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Bitmain’s revenge, Hong Kong’s crypto rollercoaster: Asia Express

Bitmain allegedly fires staff for speaking out against salary cuts, Hong Kong investors lose faith in crypto after the JPEX scandal, Bitget gets a new…

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Bitmain allegedly fires staff for speaking out against salary cuts, Hong Kong investors lose faith in crypto after the JPEX scandal, Bitget gets a new crypto credit card and more.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Bitmain allegedly fired staff after salary complaints

Bitcoin application-specific integrated circuit (ASIC) mining manufacturer Bitmain has allegedly fired three of its employees for speaking to the media regarding the withholding of salary payments by their employer. 

According to local news reports on Oct. 17, citing an alleged internal Bitmain memo, the company accused three staff members of breaching various clauses in their employment contracts for sharing their remuneration on social media platforms. The note reads: 

The EMT [Executive Management Team] has decided: (1) Employee Li of product operations and circuit development, is to be fired immediately and blacklisted. (2) Employee Xie of product operations and circuit development, is to be fired immediately and blacklisted. (3) Employee Ding, administrative intern at strategic development PMT, is to be fired immediately and blacklisted. The interns post-secondary institution shall also be informed of the incident.

In addition, the company reserves the right to pursue legal action against the individuals above, Bitmain allegedly wrote. Without authorization by the company, nothing can be said, nothing can be given [to outsiders!]

Bitmains alleged layoff notice (BlockBeats)

On Oct. 9, Cointelegraph reported that Bitmain allegedly paused September salary payments for its staff members as the company has yet to achieve a net positive cash flow, especially in the orders of [new] ASICs. In addition, employees allegedly face a 50% cut to their base salary, with all bonuses and incentives being removed. 

Founded in Beijing, China in 2013, Bitmain is one of the worlds largest Bitcoin mining ASIC manufacturers, with an estimated 70% market share during the previous bull market that ended in 2021. The firms Antminer ASIC series currently leads the industry in terms of hash rate computations for mining Bitcoin. Over the past year, several Bitcoin mining operators have gone bankrupt as the price of Bitcoin plunged while electricity costs surged. 

Hong Kong investors spooked by JPEX scandal 

Despite efforts to regulate the sector, it appears that some Hong Kong residents have lost their confidence in crypto after the largest Ponzi scheme in the citys history, the $175 million JPEX crypto exchange scandal, unfolded last month. 

According to a new study published by the HKUST Business School Central on Oct. 17, 41% of Hong Kong residents are no longer interested in holding crypto assets, a sharp rise of 12% compared to before the JPEX incident. The survey featured 7,900 respondents and was conducted between April and October. 

JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)
JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)

The study also revealed that 84% of Hong Kongers have heard of crypto, with 27% of respondents claiming they either hold digital assets now or were previously crypto investors. For those investing in crypto, over 80% said they would not invest over 50,000 Hong Kong dollars ($6,390) into the sector. Interestingly, 57% of respondents said they understood that crypto exchanges must obtain a license before operating in Hong Kong, an increase of 15% compared to before the JPEX scandal unraveled. 

Wu Huang, a professor at HKUST Business School Central, commented: 

We hope that the results of this survey can provide industry stakeholders with more perspectives to help build a sound virtual asset industry. As virtual assets play an increasingly important role in the digital economy, there is a need to strengthen education efforts to make the public better Understand the risks and potential of this emerging field.

Last month, JPEX staff fled their corporate booth at Singapores Token2049 event after the Hong Kong Securities and Futures Commission issued a warning regarding the exchanges unregulated activities. Subsequently, Hong Kong police arrested more than 10 corporate executives and influencers connected to the exchange on charges of fraud. The JPEX scandal has since grown to over 2,300 victims, with losses estimated at $175 million. The exchange was unlicensed at the time of the incident. 

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Factually inaccurate news report wipes out $54 million in market cap

When it comes to reporting, Cointelegraph has seen some blunders over the years. That said, fake news is a problem across the industry. 

On Oct. 16, Bloomberg reported that BC Technology Group, owner of licensed Hong Kong crypto exchange OSL, is contemplating the sale of the latter for 1 billion Hong Kong dollars ($128 million).

On Oct. 17, BC Technology Group issued a clarification stating: The Board wishes to clarify that the contents and statements in the [Bloomberg] Article are factually inaccurate and highly misleading and that it was not contemplating a sale of OSL. 

Unfortunately, investors who bought BC Technology stock based on the divestiture euphoria were not so happy. After publishing the clarification statement, shares of BC Technology tanked 22% during the trading day, wiping off $54 million in market capitalization. Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company, management wrote. 

Bitgets new crypto credit card

Joining the likes of its peers, cryptocurrency exchange Bitget is launching its own crypto-fiat credit card. According to an Oct. 16 announcement during the Future Blockchain Summit in Dubai, the Bitget Card, issued by Visa and backed by digital assets in users accounts and wallets, will be denominated in U.S. dollars and will be accepted in over 180 countries. 

Although many exchanges have rolled out their own crypto debit or credit cards, some have seen pushback from payment processors. On Aug. 25, Mastercard said it would end its cryptocurrency card partnership with Binance in Latin America. Although the firm did not cite a specific reason, experts have pointed to Binances recent regulatory scrutiny as the underlying cause. 

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The Fed’s Big Problem, There Are Two Economies But Only One Interest Rate

The Fed’s Big Problem, There Are Two Economies But Only One Interest Rate

Authored by Mike Shedlock via MishTalk.com,

On average, the economy…

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The Fed's Big Problem, There Are Two Economies But Only One Interest Rate

Authored by Mike Shedlock via MishTalk.com,

On average, the economy looks OK. But averages are misleading. Several large groups of people are struggling. They all have one thing in common.

Case-Shiller home price index, CPI rent index, and the index of hourly earnings for production and nonsupervisory workers.

Who’s Unhappy?

Those looking to buy a home but cannot afford the record high prices, are not faring well in this economy.

The last great time to buy a home was in 2012. Over the next eight years, home prices moved further and further away from wages.

When the Covid pandemic hit in 2020, we had record QE, record fiscal stimulus, mortgage rates hit record lows, and inflation hit the highest levels in 40 years.

In response, home prices soared out of sight. Worse yet, the price of rent rose at least 0.4 percent for 28 straight months.

Rent of Primary Residence vs OER

Data from the BLS, chart by Mish

Rent vs OER Chart Notes

  • OER stands for Owners’ Equivalent Rent. It is the price one would pay to rent their own house, unfurnished without rent.

  • Rent of primary residence is just what one would expect. It is measured price of rent, unfurnished, without utilities.

Mass Confusion Over OER

Contrary to widespread myth, OER is a measured price with very minor imputations that do not matter. OER is designed to track rent prices and it does. It is a measured price.

Much of the confusion comes from a misquoted BLS statement on OER, emphasis mine.

The expenditure weight in the CPI market basket for OER is based on the following question that the Consumer Expenditure Survey asks of consumers who own their primary residence: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?

Note that these responses are not used in estimating price change for the shelter categories, only the weight.

People quote that question as if that is how the BLS measures prices. It doesn’t. Prices, except for minor, irrelevant imputations, are based on actual measured rents.

No One Pays OER

The problem with OER is the weight not the measure. No one actually pays OER. Rather, people pay mortgages.

Yet, OER it is the single largest component of the CPI with a weight of 26.769 percent. Rent has a weight of 7.671 percent.

Many people conclude that the CPI is overstated because no one pays OER. The problem with this idea is home prices are at record highs and home prices are not in the CPI at all.

Homes are not in the CPI because economists consider them a capital expense not a personal expense.

But so what? Inflation matters not just consumer inflation. The Fed has made a big mess of things by ignoring obvious housing bubbles.

30-year mortgage Rates

Mortgage rates courtesy of Mortgage News Daily, annotations by Mish

When the Fed slashed interest rates to zero, mortgage rates fell below 3.0% for an extended period allowing everyone to refinance at 3.0 percent or below. Most did.

OER rose from 332 to 403 between January of 2020 and January of 2024. That’s a gain of 21.4 percent.

Rent rose from 338 to 412. That’s a gain of 21.9 percent.

Whereas the renter is struggling, the homeowner refinanced lower putting extra money in his pocket every month.

Home owners also benefitted from rising wages, rising value of their home and a stable, not rising mortgage payment.

Winners and Losers

  • The homeowners are generally doing OK. The home ownership rate is 65.7 percent.

  • The 34.3 percent who rent are generally not doing OK.

The study did not break things down by home owners vs renters, but I suspect most of the use is by renters.

According to the latest CPI report, rent was up at least 0.4 percent for the 29th straight month. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.

CPI data from the BLS, chart by Mish

Whereas home owners have a fixed payment, likely refinanced lower than their initial mortgage, renters faces huge increases, not every month, but once a year, big bang.

For discussion please see Another Hotter Than Expected CPI Led by Shelter, Up Another 0.6 Percent

The stress is easy to spot by demographics.

Credit Card and Auto Delinquencies Soar

Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.

Record High Credit Card Debt

Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.

For nearly all age groups, serious delinquencies are the highest since 2011 at best.

Auto Loan Delinquencies

Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.

Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.

For further discussion please see Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

The above chart is from the Apartment List’s 2023 Millennial Homeownership Report

Those struggling with rent are more likely to Millennials and Zoomers than Generation X, Baby Boomers, or members of the Silent Generation.

The same age groups struggling with credit card and auto delinquencies.

On Average Everything is Great

Average it up as Fed and all the clueless economic and political writers do, and things look great.

This is why we have seen countless stories attempting to explain why people should be happy.

Krugman Blames Partisanship

OK, there is a fair amount of partisanship in the polls.

However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.

In addition to Biden’s Age and Senility, this allegedly booming economy left behind the renters and everyone under the age of 40 struggling to make ends meet.

Powell Pleads Patience

In Jerome Powell’s Interview with 60 Minutes, the Fed Chairman Tells 60 Minutes US Fiscal Path is Unsustainable

Powell: When high inflation really threatens to become persistent, we use our tools to bring down inflation. It’s very important for that young couple — and particularly for younger couples starting out who may not have great financial means, that we succeed in this effort.

60 Minutes: You’re asking the American people for patience?

Powell: Yes. And I think people have been patient and have been through a pretty difficult time. And I think now we’re coming through that time and starting to feel a little bit better about things.

Powell, Krugman, and most of the economic writers, even at the Wall Street Journal have not managed to figure out over a third of the nation is struggling.

Many Are Addicted to “Buy Now, Pay Later” Plans

Buy Now Pay Later, BNPL, plans are increasingly popular. It’s another sign of consumer credit stress.

For discussion, please see Many Are Addicted to “Buy Now, Pay Later” Plans, It’s a Big Trap

The study did not break things down by home owners vs renters, but I strongly suspect most of the BNPL use is by renters.

What About Jobs?

Jobs Soar but Full Time Employment Is Barely Changed Since May 2022

Nonfarm payrolls and employment levels from the BLS, chart by Mish.

But hey, that’s OK because on average, the economy is great. Or do we really mean, on average the stock market is great, and the average homeowner is fine?

Hello Mr. Powell

There are two economies (the homeowners/asset holders and everyone else). However, there is only one interest rate. Patience please says Powell.

Lowering rates risks risks fueling the housing bubble and the most expensive stock market in history.

Hello Mr. Powell, it’s your move.

Tyler Durden Wed, 02/21/2024 - 07:20

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Dozens Of Major Companies Say 2024 Will Be The Year Of Cost Cutting

Dozens Of Major Companies Say 2024 Will Be The Year Of Cost Cutting

We already know that the Biden administration and the BLS are ignoring…

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Dozens Of Major Companies Say 2024 Will Be The Year Of Cost Cutting

We already know that the Biden administration and the BLS are ignoring the massive layoffs happening across corporate America in favor of pushing some asinine narrative that 'Bidenomics', whatever that even means, is somehow creating jobs other than 2nd and 3rd jobs for senior citizens driving Uber when they should be retired. 

Now, it's becoming clear that 2024 could be the year when corporations continue 'cost cutting', which could mean a number of strategies, almost all of which result in less employees and less pay instead of more. 

Executives from various industries, including toy, cosmetics, and technology sectors, are cutting costs and jobs, even in profitable companies such as Mattel, PayPal, Cisco, Nike, Estée Lauder, and Levi Strauss, CNBC wrote this week.

Macy's plans to shut five stores and cut over 2,300 jobs, while airlines like JetBlue and Spirit offer buyouts, and United reduces in-flight services. This trend is driven by consumer caution and investor pressure for companies to adapt to changing demand and higher expenses, the report says.

Significant labor contracts in sectors like airlines and UPS have raised costs, challenging businesses accustomed to passing these on to consumers. Remember those celebrations people were having about UPS drivers winning their new contracts just months ago? UPS is already laying off drivers as a result.

Walmart is expanding its store network, contrasting with the broader cost-cutting movement. Major banks have already reduced their workforce significantly, anticipating economic shifts. U.S. companies announced significant job cuts in January, indicating a focus on profit optimization amid steady earnings reports without relying on substantial price or sales increases.

A full list of major companies that have laid off workers or implemented strategies to cut costs include:

  • Mattel
  • PayPal
  • Cisco
  • Nike
  • Estée Lauder
  • Levi Strauss
  • Macy’s
  • JetBlue Airways
  • Spirit Airlines
  • United Airlines
  • UPS
  • Meta (parent of Facebook and Instagram)
  • Amazon
  • Alphabet (parent of Google)
  • Microsoft
  • Warner Bros. Discovery
  • Disney
  • Paramount Global
  • Comcast (parent company of NBCUniversal)
  • Delta Air Lines
  • General Motors
  • Ford Motor
  • Stellantis
  • Chipotle
  • Wells Fargo
  • Goldman Sachs
  • Walmart
  • Target
  • Home Depot

Meta's restructuring in 2023 set a precedent for tech giants like Amazon, Alphabet, Microsoft, and Cisco to reduce their workforces. But the trend extends beyond tech, with UPS cutting 12,000 jobs and others in retail and entertainment also announcing layoffs.

Significant cost savings have been announced by major corporations, including Warner Bros. Discovery and Disney, with the latter aiming for $7.5 billion in savings.

Paramount Global and NBCUniversal have also trimmed their staffs. Cost-cutting measures have reached various sectors, including airlines adjusting services and deferring expenses, and automakers scaling back investments due to challenges in demand and EV adoption.

“You’re seeing a rebalancing happening in the labor markets, in the capital markets. And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth, said Gregory Daco, chief economist for EY.

He continued, telling CNBC: “You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders. The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates.”

Even Chipotle is experimenting with robots to boost efficiency. These adjustments reflect a broader recalibration after the pandemic's disruptions, with companies aiming for a sustainable balance in a potentially slower economic growth environment.

Tyler Durden Wed, 02/21/2024 - 05:45

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Walmart Hits Record High After Earnings Beat, Despite Soft Guidance, Warning About “Choiceful” Consumers Spending Less

Walmart Hits Record High After Earnings Beat, Despite Soft Guidance, Warning About "Choiceful" Consumers Spending Less

Walmart shares hit…

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Walmart Hits Record High After Earnings Beat, Despite Soft Guidance, Warning About "Choiceful" Consumers Spending Less

Walmart shares hit a new all-time high after the largest bricks and mortar retailer reported earnings that beat expectations despite providing guidance that was marginally softer, as choosy shoppers nevertheless kept buying in its stores.

Here is what the company report for the final quarter of 2023:

  • Adjusted EPS $1.80 (excluding impact, net of tax, from a net gain of $0.23 on equity and other investments) vs. $1.71 y/y, beating estimate of $1.65
  • Revenue $173.39 billion, +5.7% y/y, beating estimate $170.66 billion
    • Total US comparable sales ex-gas +3.9%, estimate +3.2%
    • Walmart-only US stores comparable sales ex-gas +4%, estimate +3.12%
    • Sam's Club US comparable sales ex-gas +3.1%, estimate +2.99%
  • Change in US E-Commerce sales +17%, beating estimate +15.5%
  • Adjusted operating income $7.25 billion, beating estimate $6.79 billion

Of the metrics reported, however, the most important one is that Walmart’s same-store sales (ex fuel), rose 4% YoY for US stores (of which net sales was 3.% and eCommerce added 17%). Wall Street was expecting 3.1% so the number was clearly a beat and was driven by "strength in grocery, health and wellness, offset by softness in general merchandise", and was the result of higher transactions (+4.3%) offsetting average ticket prices, which dropped 0.3% YoY. Still, the number is a far cry from the 8.3% comp sales a year ago.

In keeping with the noted softness in general merchandise, the world’s largest retailer delivered softer guidance for the current fiscal year, as it expects consumers to be selective in their spending:

  • For full-year 2025, WMT sees
    • Net sales +3% to +4%, slower than growth from the prior year, and adjusted EPS $6.70 to $7.12, slightly disappointing vs the median consensus estimate of $7.09
    • Capital expenditures approximately 3.0% to 3.5% of net sales
  • For Q1, 2025, WMT sees sees adjusted EPS $1.48 to $1.56.

Discussing the quarter, CEO Doug McMillan said that "we crossed $100 billion in eCommerce sales and drove share gains as our customer experience metrics improved, evenduring our highest volume days leading up to the holidays"

Commenting on customer "selectivity", CFO John Rainey said that “they are being choiceful" as consumers continue to spend less per trip but have been shopping frequently, adding that the company expects some resilience to continue for the rest of the year.

There was more good news: Walmart is gaining share in nearly every category, according to Rainey, with e-commerce among the factors driving growth as the company trims losses associated with handling online orders. Furthermore, while deflation is still a possibility, the company expects it to be less likely based on what it observed during the latest quarter.

That said, while grabbing more spending with low-priced groceries and other basics, Walmart has been cautious in recent months about the health of the consumer amid persistent inflation and higher interest rates. As noted above, US consumers have been buying cheaper products and seeking value, as they pull back from discretionary products like general merchandise. That has resulted in softer sales for some retailers, including Target Corp. and Home Depot Inc. Other big-box retailers are set to report their quarterly earnings in the coming weeks.

As Bloomberg notes, the recent moderation in inflation is another challenge for Walmart and other retail operators that have passed down price increases to consumers over the past few years. This has contributed to higher dollar sales for companies, followed by an uptick in revenue during the pandemic when people bought more groceries and home goods. Such increases are slowing overall, though inflation remains stubborn in some areas like groceries and shelter.

Similar to all of its major competitors, Walmart has been beefing up automation in warehouses and stores in recent years, while remodeling locations to make them more modern. Pickup and delivery businesses continue to expand, driving share gains among upper-income households and fueling growth of the Walmart+ membership program.

Separately, Walmart said it agreed to buy smart-TV maker Vizio Holding Corp. for about $2.3 billion. The deal would accelerate the retailer’s advertising business, called Walmart Connect, and help Walmart and its advertisers engage more with customers. Walmart has been expanding Walmart Connect and other nonretail businesses that have faster growth and better margins. The deal announcement confirmed a Wall Street Journal report from last week. Vizio shares soared 15% in Tuesday premarket trading.

As for WMT, the Bentonville, after the stock gained 16% over the past year, it jumped another 5.7% on Tuesday rising to a new all time high as investors were clearly satisfied with what they saw.

Full investor presentation below (pdf link)

Tyler Durden Tue, 02/20/2024 - 10:17

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