Thursday , August 22 2019
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FT Alphaville

FT Alphaville is a free daily news and commentary service giving finance professionals the information they need, when they need it. In a world where market professionals are inundated with information there is a pressing need to edit and filter, and hopefully sow a few ideas along the way. That’s where the FT Alphaville team comes in.

Articles by FT Alphaville

Walmart sues Tesla over dodgy solar service

1 day ago

Another day brings news of another Tesla lawsuit. But this time, it’s not from a disgruntled consumer. Walmart — the $320bn market cap mega-retailer — has alleged that Tesla’s solar panels caused fires at seven of its stores across the States.
You can read the full thing here.The FT’s Mamta Badkar and Richard Waters have done a stellar write-up of the suit, but we thought it was worth picking a few of the more eye-opening paragraphs from the document.First is that after the fires, Walmart said it hired some consultants to visit its solar installations with Tesla personnel, just to check on what might be going wrong with the panels. It didn’t like what it saw:For example, solar panels across the inspected sites contained numerous hotspots–or localised areas of increased and excessive

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Offsetting Flugscham. Private jets edition

1 day ago

Regular readers may recall Alphaville writing about our battle with Flugscham, a German term based on the Swedish phrase ‘Flygskam’ used to express guilt about frequent flying.It turns out the super rich are just like the rest of us, grappling with the same problems only at slightly higher altitudes.Take Prince Harry and Meghan Markle, who faced a tabloid furore over their use of a private jet to fly from the UK to Nice for a short break at Sir Elton John’s pad. Sir Elton was quick to inform the haters that his environmentally conscious guests had, like Alphaville, offset their carbon footprint through a donation he had made on their behalf to a company that claims to do things that help the environment to exactly the same degree that you have destroyed it by flying.
As we said in our

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ARK Invest’s Tesla model gathers dust

2 days ago

In early June, Alphaville had a look at ETF-provider ARK Invest’s Tesla model which, in the spirit of transparency, the firm had open sourced on the internet.For those of you not familiar with the business, ARK manages around $9bn of assets, investing in companies that it believes are involved in “disruptive innovation”. Tesla is one its largest holdings across its various funds. To nobody’s surprise, it also has a penchant for all things blockchain.The Tesla spreadsheet, it seems, was posted as a means of justifying the firm’s $4,000 price target on the electric car company’s stock. A valuation, we should add, that had allowed ARK to become a go-to on financial news whenever the business was grabbing the headlines. In turn, helping it to market its retail products.ARK Invest told us at

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Further reading

2 days ago

Elsewhere on Tuesday…– How big pharma was captured by the 1 per cent– Slipknot returns– Google’s struggle with the culture wars– The great successor– Japanese banks, and bank profitability– Millennials lose again– Financialisation ruins everything– Fail and pay– Sound advice from Richard Madeley– How Woodstock 50 turned into a disaster– Tumblr was a porn site– Song of the day: Lisa Germano — Cry Wolf

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Alphaville LLC in the press

3 days ago

Alphaville LLC is delighted to announce that its inaugural research report “Ice deal; US chief is interested in purchasing Greenland”, was quoted by prestigious British broadsheet the Guardian on Monday 19 August.Phillip Inman, economics editor of the Observer and an economics writer for the Guardian, cited research analyst Jamie Powell’s $1.1tn price target for the arctic landmass in a piece this morning titled “Why does Donald Trump want to buy Greenland”.
If you wish to speak to Jamie Powell regarding the valuation of other sovereign nations, please do not hesitate to contact Izabella Kaminska, Director of Research at Alphaville LLC.About AlphavilleAlphaville is an international, integrated and independent firm, specialising in valuation, blockchain and banking. Operating in two

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The corner of the bond market that won’t go negative

3 days ago

On Friday, Aza Teeuwen at TwentyFour Asset Management had some interesting observations about triple-A securities at a time of pervasive negative rates.He points out that the highest rating tranches of collateralised loan obligations, which are backed by lending to companies, trade at yields of over 1 per cent in the euro primary market – far above tranches of other asset-backed securities (ABS) with similar, or even much lower, ratings.This is an intriguing aspect of market pricing within the world of ABS, where underlying loans, such as mortgages or credit cards or funds for takeovers, are packaged together and sold on to investors. But across broader markets, it highlights an even stranger phenomenon regarding the relationship between risk and return.Let’s take a step back. Highly rated

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Further reading

3 days ago

Elsewhere on Monday,– A new Satoshi claimant. — Solar roadways turned out to be not so good.– What is WeWork?– Some Kenyans believe fintech apps are enslaving them in debt. — And some Cambodians blame Germany for their over-dependence on micro-loans.– The Peterloo paradox.– What happens when you research central bank swaps.– The Kochs and climate change denial.– Plant-based eggs are competing with the real thing.– What’s going on with Overstock?– Yet another mysterious badge for Amazon shoppers to figure out.

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Thought for the weekend

6 days ago

Greta is no Wazza:
We were promised flying cars, we got:

Copyright The Financial Times Limited 2019. All rights reserved. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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Oh, Inverted World (Update)

6 days ago

This article has been updated since publication to include some new BIS data.The big story in global finance over the past 48 hours has been an inversion of the US and UK yield curves — with the news the yield on the ten-year bond had dipped below shorter maturities often seen as a harbinger of recession.Alphaville will assume that most of our readership understands terms such as yield and inversion (and for those who haven’t the foggiest, we would recommend this explainer from Vox).While it is plausible to view yield curve inversion as a sign of rising concern over the economy, we are not entirely convinced it is in fact the best economic bellwether. Neither, as it turns out, is the bank for central banks, the Bank for International Settlements.It’s worth stating that it’s easy to see why

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From pianos to insurance: revisiting the 1983 Baldwin bankruptcy

6 days ago

Over the past few months, we’ve been looking into pianos. One anecdote we came across involved a director of exports at Baldwin, a piano company, who visited London in the 1970s. He’d been through the Yellow Pages, and seen that there were more piano shops in the city than in the entire state of New York. It seemed to him that most of them couldn’t last. He wasn’t wrong. But a decade later, in 1983, Baldwin’s holding company also went into bankruptcy, in what was at the time one of the largest collapses in US financial history.This wasn’t simply a story of declining pianos in an electronic age. In fact, the bankruptcy had very little to do with pianos. Baldwin was a remarkable case of a business with a particular specialism getting drawn into the world of finance.More specifically,

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Overheard in the long room: trade war worries

7 days ago

“I worry about you Donny, sometimes I worry about you a lot” is a paraphrased line from the televised mini-series of Stephen King’s seminal novel IT.*And, as it turns out, some are really worried about Donny at the moment.From the latest edition of BAML’s fund manager survey, published Tuesday:
Yep, the trade war once again leads the “biggest tail risk” question from the survey of 224 panellists with assets under management of $553bn.It’s not much of a surprise. Global equity markets seem to be moving on a single murmur from the orange one at the moment. On Tuesday they ripped higher on news that the latest round of tariffs would be suspended until Christmas, presumably to help with the shopping. On Wednesday they did the opposite, as soft data from Germany and China (both trade-war

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Rethinking bank profitability

8 days ago

Today, the ECB has an article out on bank profits.It serves as a reminder of an easily-forgettable point: that financial profitability is a state of affairs that regulators, as well as shareholders, have a deep interest in achieving. From the piece:…profitable banks are more attractive to investors. They can increase their capital ratios by retaining earnings or accessing the markets directly – which can be critical when they’re required to adjust capital levels to meet future supervisory expectations.In Europe, the article points out, bank profitability is still low. There is a slight recent improvement, but, it goes on, this “does not ease supervisory concerns”.The linguistic complications around how modern economies try to achieve a stable banking system obscures the close relationship

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WeWork’s S-1: some quick observations

8 days ago

OK, we should probably hold fire until we’ve had a think.But here are a few more interesting titbits from WeWork’s S-1 filing, spotted by ex-Alphavillain Joseph Cotterill.First, under the “Charitable Giving” section on page 199. For context, Adam Neumann is WeWork’s founder and Rebekah is his wife [with our emphasis]:In connection with this offering, Rebekah and Adam are dedicating additional resources to amplify the positive global impact of our organisation. This effort is designed to enable us to scale our social and global impact as the Company grows. Rebekah and Adam Neumann have pledged $1 billion to fund charitable causes. To fulfil this pledge, Rebekah and Adam will contribute cash and equity to charitable causes within the 10 years following this offering. Their first contribution

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WeWork’s IPO document lands

8 days ago

So it begins. Filed a few moments ago, WeWork’s S-1 for its upcoming IPO.The opening lines are hopefully indicative of the rest of the document: We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness.While we read through the 28 pages of risk factors, elevating our minds, here’s the organisation chart for you, the intrepid investor, to decode:
Looks pretty tax efficient.Thoughts, comments and captions welcome below, we’ll be up with a take of some sort in the next 24 hours.Related Links:WeWork: leaser of last resort — FT AlphavilleRevealed: the cash cost of WeWork’s global expansion — FT AlphavilleSplashing in the WeWork waterfall — FT AlphavilleWeWork and the vanishing bond rating — FT AlphavilleWeWork’s second act — FT

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Meat tax gives Germans something to chew on

8 days ago

Tacked up next to Frankfurt’s Schreiber stall, famed for the Bratwurst in buns it sells by the hundreds each lunchtime, is this:
Alphaville won’t provide a full translation. But let’s just say the meat of it is that everyone from lawyers and professors to painters and poets loves the city’s sausages. A look at the queue this weekday lunchtime at the Kleinmarkthalle, made up of a dozen men and women of all ages, suggests this mid-19th century Ode to Wurst still holds.Politicians think that is changing. To the extent that some lawmakers from two of the three major political parties, the centre-left SPD and the Greens, are now calling for the removal of a low tax rate on meat products.It is a tender issue. Germans love meat, especially pork, consuming 60kg of the stuff per year — more per

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The Tumblr tumble

9 days ago

Remember Tumblr? The microblogging site which, for a brief period earlier this decade, seemed like a potential challenger to the established social media platforms. It was so popular, in fact, that even perennial latecomers to the party Alphaville set up a page.Then, along came Yahoo.The lagging search engine/Alibaba surrogate had spent the best part of the dotcom boom, bust and revival missing the proverbial boat in social media. And it needed a quick fix. So in May 2013, Yahoo, and its new chief executive Marissa Mayer, decided to cough up $1.1bn to buy Tumblr, in the hope it would revive the fortunes of the once omnipresent internet giant.Many analysts questioned the price. But Mayer said in a CNBC interview that Yahoo valued Tumblr using “a lot of different analyses — looking at things

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A delirious defence of Uber

10 days ago

Uber Technologies, a $62.5bn minicab company, had a bad second quarter — registering a loss of $5bn. Izzy, in her inimitable style, compared it to a cash burning art installation, as part of a show curated by the artist Simon Denny.However according to an opinion piece in Business Insider, the results are nothing to worry about:Uber stock dipped 8% last week after the company recorded a larger than expected net loss, of $5.2 billion. It added to the impression that Uber is simply burning cash, subsidising cheap taxi rides to grab market share, with no real idea of how to turn itself into a sustainable, profitable business."I think that there’s a meme around which is, can Uber ever be profitable? I certainly heard that that meme along with others," CEO Dara Khosrowshahi told analysts on

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Responsible investing: South Korea vs Japan edition

10 days ago

The South Korean state pension fund, like many other such funds, is moving into responsible investment. With a twist.From the FT overnight:The National Pension Service of Korea has started to assess whether investments in as many as 75 companies — which totalled Won1.23tn ($1.1bn) at the end of 2018, and include Mitsubishi Heavy Industries, Panasonic, Toshiba and Toyota Motor — should be dropped if it can be proved the companies were linked to Japan’s war efforts.“We are in the process of adopting a new guideline of responsible investment and we are reviewing whether Japanese ‘war crime companies’ should be excluded from our investment list,” Kim Sung-joo, NPS chair, told the Financial Times in Seoul.The move comes after escalating trade tensions between the two countries, a story which

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The Woz and the crypto wonga

10 days ago

You might be aware that Steve “the Woz” Wozniak, co-founder of Apple, has been getting into crypto of late. Last year, a few months after telling CNBC that he thought bitcoin should become the single global currency because “that is so pure thinking”, he joined a crypto venture that had failed to complete its ICO. That was Equi, a venture founded by Lady Mone of Mayfair — the lingerie tycoon-turned-Tory-baroness-and-QVC-saleswoman — and her soon-to-be-husband, Doug Barrowman, a businessman linked to tax avoidance schemes for contractors who are now being pursued by HMRC. (A somewhat motley crew, it seems fair to say.)And as of a few weeks ago, it seems the Woz has “co-founded” another crypto venture. As reported by Coindesk, Wozniak has joined a start-up called Efforce — tagline “energy

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Further reading

10 days ago

Elsewhere on Monday…– The death of Diabolik– What P.T. Barnum understood about America– Soul Cycle and the MAGA billionaire– Are negative interest rates that weird?– RIP Dave Berman– Craig Wright in the spotlight– Wizard needed– The Fed annoys the big banks– Song of the day: Silver Jews — Wild Kindness

Copyright The Financial Times Limited 2019. All rights reserved. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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When bitcoin bros talk cryptography 

13 days ago

You might remember that last month, chief bitcoin bro Anthony Pompliano — better known as “Pomp” — had a go at talking global finance (it didn’t go terribly well).This time round, the crypto fund manager talked cryptography. You know, that old practice of using codes (where words and numbers are converted into different words and numbers) and ciphers (where a message is converted on a letter-by-letter basis) in order to protect, or “encrypt” secrets. A practice that dates back to roughly 1900BC, when some unusual hieroglyphs were carved into the wall of a tomb in the Old Kingdom of Egypt. Modern cryptography is, of course, a little different, as it uses computers to generate and crack the codes and ciphers. It dates back 100 years or less, depending on how you want to measure it, with

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Uber becomes modern art

13 days ago

Back in September 2016, we cited a BCA report which questioned Uber’s $62.5bn valuation, arguing its model was neither innovative or viable. Unfortunately, the report didn’t really register with the great and the good who have money to burn. Ahead of Uber’s IPO in May, a valuation of as much a $120bn was being thrown about by some enthusiastic bankers. Fast forward to August 8, and Uber has truly beaten even the most extravagant of money-burning expectations.Here’s the Q2 results table, possibly in need of framing:
The quarterly net loss, which hit $5.2bn vs $878m a year ago and included $3.9bn in stock-based compensation expenses related to the IPO, was spectacular in its own right. (On an adjusted basis the EBITDA loss came in at $656m, which marks an improvement on Q1.) But the thing

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Offsetting Flugscham

13 days ago

In German there’s even a word for it. Flugscham is a term coined to capture the feeling of guilt one encounters when flying, all too aware of the damage it does to the climate. Alphaville knows the feeling well. Yet we still succumb too easily to the twin forces of convenience and cognitive dissonance, and fly regularly without putting enough thought into greener alternatives.It’s what filmmaker Adam Curtis would call the “Oh Dearism” of modern liberal life. We are exposed to all sorts of scary things, but feel there is not much that we can do about it, which leaves us feeling ineffectual and depressed — and our behaviour unchanged.So it’s nice of Ryanair to make us feel better about ourselves by offering Alphaville an option to offset our carbon footprint in the form of a €1 donation

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Disney and the death of cultural transmission

13 days ago

The house of mouse, Disney, reported its second-quarter results on Tuesday. They weren’t good. Despite strong growth from its film studio — thanks to popcorn pleasers such as Avengers: Endgame, Toy Story 4 and err, Aladdin — revenues came in $900m below expectations, at $20.3bn. Earnings-per-share of $1.35 also missed forecasts; analysts expected a figure of $1.72.Disney’s shares, as expected, didn’t take the news well, falling just under 5 per cent on Wednesday:
As with any mega-corporation’s results, there were multiple reasons for the miss. For one, the integration of 21st Century Fox’s wide range of entertainment assets, purchased last year for $71.3bn, isn’t quite going to plan. Chief executive Bob Iger told analysts that “Fox Studio performance . . . was well below where it had

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Why world leaders should impose green sanctions

14 days ago

Edoardo Saravalle previously worked on sanctions and economic statecraft matters at the Senate Committee on Banking, Housing, and Urban Affairs and the Center for a New American Security, a Washington-based think-tank. In this guest post, he proposes a different approach to tackling climate change.Policymakers have responded to climate change on the international stage through multilateral deals like the Paris agreement. Creating rules this way is onerous and time-consuming — and in some cases it may be unnecessary. Washington, London, and Brussels have used sanctions to unilaterally rewrite the rules of global finance. They could also use sanctions to fight climate change.The US sanctions experience since withdrawing from the Iran Deal offers lessons for policymakers concerned about

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Further reading

14 days ago

Elsewhere on Thursday:– How bad can it get?– The Trump hypothesis.– Surviving Amazon.– Ex-HSBC banker pleads guilty.– Bank edits.– Childless millennials at Disney World. — Burford unravels.– The road not taken.

Copyright The Financial Times Limited 2019. All rights reserved. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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The Burford long thesis

15 days ago

Burford Capital, a litigation financing specialist, is having a difficult 24 hours.At noon on Tuesday, the AIM-listed business had a market capitalisation of just over £3bn. At pixel time, it’s just £1.3bn. That’s a 59 per cent loss for shareholders, according to Bloomberg data:
Its precipitous fall follows a report on the business from short-selling firm Muddy Waters, which can be read here.Never one to eschew the other side of the trade, Alphaville came across this 205 page deck on the company this morning by Caro-Kann Capital, a Californian fund. It was published in January.Feel free to compare and contrast with Muddy Water’s work:
And if you’ve got an hour to spend, here’s portfolio manager Artem Fokin talking through the pitch on YouTube:

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Happy

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Former Fed chairs gang up on Trump

15 days ago

Fed chairman Jay Powell has found some powerful allies in his battle to keep the Federal Reserve’s monetary policy independent of political pressure.Every living former US Federal Reserve chair has ganged up on US President Donald Trump in an op-ed with the Wall Street Journal. Here’s the kicker:Elections have consequences. That certainly applies to the Federal Reserve as well as to other government agencies. When the current chair’s four-year term ends, the president will have the opportunity to reappoint him or choose someone new. That nomination will have to be ratified by the Senate. We hope that when that decision is made, the choice will be based on the prospective nominee’s competence and integrity, not on political allegiance or activism. It is critical to preserve the Federal

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How Lloyds got burnt by a for-profit education deal

15 days ago

When Sovereign Capital bought Greenwich School of Management on April 1, 2011, the London college earned just £8m a year in revenue.But the private equity firm was about to benefit from a crucial change in government policy.By 2014, Greenwich School of Management (GSM) was making an annual turnover of £40m, and Sovereign had refinanced its initial investment, making a return of nearly 60 per cent in just three years.What happened? The story of GSM is one of an experiment with for-profit education, which highlights the risks private equity firms take when they bet on changes in government policy, and the risks banks take when they lend to them.In 2010, the UK coalition government reformed higher education. A tripling of tuition fees, to £9,000 a year from 2012, generated mass street

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