(ZH) Bitcoin Miners Migrate From China To Canada As PBOC Begins Crackdown

Bitcoin Miners Migrate From China To Canada As PBOC Begins Crackdown

Bitcoin rangin the year Peter Thiel-inspired ramp following reports that the People’s Bank of China is preparing to crack down on bitcoin miners.
In fact, Reuters reported that the PBOC had held a meeting about regulating bitcoin mining power use, an increasingly sensitive topic now that global bitcoin energy consumption is greater than what Qatar uses in a year.
Unfortunately for bitcoiners across the world, the PBOC has called for establishing limits on the energy used by miners, sending the bitcoin price lower. Before news of the crackdown broke, we reported late last month that Winnipeg City, Manitoba, could become a hub for crypto miners because of its exceedingly low power costs. Indeed, Winnipeg City has been rated the city with the lowest power costs in North America cryptocurrencies broadens to bitcoin miners, some of the industry’s biggest players are shifting operations overseas.
While the moves are unlikely to have a noticeable effect on bitcoin transaction speeds, they could reshape the cryptocurrency mining industry. Miners have until recently flocked to China because of the country’s inexpensive electricity, local chipmaking factories and cheap labor. They now have little choice but to look elsewhere.

Bitmain, which runs China’s two largest bitcoin-mining collectives, is setting up regional headquarters in Singapore and now has mining operations in the U.S. and Canada, Wu Jihan, the company’s co-founder, said in an interview. BTC.Top, the third-biggest mining pool, is opening a facility in Canada and ViaBTC, ranked No. 4, has operations in Iceland and America, their founders said.
The moves underscore how China’s once-dominant role in the world of cryptocurrencies is shrinking as policy makers clamp down.
Meanwhile, the costs of bitcoin mining is expected to keep rising at a breakneck pace.


"We chose Canada because of the relatively cheap cost, and the stability of the country and policies," Jiang Zhuoer, founder of BTC.Top, said in an interview. He also considered locations in Iran and Russia.
Bitcoin, which surged 15-fold last year, climbed about 6 percent at 5:32 a.m. New York time.
For more on cryptocurrencies, check out the Decrypted podcast.
International investors have had interviews with "commercial real estate companies, economic development organizations, cryptocurrency industry players and Manitoba Hydro," who view the area as a “top-tier location” to open up a mining shop."
As we noted late last year, CBC News reported that international investors have had interviews with “commercial real estate companies, economic development organizations, cryptocurrency industry players and Manitoba Hydro,” who view Winnepeg City as a “top-tier location” to open up a mining shop. CentrePort Canada, North America’s largest inland port, offers 20,000 acres of cheap commercial land in Winnipeg.

This makes the area increasingly alluriarly interest from Asian investors and South American companies who want to mine cryptocurrencies is currently underway. CentrePort president and CEO Diane Gray said, “we’ve had inquiries from very large non-Asian companies, some of which have roots in North America and are looking to expand significantly."
"They’re having site visits and meetings with Manitoba Hydro and whomever else they feel are relevant to their decision-making process. So I would say strong interest, but still speculative."

The environmental downside in mining cryptocurrencies is that it requires a tremendous amount of energy. As the CBC explains, a bitcoin transaction consumes a lot of energy. However, not every Canadian city offers such favorable conditions. For example, Toronto ranks last. New York is not too far behind Toronto, ranked number 19.

Interesting facts about Bitcoin mining and electricity consumption:
In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%
  • If it keeps increasing at this rate, Bitcoin mining will consume all the world’s electricity by February 2020/Estimated annualized global mining revenues: $7.2 billion USD (£5.4 billion)
  • Estimated global mining costs: $1.5 billion USD (£1.1 billion)
  • Number of Americans who could be powered by bitcoin mining: 2.4 million (more than the population of Houston)
  • Number of Britons who could be powered by bitcoin mining: 6.1 million (more than the population of Birmingham, Leeds, Sheffield, Manchester, Bradford, Liverpool, Bristol, Croydon, Coventry, Leicester & Nottingham combined) Or Scotland, Wales or Northern Ireland.
  • Bitcoin Mining consumes more electricity than 12 US states (Alaska, Hawaii, Idaho, Maine, Montana, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming)
  • Growth of Bitcoin Mining Electricity Consumption is set to explode.
  • Meanwhile, the cryptocurrency space has been extremely volatile since the new year, with traders rotating out of bitcoin and into Ripple Labs’s Ripple token. However, that rotation has been thrown into reverse today, with Ripple down nearly 10 percentage points Friday afternoon.
Bloomberg News first reported the Chinese government’s planned curbs on Wednesday. The People’s Bank of China didn’t respond to requests for comment.

(ZH) Fed Chair Powell's Admission: "The Fed Has A Short Volatility Position"

Fed Chair Powell's Admission: "The Fed Has A Short Volatility Position"

For years, market watchers and Fed skeptics had warned that the record low volatility "blanket" that has fallen like a pall over the comatose market was the result of Fed actions, both direct or indirect. And while they mostly spoke metaphorically (although back in 2012 we observed a distinct shift in the VIX futs when the current head of the Fed's trading desk, Simon Potter, replaced Brian Sack), we now have explicit confirmation that the Fed's "short vol" position appears to be rather literal.
This is what the next Fed Chair, Jerome Powell - who is scheduled to replace Janet Yellen next month - said during the October 23-24, 2012 FOMC meeting - just one month after the Fed announced QE3, as today's just released 2012 FOMC transcripts revealed:
I have concerns about more purchases. As others have pointed out, the dealer community is now assuming close to a $4 trillion balance sheet and purchases through the first quarter of 2014. I admit that is a much stronger reaction than I anticipated, and I am uncomfortable with it for a couple of reasons.
First, the question, why stop at $4 trillion? The market in most cases will cheer us for doing more. It will never be enough for the market. Our models will always tell us that we are helping the economy, and I will probably always feel that those benefits are overestimated. And we will be able to tell ourselves that market function is not impaired and that inflation expectations are under control. What is to stop us, other than much faster economic growth, which it is probably not in our power to produce?
And then the punchline:


[W]hen it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.
Ah yes, unloading the Fed's "short volatility position". Maybe someone can ask Powell at the next FOMC press conference just where that stands today, and whether he is still as skeptical the Fed will succeed in unwinding its balance sheet, as he was in October 2012:
My third concern—and others have touched on it as well—is the problems of exiting from a near $4 trillion balance sheet. We’ve got a set of principles from June 2011 and have done some work since then, but it just seems to me that we seem to be way too confident that exit can be managed smoothly. Markets can be much more dynamic than we appear to think.
...
When you turn and say to the market, “I’ve got $1.2 trillion of these things,” it’s not just $20 billion a month— it’s the sight of the whole thing coming. And I think there is a pretty good chance that you could have quite a dynamic response in the market.
Fed's VIX trading aside, here is perhaps the most fascinating part of Powell's speech, one which contains some truly unprecedented - for a future Fed chairman - admissions:
I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.
Almost.

WSJ : Ripple Steals Bitcoin’s Thunder, Surges 1,135% in a Month

Ripple Steals Bitcoin’s Thunder, Surges 1,135% in a Month
The sudden jump has given the digital currency a virtual cash hoard of about $185 billion

In 2017, bitcoin became a household word among investors. This year, it may be Ripple’s turn.
XRP, a five-year-old digital currency offered by San Francisco startup Ripple, has soared 1,135% in the past month alone, quickly becoming the second-largest crypto-asset behind bitcoin. The rally included a 32% jump in the first days of 2018.
Such moves have become almost normal in the tumultuous virtual-currency mania of the past year. Ripple, like a bevy of other crypto startups, has benefited from the blind hope many investors are placing in largely unregulated and loosely defined bitcoin-related businesses. What is surprising about Ripple, though, comes from some of the differences that it has with bitcoin, the largest cryptocurrency by market value.
While both focus on electronic payments, bitcoin is governed by a fractious global array of technologists and antiestablishment libertarians. It was created nine years ago to reduce the power of big banks widely blamed for the financial crisis.

XRP, on the other hand, is centralized around a single for-profit company, Ripple, that has courted bankswith a promise to reduce their costs. While some banks such as Spain’s Banco Santander SA andBank of America Corp.have signed up for Ripple’s international money-transfer services, many large players such asCitigroup Inc. and HSBC Holdings PLC have stayed away and are pursuing their own payment improvements.
Ripple hasn’t disclosed how much money the banks are moving over its payments network, which offers software to transfer dollars, yen and euros more quickly and inexpensively. It says it has signed up about 100 banks, but that is a fraction of the 16,600 institutions that use Visa Inc. or the thousands that use the cooperative that runs the international bank messaging service, known as Swift.
Investors have been lining up anyway. XRP’s rise in 2017 was 24 times steeper than bitcoin’s own ascent. Overall, the company has sold about 38.7 billion tokens, which are called XRP by some and Ripple by others. The market value of those tokens, according to research site coinmarketcap.com: about $118 billion.

“It’s amazing what’s going on,” said Chris Larsen, Ripple’s co-founder and chairman. “You’ve got to be standing in the middle of the road when the luck-truck hits you.”
A former online-lending specialist who co-founded Prosper Marketplace Inc., Mr. Larsen owns roughly 5% of the outstanding XRP tokens, according to a person familiar with the company. That stake is now valued at about $15.8 billion at current market prices, up nearly 500-fold from its $32 million value a year ago.
The huge rise shows that “real utility matters,” said Ripple Chief Executive Officer Brad Garlinghouse. “Real customers matter.”
Despite bitcoin’s popularity among investors, its utility as a payments platform has suffered because of network delays and rising transaction costs. And many bankers still distrust bitcoin, with JPMorgan CEO James Dimon last year calling it “a fraud.”
Ripple, meanwhile, has become a cash-flow positive, profitable business, according to Mr. Garlinghouse. That is a rarity among crypto startups, though a big part comes from the XRP sales themselves in addition to the fees that Ripple generates by selling software licenses and collecting fees on individual money transfers.
Then there are the 61 billion tokens that Ripple owns and hasn’t yet sold. Those have soared to a value of about $185 billion. While the lofty sum could plummet at any time, it is still a staggering amount, greater than the cash hoards of nearly every company in the S&P 500 stock index, including Microsoft Corp. , which has $138 billion.
Also, since the XRP held by Ripple isn’t easy to trade like a major currency, Ripple couldn’t quickly convert major amounts of XRP to dollars without risking a crash in XRP’s price, a possibility that has made some investors nervous.
To counter those criticisms, Ripple took 90% of its remaining XRP holdings, about 55 billion tokens, and put them in 55 separate contracts designed to prevent the company from tapping more than 1 billion tokens in any one month.

At the beginning of 2017, Mr. Garlinghouse, a 46-year-old formerYahoo and AOL executive, took over the chief executive spot from Mr. Larsen, who remained chairman. Mr. Larsen says the Topeka, Kan., native impressed him with his blunt assessment of some of Yahoo’s past problems.
Mr. Garlinghouse, who joined the company as president and chief operating officer in 2015, has a stake of about 6% in Ripple, said a person familiar with the company.
Despite the surge in XRP’s value, Ripple, like all crypto companies, carries big questions. One is whether more banks will adopt it instead of choosing payment projects where they have more control and a greater stake. There are also well-funded startups, including R3 and Digital Asset Holdings, which recently scored a contract from Australian exchange operator ASX Ltd.

TechCrunch : The quantum computing apocalypse is imminent

In the ancient world, they used cubits as an important data unit, but the new data unit of the future is the qubit — the quantum bits that will change the face of computing.

Quantum bits are the basic units of information in quantum computing, a new type of computer in which particles like electrons or photons can be utilized to process information, with both “sides” (polarizations) acting as a positive or negative (i.e. the zeros and ones of traditional computer processing) alternatively or at the same time.

According to experts, quantum computers will be able to create breakthroughs in many of the most complicated data processing problems, leading to the development of new medicines, building molecular structures and doing analysis going far beyond the capabilities of today’s binary computers.

The elements of quantum computing have been around for decades, but it’s only in the past few years that a commercial computer that could be called “quantum” has been built by a company called D-Wave. Announced in January, the D-Wave 2000Q can “solve larger problems than was previously possible, with faster performance, providing a big step toward production applications in optimization, cybersecurity, machine learning and sampling.”

IBM recently announced that it had gone even further — and that it expected that by the end of 2017 it would be able to commercialize quantum computing with a 50-qubit processor prototype, as well as provide online access to 20-qubit processors. IBM’s announcement followed the September Microsoft announcement of a new quantum computing programming language and stable topological qubit technology that can be used to scale up the number of qubits.

Taking advantage of the physical “spin” of quantum elements, a quantum computer will be able to process simultaneously the same data in different ways, enabling it to make projections and analyses much more quickly and efficiently than is now possible.

There are significant physical issues that must be worked out, such as the fact that quantum computers can only operate at cryogenic temperatures (at 250 times colder than deep space) — but Intel, working with Netherlands firm QuTech, is convinced that it is just a matter of time before the full power of quantum computing is unleashed.

“Our quantum research has progressed to the point where our partner QuTech is simulating quantum algorithm workloads, and Intel is fabricating new qubit test chips on a regular basis in our leading-edge manufacturing facilities,” said Dr. Michael Mayberry, corporate vice president and managing director of Intel Labs. “Intel’s expertise in fabrication, control electronics and architecture sets us apart and will serve us well as we venture into new computing paradigms, from neuromorphic to quantum computing.”

The difficulty in achieving a cold enough environment for a quantum computer to operate is the main reason they are still experimental, and can only process a few qubits at a time — but the system is so powerful that even these early quantum computers are shaking up the world of data processing. On the one hand, quantum computers are going to be a boon for cybersecurity, capable of processing algorithms at a speed unapproachable by any other system.

By looking at problems from all directions — simultaneously — a quantum computer could discover anomalies that no other system would notice, and project to thousands of scenarios where an anomaly could turn into a security risk. Like with a top-performing supercomputer programmed to play chess, a quantum-based cybersecurity system could see the “moves” an anomaly could make later on — and quash it on the spot.

The National Security Agency, too, has sounded the alarm on the risks to cybersecurity in the quantum computing age.

“Quantum computing will definitely be applied anywhere where we’re using machine learning, cloud computing, data analysis. In security that [means] intrusion detection, looking for patterns in the data, and more sophisticated forms of parallel computing,” according to Kevin Curran, a cybersecurity researcher at Ulster University and IEEE senior member.

But the computing power that gives cyber-defenders super-tools to detect attacks can be misused, as well. Last year, scientists at MIT and the University of Innsbruck were able to build a quantum computer with just five qubits, conceptually demonstrating the ability of future quantum computers to break the RSA encryption scheme.

That ability to process the zeros and ones at the same time means that no formula based on a mathematical scheme is safe. The MIT/Innsbruck team is not the only one to have developed cybersecurity-breaking schemes, even on these early machines; the problem is significant enough that representatives of NIST, Toshiba, Amazon, Cisco, Microsoft, Intel and some of the top academics in the cybersecurity and mathematics worlds met in Toronto for the yearly Workshop on Quantum-Safe Cryptography last year.

The National Security Agency, too, has sounded the alarm on the risks to cybersecurity in the quantum computing age. The NSA’s “Commercial National Security Algorithm Suite and Quantum Computing FAQ” says that “many experts predict a quantum computer capable of effectively breaking public key cryptography” within “a few decades,” and that the time to come up with solutions is now.

According to many experts, the NSA is far too conservative in its prediction; many experts believe that the timeline is more like a decade to a decade and a half, while others believe that it could happen even sooner.

And given the leaps in progress that are being made on almost a daily process, a commercially viable quantum computer offering cloud services could happen even more quickly; the D-Wave 2000Q is called that because it can process 2,000 qubits. That kind of power in the hands of hackers makes possible all sorts of scams that don’t even exist yet.

For example, forward-looking hackers could begin storing encrypted information now, awaiting the day that fast, cryptography-breaking quantum computing-based algorithms are developed. While there’s a possibility that the data in those encrypted files might be outdated, there is likely to be more than enough data for hackers to use in various identity theft schemes, among other things.

It’s certain that the threats to privacy and information security will only multiply in the coming decades.

In fact, why wait? Hackers are very well-funded today, and it certainly wouldn’t be beyond their financial abilities to buy a quantum computer and begin selling encryption-busting services right now. It’s likely that not all the cryptography-breaking algorithms will work on all data, at least for now — this is a threat-in-formation — but chances are that at least some of them will, meaning that even now, cyber-criminals could utilize the cryptography-breaking capabilities of quantum computers, and perhaps sell those services to hackers via the Dark Web.

That NSA document that predicted “decades” before quantum computers become a reality was written at the beginning of 2016, which shows how much progress has been made in barely a year and a half. The solution lies in the development of quantum-safe cryptography, consisting of information theoretically secure schemes, hash-based cryptography, code-based cryptography and exotic-sounding technologies like lattice-based cryptography, multivariate cryptography (like the “Unbalanced Oil and Vinegar scheme”), and even supersingular elliptic curve isogeny cryptography.

These, and other post-quantum cryptography schemes, will have to involve “algorithms that are resistant to cryptographic attacks from both classical and quantum computers,” according to the NSA. Whatever the case, it’s certain that the threats to privacy and information security will only multiply in the coming decades, and that data encryption will proceed in lockstep with new technological advances.

Shlomi Dolev
CONTRIBUTOR
Shlomi Dolev is the Chair Professor and founder of the Computer Science department of Ben-Guiron University of the Negev. He is the author of Self-Stabilization. Shlomi also is a cybersecurity entrepreneur and the co-founder and chief scientist of Secret Double Octopus.

>>> Kiwi.com enters advanced stages of sale process - sources

Kiwi.com enters advanced stages of sale process

Kiwi.com, a Czech airline ticket search engine, is in the advanced stages of a sale to an undisclosed buyer, a source close and two sources briefed on the situation said. An agreement on a sale could be reached later this month, the source close said, declining to name the party involved.

Czech newspaper Hospodarske Noviny reported in December that the company was up for sale after receiving knocks on the door from potential buyers, including Norwalk, Connecticut-based The Priceline Group [NASDAQ: PCLN] as well as funds based in Silicon Valley and China.
Priceline is seen as the frontrunner in the current process, one of the sources briefed said. Priceline operates through brands Booking.com, Priceline.com, KAYAK, Agoda.com, Rentalcars.com, and OpenTable.

Priceline did not respond to a request for comment.

A formal auction process is expected to follow if talks fall through with the undisclosed buyer, the second source briefed said.

Kiwi.com CEO and co-founder Oliver Dlouhy told Mergermarket this week that he will retain the vast majority of his 24.5% stake. The stake sale will not affect Kiwi.com’s growth plans, which include expanding into new product offerings such as direct flights, ground transport and hotel accommodation, as well as potential acquisitions in South America and China, he added.
Other shareholders in the business include co-founders Jiri Hlavenka and Jozef Kepesi, Touzimsky Kapital, Impulse Capital and Sugilit Invest.
According to the previous Hospodarske Noviny report, all shareholders had agreed to a sale and had several preliminary offers on the table ranging from CZK 10bn to CZK 15bn (EUR 390.4m to EUR 585.5m).

Kiwi.com, previously known as Skypicker.com, is likely to be valued between EUR 400m and EUR 500m in the event of a deal, the source close said. The company is still an early stage business but is uniquely positioned given that its profit margins are above the market average of single-digit figures, the first source briefed said. Its valuation is partly based on its proprietary technology, he added.
Kiwi had revenues of EUR 100m and EBITDA of EUR 9m on gross ticket sales of EUR 700m for the FY16. The company expects revenue to grow between 50% and 80% this year, the source close said.

The company topped the Deloitte Technology Fast 50 CE list of central and eastern Europe’s fastest growing technology companies last October, with a growth rate of 7,165% over the previous four years.

Kiwi.com declined to comment.

Barron's : Need to Digest Gains on 2 Food-Order Stocks

Need to Digest Gains on 2 Food-Order Stocks

Just Eat and Delivery Hero have served tasty fare to both customers and investors, with stock gains of more than 20% over the past six months.

The two online-food-ordering stocks also received institutional approval recently: a spot in the U.K.’s FTSE 100 benchmark for Just Eat (ticker: JE.UK) and inclusion in the Stoxx Europe 600 for Delivery Hero (DHER.Germany). Buying the two stocks at current levels, however, might be more akin to dining at an overpriced restaurant than finding a deal on a value menu.

Just Eat trades at 48 times estimated forward-year earnings, while there is no comparable price/earnings ratio for Delivery Hero, as it isn’t expected to turn profitable until 2019, according to FactSet data. When it comes to another metric—price to estimated forward-year sales—the two fast-growing companies are both around 8. That’s above GrubHub’s (GRUB) multiple of about 7, but below the 10 sported by European peer Takeaway.com (TKWY.Netherlands).

Just Eat’s shares are “fairly valued, particularly after the strong performance and risks related to own-delivery investments,” say RBC analysts in a recent note. They’re referring to the possibility the company will start a big push to deliver meals itself, rather than simply matching customers with restaurants that deliver and then charging a commission. Pressure from U.K. competitors Uber Eats and Deliveroo may help bring about such an effort.

BUT THAT TYPE OF DO-IT-YOURSELF move didn’t treat GrubHub investors so well in 2015, point out RBC’s Sherri Malek, Richard Chamberlain, and Wassachon Udomsilpa. “The margins went down significantly, and it caused the stock to de-rate significantly for a year,” Udomsilpa tells Barron’s, though she adds that GrubHub’s shares eventually recovered.

Barron's : Don’t Blame Intel for the Failures of Computer Security

Intel came under fire last week for the revelation that its chips were vulnerable. But the bulls on Intel stock, who rose to the company’s defense, are probably right that it’s much ado about nothing. The real problem is not Intel chips, but the nature of technology, and how the industry approaches computer security.

Intel (ticker: INTC) had been planning to announce weaknesses found in its chips several months earlier by researchers at Alphabet’s (GOOGL) Google unit. But the company was preempted by a tech publication, the Register, which claimed Intel was actually preparing to reveal flaws, or bugs, in the chips. Intel shares then crashed.

Intel was forced to hold a briefing, in which it denied the Register’s characterization, saying its chips aren’t flawed, that they perform as designed, and properly functioning chips can still be vulnerable to attack.

That assertion isn’t wrong. As our story in this issue about security start-up Polyverse makes clear, technology can be used against itself. Malicious hackers are just programmers who use computer systems in a more inventive way than their conventional kin. One of the most common forms of computer attack these days, known as return-oriented programming (ROP), came out of the observation that you can find unintended strings of computer instructions by telling a microprocessor to divide up sequences of ones and zeros differently than normal.

Hence, the industry is always learning about novel ways of abusing what it has created. Hackers, good and bad, don’t follow rules, and they discover things, which puts them in the vanguard.

Against this backdrop, computer security efforts are weak, because it’s hard to stifle inventiveness. You can install a firewall, designed to block some kinds of computer-network access, but that won’t stop attackers from looking for ways around it. Polyverse’s approach would make computers more diverse, by continually changing their code, and thus less vulnerable. It’s a way of fighting inventiveness with inventiveness.


Cybersecurity vendors, such as Cisco Systems (CSCO) and Palo Alto Networks (PANW), have built good businesses selling security tools. But the rash of major computer breaches suggests blocking inventiveness isn’t working. There are certainly things Intel can do—and in fact Advanced Micro Devices (AMD), whose chips run the same software, said its products are less vulnerable than Intel’s, and its stock rose 15.6% for the week.

But differences here are just relative. Hackers’ inventiveness will continue as long as someone has the means and motive to use technology against itself. The best you can do, as Polyverse says it wants to, is to keep raising the cost of inventiveness until it becomes unprofitable.

HEADS UP, STOCK TRADERS, the Consumer Electronics Show kicks off in Las Vegas on Sunday, and as one of the most prominent technology conventions of the year, you may wonder if it’s a tradable event.

To assess that, Barron’s looked at six years of trading data for 21 companies with CES exposure, comparing returns during the week of the show, and for the three months immediately following—roughly the first quarter of each calendar year. The upshot: Because there are years in which a company is weak and others when it’s strong, it isn’t a reliable trade. Some of the details are anecdotally interesting, though.

During the week of the show, nine of the 21 names beat the average return of the Standard & Poor’s 500 index, which averaged a decline of a half a percent over those six years. Twelve of the 21 names beat the average return of the S&P 500, 4.3%, for the subsequent three-month period.

As you might imagine, the winners and losers differ for the two periods. For the week of the convention, Facebook (FB), which owns Oculus Rift, the virtual-reality technology, saw the best average return, up 3.5%, although that’s with one less data point because Facebook only went public in May 2012. Facebook’s average return over the three-month period was a healthy 4.84%.

The best average return for the three-month period belonged to Apple (AAPL), which doesn’t have a direct presence at the show and tends to lag behind the market during the week.

Aside from Facebook, winners during the week aren’t much of a surprise. T-Mobile US (TMUS), which often has splashy promotions, is one, as is Pandora Media (P), the streaming music company, and hard-drive makers Seagate Technology (STX) and Western Digital (WDC), augmented-reality headset makers Vuzix (VUZI), computer giant HP Inc. (HPQ), and audio specialists Dolby Laboratories (DLB). Logitech (LOGI), a maker of peripherals, is another winner.

Some of the losers are perplexing. Nvidia (NVDA), increasingly the heart of artificial intelligence at the show, always kicks things off opening night with a big press conference. Its average return for the week is a 4.5% decline. But its return over the three months is a nicer 9%.

CES used to be a personal computer show, but the PC duo, Intel and Microsoft (MSFT), often trade flat during the week and the subsequent three months.

Companies with winning hands following the show, besides Apple, Facebook, and Nvidia, were Logitech, Seagate, Dolby, HP, T-Mobile, AMD, Samsung Electronics (005930.Korea), Cisco, and Alphabet. Losers, aside from Intel and Microsoft, were Vuzix, Pandora, Qualcomm (QCOM), Netgear (NTGR), Fitbit (FIT), and GoPro (GPRO). Fitbit and GoPro, which went public in recent years, had fewer data points.

You’ll hear a lot of gadget buzz this week, and talk of partnerships and tech trends, but on average, you’d probably make more money at roulette than you would trading these stocks.

FT : New year’s global stock market ‘melt-up’ silences bears

New year’s global stock market ‘melt-up’ silences bears
Signs of strong growth and prospects of higher US profits buoy sentiment

On Wall Street the first week of 2018 has been marked by talk of a “melt-up”, “rational exuberance” and renewed hedge fund manager David Tepper asking anyone to “explain to me where this market is rich?”

The giddy mood has both fed, and been vindicated by, the performance of the US stock market’s leading indices, which have set fresh highs and not skipped a beat from where they finished last year.

The success late last month of Republicans in Congress and Donald Trump in delivering tax cuts has hardened the conviction of some that the second-longest bull market in US history has further to run. At the same time, the first snapshots of manufacturing in the US, the eurozone and China point to a sustained upswing in global growth — one of the anchors of last year’s rally.

If the start of 2018 has seen the mood warm to a bull run that has not always been loved, there remains concern that the focus could ultimately switch to the plans by the Federal Reserve and the European Central Bank to dial back their stimulus plans.

David Donabedian, chief investment officer of CIBC Atlantic Trust, believes 2018 will unfold in two phases.

“January and February are likely to be quite strong with a good economy, good earnings growth and tax reform, but as 2018 wears on there could be some problems,” he said. “After tax reform, there could be a ‘what’s next?’ kind of sentiment, especially in terms of valuation.”

The excitement over the effect of tax cuts on earnings could, later in the year, give way to concern around the US midterm elections, which could loosen the Republican grip on Congress.

For now, though, many investors are unfazed. Jeremy Grantham, the co-founder of asset manager GMO and a normally bearish investor, noted that: “I also recognise that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market.“

Alongside the still benign global economic backdrop, the cut in the corporate tax rate from 35 per cent to 21 per cent has helped propel expectations for corporate profits higher. According to FactSet, consensus estimates for earnings per share growth for S&P 500 companies are almost 13 per cent, against expectations of 9.5 per cent last year.

Some, such as Phil Orlando, chief equity market strategist and head of client portfolio management at Federated Investors, have already pushed their forecasts for the year higher. Federated added $10 to its 2018 and 2019 EPS estimates for the S&P 500 to $150 and $160 respectively

“3000 was our [S&P 500] forecast for 2019,” he said. “Now it is our year-end [2018] target.”


While Mr Orlando has lifted his forecasts, the tax cuts are seen as only partly factored into prices — and earnings expectations — as strategists continue to work out what the fine print of the tax bill means. Investors and sector analysts are eagerly awaiting guidance from companies as earnings season for the fourth quarter heats up next week.

“There are a lot of fundamental reasons to still like the asset class,” said Kate Moore, BlackRock’s chief equity strategist.

Even if they have not been heard amid the early year euphoria, those with concerns over valuations are not likely to finish the week feeling any more comfortable. Besides the basic forward price to earnings multiple being above long-term averages, two widely watched metrics are also signalling at least yellow if not outright red.

On a price to sales basis, the S&P 500 is nearing peaks reached back in the dotcom bubble, while the cyclically adjusted price-to-earnings ratio kept by Yale economics professor Robert Shiller is at levels topped only by the heights hit before the dotcom bubble burst in 2000 and the Great Crash of 1929.

This bull run has been dubbed “the most hated” because of the role of central banks in fuelling it through the vast stimulus plans introduced since 2009. For Nicholas Colas, cofounder of DataTrek, the big risk is that as the Fed unwinds its balance sheet and the ECB offers less monetary stimulus, the massive amount of liquidity sloshing around the world begins to fall, interest rates rise faster than expected and valuations collapse.

“Equities, fixed income, negative rates in Europe and Japan, real estate, particularly in China and the icing on the cake is the whole cryptocurrency craze — it is what happens when rates stay low too long,” he said. “People flood the system with whatever provides any return. Everything feels like a top and no one has a solid handle on what will make this pop.”

While Jay Powell, who becomes chair of the Federal Reserve next month, is not expected to speed up the pace of rate rises, he has shown a notable interest in the risks around both asset prices and the structure of markets.

“My big concern really comes midyear and beyond. The gains we have seen across asset markets globally are pretty easily explained by QE,” said Lee Ferridge, head of macro strategy at State Street. “The market seems bulletproof but, when liquidity starts to dry up, it will be interesting to see whether gains can be continued.”

FT : Milan moves to lure London asset managers after Brexit

Milan moves to lure London asset managers after Brexit
Italians make tax changes to tempt fund company executives and portfolio heads

Milan is stepping up its efforts to grab a slice of London’s asset management industry after Brexit. A delegation from the Italian government is set to meet UK companies in the next few weeks.

The Italian financial hub hopes that up to 1,500 asset management and investment banking jobs will move from London.

Italy’s initial attempts to woo fund companies in 2016 were rocked by prime minister Matteo Renzi’s failure to push through constitutional reforms in a referendum.

The poll result sent the country’s financial and political systems into a tailspin and caused concern among potential recruits.

Now Select Milano, a government-sponsored lobbying group, is increasing its efforts despite the potential for more political upheaval in the Italian general election in March.

Fabrizio Pagani, chief of staff in Italy’s finance ministry, said he was being realistic in not expecting big companies to make wholesale moves to Italy.

He said, however: “We think Milan has every chance to get its share if there is a diaspora from London.”

He pointed to the fact that Milan missed out on gaining the European Medicines Authority only by the drawing of straws as a sign that the city could compete in attracting post-Brexit business.

The Italian government changed its personal tax regime last year to try to lure high-earning expats.

Mr Pagani said this was partly designed with fund company executives and portfolio managers in mind. Incentives include a 50 per cent reduction on income tax for five years for middle managers and a flat €100,000 annual tax on foreign earnings for wealthy individuals, which lasts for 15 years.

“In speaking to people there are two main points of consensus: London will remain important and that there will not be a ‘new London’ post Brexit,” said Mr Pagani.

“There will be a wide spread of finance centres. It will be much like the 1990s where we had trading centres in different countries.”

When Amundi announced it would buy Pioneer, Italy’s third largest fund company by assets, in December 2016, chief executive Yves Perrier said his plan was to double the number of staff in Milan to 600.

Italy’s fund industry is the sixth largest in Europe, accounting for 5 per cent of market share and €1.2tn in assets, according to figures from the European Fund and Asset Management Association.