How Apple & Google Transformed into a Systemic Risk to the US Stock Market

According to Credit Suisse strategists, the “reversal of fortunes” seen by tech behemoths Apple and Google-parent Alphabet are dragging down the performance of the overall US stock market. The S&P 500 forecast has been “skewed” by companies suddenly transitioning from high growth forecasts to much more modest outlooks.

This Bad Apple Could Roil the S&P 500

An “unusually high” number of big US companies have revised previously-bullish earnings forecasts downwards. These include Alphabet and Apple, as well as Exxon Mobile, GM, Micron, Chevron, and ConocoPhillips. Oil and technology companies are also pushing US stock market growth downward.

The S&P 500, according to Refinitiv, will now only grow by 0.3% in the first quarter of 2019 compared to 23% in all four quarters of 2018. Overall S&P 500 growth for 2019 is now expected to be 4.5%.

Apple, Alphabet, and Others See a Reversal of Fortune in 2019 Impacting the US Stock Market | Source: Credit Suisse

There have only been three other times since 1990 that so many companies have seen such a reversal of growth. Per the chart above, 71 quarters have seen two or fewer top 20 growth contributors move to the worst-performing segment. Thirty-five quarters have seen less than a handful of companies reverse so rapidly, and just three have seen more than seven do so, including the first quarter of 2019.

Cited in CNBC, Patrick Palfrey, a US equities strategist at Credit Suisse, says:

“For the typical company, are they seeing a problem? The answer is not really. You can get a few bad apples distort the underlying trend.”

US Stock Market at Mercy of Mega Companies and Tax Cuts

Palfrey believes other companies on the S&P 500 are growing at between 5% and 6%, adding:

“There is this massive skew for these mega cap companies that had really great years, over the past several years and in 2019, the trends are uninspiring for them.”

Credit Suisse also points to the importance of Trump’s recent tax cuts in skewing stock market growth. The cuts added 7% to 8% to earnings growth in 2018 but are now acting as a headwind, dropping profit growth by 1%. Benefits included last year, like deductions for capital expenditures, are no longer available.

Breaking Down Growth Struggles at Apple and Google

Apple reported profit growth of over 40% in the third-quarter of 2018 and is now expected to see a 12.3% decline. Alphabet’s profits grew 23.9% in the third-quarter of 2018 but are likely to fall 21% in the first quarter of 2019.

S&P 500 (Blue) Apple (Red) Alphabet (Orange) Performance Over the Last Year Source: TradingView

The two have moved from being at the top of the S&P 500 for growth to the bottom 20%. They are joined by Exxon Mobil – dropping from 51% growth to a 14.5% decline – and Chevron, dropping from 148% growth to a 21% decline for the same period.

Apple’s ability to swing the US stock market has never been in doubt. Its shocking sales forecast revision in early January dropped its own share price 10% and sent the Dow Jones Industrial Average plummeting by a whopping 500 points. Apple and Microsoft are still battling to be America’s largest company by market value and are closely followed by Alphabet and Amazon.

These Silicon Valley giants helped propel the US stock market to record highs in 2018, but as the economy moves deeper into 2019, they may prove to be its greatest foil.

Author: Melanie Kramer
Image Credit: Featured Image from AP Photo / dapd, Martin Oeser

France nears implementation of digital tax

France is working on a “GAFA” tax with a maximum rate of five percent, Finance Minister Bruno Le Maire says

France will push ahead with its own tax on large internet and technology companies by introducing a bill that would be retroactive to January 1, its finance minister said Sunday.

The move comes as the European Union tries to finalise an EU-wide levy.

“We are working on a tax that would affect internet service companies with of more than 750 million euros ($850 million) and 25 million euros in France,” Economy and Finance Minister Bruno Le Maire told the weekly newspaper Journal du Dimanche.

“If these two criteria are not met, they (the taxes) will not be imposed,” he noted.

A draft bill would be presented to the government by the end of February “and rapidly put before parliament for a vote,” Le Maire said.

“The tax would apply as of January 1, 2019 and its rate would vary according to the level of sales, with a maximum of five percent,” a level that would represent “around 500 million euros” annually for France, he added.

Paris has been driving hard for a so-called “GAFA tax”—named after Google, Apple, Facebook and Amazon—to ensure the global internet giants pay a fair share of taxes on their huge business operations in Europe.

Le Maire called the question “a major issue in the 21st century.”

EU tax revenue losses and internet giants
Tax revenue losses in selected EU member states from Google and Facebook, as France goes alone on new digital tax.

He said that a Europe-wide agreement was also possible by late March, in light of a compromise reached in December with Germany, which has been less enthusiastic about such a levy.

A spokesman for Facebook France told AFP: “We will continue to respect our fiscal obligations as defined by French and European legislation.”

Google France declined to comment on Le Maire’s remarks.

Author: PHYS ORG
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Amazon Developing New Game Streaming Service to Compete with Microsoft and Google

Not to be outdone by its FAANG and other technology rivals, it appears Amazon has been secretly developing a game streaming service. It looks set to compete with Microsoft and Google with instant video games housed on powerful servers.

Cloud-based gaming, which will negate the need for downloads or game cards, could be one of the next major advances for the gaming industry.

Google and Microsoft Already in the Game

Google’s Project Steam cloud gaming service is currently in beta testing with no news of a full, official launch. For Google, it will be as easy as opening a Chrome tab to play your favorite game.

Microsoft unveiled its Project xCloud in October 2018. It will be available for public testing sometime in 2019 and run on console and PC.

Amazon is reportedly already in talks with publishers but won’t be launching its own service until 2020. The news comes from sources simply named as “two briefed on the plans” who revealed the development to The Information.

There has been no formal announcement from Amazon, as yet. Other reports found that Amazon is hiring engineers in Seattle and California to work on “cloud games.” With one job description revealing the opportunity involves shaping the foundation of an “unannounced AAA games business.”

An Industry Worth $20.28 Billion

Amazon already has a powerful cloud server infrastructure in Amazon Web Services.  So, an Amazon game streaming service makes a sensible addition to its wide-reaching technology portfolio. It also owns the video streaming platform Twitch, massively popular with gamers.

Of course, Amazon’s Twitch already competes with Google’s YouTube and now the rivalry between the leading technology players could well be hotting up. By 2020 the videogame industry in the U.S. will be worth an estimated $20.28 billion.

With today’s trading closed on the Nasdaq, it’s a wait and see if Amazon’s share price will be affected positively by the news.

FAANG and Microsoft Share Performance (Facebook: Blue, Amazon: Red, Apple: Orange, Netflix: Yellow, Google: Green, Microsoft: Bright Green) Last Six Months. Source: TradingView

After a poor and volatile last quarter 2018 for technology stocks there appears to be some breakouts in the FAANG and Microsoft share price and company value battle. Apple stock plummeted over sales forecast revisions and then it revealed production cuts. However, Apple’s share price has begun to recover. Netflix has had a 2019-long winning streak so far.

We might not hear from Amazon’s Jeff Bezos on the development just yet. The Bezos divorce hit the press this week and could result in the world’s largest divorce settlement yet.

Author: Melanie Kramer
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A new type of quantum computer has smashed every record

Quantum computing is progressing in leaps and bounds

Why it matters: As the quantum future looms closer, hundreds if not thousands of companies and research groups race towards constructing the first quantum computer that can outperform traditional supercomputers. However, the competition is not just between organizations, it’s also between competing methods of quantum computing.
IonQ was founded on a gamble that ‘trapped ion quantum’ computing could outperform the silicon-based quantum computers that Google and others are building. As of right now, it does. IonQ has constructed a quantum computer that can perform calculations on a 79-qubit array, beating the previous king Google’s efforts by 7 qubits.

Their error rates are also the best in the business, with their single-qubit error rate at 99.97% while the nearest competitors are around the 99.5 mark, and a two-qubit error rate of 99.3% when most competitors are beneath 95%. But how does it compare to regular computers?

According to IonQ, in the kinds of workloads that quantum computers are being built for, it’s already overtaking them. The Bernstein-Vazirani Algorithm, a benchmark IonQ is hoping will take off, tests a computer’s ability to determine a single encoded number (called an oracle) when the computer can only ask a single yes/no question.

When the algorithm is run for every number between 1 and 1023, a conventional computer gets a 0.2% success rate. IonQ’s quantum computer gets a 79% success rate.

“After two years of work, our against-the-grain bet is paying off,” IonQ’s CEO, Christopher Monroe, believes trapped ion quantum computing is the best bet. “The IonQ System is robust and industrial strength. Even at this early stage, the results show the ion trap design has all the advantages we expected and more.”

All quantum computers “isolate and manipulate quantum systems to create quantum versions of computer bits, called qubits” reads IonQ’s website. Quantum computers replace the traditional 0 or 1 logic gates processors rely on and replace them with 0 and 1 quantum gates, which are simultaneously 0 and 1 during calculations but output 0 or 1. This funky math has the potential to reinvent computing in fields like chemistry, medicine, energy, logistics and future fields like AI.

The specific ‘trapped ion technology’ the IonQ’s quantum computer relies on replaces the supercooled silicon that Google, IBM and Rigetti use with ytterbium, a silvery rare earth metal. The ionized ytterbium is suspended in an oscillating electromagnetic field, where it’s manipulated by engineers who program the lasers that input, store and retrieve information.

While ‘trapped ion’ quantum computing still has some hurdles to overcome, namely slow operation times and massive sizes, the accuracy and scalability of the technology means that IonQ will be letting companies use its computer sometime next year. It’s also got a peer-reviewed journal article on the developments that will be published in the coming months.

Quantum supremacy, the moment that the best quantum computer is better than the best traditional computer, is approaching rapidly. While even IonQ will admit that they don’t know what the “killer app of quantum computers” is yet, it doesn’t seem like it’ll be too long before we’re all taking it for granted.

Author: Isaiah Mayersen
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Ethereum’s Technology “Underrated”: ex-Google CEO

The former CEO of tech giant Google, billionaire Eric Schmidt, said during a private event hosted by venture capital firm Village Global in September that Ethereum, “in its technical use” is “underrated.”

Details from the private event have remained largely unknown until a video recording from the event was published to YouTube this week by Village Global.

In a fireside chat with Tyler Cowen, a well-known author and economist, Schmidt was asked about his opinion on a variety of subjects ranging from Antarctica, to human life expectancy, and blockchain technology.

When asked whether he thought “blockchain” was overrated or underrated, the engineer and ex-Googler explained that he believes it is overrated “in the public format.” From a technical perspective, however, he said that he believes it is “underrated.”
Cowen followed up by asking Schmidt what problems blockchain technology might solve, to which Schmidt replied that “blockchain is a great platform for bitcoin and other currencies, and it’s a great platform for private banking transactions where people don’t trust each other.”

He followed up by praising the potential of the Ethereum platform more specifically:
“I think the most interesting stuff that’s going on are the beginning of execution on top of blockchain, the most obvious example being the capability of Ethereum. And if Ethereum can manage to figure out a way to do global synchronization of that activity, that’s a pretty powerful platform. That’s a really new invention.”

In July, Speaking at a blockchain conference in Morocco, Google co-founder Sergey Brin said that Google missed its chance to be a leader in blockchain, while he has been mining Ethereum and making “a few pennies and dollars since”.
Interestingly, the cryptoverse also learned something new about the current CEO of Google, Sundar Pichai, earlier this week when it was revealed that Pichai’s 11-year-old son is mining ether on the family’s home computer.

Moreover, Pichai had to explain to his son “how paper money actually works,” while adding that “I realized he understood Ethereum better than how paper money works.”

Author: Fredrik Vold
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12 Days of…Nothing – What’s Happening to the Market?

Last week, we reported that bitcoin prices are now nearly as stable as Apple stocks, however, it appears that we were just scratching the surface for how stable these prices can really become. It may be a sign that bitcoin is nearing a bottom, according to experts. However, no one knows when the next major move will happen.

Compared to last Monday, the bitcoin price is practically unchanged, giving developers the calm they need to put their heads down and work, while traders are becoming increasingly restless.

Over the past 12 days, bitcoin prices have been so stable that technical analysts, who make trading decisions based on patterns and indicators on charts, are scratching their heads trying to figure out where the price is headed next.

In an article from CNBC this weekend, bitcoin’s record-low volatility is presented as surprising news given the sharp sell-off that occurred in the global stock market last week. “As U.S. stock markets went haywire this week, the major cryptocurrency known for giving investors whiplash was surprisingly calm,” according to the report.

However, the network’s go-to guest for all-things crypto, CEO of crypto investment firm BKCM Brian Kelly, reminded that crypto remains a non-correlated asset class, saying “I don’t know of anyone saying ‘Microsoft dropped, I better sell bitcoin to cover my margin’.”
Meanwhile, others argue that low volatility is a sign that bitcoin may be nearing a bottom. As Bloomberg Intelligence analyst Mike McGlone noted, high volatility is a major factor lessening most cryptocurrency use cases for anything other than speculation. In the same report by Bloomberg, Charlie Morris, multi-asset head at Atlantic House Fund Management in London, added that “Given this bear market is now 10 months old and is getting tired, I’d be inclined to be bullish for the next major move.”

In the meantime, Google searches do not show that people’s interest in bitcoin is picking up, which might mean that the market relies on existing investors, mostly.
Looking at global search interest for the word “bitcoin,” we can see that it is now at the lowest levels seen since April 2017, when the price of bitcoin was just over USD 1,000. Related terms like “buy bitcoin” or “trade bitcoin” gives us nearly identical results.

Author: Fredrik Vold
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Google Mentions Crypto in Ad and Everyone Tries to Guess What It Means

Internet giant Google made an ad for its new service, the call screen, and promptly took a swing at crypto. Now, the community is torn between whether this mention is good or bad for the industry as a whole.

The woman in the video tells the man that the electric company is calling, “they say that your bill is super high.” He replies, “Right, well, cryptocurrency mining takes a lot of energy.” And she follows up with, “Cryptocurrency – that money’s not real.” After the man replies that “money isn’t real”, the woman asks whether he’s going to “live that lie”.

One part of the community is firmly in the “all publicity is good publicity” ring. The main takeaway for them is that this ad shows cryptocurrency cannot be ignored anymore. In a way, it shows that Google recognizes that most of their viewers will recognize the terms “cryptocurrency mining” without additional explanation, and tries to be relatable with the debate of whether cryptocurrency is real money or not.

Perhaps expectedly, the bigger group consists of those saying Google is opposed to crypto. Earlier this year, Google banned cryptocurrency ads in an attempt to weed out potential scams and misleading services. Now, Reddit user u/jam-hay points out, “Bitcoin was one of the most searched terms last year and Google opted to leave it out of their end of year video.” User u/Hanspanzer didn’t waste their time mincing words: “[G]oogle is now officially on the hit list.”

However, in September, Google said it has once again opened up for ads with crypto-related content in the US and Japan, after placing a ban earlier this year. Meanwhile, in July, Google co-founder Sergey Brin expressed his interest in cryptocurrencies and blockchain. Google missed its chance to be a leader in blockchain, while he has been mining Ethereum and making “a few pennies and dollars since,” he said. Also in July, the most popular browser added new cryptos to its currency converter.

However, in the current discussion over the add there is a third group: those who think the video is actually funny. u/FudgieThaWhale doesn’t understand why everything has to be such a big deal, saying, “I’m still here after finding crypto [two and a half] years back and honestly it’s the people and the toxicity that put me off more than any of the projects or companies in the space.” Meanwhile, u/Arnoud1987000 says what we all believe: “Lol wtf, they bought the dip.” Well put, u/Arnoud1987000.

Whether this mention is good or bad is hard to tell by people, but looking at the market, the prices don’t seem to have moved too much since the video was published yesterday. Bitcoin – currently the butt of jokes in the community as the “new stablecoin” thanks to its pretty stable price lately – doesn’t seem to care whether it’s real money or not. As u/Kukri4321 puts it, “Uh huh, well one of my ‘not real’ coins is worth six and a half thousand of your ‘real’ coins.”

Author: Sead Fadilpašić
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Decline in Bitcoin Searches is Positive Sign For Cryptocurrency Industry

Removing the get-rich-quick enthusiasts could help establish a more viable, long-term future for cryptocurrencies

Despite the endless cries of “decentralization” and a constant stream of articles claiming that bitcoin is going to reach a million dollars any day now, interest in cryptocurrency has slumped massively over the past couple of years.

Data taken from Google search trends indicates that searches for Bitcoin have declined by 60 percent since the beginning of 2018, reaching their lowest levels in almost two years. For Ethereum, the world’s second largest cryptocurrency after Bitcoin, the stats are similar.

People aren’t just searching less for Bitcoin; they’re also buying fewer cryptocurrency products. As Finance Magnates reported in August, Nvidia, a graphics-card producer, confirmed that sales of its cryptocurrency-dedicated graphics cards had slipped from $289 million in the first quarter of 2018, to $18 million in the second.

Trading volumes have also declined massively since reaching a peak in early January of this year. On January 7, the cryptocurrency market capitalization was equal to just over $835.51 billion. Today it’s $215.91 billion – an almost 75 percent decline.

cryptocurrency market cap

Naturally, exchanges have also reported a precipitous decline in trading volumes. Trading on Coinbase, one of the largest exchanges in the world, has shrunk by 83 percent since January of this year.

Cryptocurrency – In Free Fall or Consolidating?

There seem to be two ways of looking at this. Pessimists might say that cryptocurrencies have had their moment and are set to fade into obscurity. On the other hand, it might be better to say that, after a long, wild-west period of trading, the cryptocurrency market is coming into its own.

The huge spike in cryptocurrency trading in late 2017 and early 2018 was undoubtedly driven by people trading under the greater fool theory. They bought, thinking people would continue to buy after them, driving up the price and enabling them to sell.

Up until mid-January, that straightforward trading strategy might have worked. Since Bitcoin has been comparatively stable since then, people trading using the logic of the greater fool theory will have been less interested – or indeed totally uninterested – in trading cryptocurrencies.

In fact, though the great-rich-quick mentality lingers on, it is far less pervasive in the cryptocurrency markets than it was 12 months ago. That is a good thing. If cryptocurrency is, as its fanboys make it out to be, the currency of the future, the market for it can’t be populated almost exclusively by people who are only in it for the short-term.

A positive development, for now, would be to see an expansion of cryptocurrency payments products. If the price of cryptocurrency lowers in volatility that would be a good thing for the long run as it would enable its wider adoption. No serious business is going to accept payment in a currency that loses half its value one day, doubles the next and then declines by 25 percent the day after that.

Conversely, if the price of cryptocurrencies remains stable, that would allow businesses to start taking it as a form of payment. That would silence many of the critics who say that cryptocurrencies have no use and no real value.

For that to happen, however, the industry needs to rid itself of its get-rich-quick hustlers. Once all of those wideboys are gone, cryptocurrency might start to live up to its potential.

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Google and Goldman Sachs Invest in Blockchain Payment Startup Veem

Veem has raised $25 million from some of the biggest names in Silicon Valley and on Wall Street.

San Francisco-based startup Veem, a blockchain-powered payment service for small businesses, has reportedly raised $25 million in a funding round led by Goldman Sachs, with GV (formally Google Ventures), Kleiner Perkins and Silicon Valley Bank also participating.

According to the announcement, Veem plans to use the funding to further expand its multi-rail platform that leverages blockchain technology to ensure speed, security, and the lowest possible fees by automatically finding the best possible path for each international fund transfer. This technology is a natural progression from the SWIFT payment system.

“We’re thrilled to have Goldman Sachs lead our investment round. This funding will help us expand our footprint, increase our distribution and form new strategic partnerships,” said Marwan Forzley, CEO and Founder of Veem.

Veem notes that its customer base has exploded to over 80,000 small businesses in 96 different countries.

GV general partner Karim Faris, who led the investment in Veem, recently told Forbes that the company could be the first bitcoin startup to go public.

“We’re not a strategic investor. It’s definitely not a strategic thing. It’s an opportunity to create a stand-alone company and in the process make a financial return on a good exit or an IPO down the line,” said Faris, who also sits on Veem’s board of directors.

The latest fundraising round brings Veem’s total amount raised to $69.3 million.

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Google to Allow Regulated Crypto Exchanges to Buy Ads in U.S. and Japan

On Tuesday (25 September 2018), CNBC reported that Google, from October, will end its outright ban on all crypto-related advertising, and allow regulated crypto exchanges to buy ads on its platform in the U.S. and Japan.

On 14 March 2018, Google announced that it had updated its financial services related ads policy to disallow all crypto-related advertising; this included ads related to initial coin offerings (ICOs), crypto wallets, crypto trading advice, and even crypto programming courses. Crypto companies of any kind would not be allowed to advertise via any of Google’s ads products. This ban would go into effect in June 2018.

Back then, Google’s Director of Sustainable Ads, Scott Spencer, told CNBC:

“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution.”

What Google seemed to be doing was following in the footsteps of Facebook, which had announced its own ban on all crypto-related advertising on 30 January 2018. Ads that violated Facebook’s ads policy would be banned not only on the Facebook app, but also “in other places where Facebook sells ads, including Instagram and its ad network, Audience Network, which places ads on third-party apps.”

Google announced today’s change in policy via the Advertising Policies support section of its website in a Change Log post titled “Update to Financial products and services policy (October 2018)”:

“The Google Ads policy on Financial products and services will be updated in October 2018 to allow regulated cryptocurrency exchanges to advertise in the United States and Japan. Advertisers will need to be certified with Google for the specific country in which their ads will serve. Advertisers will be able to apply for certification once the policy launches in October. This policy will apply globally to all accounts that advertise these financial products. For more details, see About restricted financial products certification. The Financial products and services page will be updated once the policy goes into effect.”

This new policy is applicable to advertisers located anywhere, but the ads can only be run in the U.S. and Japan.

Google seems to be once again copying Facebook when it comes to crypto-related advertising. On 26 June 2018, Facebook announced that it was going to relax the ban it had introduced in January, saying that from this date, it would be allowing “ads that promote cryptocurrency and related content from pre-approved advertisers” (while continuing to “prohibit ads that promote binary options and initial coin offerings”).

Author: Siamak Masnavi
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