ProSiebenSat1 stock down 13%

Today the DAX fell to the 11900 point mark and is accounting for a loss of 1,60% one hour before close, standing at the 11930 point mark. At this time no stock is in the green range with the biggest loss coming from the German Media Behemoth ProsiebenSat1 with a booming 13% loss. Investors seem to be looking to invest in assets deemed safe such as Gold, which is up 0,6%.

ProsiebenSat1 warned that TV advertising revenues in German-language markets would decline in the third quarter and said it may look for external investors. The top German free-to-air broadcaster had already cut its TV advertising market outlook twice this year but said as recently as earlier this month it still expected a bounce-back in the second half of the year. Many major companies that rely on ad revenue have reported spending cuts by makers of fast-moving consumer goods such as Unilever, Nestle and Procter & Gamble – the world’s biggest advertisers – as they respond to weak global economic growth. Goldman Sachs downgraded ProSieben to “neutral” from “buy”. “We believe shares will remain under pressure until the first signs of market improvement (this is likely to affect other ad-exposed stocks as well),” it wrote. ProSieben shares were down 11.6 percent to 28.90 euros by 0820 GMT, at the bottom of the German blue-chip DAX and dragging the European media index down 2.5 percent.

Following a brief early tease to the upside, which saw the Dow Jones Industrial Average rise close to 50 points in minutes after yesterday’s market open, further reflections on the widespread damage caused by the hurricane that ravaged Houston and other parts of the southeastern portion of Texas over the weekend, the equity market quickly turned lower. As has been the case for much of this year, however, the pullback was relatively mild, with the Dow continuing to trade between 20 and 40 points lower, while the S&P 500 held just below the breakeven line. Breaking things down, the most of the morning saw more stocks decline than rise on the NYSE, although the differential was modest. One outlier was the NASDAQ, which gained nicely during this time. As for individual stocks, the Dow was pushed lower by a multi-point early decline in shares of Travelers. Energy prices also faltered on the damage brought on by the hurricane, with driller Schlumberger pulling back, and nearing a 52-week low in the process. As to other trading influences, with a heavy week of economic news before us, headlined by this Friday’s reports on employment and unemployment, along with key data on manufacturing, Wall Street was also consumed with the latest political news, where, this week, President Trump is expected to push his tax reform package, the timing of which could be in some jeopardy if costs to pay for the hurricane balloon in the months to come. Also, with pivotal data due on the economy, some focus will logically turn to the Federal Reserve, as it prepares to meet this month. Meanwhile, after this mid-morning Dow reversal, stocks steadied somewhat, so that as we neared the noon hour in New York, the blue-chip composite was nearing breakeven, while the NASDAQ’s gain was increasing. Then, as the afternoon got under way, stocks slipped anew, and within an hour, or so, the Dow and the S&P 500 were well into the red, while the NASDAQ’s gain, once 27 points, had eased to nine. Joining Schlumberger in the red, meantime, was food giant General Mills , with its setback bringing that quality issue to within a point of a new low. Stocks then stayed range-bound into the late afternoon, before some last minute buying almost wiped out the Dow’s deficit. Even so, at the conclusion of the session, that composite was off by only five points. A token gain, meantime, was tallied by the S&P 500 Index and a 17-point advance was inked by the NASDAQ. In the end, much of the day’s focus was on Hurricane Harvey, which was crippling the energy industry in Texas. As for the ultimate cost of the tragedy, above and beyond the human toll, it will be steep, with a partial offset from rebuilding. The potential of such rebuilding, in fact, did help one Dow stock to a hefty gain on the day, as The Home Depot jumped nearly $2.00 a share. Elsewhere, there was little excitement on this Monday in late August. Looking ahead to a new day now, we see that stocks were tumbling across Asia overnight, on jitters about North Korea that emerged late yesterday, while in Europe, the major bourses are now trading much lower, as well, on those same fears. In other markets, oil is little changed; gold, up sharply in recent weeks, is soaring again after North Korea launched another missile; and Treasury yields are down notably in a flight to safety. Finally, our futures are moving decidedly lower at this early hour, with the Dow suggesting an opening loss in excess of 100 points.

Ryanair files anti-trust complaint

1. DAX Review
2. U.S. Review
3. Ryanair files anti-trust compliant
4. Amazon 16 billion bond release
5. Gigaset Earnings
6. Economic Calendar

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The DAX is recovering from its recent losses. 3 hours before close the German Index is up by 0,83% reaching the 12278 point mark. With this actual form it does seem that the DAX will be breaking its August high. There are no major international signals, as the Brent and Gold seem have to stabilized at 50 USD and 1270 USD respectively.

Following a strong equity market rally on Monday, as simmering tensions eased a little with North Korea, and fears of an imminent armed conflict with that nation lessened to a degree, Wall Street calmed down a bit yesterday morning, too. Indeed, after a small early extension to the rally in the first few minutes of yesterday’s session, stocks faltered somewhat within the first hour of trading, and an early 35-point gain in the Dow Jones Industrial Average quickly faded, with that blue-chip composite falling into the red during the second hour of trading. The other averages went into the red, as well. Meantime, a big individual story, one day after the shift away from North Korea, was at giant home improvement retailer The Home Depot, which issued quarterly results yesterday. And while the top and bottom-line results were better than expected, the gains, and the raised full-year forecast did not satisfy the Street, as that stock tumbled, losing nearly 4% of its value early on. The loss in HD turned the Dow negative, costing that index some 40 points. However, after that initial turn down by the Dow, that index returned to the black shortly thereafter. Also in the retail category weak earnings hurt Coach stock in early dealings. Still, the resilience of the bulls was evident yesterday, with that late-morning attempted comeback in the Dow. Meanwhile, in other market moving news, the Commerce Department reported that retail sales had posted an increase of 0.6% in July. That was above the 0.4% rise forecast. Also, June’s result was pared back from a rise of 0.4% to one of 0.3%. Excluding motor vehicle sales, core retail spending was ahead of 0.5%. Here, too, the gain was above consensus. Contributing to the pickup were sales of furniture and home furnishings, and building materials. Sales over the Internet soared, meantime, advancing by 1.3%. The market remained in somewhat of a mixed pattern as the noon hour arrived in New York, with the Dow near the breakeven line, and with the S&P 500 and the NASDAQ each off incrementally. The small-cap Russell 2000 and the S&P Mid-Cap 400 also were in the red, but in a more meaningful way. As has been the case recently, it was the retail group suffering once again, with steep losses in some high-profile names, such as Under Armour. Also, more stocks were lower than higher on the Big Board at that time, by a count of two-to-one while among the core groups, energy, basic materials, and consumer stocks were leading things lower. The weak tone persisted through the middle of the afternoon, and while the Dow held near the breakeven line, and the large-cap S&P 500 and the NASDAQ were just down incrementally, the smaller indexes and the advance-decline ratio were notably off. It was, to that point, a somewhat sobering day, even as the economy continued to show relative strength and the news out of North Korea was somewhat reassuring, for now. The equity market then would firm up slightly as the session wound down, but the overall weaker tone would persist into the close. When all the numbers were in, the Dow, with some last-minute selling, would end the session ahead by just five points; the S&P 500 would conclude matters just about where it began them; and the NASDAQ would end the day off seven points. Losing stocks easily led gains, though, and the small- and mid-cap categories showed noted weakness.

Germany on Wednesday rejected a claim by budget airline Ryanair of a conspiracy behind efforts to keep bankrupt rival Air Berlin afloat until a new owner is found. The Irish airline lodged a complaint with European Union competition authorities after Air Berlin filed for bankruptcy protection and then got a 150 million euro ($177 million) loan from the German government. Ryanair said late Tuesday there’s “an obvious conspiracy” between the German government, Lufthansa and Air Berlin. The loan will help Air Berlin to keep flights running for the next three months, while it is negotiating a possible deal with Lufthansa and another unnamed carrier, reported by German media to be easyJet. A spokeswoman for Germany’s Economy Ministry said it was “absurd” to claim that the rescue package had been staged. Beate Baron told reporters in Berlin that the government expects the loan to Germany’s second-largest airline to be repaid. Air Berlin filed for bankruptcy protection Tuesday after its main shareholder, Abu Dhabi-based Etihad, said it would make no more financing available following years of unsuccessful turnaround attempts. The airline, which carries some 80,000 people a day mostly on short-haul destinations, made a loss of about 782 million euros last year.

Amazon.com Inc. on Tuesday completed a $16 billion bond deal to fund its planned $13.7 billion acquisition of Whole Foods Market Inc. The issue came a day after ratings agency Moody’s Investors Service assigned the deal a Baa1 rating and revised Amazon’s credit outlook to positive from stable. S&P Global Ratings assigned the credit a higher rating of AA-minus last week. Amazon raised $16 billion in a seven-part offering that included a 40-year tranche, underwritten by Bank of America Merrill Lynch, Goldman Sachs and J.P. Morgan Chase. As expected, the bonds priced at the tight end of guidance, but the new concessions were still attractive, according to research firm CreditSights, which had upgraded its recommendation on Amazon’s bonds to outperform from underperform based on the initial price talk. Initial price talk on the 10-year tranche was 110 basis points above comparable Treasurys, which later tightened to Treasurys plus 90 basis points. CreditSights analysts led by Jordan Chalfin said at the price, the notes were still a bargain.

Gigaset reported a drop in first-half sales and EBITDA but reiterated its outlook for higher sales over the full year, thanks to growth in new market segments like smartphones. In the first half, smartphone revenues rose to EUR 3.7 million from EUR 1.1 million a year earlier, following the launch of two devices. Over the first six months of 2017, total revenues fell 3.6 percent to EUR 128.3 million due to a continued contraction in Gigaset’s main market, cordless home phones. Sales in the consumer segment fell to EUR 98.1 million from EUR 110.7 million a year ago, while the business market grew 25.7 percent to EUR 25.4 million, driven by strength in its home market Germany.  EBITDA fell to EUR 5.7 million from EUR 10.6 million in the first half of 2016, hurt by increased spending on marketing and R&D, including the ramp-up of mobile sales. Excluding the extra EUR 4.6 million in costs, EBITDA would have been largely stable for the full year, Gigaset said. Free cash flow was a negative EUR 24.1 million versus an outflow of EUR 13.1 million a year earlier.  Despite the lower H1 results, Gigaset maintained its outlook for higher revenues over the full year, with a low double-digit million euro increase thanks to the expanding smartphone business. Core EBITDA is expected to reach EUR 15-25 million over the year, while cash flow should be just a mid single-digit million euro outflow.

Today Economic Calendar:

1. MBA Mortgage Applications
2. Housing Starts
3. Atlanta FED Business Inflation Expectations
4. EIA Petroleum Status Report
5. FOMC Minutes

 

Sysco down albeit strong earnings.

As there have been no further major escalations in the North-Korea conflict DAX investors took a bullish stance. After a strong opening,rallieing up to the 12200 point mark, the German DAX closed on the 12165 point mark, an intraday increase of 1.26%. With the highly expected German Economic Data about to be revealed tomorrow, the Investors seem to expect a positive development in Germany.

As we are off-schedule today, we will be reporting on today’s stock market developments. Stocks are moving nicely higher today, as we embark on a new trading week. Of note, traders are likely pleased that geopolitical tensions seem to be easing. At just past noon in New York, the Dow Jones Industrial Average is up roughly 147 points; the broader S&P 500 Index is ahead 25 points; and the NASDAQ is higher by 73 points. Market breadth shows broad based support for stocks, as winners are well ahead of losers on the NYSE. From a sector view, leadership can be found in the technology and financial issues. Meanwhile, the energy stocks, while still ahead, are logging more moderate gains. Elsewhere, traders received no major economic news items this morning. However, tomorrow should be a busier day for reports. Specifically, retail sales for the month of July, the latest monthly import and export prices, the Empire Manufacturing Survey, and a business inventories report, will all be released. These items won’t likely go unnoticed by traders. Finally, although the second-quarter corporate reporting season has largely concluded, we are still receiving some profit announcements. Specifically, Sysco stock is trading lower today, even though the food services company delivered a respectable quarterly report. In addition, shares of JD.com are lower, after the China-based Internet operator posted weaker-than-anticipated numbers. Technically, stocks are recovering some ground today, after a pulling back in price over the past week, or so. It remains to be seen, if the bulls can push the market higher from here, or if some consolidation will be in order. Traders will be looking at the corporate outlook, and also will likely be turning their attention to the domestic and international political arenas

Sysco Corp. reported earnings for its fourth quarter that advanced compared to the same period last year. The company said its bottom line came in at $388.30 million, or $0.72 per share. This was higher than $365.67 million, or $0.64 per share, in last year’s fourth quarter. Analysts had expected the company to earn $0.72 per share, according figures compiled by Thomson Reuters. Analysts’ estimates typically exclude special items. The company said revenue for the quarter rose 5.6% to $14.42 billion. This was up from $13.65 billion last year.

Sysco Corp. earnings at a glance:

• Earnings Growth (Y-o-Y): 6.2%
• EPS Growth (Y-o-Y): 12.5%
• Revenue Change (Y-o-Y): 5.6%

German technology startup investor Rocket Internet has announced a share buy-back with a total maximum consideration of up to 100 million Euros ($118 million). The buy-back scheme will include up to 5,000,000 shares, representing a maximum of up to 3.03 per cent of the outstanding share capital of the company, Rocket Internet said in a statement. The buy-back will be executed via Xetra trading on the Frankfurt Stock Exchange and will begin on August 14, 2017, ending on April 30.

 

Dow Jones opens with 100 point loss

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• DAX Review
• Wall Street Review
• Bechtle Earnings
• Macy’s Earnings
• Kohls Earnings

After record-breaking weeks, Equities have had a hard time in the European Markets. Some catalysts for the week development in the Eurozone were the strengthening EURUSD, fueling the European Markets and therefore increasing liquidity in U.S. Markets. German Earnings and the German auto- cartel have been weighting down investor-sentiment. The North-Korea conflict seems to be the most recent agitator for the sell-off on the German markets. For the current trading day the DAX has not been quoting any green digits with the Index going down since its opening without any resistance. 2 Hours before close the German DAX is down 0,91% from its previous close.

Following another record closing high by the Dow Jones Industrial Average to start the trading week on Monday and a late reversal on Tuesday amid growing tensions with North Korea, the stock market, on an extension of those heightened geopolitical concerns yesterday morning, started the middle session of the week, notably to the downside. Of course, the threats and counter threats involving North Korea was not the only influence on Wall Street, as a disappointing revenue release from entertainment mogul Walt Disney also rattled the street and helped to push the Dow down notably to start the day.  In all, the Dow fell back 80 points early, and the NASDAQ, under pressure from declines in several high-profile technology names, tumbled 60 points at the morning’s nadir. In fact, that composite remained the large-cap’s weak link throughout the morning. But it was mainly a story of growing geopolitical risk, as U.S.-North Korean relations continued to deteriorate. Leading the way lower was the consumer discretionary category, which takes in the aforementioned entertainment giant, which lost some 5% of its value in the morning. What did do well early yesterday were traditional safe havens, such as Treasuries and gold. Meanwhile, there was no bounce of note as the morning moved along, as all 10 of the principal equity groups were trading in the red as we approached the noon hour in New York, while losing stocks were sustaining a 2.3 to 1.0 ratio on the Big Board. Further underscoring the weak nature of the day’s action to that point, the CBOE Volatility Index (VIX), widely considered the fear gauge, was up some 7%, to near 12, a one-month high. Overall, we think the market’s response to the threats from North Korea seems rather muted, in part because the consensus seems to be that tensions will eventually subside. The market’s decline then moderated for a time as the afternoon got under way, with the Dow’s loss narrowing to about 40 points. However, that proved to be a brief respite, and stocks soon faltered again, but not dramatically so. In truth, the stock market is a bit frothy, with P/E’s up to around 20 for companies with earnings. That is high, albeit not dangerously so in this low inflationary environment. Still, if traders needed some excuse to sell, the news out of North Korea and the revenue miss at Disney were reason enough. So, stocks wilted, as the afternoon progressed, and as we moved inside two hours, the Dow was near the day’s low. This downturn would then persist up until the final half hour, or so, with few periods of sustained buying to interrupt the downtrend. However, as the session neared its close, some selective buying took hold, enabling the larger-cap composites to notably pare the day’s losses. However, the comeback did not fully encompass the smaller-cap indexes, where the Russell 2000 still ended matters off more than 13 points. As for the various equity sectors, there was only a breakeven performance by the health care group, while the other nine categories posted declines of generally half a percentage point, or less. In the Morning the Dow Jones is down 100 points shortly after open, dropping under the 22’000 point mark, with Goldman Sachs contributing the most losses. The S&P 500 declined 0.6 percent, with information technology and financials leading all sectors lower. The Nasdaq composite pulled back 0.75 percent, with Apple, Alphabet, Amazon and Netflix all trading lower. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, soared more than 24 percent to trade at 13.79.

Information technology company Bechtle AG said its second-quarter earnings after tax rose 11 percent to 25.39 million euros from 22.71 million euros last year. Earnings per share grew to 1.21 euro from 1.08 euro a year ago. Earnings before interest and taxes or EBIT in the second quarter reached 36.5 million euros, an increase of 13.2 percent from 32.3 million euros last year. Quarterly revenue increased 13.7 percent to 822.2 million euros from 723.4 million euros a year ago. Looking ahead, the company’s Executive Board continues to expect significant revenue and earnings growth for the year as a whole and confirms the forecast for 2017 published in March.

Macy’s is taking its victories where it can. On Thursday, the department store chain said comparable sales fell 2.8% in the second quarter, the 10th straight quarter of decline for the retailer. That said, the results were not as bad as investors had feared. Wall Street had predicted comparable sales would drop by 3.5%, according to Consensus Metrix. (Comparable sales exclude recently opened or closed stores.) And profit by one measure came in at 48 cents a share, better than the 45 cents analysts were projecting. Total net sales fell 5.4% to $5.55 billion, slightly above expectations. Despite the not-as-bad-as-expected results, Macy’s did not raise its full year forecast, which suggests the retailer views these improvements as fragile. Investors were sufficiently spooked: Macy’s shares were down 2% in premarket trading to $22.50, about half the level of their 52-week high.

Kohl, who has a recorded success of undermining Macys, has released its and they look crispy. Kohl’s reported a narrower, 0.4 decline in same-store sales, compared to a drop of 1.8 percent during the same quarter last year. Analysts were expecting comparable sales to fall 1.5 percent, according to FactSet. Shares of Kohl’s were recently down 9 percent on the news, after initially jumping 4 percent in premarket hours. “The traffic momentum that we saw in the combined March/April period accelerated in the second quarter,” CEO Kevin Mansell said in a statement. “Though transactions for the quarter were lower than last year, July transactions increased. … We are also excited by the sequential sales trend improvement in all our lines.” Trying to drive shoppers back to its stores, Kohl’s has been testing new initiatives, like entering a partnership with Under Armour to sell the sports retailers merchandise. Management said on Tuesday that it’s also beginning to see benefits from initiatives in place with the goals of better managing inventory and cutting costs. “Under Armour in particular continued a very strong performance and beat the sales plan across almost all categories,” Mansell said on Thursday’s earnings conference call. “We’ve gained significant share in active apparel and footwear in the first half of the year and expect that to continue in the back half based on assortment improvements and our momentum.” The company’s net income rose to $208 million, or $1.24 per share, in the second quarter, from $140 million, or 77 cents per share, a year earlier. Net sales fell 1 percent, to $4.14 billion, notably declining for the sixth straight quarter. Analysts on average were expecting Kohl’s to report an adjusted profit of $1.19 per share and revenue of $4.13 billion, according to a survey by Thomson Reuters.

 

European stocks fall amid North-Korea conflict

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The North-Korean conflict is staining the stock markets. European stocks fell sharply across the board today as investors around the world piled cash into safe-haven assets amid increasingly dangerous rhetoric between North Korea and the United States. President Trump presented a statement warning North Korea that any threats to the United States would be met with “fires and fury.” Gold and Silver are up 1,26% and 2,84%respectively.On the other hand all major European Stock Indices ,with a few exceptions such as the ATHEX, are quoting a negative net change. The DAX is no different and as such is down 1,17%, two hours before close. After a pretty slow week, the DAX opened by climbing a little and reaching the 12226 point mark 30 minutes after opening. After reaching the intraday high, the DAX went crashing and is now down 1,17%.

Following a mostly higher beginning to the trading week on Monday, Wall Street got off to a somewhat weaker start yesterday, with the Dow Jones Industrial Average, a 26-point winner on the first session of the week, moving down to a 40-point loss in early dealings. With the economic calendar light and no new political headlines of note until late in the day, the focus was again on earnings, which continue to pour in for the second quarter. To be sure, most of the nation’s larger companies have reported already. Now, we are starting to hear from some smaller names, as well as results from a few retailers, which often have July ending periods. As has been the case almost uniformly, however, the bulls didn’t stay down for long, and as we ended the first half hour of trading, the early setback was pared, although the indexes remained a bit under water. That would change in the next half hour, as the Dow would make it back into the black, with the bulls hoping for a 10th straight record close. Meantime, the big item of note on the earnings calendar was yesterday afternoon’s pending quarterly release from Dow stock Walt Disney, which is noted below. Some retailers also were on the docket, as noted above. Indeed, with respect to the latter item, the retail reports made surprisingly good reading, with better-than-expected results from both Ralph Lauren and Michael Kors Holdings helping to turn things around as the morning wound down. In fact, as we approached the noon hour in New York, all three large-cap indexes were securely in the green, with the Dow seemingly on course for a 10th straight record close, with a mid-session gain of some 50 points. All told, corporate earnings have been up some 10% for the second quarter, which is well ahead of the 6% increase that has been forecast. Little wonder stocks are strong. The good news would continue into the first part of the afternoon, affirming that when the focus is on earnings, rather than politics and even the economy, this overbought stock market has continued to do well. And yesterday, the gains extended to the S&P 400, the mid-cap benchmark and the small-cap-dominated Russell 2000. Meantime, the gains increased in the first part of the afternoon, with the Dow’s intraday uptick reaching 60 points. But that would prove to be the high water mark for stocks, and as the afternoon moved along, the sellers entered the fray. However, there was little intensity to that pullback. The mid-afternoon selloff, albeit modest, did continue into the close, with the energy and basic materials sectors leading the way lower, with an assist from health care. Few groups showed any noteworthy strength, although recently soaring Apple Inc. shares did press ahead to an all-time high of just over $161. Still, while the Dow and the S&P 500 Index both set intraday peaks, each fell back below the neutral line in the final hour of trading–especially during the closing half hour. Also, losing stocks held a plurality on winning issues on the Big Board and the NASDAQ. The late selloff, meanwhile, was driven largely, it would seem, by President Trumps statement.The weakness then accelerated somewhat into the close, with the Dow at one time dropping by some 60 points. So, when all the numbers were added up, the blue chip composite was off by 33 points; the S&P 500 Index was lower by six points; and the NASDAQ’s deficit was 13 points, as more stocks fell than gained on the session. Then, after the close, Disney chimed in with a profit beat, but a shortfall on the revenue side, causing that stock to falter in after hours trading.

Walt Disney will stop providing new movies to Netflix starting in 2019 and launch its own streaming service as the world’s biggest entertainment company tries to capture digital viewers who are dumping traditional television. Walt Disney will launch two Netflix-like streaming services, one for sports and another for films and television shows. As a reaction to these news Disney is up 0,19% and Netflix is down 2,61%, as these move could be a predecessor for further pullbacks.

Office Depot‘s profits fell on weaker sales in the second quarter, missing analysts’ estimates. Second-quarter sales declined 9 % to $2.4 billion YoY, the Boca Raton-based office supply retailer said Wednesday. Same-store sales — those open at least a year — fell 6%, Office Depot said. Retail sales were $1.1 billion for the quarter compared with $1.2 billion a year ago. Office Depot had lower traffic, transaction counts and average order value, according to its regulatory filing. It saw lower sales in most categories, including ink and toner, computer and technology products, offset in part by cleaning and break-room products. Office Depot had previously said 2017 sales would be lower due to store closures. The company said it closed 31 stores during the quarter, ending with a total of 1,408. For 2017, 75 stores are scheduled to close.

The airlines of the Lufthansa Group welcomed 13.1 million passengers on board in July 2017. This shows an increase of 16.9% YoY. The available seat kilometers were up 12.4% over the previous year, at the same time, sales increased by 12.8%. The seat load factor improved accordingly, rising 0.3 percentage points to 86.3%, compared to July 2016. In total the airlines of the Lufthansa Group carried more than 73 million passengers this year until July. The overall seat load factor reached a historical record with 80.2 percent.

Todays Economic Calendar:

1. MBA Mortgage Applications
2. Productivity and Costs
3. Wholesale Trade
4. EIA Petroleum Status Report

Michael Kors Income drops 15%, stock is up 14% pre-market.

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The summer season seems to be affecting the German DAX. After a strong start in the afternoon and a slide-off in the afternoon, the Index reverted back to its previous close being off by 0,03%. If there can be a mention of a clear winning stock, REWE the German retail group would be it, being up 1,43% from its previous close.

The same kind of holiday boredom seems to have hit the Wall Street. Following a rather eventful week on Wall Street, as one month ended and another one began, with a succession of all-time highs being set amid some mixed economic data being issued, the latest five-day span began with prices initially headed somewhat higher. On point, the old week featured confirming evidence that the economy was still pressing ahead, if irregularly. Specifically, the reports showed a solid level of manufacturing growth, a slowing rate of non-manufacturing improvement, and a surprisingly strong employment report. Given that still largely positive backdrop, it is not all that surprising that stocks have been on the ascent. After all, with solid, but not inflationary, economic growth, a cooperative and cautious Fed, and strong earnings, the market backdrop is positive enough to keep the bull alive. On the other hand, multiples are rather stretched, so the margin for error is quite small. Accordingly, although stocks continue to head higher, the gains are not easily secured. And that was the case again yesterday morning, as the initial gain was pared rather quickly. But as has been the case this year, no serious selling took place. Thus, stocks again headed higher as the morning wound down, and the afternoon began. By midday, it looked as though another record in the Dow Jones Industrial Average would be set. The major beneficiaries yesterday were the consumer staples stocks, which performed nicely on the Dow. Slightly weaker performers included the energy stocks, which eased as oil prices fell, and some basic materials names, including recently weak Mosaic. On the other hand, some tech names strengthened, as the NASDAQ, with a mid-afternoon gain of 30 points again led the way. One big tech name doing well yesterday was Apple, which pushed up close to another all-time high. Holding the 30-stock Dow down, with a sharp loss on the day was United Technologies. That issue fell on news that it might be going after a major merger partner in Rockwell Collins. Meanwhile, stocks stayed irregularly higher as the afternoon wound down, but stayed in a tight band throughout the afternoon. As the final bell sounded, the major averages were all in the black, with the Dow’s 26-point gain securing that composite’s ninth straight record close. A four-point advance by the S&P 500 Index and a 32-point surge by the NASDAQ rounded out the session. Going forward, we will get inflation data later in the week along with earnings reports from some of the nation’s retail chains.

Michael Kors said Tuesday that its net income attributable to the company dropped 15 percent to $125.5 million, or 80 cents per share, from $147.1 million, or 83 cents a share, a year ago. Last year’s figure included one-time costs related to the acquisition of a Greater China licensee. Excluding that charge, Kors had earned 90 cents a share. While its profits fell, Tuesday’s results outpaced both the company’s and analysts’ expectations. According to Thomson Reuters, analysts on average were predicting Kors would earn 62 cents per share. That was also the midpoint of the company’s own forecast range. Total revenue for the first quarter came in at $952.4 million, again topping analysts’ estimates for sales of $918.6 million, according to Thomson Reuters. But this was another drop — by 3.6 percent — from last year. The drop in revenue wasn’t a surprise, Saunders commented, but it’s more of a “necessary evil” as Kors gets out of retailers that no longer fit the brand’s fresh strategy. “Reducing ubiquity comes with a price attached.” Michael Kors’ same-store sales dropped 5.9 percent during the period, coming in better than expected. Analysts surveyed by FactSet had predicted a decline of 9 percent. Shares of Michael Kors climbed more than 14 percent higher on the news in premarket hours.

The VW brand said it would offer buyers trading in an old diesel a discount on cars meeting the latest Euro 6 emissions standard, ranging from €2,000 to 10,000€ on its compact cars. And the carmaker proposed an additional discount of between 1,000€ and 2,380€ for those buying more environmentally friendly hybrid, all-electric or natural-gas-powered vehicles. VW was “acknowledging its share of responsibility for climate- and health-friendly mobility on German streets,” it said in a statement.

Ralph Lauren Corp reported better-than-expected quarterly profit and sales as the luxury apparel maker kept a tight leash on discounting and inventory, sending its shares up 5 percent in premarket trading. Ralph Lauren, like other U.S. apparel chains, has been struggling with weak sales due to sluggish spending on clothing and accessories and fierce competition from Amazon.com and fast-fashion retailers.  In a bid to turn its business around, the company has been pulling back inventory from wholesale partners, reducing sales in the off-price channel, engaging in fewer promotional periods, shuttering stores and exiting underperforming brands.  Ralph Lauren’s adjusted gross margins rose 210 basis points to 63.2 percent in the first quarter ended July 1, helped by a double-digit decline in costs.  The company also lowered its inventory levels by 31 percent from a year earlier.  The company’s net income was $59.5 million, or 72 cents per share, in the first quarter ended July 1, compared with a loss of $22.3 million, or 27 cents per share, a year earlier. Excluding items, the company earned $1.11 per share, while sales fell 13.2 percent to $1.35 billion in the quarter. Analysts on average were expecting adjusted earnings of 94 cents per share and revenue of $1.34 billion, according to Thomson Reuters I/B/E/S.

Todays Economic Calendar:

1. NFIB Small Business Optimism Index
2. Redbook
3. Jolts

 

German DAX generates losses on weak German economic data

If you missed our Bitcoin investor guide, make sure to catch up with it.

After opening at 12’303 the German DAX was able to rally up and peaked at the 12’325 point mark 4 minutes after opening. The joy was off short time, as after reaching the 12’325 point mark, the German DAX started tumbling down on news of weak German economic Data. 2 hours before close the German DAX is down 0,46% from its previous close. The notable winners/losers are Deutsche Telekom (up 1,41%) and Fresenius Medical Care AG & Co KGaA (down 1,49%). After the German healthcare company released solid earning end of July, the emerging news of Fresenius acquiring NXStage seem to shake up investors.

In the States it continues to be mostly about earnings these days, as the dog days of August continue, with favorable reviews from the investment community, interspersed with a few notable setbacks among individual stocks, being the rule. That was the case again on Friday, as generally solid profit reports helped lift the Dow Jones Industrial Average further into record territory, with that index going well past 22,000 in a modest buying campaign. A few headline movers, such as Weight Watchers, benefiting from an earnings beat, paved the way for the early gain that carried the market solidly higher in the morning. As we moved into the early part of the afternoon, the Dow was ahead by 40 points, while the other large and small-cap indexes were up modestly, as well, with gaining stocks retaining a small lead on declining issues. All told, the session was a positive one to that point, even though there were a few headline makers on the downside, such as Fluor, which while posting better-than-forecast second-quarter earnings, still weighed in with lower orders and backlogs, and much-reduced guidance for the 12 months. The stock tumbled to a 52-week low, in response. The equity market remained range-bound over the final few hours of trading, as investors further digested the benign jobs report and the likelihood that the Fed will not be unduly influenced by it. Another generally constructive earnings day proved supportive, as well. So, all of the averages stayed on the plus side of the ledger, but the gains were far from formidable. As to stocks on the Dow, the financials did better, while most other issues on that composite moved little.  The lone negative on the day was a rise in bond yields on the better jobs data, with the 10-yesar Treasury note climbing to a yield of 2.27%. The market drifted until near the close, when there was a late spurt of additional buying, which helped cap off a week of generally higher prices. At the close, the Dow was ahead 67 points; the S&P 500 was better by five points; and the NASDAQ, on selective strength in technology, was in the black by 11 points. Meanwhile, there were more gaining groups than declining sectors, while on the Big Board, the earlier advantage held by advancing issues was retained into the close, with rising stocks holding about a four-to-three lead. Next week will be a lighter one for economic news, while earnings releases will start to slow down.

Sprint Corp.’s resumed talks about a potential merger with T-Mobile US Inc., being held at the same time as discussions with cable companies, shows the lengths billionaire Masayoshi Son is taking to build scale for a wireless carrier facing increasing competition in the U.S. The two wireless operators restarted discussions after Sprint’s exclusive negotiating period with Comcast Corp. and Charter Communications Inc. expired at the end of July, according to people familiar with the situation who asked not to be identified because the information is private. Sprint shares rose as much as 2.9 percent to $8.95 in early trading in New York Monday.

Todays Economic Calendar:

1. Gallup US Consumer Spending Measure
2. Labor Market Conditions Index
3. TD Ameritrade IMX
4. Consumer Credit

A beginners guide to Bitcoin investing.

Initial Comments:

So I have decided to post this article as a Weekend Special Edition. Bitcoin is a topic that I have invested a lot of time in myself. This article is a long read for people who really want to try and understand the Bitcoin technology.

As there is no uniform terminology we will refer in this article to Bitcoin as the technology and to bitcoin as the underlying currency itself.

This article will be solely focused on Bitcoin and the underlying Blockchain and is divided in 5 sections:

1. Introduction
2. What is Bitcoin? How does the Blockchain work?
3. Is the Bitcoin setup impenetrable?
4. An empirical analysis on the usage of bitcoins.
5. Valuation of bitcoins

1. Introduction

Bitcoin is a digital currency that creates unique, non-duplicable electronic tokens using software (dubbed mining) with an asymptotic limit of creation of 21 million tokens. Every four years the number of bitcoins created is scheduled to be cut in half until 2040 when creation is supposed to go to zero. The system operates by clearing transactions in a peer-to-peer decentralized system. If you don’t understand the previous sentences, it’a fine as we will come to the core of Bitcoin and the workings of the underlying technology. Since Bitcoin first started trading (on stock exchanges) the 16th of July 2011 the price has increased by baffling 5’209’254% (as of 29.06.2017). Officially Bitcoin was introduced to public in 2009, when Satoshi Nakamoto (allegedly a pseudonym) introduced his whitepaper entitled :”Bitcoin: A Peer-to-Peer Electronic Cash System”.

The bitcoin has enjoyed an enormous increase in valuation, reaching a total market capitalization of 40 billion USD. As shown in the graph above Bitcoin surged for the first time in November of 2013 reaching an all time-high, at a market cap of 13,9 billion USD. Bitcoins plummeted afterwards and hit the floor on a market cap of 2,4 billion USD. On the 11th of June 2017 bitcoins rallied up to a record-breaking 2895,44 USD. Given this recent , nearly unseen rise, it’s astonishing that many people don’t understand what Bitcoins are and how they work. In this article we will try to get to the core of Bitcoin and the underlying blockchain, we will support our assumptions with empirical analysis. One resource will be the whitepaper released by Satoshi Nakamoto. As the concept of Bitcoin is technically complex we will be quoting the most relevant extracts, try to paraphrase them and supplement them with practical examples. If you are a curious and tenacious mind I suggest you read Nakamotos paper yourself.

2. What is Bitcoin? How does the Blockchain work?

“A purely peer-to-peer version of electronic cash would allow online

payments to be sent directly from one party to another without going through a

financial institution.”

This first quote is taken from the abstract and elaborates on the Bitcoins doctrine, a decentralization of cash-flow. Our current methods of making transactions require our money to go through Financial Institutions such as Banks, the FED or any other governmental institution. For years we have trusted financial institutions as middlemen for all of our transactions, the repercussions can be enormous as history has proven. In 2015 Greece was facing a sovereign default, with the Banks having no liquidity and with no re-financing possibilities at first. People were standing on the streets, raiding every ATM they could find in the hopes of saving what was left on their bank deposits. The Greek Government debt crisis has various catalysts, among them a corrupt government and rigged banks. Private Greek banks started according dubious loans and creating a credit bubble that burst in 2010. Two years beforehand Lehman Brothers, a real estate hedge fund disguised as an investment bank, was the originator of the subprime-mortgage financial crisis when it filed for bankruptcy on the 15th of September 2008. By that time, Lehman had assets of $680 billion supported by only $22.5 billion of firm capital. From an equity position, its high risk commercial real estate holdings were three times greater than capital. In such a highly leveraged structure, a three- to five-percent decline in real estate values would wipe out all capital, which finally ended up by happening and causing a financial mayhem . So this really begs the questions: “Why do we entrust banks with our money?”. Because we plain and simply lack alternatives to them. Clearly having all our financial transactions , like loans, credit transactions and savings-account, handled by banks bears a concentration risk. Projects like Kickstarter have been a real alternative to banks, crowdfunding projects thus replacing the process of inquiring for loans at banks. What Nakamoto proposes is that there is a possibility to replace banks as middlemen for online transactions. If we think about electronic money transfer, we have to think this process is just an entry in a register, as no physical cash gets exchanged. If we are able to set-up a public and anonymous register, are we then able to construct an online transaction network without middlemen?

“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.”

This paragraph extracted from the Introduction accurately pinpoints which problems need to be faced to institute a decentralized network. Nakamoto proposes that the “inherent weaknesses of the trust based model” is a hurdle to online transactions. Completely non-reversible transactions are not possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. Nakamoto suggests that the trust-model should be replaced by a mathematical model. We will now slowly start to dig into how the blockchain works.

Imagine you are a group of 5 friends sitting in a circle. Everyone in the circle has a sheet of paper and a pen. Friend A wishes to make a 10 euro transaction to friend B. He will now say it out loud and notify the whole group. Everyone in the group verifies if friend A has enough balance to pay friend B and then takes note of the transaction. Whenever enough transactions have been made and documented, all friends put their respective page away in their own folders and start a new one. As you might be able to tell everyone will store away the same amount of information. But before putting away the page, the group of friends needs to make sure that no one can alter the content of what has been documented. The pages need to be sealed with a code that everyone in the group agrees to. In the Bitcoin jargon the process of sealing is defined as mining.

“We define an electronic coin as a chain of digital signatures.”

This is where it starts getting technical. Firstly we will have a closer look at hash functions, as they are the main component of the mining process. A hash function is any function that can be used to map data of arbitrary size to data of fixed size. Suppose you have the number 100 as an argument and run your hash function on it. The output will be “ghakjdhg”. Given our argument that we have now defined as 100. the output will always be the same, in this case “ghakjdhg”. No one will know how your argument got converted into “ghakjdhg” and moreover the process is irreversible, eliminating any possibility of backtracking the functions logic. This means that given the word “ghakjdhg”, it is impossible to tell what our input was, hence why hash functions are very helpful in cryptography. As you might have figured out, hash functions play a role when it comes to Bitcoin mining. To illustrate the usefulness of hash functions in the mining process we will come back to our example with the group of friends. Let’s assume that the total sum of all transactions on one page is equal to 275 Euro, so we label this page with the number 275. Then we will try to find a second number that when added to our number gives us an output of that starts with 4 a`s. After some calculation we may find that this number is 45678. In such a case, 45678 will become the seal for the number 275. To seal the page that bears the sum of 275 euros we will put a badge labeled 45678 on it. An altering of the transaction sum, to lets say 300, would change the output of the hash function. The sealing of numbers is called proof-of-work, as defined in chapter 4 of Nakamotos paper .

“To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system similar to Adam Back’s Hashcash, rather than newspaper or Usenet posts.The proof-of-work involves scanning for a value that when hashed, […] , the hash begins with a number of zero bits.”

So we have come to the conclusion that the combination of the sealing number and the total sum of transaction gives us a unique output. But who calculates the sealing number? Let’s go back to our group of friends, who has just finished another page of transactions. Everyone in the group engages in the process of calculating a matching sealing number. The first to figure it out will then announce it to the rest of the group. As soon as the sealing number gets announced everyone double-checks if it yields the required output or not.

Some readers now might be asking themselves: “Why should I waste time and energy figuring out a sealing number if eventually someone else might do it?”. This problem gets addressed in Chapter 6, named “Incentive”. Obviously in the real world the process of finding the adequate sealing number, takes up electricity and deteriorates your GPU and/or CPU. The twist is that the first one to calculate the sealing number gets compensated for his success. So imagine we get back to our circle of 5 friends and friend C is able to calculate the sealing number. Friend number C will be rewarded with a freshly printed 1 Euro piece for his efforts, effectively not decreasing anyone’s balance (disregarding any inflationary effects).

We will now advance to digital signatures and how they are embedded in the Bitcoin network. Digital Signatures play a critical role when sending and receiving bitcoins. Digital signatures are the public-key primitives of message authentication. In the physical world handwritten signatures are used to make contracts or documents binding. Similarly, a digital signature is a technique that binds a person or an entity to some sort of digital data and is much less susceptible to fraud.This binding can be independently verified by the receiver as well as any third party. A digital signature is a cryptographic value that is calculated from a secret key, belonging to the signer.

Depicted above we are able to see the flow of a standard normal digital signature process.

Each person involved in the signature flow will have a public and a private key pair. Generally the key pairs used for encryption/decryption and signing/verifying are different. The private key used for signing is referred to as the signature key and the public key as the verification key. The signer feeds some data to a hash function and generates a hash of that data. After obtaining a hash value, its is packed together with the signature key and the package is then fed to the signature algorithm. The algorithm will then proceed to create the digital signature. The signature is appended to the data and both are then sent to the verifier. The verifier then feeds the digital signature and the verification key into the verification algorithm. The verification algorithm gives some values as output, meanwhile the verifier also runs the same hash function on the received data to generate a hash value. This hash value and the output of the verification algorithm are compared. Based on the comparison result, the verifier decides whether the digital signature is valid. The digital signature will be unique, as it is created by the verifier’s private key.

“Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.”

To illustrate the Bitcoin transaction procedure we will annex the process flow chart from Nakamotos paper.

For person 1 to transfer a coin to person 2, person 1 signs the hash of the last Bitcoin transaction to occur and the public key of Person 2. Because the network is high-velocity, most of the major parts in the Bitcoin network are high performance supercomputers and dedicated servers that have enough processing power to manage all of the transactions across the continents.

It stands out that bitcoin transactions are very unique in the sense that transactions can be made between parties on opposite sides of the globe via the Internet. Due to the underlying mathematical models no middlemen, such as banks, are needed anymore.

3. Is the Bitcoin setup impenetrable?

While bank robberies and money counterfeiting are of course no problem for an electronic currency, Bitcoin online platforms face severe hacker attacks. Furthermore, due to the lack of regulation the Bitcoin ecosystem remains a “Wild West”. Because Bitcoin transactions are non-revocable, hackers have frequently stolen bitcoins of individuals leaving the victims without recourse. The most common source of scourge to afflict Bitcoin participants has been the denial-of-service attacks (DDoS). These are inexpensive to carry out and quite disruptive. Records show that competing services carry them out in order to improve their market share. A massive DDoS attack hit OKCoin, a China-based Bitcoin exchange, the 10th of July 2015. The platform saw a massive distributed denial of service attack on the which resulted in the international site being shut down for a week. Furthermore the platform compensated traders for losses incurred due to the DDoS. Other times exchanges similar to OKCoin have just shut down without explanation, often with customers losing their deposits. Empirical papers like Vasek et al (2014) show, the number of attacks has increased over time. Böhme et al. (2015) argue that DDoS attacks are especially attractive as stolen Bitcoins can easily be converted into money. We will not dwell into the depths of how such attacks occur but have a look at their frequencies and repercussions. Despite their apparent frequency, very little is known about the true prevalence of DDoS attacks.

From May 2011 to October 2013 142 DDOS attacks on 40 Bitcoin services were documented. Most currency exchanges and mining pools are much more likely to have a DDoS protection such as CloudFlare, Incapsula or Amazon Cloud. Vasek et al (2014) found that 7% of all known operators have been attacked, but that currency exchanges, mining pools, gambling operators, eWallets and financial services are much more likely to be attacked than other services. The study found that big mining pools (those with historical hashrate shares of at least 5%) are much more likely to be DDoSed than small pools.

This Graph issued by Vasek et al. (2014) plots the shift in the DDoS attack targets. We can see that the number and target of reported attacks varies greatly over time. Initially, in the second half of 2011, most DDoS reports concerned mining pools. Then there were very few reported attacks of any kind during the first half of 2012. During the second half of 2012, DDoS attacks picked up again, initially targeting pools, but more frequently targeting currency exchanges and other websites. During 2013, attacks on pools continued, but they were joined by DDoS on gambling websites, eWallets, and currency exchanges. Attacks on currency exchanges dominated the totals from March–June 2013, coinciding with rising exchange rates and unprecedented interest in Bitcoin.

This second table, also published by Vasek et al. (2014), allows a categorisation of DDoS events. Currency exchanges and mining pools make up for nearly 80% of the DDoS attack targets, whereas gambling sites make up for 9%. The figure on the left depicts a cumulative distribution function off how recurrent DDoS attacks are on certain entities. It can be observed that 44% are only attacked once while 15% are attacked on at least on five different occasions. The leader in suffered DDoS attacks was Mt. Gox, with 29 suffered attacks. Mt. Gox was responsible for almost 90% of all the exchange operations in the network before filing for bankruptcy. Mt. Gox has filed for bankruptcy protection from creditors in February of 2014. In April 2014, the company began liquidation proceedings. Out of the 1236 Bitcoin related services only a mere 203 services (16%) have adopted an Anti-DDoS application. The adoption rate among services who have been hit by DDoS attacks is with 54% comparably higher, nonetheless still considerably low.

The Bitcoin’s Proof of work system has been developed to prevent double spending schemes. A double spend attack, is a scheme which enable a certain set of bitcoins to be spent in more than one transaction. Karame et al. (2012) have been able to show that it is possible to bypass the proof of work. While the Bitcoin payment verification process is designed to prevent double spending, Karame et al. show that the system requires tens of minutes to verify a transaction and is therefore inappropriate for fast payments. The security of using Bitcoin for fast payments was analyzed. The paper shows that unless appropriate detection techniques are integrated in the current Bitcoin implementation, doubles spending attacks on fast payments succeed with overwhelming probability and can be mounted at low cost.

4. An empirical analysis on the usage of BTC’s.

We will now take a closer look at what bitcoins are used for and by whom. There are many types of statistics and graphs about the Bitcoin network which can be readily downloaded from the Internet (https://blockchain.info/charts). However these types of statistics tend to describe some global property of the network over time such as the number of daily transactions, their total volume, the number of bitcoins mined so far and the BTCUSD exchange rate. It is very difficult to get accurate information about how bitcoins are used in practice. A paper released in 2013 by Dori Ron and Adi Shamir entitled “Quantitative Analysis of the Full Bitcoin Transaction Graph” provides a detailed understanding off the Bitcoin network . This paper gives a great insight off all transactions from the first time Bitcoins became fully operational up to the 13th of May 2012.The data was gathered from the Bitcoin wallet, which tracks all transactions anonymously Even though the landscape, as of 2012, might have changed this paper provides a great insight towards the typical behaviour of users.

At the time there were 3’730’218 different public keys. 3’120’948 of them were involved as senders in at least one transaction, while the rest of 609’720 appeared to form a network of receivers. One entity (person or company) can have multiple Bitcoin addresses. The paper determined that the total of 3’120’948 addresses can be attributed to 1’851’544 entities. Adding the 1’851’544 entities to the network of receivers only we get a total of 2’460’814 entities involved in the Bitcoins transactions. This implies that on average every entity has 1,5 addresses. However there is a huge statistical variance in the number of addresses an entity manages and in fact one entity is associated with 156’722 different addresses. The paper was able to determine the entity behind all these addresses as being Mt. Gox. The paper made one very interesting finding regarding the distribution of Bitcoins. Of the 9’000’050 bitcoins that were in circulation 7’019’000 bitcoins could be attributed to the 609’720 addresses which only receive and don’t send any bitcoins which were almost 78% of all existing bitcoins. 76.5% of these 78% (or 5’369’535 bitcoins) are what is defined in the paper as “old coins”, this meaning that these coins have not been moved over a time-period of 3 months. The analysis of the total volume of transactions resulted that 40% of all addresses had received fewer than one bitcoin and 59% of the addresses had received fewer than 10 bitcoins over their lifetime. Bitcoin allows for micro transactions, which are called satoshi and are of the order of 10^(-8), this is the smallest fraction into which a bitcoins can be broken up. The paper also goes to show that on the other end of the distribution there was only one address which received over 800’000 bitcoins. The current balance of almost all 98% of all entities was less than 10 bitcoins. 93% percent of all addresses had fewer than 10 transactions each, while 80 addresses used the network for more than 5000 transactions. The paper also goes ahead and dissected the nominal of each transactions. 84% of all the transactions involved fewer than 10 bitcoins. On the other hand large transactions are rare with only 340 transactions larger than 50’000 BTC’s. The paper also went ahead and filtered out 19 of the most active entities. I attached the Table below.

Source

The table shows that Mt. Gox had the most addresses but not the largest accumulated incoming bitcoins nor the largest number of transactions. Six out of the 19 entities have each made fewer than 30 transactions with a total volume of more than 400’000 bitcoins each. A fair conclusion that we can draw from this paper is that most of the mined BTC’s remain dormant in addresses which had never participated in any outgoing transaction. We can also concluded that there is a huge number of tiny transactions which move only a small fraction of a single bitcoin, but there were also hundreds of transactions which moved more than 50’000 bitcoins.

Bitcoin has also been massively linked to the Silk Road in the past, an anonymous, international online marketplace that operates as a Tor hidden service in the past. “More brazen than anything else by light-years” is how U.S. Senator Charles Schumer characterized Silk Road which was shut down March 2015. The Silk road had reportedly between 30’000 and 150’000 active users. The Silk Road was an online “black market” which offered a variety of goods but had a clear focus on drugs. The users were able to stay anonymous, bitcoins granting anonymity even trough the payment process.

5. Valuation of bitcoins

As of now we have only been assessing the design and the technology underlying the decentralized infrastructure of Bitcoin. As this is a financial-centered blog we will try do identify if there are any valuation models for bitcoins. To be able to assess if we can erode a bitcoins value we elaborate whether Bitcoin is primarily an alternative currency or just a speculative asset. According to Kaplanov a currency can be used as a mean of trade, a vehicle to store value, or a unit of account in order to compare the value of different goods or services. Dirk B. et al state that:

“Bitcoin cannot be considered a currency. Its high level of volatility makes a reliable exchange impossible and adversely affects the store of value and unit of account properties. In addition, the fact that it is not an official currency in any country and not backed by any government implies that the high level of volatility affects every Bitcoin transaction, within-country and cross-country transactions. […] Hence, Bitcoin might better be classified as an investment. Its appeal lies in the large historical price movements and expected future returns. Whilst most assets exhibit at least some fluctuations of its price and can thus be labeled risky, Bitcoin appears to be particularly risky and clearly belongs to a high-risk (speculative) asset class.”

Speaking in terms of exchange rates an empirical analysis on volatility shows that minima and maxima observed average daily return for Bitcoin are about 10 times higher than for the Euro or Yen.The standard deviation of realized volatility for the Bitcoin markets varies between 229 and 558 basis points per day, which is 100 times higher than in the FX markets. The Euro FX market exhibits an average of volatility of 50 basis points per day. The figure, published by Dirk B. et al shows that all markets but BTC and Zaydo, from the chosen sample these had the lowest market shares, exhibit moderate statistical skewness. For those two markets the chosen samples show a leptokurtic distribution.

As bitcoins do not provide the feature of an interest rate in contrast to traditional currencies, where interest rates are provided by central banks, valuation models relying on given interest rates are rendered meaningless. Users are left to determine the value of bitcoins themselves by gathering and evaluating information in news and web resources. The price is therefore determined on exchanges by demand and supply. Considering that there is a cap at 21 million bitcoins, as of 8 February 2017 there were 16’152’087,5 bitcoins in circulation, off which many may be lost or not in circulation, it follows that an increasing growth of the demand side is leading to increasing prices. An example how prices can be driven up by an increasing demand can be exemplified with Baidu. On October 14, 2013, Baidu, a web services company that runs the largest search engine in China, began accepting bitcoin. This single action opened the bitcoin network to roughly 570 million internet users in China and prompted other internet companies to consider the cryptocurrency more seriously. The closing price of bitcoin, which averaged just $124 over the 2-week period prior to the announcement, increased to $170 over the 2-week period following the announcement. As we have seen recently the mixture of media attention, the novelty of both the design and the features of a cryptocurrency, combined with its global availability over the internet , have lead to an exponential growth of demand. It seems to be a fair assumption to say that an increase in the number of Bitcoin participants is associated with an increase in the Bitcoin network volume, leading to an increase in the Bitcoin price. It follows that if Bitcoin participants seek to use Bitcoin primarily as an asset, they will not leave a footprint within the Blockchain. This is supported by the common practice of exchanges to keep internal accounts on behalf of their customers. That is, the exchanges are handling accounts of their customers in an internal accounting system, guaranteeing for keeping record of the on-exchange purchased and sold Bitcoins without actually transferring these Bitcoin through the Blockchain. We would expect that those users’ Bitcoins primarily remain within the exchange internal systems.

Users pursuing Bitcoin for its purpose as an alternative asset also lack a valid valuation method. Given that there is no fundamental pricing methodology available, sources of information, like the media, are likely to have a higher influence on prices. Negative news like the announcement of security issues revealed in the underlying protocol should concern users who are using Bitcoin for operational transactions and push some users to re-evaluate the utility and usability and eventually sell their Bitcoin, hence lowering prices on exchanges. Due to the volatile character and the volatile historical prices of the underlying an investor may be aware that they invest in an instrument with a high price uncertainty. Hence, it is a valid assumption that these users only invest a small amount of their total portfolio. They buy Bitcoin at an exchange and store it, waiting for prices to rise. An investor might also keep in mind that if Bitcoin is rendered illegal by change of law, the Bitcoin immediately lose their value. What seems to be noteable is the correlation between the price of Bitcoin and the daily English Bitcoin Wikipedia views, which has been pointed out by Florian Glaser et al. in 2014. This graph helps to identify the mass of particularly uninformed users who have only limited knowledge about Bitcoin and therefore acquire initial information from an initial source of information like Wikipedia.

 

View at Medium.com

Dow breaks the 22’000 mark

The German DAX was able to profit from the great reports released by the Labor Department. The reports were a catalyst for a weaker EURUSD which fueled investments in the German Index. 2 hours before close the DAX is up 0,75% at the 12247 points mark. The German Index was able to make a 100 point jump thanks to the big jump in Daimler. Daimler was able to increase sales of cars by 12,1 in July.

As per recent sessions, the chief influences were second-quarter earnings. And as before, the profit tide was strong and supportive, although there were some outliers among the companies issuing their releases, including MetLife, Inc., the giant insurer. That stock fell back some 3% after posting results on Wednesday. Overall, though, the reporting season has been a good one, with some three-quarters of the companies in the S&P 500 exceeding their bottom-line consensus views. That is helping to counter the choppy economic news we have been seeing on occasion. On this count, the Institute for Supply Management reported that its non-manufacturing survey had slowed down in July, registering a well-below consensus expansion rate of 53.9. Expectations had been for a tally of 57.0. In June, this survey had come in at 57.4. Breaking this report down, we see that July’s results were headlined by slower rates of growth in new orders, employment, supplier deliveries, backlogs, and exports. One category, pricing, rose strongly in July, however, as it had in the companion manufacturing survey released on Tuesday. Still, this report, disappointing as it was, didn’t shake Wall Street, as the initial pause in the Dow’s rally was brief. So, as we moved into late morning, that composite strengthened a bit further, although the other indexes remained under water. As we moved into the first part of the afternoon, the market steadied, but the Dow again started to move in and out of the black. The other indexes retained their losses, as selective profit taking persisted. As before, most of the 10 leading equity sectors were lower, but just marginally so, while losing issues held a modest lead over gaining stocks on both the Big Board and the NASDAQ. Things changed little as we moved into and through the latter stages of the afternoon, as most investors’ eyes were focused on the just-released Labor Department report on non-farm payrolls and the unemployment rate (see below). That posting can be a game changer if there is a major departure from expectations. That said, the Dow did firm somewhat for a time, before weakening again into the close. So, when the final tallies were in, we saw that this index had set another record high, while rising a modest 10 points on the day. Losses were spread across the other large and small composites, however.

Royal Bank of Scotland swung to a profit in the second quarter as the taxpayer-owned lender reduced charges for past misdeeds. RBS, bailed out by the British government during the 2008 financial crisis, said Friday that net income totaled 680 million pounds ($894 million) after a loss of 1.08 billion pounds in the same period last year .Adjusted operating profit, which excludes litigation and restructuring costs, more than doubled to 1.69 billion pounds as RBS increased lending, cut spending and reduced the amount of money it set aside for bad loans. “We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced,” CEO Ross McEwan said in a statement. RBS also said its NatWest Markets unit has carried out contingency planning for Britain’s looming departure from the European Union by ensuring that the bank’s license ithe Netherlands is valid. Depending on the outcome of Britain’s negotiations with the EU, the bank may need a beachhead in Europe to continue operations on the continent.

As to the employment report, the Labor Department has reported that the nation had added 209,000 positions in July; expectations had been for a gain of 180,000. At the same time, the unemployment rate came in at 4.3%; the consensus had been for a 4.3% rate. In June, the jobless rate had been 4.4%. This ties the low rate since the recession in 2007-2009. Also, job gains for May were reduced from 152,000 to 145,000; for June, though, they were revised up from 222,000 to 231,000. Importantly, and the best feature of this report was the fact that average hourly wages rose by nine cents, or above expectations in July.

This report, while better than forecast, still wasn’t strong enough, with a labor-force participation rate of 62.9%, to push the Federal Reserve to be more aggressive in raising interest rates. At most, we see just one additional interest rate increase this year, with that uptick unlikely to come before December. As for the stock market reaction, the U.S. equity futures, up modestly before the report was released, strengthened a little further in the moments following the issuance. Treasuries, though, weakened, with yields rising somewhat on the better-than-expected data.

 

Tesla losses smaller than expected

After a big earnings-flood the German Index started by opening with a loss at 12140 points. The DAX documented a downwards movement and nearly fell under the 12100 points mark and was able to recover in the afternoon. 1 hour before close the Dax is trading at 12145 points cumulating a loss of 0,28%. The big winner of the day is Commerzbank which is up 2%.

Following another record-breaking performance on Tuesday, and an after-the-close earnings beat by Apple that day, it was widely expected that the equity market would start the middle session of this five-day span with formidable gains. And, indeed, that is just what transpired, as the Dow Jones Industrial Average broke through the psychologically important 22,000 barrier during the first minutes of trading yesterday morning. Not surprisingly, the early charge was led by a nine-point gain in the shares of Apple. But this is just one stock, and when that increase was not followed by a broader rally, the market wilted. In fact, as we passed the first hour of trading, the S&P 500, the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 all had moved into the red, with the Dow, the lone remaining winner. But even that upturn had eased notably from an early 70-point plus advance to one of fewer than 30 points. Profit taking was the main culprit, it would seem, as the economic and political tidings were rather sparse and not unwelcome. The stock market then stayed range bound for several hours during the middle of the day, with the Dow generally holding to about a 40-point advance, while the other indexes remained under water. The Dow, heavily influenced by Apple stock, which remained some 5% higher on the day, continued to hold above the 22,000 mark. Apple shares were heavily influenced both by the latest quarterly results and also the upcoming iPhone cycle 8, which is expected to begin this fall. Meanwhile, it took just 107 days for the Dow to go from 21,000 to 22,000. The biggest contributor to this additional surge has been Boeing, the aerospace and defense giant. In other news, private U.S. companies added 178,000 jobs last month, a tad below the consensus forecast of 185,000 jobs. Returning to the stock market, the Dow strayed modestly above 22,000 as the afternoon progressed. The recent batch of economic reports, albeit stronger, in the main, seem insufficiently formidable to encourage the Federal Reserve to more aggressively step on the monetary brakes. The pending jobs and non-manufacturing issuances would seem to fall into that category. Current thoughts on the Fed suggest that the bank will next raise interest rates in December, making it three such increases this year. We now would expect a similar level of tightening in 2018, assuming economic growth does not slacken. The Dow held its ground into the close, while the NASDAQ, once down more than 40 points, came all the way back, even going into the black briefly in the final hour. The S&P Mid-Cap and the smaller-cap Russell 2000, however, stayed well into minus territory, as sector rotation evolved notably. At the close, some late buying lifted the Dow comfortably above 22,000. In all, that index ended the day’s action at 22,016; while the S&P 500 and the NASDAQ were, respectively, just above and below the breakeven lines, and, as noted, the S&P Mid-Cap and Russell were off on the day, while losing issues were out ahead of gaining stocks on the NSYE.

On Wednesday Tesla reported a smaller quarterly loss than expected and said production of its Model 3 sedan remained on track to hit targets. The electric-car maker reported a loss of $1.33 per adjusted share on revenue of $2.79 billion. Analysts had forecast Tesla lost $1.88 per share and earned $2.51 billion in revenue, according to Bloomberg. In the earnings letter, Tesla said it averaged over 1,800 net Model 3 reservations daily and was confident it could produce just over 1,500 vehicles in the third quarter. Deliveries to non-Tesla employees would start in the fourth quarter, Tesla said. Tesla had said it planned to produce 500,000 vehicles annually by 2018 and would ramp up costs to meet that goal. The company burned through $1.16 billion in cash in the second quarter, up from $144 million a year before.

BMW, the German carmaker, posted stronger than expected profits after sales of its latest models in Europe and Asia helped offset a decline in the US. The Munich-based maker of luxury cars said operating margins at its automobiles unit rose to 9.7 per cent in the second quarter, from 9.5 per cent last year, near the upper end of its 8 to 10 per cent target. The figure compares with 9.2 per cent at Daimler’s Mercedes unit and 9.1 per cent at Audi, the luxury unit of Volkswagen. The improved margins helped BMW post a 9.2 per cent climb in profit before tax to €3.06bn in the quarter as revenues climbed 3.1 per cent to €25.8bn. After earnings report BMW is up 0,95%.

Continental’s second-quarter adjusted operating profit fell 10 percent as the auto parts maker raised spending on production and R&D capacities, but the company slightly lifted its sales outlook on growing demand for electric-car components. Adjusted earnings before interest and tax (EBIT) declined to 1.16 billion euros ($1.37 billion), near the low-end forecast of 1.15 billion in a Reuters poll of analysts. But the world’s second-largest automotive supplier raised its full-year sales guidance by 500 million euros to more than 44 billion euros and stood by its profit forecast which includes an adjusted EBIT margin target of 10.5 percent. Continental, which makes driver-assistance technology, fuel-injection systems and vehicle tires, said it expects about 450 million euros in raw material cost headwinds until the end of the year, 50 million euros less than previously forecast.