GOAL IS SMOOTH
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JPMorgan CEO Jamie Dimon famously called bitcoin a “fraud,” but that opinion is not shared by The Goldman Sachs Group Inc. (NYSE: GS). Goldman’s board of directors has approved a management decision to begin trading bitcoin contracts using the bank’s own money to trade with clients in a number of contracts linked to the cryptocurrency’s price.
The bank will allow clients to trade bitcoin as a non-deliverable forward where no physical exchange of the underlying asset occurs. The exchange will take place in the currency the trade is quoted in on the settlement date of the forward contract. That currency is most likely to be dollars.
Even though Goldman will not be buying or selling bitcoin, the bank has created a group to consider such market-making provided it receives regulatory approval and can come to grips with the additional risks surrounding virtual currency.
Goldman’s Rana Yared, one of the executives helping create the trading operation, said that it “resonates” with the bank when its clients say they want to hold bitcoin or bitcoin futures because they believe it is an alternative to gold as a store of value.
Another issue the bank has to deal with if it wants to trade actual bitcoin is how to hold the virtual currency while protecting it from being stolen by hackers. Yared and trader Justin Schmidt, whom the bank recently hired as its virtual currency trader, agree that current options for holding actual bitcoin do not yet meet financial industry standards.
An exact date for the start of trading has not been set but the trading operation is expected to launch in the next few weeks. The new trading desk will be open only for institutional investors.
MORTAGE RATES CLIMBING
The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 2.5% in the group’s seasonally adjusted composite index for the week ending April 27. Mortgage loan rates rose last week on all five loan types that the MBA tracks, and four again posted multiyear highs
On an unadjusted basis, the composite index decreased by 2% week over week. The seasonally adjusted purchase index was dropped 2% compared with the week ended April 20. The unadjusted purchase index decreased by 1% for the week and is now 5% higher year over year.
The MBA’s refinance index decreased by 4% week over week, and the percentage of all new applications that were seeking refinancing dipped week over week from 37.2% to 36.5%, its lowest level since September 2008.
Adjustable rate mortgage loans accounted for 6.7% of all applications, up from 6.5% in the prior week.
Mortgage loan rates have moved mostly sideways this week, according to Mortgage News Daily. Today’s announcement following the Federal Reserve’s board meeting is not expected to include a policy rate hike, but Fed watchers will be parsing the announcement for clues to the next hike. The most prevalent mortgage loan rate on a 30-year fixed-rate conforming loan fell into a range of 4.625% to 4.75% on Tuesday.
According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage rose from 4.73% to 4.80%, its highest level since September 2013. The rate for a jumbo 30-year fixed-rate mortgage jumped from 4.64% to 4.69%, also a high since September 2013. The average interest rate for a 15-year fixed-rate mortgage rose from 4.13% to 4.21%, its highest level since February 2011.
The contract interest rate for a 5/1 adjustable rate mortgage loan increased from 3.98% to 4.03%. Rates on a 30-year FHA-backed fixed-rate loan rose from 4.71% to 4.81%, the highest level since July 2011.
MAY NEWSLETTER 1
Tesla Inc. (NASDAQ: TSLA) is set to report its first-quarter financial results after the markets close on Wednesday. Thomson Reuters consensus estimates call for a net loss of $3.48 per share on $3.22 billion in revenue. In the same period of last year, the electric car giant posted a net loss of $1.33 per share on $2.7 billion in revenue.
The automaker is also undergoing a patent dispute that could prove costly.
Earlier this month, China announced a plan to remove current restrictions on foreign carmakers that require the companies to form joint ventures with Chinese automakers in order to do business in the country. Lifting the restrictions is good news for Tesla, which does not have a Chinese joint-venture partner, because the requirement on electric vehicles ends this year instead of in 2022, when restrictions on makers of gasoline- and diesel-powered vehicles will disappear.
China is the largest foreign market for Tesla, and Tesla buyers already pay a 25% import tax for the U.S.-built vehicles and face another 25% on top of that if the government goes ahead with threatened tariffs on cars imported into the country. According to a report at The Detroit News, Tesla sold nearly 15,000 vehicles in China last year, accounting for about 17% of the company’s revenue. In February, China imported 2,323 U.S.-built electric cars, 2,160 of which were Teslas.
The automaker already has faced some problems with its Model 3 production this quarter, but at last check everything on the production side seemed to be running smoothly.
Also, Jim Keller, the head of Tesla’s Autopilot semiautonomous-driving system, departed for Intel, adding some confusion to an integral part of Tesla that is already dealing with executive departures and safety questions.
Over the past 52 weeks, Tesla has underperformed the broad markets, with its stock down 7%. In just 2018 alone, the stock is down nearly 4%.
A few analysts weighed in on Tesla ahead of the earnings report:
Goldman Sachs has a Sell rating and a $195 price target.
Morgan Stanley has a Hold rating.
KeyCorp has a Hold rating.
Vertical Group has a Sell rating and an $84 price target.
RBC has a Market Perform rating with a $305 target.
Jefferies has a Hold rating with a $250 price target.
Nomura has a Buy rating with a $420 price target.
Shares of Tesla were last seen trading at $300.15, with a consensus analyst price target of $316.92 and a 52-week range of $244.59 to $389.61.24/7 Wall St.