Small lenders may pose unexpected systemic risk as recession fears grow
By Chris Dannen
Apr 16, 2019
The chances of recession appear to be growing, according to economists polled by Reuters last month: 25 percent predicted a US recession over the next 12 months. Dovish comments from the Fed have increased the fears that there will be no rate hikes to stall inflation, which increased 55% between 1996 and 2016, according to AEI.
Fears were quelled somewhat last Friday, when JPMorgan Chase posted better than expected quartery earnings, which it attributed to "solid U.S. economic growth." But it may be smaller lenders who post a threat in aggregate, many of whom claim to have their own proprietary risk metrics.
"A recession could bring escalating credit losses, liquidity crunch and higher funding costs, testing business models in a relatively nascent industry. Peer-to-peer and other digital lenders sprouted up largely after the Great Recession of 2008. Unlike banks, which tend to have lower-cost and more stable deposits, online lenders rely on market funding that can be harder to come by in times of stress. Their underwriting methods also often include analysis of non-traditional data, such as education level of borrowers. While platforms see that as a strength, it has yet to be tested in times of crisis."
"Companies are already using blockchain to track fresh-caught tuna from fishing hooks in the South Pacific to grocery shelves, to speed up insurance claims and to manage medical records. Total corporate and government spending on blockchain should hit $2.9 billion in 2019, an increase of 89% over the previous year, and reach $12.4 billion by 2022, according to the International Data Corp. When PwC surveyed 600 'blockchain-savvy' execs last year, 84% said their companies are involved with blockchain."
"With assistance from industry consultants and other experts, Forbes' team of reporters and editors identified more than 100 big companies actively exploring blockchain through industry consortiums and other proprietary projects. Our new list features 50—with minimum revenues or valuations of $1 billion, and U.S. operations— that are currently leading the way in adapting decentralized ledgers to their operating needs. From eliminating paperwork, to monitoring hamburger patties and speeding up insurance payments, the anti-establishment software is being welcomed in the executive suite."
"Today, the centralization of platforms and service providers makes enforcement surprisingly easy. It’s just a matter of picking which layer of the tech stack to hold accountable. If lawmakers want to prevent the dissemination of certain content on social media, they can cover most of the U.S. population with a phone call to Facebook and Twitter. If governments want more comprehensive coverage, they can hit up the handful of cloud providers that serve up over half the internet. Problematic websites effectively vanish if deleted from Google, which handles 90 percent of search activity, and apps can be rendered unfindable if Apple and Google simply remove them from their app stores."
"How, realistically, can this state of affairs be amended to suit Bitcoin’s nature? Despite a refrain of 'not your keys, not your coins,' the Bitcoin banks are here to stay: the convenience tradeoff is simply too compelling. What if we acknowledge that they will persist as long as they perform a useful service, and focus instead of bringing Bitcoin’s assurances to them? Ten years on, Bitcoin has entered its adolescence. Perhaps by seeing it for what it is — a peculiar beast, suitable for a narrow set of things — it can become more comfortable in its own skin. By adding institutions to the set of entities accountable to Bitcoin’s innate transparency, we can radically improve the state of affairs in Bitcoin’s depository industry today."
"A new alternate reality game called Satoshi’s Treasure has hidden the keys to $1 million worth of bitcoin across the globe, forcing players to collaborate and improvise. 'A lot of people have joked we’re doing the bitcoin version of Ready Player One,' Primitive Ventures co-founder Eric Meltzer, the game’s co-creator, told CoinDesk. 'The game is going to have a leaderboard to show which teams have the most keys.' Revealed exclusively to CoinDesk, the keys to this bitcoin wallet were divided into 1,000 fragments, requiring a minimum of 400 key fragments to move the funds. Players can collect and unravel clues any way they want, even selling leads if they choose."
"The French parliament last week approved a financial sector law that included rules aimed at tempting cryptocurrency issuers and traders to set up in France by giving them some official recognition, while ensuring the country can tax their profits. 'I will propose to my European partners that we set up a single regulatory framework on crypto-assets inspired by the French experience,' Le Maire said in Paris at an event on blockchain technology. 'Our model is the right one.' The French government’s new cryptocurrency bill - the first of its kind adopted by a major nation - will allow firms that want to issue new cryptocurrencies or trade existing ones to apply for a certification."
"That is why I am excited about the combination of crypto networks with open internet protocols. Decentralized networks with decentralized value transfer provide the kindling for an emerging economy in the digital world where value creation and value capture is non-discriminatory. There may be a messy transition as those who optimized for the present adapt to the future. But this future will unlock higher potential, and that to me is exciting."
"Crypto exchange Binance has announced it will delist Bitcoin SV on April 22 at 10:00 AM UTC following the review of digital assets available on the platform. Withdrawal of the tokens will be possible until that time. Afterwards, all trading will cease. According to the blog post, a coin or token is no longer delisted simply for failing broadly to meet its standards. Binance takes into consideration variables, such as level and quality of development activity, network / smart contract stability, or evidence of unethical/fraudulent conduct."
"If you are going to have robots sitting around analyzing the tone and nuance of an earnings call, then there will be opportunities for the humans, since you’ll need them to stall and qualify on earnings calls. Also in the near term you will probably need humans to ask the questions. In the medium term, the next generation of NuanceBots will dial in to earnings calls and ask algorithmically generated questions designed to elicit the maximally informative amounts of stalling. I guess in the long term, a specialized NuanceBot will also be tasked with answering the questions and the earnings calls will become perfectly uninformative again. But for now, the humans are providing the alpha; it is just being filtered through a robot analysis. Honestly it is a little wild that an analysis of sentiment on earnings calls can produce a 13 percent excess return."
"Last year, the company’s EUV-based 7-nanometer node entered risk production. Today, Samsung is reporting that 7-nanometer has entered mass production. ... In addition to the 5-nanometer node, Samsung mentioned a new 6-nanometer node. At one time Samsung had a 6LPE on their roadmap but has long been removed. In fact, no 6 nm was mentioned at the Samsung Foundry Forums late last year either. Not much is known about this node other than they have had a custom tape-out on it. It’s worth noting that TSMC has also announced a new 6-nanometer node today which offers an 18% logic density improvement over their 7 nm node."