nonetheless changing hands for 3 cents a unit. "No value, no security, and no product. Just me, spending your money," its website states.

"It's just so easy to raise money on an ICO right now, it just feels like there's a gold rush going on there," said Moffat. "Some of the new currencies - beyond bitcoin and Ethereum - could crash to zero."

By mid-July, about $1.1 billion had been raised in ICOs this year, roughly 10 times more than that in the whole of 2016, according to cryptocurrency research firm Smith + Crown. (Graphic:

The rapid ascent of ICOs prompted the U.S. Securities and Exchange Commission (SEC) to warn last month that some ICOs should be regulated like other securities.

This is new digital territory and how the rapidly proliferating cryptocurrency market will play out is anyone's guess.

While critics say the highly correlated nature of the currencies means the weakness of newer entrants could bring the whole house down; others argue market forces will ensure the best players prevail.

"Will some of these (currencies) go away? Of course," said Vias of Ripple. "We’re going to see Darwinism in real-time here. Only the strong will survive."

Article Link To Reuters:

Here's What Goldman Sachs Is Telling Big Money Clients About Bitcoin

Strategists say ‘hype cycle’ in full effect for cryptos; Q&A to customers doesn’t address whether to buy digital assets.

By Camila Russo
August 10, 2017

Goldman Sachs Group Inc. is acknowledging that it’s getting harder for institutional investors to ignore the cryptocurrency market with total assets ballooning to $120 billion and bitcoin soaring more than 200 percent this year.

“Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are), real dollars are at work here and warrant watching,” analysts including Robert Boroujerdi and Jessica Binder Graham wrote in a Q&A sent to clients.

The debate has shifted from the legitimacy of the “fiat of the Internet” to how fast new entrants are raising funds, with initial coin offerings and fundraising that now exceeds Internet angel and seed investing. These are some of the questions the Goldman Sachs analysts answered:

How to Trade Cryptocurrencies in the U.S.?

Digital exchanges and block trades, and options will be coming soon. While individual investors can trade virtual coins on various online exchanges, institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility. But block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges, and could be traded in the U.S. by the end of the year.

Are Cryptocurrencies a Currency or a Commodity?

Coins have attributes of a currency, as they’re presented and trusted by some medium of exchange, and of a commodity, as they’re a limited resource. The classification of cryptocurrencies varies by country, government and even application. In the U.S., the Internal Revenue Service has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property.

What is Ethereum?

A platform first, and a cryptocurrency second. Unlike bitcoin, which is designed to be an alternative to "real money," Ethereum is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency called ether, but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. The rise of ethereum has not come without setbacks, including the $60 million hack of a venture capital-like organization called "The DAO."

What is an Initial Coin Offering (ICO)?

A fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which cash is raised with often little more than a white paper and Internet browser has sounded the alarm bells from parties including the Securities and Exchange Commission and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global angel and seed stage Internet venture capital funding in recent months.

What the Goldman strategists didn’t address is whether institutional investors should be buying cryptocurrencies or not.

Article Link To Bloomberg:

How War In Korea Would Impact The World Economy

Capital Economics has run the numbers on the economic cost.

By Enda Curran
August 10, 2017

Donald Trump’s warning of ‘fire and fury’ to deal with North Korea has rattled global markets.

If war were to break out, the biggest toll would be the humanitarian one. But it would shake the global economy too.

An analysis by Capital Economics Ltd. found that the supply and production of everything from smartphones and cars to flat screen televisions would take a significant hit, hurting growth around the world and pushing up prices. That’s because South Korea is embedded in a supply chain that feeds production of electronic appliances.

Here are some of the channels:

South Korea is the biggest producer of liquid crystal displays—used in televisions and other electronic devices—and accounts for 40 percent of their global production.

It’s the second biggest maker of semi-conductors—used in smartphones—with 17 percent of market share.

The Asian nation is also one of the world’s biggest car makers and is home to the globe’s three biggest ship builders.

“If South Korean production was badly damaged by a war there would be shortages across the world,” economists Gareth Leather and Krystal Tan wrote in a note. “The disruption would last for some time – it takes around two years to build a semi-conductor factory from scratch.”

Then there’s the risk to shipping lines. Any conflict would likely gum up major routes along the eastern seaboard of China, the world’s biggest trading nation.

“If it became too risky for container ships to enter and exit Chinese ports, it would cause even further disruption to the global economy,” according to Capital Economics.

For the U.S. alone the costs could be profound. Federal debt would likely be pushed higher to fund the cost of fighting the war and to pay towards reconstruction costs. If the U.S. were to spend proportionally the same amount on any reconstruction on the Korean peninsula as it did in Iraq and Afghanistan, national debt would soar by another 30 percent, according to the Capital Economics analysis.

Of course, we’re not at the point of conflict and some analysts say the scare is overdone. They point to previous periods of tension that eventually eased. It’s not even clear how any military conflict would play out given the diversity of potential actors involved.

Still, even in the absence of military action, heightened tensions are already bad news for North Asian growth, according to Bloomberg Intelligence. “For South Korea, the overhang of uncertainty dents confidence – threatening a blow to investment and hiring. For Japan, a stronger yen hits corporate earnings and the Bank of Japan’s reflation plans.

Article Link To Bloomberg:

The New Copycats: How Facebook Squashes Competition From Startups

Tiny Houseparty has a promising video-chat app—the social-media giant has noticed.

By Betsy Morris and Deepa Seetharaman
The Wall Street Journal
August 10, 2017

Tech startups live by the rule that speed is paramount. Houseparty, creator of a hot video app, has an extra reason for urgency.

Facebook Inc., FB -0.03% a dominant force in Silicon Valley, is stalking the company, part of the social network’s aggressive mimicking of smaller rivals. Facebook is being aided by an internal “early bird” warning system that identifies potential threats, according to people familiar with the technology.

This fall, Facebook plans to launch an app similar to Houseparty, internally called Bonfire, say people familiar with the project. Both apps let groups of people hang out over live video on a smartphone.

“They see we’re having traction,” says Sima Sistani, co-founder of Houseparty, which is based in San Francisco. “That’s why we’re pushing so hard.”

Silicon Valley is dominated by a few titans, a development that’s fundamentally altering the nature of America’s startup culture. While it’s as easy as ever to start a company, it is getting harder to grow fast enough and big enough to avoid getting either acquired or squashed by one of the behemoths.

For months, Houseparty could see Facebook in the rearview mirror. Last year, Facebook executives approached it for meetings the startup interpreted as exploring an acquisition. Then, two months after Houseparty publicly introduced itself as “the internet’s living room” in November, Facebook’s Messenger app said it would become a “virtual living room.”

Facebook in February launched a study of Houseparty, wooing its teenage users in a post that began: “Hi everyone!! Do you use Houseparty?”

The deep pockets of giants such as Facebook, Alphabet Inc.’sGOOGL -0.44% Google, Apple Inc. and Inc. make it increasingly difficult for startups to compete and stay independent. The four firms have a combined market capitalization of almost $2.5 trillion, a rough equivalent to the annual gross domestic product of France.

Facebook acquired photo-sharing app Instagram in 2012 for $1 billion and messaging service WhatsApp in 2014 for $22 billion. Google in 2013 bought Waze, a rival to Google Maps. Amazon in 2010 bought Quidsi, the online retailing company behind and other sites, after trying to copy it.

Lately, the titans also appear to be imitating smaller rivals more aggressively. In July, a week after the initial public offering of Blue Apron Holdings Inc., an Amazon subsidiary filed to trademark a meal-delivery kit with a tagline that echoed Blue Apron’s offering. Both Google and Facebook have taken aim at features on Snap. Inc.’s Snapchat platform. Amazon declined to comment. Google didn’t respond to requests for comment.

At an all-hands meeting last summer, Facebook Chief Executive Mark Zuckerberg told employees they shouldn’t let pride get in the way of serving users, another way of saying they shouldn’t be afraid to copy rivals, according to someone who was at the meeting. The message became an informal internal slogan: “Don’t be too proud to copy.”

Facebook executives have said publicly it is common in tech for companies to build on technologies pioneered by others.

Regulators, politicians and academics are increasingly questioning how tech giants use their considerable clout. In June, the European Union’s antitrust regulators fined Google $2.71 billion, saying its search engine favored its own comparison-shopping service over others. Google has said it disagrees with the conclusions and will consider an appeal.

“If you’re an app, are you better off getting acquired or competing against one of the big platforms?” says Scott Stern, management professor at Massachusetts Institute of Technology. While getting acquired can be “a very good win for the founders, that might be at the expense of a more competitive landscape.”

Houseparty, formally known as Life on Air Inc., was one of the first startups to go all-in on video chat, with an app that lets small groups of friends drop into a video conversation as if hanging out in a dorm room. It has tapped a coveted audience: teens who love Snapchat but not necessarily Facebook.

The odds are already stacked against it. The average smartphone user has about 89 apps on a device but uses only seven or eight daily, according to Verto Analytics. Facebook, Apple and Google dominate, commanding about 60% of the time and 80% of the ad dollars spent on mobile, the market-research firm says.

Houseparty “is one of the cool new apps—a good example of somebody who is challenging the status quo and may have success in a certain age group,” says Verto CEO Hannu Verkasalo. But Facebook, Google and Apple “are extremely monopolistic,” he says. “It’s very difficult to break in.”

Two of Houseparty’s founders—Ms. Sistani, 38, and Ben Rubin, 29—have been on the verge of success before. They previously led one of the first live-video-streaming apps, Meerkat, but its downloads tumbled after Twitter Inc. booted the app off its platform in favor of its own live-streaming app.

Facebook delivered the death blow to Meerkat by deciding to go full force into live video. “We couldn’t go head to head,” recalls one of Meerkat’s investors, Josh Elman, a former Facebook manager who is a partner at the venture-capital firm Greylock Partners and a Houseparty investor and board member.

Later that summer, Mr. Rubin, Ms. Sistani and several others including the third co-founder, Itai Danino, sequestered themselves for several days to brainstorm. What users loved about Meerkat, they decided, was a feature that let them share the screen for 60 seconds with a friend. That type of video interaction was more private than the live video broadcasts on Meerkat, they concluded, and more spontaneous than a phone call.

Their new app idea: “We want to remind people how nice it is to catch up with your friends. Or how easy it is to say hi to your mom,” says Mr. Rubin. “It doesn’t need to be this heavy thing.”

In February 2016, Mr. Rubin and Ms. Sistani launched Houseparty and began to demo it on college campuses. In May 2016, it briefly became the top social-networking app for the iPhone, according to app-research firm Sensor Tower.

Houseparty downloads went from 10,000 to 100,000 in one day and then crashed, unable to handle the load. The app was down for several hours and then glitchy through July, when the team decided it needed a major overhaul.

When Houseparty was at its most vulnerable, Facebook came knocking. Fidji Simo, head of Facebook’s video efforts, contacted Mr. Rubin, according to people familiar with the contact. She wanted to talk about live video, the people say. It was the first sign Facebook was scrutinizing Houseparty.

Mr. Zuckerberg is sensitive to anything that might disrupt Facebook, even the teeniest startup, say current and former executives and employees.

Facebook uses an internal database to track rivals, including young startups performing unusually well, people familiar with the system say. The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-video strategy, they say. Facebook used Onavo to build its early-bird tool that tips it off to promising services and that helped Facebook home in on Houseparty.

Houseparty says its growth had been stymied by the app’s crash, which slowed its ability to introduce new features and attract new users. The calls from Facebook’s Ms. Simo led to “natural conversations,” says Mr. Elman, the Houseparty investor and director, in which Facebook was exploring whether Houseparty would be a good fit for an acquisition.

Mr. Rubin didn’t want to sell but was under pressure from his board to keep Houseparty’s options open, Mr. Elman says. “If a company like Facebook or Snapchat needs your team’s expertise, that might be a better return for shareholders than the risk of going big,” Mr. Elman says he told Mr. Rubin.

Mr. Rubin says in general he isn’t against getting acquired as long as the opportunity would allow him “to continue to work on the mission on a larger scale.”

Mr. Rubin communicated with Ms. Simo and others over email and phone and then met with Facebook executives at Facebook’s offices, says a person familiar with the contacts. Messrs. Rubin and Elman declined to discuss details of the conversations.

Later, Ms. Simo informed Houseparty the talks wouldn’t go further, the person says. Facebook said Ms. Simo declined to comment.

In December, Facebook began its group-video-chat offensive. Its Messenger app introduced the feature with the ability to see up to six people in a conversation, compared with the eight-person rooms on Houseparty.

In February, Facebook invited Houseparty users between the ages of 13 and 17 to come to its offices in Menlo Park, Calif., to participate in a study and keep a diary for a week afterward that they would share with Facebook, offering as an inducement $275 Amazon gift cards.

Meanwhile, Houseparty readied for battle with $50 million in fresh funding in December from a group led by Sequoia Capital, a venture-capital firm that invested in WhatsApp and Instagram. Mike Vernal, a former Facebook executive, a Sequoia partner and Houseparty director, says Facebook’s interest in Houseparty and live video chat is to be expected because “Facebook has a mission that is fundamentally about helping people connect with each other.” He says he is optimistic about Houseparty’s growth potential.

Houseparty rebuilt its app so it could expand reliably without crashing. It added 25 employees, increasing its staff by 30%. Last month, it recruited a vice president of engineering, Kinshuk Mishra, who had helped Spotify AB, the music-streaming service, fend off Apple Music. It introduced a new chat feature called “passing notes” to attract more users.

In Houseparty’s office in an unmarked warehouse in San Francisco’s trendy Soma neighborhood, the startup’s leaders huddled in a tense meeting in May to discuss plans to beef up the app. When Ms. Sistani heard the company’s lawyer had delayed some minor changes to the terms of service, the latest in a series of delays, she jumped in and said: “No. No. No. No! Just update the policy.”

The pressure increased later that month when Houseparty learned of Bonfire, Facebook’s planned live group-chat app. (Tech news site The Verge reported on Bonfire in July.) “I have no problem with the copying,” Mr. Rubin says. “It’s just business. It’s just a distraction.”

Houseparty, which has one-million-plus monthly users, compared with Facebook’s more than two billion, is determined to beat Bonfire, he says.

Mr. Elman says he is encouraged that Bonfire is a stand-alone app and that Facebook hasn’t been particularly successful with those. But, he says, if Facebook figures out how to integrate the power of Houseparty “into a property that I’m already using 10 times a day, that would scare the crap out of me.”

Article Link To The WSJ:

Britain Launches Brexit Charm Offensive

London has become increasingly sensitive to suggestions the UK is underprepared for Brexit.

By Charlie Cooper, Tom McTague, and Annabelle Dickson
Politico EU
August 10, 2017

Theresa May has ordered a Brexit charm offensive at home and abroad, coordinated by a new Whitehall team drawn from David Davis’ Brexit department and Boris Johnson’s Foreign Office.

The new “engagement unit” will exploit the U.K.’s network of European ambassadors in an attempt to directly explain the U.K.’s Brexit strategy to government officials, businesses and other “stakeholders” in EU capitals, while also engaging with key interest groups at home, government officials familiar with the strategy told POLITICO.

It follows a direct “edict” from the prime minister herself for the U.K. to redouble efforts to “get the message out,” one senior U.K. official said.

London has become increasingly sensitive to accusations that Whitehall is underprepared for Brexit. The communications strategy, which hitherto saw the government keep many aspects of its Brexit plan a closely-guarded secret, has allowed the EU side to fill the void and frame the debate, senior officials now believe.

The change in approach is also symptomatic of an opening up of communications under the new team in No. 10 Downing Street following the June 8 election. Prior to the election, in which Prime Minister Theresa May lost her majority, the prime minster’s two co-chiefs of staff ran a very tight operation which controlled communication across all government departments. Both were forced to resign in the wake of the election campaign and May’s new team has made deliberate efforts to make government more open.

“This is about making the most effective use of specialist knowledge across both departments” — DExEU spokesperson

The strategy will particularly focus on EU capitals, ahead of a crucial European Council summit in October that will decide whether negotiations can progress to the next stage and discussions of the future relationship between the U.K. and the EU.

“As we approach the next stage of negotiations — discussing our future relationship with the EU once we’ve left — we want to ramp up the communications work, campaigns and stakeholder engagement that will enable the government to communicate its messages effectively in EU member states as well as at home,” a spokesperson from the Department for Exiting the European Union (DExEU) said.

“Staff from DExEU and FCO are working together to deliver this. This is about making the most effective use of specialist knowledge across both departments.”

‘Special Partnership’ With EU

Britain’s network of ambassadors in the EU27 capitals, who are coordinated from the Foreign and Commonwealth Office (FCO) led by Johnson, had been underused in the Brexit process so far, the first official said.

“Ambassadors know who to talk to and how to talk to them, but they have been a relatively untapped resource … They can have more influence than an opinion piece by a minister in a newspaper,” the official said, speaking on condition of anonymity.

With the role of the EU member countries in the Brexit negotiations about to become critical when leaders of the EU27 and Theresa May meet for the October European summit, British officials are conscious of the need to reassure May’s counterparts that the U.K. wants a good economic outcome for both sides and a close relationship with the EU after Brexit.

May’s Article 50 letter from March called for a “deep and special partnership” with the EU and “a fair settlement of the U.K.’s rights and obligations as a departing member state.”

The new Whitehall unit will ensure ambassadors and their teams are fully briefed on Brexit plans and empowered to reach out to their opposite numbers and other key influencers.

Their task will be made easier after the U.K. publishes up to 12 position papers, expected in the coming weeks, on crucial aspects of its EU strategy — part of what officials are calling a “big push” to firm up and publicize the Brexit plan.

Robin Niblett, director of the London-based foreign policy think tank Chatham House, said that the U.K. had neglected diplomacy in European capitals in recent years, and welcomed the move toward deeper engagement ahead of Brexit.

“During the last big push for ‘Global Britain,’ prior to Brexit, the government raised the number of British diplomats in India, China, the Gulf, while cutting back some of the human capacity in European capitals. Now the government is having to do some re-engineering to bring back that capability to prepare for the pointy end of the Brexit negotiation,” he said.

“But the government has to be clear that we are negotiating with Brussels and that we do have clear ideas on everything from fisheries to farming to air traffic control, and on the whole negotiating position with the EU, right down to granular details.”

Victory For Whitehall

The formation of the new unit is in part a victory for senior DExEU official Alex Ellis, a former ambassador to Brazil and European Commission staffer, who has long argued for greater openness and engagement over Brexit, according to the first official.

Ellis, who previously worked in the office of former European Commission President José Manuel Barroso, became a director general at DExEU in January. His push, supported by others within the Brexit department, for officials to have more contact with external parties such as foreign governments, businesses, and the media fell foul of No. 10’s tight communications management prior to the June general election, the official said.

A third former Whitehall official also said that the ambassador network had been under-used, and unable to feed into the Brexit strategy with political intelligence from EU27 capitals because of the closed-shop nature of Downing Street prior to June’s general election.

May’s civil service restructure following the June 2016 EU referendum result — which created DExEU and sidelined Johnson’s Foreign Office — was seen as a mistake by many senior officials at the time, the ex-official said.

Article Link To Politico EU:

Snap Shares Up Ahead Of Results; Options Traders Eye Steep Stock Swing

By Noel Randewich and Saqib Iqbal Ahmed
August 10, 2017

Shares of Snap Inc (SNAP.N) rallied on Wednesday as options traders buckled in for the social media company's quarterly results and after an analyst said the beaten-down stock was "getting interesting."

Shares of Snap, owner of the popular messaging app Snapchat, have been punished by investor concerns about user growth and waning confidence in the company's ability to ever turn a profit. The shares are down 50 percent from the record high reached shortly after Snap's market debut in early March.

Shares of Snap closed up 4.15 percent at $13.56 on Wednesday, still well below the $17 price in the initial public offering, the third-largest IPO for a U.S. technology company. The company is set to report quarterly results after the market close on Thursday.

Recent options transactions imply traders expect a 15 percent one-day swing for the stock in either direction following the quarterly results.

Opening the door to more volatility, Snap employees on Monday will be permitted to sell shares for the first time since the IPO, in the second expiration of restrictions on sales by certain shareholders. Restrictions on stock sales by early investors in Snap expired on July 29.

Snap has been a favorite of short sellers - who bet that a stock will fall - and the expiration of the lockup last month increased the number of shares available for trade.

Traders are now paying an annualized interest rate of 3.5 percent to borrow Snap shares in order to short them far less than rates over 70 percent ahead of that lockup expiry, according to S3 Partners, a financial analytics firm. Short bets have increased to 70 million shares from 67 million at the end of July.

Snap's chief executive, Evan Spiegel, and co-founder Robert Murphy each own 211 million shares and are the company's two largest shareholders. Some investors believe that on an analyst conference call following the quarterly report, Spiegel may reassure investors that he has no immediate plans to sell.

"People would be encouraged by that, inside and outside the company," CFRA analyst Scott Kessler said in a recent interview.

On May 11, shares plunged 21 percent after Snap, in its first quarterly report as a public company, released results that missed some Wall Street estimates.

FBN Securities analyst Shebly Seyrafi on Wednesday cut his price target for Snap's stock to $17 from $21, and wrote that at current levels Snap is "getting interesting" and could become an acquisition target for Facebook Inc (FB.O).

For the quarter ending in June, analysts on average expect $187 million in revenue and an adjusted loss of 14 cents per share, according to Thomson Reuters data. On a GAAP basis, Snap is expected to post a loss of $359 million.

Article Link To Reuters:

Tesla Developing Self-Driving Tech For Semi-Truck, Wants To Test In Nevada

By Marc Vartabedian
August 10, 2017

Tesla Inc is developing a long-haul, electric semi-truck that can drive itself and move in "platoons" that automatically follow a lead vehicle, and is getting closer to testing a prototype, according to an email discussion of potential road tests between the car company and the Nevada Department of Motor Vehicles (DMV), seen by Reuters.

Meanwhile, California officials are meeting with Tesla on Wednesday "to talk about Tesla's efforts with autonomous trucks," state DMV spokeswoman Jessica Gonzalez told Reuters.

The correspondence and meeting show that Tesla is putting self-driving technology into the electric truck it has said it plans to unveil in September, and is advancing toward real-life tests, potentially moving it forward in a highly competitive area of commercial transport also being pursued by Uber Technologies Inc [UBER.UL] and Alphabet Inc's Waymo.

After announcing intentions a year ago to produce a heavy-duty electric truck, Musk tweeted in April that the semi-truck would be revealed in September, and repeated that commitment at the company's annual shareholder meeting in June, but he has never mentioned any autonomous-driving capabilities.

Tesla has been a leader in developing self-driving technology for its luxury cars, including the lower-priced Model 3, which it is beginning to manufacture.

Several Silicon Valley companies developing autonomous driving technology are working on long-haul trucks. They see the industry as a prime early market for the technology, citing the relatively consistent speeds and little cross-traffic trucks face on interstate highways and the benefits of allowing drivers to rest while trucks travel.

Some companies also are working on technology for "platooning", a driving formation where trucks follow one another closely. If trucks at the back of the formation were able to automatically follow a lead vehicle, that could cut the need for drivers.

Silicon Valley startup Peloton Technology, for example, is working with several truck makers including Volvo on its platooning system, which it sees as a precursor to autonomy.

Tesla's high-flying shares, up almost 70 percent this year, closed down 0.5 percent at $363.53 on Nasdaq, but rose slightly after hours.

Prototype Tests

An email exchange in May and June between Tesla and Nevada DMV representatives included an agenda for a June 16 meeting, along with the Nevada Department of Transportation, to discuss testing of two prototype trucks in Nevada, according to the exchange seen by Reuters.

"To insure we are on the same page, our primary goal is the ability to operate our prototype test trucks in a continuous manner across the state line and within the States of Nevada and California in a platooning and/or Autonomous mode without having a person in the vehicle," Tesla regulatory official Nasser Zamani wrote to Nevada DMV official April Sanborn. He made no reference to any dates for potential road tests.

No companies yet have tested self-driving trucks in Nevada without a person in the cab. On July 10, Zamani inquired further to the Nevada DMV about terms for a testing license, an email seen by Reuters shows.

California DMV spokeswoman Gonzalez said that Tesla had requested a meeting on Wednesday to introduce new staff and talk about Tesla’s efforts with autonomous trucks. She said that the DMV was not aware of the level of autonomy in the trucks.

Tesla declined to comment on the matter, referring Reuters to the previous statements by Musk, who has discussed the truck in tweets and at the annual shareholder meeting.

Nevada officials confirmed the meeting with Tesla had occurred and said that Tesla had not applied for a license so far. They declined to comment further.


Musk has said that potential customers are eager to get a Tesla electric long-haul truck, but he faces doubt that the company can deliver.

While established trucking companies and truck manufacturing startups have poured resources into electrifying local package delivery fleets, battery range limitations have largely kept the industry from making electric trucks that travel across swaths of the country.

Lithium ion battery researcher Venkat Viswanathan of Carnegie Mellon University said electric long-haul trucking is not economically feasible yet.

“Your cargo essentially becomes the battery,” Viswanathan said of the massive batteries that would be needed to make range competitive with diesel.

Diesel trucks used for cross-country hauls by United Parcel Service Inc can travel up to 500 miles (800 km) on a single tank, according to UPS's director of maintenance and engineering, international operations, Scott Phillippi. By comparison, the company's electric local package delivery trucks travel up to 80 miles on a full charge.

Article Link To Reuters:

Markets Must Consider The Unimaginable

If a military engagement with North Korea occurs, then virtually every bet that has been made in markets will be 100 percent wrong.

By Mark Grant
The Bloomberg View
August 10, 2017

Market participants are sometimes forced to consider what no one wants to think about. It is not only an unpleasant experience, but you find yourself in a mental state that is quite uncomfortable. Still, when threats are being lobbed like bombs and when the world’s political elite are off in no-man’s land casting ever more heated words, then this realm must be entered, if only to consider the dreaded behemoth rising once again, and throwing the markets into the darkest of dungeons. I speak of war.

The current U.S. president can be somewhat erratic. However, he is not without purpose. North Korea has now engaged him, and the U.S., in a worrisome battle of words that keeps escalating by the day. I have faith in the rational behavior of Donald Trump, but when a sovereign nation, North Korea, actually threatens Guam with a “ring of fire,” then miscalculations become an ever-increasing threat. As author Margaret Atwood said, “War is what happens when language fails.”

Someplace, in all of this rancor, there is a line that should never be crossed. It is the line where words morph into battleships and tanks. In our nuclear age, the threat envelops more than just the destruction of armies but of entire nations thrown into a sea of incomprehensible destruction.

My concern here is with the leader of North Korea. Kim Jong Un does not seem to recognize any line and he seems to have no respect for anyone. Any person killing his own people with howitzers just for the show is someone to be terrified of because they have obviously lost any respect for humanity. The North Korean despot is a very dangerous man, and what he may do could well threaten the entire world by some moronic action.

What I am sure about is that if a military engagement occurs, then virtually every bet that has been made in markets, every position that has been taken, will be 100 percent wrong. The battlefield won’t be the only place where bombs are exploding. The markets -- all of them -- will go ballistic.

Equities will get creamed, prices of U.S. Treasuries will head toward the stratosphere, oil will rise back above $100 a barrel, yield spreads for credit assets will widen viciously against Treasuries, and riskier assets in general will lose their present value in the first moments of combat.

I do not think any of this will happen, but preposterous things have occurred before in our world. The leader of North Korea is a fanatical dictator who reminds me of another, many long years ago. It was 1938 and they said it could never happen, and yet it did. I am always mindful of this. My father bore the scars of what could not happen and he bore them for the rest of his life. One cannot ignore what stares you in the face.

Article Link To The Bloomberg View:

Facebook Hits Play On Watch, Its Video Tab

Redesign part of broader push to invest more in video, which Zuckerberg predicts will be largest driver of business over next two to three years.

By Deepa Seetharaman
The Wall Street Journal
August 10, 2017

Facebook Inc. FB -0.03% is taking a serious shot at YouTube.

The tech behemoth, which isn’t shy about replicating rivals’ features, is redesigning its video tab to bring Facebook’s original programming front-and-center. The revamped video tab, now dubbed Watch, includes sections that showcase videos a user’s friends are watching or those that spark a lot of debate on the platform, Facebook said Wednesday.

The new tab will roll out over the next several weeks.

Fidji Simo, who leads Facebook’s video efforts, said that unlike YouTube, Facebook wants its shows to generate conversation, preferably on Facebook itself. Early on, new shows will have to apply, but eventually Facebook wants to make it possible for any creator to simply upload a show on Facebook, as they do on YouTube.

“The thing that we’re doing that’s similar is really creating a platform where everybody can come in, but the thing that’s very different is all the content that we want to create is really around bringing communities together,” Ms. Simo said. “The angle that we’re taking is really finding shows that are about bringing fans together.”

The initiative is part of Facebook’s broader push to invest more in video, which Chief Executive Mark Zuckerberg predicts will be the largest driver of Facebook’s business over the next two to three years. Video ads will also help offset what Facebook expects will be slowing growth in news feed ad, its primary source of revenue.

Last year, Facebook paid publishers to produce live videos to jump-start production of live streams among its users. Today, one in five videos posted on Facebook are live.

Ms. Simo said a small portion of Facebook’s new original shows are paid for by the company, while the rest will receive a portion of ad revenue. Facebook’s goal is to create an ecosystem of video creators who are entirely sustained by revenue from ads shown in the middle of their videos, also known as ad breaks or mid-roll ads, she added.

This strategy echoes that of YouTube, a division of Alphabet Inc.,which in 2011 spent as much as $100 million buying content as part of the service’s attempt to compete with cable television. While YouTube’s shows weren’t particularly popular, they helped build a broader infrastructure to support creators, many of whom rely mainly on YouTube for revenue. Earlier this year, YouTube reached a major milestone when it reported that its viewers world-wide were watching more than 1 billion hours of videos a day.

Facebook declined to say how much they are spending on original content.

Each original show will get a page within the video tab that links to a Facebook group where viewers can chat. Unlike Netflix Inc., Facebook plans to roll out an episode every week rather than release all the episodes at once for binge-watching.

Facebook executives spent the first half of the year discussing its video tab plans with creators and Hollywood agents. People familiar with the matter previously said Facebook was soliciting pitches for shows in six main categories: sports, science, pop culture, lifestyle, gaming and teens. Facebook didn’t want to pay for a news show, the people said.

Wednesday, Ms. Simo said Facebook wanted a broad range of content. The company’s original programming includes a children’s cooking show and a series about science topics.

ATTN, a publisher that often tackles politically charged topics like climate change, decided to create lighter fare for Facebook’s tab, partly based on Facebook’s specifications, said ATTN co-founder Jarrett Moreno. ATTN’s two shows for Facebook include a healthy living show hosted by actress Jessica Alba that spans 10 episodes.

Mr. Moreno said it would get a portion of ad revenue and that Facebook is guaranteeing a certain amount revenue for every episode.

Article Link To The WSJ:

These 7 Billionaires Are Worried About A Stock-Market Correction

Listen to Jeff Gundlach, Carl Icahn, Howard Marks, Warren Buffett, George Soros, David Tepper and Paul Singer.

By Jeff Reeves
August 10, 2017

By now, all investors should know the research about the follies of market timing.

But similarly, all investors should admit that a quest for outperformance by stock picking and active management will never end — particularly given that 2017 shows more than half of active funds are beating their benchmarks for the first time since before the Great Recession.

So it’s worth noting that a host of big-name billionaire investors are pretty concerned about current market conditions.

Yes, there are tremendous benefits to passive, low-risk, long-term investing strategies. And obviously, some of the “best” investors on Wall Street often get things painfully wrong.

But when some of the biggest and most respected hedge funds are pumping the brakes as the Dow Jones Industrial Average DJIA, -0.17% and the S&P 500 SPX, -0.04% have hit new all-time highs this week (and the Nasdaq Composite COMP, -0.28% isn’t far off) … well, it seems plain irresponsible to simply write that off.

Here are what seven of Wall Street’s most iconic investors have to say about the market and the potential for a correction in the next several months.

Jeff Gundlach advises “moving toward the exits”:
DoubleLine Capital CEO and bond guru Jeff Gundlach is reducing his positions in junk bonds, emerging-market debt and other lower-quality investments on a fear that investor sentiment may roll over in the near future with painful effects. That probably won’t manifest in a huge drop over a short period, Gundlach predicted, but it’s wise to prepare nevertheless. “If you’re waiting for the catalyst to show itself, you’re going to be selling at a lower price,” he told Bloomberg recently, instead recommending investors begin “moving toward the exits.”

Carl Icahn warns stocks are overvalued:
Investing icon Carl Icahn has made plenty of bold bullish calls in recent years, including a winning bet on Herbalife HLF, -1.21% despite a lot of negative press at the time. However, Icahn generally isn’t seeing a lot of opportunities given how much stock prices have run up. “I really think now, I look at this market and you just say ‘look at some of these values’ and you have to wonder,” he told CNBC in June.

Howard Marks warns clients of “too-bullish territory”:
In a late July note to clients, billionaire Oaktree Capital founder Howard Marks used one of his popular memos to warn about the chance of a correction. You should read the whole piece about the formation of bubbles, market cycles and about the importance of caution right now. But in a nutshell, he warns aggressive investors are “engaging in willing risk-taking, funding risky deals and creating risky market conditions” and that this has been a hallmark of past downturns.

Warren Buffett has nowhere to go:
When you think of corporate cash hoards, Apple Inc. AAPL, +0.61% normally springs to mind — not Berkshire Hathaway Inc.BRK.A, +0.93% BRK.B, +0.92% the conglomerate known for big deal-making. Unfortunately, those deals haven’t materialized and the company that Warren Buffett built has seen its stockpile soar from under $40 billion in the second quarter of 2013 to nearly $100 billion at the end of June. That is telling, considering the Oracle of Omaha’s adage that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Despite all that cash, apparently Buffett & Co. don’t see many opportunities — either to buy wonderful companies, or to get them at fair prices.

George Soros gets bearish in a big way:
George Soros recently sold stocks and bought gold in anticipation of a big downturn. Admittedly, the billionaire investor jumped the gun with a bleak outlook for stocks, warning right after Trump’s election that global markets were in trouble — a call that clearly was incorrect. But Soros made a name for himself for a reason, so that he is doubling down again on this call is at least worth acknowledging.

David Tepper is “on guard”: The hedge fund guru behind Appaloosa Management isn’t leaning to the short side just yet, but is far less bullish than just several months ago. He has even suggested wary investors put some money in cash if they don’t like the frothy valuations on Wall Street right now. Tepper was particularly concerned about central-bank intervention over the last several years distorting bond markets and how that is influencing stocks in a way that could lead to trouble.

Paul Singer warns of an ETF crisis:
Admittedly, hedge-fund icon Paul Singer of Elliott Management has a personal stake in the fight against passive ETFs, given the active strategies pursued by his firm. However, Singer’s recent warning on CNBC that passive funds could create an inflexible trend that leads to a marketwide sell-off is worth listening to. “It means that at one point you will not have the active end in the market to stabilize it. You would have just the passive guys getting into herd mentality,” Singer said. In other words, if sentiment takes a hit, it will be dramatic — and no amount of bargain hunting or logic about fundamentals will help cushion the blow.

Article Link To MarketWatch:

How Trump's Threat Of 'Fire And Fury' Is Rattling Stock-Market Calm

‘So what are you waiting for? The S&P is still red as we write these lines. Get to work’

By Shawn Langlois
August 10, 2017

Relative to the kind of action we’ve grown accustomed to lately, Tuesday’s session was a regular roller-coaster ride of volatility. Of course, it just feels that way because the stock market has been in sleep mode for weeks now.

In reality, the North Korea stuff, as one former White House staffer might describe it, has turned out to be a “nothingburger” when it comes to derailing this rally.

The Cracked Market blog’s Jani Ziedins points out that, at the highest point on Tuesday, the S&P 500 SPX, -0.04% was up 0.4% before closing down a mere 0.2%. That kind of swing would hardly even register in another era.

He used this chart for some perspective of the action, or lack thereof.

“For a while I’ve been saying that the summer’s slow drift higher will continue until something new and unexpected happened. Is this war of words between Trump and Kim Jong Un that thing? Probably not,” Ziedins said. “While consequences could be quite dire, the odds of this grudge match escalating to a nuclear war are almost nonexistent. Neither side can afford to let it go that far.”

Or, as Rex Tillerson put it: “Americans should sleep well at night.”

Yes, Ziedins offers the same message to offer investors with an itchy selling finger. “While it is new and unexpected, it isn’t really material and unlikely to derail this bull rally,” he said. “Any near-term weakness should be viewed as a buying opportunity.”

He added that the stock market could actually feel a tailwind in the coming weeks when the big money managers come back from their summer vacations and the underperformers desperately try to play catch up with the record highs.

“This is a buy-and-hold market and keep doing what is working,” he said.

In a separate post, the Heisenberg Report gave investors another reason to be hopeful, by showing what happened to stocks the last time the U.S. found itself in a geopolitical spat like this:

“So what are you waiting for?” the Heisenberg Report blogger wrote. “The S&P is still red as we write these lines. Get to work.”

Article Link To MarketWatch:

You're Gonna Need A Bigger Virtual Wallet

The cryptocurrency market is exploding with new options, and there's reason to doubt a consolidation is coming.

By Tyler Cowen
The Bloomberg View
August 10, 2017

One unusual development is how many new “coins” -- sometimes called alt coins or cryptocurrencies -- have been created lately. Bitcoin is well-known, but now there’s Ethereum, Ripple, Zcash, Byteball, Augur and many others. By one estimate, there are more than 900 such assets on the market. These are not physical coins, of course, but rather entries in ledger systems based on new information technologies, sometimes called a “blockchain.” 1

In the long run, how many of these assets can survive? After all, we are used to nations having one dominant currency, or investors holding assets in a relatively small number of currencies, such as dollars, euros and yen.

A common view is that we are due for a “coin consolidation,” in which hundreds of assets will be whittled down to two or three dominant brands. To be sure, it seems likely that many of the coins trading right now are ill-conceived startups or maybe even fraudulent, and their values will fall to zero. That said, the marketplace can probably sustain a large number of alt coins, and I expect we will continue to live in a kind of coin menagerie.

Consider how people might use these coins. After the current speculative fervor fades, an individual might hold an alt coin for risk diversification. Just as the wealthy may put a certain percentage of their portfolios into gold, they are starting to do the same with these new coins. They don’t necessarily expect superior returns; rather the coins may be a hedge, as there are not enough high-quality government securities to go around.

Alt coins may be effective hedges for at least two reasons. First, the value of the coin may depend on how well the original rules for the coin were written, or how well it is governed in the case of managed coins like Ethereum or Ripple. Those factors may be fairly independent of what’s driving returns in traditional stocks and bonds, which in turn creates an opportunity for diversification.

Under these scenarios, alt coins are primarily stores of value rather than media of exchange. There is a notable tendency for exchange media to consolidate into a dominant currency in a given geographic region. But the very large number of financial assets in the world shows that thousands of stores of value can coexist and compete without much consolidation.

Second, alt coins to some extent are used for money laundering. If you think the world might be moving toward greater authoritarianism, the demand for money laundering could go up, to evade capital controls or asset restrictions. The value of alt coins would rise in turn, and that means alt coins would provide partial insurance against this very possible but unpleasant future path.

Money laundering may have a pejorative connotation, but a lot of laundering protects wealth from political tyranny or unfair treatment. Regulators may not wish to eliminate money laundering entirely, even if they could.

That said, money laundering is often illegal and harmful. If you earned some money by smuggling drugs, you might use it to buy an alt coin on one of the less regulated international coin exchanges, and then sell back that coin for a major currency, converting your dirty money into clean. You might go further and call your initial coin purchase an “investment” in a coin-related company and (illegally) claim you suffered a loss of funds, thereby strengthening your tax position with a potential loss offset. These actions will help make liquid markets in the coins and give them a real financial value.

The authorities are likely to take steps to reign in such behavior, but it won’t be easy to force full financial disclosure from all the exchanges. Many of the newest coin products specialize in creating transactional anonymity, protected by encryption. As is so often the case, for better or worse, technology is outracing the regulators.

Furthermore, when money laundering is a motive, at least some people in the market won’t want to consolidate into the best-known and most heavily scrutinized coins. New and unusual coins will flourish and find their markets, even if there is a high degree of churn.

Not long ago, we thought we knew what money was, but now it’s becoming so strange and diverse that the actual practice of money is outracing anything found in economic theory or in the law.

Article Link To The Bloomberg View: