After Hours Summary: FARM -4.7% following earnings/guidance, FOMX +52% on Phase 3 clinical trial updateAfter Hours Gainers:
Companies trading higher in after hours in reaction to news: FOMX +51.9% (announces 'positive' top line results from third Phase 3 trial evaulating FMX101 for the treatment of moderate-to-severe acne), EYPT +9.2% (ahead of earnings tomorrow before the open), GLPG +7.1% and GILD +2.4% (Gilead Sciences and Galapagos NV announced that filgotnib achieved primary and all key secondary endpoints in Phase 3 Study FINCH 2), LPI +6.7% (will replace HealthEquity in the S&P SmallCap 600), EPE +5.1% (SVP Chad England disclosed the purchase of 50K shares), NWY +2.7% (ticking higher - to launch rebranding/transformation; outlines plans to grow sales beyond $1 billion and achieve double digit EBITDA margins), SLCA +2.5% (Pioneer Natural Resources and U.S. Silica announce West Texas sand supply agreement), ATHN +1.1% (edges higher after DealReporter / MergerMarket reporter teased 'ATHN detailed sale update published'), BHC +0.9% (modestly higher after confirming it has paid down an additional $57 mln of senior secured term loans and $50 mln of revolver borrowings), ETE +0.4% (Director Richard Brannon disclosed the purchase of ~100K shares worth ~$1.8 mln)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: FARM -4.7%
Companies trading lower in after hours in reaction to news: PGTI -5% (commenced an underwritten public offering, subject to market and other conditions, of 7 mln shares of its common stock), NLY -2.2% (to make public offering of 78 mln shares of common stock), DOCU -1.8% (files for 8,060,550 share common stock offering by selling stockholders; proposes private placement of $400 mln of convertible senior notes), CADE -1.6% (announces 12.1 mln Class A share offering by selling stockholders pursuant to shelf registration), CISN -1.6% (light volume; commences proposed public offering of 12 mln ordinary shares by selling shareholders), WCG -1% (lower despite S&P 500 addition news), S -0.5% (FCC releases letter pausing the T-Mobile [TMUS] -Sprint transaction clock)
September-October 2018 Outlook: Deadlines
The next few months will see the culmination of a number of geopolitical issues that have been building a ‘wall of worry’ for the financial markets. A cluster of hard and soft deadlines will hit from now through the end of the year that will realign the global political and economic landscape for years to come. From the impending US Congressional election, to the due date for a Brexit deal, to looming ultimatums on trade deals, these deadline will mark binary moments that could either give markets the footholds to keep climbing or cause the first stumble toward the next recession. These key unresolved risks along with the historical trend for the September-October period to be especially volatile are a recipe for some unnerving gyrations during the next couple of months. If progress is demonstrated on these time-sensitive issues, then equity markets may continue to melt up on the strength of corporate earnings reports amid stronger fiscal stimulus and what is still a highly accommodative interest rate environment globally.
The D.C. Political Calendar
In the US, the growing intensity of the political divide between Democrats and Trump’s Republican Party may hit a crescendo in the next few months. With control of Congress the President has been able to shape an agenda of lower taxes, increased military spending, and cutting regulation. But Trump’s chaotic personality has maybe made these victories harder than they should have been and has contributed to consistently low poll numbers for the President outside of his core supporters. The installation of another conservative jurist on the Supreme Court this fall may be his last victory in a while as all indications are the Democrats should retake the House in the mid-term elections (November 6).
While a Democrat-controlled House may provide the President with a foil to grouse about obstructionism, it will effectively stall any further legislative planks in his agenda. Assuming a Democratic win, the new Congress will not be taking up additional tax cuts or discussing funding for a border wall. Democratic committee leaders will also seek more oversight of Executive activities and may even be emboldened to start impeachment proceedings (even if it’s a lost cause without a supermajority in the Senate).
The other political shoe that could drop in the next few months is the conclusion of Robert Mueller’s investigation of election meddling by Russia. With a handful of Trump associates already facing jail time it has yet to be seen if Mueller or federal prosecutors will net any bigger fish. The timeframe on when the investigation will close remains murky, but the pressure is growing with Trump’s lawyers threatening to cry foul if Mueller makes any major announcements in the two months leading up to the election, and the President himself saying since June that “he may get involved” in the FBI probe.
It should be noted that as part of his electioneering the President is also threatening another government shutdown if he does not get the border wall funding he desires. Current funding expires at the end of September, so if the Trump holds fast there could be a temporary disruption of some government services. Democrats will pounce on this as material for political ads, while the President will hope that it burnishes his reputation as a tough negotiator who is ready to shutdown “the swamp.”
Countdown to Trade War
Trump’s best hope at improving chances for the GOP in November would be to cobble together one or more significant trade deals. US trade negotiators reached a handshake deal with Mexico, but are having a harder time integrating Canada into the accord. Canada seeks a win-win-win agreement, but has said that no NAFTA is better than a bad agreement. PM Trudeau has stated outright that Canada wants to keep the dispute resolution mechanism (‘Chapter 19’) and that his country will not give in to US demands that it abandon dairy supply management (which results in high tariffs on US dairy products). Negotiators have given the impression that they are making slow progress, and if they can overcome these two points of contention it seems possible a deal could be reached by the end of September.
Markets have not reacted much to the Trump Administration’s tough talk on trade, largely on the belief that no one wants a trade war and that all sides will come to terms in the months ahead. That conviction may be tested if the US moves forward with $200 billion in additional tariffs on China that are now cleared and ready to go at any moment. President Trump appears to be holding the new tariffs in reserve as leverage to get some movement out of Beijing, and he recently threatened that another $267 billion could be teed up rapidly, which would effectively be putting duties on just about all Chinese imports.
All of this gamesmanship with tariffs does not appear to be benefitting anyone. Even though US metals manufacturers made upbeat comments about the trade restrictions, shares of US Steel have dropped 40% from the moment the metals tariffs were officially announced.
China is definitely feeling the pinch: the China Securities Journal recently forecast that export growth in the second half of 2018 may decline to 2% (after reporting July exports rising 12.2% y/y), and the Shanghai Composite Index and Hang Seng have tumbled into a bear market. Amid these circumstances, China has shown patience and has thus far given signals that it does not intend to use currency as a weapon in the trade war. Nor has there been any sign of either side giving concessions, and by all reports there is currently minimal high-level contact between Beijing and Washington.
The lack of progress on US/China trade talks is also hampering negotiations with North Korea. President Trump effectively stopped the countdown clock on the ‘denuclearization’ of the Korean peninsula, canceling his Secretary of State’s visit on the grounds that China is no longer helping the cause. The implication is that North Korea will be put on the back burner until the Sino-American trade dispute is resolved.
The US also continues to tangle with Europe and emerging market countries on tariffs, with a large focus on the automobile and steel industries. The US and EU announced a temporary ceasefire in late July with an agreement to discuss WTO reforms and to work toward zero tariffs on non-auto industrial goods. The two sides agreed to resist implementing any new tariffs while talks are ongoing. Trade representatives from both sides will meet again at the end of September with the goal of finalizing agreements on at least some areas of trade by November.
Emerging markets are struggling with US trade pressures coupled with the strong dollar, which have exacerbated already difficult local conditions in places like Turkey and Argentina. Elections in Brazil (first round October 7, runoff October 28) will be a chance to stabilize Latin America’s biggest economy, maybe providing footing for the emerging markets. After years of the political establishment being overrun by corruption, this election could be a seen as a break with the past, though markets participants are not that keen on the expected victory by one of the more left-leaning candidates.
World leaders will have several opportunities to hash out their differences (or clash further) in the coming months. The UN General Assembly in New York, scheduled for September 25, is often used by politicians as a platform for policy speeches and a chance for bilateral meetings, and leaders will gather again in Buenos Aires on November 30 and December 1 for the G20 summit.
Brexit Deadlines Loom
The clock is running out on Brexit talks, which appear to be moving along in fits and starts, with some recent headlines indicating that EU and the UK have eased some of their redlines in hopes of getting closer to a deal. The days ahead will come down to whether the EU accepts the ‘Chequers’ proposal formulated by UK PM May as a compromise. If Chequers can be used as a framework, then an exit arrangement may still be reached by the legislative deadline that has reportedly already been pushed out a month to mid-November. If all goes well, an EU summit could be held in that timeframe to seal the deal.
Things get much more complicated, however, if the EU explicitly rejects the Chequers proposal. The BOE’s chief economist Haldane recently noted the markets are putting chances of a ‘no deal’ Brexit at about one-in-four, but that may rise dramatically if the EU says ‘no’ to Chequers.
Should Chequers be spurned, pro-Brexit ministers are urging the PM to take a harder tack, endorsing an agreement framed on the EU’s trade agreement with Canada. The “Canada-plus” model envisions allowing nearly all goods to be traded without tariffs, but, just as with the Chequers plan, this new idea does not solve the most nettlesome issue in the talks: a resolution for the Irish border that prevents the reintroduction of fixed customs checks at the border that would undermine Ireland’s Good Friday Agreement. Unless UK and EU negotiators find an answer to avoid a hard border in Northern Ireland soon, they may not be able to get a withdrawal agreement in place by March.
In recent days the EU’s chief Brexit negotiator Barnier stated that he sees a realistic possibility of reaching an agreement in the next 6-8 weeks. That comes on the heels of reports that the EU was instructing Barnier to get a deal done to avoid a ‘hard Brexit.’ An informal meeting of the EU 27 in Salzburg on September 19 may be the first indicator that this timeframe is on track. Current expectations are that the Salzburg meeting could report more Brexit progress and confirm plans for a formal leaders’ summit on Brexit, likely on November 13…if all goes well.
End of an Era
All of the short term deadlines of the next few months described above are coming due in the context of the end of an era of extremely accommodative monetary policy. The global economy is starting to hum again, but it is not clear how long that will continue once the unprecedented central bank accommodation is withdrawn.
Most major central banks have now made minor adjustments to edge away from ultra-easy policy, but rates largely remain stuck near zero. The BOE is only planning one more rate hike between now and 2020, the ECB is not expected to start raising rates until September 2019, and the BOJ may not raise rates for years.
Meanwhile, the Federal Reserve will extend its divergence from other global central banks with another 25 basis point rate hike at the September 26 FOMC meeting. That will take the key rate to over 2.00% for the first time since 2008, and bring it closer to the ‘neutral’ rate which is being estimated somewhere in the 2.50-3.00% range. The September hike is locked in, but there is still some dove/hawk debate over a fourth 2018 rate hike in December. The Fed appears to be ignoring President Trump’s gripes about rates rising too fast, and that may even stiffen the Fed’s resolve to move higher again in December to demonstrate the central bank’s independence.
Markets have taken higher US rates in stride and that may continue as the Fed works its way back to the ‘neutral’ rate. As this process continues, there seems to be little discomfort with the flattening yield curve, perhaps in part because Japanese and German bonds are holding down the long end of the curve. The theory goes that the 2-10 year curve may not be as good a signal for recession as in the past because of extraordinary global rate accommodation over the last decade. However, it is possible that a yield curve inversion could still trigger a stock market reversal, becoming a self-fulfilling prophecy as traders who are trained to watch for the inversion react to it.
It appears that US economic outperformance and the strong dollar will be the dominant themes in the global economy for the rest of the year. America’s economic strength has allowed the Fed to get far ahead of other central banks in policy normalization, and now the market perspective may be shifting toward predictions of how high rates will go. Fed Chairman Powell has signaled that, with inflation looking very stable, once rates get to ‘neutral’ the Fed will be more cautious about taking rates higher from that point, even if the economy remains very strong. Barring any new shocks developing from missing one of the geopolitical ‘deadlines’ described earlier, that should give comfort to the markets that the next recession is not due any time soon.
Calendar
SEPTEMBER
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI
5: UK Services PMI; US ISM Non-Manufacturing PMI
6: China Trade Balance
7: US Payrolls & Unemployment
9: China CPI
10: UK Q2 GDP; UK Manufacturing Production
11: UK Goods Trade Balance
12: UK Claimant Count & Unemployment; US PPI
13: BOE Policy Statement; ECB Policy Statement & Press Conference; US CPI; China Industrial Production
14: US Retail Sales; Preliminary Univ. of Michigan Consumer Sentiment
17: EU Final CPI; Empire State Manufacturing Index
18: UK CPI & PPI; German ZEW Economic Sentiment; BOJ Policy Statement
19: US Housing Starts & Building Permits; EU 27 meeting in Salzburg
20: UK Retail Sales; Philadelphia Fed Manufacturing Index; US Existing Home Sales
21:
24: Various EU Flash Manufacturing & Services PMIs; German Ifo Business Climate
25: US Conference Board Consumer Confidence; UN General Assembly in NYC
26: FOMC Policy Statement & Press Conference
27: German CPI; US Final Q2 GDP; US Durable Goods Orders
28: German Retail Sales; UK Current Account; UK Final Q2 GDP; EU Flash CPI; US Personal Income & Spending; Chicago PMI
29: China Manufacturing & Non-Manufacturing PMIs
OCTOBER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI
3: UK Services PMI; US ISM Non-Manufacturing PMI
4:
5: US Payrolls & Unemployment
7: Brazil election (1st round)
8: China Trade Balance
9:
10: UK Q3 GDP; UK Trade Balance; US PPI
11: UK Manufacturing Production; ECB Minutes; US CPI
12: Preliminary Univ. of Michigan Consumer Sentiment
15: US Retail Sales; Empire Manufacturing; China Q3 GDP; China CPI; China Industrial Production
16: UK CPI & PPI; German ZEW Economic Sentiment
17: UK Claimant Count & Unemployment; EU Final CPI; US Housing Starts & Building Permits; FOMC Minutes
18: UK Retail Sales; Philadelphia Fed Manufacturing Index
19: US Existing Home Sales
22:
23:
24: Various EU Manufacturing & Services PMIs
25: German Ifo Business Climate; ECB Policy Statement & Press Conference; US Durable Goods Orders; UN General Assembly in NYC
26: US Advance Q3 GDP
28: Brazil election (2nd round)
29: German Retail Sales; US Personal Income & Spending
30: German Preliminary CPI; EU Flash Q3 GDP; US Conference Board Consumer Confidence; BOJ Policy Statement & Outlook Report
31: EU Flash CPI; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs
NOVEMBER
1: UK Manufacturing PMI; BOE Policy Decision & Inflation Report; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment
6: US Midterm Election
Closing Market Summary: S&P Overcomes Slow Start, Extends Monday's ReboundStocks stumbled out of the gate on Tuesday, but strengthened as the day wore on, ending higher for the second day in a row. The benchmark S&P 500 was down as much as 0.4% early, but finished with a gain of 0.4%, closing a tick below its session high. The Dow also climbed 0.4%, while the tech-heavy Nasdaq added 0.6%.
Tuesday's slow start came after China told the World Trade Organization (WTO) that it wanted to impose sanctions on the U.S., citing Washington's non-compliance with a ruling in a dispute over U.S. dumping duties. That headline weighed on the futures market, but stocks immediately started moving higher after the opening bell.
Energy shares were particularly strong, helped by a rebound in the price of crude oil. WTI crude futures rallied 2.5% to $69.25/bbl, ending a five-session losing streak, as Hurricane Florence continued barreling towards the East Coast, where it may disrupt the Colonial Pipeline that connects Houston to New York. The S&P's energy sector advanced 1.0%.
Meanwhile, FAANG names gave the information technology (+0.8%) and consumer discretionary (+0.8%) sectors a boost, with Facebook (FB 165.94, +1.76), Apple (AAPL 223.85, +5.52), Amazon (AMZN 1987.15, +48.14), Netflix (NFLX 355.93, +7.52), and Alphabet (GOOG 1177.36, +12.72) adding between 1.1% and 2.5%.
The lightly-weighted telecom services sector (+1.1%) was another outperformer, but no other group posted a gain of more than 0.2%. Conversely, five of the eleven sectors finished in negative territory, but losses were modest; consumer staples and utilities were the worst-performing groups with a loss of 0.4% apiece.
U.S. Treasuries moved notably lower on Tuesday, pushing yields higher across the curve. The yield on the Fed-sensitive 2-yr note jumped four basis points to 2.75% -- its highest level in over a decade -- and the yield on the benchmark 10-yr note also advanced four basis points, settling at 2.98% -- its highest level in a month.
In politics, President Trump is reportedly considering a second meeting with North Korean leader Kim Jong Un ahead of the November midterm elections. The two leaders held a historic summit in June, but relations have cooled since as North Korea drags its feet in its promise to work towards denuclearization.
Reviewing Tuesday's economic data, which included July Wholesale Inventories, the July Job Openings and Labor Turnover Survey, and the August NFIB Small Business Optimism Index:
- July Wholesale Inventories rose 0.6% (consensus +0.7%). The June reading was left unrevised at +0.1%.
- The key takeaway from the report is that the pace of sales growth year-over-year continues to exceed the pace of inventories growth, which is a positive dynamic that can eventually help wholesalers regain pricing power if it persists.
- The July Job Openings and Labor Turnover Survey showed that job openings increased to 6.939 million from a revised 6.822 million (from 6.662 million) in June.
- The NFIB Small Business Optimism Index for August increased to 108.8 from 107.9 in July.
Looking ahead, investors will receive the weekly MBA Mortgage Applications Index, the August Producer Price Index, and the Fed's Beige Book for August on Wednesday.
- Nasdaq Composite +15.5% YTD
- Russell 2000 +11.9% YTD
- S&P 500 +8.0% YTD
- Dow Jones Industrial Average +5.1% YTD
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Apple’s autonomous vehicle fleet swells 27% in four months
Apple keeps adding autonomous vehicles to its test fleet in California, boosting its ranks 27% since May, according to records from the California Department of Motor Vehicles.
The company now has 70 autonomous vehicles permitted to test on public roads, Mac Reports first reported. The permits, which are issued by CA DMV, require a safety driver to be behind the wheel.
Over the past 18 months, Apple has gone from just three autonomous vehicles to 27 by January, 55 by May, and now 70. GM Cruise has the most permitted autonomous test vehicles at 175, followed by Waymo with 88. Apple has the third-largest fleet.
The number of permitted test vehicles is one of the only ways to track what Apple is up to. The company doesn’t talk about its self-driving vehicle program.
The tech company’s permit with the CA DMV, the agency responsible for monitoring AVs in the state, is the only official acknowledgment that it even has a program. Apple’s self-driving program has been considered an open secret in Silicon Valley. CEO Tim Cook has more recently made references to the company’s interest in autonomous systems.
Last month, the company disclosed its first accident, according to a report filed with the CA DMV. The low speed accident occurred August 24. The number of accidents involving autonomous vehicles have become more common as companies put more of these self-driving cars on public roads. The vast majority are minor, low-speed incidents.
There was just one accident involving a self-driving vehicle (that one was owned by Delphi) reported to the DMV in 2014. So far this year, there have been more than 40 accidents involving self-driving cars reported to CA DMV.
He Turned $14,502 Into $800 Million: Now The World's Biggest Crypto Hedge Fund Is Hurting
Olaf Carlson-Wee is hardly a household name in the pantheon of iconic hedge fund investors. And yet, after turning $14,502 into a $150 million personal fortune by going all-in on cryptocurrencies just before bitcoin became a household name, earning investors in his Polychain Capital such as heavyweight VC Andreessen Horowitz a staggering 2,303% return last year, eventually growing his hedge fund to $800 million... and then losing some 40% of it all before the age of 30, perhaps he should be.
But the bigger question is with millions riding cryptocurrencies from rag to riches and then back to rags again, is Olaf just a one hit wonder?
Olaf Carlson-Wee, 29
That's what the WSJ asks in its wide-ranging profile of the Silicon Valley (former?) star who wears neon tracksuits, has five earrings and routinely eats only a plate of refried beans, garlic and cheese for dinner. He is treated as an oracle by wannabe cryptocurrency moguls who mob him in public. He was treated similarly by his investors, until the losses started coming in.
Riding the crypto wave to its December 2017 all time highs, Polychain has since lost around 40% of the $800 million it made for clients last year "through a combination of investment losses and withdrawals by some of its earliest investors." Some backers are unhappy that Carlson-Wee refuses to change tactics despite a broad pullback from crypto; he himself - like David Einhorn - is fine with his strategy, especially since he cashed out a big chunk of his personal haul in the fund months ago.
To be sure, 2018 has brought nothing but bad news for the one-time star investors:
Prominent venture-capital firm Union Square Ventures has yanked some of its money, while others have fallen out privately with the firm. One investor is suing, suspecting he was underpaid when he moved to redeem his investment. Attorneys for Polychain and Mr. Carlson-Wee deny that.
Worse, the crypto bubble has burst, with bitcoin sliding 55% this year, recently trading for $6,301, down from its peak of nearly $19,280 in December. Ethereum is even worse, down over 80% from its all time highs over $1,300 to below $200 and sliding every day.
“How much of it is luck, how much of it is skill and how much of it is luck disguised?” asks Fred Ehrsam, one of Polychain’s first investors, who is now starting his own fund.
Luck or skill, it is safe to say that Olaf is unorthodox.
The young man has "compared his relationship with cryptocurrency to romantic love, and likened the current investment opportunity to the early days of the internet." A true bitcoin fanatic, he is not only a hodler, he is a BTFDer - and there have been many dips recently - and has continued buying on every single dip, particularly stakes in businesses tied to bitcoin rivals such as the cryptocurrency ether.
His "office" is what one would hardly describe as "midtown Madison avenue": he manages Polychain’s roughly $650 million flagship fund—the world’s biggest in crypto—from an Apple laptop surrounded by vintage boom boxes in undisclosed, secret San Francisco warehouse offices.
His background is also unique: Olaf's path to high-stakes investing began in Minnesota, in the suburbs of Fargo, N.D., where his parents were Lutheran pastors. In high school, Mr. Carlson-Wee wrote an SAT tutoring program in his spare time. He said he had few friends; his classmates voted him “most unique.” At Vassar College, he majored in sociology and against advice from his professors wrote a senior thesis on a virtually unknown digital currency named bitcoin.
After graduation in 2012, he found his calling early when he became the first employee at Coinbase, a cryptocurrency exchange that would soon become America's largest.
And - unexpectedly for a multi-millionaire - until the morning of his WSJ interview, he owned only one pair of pants: jeans covered in sap from a short stint as a lumberjack. A shoestring acted as the belt. His $50,000 starting salary was paid in bitcoin.
And lucky that it was, because in July 2016, Carlson-Wee quit to start one of the first-ever crypto funds out of an apartment he shared with seven roommates in San Francisco’s gritty Mission district.
With a mullet, a wide collection of vintage windbreakers and a tendency to speak extemporaneously on esoteric topics, Mr. Carlson-Wee reminded some investors of the 1980s “Back to the Future” character Marty McFly.
The pitch worked and soon venture capitalists were lined up at the door (even though as the WSJ writes, Carlson-Wee reminded some investors of the 1980s “Back to the Future” character Marty McFly).
The pitch worked: In December 2016, Union Square Ventures agreed to invest in the fledgling firm at a $5 million valuation, a steep price considering its total assets under management were roughly the same.Venture capitalist Ramtin Maimi took a stake in Polychain at the same time, and afterward took Mr. Carlson-Wee out to lunch. Over avocado toast, he asked the manager how large Polychain could grow.“Fifty million dollars is a great target,” Mr. Carlson-Wee responded. A few months later, Mr. Maimi repeated the same question. “I think $400 million is really the right number,” Mr. Carlson-Wee said.
His timing was perfect: polychain grew exponentially at a time when cryptocurrency suddenly became mainstream. Hundreds if not thousands of startups were forming to use the blockchain.
As the money rolled in, Carlson-Wee spent hours each day at his computer, occasionally responding to strangers on Reddit, encouraging them to buy bitcoin and the like. More big names in Silicon Valley were beginning to invest in the fund including Sequoia Capital, Bain Capital Ventures and Peter Thiel’s Founders Fund, all eager to get access and insight into the crypto phenomenon.
Carlson-Wee at Polychain Capital’s offices in a converted warehouse
However, things started to turn sour after Richard Craib, one of Olaf's friends who first invested with Polychain, was among the first those having second thoughts. He had invented his own coin, dubbed the Numeraire, which briefly made him wealthy on paper as investors including Polychain bid it up. But Polychain subsequently sold some Numeraire, depressing the value of Mr. Craib’s holdings. Mr. Craib shortly after redeemed his investment in Polychain funds, for what he says were unrelated reasons.
Union Square Ventures, one of Polychain’s earliest backers, was also debating its investment. Polychain was racking up millions in gains, but only on paper, and the digital currency was volatile.
None of these events would have taken place if bitcoin had continued to surge, but it was not meant to be.
So has the bitcoin crash affected the 29 year old? Not at all: according to the WSJ, Olaf isn’t bothered by bitcoin’s daily churns. On a recent weekday afternoon, he left his cellphone in his dusty, black Cadillac Escalade for a 90-minute, technology-free hike to the site of an ancient volcanic crater in the Oakland hills.
In between digressions on movie trailers (he won’t watch them, fearing spoilers) and capitalism (in a natural, but not imminent, decline), he talked about how he doesn’t consider himself a trader.
“One thing I want to emphasize is that as a trader, when something doubles, you sell half—or something like that,” he says, making air quotes over the word “trader.” At Polychain, he says, “We don’t trade. We shift around positions.”
Instead, Carlson-Wee describes his approach as “long-term, thesis-driven investing.” This philosophy, shared by blue-chip technology investors such as Andreessen Horowitz, is that cryptocurrency is only one branch of a larger upending of the digital world. Most existing online entities, from dating applications to enterprise cloud computing, will be replaced on a less-expensive, decentralized infrastructure, the blockchain. The question for evangelists is which of the hundreds of competing blockchain platforms will reach widespread adoption.
Last year, Mr. Carlson-Wee was largely placing a bet that his favored platform, Ethereum, would win out; more than one-quarter of Polychain’s main fund was invested in Ethereum, according to its most recent audit.
It proved to be a pinful but, as ethereum is down over 75% this year, while Polychain’s main portfolio is down by about 31% through the end of July, the latest figures available. In communications this year with investors, the firm defended its performance as better than the crypto market at large.
Investors in the fund credit a shift from assets such as Ethereum into less-liquid, more stable stakes in crypto companies internationally. That’s a less-volatile bet but one that’s harder to get out of in the case of an extended decline.
Whether he managed to beat his ethereum "benchmark" is irrelevant, as those investors who want to pull all of their money are now out of luck. Since the start of the year, Polychain has blocked investors from redeeming their money immediately, instead putting investments into a side pocket that now comprises more than half the fund. That means investors can’t cash out fully even if they want to.
But while his investors may be stuck, Carlson-Wee is rich. Unlike many firms that hold illiquid assets that are paid only when they sell investments, Polychain’s main fund takes its fees every year on paper gains. And while Carlson-Wee started last year with just $14,502 in the fund, turning that into $150 million of fees, he has since cashed out $60 million, a move that raised concerns among investors about his commitment to his own fund. "He says he set aside money for family, and subsequently invested more in the firm’s funds."
What happens next is unclear.
Carlson-Wee now straddles the line between crypto kid and crypto king. He has pared back his time on online message boards to 15 minutes a day, from an hour or more in years’ past, to spend more time on the fund. He recently chopped off his mullet because being known for such an idiosyncrasy reminded him of “something a hedge-fund manager would do.”
He moved the firm to new offices in a converted warehouse. The San Francisco address listed on Polychain’s public filings is a fake, designed to fool would-be hackers and kidnappers who have targeted other crypto traders.
“This is going to be such an epic adventure either way,” Carlson-Wee said, smiling. “Like, if this whole thing collapsed, that would be crazy, you know?”
Others disagree: "This model will not last,” says Jing Sun, a Polychain investor. Polychain is now raising new funds that won’t charge fees until they realize gains.
Ultimately, the story of Olaf will be determined by whether believers in cryptocurrencies can reflate yet another bubble. "If cryptocurrencies go to zero, we go to zero," Carson-Wee said. "I don’t think anyone is under any illusions that’s not the case."
Ferragamo could assess strategic options, including sale - source
11 SEP 2018
Italian luxury goods group Salvatore Ferragamo [SFER:MI] could consider strategic options, including a potential delisting, according to a source close to the company. The group is also studying the potential disposal of some real estate assets.
The company, which is 67.7%-owned by the Ferragamo family, has been approached by several private equity funds, the source said. Sale talks with a large private equity firm are ongoing, he added.
However, a Ferragamo spokesperson denied that the company is considering such plans, and added that the family does not intend to sell, the spokesperson said.
Ferragamo’s board is likely to look at a number of strategic options at its upcoming meeting, the source said, adding that the company could come to a decision soon in light of its disappointing financial performance.
The next board meeting will take place at the beginning of October, but no strategic or other sale options will be on agenda, the spokesperson added.
Any potential changes to the company’s shareholder structure will only be possible six months after the completion of a 3.5% stake sale via an accelerated book-building process that was carried out in June, a person familiar with the situation said. The ABB was priced at EUR 23.25 per share, according to press reports.
Ferragamo needs to shore up its finances, the source said. In 1H18, Ferragamo’s revenues fell 6.2% compared to the same period last year, while EBITDA dropped about 14% over the same period.
As of 30 June 2018, the company reported a net cash position of EUR 101m. The value of property, plant and equipment assets, which include real estate, came in at EUR 254m.
Ferragamo expects 2018 sales and margins to be negatively impacted by currencies trend, “unfavourable retail channel mix” and “difficult wholesale environment”, according to a company’s press release.
Meanwhile, full-year results in 2017 saw revenues declining 3% and EBITDA slumping some 23%. This was anticipated by a profit warning issued in December 2017.
On a TTM EBITDA basis, the Italian company’s EBITDA level corresponds to a 24x EV/EBITDA multiple against peers such as Prada [1913:HKG], LMVH [EPA:MC], Hugo Boss [ETR:BOSS] and Richemont[SWX:CFR] pointing at an average of 13.5x, according to Dealreporter analytics.
Ferragamo is trading at EUR 20.16/share at 17:25 BST, for a market cap of EUR 3.4bn.
The company, which is 67.7%-owned by the Ferragamo family, has been approached by several private equity funds, the source said. Sale talks with a large private equity firm are ongoing, he added.
However, a Ferragamo spokesperson denied that the company is considering such plans, and added that the family does not intend to sell, the spokesperson said.
Ferragamo’s board is likely to look at a number of strategic options at its upcoming meeting, the source said, adding that the company could come to a decision soon in light of its disappointing financial performance.
The next board meeting will take place at the beginning of October, but no strategic or other sale options will be on agenda, the spokesperson added.
Any potential changes to the company’s shareholder structure will only be possible six months after the completion of a 3.5% stake sale via an accelerated book-building process that was carried out in June, a person familiar with the situation said. The ABB was priced at EUR 23.25 per share, according to press reports.
Ferragamo needs to shore up its finances, the source said. In 1H18, Ferragamo’s revenues fell 6.2% compared to the same period last year, while EBITDA dropped about 14% over the same period.
As of 30 June 2018, the company reported a net cash position of EUR 101m. The value of property, plant and equipment assets, which include real estate, came in at EUR 254m.
Ferragamo expects 2018 sales and margins to be negatively impacted by currencies trend, “unfavourable retail channel mix” and “difficult wholesale environment”, according to a company’s press release.
Meanwhile, full-year results in 2017 saw revenues declining 3% and EBITDA slumping some 23%. This was anticipated by a profit warning issued in December 2017.
On a TTM EBITDA basis, the Italian company’s EBITDA level corresponds to a 24x EV/EBITDA multiple against peers such as Prada [1913:HKG], LMVH [EPA:MC], Hugo Boss [ETR:BOSS] and Richemont[SWX:CFR] pointing at an average of 13.5x, according to Dealreporter analytics.
Ferragamo is trading at EUR 20.16/share at 17:25 BST, for a market cap of EUR 3.4bn.
Ferragamo shares price lost some 7% since the start of the year, averaging at EUR 22/share. The stock reached a peak of EUR 25.3 in mid-May.
In July 2018, Salvatore Ferragamo Chairman Ferruccio Ferragamo said that unnamed French companies had approached the Italian group, adding that the company’s family owners had rebuffed the approaches. At the time, it was understood that Ferragamo was referring to luxury goods companies LVMH and Kering [EPA:KER], according to a media report.
In November 2017, Italian media reported that the Ferragamo family had signed an agreement related to future control of the company. The item, which cited Ferruccio Ferragamo said that all 26 adult members of the family had signed the three-year agreement, which is focused on the third and fourth generation.
Such an agreement confirms that the CEO will always be external to the family and the family members that want to be involved in the business are subject to verification by the family board. At that time, Ferruccio Ferragamo was reported to have ruled out the option of selling the group.
In July 2018, Salvatore Ferragamo Chairman Ferruccio Ferragamo said that unnamed French companies had approached the Italian group, adding that the company’s family owners had rebuffed the approaches. At the time, it was understood that Ferragamo was referring to luxury goods companies LVMH and Kering [EPA:KER], according to a media report.
In November 2017, Italian media reported that the Ferragamo family had signed an agreement related to future control of the company. The item, which cited Ferruccio Ferragamo said that all 26 adult members of the family had signed the three-year agreement, which is focused on the third and fourth generation.
Such an agreement confirms that the CEO will always be external to the family and the family members that want to be involved in the business are subject to verification by the family board. At that time, Ferruccio Ferragamo was reported to have ruled out the option of selling the group.
Atlanta Fed cuts Q3 GDP forecast to 3.8% from 4.4% prior
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2018 is 3.8 percent on September 11, down from 4.4 percent on September 5. After last Friday morning’s employment report from the U.S. Bureau of Labor Statistics, the nowcasts of third-quarter real consumer spending growth and third-quarter real gross private domestic investment growth decreased from 3.3 percent and 15.9 percent, respectively, to 3.0 percent and 14.0 percent, respectively. The model's estimate of the dynamic factor for August—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—declined from 1.11 to 0.41 after Friday's employment report.