The ‘Chips’ Continue To Fall; TSMC Cuts Q2 2018 Revenue Forecast To $7.8 Billion, Citing Weak Demand From Mobile Sector

After a brief pause, troubles in Apple (NASDAQ:AAPL)’s supply chain are once again coming to light.  A couple of months back it was reported that the company is facing weak iPhone X demand. While the smartphone’s high price drove Apple’s ASP to record high levels, it naturally failed to stimulate demand.

Therefore, Cupertino was forced to cut down orders for the smartphone in half, which led to Samsung Display having excess OLED capacity for the first time in years. Today, another Apple (NASDAQ:AAPL) supplier looks to face a similar fate. Take a look below for more details.

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Taiwanese Chipmaker TSMC Cuts Down Revenue Forecast For The Second Quarter To $7.8 Billion Citing Weak Smartphone Demand

Right now, TSMC’s at the top of the mobile processor world. Its 7nm process will dominate for at least a year until Samsung shifts gears to EUV in 2019. Apple is all set to order its next A12 processor from the company, and if we’re lucky, even the A11X. However, recent sales declines for the iPhone X haven’t done any good to TSMC (NYSE:TSM).

The fab’s second-quarter results are due on July 19th, so there’s a lot of time left. Still, the company sounds pessimistic, as reported in its Q1 earnings release. TSMC (NYSE:TSM) expects that revenues for the second quarter will drop to $7.8-$7.9 billion. The company’s revenues for its latest quarter are $8.46 Billion, down by 8.2% over the previous quarter.

Apple’s Chief Supplier TSMC Believes a Drop in High-End Phone Shipments but Predicts Growth in a Different Market

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“Our first quarter business was impacted by an unfavorable foreign exchange rate as NT dollar has appreciated by 5.9% against US dollar over [the] first quarter of 2017, as well as mobile product seasonality, while the continuing strong demand for cryptocurrency mining moderated the mobile softness. Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining,” said Lora Ho, SVP and Chief Financial Officer of TSMC.

Ms. Ho then proceeded to lay out guidelines for Q2 2018. She set TSMC’s expectations below Wall Street Estimations. Analysts expected TSMC’s forward guidance for revenues to stand at $8.8 Billion. TSMC’s next-generation node, 7nm, will bring a host of improvements for power efficiency and transistor density.

We’re interested to see how Apple (NASDAQ:AAPL) integrates these on to the A12, especially as the company’s current A11 fails to maintain performance at high temperatures. Thoughts? Let us know what you think in the comments section below and stay tuned. We’ll keep you updated on the latest.

Source: TSMC

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Qualcomm’s Steve Mollenkopf Is Good For His Word; Company Will Lay Off 1500 Employees As Part Of CEO’s Promised Cost Reduction Program

US chip giant Qualcomm (NASDAQ:QCOM) was in the news a couple of weeks back, being a target of a potential acquisition by Broadcom. It employed several different tactics to ensure that the deal would either fail to go through, or Broadcom would have to pay the maximum possible amount possible.

As shareholders considered selling, the company CEO made a commitment to reduce costs by $1 Billion, in order to entice them away. Now that the dust has settled after government rejection of the deal, Qualcomm is following through on its earlier promise. This means bad news for a lot of workers. Take a look below for more details.

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Qualcomm To Lay Off 1500 Workers As Part Of CEO Steven Mollenkopf’s Earlier Promise To Shareholders; Chip Giant Desperate To Stay Profitable As Revenues Continue To Decline

The past couple of months have proved quite controversial for Qualcomm. The company tried all that was possible to skirt Broadcomm’s potential hostile takeover. After the US government came to its help and the deal failed to follow through, a new controversy opened up. Paul Jacobs, former CEO, Chairman and the son of Qualcomm’s founder expressed his interest to take over his father’s former company.

However, this didn’t fall through either and Jacobs was removed from his position on Qualcomm (NASDAQ:QCOM)’s board due to concerns about a potential conflict of interest. Now that the drama is over, the San Diego chip giant is looking to make good on its earlier promises to shareholders. These will result in a lot of folks losing their jobs.

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The company employs 34,000 people globally and will lay off approximately 1500 people after Steven Mollenkopf’s earlier commitment to shareholders. The bulk of these will target California, where the company is yet to file a Worker Readjustment and Training Notification (WARN). A WARN is necessary for companies looking to strike off more than 50 workers from their rolls.

In an emailed statement, the company confirmed its reduction by stating, “We first evaluated non-headcount expense reductions, but we concluded that a workforce reduction is needed to support long-term growth and success, which will ultimately benefit all our stakeholders.”

The Snapdragon manufacturer has witnessed revenues decline for a long time now, with a further 3% dip expected this fiscal year. The majority of Qualcomm (NASDAQ:QCOM)’s business is based on licensing and the company isn’t having much luck in China. The Asian country continues as a dominant force for smartphones, with several manufacturers looking to target its rising middle class.

Source: Reuters

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Tesla Stock Surges After Elon Musk Internal Email is Leaked

Late Thursday afternoon an internal memo written by Elon Musk was leaked via Electrek. The lengthy e-mail discusses Tesla’s (NASDAQ:TSLA) progress in ramping up the critical Model 3 production numbers, manufacturing precision/tolerances, and finally how the company will finally become profitable. Shares of Tesla enjoyed a healthy boost this morning with shares cresting $298 before relaxing to $293/share, a 2% gain on the day.

The primary focus of the message is centered around how the young automaker will continue to scale up Model 3 output. The Model 3 is Tesla’s first major push into the mass passenger (read: middle class) vehicle market with a much lower price tag, around $30,000, compared to $80,000+ for its Model S and X luxury vehicles.

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Preorders are rumored to be around half a million units for the affordable Model 3 thus-far and so Tesla’s ability to crank out them out is vital to its success, both long and short-term.

Tesla’s most recent revision of production goals for the Model 3 was 2,500/week. Rumors were swirling in January that the company couldn’t even manage a 1,000 units/week. Elon Musk announced that the last week of March saw over 2,000 Model 3’s roll off assembly lines.

Elon Musk: Tesla to reach 6,000 Model 3’s units produced per week by the end of July.

Elon Musk with the Model 3

Yesterday’s memo revealed that Tesla has maintained a 2,000+ unit output for three straight weeks, dispersing concerns that they merely boosted production for a single week to reach 2,000 units for PR’s sake. In fact, the week ending April 13th saw 2,250 Model 3’s completed, so it seems production is trending in the right direction.

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The major takeaway from the internal memo is that Musk expects output to reach 4,000 units by end of May and up to 6,000 by the end of July. Elon calls out specific targets in his memo:

Starting today at Giga and tomorrow at Fremont, we will be stopping for three to five days to do a comprehensive set of upgrades. This should set us up for Model 3 production of 3000 to 4000 per week next month.

Another set of upgrades starting in late May should be enough to unlock production capacity of 6000 Model 3 vehicles per week by the end of June. Please note that all areas of Tesla and our suppliers will be required to demonstrate a Model 3 capacity of ~6000/week by building 850 sets of car parts in 24 hours no later than June 30th.

Model 3 production will move to three shifts, 24/7 at the Freemont facility and Tesla expects to hire 400 employees a week for the next few months to support these efforts.

The CEO also discusses profitability which the carmaker has never achieved before in its 15 years of operations. Now any purchase that will amount to $1 million or more is on conditional freeze and requires Elon Musk’s personal approval to move forward. He called out contractors and was especially harsh in his assessment of their performance as it pertains to Tesla’s profitability:

Often, it is like a Russian nesting doll of contractor, subcontractor, sub-subcontractor, etc. before you finally find someone doing actual work. This means a lot of middle-managers adding cost but not doing anything obviously useful. Also, many contracts are essentially open time & materials, not fixed price and duration, which creates an incentive to turn molehills into mountains, as they never want to end the money train.

There is a very wide range of contractor performance, from excellent to worse than a drunken sloth. All contracting companies should consider the coming week to be a final opportunity to demonstrate excellence. Any that fail to meet the Tesla standard of excellence will have their contracts ended on Monday.

Overall it reads as if Musk is rallying the troops and the message is overall positive. The automaker is extremely keen to show a profit and cutting excess costs and finally, ramping Model 3 production will be its surest way of achieving its goal.

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China Opens up Automobile Market in Historic Move

This morning China’s state planner announced that China will be phasing out ownership caps for car companies starting this year for plug-in hybrid and fully electric vehicles. Commercial and light-duty vehicles will see the restrictions removed in 2020, and finally, any remaining models will see caps removed in 2022.

Before I analyze what today’s news out of Beijing might mean its important to understand just how valuable the Chinese auto market is.

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2016 saw the U.S. set an all-time record of over 17 million light-duty vehicles sold to consumers. In the same year, China sold 27.5 million light-duty cars and China is even forecasted to sell 30 million by 2020. China could be double the size of the U.S. domestic market in just a handful of years! It’s easy to see why today’s announcement might end up proving pivotal for global automakers’ futures.

China to end foreign automaker restriction after 25 years of pro-domestic policy

Since the ownership caps have been put in place China’s domestic car market has soared. Shown: BYD’s all-electric E6 already in mass production….. since 2009.

The year 1994 saw China impose strict limitations on carmakers’ ownership of any joint venture for selling vehicles in the world’s most populous nation. The way it was set up and operates to this day finds the top foreign auto brands (listed in descending order in terms of sales volume) such as VW (ETR:VOW3), Buick (NYSE:GM), Honda (NYSE:HMC), Hyundai (KRX:005380), and Toyota (NYSE:TM) forced to partner with a “local” entity in order to produce and sell cars in the Chinese domestic market. The current limit is a 50% ownership stake in the JV.

For example, the number 1 selling foreign brand in China is Volkswagen. In 1984 VW signed a 25-year agreement to partner with Shanghai Automotive Industry Corporation (now SAIC Motor) resulting in the joint venture Shangai Volkswagen Automotive Co. Volkswagen owns the state maximum of 50%, SAIC owns the other 50%.

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Volkswagen, in effect, had to sign over 50% of its profits in order to move into China while SAIC Motor just needed to build out the infrastructure for manufacturing which would be relatively risk-free when all of the R&D has already been funded and vehicles models blueprinted in other facilities. SAIC received fully researched and developed modern car technology just for being a Chinese domestic company while VW gave all this up just for the ability to make and sell cars there.

And this is just about how all the major brands entered the Chinese car market; with 50% stakes in joint ventures.

Today’s announcement from China means all that may change in the coming years. Electric and hybrid carmakers will see an immediate opportunity to wholly own their Chinese operations while commercial (2020), and everyone else (2022) will have to wait.

Despite the possibility to massively increase stakes in their Chinese subsidiaries, most manufacturers are downplaying today’s announcement and are stating their intention to continue to work with their Chinese partners.

BMW:

We believe a more free and flexible business environment will benefit both Chinese and foreign companies in China and the Chinese economy. BMW will continue pursuing mutual benefit and win-win solutions with the local partners.

Honda:

At the moment we have no plans to change our capital relationship..

GM is also partnered with SAIC Motors and said its grown in China is “a result of working with our trusted joint venture partners”.

After so many years of working together and relying on the Chinese, automakers may find that their structure is now too deeply ingrained to revert back to full ownership. Facilities, supply chains, and operations would have to be purchased back retroactively and there might be regulatory nightmares in doing so. China may make this so difficult that the change is only lip-service and in reality, nothing will change.

Its possible the automakers are just playing coy and don’t want to upset their business partners before they are ready to strike out on their own. Given the huge (both present and future) volume of the Chinese market, and the newfound ability to raise their stake from 50% to 100%, it speaks to reason that there is a massive incentive for automakers to actually take advantage of the change and retake ownership of their Chinese divisions.

The automaker that may be the most excited for today’s news might be Elon Musk’s Tesla (NASDAQ:TSLA). The electric automaker has never been shy about its ambition to build a production facility in Shangai to reach the massive Chinese consumer base. Tesla doesn’t have a deeply ingrained Chinese partnership and perhaps most important – since it produces exclusively electric vehicles it is immediately allowed to enter the market and own a 100% stake in its Chinese division.

Automaker ownership getting relaxed could be a diversion from the real campaign: Made in China 2025

Made in China 2025 is a state-sponsored initiative to boost homegrown tech and manufacturing.

I will go out on a limb and say that it seems China may be deflecting attention away from its true intentions – to become the undisputed leader in global high-technology. As we reported a few weeks ago, China is giving its domestic tech industry massive tax cuts.

The automobile is old-world technology. Cars are getting “smart” features and assembly is utilizing more and more advanced robotics but the product itself isn’t some paradigm shift. Both the United States and China understand this.

Tomorrow’s world (and economic leverage) will rest in rapidly advancing information technology. Big data, machine-learning, advanced artificial intelligence, autonomous algorithms and robots all promise to shift how we do business and even go about our lives as humans. Advertising, production, content creation, entertainment, research and development – the list goes on.

Several industrial sectors are highlighted in China’s official plan. However, most acknowledge that semiconductors and other related high tech systems that will drive tomorrow’s information technologies are one of the primary, if not THE primary focus of the plan.

To wrap up, U.S. President Trump has already discussed this in the media on several occasions and indeed, there is general bi-partisan agreement that China becoming a leader in advanced technology poses a risk the business interests of the Western world. China appears to be adopting a true change in how it allows foreign companies to sell cars within its borders, but this might be a smokescreen that will allow the Xi administration to proclaim they engage in “free and open trade” while remaining a protectionist when it comes to its more important sectors like big tech.

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Chinese Fashion Giant “Meilishuo” Moving Forward with U.S. IPO

You may not have heard about Meilishuo, a Chinese online fashion and cosmetics retailer, but they are headed to the U.S. stock market.

Meilishuo which means “Beauty Talk” is actually quite large. Despite being obscure to most Western readers the company posted annual revenues of over $3 billion USD last year after a merger with rival Mogujie in 2016.

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The online retailer now commands over 200 million registered users and enjoys around 15,000 merchants that trade on its platform, similar to how Amazon (NASDAQ:AMZN) operates. It’s easy to forget that China now has over 1.4 billion citizens – more than four times that of the United States, so even at 200 million users, there is room for massive growth in its market niche.

What makes today’s news a bit more interesting is that Tencent (SEHK:700), Asia’s most valuable company ($580 billion market value!), is backing Meilishuo so there is major support coming from the world’s biggest investment corporation. If you haven’t heard of Tencent then it might surprise you to know just how massive this firm is.

In 2017 the company did over $38 billion in sales and managed to keep over $11 billion in net profit. The multinational conglomerate is now focusing on e-commerce and Meilishuo will be a major benefactor to that strategy as Tencent will be supporting Meilishuo through their IPO.

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Meilishuo is now in talks with multiple investment banks about a U.S. stock listing and the company is seeking a valuation somewhere in the neighborhood of $4 billion which should be feasible given their annual revenues.

More and more large Chinese technologies companies are headed for public offerings on the New York stock exchanges as they view the American market as highly visible and thus attractive. Smartphone manufacturer Xiaomi Corp (who if you recall was shunned by AT&T at the last minute) is seeking a valuation of $100 billion in a long-awaited offering.

Meilishuo will be one to keep your eyes on when it comes time for the public listing of its shares, expected later this year.

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The Crypto Conundrum – Regulatory Pressures for Cryptocurrencies

Crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and international sanctions

Mark Carney, Governor of the Bank of England in a speech on the 2nd of March 2018.

Over the last six weeks, we have taken a look at many of the different aspects of cryptocurrencies or “crypto-assets” as some are calling them. We’ve looked at the underlying technology, the concept of cashless economies, cryptocurrencies as cash, the risks in trading cryptocurrencies and some of the investment considerations of cryptos. In this final piece in the series, we’ll be looking at the regulatory landscape surrounding cryptocurrencies and the different approaches taken by governments and the financial regulators of the world, but first a relevant question.

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What IS a cryptocurrency?

Is it meant to be (as its name implies), a currency? Or is it an investment vehicle in the traditional sense like any other security? At this point I turn to Adam Smith who in The Wealth of Nations defined a currency as:

  • A store of value with which to transfer purchasing power from today to some future time;
  • A medium of exchange with which to make payments for goods and services; and
  • A unit of account with which to measure the value of a particular good, service, saving or loan.

From this perspective, it is clear that SOME cryptocurrencies at least ASPIRE to be currencies, although they are clearly not there yet. This is an important distinction to make because as many people may not be aware, foreign exchange (the transacting of one currency to another) is generally unregulated when dealing with spot transactions (as opposed to derivatives based on foreign exchange which are regulated).

The difficulty here is that there are also some cryptocurrencies which are very clearly a security rather than a currency and yet companies are trying to circumvent some of the investor protections which are associated with buying stock in a company by issuing a cryptocurrency.

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From a regulatory perspective and as we’ve seen time and again throughout the series, despite the name cryptocurrencies, these are really for the most part nothing other than a new generation of securities, at least at the moment. That may change in future and certainly governments and regulators are considering the possibilities of centrally backed digital currencies but for the most part as things stand today, cryptocurrencies are really securities/assets first and currencies as a distant (or not at all) second.

This is important since it has significant implications for the regulatory implications of cryptos.

What are Financial Regulators?

Regulators are organisations who have the responsibility to lay down and enforce the rules of a particular jurisdiction when it comes to the financial services industry. This includes the big and well known ones like the SEC in the US and the FCA in the UK among others. Financial regulation has existed in some form or other for hundreds of years and in general (certainly recently) it has a few good objectives:

  • Maintaining confidence in the workings of the financial services industry.
  • Maintaining the stability of the financial services system.
  • Protecting consumers from fraudulent activities.

One of the major regulators looking at cryptos

These three functions are somewhat complicated with the advent of new technologies and financial regulation is often about playing catch up to the realities of the market. Recent examples include the much vaunted MiFID II which was supposed to be about moving liquidity and trading away from dark venues and onto lit markets and exchanges. What have we seen since the volume caps restricted trading on dark markets? Movement of trading to periodic auctions and other such mechanisms for avoiding interacting with a normal continuous trading lit order books.

Other protections aim to provide a degree of circular responsibility such as the traditional shareholder and voting rights associated with stocks and shares. Barring the odd financial engineering effort such as Mark Zuckerberg basically holding all the voting rights for Facebook despite not being the majority shareholder in the company (recently prompting calls for him to step down in the wake of the Cambridge Analytica scandal since he can’t be removed as CEO, even by the board).

Should You Worry About Investing in Unregulated Cryptocurrencies?

Worry is a strong word. Certainly if you’re traditionally a cautious investor, you’re probably (for the time being) going to want to avoid them. There is a lot of money to potentially be made (and lost) in the crypto world, but there are a lot of risks which are risks that would be inherently mitigated by investing in traditional securities and by the regulatory regimes which govern them. As such, it’s right to investigate any cryptocurrency you’re considering investing in.

In December 2017, Jay Clayton the SEC Chairman wrote an interesting public statement which is published on the Securities and Exchange Commission (SEC) website. It was interesting for several reasons. First of all for its disclaimer stating that it reflects his own personal view and not the views of any other commissioner or indeed the Commission itself, despite appearing in a fairly prominent manner on the SEC website. Secondly, it was interesting due to its target audience. For a communication from a senior person on the website of one of the largest financial regulators out there, it was written in such a way as to be easily readable for the layperson. Finally (and perhaps most importantly), it was interesting in that it posed a number of questions which investors should ask when considering a cryptocurrency or ICO investment.

These questions are fundamentally things which most normal investors don’t need to ask since they are covered by traditional financial regulation but they’re relevant here and of course the point is that if you don’t feel satisfied with the answers of these questions (whether provided by the person touting the investment or your own research), you probably want to consider walking away.

  • Who exactly am I contracting with?
  • Who is issuing and sponsoring the product, what are their backgrounds, and have they provided a full and complete description of the product? Do they have a clear written business plan that I understand?
  • Who is promoting or marketing the product, what are their backgrounds, and are they licensed to sell the product? Have they been paid to promote the product?
  • Where is the enterprise located?
  • Where is my money going and what will it be used for? Is my money going to be used to “cash out” others?
  • What specific rights come with my investment?
  • Are there financial statements? If so, are they audited, and by whom?
  • Is there trading data? If so, is there some way to verify it?
  • How, when, and at what cost can I sell my investment? For example, do I have a right to give the token or coin back to the company or to receive a refund? Can I resell the coin or token, and if so, are there any limitations on my ability to resell?
  • If a digital wallet is involved, what happens if I lose the key? Will I still have access to my investment?
  • If a blockchain is used, is the blockchain open and public? Has the code been published, and has there been an independent cybersecurity audit?
  • Has the offering been structured to comply with the securities laws and, if not, what implications will that have for the stability of the enterprise and the value of my investment?
  • What legal protections may or may not be available in the event of fraud, a hack, malware, or a downturn in business prospects? Who will be responsible for refunding my investment if something goes wrong?
  • If I do have legal rights, can I effectively enforce them and will there be adequate funds to compensate me if my rights are violated?

The Regulatory Landscape Today and Tomorrow

Much of the world has adopted a wait and see approach to cryptocurrencies. While the wait and see happens, the slow wheels of government and regulators have begun churning to attempt to anticipate the likely direction that cryptocurrencies and blockchain technologies will go. While the underlying distributed ledger technology is seen as an interesting technological exercise and one which may serve the betterment of financial services in future, regulators are keen to distinguish that from the endorsement of cryptocurrencies themselves.

Mark Carney, one of the many regulatory faces coming for crypto…

Additionally, wait and see isn’t entirely the case with high profile restrictions in places like China and India. Realistically, blanket bans are just pushing activity underground and abroad from jurisdictions which ban them while likely giving the regulators some breathing room to figure out how to manage them appropriately. Whether companies issuing cryptocurrencies to raise money should be subject to the kinds of rules associated with issuing stock and voting rights and powers rather than just giving money for what is clearly a speculative investment on the effort of others with little to no guarantee of return other than the possibility for capital appreciation of the token is acceptable or not remains to be seen. It will be interesting to see an ICO which offers voting rights and dividends equivalent to its shareholders to its coin investors but while companies can raise funds by effectively giving away nothing, this seems unlikely to change in the short term.

In other areas, traditional financial organisations like CME and CBOE have started offering derivatives on Bitcoin to try to aid some of the transition into the established financial services industry and these are of course regulated entities which come with the associated protections. However people would of course do well to remember that derivatives are so named as they derive their value from an underlying instrument and that this underlying instrument is unregulated and as explained in our trading article, heavily subject to market manipulation due to highly concentrated liquidity pools and other constraints which may not apply to such an extent on other traditionally unregulated spot foreign exchange currency markets.

Additionally, the UK Financial Conduct Authority recently stated that although cryptocurrencies are not (yet) subject to regulation by the FCA, cryptocurrency derivatives are capable of being financial instruments as defined by MiFID II and as such any firms conducting regulated activities in these instruments must comply with all applicable rules in the FCA Handbook and any relevant provisions in EU regulations. What this means from a practical perspective is that anyone dealing in, arranging transactions in, advising on derivatives in relation to cryptocurrencies or tokens issued through an ICO is required to be authorised by the FCA. Conducting this while not being authorised is a criminal offence and being authorised but not having permission to offer those specific products would subject the authorised entity to enforcement action.

The bottom line is that the business of regulation is a slow one. Comments from Governor Carney, Chairman Clayton and others are only the earliest of indications that regulation is coming for cryptocurrencies. The days of them claiming to be actual legitimate currencies are obviously numbered, Bitcoin and any others such as Ether which have a hard ceiling of supply or a supply coefficient which is based on an actual number rather than a proportion will ultimately be deflationary in nature if they were ever to become true currencies.

I’ll finish off with another quote from Mark Carney’s speech in which he says that fixed supply:

…would impart a deflationary bias on the economy if such currencies were to be widely adopted. If “those who cannot remember the past are condemned to repeat it”, recreating a virtual global gold standard would be a criminal act of monetary amnesia.

Mark Carney Speech
Jay Clayton Guidance
FCA Crypto Derivatives Guidance

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Americans Are Dodging $25 Billion in Cryptocurrency Capital Gains Tax

Time is running out to file a 2017 tax return in the U.S. as the April 17th deadline is fast approaching with only four more days left to go. Now that tax return data is beginning to firm up it’s becoming apparent that many Americans are simply not reporting any income made from Bitcoin and other cryptocurrencies.

Bitcoin soared by 13 times in price last year and hit its all-time high of over $19,000 in December. Thomas Lee is head of research at Fundstrat Global Advisors and according to him U.S. households likely owe $25 billion in capital gains taxes for income made off the back of the crypto boom of 2017. He bases this off the assumption that typically American households tend to realize about 52 percent of capital gains in any given year. If you figure typical tax rates, this would indicate Americans profited well over $100 billion off the back of Bitcoin, Etherum, Ripple, and others.

Related The Crypto Conundrum – Getting Started With Investment

Source: CoinDesk

Crypto losses may have been accelerated this year as investors sell off to cover tax liabilities.

At least this is the theory that many market bulls have proposed could be responsible for driving crypto prices downward thus far this year. However, according to CreditKarma.com, of the most recent 250,000 tax filings, fewer than 100 have reported capital gains on cryptocurrency investments. Just 0.04% of Credit Karma Tax users have self-reported any gains from cryptos!

Its nearly impossible for the IRS to track cryptocurrency trades and so enforcement of these dodged taxes might prove very difficult indeed.

“If I had to guess, there’s probably a lot of underreporting,” said Elizabeth Crouse, an investment tax attorney for the Seattle-based law firm K&L Gates. “Most of the people in the cryptocurrency world tend to have a pretty high risk tolerance.” Those who engage in the extremely volatile crypto market coupled with the idea that the IRS isn’t nearly ready to actually monitor crypto investments should make today’s news not surprising to anyone that has been paying attention.

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2018 has proven very difficult for anyone that has remained invested, at least in part, past last December’s peak in Bitcoin’s valuation. It speaks to reason that those that have seen investments dwindle in the recent months are looking to soften the impact by taking a seemingly minimal risk in evading the Internal Revenue Service. When it comes to new age investments the IRS is still years away from reliable enforcement.

Interested in investing in Bitcoin or another cryptocurrency? We have an excellent primer right here.

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Xiaomi Is Mulling the Acquisition of Action Camera Maker GoPro but Is Not Ready to Pay More Than What Is Required

Xiaomi is currently in a predicament; it does not want to overpay for the American company GoPro that is thinking about being acquired. Apparently, GoPro is struggling right now and Xiaomi isn’t about to pay a high premium for something risky. Xiaomi’s primary interest in GoPro is diversification in the run-up to going public.

GoPro Has Seen Declining Revenues From 2015 – Currently Valued at $700 Million

GoPro has seen its revenue slump in recent years. In 2015, the company reported a revenue of $1.6 billion, which decreased to $1.17 billion in 2017, with the slump expected to continue.

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There are several reasons behind GoPro’s declining revenues. First of all, the company faces fierce international competition from companies that lure its customer away with much cheaper products. Secondly, action cameras aren’t something people upgrade every year and is often looked as a ‘buy once’ product.

The company is being compared to Palm, a PDA manufacturer that suffered a similar fate and ultimately wounded up in the hands of HP in 2010 for a sum of $1 billion. According to people close to this information, GoPro can expect to get the same money if it is sold as soon as possible. The company is currently valued at around $700 million, which is a depreciation of 36 percent compared to last year.

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An industry insider claims that some anonymous bankers suggested DJI, a Chinese drone company to buy GoPro, but DJI did not find the offer lucrative. Whether it’s Xiaomi that buys GoPro or any other company, the revenue is unlikely to grow by a lot. The action camera manufacturer has been struggling to diversify and had to shut down its drone business in January after it tanked in the market. Action cameras are the only products it could count on.

GoPro started out well and gave a new meaning to cameras, but sadly its creative juices stopped flowing shortly afterward. Meanwhile, Xiaomi is doing very well with competitively-priced action cameras we are hopeful that it will save GoPro while also diversifying its business in the process.

Source: The Information

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JP Morgan Working on Artificial Intelligence Trading Bot

JP Morgan (NYSE:JPM) Asset Management has a team working on a new machine learning software model that the firm hopes will make more efficient and profitable trades than its human counterparts are capable of.

The highly specialized “AI” model is being developed by a team comprised of quantitative analysts and traders. Lee Bray is head of equity trading at JP for the Asia Pacific geomarket and is leading the efforts.

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“By creating a systematic, adaptive model able to alter actions based on mathematical patterns rather than relying on human input, we’re transitioning equity trading to be more scientific and quantifiable … to develop the model with machine learning, we tapped into techniques more commonly found at companies like Facebook and Google,” Bray said.

It seems as if deep learning and machine learning have some application in almost every industry out there whether its self driving cars, massive social networks, and now perhaps unsurprisingly, investment trading. It should come as no surprise that JP is mimicking Facebook and Google – there is a truly enormous amount of data out there from historical financial trades and new data is being created every second. The goal here is to utilize machine learning to attempt to get a grasp at any pattern that exists in the numbers in order to get ahead of other traders.

While the algorithm in its current iteration currently only offers recommendations to human traders; it is already handling some minor tasks in an increasingly automated role. While perhaps overly ambitious, JP Morgan has a goal for the bot to be executing about 50% of regional trades for the Asia Pacific Division by the end of this year! This is the notional value too so this is a true 50% of all funds traded by JP Morgan Asset Management, Asia Pacific – all handled autonomously by an AI script.

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JP Morgan has stated its taken “significant resources” to get to this point and surely expects to see a healthy return on its investment.

It may be alarming to some that the future may be dependent on robots trading financial instruments with other robots with little to no human intervention between them. However if there is a money to be made then the prevalence of this type of trading algorithm will only increase in the future once JP proves the concept.

In fact, Bank of America Merrill Lynch (NYSE:BAC) hired away Rajesh Krishnamachari, a senior quantitative researcher at JP Morgan just last month to head its Data Science for Equities group in New York City. Bank of America’s new equities-focused data-science team is using machine learning and artificial intelligence to get insights from proprietary data and develop new products to drive profitability.

AI trading is here to stay. Will it one day be impossible to trade successfully without it?

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Bitmain is Pushing Back Delivery of its New Ethereum Mining Chips

Sources via Digitimes today confirmed that Bitmain will be pushing back its eagerly awaited Antminer E3 – a new mining ASIC designed to mine the world’s second largest cryptocurrecy, Ethereum.

Currently Etheruem mining is done via AMD’s (NASDAQ:AMD) Radeon video cards and NVIDIA’s (NASDAQ:NVDA) GeForce video cards and the new Antminer E3 promises to threaten their market dominance when it comes to Ethereum hashing.

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In terms of retail price versus mining speed GPUs like the Radeon RX570 cost about $12 per megahash/second, while the Antminer E3 in comparison offers 1MH/s at about $4.50, so it’s at least 2x more cost effective than existing solutions. A purpose built ASIC such as this would relegate GPU mining to fringe cases as the large scale farms would switch to the Bitmain for the increased throughput it offers. The E3 will be about as good as the best GPUs out there in terms of efficiency but doesn’t represent an upgrade in that department.

Cost Efficiency comparison GPUs vs the Antminer E3

The sources indicate Bitmain is citing weak silicon performance and needs to delay initial low volume shipments until July, with “large scale” volume following in Q4 2018. Bitmain is still confident it can hit 1.8-2.0 million units shipped for this year despite a much shorter sales period.

AMD and NVIDIA as well as their investors may be happy to hear this as it means GPU shipments shouldn’t be affected for Q2 and based on Bitmain projecting “low volume” in late July, probably Q3 as well. Banks may be more bullish on the two companies now for the next quarter with strong GPU demand having no end in sight. A possibly more serious threat to GPU demand would be the macro cryptocurrency market as a whole which has shown some serious volatility in the last few months. If the market plunges further we may finally see the crazy demand for GPUs come to end.

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