7 February 2023
US large-cap S&P 500 closed 0.61% DOWN 🔻 Tech-heavy Nasdaq Composite closed 1% DOWN 🔻 Pan European STOXX Europe 600 closed 0.78% DOWN 🔻 HK’s Hang Seng Index closed 2.02% DOWN 🔻🔻Japan’s Nikkei 225 closed 0.67% UP ▲
Bard-a-Bing Bada Boom
📊 In the Markets
Record Crypto hacking in 2022More firing… but tech unemployment’s still just 1.5%In the Beginning (of the end of Genesis) there was 3AC and FTX
📖 MoneyFitt Explains
🎓 Fixed (pegged) Exchange Rates
Bard-a-Bing Bada Boom
Clearly forced into accelerating the rollout of its own artificial intelligence chatbot by ChatGPT’s soaring popularity since its launch in November last year, Google on Monday announced its own version, called Bard. (It’s been reported that CEO Sundar Pichai internally declared “Code Red.”)
ChatGPT is run by OpenAI, which is heavily backed by Microsoft. The tech giant is introducing OpenAI technology to its suite of products, including its underachieving Bing search engine. (See our note from last week on the Innovator’s Dilemma here, in which we look at the business conundrum Google faces in dealing with the threat from ChatGPT given its hugely profitable advertising business model built around search.)
Bard is powered by the Google’s large language model LaMDA, or Language Model for Dialogue Applications and will be used by a group of “trusted testers” before being rolled out to the wider public in the coming weeks. Google has always denied the claim that LaMDA was “sentient“… and last year fired the senior software engineer who said it was.
Without actually saying, “honestly, it’s really a lot like ChatGPT but better,” Pichai offered “explaining new discoveries from NASA’s James Webb Space Telescope to a 9-year-old” as an example of using Bard. Still, pretty much everyone already knows what to expect.
Besides cannibalisation effects, among the constraints, Google faces as an incumbent is a much higher bar for “quality, safety and groundedness in real-world information” and its need to move “more conservatively than a small startup.”
Microsoft, meanwhile, said it planned its own AI reveal for Tuesday. Satya Nadella of Microsoft may be channelling an earlier mobster than Tony Soprano in taking the game to Google:
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📊 In the Markets
Hong Kong stocks extended losses on Monday over geopolitical tensions regarding the suspected Chinese spy balloon that was shot down over the US, threatening the embryonic rapprochement traders had been hoping for. The benchmark Hang Seng Index slumped by 2%, with The Hang Seng Tech Index down 3.7%, led by Meituan and Xiaomi, both down 5% with giants Tencent and Alibaba both off over 2% too. Last week, mainland investors sold HK$17.5 billion worth of shares via the southbound Connect trading link, the most since August 2021.
The Hong Kong Stock Connect Scheme – a mini-explainer
The Stock Connect is a mutual market access program that allows investors in Mainland China to trade stocks listed on the Hong Kong Stock Exchange (HKSE), and vice versa, with the goal of promoting closer economic and financial ties. Investors in Mainland China can trade “Southbound” in qualifying stocks on the HKSE through their brokers, using the same trading platform and rules as HK domestic investors. Similarly, investors in Hong Kong can trade stocks “Northbound” the same way.Volumes in each direction are limited by daily quotas set by the China Securities Regulatory Commission (CSRC)
Meanwhile, a plunge in the Hong Kong interbank offered rate (HIBOR) to 2.47% from a peak of 5.08% last December compared to the equivalent USD rate of 4.57% has sparked a revival of the carry trade in HK (in which traders borrow in the lower interest rate currency to buy the higher rate currency). Questions over the HK$ Peg, the Fixed Exchange Rate regime 🎓, will of course be revived as well (see MFM from last Nov.)
Record Crypto hacking in 2022
Even with the cryptocurrency market hitting full-on winter in 2022 with massive selling on the global drop in risk appetite and multiple high-profile crypto firms collapsing, last year at least saw one record broken: hackers stole US$3.8 billion, the worst on record for cryptocurrency heists, according to a Chainalysis report
Almost half of the hacking was from North Korea-linked hackers such as Lazarus Group, a cybercriminal syndicate, stealing an estimated US$1.7 billion worth. “It isn’t a stretch to say that cryptocurrency hacking is a sizable chunk of the nation’s economy,” the report said.
Hacking activity saw “huge spikes” in March and October, with October the biggest single month ever for cryptocurrency hacking, with US$775.7 million stolen in 32 separate attacks.
The value of crypto transactions related to illicit activity also rose for the second year running in 2022, Chainalysis said in an earlier report, hitting a record US$20 billion with transactions involving companies targeted by US sanctions skyrocketing. (Wallets are tagged as “illicit” if they are part of a sanctioned entity.)
More firing… but tech unemployment’s still just 1.5%
Now it’s Dell’s turn to slash jobs. The direct-to-consumer PC and server company led a much earlier phase of tech disruption, mainly in hardware and services, and was the subject of endless, complex corporate intricacies involving delisting, tracking shares, relisting and M&A (VMWare, EMC) in the last decade which somehow resulted in Michael Dell still being among the richest people on the planet (clocking in at #24 with US$52 billion, according to Forbes, two thirds more than the market capitalisation of the company bearing his name.)
Anyway, struggling with sales for PCs and tablets set for another down year in 2023 with a fall of 2.6%, according to research firm IDC, and bracing for a potential recession, Dell is cutting about 6,650 jobs, or 5% of its global workforce, joining rival HP (cutting 6,000) and tech companies from Alphabet and Meta to Snap and Salesforce. But as various commentators have pointed out, the lost tech jobs pale in comparison with the blowout pandemic hiring those same firms did into their “families” (“I’m feeling very bad for the HR“.)
More interestingly, with US unemployment at a 53-year low at 3.4% in January (which sparked terrified such selling from the big swingers on Wall Street the last couple of days,) tech unemployment has dropped from 1.8% to just 1.5%, continuing its multiyear trend of being well well below the national average. This tells us that despite a rash of tech-sector layoffs, demand for tech workers continues to outpace supply. Many laid-off workers were re-hired and absorbed back into the labour market, according to non-profit industry body CompTIA.
In the Beginning (of the end of Genesis) there was 3AC and FTX
Genesis (which filed for bankruptcy protection in January after an endless slow death after mortal blows from 3AC and FTX) and its parent company, Barry Silbert’s Digital Currency Group, have reached an initial agreement on a restructuring plan with a group of the firm’s main creditors, according to a report from CoinDesk (parent: DCG, and also the blockchain news outlet whose investigation triggered the collapse of FTX.)
This will involve winding down the Genesis loan book, selling off bankrupt Genesis entities, and refinancing outstanding loans where DCG borrowed US$500 million in cash and US$100 million worth of Bitcoin from Genesis.
The agreement will be solicited to other creditors, with claims of around US$2.4 billion, including customers of the Gemini Earn lending product.
📖 MoneyFitt Explains
🎓 Fixed (Pegged) Exchange Rates
A fixed exchange rate is a rate that is set and maintained by a central bank or other authority, and is not allowed to fluctuate freely.The central bank or other authority intervenes in the market to buy or sell currency, in order to keep the exchange rate at the desired level.A country with a fixed exchange rate typically also has a peg to another currency, a basket of currencies, or a commodity.Fixed exchange rates were once common, but they are now less so, as most countries have switched to floating exchange rates.
A fixed exchange rate system can help to promote stability and certainty in the economy by eliminating fluctuations in currency values. A fixed exchange rate system can also help to promote trade and investment by providing more stability and predictability for businesses and investors. A fixed exchange rate system can also help to reduce inflation by limiting the amount of money that can be brought into the economy.
A fixed exchange rate system may lead to a loss of competitiveness in the pegged currency, as the exchange rate cannot adjust to changes in economic conditions. A fixed exchange rate system may lead to a build-up of imbalances in the economy, as the pegged exchange rate may not reflect the true underlying economic conditions.
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