WSJ : Utilities Look to Green Hydrogen to Cut Carbon Emissions

Utilities Look to Green Hydrogen to Cut Carbon Emissions
U.S. power providers facing regulatory pressure test ways to use renewable energy to produce the fuel

U.S. utilities are increasingly exploring the use of what is called green hydrogen made from wind and solar energy to reduce emissions from power plants and pipelines.

The early investments by companies including NextEra Energy Inc. and Dominion Energy Inc. are expected to help commercialize a costly technology that has been slow to develop despite its ability to provide a steady source of carbon-free power. Utilities and policy makers are beginning to view the technology as necessary to support ambitious renewable-energy goals.

The Los Angeles Department of Water and Power, the nation’s largest municipal utility, is spearheading a $1.9 billion effort to convert a coal-fired power plant in Utah to run on natural gas and hydrogen produced with excess wind and solar power. The plant, which serves numerous small utilities and electric cooperatives, has long been one of Southern California’s most significant power sources.

The gas turbines, slated for completion in 2025, will initially burn a 30% hydrogen fuel mix. Within two decades, they are expected to run entirely on hydrogen to comply with a California law that requires the state’s electricity supplies to be carbon-free by 2045.

“From a cost perspective, it doesn’t compete with natural gas at this point,” said Paul Schultz, director of external energy resources for LADWP. But he said the utility considers the conversion a long-term investment in changes that lawmakers and regulators are requiring.

And the price of green hydrogen is expected to become more competitive in coming years.

“The costs are going to go one direction, and that’s down,” said Craig Wagstaff, Dominion Energy’s senior vice president for Western gas distribution. “It’s just a question of how far down they’re going to go.”

Hydrogen, which is used in a range of industries, is most often produced from coal or natural gas through carbon-emitting processes. The production of green hydrogen, on the other hand, eliminates those emissions by using renewable energy to strip hydrogen atoms from water molecules through a process called electrolysis. Currently, only 1% of the hydrogen produced is green hydrogen.

A relatively small number of electrolyzers were deployed globally through 2019. Many more are expected to be in use by 2025 as companies look for ways to cut emissions from power and gas supplies, transportation and other sectors, according to a report by research firm Wood Mackenzie.

In June, German engineering firm Apex Energy Teterow GmbH completed a green-hydrogen plant with a two-megawatt electrolysis system located near the Baltic Sea.

Growth in green-hydrogen production has been slow in part because it typically costs three to six times as much as hydrogen derived from fossil fuels, said Dan Hahn, who leads the global energy-providers practice for research firm Guidehouse. He expects costs could fall significantly within the next decade as production technology develops and policies are implemented that favor green hydrogen over that derived from fossil fuels.

“We think that even in the next two to three years, costs will decrease because of the investments that are being made in the market,” Mr. Hahn said.

Juno Beach, Fla.-based NextEra, the nation’s largest owner of wind and solar farms, earlier this year announced plans to invest $65 million in a project that will use excess solar energy to produce hydrogen for use in a Florida natural-gas plant. The 20-megawatt electrolysis system, expected to be online in 2023, will be used to replace a portion of the natural gas in one of the plant’s three gas turbines.

“What makes us really excited about hydrogen…is that it has the potential to supplement significant deployment of renewables,” Chief Financial Officer Rebecca Kujawa said in a recent earnings call. NextEra declined to elaborate on its plans.

Dominion Energy, a Richmond, Va.-based company that provides electricity or natural gas to about seven million customers in 20 states, is planning to blend hydrogen into its gas-distribution system to reduce methane and carbon emissions. It is aiming to test a 5% blend at one of its training sites early next year, with the intent to incorporate it more widely and eventually increase the percentage of hydrogen in the system.

Eventually, the company sees potential in using excess wind and solar power to produce its own hydrogen for power plants and pipelines as it pushes for net-zero emissions by 2050.

Barron's : Capita’s Stock Has Taken a Dive. The U.K. Consultant May Need Its Own

Capita’s Stock Has Taken a Dive. The U.K. Consultant May Need Its Own Support Services.

Shares in Capita, the London-listed consulting and outsourcing firm, have fallen so much that they have virtually nowhere left to go.

The stock (ticker: CPI.UK) has declined from a 2015 high of 1,294 pence to 30 pence (40 cents) after a series of government contracts disappointed and profit margins were squeezed. Shares are down more than 80% this year but climbed as much as 14% on Thursday after a media report said private equity firm CVC Capital Partners was interested in the company, according to Reuters. Subsequent reports quashed the speculation, citing sources close to CVC saying it had no plans to launch a takeover bid.

The company, which manages the tax levied on drivers taking their car into a specific central London zone, and is involved with recruitment for the British army, and offers business and consulting services, is weighed down by a 1.1 billion pounds sterling ($1.45 billion) debt pile that dwarfs its £524 million market value.

Forget earnings and dividends—investors are more focused on whether Capita will make it through the second half without breaching banking covenants—agreements made with banks over the terms of loans.

“Capita continues to look uphill in its recovery; meeting banking covenant is set to remain tight in the short term,” wrote Robin Speakman, an analyst with broker Shore Capital, in a note. “Assessing shareholder value remains challenging, in our view; we expect Capita to survive and this should deliver material value.”

There are other glimmers of hope. Capita is seeking to sell its Education Software Solutions, or ESS, unit for £500 million. The company also said in its half-year update that it won £770 million of new business.

In a statement to Barron’s, CEO Jon Lewis says, “The market is clearly challenging, but we are continuing to win new business and deliver for our existing clients as we build a more focused and sustainable business for the long term.”

Capita has “accelerated some strategic decisions,” including the sale of Education Software. “This prospective divestment, alongside other planned disposals, will help us to strengthen our balance sheet and deliver on our long-term aim of generating sustainable revenue growth and cash flows,” Lewis says.

Brave investors could see this as a buying opportunity, with Jefferies marking Capita stock a Buy and estimating that it could rise 250%, to 105 pence. Broker Numis sees the price rising to 80 pence.

The business fetches four times this year’s expected earnings and is valued at an 80% discount to its peers.

Capita employs 61,000 workers, and at the full-year update in March, it posted a loss of £62.6 million for the year to Dec. 31, swinging from a £272.6 million pretax profit the year before. Revenues in 2019 were £3.6 billion. At the August half-year update, profits were worse than expected due to coronavirus.

In 1984, Capita was created as part of a unit within the Chartered Institute of Public Finance and Accountancy.

Its first CEO, Rod Aldridge, led a management buyout in 1987. Lewis was drafted to the turn business around in 2017.

The business is selling some of its crown jewels to prop up its finances, and Capita is a key partner in a number of United Kingdom government contracts. Some think that it’s too strategically important to fail.

Capita provides some bespoke services that are difficult for customers to replicate themselves, but this isn’t a good time in general for support companies, as customers tighten their belts to ride out the crisis.

Lewis says that Capita has made “good progress with our transformation,” and that it has managed its way through the Covid-19 crisis.

Yet the business is having to adapt its revival plan to incorporate measures to withstand the pandemic. If anyone needs support services, it’s Capita. The stock may be one for the brave.

Barron's : SoftBank Apparently Is Warping Tech Options Trading. Why You Shouldn’

SoftBank Apparently Is Warping Tech Options Trading. Why You Shouldn’t Be Surprised.

SoftBank Group has been on a year-long campaign to remake its capital structure and asset portfolio to make itself more appealing to investors, and the plan has largely worked—the stock has rallied 130% since bottoming in March.

But even amid its aggressive push to sell off assets, pay down debt, and buy back stock, the company periodically does things that confuse the heck out of the Street, which is one reason for the persistent 50% discount between the company’s market value and its underlying assets.

The latest example arrived Friday, as both The Wall Street Journal and the Financial Times reported that SoftBank (ticker: 9984.Japan) in recent months has invested billions of dollars in U.S. equity call options in a move that seems to have contributed to the recent rally in technology shares—and may be adding to volatility in the selloff of the past few sessions.

There aren’t a lot of details here. Neither the Journal nor the FT have any details on the size of the bet, which stocks were the focus of the trading, or even if the recent trades are still in force. The Journal says one investor appears to have purchased options tied to $50 billion worth of individual stocks, but the value of the options invested would likely have been a lot less than that.

SoftBank isn’t commenting. But a push into the options market would be consistent with other recent indications that founder and CEO Masayoshi Son, known to most as simply Masa, has become interested in speculating in the equity markets. Here’s what we know:

  • * In announcing June-quarter earnings, SoftBank also announced the creation of an investment management subsidiary capitalized at $555 million, with the cash to come two-thirds from the company and one third from Masa. In announcing the unit, the company specifically said it would invest in highly liquid public listed stocks, via both direct investments and derivative transactions.
  • * As Barron’s reported, SoftBank booked a profit of $611.5 million in the June quarter after investing $10 billion of the cash from its recent asset sales in large-cap tech companies. As of the end of the June quarter, the position had been trimmed to $3.4 billion.
  • * In a subsequent Securities and Exchange Commission filing, the company disclosed $3.8 billion in tech-stock holdings as of June 30, positions that appear to reflect both the holdings of the new fund and the tech investments with proceeds from recent asset sales. SoftBank disclosed a $1 billion stake in Amazon.com (AMZN) as well as $475 million worth of Alphabet (GOOGL) and nearly $250 million of Adobe (ADBE) shares. Other big bets include Netflix (NFLX), Microsoft (MSFT), and Nvidia (NVDA), all between $180 million and $190 million, with nine other stockholdings around $100 million, including Tesla (TSLA), Shopify (SHOP), PayPal Holdings (PYPL), DocuSign (DOCU), Zoom Video Communications (ZM), Square (SQ), Spotify Technology (SPOT), Paycom Software (PAYC), and ServiceNow (NOW).
  • * As part of the June-quarter earnings announcement, the company also said it was changing the way it reports financial results to reflect the fact that it is an investment company, and not an operating company. That repositioning is only reinforced by the reports that the company has become a major force in the options market.
  • * Just last week, SoftBank announced plans to sell about a third of its position in the telecom company SoftBank Corp. (9434.Japan) for $13.5 billion. That’s on top of the company’s nearly completed $41 billion asset sales program announced earlier this year, and accomplished via the sale of a large slice of the company’s stake in T-Mobile US (TMUS), the previous sale of SoftBank Corp. shares, and the sale of a small slice of the company’s huge stake in Alibaba Group Holding (BABA).
  • * The company has also acknowledged that it is shopping the U.K. chip design house Arm, which it bought for $32 billion in 2016. That business could be worth $40 billion or more. Add it all up, and you have about $100 billion in cash, enough to allow Masa to dabble in tech stocks, warp the options market, or do almost anything else he has in mind.

What makes this situation so perplexing is that after six months of aggressively trying to please investors with the asset sales program, paying down billions in debt, and buying back $10 billion of stock, with another $15 billion to come, Masa runs the risk of frittering away that goodwill should a large bet in the equity or derivative markets go awry.
SoftBank’s American depositary receipts (SFTBY) were down 3.3%, at $28.97, in recent trading. The S&P 500 was down 0.8%.

NYP : Judge rules Carlos Ghosn’s American accomplices can be turned over to Japa

Judge rules Carlos Ghosn’s American accomplices can be turned over to Japan

A federal judge on Friday ruled that two Massachusetts men can be legally extradited to Japan to face charges they helped former Nissan Chairman Carlos Ghosn flee the country in a box and on a private jet.

US Magistrate Judge Donald Cabell in Boston rejected the arguments against extradition by US Army Special Forces veteran Michael Taylor and his son, Peter Taylor, and certified the case for the US secretary of state to evaluate.

The Taylors’ lawyers had argued they could not be extradited because Japanese penal code does not make it a crime to help someone “bail jump,” and that they could only be charged if Japanese authorities were already pursuing Ghosn pre-escape.

But Cabell rejected that argument, saying their conduct “literally brings them squarely within the purview” of the law, which makes it a crime to harbor or enable the escape of someone like Ghosn who has committed a crime.

Lawyers for the Taylors did not immediately respond to a request for comment.

US prosecutors say the Taylors facilitated “one of the most brazen and well-orchestrated escape acts in recent history,” allowing Ghosn to flee to Lebanon, his childhood home, which has no extradition treaty with Japan.

Ghosn fled on Dec. 29, 2019, while awaiting trial on charges that he engaged in financial wrongdoing, including by understating his compensation in Nissan’s financial statements. Ghosn denies wrongdoing.

Prosecutors said both the elder Taylor, a private security specialist, and his son received more than $1.3 million from Ghosn and his family members for their services.

Both the elder Taylor, a private security specialist, and his son were arrested in May at Japan’s request and have been held without bail since then.

NYP : This colorful billionaire reportedly played outsized role in recent market

This colorful billionaire reportedly played outsized role in recent market rally

The mystery player behind the unprecedented summer tech rally appears to be the colorful billionaire CEO of Japanese conglomerate Softbank.

Masayoshi Son, known for nurturing startups into tech giants, has plunked down billions for options in individual tech stocks in a Softbank-backed buying spree that appears to have helped pull the broader markets out of their COVID-related swoon, according to multiple reports on Friday.

Softbank, which took an $18 billion loss in May tied to investments in Uber and WeWork, doled out more than $4 billion for large option positions in Amazon, Alphabet, Microsoft, and Tesla during the COVID market crash, according to the Wall Street Journal.

The investments, some of which came from Son’s own pockets, represented exposure of $50 billion in a bid to profit if the stocks hit certain levels, the report said.

Wall Street has been abuzz in recent weeks over the “Nasdaq Whale” as that exchange gained more than 60 percent between April and September amid a large volume of option buying.

Now traders say Son may have been a big reason tech stocks have been on such a roll, defying trends in the larger economy. Companies like Elon Musk’s Tesla, for example, have more than doubled in value since July, before falling back a bit due to a two-day stock market rout that started on Thursday.

Large tech stocks like Apple, Amazon, Facebook, Microsoft and Google’s parent company Alphabet represent about a quarter of the S&P 500 index. Apple is the largest company in the world by market capitalization at $2 trillion followed by Amazon and Microsoft at $1.6 trillion each.

“It’s just insane that, out of the blue, one Japanese fund bought 24 tech stocks in a quarter,” said Thomas Thornton of Hedge Fund Telemetry. “And also bought billions in options just to juice up the positions.”

Son — worth an estimated 30.2 billion, according to Forbes — is known in Silicon Valley for his sometimes eccentric personality, which has led to both extreme successes, like Alibaba, and failures, like WeWork. In a May presentation to analysts, he reportedly compared himself to Jesus Christ when discussing SoftBank’s $18 billion loss by reminding Wall Street that “Jesus was also misunderstood and criticized.”

It’s unclear if Softbank’s big adventure has come to an end, but the Nasdaq rally appears to have hit a wall.

The tech index finished its worst week since March on Friday — falling 144.97 points or 1.3 percent to finish at 11313.13 — as tech stocks failed to rebound from a massive 5 percent decline on Thursday that cost the top 10 tech tycoons, including Jeff Bezos, Elon Musk and Bill Gates, a combined $44 billion in a single day.

The tech rout led to pain in other indexes, too, with the S&P 500 ending Friday lower 28.10 points, or 0.8 percent, to 3426.96, and the Dow Jones industrial average losing 159.42 points, 0.6 percent, to close at 28133.31.

NYP : Pentagon says Microsoft won $10B contract over Amazon fair and square

Pentagon says Microsoft won $10B contract over Amazon fair and square

The Department of Defense on Friday reiterated its stance that Microsoft was the best recipient of its $10 billion cloud-computing contract, dealing a blow to Jeff Bezos’ industry leader Amazon.

The Pentagon came to its conclusion following a four-month re-evaluation of the contract, which had been awarded to Microsoft over Amazon — long considered the favorite to win the contract thanks to its Amazon Web Services cloud business.

“Microsoft’s proposal continues to represent the best value to the Government,” the DoD said in its statement.

The contract, however, is still on hold following Amazon’s argument that President Trump caused it to lose out on the lucrative deal.

The March injunction put a freeze on the Joint Enterprise Defense Infrastructure, or JEDI, project, which aims to allow the US military to use artificial intelligence to beef up its fighting capabilities as well as improve communications with soldiers on the battlefield.

Defense Secretary Mark Esper has denied there was bias and said the Pentagon made its choice fairly and freely without external influence.

Amazon Web Services previously said it was seeking to depose Trump and Esper in its lawsuit over whether the president was trying “to screw Amazon” over the contract.

Amazon also looked to question other officials involved in the decision and alleged that Trump had a history of inappropriately intervening in governmental decisions.

(ZH) Why We're Facing The Biggest Election Nightmare In Modern American History

Why We're Facing The Biggest Election Nightmare In Modern American History No Matter Who Ends Up Winning

It looks like we are headed for the most chaotic presidential election in modern U.S. history. According to some estimates, somewhere around 40 percent of all U.S. voters will vote by mail this year. That means that tens of millions of votes will be going through the postal system, and that has the potential to create all sorts of problems. For one thing, it is going to take a lot of extra time to open those ballots and count them.
For states that allow mail-in votes to be counted in advance, that shouldn’t delay final results by too much, but in other states we are facing the possibility of a nightmare scenario. There are certain states that are not allowed to start counting any ballots until the polls close on election day, and that includes key swing states such as Wisconsin, Michigan and Pennsylvania…

In several states not accustomed to high volumes of mail-in voting, including Rust Belt swing states Wisconsin, Michigan and Pennsylvania, election officials cannot start counting ballots until voting ends on election night. Other swing states, such as Minnesota, allow absentee ballots to be postmarked up to Election Day.
So as we all watch the election results come in on the night of November 3rd, what we will be getting will only be partial results.
And at this point the mainstream media is assuming that the votes that are cast in person will heavily favor President Trump, and so they are warning us that there could be a “red mirage” scenario in which it appears that Trump is easily winning an election that he has actually lost.
Of course if Trump builds a huge lead on election night, he is likely to declare victory, and Facebook has already stated that they intend to “flag” any such attempt…
Facebook plans to flag any attempt by the Trump campaign to declare a premature victory in the presidential race on the platform, the company announced on Thursday.
The social media giant, which has come in for heavy criticism for failing to police foreign and domestic elections propaganda on its network, also said it would not accept any new political ads in the final week of the 2020 presidential race.
This is one of the reasons why I have always been strongly against mail-in voting. Our nation is likely to be thrown into a state of chaos in November because it is going to take so long to count all the votes. President Trump and his supporters will be absolutely convinced that they have won the election if they have a big lead on election night, and Joe Biden and his supporters will be absolutely convinced that they will be victorious once all of the mail-in votes are finally counted. And then no matter what the final result is, about half the country will not be willing to accept it as legitimate.

This is going to be such a disaster, but nobody can do anything about it now. All we can do is watch this slow-motion train wreck play out.
Biden supporters are already pointing to a recent poll which shows that Biden voters are far more likely to vote by mail than Trump supporters are…
Forty-seven percent of voters who plan to vote for Biden say they are likely to vote by mail, according to a USA TODAY/Suffolk University poll released Wednesday. That’s more than double the 21% of voters backing Trump who say they are likely to vote by mail. The poll found 56% of Republicans say they intend to vote on Election Day, compared with 26% of Democrats.
If all of the votes were counted and released at one time, this wouldn’t be so much of a problem.
But instead most of the results that we will get on election night will be from in-person voting, and most of the mail-in votes will be counted some time later.
At this point, everyone should be able to see that this is almost certainly not going to end well.
So many Trump voters prefer to vote the old-fashioned way, while many Democrats are very eager to vote by mail, and this has created a huge disparity in ballot requests in some of the most critical swing states. Just check out these numbers…
In Pennsylvania – a state Trump won in 2016 but where polling shows him behind – nearly 900,000 Democrats have requested a mail ballot for the election, more than twice the 347,000 Republicans who have done so. In North Carolina, another state Trump won in 2016 but where he and Biden are in a close race, nearly 313,000 Democrats requested mail ballots compared with nearly 93,000 Republicans.
We are seeing similar numbers in other states, and this is one of the reasons why Joe Biden will not concede no matter how large Trump’s lead on election night is.
This thing could end up dragging out for an extended period of time, and that is extremely unfortunate.
And the truth is that we may never even know the true winner of the 2020 election. Voting by mail opens up so many opportunities for fraud, and large numbers of ballots never even get delivered to the intended voters in the first place. As Breitbart has reported, 17 percent of the ballots that were sent out to registered voters in Nevada for their primary in June came back as “undeliverable”…
Last month, the Trump campaign filed suit against Nevada for their universal mail-in voting plans that would allow votes submitted after election day to count for the election. More than 223,000 mail-in ballots sent to registered voters in Las Vegas, Nevada, for their June primary bounced as “undeliverable” — 17 percent of the total 1,325,934 mail-in ballots that were sent out in the county.
Over the next couple of months, tens of millions of ballots are going to be floating around out there, and many will end up in the hands of people that should not have them. For example, Hulk Hogan says that one of his friends just received a ballot that was addressed to his dog…
Crazy stuff, a friend of mine just got a mail in ballot for his dog Nugget? Now even dogs can vote!
How does something like that happen?
Another thing to watch out for is “ballot harvesting”. Democrats have become masters of this practice, and they used it with devastating effectiveness in California in 2018. Now they are deploying this tactic all over the nation, and very alarming incidents of abuse are already being reported…
Furthermore, a citizen journalist reported that Democrats were harvesting mail-in ballots from nursing homes in Texas by fraudulently submitting ballot applications in bulk.
The journalist said that at least 32 applications supposedly from elderly voters were all submitted with the exact same handwriting, and were all submitted using the same pre-printed envelope with the same-style stamp.
In the end, we should all want a legitimate outcome. The integrity of our elections is of paramount importance, and the will of the American people should be respected.
But I don’t think that any of us will ever be able to feel good about the outcome of this election no matter who ends up winning.
Needless to say, the losing side is likely to be absolutely enraged over an election that they feel has been stolen from them, and that is likely to make the current chaos in our streets even worse.
At this point, even the Washington Post is warning that this election is likely to end “catastrophically”…
Perspective: The election will likely spark violence — and a constitutional crisis.
In every scenario except a Biden landslide, our simulation ended catastrophically.
For once, I actually agree with the Washington Post.
I have a hard time trying to imagine how this election could possibly end well.
Right now, Trump and his supporters are convinced that Trump will win, and Biden and his supporters are convinced that Biden will win.
One side is going to be bitterly, bitterly disappointed, and they will almost certainly feel like the election was not won legitimately.
There is going to be so much anger, and when it explodes it is going to be very frightening to watch.
This is already such a dark chapter in American history, and this election is going to take things to an entirely new level.
Sadly, I believe that after November 2020 nothing in this country will ever be the same again.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Now may be the time for individual investors to look at new strategies to prepare for retirement in the pandemic era; ZM's recent performance isn't sustainable

* Cover Story: Among the near-retiree set of 50- to 64-year-olds, confidence about having enough saved for retirement has fallen to 48 percent from 65 percent before the pandemic, according to a recent poll by Edward Jones/Age Wave, and they may need a “new playbook to shore up their retirement for the pandemic era”; “The rapid return to record levels in major stock benchmarks opens the door for savers to review their strategies, recalibrate their portfolios, and rethink their risks.”

* Tech Trader: Cautious on ZM: The video communications company’s recent results are out of sync with the rest of the market, and what frustrates investors and analysts is how to model the business and how to use those models to value the business; The chief obstacle is that Zoom appears either unable or unwilling to give realistic guidance in the current environment—and ultimately its remarkable performance isn’t sustainable.

* Trader: A market reckoning is coming—“The Nasdaq has gotten too far ahead of itself for it to end any other way, despite protestations that the rise has been well-deserved. Low interest rates make expensive stocks look cheap and business models look unstoppable, and the looming threat of a coronavirus second wave makes tech stocks look all the more attractive”; Investors are blaming unusual stock options activity for the week’s tech stock rout, but there’s another factor roiling options that affects the stock market: Gamma is exploding.

* Profile: Karina Funk, co-manager of the $3.6B Brown Advisory Sustainable Growth fund, defines sustainability differently than other managers—While many socially responsible funds seek to reduce ESG risks by screening out, say, oil companies to reduce their carbon footprint, Funk also seeks companies that exploit ESG opportunities to increase profits, which she calls their sustainable business advantage (top 10 holdings: AMZN, MSFT, DHR, AMT, TMO, V, GOOGL, INTU, VRSK, UNH).

* Interview: Jenny Davis, co-manager of the $3.6B Baillie Gifford International Alpha 2 fund, focuses on companies around the world that can grow regardless of what events they face—such as the pandemic and the cold war between the US and China—and on long-term trends at companies with considerable competitive advantages.

* Features: 1) Warren Buffett’s surprising bet on five Japanese trading companies spotlights the appeal of Japan’s long-depressed stock market; Based on several measures—earnings, dividend yield, and price-to-book ratio—Japanese stocks broadly look inexpensive, and government policies should help improve weak returns; 2) Positive on PTON: The connected bike company has been one of the great Covid-19 success stories, and demand continues to soar as gyms in many states remain shut down, and with the home fitness segment remaining resilient, many analysts expect Peloton to issue a strong earnings reports; 3) “New rules governing how banks account for bad loans have helped sink bank stocks this year—the changes, however, might provide a boost to the banks and their shares in 2021, if the economy strengthens,” partly because many banks may have been reserving more than the losses they will eventually incur; 4) Abenomics, the strategy of former Japanese prime minister Shinzo Abe, was meant to break the “deflationary mind-set” that had plagued the country ever since its stock market and real estate bubbles burst in the early 1990s, and by some measures it was a success—yet when evaluated against the benchmarks set by Abe and his top advisors, Abenomics has failed to deliver; 5) For some single people, filing for Social Security at 62 could be a short-term solution to get through a period of crisis without income, but it doesn’t have to mean retiring permanently and giving up sizable Social Security benefits for life—and for baby-boomer couples, the options can be even better if they’re able to use a little-known strategy known as a “restricted application” for Social Security.

* European Trader: Cautious on Capita: Shares in the London-listed consulting and outsourcing firm have fallen so much that they have virtually nowhere left to go, and investors are concerned that it won’t make it through the second half without breaching banking covenants—yet a potential sale of its Education Software Solutions unit and £770M in new business offer glimmers of hope.

* Emerging Markets: The upcoming IPO of Ant Group, BABA’s financial arm, is what emerging market investors have been waiting for, and its estimated $250B valuation would make it one of the top global fintech companies—but it isn’t likely to inspire smaller releases among China’s half-dozen other “decacorns,” private companies with imputed worth more than $10B.

* Streetwise: Columnist Jack Hough looks at the “head-scratching math behind when to claim social security benefits,” noting that claiming benefits late reduces longevity risk—the risk of outliving savings—but it presents the risk that you won’t maximize benefits if you die before your life expectancy.

FT : SoftBank unmasked as ‘Nasdaq whale’ that stoked tech rally

SoftBank unmasked as ‘Nasdaq whale’ that stoked tech rally
Japanese conglomerate has been snapping up options in huge amounts over past month

SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday and Friday, according to people familiar with the matter.

The Japanese conglomerate had been snapping up options in tech stocks during the past month in huge amounts, fuelling the largest ever trading volumes in contracts linked to individual companies, these people said. One banker described it as a “dangerous” bet.

The aggressive move into the options market marks a new chapter for the investment powerhouse, which in recent years has made huge bets on privately held technology start-ups through its $100bn Vision Fund. After the coronavirus market tumult hit those bets, the company established an asset management unit for public investments using capital contributed by its founder, Masayoshi Son. 

Now it has also made a splash in trading derivatives linked to some of those new investments, which has shocked market veterans. “These are some of the biggest trades I’ve seen in 20 years of doing this,” said one derivatives-focused US hedge fund manager. “The flow is huge.”

The surge in purchases of call options — derivatives that give the user the right to buy a stock at a pre-agreed price — has been the talk of Wall Street, as the sheer size of the trades appears to have exacerbated a “melt-up” in many big technology stocks over the past few months. In August alone, Tesla’s share price shot up 74 per cent, while Apple gained 21 per cent, Google’s parent Alphabet rose 10 per cent and Amazon 9 per cent.

One person familiar with SoftBank’s trades said it was “gobbling up” options on a scale that was even making some people within the organisation nervous. “People are caught with their pants down, massively short. This can continue. The whale is still hungry.”

SoftBank declined to comment.


The Nasdaq was at one point on Friday down 10 per cent from its peak — the common definition of a correction — yet the options boom means that the US stock market remains vulnerable to further bursts of volatility, according to Charlie McElligott, a strategist at Nomura. “The street is still very much in a dangerous space, and that flow is still out there,” he wrote in a note on Friday.

The overall nominal value of calls traded on individual US stocks has averaged $335bn a day over the past two weeks, according to Goldman Sachs. That is more than triple the rolling average between 2017 and 2019. The retail trading boom has played a big part in the frenzy, but investors say the size of many recent option purchases are far too big to be retail-driven. 

Unusually, single-stock call trading volumes have surged beyond the average daily volumes of calls on the broader US stock market, and are almost as high as the level of trading in index puts — which give the buyer the right to sell at a preset price and act as a popular form of insurance against stocks falling. 

The size and aggressiveness of the mysterious call buyer, coupled with the summer trading lull, has been a big factor in the buoyant performance of many big tech names as well as the broader US stock market, according to Mr McElligott. This week, he warned that dynamics around options meant the heavy purchases forced banks on the other side of the trades to hedge themselves by buying stocks, in a “classic ‘tail wags the dog’ feedback loop”. 

This explains the US stock market climbing in tandem with the Vix index — often referred to as Wall Street’s “fear gauge” — and meant that equities were fragile and vulnerable to the kind of sudden setback that erupted on Thursday. “The equity volatility complex is acting ‘broken’ and indicative that ‘something’s gotta give’,” Mr McElligott warned in a note shortly before the Nasdaq fell 5 per cent. 

One banker familiar with the latest options trading activity said Thursday’s market pullback would have been painful for SoftBank, but he expected the buying to resume. A larger and longer-lasting stock market decline would be more damaging for this strategy, and would probably involve rapid declines, he added.

The options buying comes alongside $10bn in public investments SoftBank is targeting through its new asset management arm.

According to a filing to the Securities and Exchange Commission last month, SoftBank has bought stakes of almost $2bn in Amazon, Alphabet, Microsoft and Tesla — investments that are partially funded by cash from its $41bn asset sale programme that was triggered by a collapse in its share price during the Covid-19 market turmoil.