In the Blind Spot (BBBY, Coinbase, River levels)

This edition of the Blind Spot Wrap was compiled by Dario Garcia Giner (DGG) and Izabella Kaminska (IK).

Markets, economics, finance etc:

• German supermarket prices are rising faster than those in other European countries. German food CPI was up 14.8 per cent YoY in July, the highest level since the record started.
• US jobless claims rose to their highest levels since November 2021.
• The Wall Street Bets Reddit community is hyping Bed Bath and Beyond (BBBY).
  

  The buzz surrounding BBBY follows a familar pattern. User Benzinga Pro is highlighting that BBBY’s short float is over 46 per cent, meaning it is one of the most shorted stocks on the Nasdaq and thus vulnerable to pile in. The community has set itself challenges like eating ghost peppers or entire watermelons if and when specific price levels are reached  – DGG

• Second quarter US worker productivity figures fell at the steepest pace since records began in 1947, which is expected to continue putting upward pressure on wages.
• Coinbase shares suffered a steep drop on news the crypto firm loss over $1bn in the quarter.
  

  There’s a lot going on with the Coinbase results. First, there’s the massive impairment charge of around $663mn the “exchange” has had to take on its own crypto holdings. “We take impairments when the value of crypto assets or the value of our ventures investments fall below our carrying value of those assets,” the results noted. If that strikes you as weird, you’re not alone. Remember that time the CME had to take an impairment on its holdings of pork bellies? Us neither. Given the massive “own account” impairment, it’s also worth noting the ongoing confusion about whether Coinbase considers itself a neutral exchange/broker or a principal in its own right. “Judgment is required in determining whether the Company is the principal or the agent in transactions between customers.” Indeed.

  Coinbase’ operating expenses, meanwhile, amounted to $1.9bn in the three months ended June 30, 2022.  Intercontinental Exchange’s operating expenses in the same period, as a comparative, were $945mn. ICE, as it is also known, is one of the largest and most established exchanges in the world dealing in real world commodities, equities and other derivatives. ICE’s market cap currently stands at $60bn. At its peak in November 2021, Coinbase had a market capitalisation of nearly $90bn.

  Despite the results horror show, the stock was buoyed earlier this week on news Blackrock was going to onboard the exchange onto its Aladdin portfolio risk management system. This was seen as a big boon for the ailing crypto broker — or even a pseudo bailout — on hopes the integration would encourage institutional inflows just when Coinbase needed them most. Some stressed plugging into Aladdin was far from Blackrock moving client money into crypto directly and that there was a need to differentiate Blackrock the asset manager from Blackrock the technology vendor. But that take was left on the scrap heap by Thursday when Blackrock, which manages $8.5tn in assets, announced it would be launching a “Spot Bitcoin Private Trust” — a mechanism by which its institutional clients could finally gain exposure to bitcoin. Ay Caramba. The price of bitcoin was at $24,000 at pixel time. – IK

• Citi analysts downgrade Lowe’s on the expectation a rapid slowdown in the housing market will lower demand at the home improvement retailer.

Cry me a river:

• A key Rhine river marker is set to drop below 40cm on August 12, meaning access to most energy and transport barges will be barred as it is set to decrease even further down to 37cm the next day.
• The Loire, Rhone, and other French rivers also appear to be experiencing a severe drought.

This has led EDF, who runs several nuclear plants alongside these rivers’ edges, to reduce output at some of its nuclear reactors due to a lack of cooling water.

Geopolitical motions:

• The mega semiconductor logistics Chip 4 alliance between the United States, Korea, Japan and Taiwan appears to have met a geopolitical challenge with Seoul demanding continued respect for China’s one China policy as a condition of their entry.
• Is Ireland becoming a de-facto British protectorate?
• Xi Jinping will visit Saudi Arabia next week in his first overseas trip since Covid.
• A Newsweek poll shows China is more popular than the United States in the Middle East, everywhere apart from Morocco.

Modern affairs:

• A move to revive combat aircraft from aircraft graveyards and equip them with modernised communications and guidance systems so these ‘undead aircraft’ can be used as unmanned, disposable drone swarms.
• Fascinating drone perspective of Ukrainian mi24 and mi8 helicopters attacking Russian ground positions with their rocket batteries.

Intel assets:

• A Twitter employee was found guilty of spying for Saudi Arabia in exchange for cash and a gold watch.
• The New Yorker goes deep into Trump’s troubled relations with his generals.
  

  It’s a great read. But it’s clear the magazine has given up on even trying to talk to the other side let alone give them a right of reply.