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Bitcoin bombs lower, touching the dreaded $30,000 range

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Bitcoin bombs lower, touching the dreaded $30,000 range


This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Happy Friday, Bull Sheeters. A risk-off mood has descended over markets as COVID worries intensify. From Tokyo to Frankfurt, there’s red on the screens, and U.S. futures aren’t doing much better. Meanwhile, the Bitcoin bears are out in force; the digital currency is having another rough session.

Below, in the weekly “By the Numbers” section, I get more into the wild ride of the crypto trade, and whether this is a mere blip, or the sign of more pain to come.

In Postscript, I make good on my promise from earlier in the week. You have homework this weekend, dear reader.

But first, let’s see what’s moving markets.

Markets update

Asia

  • The major Asia indexes are closing out the week with a whimper, with the Hang Seng down 1.6%.
  • The much anticipated Ant Group IPO could be worth less than 700 billion yuan ($108 billion)—or, half the size of what underwriters were expecting just a few months ago.
  • The China-Australia trade spat has cost the latter about $3 billion—not a huge sum, but it’s putting the pinch on Australian winemakers and other exporters.

Europe

  • The European bourses stumbled out of the gates with the Stoxx Europe 600 down 0.4% at the open.
  • The COVID numbers out of the U.K. are truly frightening, and now PM Boris Johnson is signaling the current lockdown measures could extend into the summer. The pound is lower this morning.
  • The deadly winter coronavirus surge knows no borders. France announced that any visitors from aboard—including EU nations—will have to present a negative COVID-19 test to get into the country. And Portugal has suspended all flights to and from the U.K.

U.S.

  • The U.S. futures point to a weak open after a mixed trading session on Thursday. Still, all three major exchanges look as if they’ll finish the week in the green.
  • The Nasdaq closed at a fresh all-time high yesterday, helped by big gains from Intel. Alas, the chipmaker is down 4.6% in pre-market trade this morning after disclosing mixed results—record sales, but a bottom-line miss.

Elsewhere

  • Gold is lower, trading around $1,860/ounce.
  • The dollar is up as equities falter.
  • Crude is down, with Brent steady around $55/barrel.
  • Bitcoin has had a brutal week. It’s down a further 8.7%, trading below $31,000. At one point, it had broken $30k.

***

By the numbers

26.2%

Bitcoin bulls, I’ll give you the good news first. The notoriously volatile digital currency, is up 6.3% so far in 2021. Before you get out the cigars, take a peek at the past two weeks. Since hitting its all-time high of $41,940 on Jan. 8, it’s down 26.2%. That’s solidly in bear market territory. The rapid plunge has triggered all kinds of warnings about how low it could go. But cryptocurrency investors aren’t sweating it—they’ve lived through wild swings in the past. Some even see the swoon as a perfectly understandable and necessary correction. With all this in mind, Fortune‘s Robert Hackett answers the question on a lot of investors’ minds these days: Should you add Bitcoin to your portfolio in 2021?

97,528,800

Tomorrow marks the one-year anniversary of the Wuhan lockdown, a news headline that shocked the world at the time. Now stay-at-home orders, border closures and travel restrictions are commonplace the world over. According to the New York Times COVID-19 tracker, official reports show 97,528,800 people have been sickened around the world with at least 2,090,500 deaths. The numbers are worse than anybody thought in those early days. And the near future doesn’t look much better, with the U.S. Centers for Disease Control and Prevention warning of a further 100,000 deaths over the next few weeks. The stock market rally aside, it’s been a brutal year.

44.4%

There’s another recent milestone that means a lot to me. Jan. 21, 2020 was the launch date of the Bull Sheet. The Nasdaq closed that day at 9,370.21, which means the tech-heavy index is up 44.4% since I’ve been writing this newsletter. Had you put 10 grand on QQQ that day, you’d be looking at a pretty impressive return… I want to thank you all for your support in year one. I’m looking forward to the ride in 2021.

***

Postscript

As I mentioned earlier this week, my inbox filled up with requests for our ribollita recipe. I’m a man of my word.

Before I share the ribollita recipe, I should explain a bit about its origin. It falls squarely in the cibo povero, or peasant food, category. And it’s Tuscan through and through. You may find something similar across the border in Umbria or here in Lazio, but the Tuscans perfected it.

We pay homage to all those nonne toscane in strictly sticking to the Tuscan version. Our recipe was inspired by the version you find in and around Pienza (I can smell the pecorino cheese whenever I think of that gem of a hill town).

Here goes:

First, a warning… this is a recipe that may trip up kitchen novices. But don’t get discouraged. You’ll earn serious points with loved ones for the effort. And once you’ve perfected it, you’ll be the envy of your investing club.

Ingredients: jar of passata di pomodoro (tomato paste) 400g, white beans (dry) 350-400g, leeks 250g, carrots 80g, 2-3 potatoes, green cabbage 250g, chard 300g, Italian black cabbage 300g, pig bone, laurel leaf, sprigs of fresh rosemary+sage+marjoram, salt.

Step one: the night before you decide to cook the ribollita, soak your white beans overnight.

Step two: You’ll need two big pots. Put your soaked white beans + pig bone + laurel leaf in one of the two big pots. Let’s call this Pot 1. Fill with 2 liters of water and cook over medium heat. Skim off the muck that floats to the top every now and then.

Step two: about 45 minutes later, you can start on your second pot. Let’s call this Pot 2. You start here with your sofrito. Pour in olive oil and cubes of your leeks, carrots and potatoes, plus salt. Let them cook for a bit, then pour in the jar of passata del pomodoro. A good five minutes later, your mix will have thickened.

Step 3: Ladle the boiled broth from the Pot 1 into Pot 2. Add the rest of your cabbages, diced, into Pot 2. Add the sprigs of fresh rosemary+sage+marjoram at the end. We usually tie the sprigs together on a thin string that we can then fish out of the cooking broth at the end. I usually sprinkle a bit more salt in Pot 2 at this point.

Step 4: After you’ve ladled out all the broth from Pot 1, you’ll be left with the pig bone and the white beans. Discard the bone. Scoop out the remainder of the white beans and blend half of those white beans into a paste. Add the white bean paste and the remainder of the whole white beans into Pot 2.

Step 5: At this point, you’re down to a single pot, Pot 2. Let Pot 2 cook for another 45-60 minutes under medium heat.

Serve: Place into your bowl a big slice of toast or, even better, a piece of stale bread; then pour your soup on top. Add a bit of pecorino romano shavings, and a dollop of olive oil.

Pair with Sangiovese or Montepulciano d’Abruzzo, a big-bodied Italian red. You won’t find me drinking a Pino with this dish.

Please share your ribollita photos with me!

***

Have a nice weekend, everyone… But first, there’s more news below.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.



Business

Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter

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Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

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Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter

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Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

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The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says

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The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

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