Tuesday, October 25, 2016

Snapchat Is Pumping the Next Tech Bubble with More Hot Air


Tech Bubble Likely to Burst

For greater part of the year, apprehension has been mounting that the second tech bubble is likely to burst. Contrasting from the dotcom bust of 1999 as well as 2000, that had been generated due to the unexpected downfall of companies on the stock market, the second coming has been established on the eye of valuation which the latest generation of tech companies had organised in achieving through private fund-raisings.

Scores of business all over the world have attained the so-called `unicorn’ status, an estimate of over $1bn. Overall, it is reaching 200 universally which have succeeded this mythical tag. Some of them seemed to be `mega-unicorns’ companies that have exceeded the $10bn target though a handful of superstars have hit the extraordinary levels.

Uber the taxi app is presently worth over $60bn while Airbnb, the favourite of the sharing economy has raised funds valued at $30bn. Meaningless estimates of young companies some of which make no money and you have the makings of a bubble which will certainly have to burst at some point of time with catastrophic consequences for global markets. Indications have been there for some time. Confidence in private market has taken a blow with a drop in funding rounds for start-ups.

Fidelity – Instigated Panic

A high profile tech investor, Fidelity had instigated panic when it had dropped the evaluation on dozen investments. On the other hand, some start-ups comprising of Uber had been compelled to go overseas in raising funds at higher assessments where the assessments of several big tech companies already on the stock market had collapsed.

However, in spite of the anxieties, the bubble is likely to be pumped with more hot air due to another burst of vastly over-priced floats. One of the most high profile is Snapchat which is a company that several people of a particular age would possibly not have heard it but has instantly become the social network of choice among millennial who tend to utilise the same in sharing photos, video drawings and texts.

Launched only five years back by three ex-Stanford University students, the same has been amazing. Snapchat tends to generate sales of only £300m each year, in spite of being utilised by 150m users each day and is uneconomic due to its free services.

Bubble – Low Interest Rate Environment

But these matters seem to be of no concern to the experts of Silicon Valley and Wall Street who tend to value the app at $25bn. However, it could prove to be the next Apple or Facebook and many are of the opinion though the same has been said regarding Twitter, Groupon as well as LinkedIn which tend to be over-hyped.

Snapchat will probably be followed by other hot tech firms comprising of Pinterest, Dropbox and SpotifyIt may only need one failure to affect it badly and 2016 may be the year the dotcom bubble 2.0 would eventually goes pop. The founder of PayPal and a billionaire tech investor, Peter Thiel states that we are in a bubble owing to the low interest rate environment that had been talked over earlier.

 He comments that `I think we have a bubble in the US in government bonds, due to the quantitative easing and the adverse real interest rates and to some extent that increases asset values all over the board inclusive of start-ups’

Saturday, September 17, 2016

Mark Carney ‘serene’ about pre-referendum economic warnings

Mark Carney

Governor of Bank of England – Serene on Judgement of MPC/FPC

With the indications increasing, that economic activity had held up more than expected since the June referendum, the Governor of the Bank of England, Mark Carney has fortified his blatant warnings regarding the negative impact of Brexit on the economy before MPs. In recent weeks with the firming of business activity surveys together with resilient retail spending data, has led to assertions from supporters of Brexit that the warnings of recession of the Governor has now been shown as scaremongering together with the quick to reduce interest rates, by the Bank’s Monetary Policy Committee – MPC, after the vote.

 However, these charges were denied by Mr Carney at the time of replying to the questions before the Treasury Select Committee. He stated that considering all the events since the referendum he was absolutely serene regarding the judgements made by the MPC as well as the FPC – Financial Policy Committee. He further added that they certainly welcome the signs of stabilisation and that the Bank had anticipated a bounce back in the much observed Purchasing Managers’ Index – PMI surveys when the interest rates were reduced on 4 August.

Biggest Downgrade in Modern History – Growth Forecasts

That recover had provoked the economic forecasters of a host of City of London to revise their expectation of a recession in the second half of the year, though a sharp go-slow in the growth is yet extensively predicted. Mr Carney had mentioned before the EU referendum in May that a technical recession would be possible in case of a majority Brexit vote by the British public.Interest rates were reduced last month by the Bank to a new historic low of 0.25% and had pushed on another £70bn of Quantitative Easing as it revealed its biggest downgrade in its modern history in growth forecasts.

Mr Carney had repudiated the charges that levelled by the pro-Brexit Conservative MP Jacob Rees-Mogg stating that the Ban had issued dire warnings before the vote, replying that he had heighted risks aptly. Moreover, the Governor had also added that the financial impetus the Bank had instigated together with its rapid offer of liquidity to the banking system had been one of the main causes the financial conditions seemed to be alleviated.

Traders Clambering Back

Moreover the Governor had also added that the implementation of the Bank on monetary stimulus and its rapid offer of liquidity to the banking system had been the main cause of financial situations being steadied. He commented that they had made the crystallisation of those risks less probable. Mr Carney had also mentioned that the Bank had `helped ensure that what was surprise for financial markets passed smoothly and that allowed us not to have an overshoot’.

Sterling has faced a record fall against the dollar in the two day in the wake of June 23 vote, dipping to its lowermost rate against the US currency in the last 31 years.The Bank of England had stated in August, that it could cut the interest rates again later in the year if the economy declined on the predictable. Presently the traders are clambering back their bets on another cut in view of the more positive economic data.

Thursday, September 1, 2016

Oil Prices Fall As Production Freeze Expectation Fades


Oil Prices Dropped – Oversupply/Decline Expectation of Production Freeze

Oil prices had dropped on Thursday while market concentrated on oversupply and declining expectation of a production freeze. Global crude oil benchmark Brent had been down by 10 cents at $48.95 per barrel by 1230 GMT after closing down at 1.8% on Wednesday and U.S. light crude oil fell by 15 cents at $46.62 a barrel, after slipping by 2.8% on Wednesday.

In the first three weeks of August the oil prices had increased over 20% on talk of a probable deal by oil exporters to freeze production levels in an attempt to support prices. On September 26-28, members of the Organization of the Petroleum Exporting Countries would be meeting on the side-lines of the International Energy Forum, with groups and consumers in Algeria.

There are rumours that the meeting would agree to some kind of output curbs when similar attempts for production freeze had failed in April. Expectations however of a deal have been restrained by the record of OPEC output where some analysts envisage the vision of voluntary restrictions. Senior oil analyst at Commerzbank in Frankfurt, Carsten Fritsch, states that speculators pressed the price up expecting an output freeze that is doubtful to take place and perceives downside risk if the expectations are being scaled back.

Effects Minimal on Physical Market

U.S. investment bank Jefferies approved informing clients recently that even if a freeze had been agreed, the effects would seem to be minimal on the physical market. It was mentioned in a report that they did not expect a production freeze, let alone a production cut from the OPEC meeting.

With the output reaching almost record levels from several of the top producers and the demand unsteady, there seems to be little vision to the end of the surplus which had pulled down the prices of crude from more than $100 per barrel in 2014 to their present sub-$50 stages.

High storage levels too seemed to be weighing on the market. Commercial crude oil stocks, in the United States had increased by 2.5 million barrels to 523.6 million barrels, higher by 16% than a year ago.

Stocks across the world, with regards to refined products also brimmed as the demand slowed while refinery output seemed to stay high. BNP Paribas has commented that `ample inventories were due to weaker demand in Asia though more generally were driven by excess supply generated by refiners maximising runs, notably to produce gasoline in the U.S.’.

China’s Indirect Demand of Oil Dropped

According to Reuters’ calculations utilising official data, the indirect demand of oil of China had dropped by 0.3% from a year earlier to 10.58 million barrels a day in July.

After Saudi Energy Minister Khalid Al-Falih had informed Reuters that oil had paired some gains, he was of the belief that any substantial oil market intervention would be essential as the demand for crude would be picking up well around the world. He informs that there has been no discussion of substance still on the production levels of OPEC.

His comments strengthened the belief of several market participants which the September meeting would not resort to any production curbs particularly with the recent data portraying the Saudis and fellow OPEC member Iran were driving as much as they could.

Tuesday, August 16, 2016

Weak oil prices pull Wall Street away from record levels

Wall Street

U.S. Stock Indexes Move Back – Drop in Oil Prices

Stock indexes of U.S. moved back from its record levels due to drop in oil prices which overstretched energy stocks. The prices of oil dropped by 1.6% in cutting trading after the reports of the U.S. government of a surprise crude stockpile build. The energy index of S&P 500 fell by 0.9% and Exxon Mobil – XOM.N 1.5% drop was the top strain on the S&P 500 and the Dow. Since late June, a rally has left the S&P to almost 7% in 2016 as prospects of constant low interest rates motivated investors in buying into U.S. equities. The standard index this month had hit four record intraday highs.

 Regional investment director for The Private Client Reserve of U.S. Bank, Tim Dreiling had stated that once they had seen the new inventories, it certainly moved energy far lower dragging almost everything down.He further added that to grind higher, earnings improvements needed to be seen and that would come from economic improvement. The industrial average of Dow Jones – DJI had declined by 0.2% to finish at 18,495.66 points while the S&P 500 .SPX lost 0.29% to 2,175.49 points. The NASDAQ Composite .IXIC had dropped by 0.4% to 5,204.59.

Trading Volume – Lack of Market-Moving Information

Out of the 10 major S&P 500 index, six were lesser. Due tolack of market-moving information in a traditionally low-volume season, trading volume had been low. Around 5.92 billion shares had changed hands on the U.S. exchanges when compared to the 6.45 billion regular averages for the last 20 meetings. The shares of Walt Disney – DIS.N had ascended by 1.23% after the company recently had informedthe results which beat estimates stating that it is purchasing a 33% stake in video-streaming firm BAMTech. The stock offered the biggest increase to the S&P 500 and the Dow.

SunPower shares had fallen by 30% after the company had fluctuated to a second quarter loss, lowering its full year revenue prediction, stating that it would restructure its business. Perrigo dropped 11% to $85.06 after the company had reported a lower than expected earnings and dropped its remunerations forecast. JD.com soared to 8.6% to $24.28 after the company had stated the revenue within its forecast. The stock had given the biggest increase to NASDAQ. Weakening matters outstripped progressing ones on the NYSE by 1,610 to 1,259 and on NASDAQ; the issues dropped by 1,798 and advanced by 924.

Low Volume Could Skew Market in Any Direction

The S&P 500 index portrayed 18 new 52-week highs together with two new lows though the NASDAQ verified 61 new highs and 28 new lows. Market strategist at Prudential Financial, Quincy Krosby had stated that low volume was fairly standard at that time of the year and August seems to be a very irregular month and if one has low volumes, it could skew the market in any direction and that is what we have today. The trading volumes had been near year low since Monday as the second-quarter earnings seasons tends to wind down. Dollar index had slipped for the second straight day as weak U.S. productivity data on Tuesday dimming a bit the prospects of economic growth which would probably discourage the Federal Reserve from increasing the interest rates.

Wednesday, August 3, 2016

5 Technologies That Can Change Stock Markets Forever

Improved Insight on Risk Undertaken

Disturbance in digital system has been making the financial markets more apparent, reachable and efficient. Besides this it also tends to help the regulators in getting an improved insight on the risks which the applicants may seem to undertake. The following technologies could transform the financial markets in the forthcoming days:

Artificial intelligence and natural language processing 

Several of the financial companies are adopting algorithms in doing the tasks which humans have been performing for years. Mechanism learning systems have been enhanced considerably and with expanding processor potentials at lower cost, these systems are made available for larger usage. The techniques for artificial intelligence enable the system to learn from user connections as well as patterns without the need of being openly programmed for the same.

Machine learning together with other artificial intelligence technologies, in the past few years, has provided us with self-driving cars, real-world speech recognition, chess champions as well as more related as well as realistic web-searches. With regards to financial markets, we have software analysing voice patterns of recorded calls at investment banks, brokerages and on the client side too which could instantly distinguish irregularities and frauds, It can also look at keywords, decode conversational encryption of information and achieve difficult searches on the recordings.

Robo Advisers 

From the present situation, there could be probabilities that we would be seeing the last few Wolves of Wall Street and Dalal Street and moving ahead we may have only robots of Wall Street and Dalal Street. Though the systems hasprogressed in grasping the monetary goals, risk profiles together with the other complex details of investment to come up with personalised investment portfolio, it could alter funds, book profits or square off position depending on self-learning processes. The platform could be either for web-based and/or smartphone based, thus enabling easy access or adapt.This is said to be self-operated without the need of the user talking to a live person. Compared to a human advisor who tends to charge a portfolio management fee, the services here are rendered at no recurring expense.

Quantum `sealed envelope’

Outrages centred on information theft have often been a nightmare for performers in financial markets. Till now, hackers have somehow achieved to stay ahead of security programs as well as passwords though it could change very soon. A team of researchers inGeneva, Singapore, Cambridge and Waterloo and Ontario had utilised the breakthroughspeculative work co-authored by Dr Adrian Kent from University of Cambridge’s Department of Applied Mathematics and Theoretical Physics in providing `unconditionally guaranteed’ security as well as purity of message transferred from any two points on earth. Earlier trials using these digital `sealed envelopes’ is said to be successful and if all goes well, the monetary markets would be entirelysecured against any threat of statistics invasion.

Bitcoin and Blockchain technologies 

The distributed ledger, Blockchain technology after the virtual currency Bitcoin, tends to record the financial transaction of any digital interaction in secured, transparent, traceable and in an efficient manner. So it is appropriate in providing a universal virtual currency as well as for digital accounting and auditing financial transaction of any kind. The possibility of Blockchain technology is understood from the fact that 30 of the largest banks in the world had recently formed a global consortium to research, design and build Blockchain solutions further. Besides this, the Reserve Bank of India – RBI that had issued a cautionary note in 2013, against Bitcoin had changed its stance. The Indian central bank is now of the belief that the Blockchain technology could be helpful in the prevention of counterfeiting currency as well as financial transactions.

Big data and analytics 

Financial markets tend to generate enormous amount of data each second. Storing and analysing these details on real time basis could be critical. With a combination of private as well as public cloud tends to resolve the issue of storage as well as real-time access to this multitude of data at reasonable charges. Big data analytics tend to make it likely to highlight correlations which seem incredible for humans to locate. For instance, envisage a situation where 90% of orders that are positioned on NSE and BSE through high-frequency algorithmic dealing platforms tend to abruptly get cancelled within a span of less than 30 seconds.

 A human may never have known such trends with so much accuracy; RBI had highlighted this trend last year and alerted the market regarding it. Such kind of analysis could never be done without leveraging technology for big data scrutiny. There could also be software which could analyse thousands of social media feeds regarding the sentiments and news of a company and could try to forecast future as well as probable sentiments regarding the company. These visions could change the way institutional as well as retail investor trade in the market. Though some of these technologies could be in its initial stage of development and may need substantial enhancement together with market interest, the base has been set for digital alteration.