Raphael Stevens

A banner with the logo of bitcoin is seen during the crypto-currency conference Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida, on June 4, 2021.Marco Bello | AFP | Getty ImagesBitcoin’s price slipped again Tuesday. The reason for the move was unclear, however it may be related to concerns over security of the cryptocurrency after U.S. officials managed to recover most of the ransom paid to hackers that targeted Colonial Pipeline.Court documents said investigators were able to access the password for one of the hackers’ bitcoin wallets. The money was recovered by a recently launched task force in Washington created as part of the government’s response to a rise in cyberattacks.The world’s largest cryptocurrency slid over 7% at 7:30 a.m. ET to a price of $32,936, according to Coin Metrics data. Smaller digital coins also slumped, with ether falling more than 7% to $2,512 and XRP also losing around 7%.In April, 2021 was looking to be a banner year for digital assets, with bitcoin having topped $60,000 for the first time ever. But a recent plunge in crypto prices has shaken confidence in the market. Bitcoin sank to nearly $30,000 last month, and is currently down almost 50% from its all-time high.The digital currency is now up only 13% since the start of the year, though it’s still more than tripled in price from a year ago.U.S. recovers most of Colonial ransomOn Monday, U.S. law enforcement officials said they had seized $2.3 million in bitcoin paid to DarkSide, the cybercriminal gang behind a crippling cyberattack on Colonial Pipeline.According to a court document, the Federal Bureau of Investigation was able to access the “private key,” or password, for one of the hackers’ bitcoin wallets. Bitcoin has often been the currency of choice for hackers demanding ransom payments to decrypt data locked by malware known as “ransomware.”Crypto media outlet Decrypt reported there were unfounded rumors that the attackers’ bitcoin wallet had been “hacked,” an unlikely scenario.DarkSide, which reportedly received $90 million in bitcoin ransom payments before shutting down, operated a so-called “ransomware as a service” business model, where hackers develop and market ransomware tools and sell them to affiliates who then carry out attacks.According to blockchain analytics firm Elliptic, the seized funds represented the bulk of the DarkSide affiliate’s share of the ransom paid out by Colonial.John Hultquist, vice president of analysis at Mandiant Threat Intelligence, called the move a “welcome development.””It has become clear that we need to use several tools to stem the tide of this serious problem, and even law enforcement agencies need to broaden their approach beyond building cases against criminals who may be beyond the grasp of the law,” said Hultquist.”In addition to the immediate benefits of this approach, a stronger focus on disruption may disincentivize this behavior, which is growing in a vicious cycle,” he added.Crypto crackdownA number of issues are weighing on cryptocurrencies, including fears of a regulatory clampdown and recent tweets from Tesla CEO Elon Musk.Chinese authorities last month called for a crackdown on crypto mining and trading. Once a major player in the market, China has since moved to stamp out speculative investment in cryptocurrencies, banning a fundraising method known as initial coin offerings and shuttering local exchanges.Meanwhile, Elon Musk has gone from a supporter of bitcoin to seemingly falling out of love with it in a matter of months. Musk’s electric car firm stopped accepting bitcoin as a payment method last month due to concerns over its environmental impact, resulting in a crypto market sell-off.”Bitcoin bulls have been chastened by the market pull back and perhaps are feeling once bitten, twice shy,” Charles Hayter, CEO of digital currency data firm CryptoCompare, told CNBC.”The euphoria has worn off to some extent in the retail frenzy, as regulators have moved to temper manias,” he added. “Data is showing continued cornering of the market by institutionals.”Last week, thousands of bitcoin investors descended on Miami for an event billed as the biggest bitcoin event in history.The conference had a few bizarre highlights, including El Salvador President Nayib Bukele announcing plans for the country to accept bitcoin as legal tender. More

Take a look at some of the biggest movers in the premarket:Stitch Fix (SFIX) – Stitch Fix lost 18 cents per share for its first quarter, smaller than the 27 cents a share loss that analysts were anticipating. The online clothing styling company’s revenue came in above estimates. Stitch Fix also issued an upbeat forecast, amid 20% growth in its active client base compared to a year ago. Shares soared 14.8% in premarket action.Contango Oil & Gas (MCF) – The energy producer agreed to combine with KKR’s (KKR) Independence Energy business in an all-stock deal. The combined company will have an initial market capitalization of about $4.8 billion. Contango shares jumped 10.3% in premarket trading.Coupa Software (COUP) – Coupa reported quarterly earnings of 7 cents per share, compared to Wall Street forecasts for a 19 cents per share loss. Revenue beat estimates, and the financial software company also issued an upbeat outlook. Despite the upbeat numbers, Coupa shares tumbled 9.2% in premarket trading.Thor Industries (THO) – The recreational vehicle maker’s shares jumped 3.4% in the premarket after it beat estimates on both the top and bottom lines for its fiscal third quarter. Sales more than doubled compared to a year ago, and the company said it sees no signs of demand slowing.Chico’s FAS (CHS) – Chico’s surged 6.6% in the premarket after the apparel retailer said it was taking all appropriate steps to improve performance and increase shareholder value. The statement was in response to a letter sent to management by activist investor Barington Capital. Separately, Chico’s reported quarterly earnings and sales that topped Wall Street forecasts.Fastly (FSLY) – The cloud computing company’s shares fell 1.7% in the premarket, but came off earlier lows stemming from an internet outage impacting Fastly-backed websites. Shortly after the outage hit, Fastly said it had identified the issue and that a fix was being implemented.Tesla (TSLA) – The automaker delivered 33,463 China-made vehicles in that market in May, up 29% from April when production was impacted by a maintenance shutdown. Tesla rose 3% in the premarket.AMC Entertainment (AMC) – AMC insiders have been selling shares amid a social media-fueled rally in the movie theater operator’s stock. According to a study of insider filings done by analytics firm InsiderScore, seven AMC insiders have sold parts of their stakes since May 28, among nine who have executed sales this quarter though CEO Adam Aron is not among them. There were no AMC insider sales in 2020. AMC added 4.3% in the premarket.Marvell Technology (MRVL) – Marvell shares jumped 5.5% in premarket trading after it beat Wall Street estimates on both the top and bottom lines for its first quarter. The chip maker also expects its current-quarter revenue will surpass $1 billion for the first time.Keurig Dr Pepper (KDP) – The beverage company’s stock lost 3.6% in the premarket after it announced a secondary offering of 28 million common stock shares, to be sold on behalf of food producer and Keurig Dr Pepper shareholder Mondelez (MDLZ). Keurig Dr Pepper will not receive any proceeds from the offering.Vail Resorts (MTN) – Vail Resorts beat estimates by 18 cents a share, with quarterly profit of $6.72 per share. The resort operator also saw revenue top forecasts. Vail said pass sales were up 50% by units and 33% by dollars compared to pre-pandemic results in 2019, as the company slashed season pass sale prices by 20%.Etsy (ETSY) – Etsy announced a private offering of $1 billion in convertible senior notes, with the online crafts marketplace planning to use the proceeds to fund stock buybacks and for general corporate purposes. Etsy fell 1.9% in premarket trading. More

ZHANG KUN is the rock star of Chinese fund management. His name often makes headlines; whole articles are dedicated to his investment calls. Investors vie to get into his funds, one of which has reportedly delivered a return of 700% since it was launched eight years ago. He is among a growing number of managers who generate more hype than the firms that employ them. With personalities like Mr Zhang on its payroll, E-Fund, a state-owned investment group, hardly needs to advertise.Now a swathe of foreign firms hopes to take on Mr Zhang and his ilk by entering China’s asset-management industry. Last month Goldman Sachs, a Wall Street bank, announced a wealth-management venture with ICBC, China’s largest commercial lender by assets. BlackRock, a giant American asset manager, will join forces with China Construction Bank (CCB). Amundi, a French firm, has linked up with Bank of China and Schroders, a British investment group, with China’s Bank of Communications. In March JPMorgan Asset Management said it would buy a 10% stake in China Merchant Bank’s wealth business. Nearly 20 global investors are setting up fund-management firms; others are launching private securities funds.The prize is access to a pot of money worth 120trn yuan ($18.8trn), which includes investments made by everyone from the average saver to the ultra-rich in mutual funds, trusts, wealth and other asset-management products. The pot could hit 320trn yuan by 2030, reckons Oliver Wyman, a consultancy, as more people grow comfortable giving their money to managers instead of picking their own stock investments or buying property (see chart 1). Goldman puts the figure of investible assets by 2030 higher, at about $70trn. That compares with $59trn in North America last year, estimates PwC, an accounting firm. But foreigners’ attempts to crack other parts of China’s financial market have yielded underwhelming results. Could this time be different?For China’s regulators, the new ventures are a high-stakes experiment meant to transform how savers think about investing. For years retail investors ploughed cash into deposit-like investment products sold and backed by state banks. The principal on such products was considered guaranteed, but the banks funnelled the cash towards high-risk borrowers such as small property developers or coal-mining outfits. By 2016 the banks’ wealth-management arms oversaw around 13% of total banking assets (see chart 2). But regulators cracked down, no longer willing for the state to shoulder the rapidly intensifying risks on behalf of the ordinary saver.Guaranteed products have been banned. Meanwhile banks’ wealth assets have been spun into new subsidiaries. These must wind down the old deposit-like products and design new ones based on net asset value. In 2020 these new units had 26trn yuan in assets under management, reckons CICC, an investment bank. It is with these that foreign investors have been invited to establish joint ventures.The call sounds familiar. Foreign financiers have been knocking at China’s door for generations with an eye to every corner of the industry, from retail banking to securities. In 1995 CCB and Morgan Stanley, another Wall Street bank, set up CICC; in 2004 Goldman was allowed to establish the first foreign securities joint venture. But when you look back over the past two decades, the developments seem underwhelming and the returns meagre. That was largely because China opened up only when home-grown firms were big enough to withstand competition. Some foreign retail banks launched gung-ho expansion plans only to quit the market later, defeated by domestic giants’ extensive branch networks. Securities joint ventures have taken more than a decade to pass majority control to foreign investors. Payments firms such as Visa and Mastercard were shut out until mobile payments became dominant and competition futile. Wealth management could be different, for several reasons. For one, the foreigners are not entering a mature market with insurmountable competition. Regulators’ sweeping reforms mean that they are in fact entering what could become the world’s largest market for retail wealth at an early stage. This is evident in the types of financial products on offer today. China’s mutual-fund industry has grown at a fantastic pace over the past three years. Many firms already oversee 1trn yuan in assets. Money-market funds are ubiquitous. But product design is still in its infancy. Global firms are expected to bring a new level of sophistication to it. Tuan Lam of Goldman says his group will offer quantitative products such as algorithmic and factor-based strategies, and cross-border and alternative-asset investments. “These are not present in China right now,” he notes.Another benefit of the joint ventures is their links to China’s largest financial firms. The banks and their tens of thousands of branches were key intermediaries during the first era of wealth management and, say experts, may also define the next. The market share of foreign retail banks remains less than 5%.Their wealth-management subsidiaries have vast portfolios and huge numbers of clients. Take CCB. It has more than 14,700 branches. Last year it managed 2.2trn yuan in wealth-management products and attracted more than 4.4m new investment and wealth-management clients. Access to customers is “one of the benefits of partnering with one of the largest banks in China”, says Susan Chan of BlackRock. Yet success will depend on foreigners’ ability to establish and market themselves. Goldman and BlackRock have some name recognition in China by virtue of their size. Amundi and Schroders, by contrast, are unknown outside financial circles. And teaming up with home-grown banks has some downsides. A potential customer at a bank branch will be offered a suite of products, which will include those designed and branded by the joint ventures, but also those designed solely by the bank. Online, joint-venture offerings will probably appear on smartphone apps on a list of commoditised products. The foreign groups will therefore have to make sure their offering is advertised sufficiently to clients—no easy task given that tens of thousands of banks’ relationship managers will be responsible for sales. It can be done, but only with hefty investment in staff training, says Philip Leung of Bain, a consultancy.Another problem is competing with superstars such as Mr Zhang, who often manage money for giant mutual funds. Financial news in China is abuzz with stories on the performance of star managers. Many retail investors make decisions based on such information. Few clients are interested in a fund’s risk controls, notes Fabrice Maraval, an executive who has worked at two Sino-foreign financial ventures. Instead, they ask, “What’s your ranking on the list of top fund managers?”, he says.Executives at several joint ventures bristle at the idea of hiring stars who market their funds. “It’s just not our culture,” says one. Instead they must slowly build trust with clients through solid performance and prudent risk controls. Zhong Xiaofeng of Amundi describes his group’s marketing strategy in China as a “long-haul effort”. If foreigners are to give the stars a run for their money, it will have to be. More

BTIG’s Julian Emanuel believes the Reddit frenzy will play a major role in a deep market sell-off this summer.On CNBC’s “Trading Nation” on Monday, Emanuel compared the current backdrop to late January when the mania was firing on all cylinders. Weeks later, wild swings pressured the major indexes as retail investors took profits.”We all know the video game retailer [GameStop] really leading the charge at that time,” Emanuel, BTIG’s chief equity and derivatives strategist, said. “Essentially, it precipitated a month or two of sort of violently sideways to lower activity in the broad market as speculation came off.”This time, according to Emanuel, the fallout could be more serious. If the Reddit mania setback unfolds as Emanuel predicts, he warns that it would also come amid more intense inflation concerns on Wall Street.”We’ve got some yellow caution flags up,” said Emanuel.He’s particularly worried about Core PCE, a key gauge closely monitored by the Federal Reserve, which rose at a faster-than-expected 3.1% in April from a year earlier.”Any time that number has risen above 2%, the average monthly return for those periods is -1.6% [for the S&P 500], ” he said. “You couple that with the fact we’ve had the lowest bearish reading in the [AAII] sentiment survey this past week, not seen since the beginning of 2018, just before the Armageddon episode, [and] we think there’s a recipe for a pullback within the longer-term uptrend right in front of us.”Since Emanuel believes the bull market will be intact until at least the middle of next year, he doesn’t plan to retreat.”We would be looking to add on weakness to our core overweights in energy and financials,” he added. “For now, we prefer the more defensive cyclicals such as consumer staples, health care and actually REITs.”Emanuel said he thinks there’s a chance the S&P 500 could fall as low as 3,770 this summer, matching the 200-day moving average. But he expects the index would rally off the low and maintains a year-end target of 4,000. On Monday, the S&P 500 closed at 4,226.52, up almost 13% so far this year.Disclaimer More