FT : Crypto currencies are mirroring pre-crash banking systems

Crypto currencies are mirroring pre-crash banking systems
An ideological dispute over future scale has led to a breakaway version of bitcoin

When bitcoin, the crypto currency, first arrived on the scene in 2009 it sold itself on a simple principle.

Unlike central bank money, the supply of which could be expanded on the whim of a non-democratically elected committee, bitcoin’s supply would remain capped at 21 million coins at any cost. This would be effected by way of a decentralised protocol, making it theoretically impossible for any single authority to override or control it.

This, ultimately, was bitcoin’s promise to the world: a currency manufactured and supported by the users for the users, which no single entity could manipulate, and which no third party was required to intermediate. Understandably the pledge appealed most to those who might describe themselves as hard money enthusiasts. Their view was that uncontrolled money creation was the probable cause of most economic instability in the world, and must therefore be constrained. Bitcoin offered them the perfect conduit for this vision.

More than eight years after bitcoin’s arrival, most of these principles have fallen by the wayside. Bitcoin spawned a litany of copycat systems — each with its own profiteering opportunity for early adopters. It no longer matters, for example, that the system is being engulfed by rogue and untethered private money creation. Nor does it seem to matter that it’s been a long time since bitcoin could be honestly described as a decentralised system, free of intermediaries. Economies of scale, as is their habit, have ensured only a handful of professional mining outfits and pools control the bitcoin production scene — they can collude oligopolistically if they so want. What matters is that the crypto scene’s popularity and profitability is soaring, especially for those who have become the new bitcoin power elite.

Even bitcoin is succumbing to the pressure. As of Tuesday, a bitter ideological dispute over how the protocol should scale in the future has led to a breakaway version of the original currency. Because of the way bitcoin is designed, if this breakaway copy gains traction with miners, corporations and users — something we could know within a few hours or days — it could immediately expand bitcoin’s lifetime money supply to 42m from 21m.

Dubbed “bitcoin cash”, this money-creating breakaway ironically owes its existence to the more puritanical part of the community, who insist replica bitcoin systems (known as sidechains) should never be allowed to tie themselves to the core system without limit: that would replicate the conventional and inflationary banking system. 

Unsurprisingly, it is the miners, corporations and intermediaries who support these sidechains: only by forgoing some of their core principles can they remain profitable in this sector. Bitcoin purists tend to be the staunchest critics of the expanded crypto scene, pointing out that almost every day a new token or coin is being issued into the market on the flawed assumption that full convertibility and liquidity can be guaranteed.

Today’s crypto system is beginning to replicate the pre-crisis financial system of the UK, when banks — as long as they had acceptable assets to pledge at the central bank — could receive whatever official liquidity they demanded. For everything else, such as self-created assets, there was the wholesale funding market. We know many of these assets were self-valued at entirely fantastical rates. When the wholesale market froze up, only the central bank had the capacity to support them. The purists understand that the crypto scene will not have that saving grace.

That makes the bitcoin fork a judgment of Solomon moment. Only a decisive win by either side will prevent bitcoin from splitting itself apart. Who, if anyone, gives way in the event of a stand-off will be a telling indicator of what really motivates the community.

>>> Worldpay/Vantiv: bidder open to secondary listing, headquarters solutions

Worldpay/Vantiv: bidder open to secondary listing, headquarters solutions (MergerMarket)

Worldpay [LON:WPG] bidder Vantiv [NYSE:VNTV] accepts there is some rationale to having a secondary listing in London and sees it as a potentially easy fix for some disgruntled shareholders, it is understood.
On announcing the possible offer on 5 July, Worldpay said it had agreed "key terms"’ and that the companies would proceed with mutual due diligence. The extension of the PUSU deadline today to 8 August -- rather than for longer as is permitted under UK takeover rules -- is a sign that the parties are close to a deal, it was said.
Vantiv’s decision today to hold its results call on 8 August, along with Worldpay, could also be seen as a positive sign the parties will have agreed the deal by then, it was said.
A small percentage, understood to be less than 15%, of Worldpay shareholders who are not mandated to hold US shares would benefit from a listing in London, secondary to the US. Listing the company in London would be a fairly easy and inexpensive fix, meaning any issues here very solvable, it is understood.
The location of headquarters is similarly not a key risk, it was said. Several headquarters are possible and not a contentious idea, it is understood. Maintaining UK headquarters would go some way to calming any fears about job losses, it was noted.
The sale of UK star Worldpay to US-based Vantiv has not attracted scrutiny from UK politicians so job and other pledges aren’t so important, a banker following the deal said.
Neither is the question of main headquarters important for any tax synergy discussions, as this will depend on where the company is incorporated, it was noted. Depending on its domicile, the deal could use an inversion structure, as previously reported.
Given all the above, and with key terms and management team agreed on, one important detail to agree on is the synergy level, the banker said. Vantiv needs to ensure this is well priced in to prevent any further shareholder discontent, the banker said. The offer is too low, one top-15 shareholder told this news service, as previously reported.
The presence of US activist Sachem Head Capital Management in the Worldpay shareholder register has not raised alarm, it is understood. The stock part of the offer means it would be more difficult to engage in bumpitrage, it was said.
Sachem has amassed a 2.3% stake in Worldpay, but hasn’t publicly made any demands. Sachem’s form 8.3 says the nature of its Worldpay dealing is "increasing a long position".
On 5 July, Worldpay agreed to preliminary terms for a possible equity and cash merger with Vantiv valuing the target at approximately GBP 7.6bn. The offer was at an 18.9% premium to Worldpay’s closing prior, and would leave Worldpay shareholders with a 41% ownership stake in the combined group.
Worldpay declined to comment. Vantiv did not respond to a request for comment.

WSJ : Eurozone Economy Speeds Up, Raising Chance of Stimulus Taper

Eurozone Economy Speeds Up, Raising Chance of Stimulus Taper
Currency area’s GDP grew faster than the U.S. in the three months to June on an annualized basis

Eurozone economic growth gathered pace in the three months to June, making it more likely the European Central Bank will decide in 2017 to remove some of its growth-boosting stimulus measures.

The currency area’s economy has now recorded three straight quarters of strong growth, the longest such period since its rebound from the recession that followed the global financial crisis, and before it entered its own government debt and bank solvency turmoil.

Its economic strength has been a boon for the global economy this year, partly offsetting weaker-than-expected U.S. growth. Entering 2017, most economists expected eurozone growth to slow in response to heightened uncertainty amid a busy year for political elections and higher energy costs.

However, the European Union’s statistics agency said Tuesday that eurozone gross domestic product was 0.6% higher in June than in the three months through March, and 2.1% higher than in the second quarter of 2016.

That marked a pickup from the 0.5% quarterly growth rate recorded in the three months to March and was the fastest annual growth rate since the first quarter of 2011.

The quarterly measure in the three months to June was equivalent to an annualized growth rate of 2.3%, making it weaker than the 2.6% expansion recorded by the U.S., but stronger than the 1.2% growth posted by the U.K.

“All in all, the eurozone economy has rounded out the first half of the year in a very healthy state and seems to be set up nicely for continued firm growth for the rest of 2017,” said Bert Colijn, an economist at ING Bank.

Eurostat gave no details on which parts of the economy had contributed most to the acceleration, although economists suspect both consumer spending and business investment played their part.

There is also little information on how the eurozone’s members performed. Spain has separately recorded an acceleration in the second quarter, while France says its growth rate was unchanged. Germany and Italy—the largest and third largest members respectively—have yet to report.

The ECB has already raised its growth forecast twice this year and may do so again in September. It currently expects the eurozone economy to grow by 1.9% across 2017.

In July, Mario Draghi, the central bank’s president, described the recovery as “robust” and said policy makers would decide during the fall on the future of their bond-buying program, which is tentatively scheduled to end in December. ECB watchers expect the stimulus program, known as quantitative easing, to be extended into 2018, but at a reduced scale. Most doubt the purchases will continue into 2019.

The recovery has helped drive the eurozone’s jobless rate to its lowest level in almost eight years, while business and consumer confidence is at highs not seen since before the global financial crisis.

However, for the ECB, one key ingredient remains absent: a sustained rise in inflation toward its target of just below 2%. Figures released Monday showed consumer prices were up just 1.3% in July from a year earlier, a rate of inflation that was unchanged from June and the lowest in 2017.

Nonetheless, the pickup in growth has contributed to a change in mood within the eurozone’s institutions, which has also been boosted by political victories.

As the start of 2017, nationalist political parties that were hostile to the euro and conventional economic policies appeared to have the momentum, buoyed in part by the U.K.’s Brexit vote and Donald Trump’s election as U.S. president.

Instead, centrists who favor the euro have been victorious in Dutch and French elections and opinion polls suggest German Chancellor Angela Merkel will remain in office after a September vote.

However, the International Monetary Fund warned eurozone leaders in July against becoming complacent and highlighted a number of deep-seated problems that continue to threaten cohesion.

And while the fund last month raised its growth forecast for the currency area and lowered its projection for the U.S., it still expects the latter to grow faster in 2017.

There are early signs the second half of the year won’t be quite as strong as the first for the eurozone. A survey of 3,000 manufacturing companies released Tuesday found that activity increased at a slower pace in the four months during July than previously indicated. But at 56.6, the Purchasing Managers Index for the sector still pointed to strong growth and even perennial laggard Greece recorded a second straight month of increased output for the first time in three years.

Expectations that stronger growth will prompt the ECB to reduce its bond buys may themselves be a problem for the recovery in the rest of 2017, since they have led to a strengthening of the euro that could hit exports and damp inflation.

“The strength of the euro is likely to be an important consideration for the ECB,” said Apolline Menut, an economist at Barclays bank.

>>> US Gapping up:

Gapping up:
  • Earnings earnings/guidance: WG +15.2%, CGNX +8.3%, ALSN +7.1%, TXRH +6.8%, HLS +3.6%, HVT +3.4%, BP +3.4%, LPX +3.1%, OI +2.7%, LL+2.6%, MATX +2.6%, ICHR +2.3%, SNE +2.3%, CACC +1.2%, TREX +1.1%
  • Other news: CBMX +50.5% (CombiMatrix to be acquired in an all-stock merger for approximately $33 million of combined consideration by Invitae), GRPN +6.1% (Groupon and Grubhub announce partnership to bring food delivery to Groupon customers throughout the US; GRUB is acquiring certain assets in 27 company-owned OrderUp food delivery markets from Groupon), CTIC +5.0% (announced that the first patient has been enrolled in PAC203, a Phase 2 clinical trial of pacritinib in patients with primary myelofibrosis who have failed prior ruxolitinib therapy), RACE +2.9% (said to be planning to add a utility vehicle as it looks to double profit by 2022, according to Bloomberg), NVTA +2.0% ((announced two acquisitions - including CombiMatrix (CBMX), announces $73.5 million private placement offering and reports prelim Q2 results ), ETP +2.0% (Energy Transfer signs agreement w/ The Blackstone Group whereby Blackstone will contribute approximately $1.57 billion in cash in exchange for a 49.9% interest in HoldCo ), GRUB +1.9% (Groupon and Grubhub announce partnership to bring food delivery to Groupon customers throughout the US; GRUB is acquiring certain assets in 27 company-owned OrderUp food delivery markets from Groupon)
  • Analyst actions: NEOS +5.4% (initiated after the close with Overweight and $20 tgt at Cantor Fitzgerald), SOHU +2.0% (upgraded to Equal-Weight from Underweight at Morgan Stanley)

>>> US Gapping Down

Gapping Down
  • On earnings/guidance: TRQ -6%, SLCA -6.9%, KONA -5.7%, P -4.0%, IDTI -3.8%, AMKR -3.1%
  • Other news: NOG -4.0% (ticking lower; FCN will replace Northern Oil and Gas in the S&P SmallCap 600), CHGG -1.8% (confirms the commencement of an underwritten registered public follow-on offering of 8 mln shares of its common stock), INVA -1.6% (proposes offering of $175 mln of convertible senior notes due 2025 in a private placement).

TechCrunch : Offshore U.S. wind farm proposal uses Tesla batteries to store powe

Tesla’s energy business is focused in part on solar power generation, but a big component of the business hopes to use its Powerpack commercial storage batteries in tandem with renewable power generation to store energy until it’s needed. A new proposal, reports Bloomberg, by energy supplier Deepwater Wind would use Tesla’s batteries in a new offshore wind plant near Massachusetts for exactly that purpose.
The plan, which is one of the bids submitted to a request for proposals to supply power to the state of Massachusetts, would see a production facility with 144-megawatt capability build off the coast. The batteries from Tesla would then store the wind-generated energy at peak production times, and hold it in reserve for peak demand hours. It’s exactly how other Tesla Powerpack facilities function, including its Kauai energy storage installation, which opened earlier this year.
The proposed plan includes a 40-megawatt storage capacity, which is less than either 52 MWh facility on Kauai, or the planned 100 KWh set for construction in Australia. But the unique offshore installation would add yet another example of how Tesla’s battery storage can supplement a range of power generation methods, which would help with its larger goal of demonstrating how it can be applied to a wide variety of requirements.

Deepwater will still have to compete with other bids, but it’s already built the first ever U.S. offshore wind farm near Rhode Island.

>>> Abertis/Atlantia: counter-bidder ACS talks to KKR, Macquarie, CVC and TCI

Abertis/Atlantia: counter-bidder ACS talks to KKR, Macquarie, CVC and TCI

Abertis [BME:ABE] suitor ACS [BME:ACS], working to table a rival offer for the Spanish infrastructure group, has approached KKR [NYSE: KKR], Macquarie, CVC, and TCI, El Economista reported.
ACS CEO Marcelino Fernandez Verdes said on Friday 28 July that the process will take some time, El Economista said. ACS has until five days before the EUR 16.3bn offer tabled by Atlantia [BIT:ATL] of Italy expires, the Spanish-language paper noted.

ACS will vehicle its offer through the listed German unit Hochtief [ETR: HOT] the report went on to say. Lazard has ACS’ mandate for the transaction.
CVC has just closed a EUR 16bn vehicle for investments in Europe and North America. TCI was ready to bid for Abertis with the Spanish airports group Aena [BME:AENA], an option finally rejected by the government. Macquarie is active in Spain and has just closed the acquisition of the car-park company Empark. Finally KKR has made several significant investments in Spain.

The Spanish government and Abertis significant shareholder La Caixa will back a Spanish offer for Abertis, the paper said.

Potential funds that may take part in ACS’s bid also include GIP and Advent according to the report.

FT : Airbus A380 cuts signal the end of an aviation dream

Airbus A380 cuts signal the end of an aviation dream

The industry fails to capitalise on its ingenuity


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When the dinner trays have been cleared, the aircraft lights turned down and the passengers are asleep or peering at screens, I sometimes reflect on what an inventive species ours is.

Here we are in a long tube, 35,000 feet high, soaring across thousands of miles of land mass and oceans. And while there are some highly qualified people in the cockpit, the plane is largely flying its computer-controlled self.

Last year, aircraft flew 3.8bn passengers, equivalent to more than half the world’s population, and they did so mostly in safety. In 2016, there were 10 fatal airline accidents, with 268 deaths.

It is an astonishing achievement — and I never feel it as keenly as I do on an Airbus A380. This double-decker giant carries more than 500 people and its engines are so quiet that, in the plane’s early days, there were reports that pilots found it difficult to doze during their breaks because they could hear babies crying and toilets flushing.

Yet just 10 years after Singapore Airlines flew the first A380 commercial flight to Sydney, Airbus has announced such a sharp cutback in production that many believe the double decker is doomed.

After saying last year that it was going to reduce the annual production rate of A380s from 27 in 2015 to just 12 in 2018, Airbus last week said that it would cut the number to eight by 2019.

Although Airbus has taken orders for 317 A380s and has delivered 213 of those to airlines, it has not won a new order for more than two years and does not expect any for the rest of this year.

What has gone wrong? Since the 1990s, Airbus has been putting a plausible case for a new superjumbo jet to succeed Boeing’s ageing 400-seat 747s. With newly wealthy travellers from emerging economies itching to see the world, air travel numbers are rising.

Airports are expensive to build and expanding them is often controversial. With the airline industry under pressure to reduce emissions, it made sense to fly people in fewer, bigger, more fuel-efficient modern planes. The A380, Airbus argued, answered that need.

I recall in pre-A380 days looking at the departure board at Johannesburg airport on the day before school holidays ended in the UK. There were five fully loaded 747s taking off for London that night — two British Airways, two South African Airways and one Virgin Atlantic. This looked like a route that could do with bigger planes.

Airbus said the A380 would be crucial for flying passengers on many well-travelled routes and in and out of the world’s big hubs, such as London Heathrow, Hong Kong and Dubai. Airbus forecasted that by 2030, there would be about 1,300 A380s flying.

So why are only a fraction of those in the air today? There are several reasons. Many travellers prefer to fly directly between smaller airports, often on low-cost carriers, rather than change flights at one of the large hubs.

New, smaller aircraft can now fly further, reducing the need for super-large planes. And airline economics are rocky, as they have been throughout much of the industry’s history.

Profits at Emirates, the aviation star of recent years and the biggest buyer of A380s, fell 82 per cent over the past year, hit by travel restrictions in the US, terror attacks in Europe and a weak oil and gas industry in the Middle East.

If the A380 fails to live up to Airbus’s hopes, it will not be the first time that the aircraft industry’s technical ingenuity has fallen foul of the sector’s difficult economics.

Concorde, the supersonic aircraft, began flying in 1976 and was grounded in 2003. It was an elegant bird that could cross the Atlantic in less than four hours. For business travellers, or anyone who preferred to spend time at their destination rather than in the air, it seemed an obvious next step. Yet only BA and Air France flew Concorde and no one could find a way of making it pay.

Although there are plans for a new supersonic plane, there is still no replacement for Concorde. It is hard to think of another industry which has failed to capitalise on a technology it mastered more than 40 years ago.

Thomas Enders, Airbus chief executive, insisted last week that the A380 had a future and that the company would use the production downturn to make the aircraft even more attractive to customers. Perhaps orders will boom again one day. More likely, Airbus’s superjumbo will be, like Concorde, a limited edition. For all of its achievements, the aircraft business sometimes falls short of its dreams.

>>> National Retail Properties beats by $0.02, beats on revs; raises FY17 core F

National Retail Properties beats by $0.02, beats on revs; raises FY17 core FFO guidance (39.95)
  • Reports Q2 (Jun) core FFO of $0.64 per share, $0.02 better than the Capital IQ Consensus of $0.62; revenues rose 11.2% year/year to $145.55 mln vs the $142.83 mln Capital IQ Consensus. AFFO for Q2 was $0.65 per share.
  • Co issues in-line guidance for FY17, sees core FFO of $2.46-2.50, excluding non-recurring items, vs. $2.48 Capital IQ Consensus Estimate and vs prior guidance of $2.44-2.48. AFFO for 2017 is expected to be $2.50-2.54.
  • "National Retail Properties enjoyed another impressive quarter, driven by our healthy portfolio, our selectively underwritten acquisitions, and our flexible, low leverage balance sheet, all of which has positioned us to raise our guidance and, as previously announced, to raise our common dividend for the 28th consecutive year, a record matched by only three other REITs and less than 90 public companies in the United States."