5/5/2016

Can Tesla Meet Demand

There is high Demand for the Tesla model 3. The car has accumulated more than 350,000 pre orders to be ready by 2017. But the company moved its 500,000 total unit annual build target up two years to 2018. Musk said he expects production of 100,000 to 200,000 Model 3 vehicles in the second half of next year. But it remains to be seen if Tesla can pay for and complete its bullish production projections for the coming years. In its letter, Tesla said increasing production "will be challenging and will likely require some additional capital." It will "cost a tremendous amount of money to build plant capacity to meet those production goals. Production plans were further complicated earlier Wednesday as Tesla confirmed Greg Reichow, its vice president of production, will take a leave of absence after it finds a successor. Tesla's vice president of manufacturing, Josh Ensign, is also expected to depart. However, Musk touted Tesla's "excellent production team." He said the company's Gigafactory allows it to "exceed anybody else in the world at scale economies."

Fitbit a One Trick Pony

If you’ve been an investor since Fitbit’s IPO, you’ve lost almost half your investment in under a year as investors remain worried about the Apple Watch and the prospect of Fitbit being a one-trick fad. But, according to IDC, Fitbit moved the most devices globally in 2015 and had the largest market share. Fitbit said it sold 4.8 million devices during the first quarter. However, management cut their optimism for next quarter based on a lower than expected earnings report. Fitbit is looking a bit like GoPro. They were both pioneers in a now saturated market. Competition is steep and that is taking a toll on the stock price.

Aeropostale Goes Bankrput

Aeropostale hs officially filed for chapter 11 bankrupcy after 13 straight quarters of hemorrhaging cash. It is clear that the rapid rise of fashion giants like Zara and H&M, with their trendy and reasonably-priced clothing, ultimately led to Aeropostale’s bankruptcy. Also less people are shopping at malls. Rather, they buy retail items over the Internet.

Time Warner’s Positive Earnings

Despite lower revenue from Time Warner due to fewer movie releases and subscription revenue at Turner (think CNN and TNT), the stock popped 15% thanks to blowout March Madness ratings. Meanwhile, powerhouse HBO kept increasing revenues with the success of its standalone streaming service HBO Now, made popular by shows such as Game of Thrones.

YouTube’s Plan to Make Internet TV Happen

YouTube is trying to make internet TV happen. The company is working on a subscription-based streaming service called "Unplugged" that would let customers stream a bundle of cable channels. YouTube has been working on such a product since 2012, according to the report, but has ramped up efforts recently as other companies including Dish, Sony, and now Hulu have launched or plan to deliver premium internet TV offerings. The current goal is to launch Unplugged in 2017. Talks have been ongoing with all the big content players — NBCUniversal, CBS, Twenty-First Century Fox, and Viacom — but so far YouTube has been unable to lock down deals with any of them, the report says. This is the same sort of roadblock that led Apple to pause on its own web TV plans. But companies like Sling have been able to piece together so-called "skinny bundles" for rates starting at $20 per month. YouTube is aiming to price Unplugged at under $35 monthly, according to Bloomberg News.

Biggest Recall in American History

Takata Motors (Japanese auto supplier) is recalling 40 million airbag inflators. About 28.8 million inflators had already been recalled to repair a defect that can cause the air bags to explode during an accident. Eleven deaths have been linked to the defective parts. The defective air bags are at risk of rupturing violently in a collision, hurling fiery shrapnel into drivers and passengers. In addition to the fatalities, about 100 people have been injured. The defect, stems from conditions affecting ammonium nitrate propellant used in the inflators, NHTSA has concluded. The propellant is prone to degrading over time, especially in hot, humid climates, according to tests by the government and Takata. That's why older cars that have spent most of their time in states such as Florida are prioritized first in the recall process.

"This is the largest recall in American history," National Highway Traffic Safety Administration told reporters.

China Sides With Domestic Company Against Apple

In 2010, the Chinese company, Xintong Tiandi, trademarked "IPHONE" for leather products in China. But The Beijing Municipal High People's Court ruled in favor of Xintong Tiandi Technology. Apple intends to request a retrial with the Supreme People's Court and will continue to vigorously protect their trademark rights. Apple states, "We work hard to make the best products in the world and want to ensure our customers' experience is not compromised by companies who try to profit from using our brand."

This is an example of how the Chinese government gives privilege and special treatment to their domestic businesses over foreign businesses.

$70 Million Diamond

Lesedi la Rona is an 1109-carat diamond. It's the size of a tennis ball. The gigantic diamond will be auctioned by Sotheby's in London next month. The diamond was found in Botswana in southern Africa in November. It took months to determine even an estimated price, because it is so large that it does not fit into conventional scanners used to evaluate a stone's potential worth.

Sotheby's said the diamond is the largest rough, gem-quality diamond in existence today. It is believed to be between 2.5 billion and 3 billion years old. Lucara, the Canadian company that owns the diamond, called it the biggest diamond found in more than 100 years. The discovery sent the company's shares soaring. It is expected that the diamond will be auctioned off for around $70 million.

Facebook’s Bug Bounty Program

Facebook operates a "bug bounty" program that rewards those who report vulnerabilities in its services, including Instagram. The program is meant to stave off hackers and fix bugs. Facebook has rewarded more than $4.3 million to more than 800 people under the program since it launched in 2011. A 10-year-old boy figured out he could delete other people's comments from Instagram using malicious code. He alerted the service to this flaw and was paid $10,000 as a reward. Instagram said the vulnerability had been fixed.

China Devalues Currency .6%

China's central bank on Wednesday (May 4) fixed the yuan currency nearly 0.60 percent weaker against the US dollar, according to the national foreign exchange market, the biggest downward move since devaluing the unit in August last year.

The People's Bank of China set the value of the yuan - also known as the renminbi (RMB) - at 6.4943 to US$1.0, weakening 0.59 per cent from the fix of 6.4565 the previous day, according to data from the Foreign Exchange Trade System. China only allows the yuan to rise or fall two percent on either side of the daily fix, one of the ways it maintains control over the currency. Analysts said the weaker fix was in line with strength in the US dollar on Tuesday, as financial authorities seek to make trading more market oriented. The dollar rose against most of its peers Tuesday as global growth worries swept equity markets and pushed oil prices lower, boosting demand for the safe-haven US currency.

To maintain a stable currency market, the RMB weakened accordingly. The world's second-largest economy rattled global investors with a surprise devaluation last August, when it guided the normally stable yuan down nearly five percent over a week.                 

Oil Companies Continue to go Bankrupt

The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week's filings for creditor protection by Midstates Petroleum and Ultra Petroleum.

The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com.

It is said the U.S. oil industry is not even halfway through its wave of bankruptcies. Until recently, banks had been willing to offer leeway to borrowers in the shale sector, but lately some lenders have tightened their purse strings.

A widely predicted wave of mergers in the shale space has yet to materialize as oil price volatility makes valuations difficult, and buyers balk at taking on debt loads until target companies exit bankruptcy.

The telecom and energy boom-and-bust cycles have notable parallels. Pioneering technology brought an influx of investment to each industry, a plethora of new, small companies issued high levels of debt, and a subsequent supply glut sapped pricing just as demand fell sharply.

Neither this crash nor the telecom crack-up in the early 2000s rival the housing and financial bust in 2007-2009 in terms of magnitude and economic impact. But losses for energy investors in the stock and bond markets in the last two years are significant. It remains unclear how long it will take to get through the worst of the declines, and who will be left standing when it is over.

A 60 percent slide in oil prices since mid-2014 erased as much as $1.02 trillion from the valuations of U.S. energy companies. In the debt market, there are also signs that lots of money could be lost this time around, especially in high-yield bonds.

During its boom, U.S. oil and gas companies issued twice as much in bonds as telecom companies did in the latter part of the 1990s through the early 2000s.

Between 1998 and 2002, about $177.1 billion in new bonds were sold in the U.S. telecommunications sector; less than 10 percent were junk bonds. U.S. oil and gas companies sold about $350.7 billion in debt between 2010 and 2014, the peak years of the oil-and-gas boom, with junk bonds making up more than 50 percent of all issuance.

A Brexit Will influence Fed’s Interest Rate Decision

Britain's vote on whether to stay in the European Union will effect the U.S. central bank’s decision whether to raise interest rates at its next policy meeting. This is because a Brexit could be a source of heightened global uncertainty. Fed policymakers in March forecast two rate rises this year but there was little sign in their latest policy statement last week of any hurry to raise rates again amid slowing global growth and tepid inflation at home. However, an interest rate hike in June can happen as long as there is continued progress on the economy, inflation and jobs. But political uncertainty (trump) may also be affecting business investment and consumer spending. In addition, separate manufacturing data from China and Britain on Tuesday rekindled fears over the pace of the global slowdown, sending U.S. stocks lower.

Financial Industry to Acquire Bitcoin Technology

It is "overwhelmingly likely" that the financial industry will adopt uses for the technology underpinning bitcoin, former Treasury Secretary Larry Summers said.

The bitcoin’s blockchain technology has a lot of potential in banking. To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are. Blocks, meanwhile, are like individual bank statements. Based on the Bitcoin protocol, the blockchain database is shared by all nodes participating in a system. The full copy of the blockchain has records of every Bitcoin transaction ever executed. It can thus provide insight about facts like how much value belonged a particular address at any point in the past. On an average, every 10 minutes, a new block is appended to the block chain. And while some investors and techies spent the blockchain-focused conference pitching how a secure, unchangeable global ledger (a blockchain) could supplant the existing global monetary system, others suggested it could take a more ironic role. That is, the technology behind bitcoin could change money forever — by helping fiat currency be more efficient. Instead of a trustless network of economically incentivized database maintainers (called "miners" in the bitcoin community), a variant of blockchain technology would be employed by the very central banks that crypto-anarchists speak against, several projected. For one, Digital Currency Group CEO Barry Silbert predicted that the U.S. Federal Reserve and the People's Bank of China will seek to digitize their current fiat currencies, issuing something akin to RMB-coin, or dollar-coin. That is, central banks will issue digitized tokens that represent their current currencies — but those systems' security will be underpinned by bitcoin technology.

There are a wide range of benefits for central banks ranging from tracking money's velocity and its usage to easier issuance of stimulus "helicopter" money, sources said.

"There's going to be an important distinction between central banks' coins and bitcoin," Silbert said Monday. "They're certainly not going to cap the output."

Bitcoin derives its value in part because of scarcity: It's hard-wired into the code that there will only ever be a certain amount of the token. Central banks, on the other hand, will want to be able to create more digital assets as monetary policy requires.