Shares of GameStop more than doubled on Wednesday, forcing hedge funds to take heavy losses as they unloaded bets the stock would fall, as message boards aimed at amateur investors continued to hype the stock. Conway G. Gittens has the story.
Shares of GameStop more than doubled on Wednesday, forcing hedge funds to take heavy losses as they unloaded bets the stock would fall, as message boards aimed at amateur investors continued to hype the stock. Conway G. Gittens has the story.
(Bloomberg) -- Aggreko Plc, one of the world’s biggest suppliers of portable power generators, accepted a 2.3 billion-pound ($3.2 billion) bid from a private equity consortium.TDR Capital and I Squared Capital agreed to buy the business for 880 pence per share in cash, London-listed Aggreko said in a statement. The price represents a 39% premium to Aggreko’s closing price on Feb. 4, the day before their interest was first reported. The stock rose 1.8% to 905 pence shortly after the open of regular trading Friday.Aggreko offers rentals of power, heating and cooling equipment to clients in the energy, refining, construction and events industries. It has provided generators to the Glastonbury Festival, Britain’s marquee music event, as well as the 2018 Winter Olympic Games in South Korea.Bloomberg News reported Thursday that the private equity firms were nearing a firm offer for Aggreko following weeks of negotiations. Platinum Equity has also made a preliminary approach to Aggreko, though its interest was seen as less likely to translate into a deal, people with knowledge of the matter said.TDR and I Squared’s offer for Aggreko is in-line with expectations and unlikely to see competing bids, Andrew Nussey, a Peel Hunt analyst, wrote in a note. The acquisition is expected to be completed in the summer of this year.Bargain HuntingPrivate equity firms have been hunting for bargains among listed companies in the U.K. Blackstone Group Inc. and Global Infrastructure Partners teamed up last month on a deal to buy Signature Aviation Plc, an operator of private-jet bases, for $4.7 billion. Allied Universal Security Services LLC, which is backed by Warburg Pincus, has offered to take over British security firm G4S Plc for 3.8 billion pounds.TDR has been particularly active. It completed an acquisition last month of a controlling stake in Walmart’s U.K. grocery arm, Asda Group Ltd., together with Britain’s Issa brothers. In February, it approached Arrow Global Group Plc about a potential takeover bid valuing the London-listed alternative investment group at more than 540 million pounds.Morgan Stanley, Barclays Plc, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp. are advising the private equity consortium. Aggreko is working with Centerview Partners, Citigroup Inc. and Jefferies Financial Group Inc.Barclays, Bank of America, Deutsche Bank, Goldman Sachs and Banco Santander SA are helping arrange debt to fund the transaction.(Updates with shares trading in the second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Exxon Mobil Corp is suing Australia's Macquarie Energy in a Texas court to avoid paying $11.7 million for missed deliveries during last month's winter freeze in the central United States. The lawsuit, filed by Exxon's natural gas business, said the massive storm and state declarations of emergencies prevented it from fulfilling its supply commitment to Macquarie Energy, the second largest U.S. gas marketer. Exxon is asking the Texas court to rule that the massive storm, caused when an arctic air mass swept the central United States, was a natural disaster.
(Bloomberg) -- Gabe Plotkin spent the first half of January defending his hedge fund’s portfolio from a Reddit mob, the second half trying to convince investors he can survive a 53% loss, and early February explaining to Congress what happened.Now with the public spectacle subsiding, the most concrete sign is emerging yet that his Melvin Capital Management might actually manage to thrive anew. After adjusting strategy, Plotkin pulled off an almost 22% gain in February, about eight times the return of the S&P 500.So starts the most arduous part of the 42-year-old hedge fund manager’s bid to climb out of the hole left by January’s clash, in which retail investors organized on social media to drive up stocks such as GameStop Corp. that Melvin and others had bet would fall. The episode cost his investors -- including billionaire Steve Cohen, Brown University and the Robin Hood Foundation -- more than $6 billion.But even with the rebound, Plotkin’s fund, which had $8 billion at the start of February, will need to produce an additional 75% gain for earlier clients before they break even and start paying fees again. Investors who have stuck by or piled into the firm are betting he’ll be able to do that given his track record, which ranked him as one of the best stock pickers until this year.Last month’s performance was especially welcome for investors who decided to pony up a collective $250 million at the beginning of February -- likely seeing it as an opportunity to increase their exposure to a hedge fund that had been closed to new capital. The firm now manages $10.9 billion, including February’s gain and money that came in on March 1.That vote of confidence followed a late-January investment by Ken Griffin, his partners and his Citadel hedge funds, and Cohen’s Point72 Asset Management, which together gave the firm $2.75 billion in exchange for a three-year minority piece of Melvin’s revenue. The deal came together in a matter of hours.Plotkin said in his testimony to the House Committee on Financial Services last month that Griffin had reached out to him, and that the cash injection was not an emergency bailout.People close to his backers say they doubled down because they have faith in his trading acumen and personally like Plotkin, who’s known as family-oriented and relatively nice in an industry that’s famously cutthroat.Modifying WagersHe’s also a confident risk-taker. Since his days at Cohen’s shop, Plotkin was known for taking big positions on the long and the short side. His recent performance suggests January’s rout hasn’t damaged his ability to make money.He did modify his wagers on stocks he expects to tumble, saying in his testimony that he would avoid crowded shorts. A person familiar with his strategy said he also will take smaller-sized positions to limit exposure to single companies. And Plotkin told his team of data scientists to scour social media and message boards to look for shares that retail investors are rallying around.He has stopped using exchange-traded puts that show up on his quarterly filings with the Securities and Exchange Commission -- clues that allowed his firm to be singled out by the Reddit crowd.Some hedge fund observers question whether Plotkin will still be able to produce blockbuster returns without chunky short positions. In Melvin’s first year of trading, 70% of the fund’s profits came from his bearish bets.Plotkin, who grew up in a middle-class family in Portland, Maine, didn’t have a flashy start to his money management career. Early on he landed at Griffin’s Citadel, hired to evaluate new businesses rather than taking a more coveted investment position. After a year, he jumped to Greenwich, Connecticut-based North Sound Capital, where he was a consumer stocks analyst for two years, with limited trading authority.Then, in 2006, he took a job at Cohen’s predecessor firm SAC Capital Advisors, and within five years was managing more than $1 billion in consumer-related stocks. Plotkin was among only a handful of managers at the firm with such a large portfolio, and was one of its highest paid professionals. He also would join Cohen on client visits to demonstrate SAC’s deep bench of talent.Cohen’s HelpInside SAC he was known for rigorous research of companies he invested in, former colleagues said. He used detailed models to analyze everything from cash flows to product demand, rather than relying on market information from brokers. He also was an early user of credit-card data.Plotkin announced he was leaving Cohen’s firm in early 2014 to start his own shop, just a few months after SAC pleaded guilty to securities fraud and paid a record fine to resolve charges in the U.S. government’s six-year crackdown on insider trading. Plotkin, who wasn’t accused of any wrongdoing, was among several senior portfolio managers to quit. As part of the settlement, Cohen would -- for a time -- only be managing his own money, thus reducing the amount of cash to be spread among portfolio managers.By that December, Plotkin was up and running at Melvin. He named the firm after his grandfather who ran a convenience store and had the work ethic and integrity he wanted do emulate in his own business. Plotkin raised close to $1 billion, including about $200 million from Cohen’s firm, now called Point72. His only down year was in 2018, when he lost 6%. The next two years his returns were around 50%.Overall, he posted annualized returns about 30% from his start in 2014 through last year.Plotkin declined to comment for this article, but during his House testimony, he signaled confidence that he will turn things around.“We’ll adapt,” he said. “The whole industry will have to adapt.”(Updates with inflow data in fifth paragraph and details of SAC role in fourteenth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Las Vegas Sands Corp., the world’s largest casino operator by market value, agreed to sell its properties in Las Vegas to Apollo Global Management Inc. and Vici Properties Inc. for $6.25 billion, refocusing the company on its successful Asian resorts and other potential opportunities in the U.S.Apollo will run the properties, which will be owned by Vici, a real estate investment trust, the companies said in a statement Wednesday. The Venetian, Palazzo and related convention facilities in Vegas contributed less than 15% of the company’s revenue in 2019, before the coronavirus pandemic hit.Sands rose as much as 2.8% to $66.77 in New York trading, while Apollo gained 2% to $50.90 and Vici was up 2.3% to $29.12. Sands China Ltd. shares were little changed as of 10 a.m. in Hong Kong.Sands signaled last year that it no longer viewed Las Vegas, its home turf, as a priority when it tapped advisers to solicit interest in the properties. The company has identified over $5 billion in capital spending plans at its resorts over the next five years, most of it focused on Macau and Singapore, which generated 85% of its revenue in 2019.“This company is focused on growth, and we see meaningful opportunities on a variety of fronts,” Sands Chief Executive Officer Robert Goldstein said in the statement. “Asia remains the backbone of this company and our developments in Macau and Singapore are the center of our attention.”The company is also weighing a role in the fast-growing field of online gaming, something its late founder, Sheldon Adelson, shunned on moral grounds. Adelson died in January.Apollo, a private equity giant, is betting on a fast comeback for America’s gambling mecca as the pandemic plays out. It’s planning to market the high-end resort more specifically to gamblers and offer consumer tie-ins through some of the other companies in its portfolio. Also, the resort could serve as a focal point for the fast-growing business of sports betting in the U.S.The investment “underscores our conviction in a strong recovery for Las Vegas as vaccines usher in a reopening of leisure and travel in the United States and across the world,” Apollo Partner Alex van Hoek said in a statement.Apollo has made a number of investments in gambling businesses recently, including Great Canadian Gaming Corp., one of that country’s largest casino companies, and European lottery operator Sazka Group.Apollo, along with TPG, was also the owner for a number of years of Caesars Entertainment Corp., which the firms took private in a $30.7 billion leveraged buyout at the top of the market in 2008. The company struggled for years under its debt load before the investors sold out. Vici was spun off to Caesars debt holders in a restructuring.Seller FinancingUnder the terms of the deal, funds affiliated with Apollo will acquire the operating assets and liabilities of the Las Vegas business for about $2.25 billion, including $1.2 billion in seller financing. Vici will purchase the real estate and related assets of the Venetian for about $4 billion in cash.The sale of the Vegas properties would mark Sands’ exit, for now, from the U.S. gambling industry. The Venetian, Palazzo and Sands Expo Convention Center are all connected along the city’s famous Strip. However, they were already a small and shrinking part of the company, and the Las Vegas convention business has been particularly hard hit by the coronavirus and related restrictions on large gatherings.The money from a sale could allow the company to fund other development opportunities. Sands dropped out of the competition to build a casino in Japan last year due to terms that executives described as unfavorable. But the company has expressed interest in building in New York, which may consider an increase in the number of casinos it allows. Texas is considered another potential growth market, although some prominent legislators there have repeatedly signaled their opposition to casino legalization.Sands is the only major U.S. operator without a nationally focused online or sports betting business. Goldstein, its CEO, has been holding talks with potential partners, something that could be more of a focus with the cash proceeds from the sale.Keeping HeadquartersSands intends to keep its corporate headquarters in Las Vegas. The Adelson family, now led by Sheldon’s widow, Miriam, will also maintain a presence through their ownership of the city’s largest newspaper, the Las Vegas Review-Journal. Miriam’s son-in-law, Patrick Dumont, is the president of Sands.The company may consider resuming its dividend, stock buybacks and debt retirements, particularly once its business in Asia picks up. Sands is financing $1.2 billion of Apollo’s purchase price with a six-year note that begins at 1.5% interest and rises to 4.25% after three years, according to people familiar with the terms.Goldman Sachs Group Inc. acted as financial adviser to Las Vegas Sands in the latest deal. Skadden, Arps, Slate, Meagher & Flom LLP served as legal adviser.Sheldon Adelson was a big believer in the concept of resorts that linked meeting space for business travelers with casinos. A lifelong entrepreneur who made his first serious fortune in the trade-show business, he built the Sands convention center and its connected hotels, later copying the formula overseas. But he was also capable of parting ways with his developments, as he did in the past with the Venetian’s Grand Canal Shoppes in Las Vegas and a casino in Pennsylvania.The current deal will “pay tribute to Mr. Adelson’s legacy while starting a new chapter in this company’s history,” Goldstein said.(Updates with China Sands shares in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Stocks and bonds sold off after Federal Reserve Chairman Jerome Powell underwhelmed markets by refraining from pushing back more forcefully against the recent spike in Treasury yields.The S&P 500 briefly erased its 2021 gains, notching its lowest close in about five weeks. Benchmark 10-year bond rates topped 1.5% and the dollar climbed. The Nasdaq 100 extended losses from a February peak to almost 10%, and the Russell 2000 of small caps slid 2.8%. Reddit users appeared to rush back into GameStop Corp., with the video-game retailer soaring.Powell said in an online event Thursday that he’d be “concerned” by disorderly markets, but stopped short of offering steps to curb heightened volatility. The surge in Treasury yields has triggered fears about elevated stock valuations after a torrid equity rally from the depths of the pandemic. While bulls have decided to view the jump in rates as a sign of economic strength that could lift corporate profits, there’s been mounting concern over a potential inflation pickup. For Bleakley Advisory Group’s Peter Boockvar, the Fed has put itself in a “tough situation.”“We are again seeing a market that is taking control of monetary policy from the Fed,” said Boockvar, the firm’s chief investment officer. “Long rates are rising right now because Powell is again very dovish. The more dovish they get in the face of market expectations of higher inflation, the more financial tightening we’ll see.”Stock-Market Momentum Comeuppance Gets No Sympathy From the FedDespite the lingering uncertainties about the impacts of rising bond yields, such fears are “misplaced,” according to Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital.“As long as the back-up in bond yields reflects stronger growth expectations (versus tighter monetary policy), then the long-term bull market will not be at risk,” she said. “The latest normalization in bond yields should be viewed as an encouraging sign that growth is healing, while the prospect for a hawkish turn from the Federal Reserve is clearly not in the cards today.”The U.S. Senate voted to take up a $1.9 trillion relief bill backed by President Joe Biden, setting off a debate expected to end this weekend with approval of the nation’s sixth stimulus since the pandemic-triggered lockdowns that began a year ago.Elsewhere, Bitcoin’s appeal as a hedge against inflation was put to the test, with the largest cryptocurrency joining a slump in other risk assets. Oil surged after the OPEC+ alliance surprised traders with its decision to keep output unchanged, signaling a tighter crude market in the months ahead.Some key events to watch this week:The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.These are some of the main moves in markets:StocksThe S&P 500 sank 1.3% at 4 p.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index dipped 2.5%.The MSCI Emerging Market Index declined 2.6%.CurrenciesThe Bloomberg Dollar Spot Index rose 0.7%.The euro decreased 0.8% to $1.1971.The Japanese yen depreciated 0.8% to 107.92 per dollar.BondsThe yield on 10-year Treasuries rose six basis points to 1.54%.Germany’s 10-year yield fell two basis points to -0.31%.Britain’s 10-year yield decreased five basis points to 0.731%.CommoditiesWest Texas Intermediate crude jumped 4.8% to $64.24 a barrel.Gold fell 0.8% to $1,698.21 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Stocks dipped Wednesday, extending losses from a day earlier as investors weighed optimism over widespread post-pandemic business reopenings against concerns over economic overheating.
The British pound rallied a bit on Wednesday to peak above the 1.40 level early but have pulled back just a bit as we calm down ahead of the jobs number.
Some households are collecting a big pile of federal money in 2021.
The president has agreed to a compromise making millions ineligible for the third checks.
A firm hired to monitor Texas' power markets says the region's grid manager overpriced electricity over two days during last month's energy crisis, resulting in $16 billion in overcharges.
(Bloomberg) -- Oil jumped the most in more than a week after a U.S. government report showed a record drop in domestic fuel inventories from the aftermath of a deep freeze that shuttered refineries in several states.Crude futures in New York climbed 2.6% on Wednesday, snapping a three-day streak of losses. U.S. gasoline inventories tumbled last week by the most since 1990 after a polar blast wiped out more than 5 million barrels a day of refining capacity in late February along the U.S. Gulf Coast, according to Energy Information Administration data. Crude stockpiles swelled with refineries still shut.See also: Record U.S. Gasoline Decline Raises Prospect of $3 Pump Prices“The market expected some noise from the storm’s lingering effects,” said Matt Sallee, portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “Absent the magnitude of the changes, things came in pretty much as expected with the enormous product draw more than offsetting the record crude build.”The U.S. data also showed gasoline supplied, a gauge for demand, surged the most since May, supporting those who say the oil market needs more barrels from producers as OPEC+ heads into a meeting on Thursday. The group is poised to agree on a coordinated production hike to cool the rapid surge in crude prices.Oil has rallied more than 25% so far this year, shepherded by the OPEC+ alliance’s continued production curbs and expectations for demand to meaningfully rebound as Covid-19 vaccines are rolled out worldwide. That strength though has paved the way for the alliance to unleash more barrels, with OPEC Secretary-General Mohammad Barkindo saying Tuesday that both the wider economic outlook and oil-market fundamentals continue to improve. The group could return the bulk of the 1.5 million-barrel-a-day hike that’s up for debate.There are two parts to the potential production ramp-up that OPEC+ will discuss. The first is whether the cartel will proceed with a 500,000-barrel-a-day collective increase in April. The second is the question of how Saudi Arabia could phase out its extra reduction of 1 million barrels a day.“Elevated price levels will incentivize the cartel to taper their output cuts, but given the uncertainty, the market is likely to be on edge heading into tomorrow’s meeting,” TD Securities commodity strategists including Bart Melek said in a note. In the U.S., the decline in both gasoline and distillate inventories coincides with a spate of refinery outages left in the wake of the cold snap: Plants processed crude at the lowest level on record last week. While some refineries, like Motiva Enterprises LLC’s Texas site, have been able to restart key processing units, many that shut due to the freeze are still in the process of making repairs or restarting operations.Meanwhile, much of the crude production hit by the cold temperatures has been restored. Crude supplies grew by a record 21.56 million barrels, signaling weak demand from refiners at the time.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Bitcoin (CRYPTO: BTC) may be headed for the $100,000 mark by the end of this month, according to Mike McGlone, a Bloomberg analyst. What Happened: McGlone, who previously ascribed a $50,000 plus level for the cryptocurrency, said in a March outlook report that if the Grayscale Bitcoin Trust (OTC: GBTC) closing at its steepest discount ever is an indicator, then it may “signal [Bitcoin’s] march to $100,000.” The Greyscale premium, a metric watched closely, ended February with a 2.7% discount. McGlone pointed to March 2017, when BTC backed up to nearly $1,000 on the way to its peak near $20,000 in December of that year. “Sharp reductions in the GBTC premium have often marked bottoms in Bitcoin,” wrote McGlone. “The increasing probability of [exchange-traded] funds in the U.S., on the back of launches in Canada are adding pressure to the trust price, but we see sustaining the upward trajectory as the more likely outcome.” Bitcoin traded 8.48% lower at $47,120.70 at press time. GBTC closed 10.31% lower at $41.40 on Thursday. Why It Matters: The Grayscale premium is a reference to the difference between the value of the holdings of GBTC versus the market price of its holdings. McGlone also noted the increased replacement of Gold in portfolios with BTC. “In 2020, the benchmark crypto gained legitimacy with declining volatility vs. the opposite in most assets. In 2021, we see little to stop the process of old-guard gold allocators simply focusing on prudent diversification,” wrote the analyst. On Thursday, Kraken CEO Jesse Powell said that BTC could replace all of the world’s currencies and hit a million-dollar price target within the next ten years. “The younger demographic is certainly taking notice of it and they see it as a better version of gold,” said Powell. Read Next: 'Morons:' Crypto Enthusiasts Burn Banksy's Real Artwork To Turn It Into Digital Token See more from BenzingaClick here for options trades from BenzingaHow Square's Purchase of Jay Z's Tidal Could Popularize Blockchain'Morons:' Crypto Enthusiasts Burn Banksy's Real Artwork To Turn It Into Digital Token© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) -- Major oil sands producers in Western Canada will idle almost half a million barrels a day of production next month, helping tighten global supplies as oil prices surge.Canadian Natural Resources Ltd.’s plans to conduct 30 days of maintenance at its Horizon oil sands upgrader in April will curtail roughly 250,000 barrels a day of light synthetic crude output, company President Tim McKay said in an interview Thursday. Work on the Horizon upgrader coincides with maintenance at other cites.Suncor Energy Inc. plans a major overhaul of its U2 crude upgrader, cutting output by 130,000 barrels a day over the entire second quarter. Syncrude Canada Ltd. will curb 70,000 barrels a day during the quarter because of maintenance in a unit.The supply cuts out of Northern Alberta, following a surprise OPEC+ decision to not increase output next month, could add more support to the recent rally in crude prices. OPEC+ had been debating whether to restore as much as 1.5 million barrels a day of output in April but decided to wait.The Saudi-led alliance closely monitors other major oil producers as it seeks to manage the entire global market, and surging production in North America was its biggest headache in recent years -- especially from U.S. shale but also from Canada.“The U.S., Saudi Arabia, Russia, Canada, Brazil and other well endowed countries with hydrocarbon reserves -- we need to work with each other, collaboratively,” Saudi Energy Minister Prince Abdulaziz bin Salman said after the group’s meeting on Thursday.Read More: Saudis Bet ‘Drill, Baby, Drill’ Is Over in Push for Pricier OilCanada’s contribution to balancing the market with less production, much like slowing output in the U.S., is not a deliberate market-management strategy but significant nonetheless.Even though the output cuts are short-term, the battered oil-sands industry shouldn’t be a concern for the Saudis in the long run either, judging from McKay’s outlook for the industry.“I can’t see much growth in the oil sands happening because there is going to be less demand in the future,” he said. “The first step is we have to get our carbon footprint down.”After years of rising output turned Canada into the world’s fourth-largest crude producer, expansion projects have nearly halted on the heels of two market crashes since 2014.Adding to its struggles, Canada’s oil industry is being shunned by some investors such as Norway’s $1.3 trillion wealth fund amid concern that the higher carbon emissions associated with oil sands extraction will worsen climate change. These forces help make future growth in the oil sands unlikely, said McKay, whose company is among the largest producers in the country.Oil sands upgraders turn the heavy bitumen produced in oil sands mines into light synthetic crude that’s similar to benchmarks West Texas Intermediate and Brent. Syncrude Sweet Premium for April gained 60 cents on Thursday to $1.50 a barrel premium to WTI, the strongest price since May, NE2 Group data show.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
GameStop shares closed up 6.4% at $131.93 after earlier hitting $147.87, their highest since a surge in the heavily shorted stock late last month. One analyst and some Twitter users pointed to a cryptic tweet by Ryan Cohen, a major shareholder of GameStop and founder of e-commerce firm Chewy.com, as a plausible reason for the move, although Reuters could not independently determine causation. The late afternoon rally in GameStop began roughly around the time that Cohen tweeted what appeared to be a screenshot with the puppet dog advertising mascot of Pets.com, a famous casualty of the dotcom bubble two decades ago.
Mortgage rates have risen past a psychological benchmark for the first time since they fell to historic lows during the pandemic. The average rate on a 30-year fixed-rate mortgage increased to 3.02% this past week, according to Freddie Mac’s Primary Mortgage Market Survey—the first time since July that the rate has risen above 3%. “Since reaching a low point in January, mortgage rates have risen by more than 30 basis points,” wrote Freddie Mac’s chief economist, in a release.
(Bloomberg) -- A firm hired to monitor Texas’ power markets says the region’s grid manager overpriced electricity over two days during last month’s energy crisis, resulting in $16 billion in overcharges.Amid the deep winter freeze that knocked nearly half of power generation offline, the Electric Reliability Council of Texas, known as Ercot, set the price of electricity at the $9,000-a-megawatt-hour maximum -- standard practice during a grid emergency. But Ercot left that price in place days longer than necessary, resulting in massive overcharges, according to Potomac Economics, an independent market monitor hired by the state of Texas to assess Ercot’s performance. In an unusual move, the firm recommended in a letter to regulators that the pricing be corrected and that $16 billion in charges be reversed as a result.Potomac isn’t the first to say that leaving electricity prices at the $9,000 cap for so long was a mistake. Plenty of power companies at risk of defaulting on their payments have said the same. But the market monitor is giving that opinion considerable weight and could sway regulators to let companies off the hook for some of the massive electricity charges they incurred during the crisis.The Arctic blast that crippled Texas’s grid and plunged more than 4 million homes and businesses into darkness for days has pushed many companies to the brink of insolvency and stressed the power market, which is facing a more-than $2.5 billion payment shortfall. One utility, Brazos Electric Power Cooperative, has already filed for bankruptcy, while retailers Griddy Energy LLC and Entrust Energy Inc. defaulted and have been banned from participating in the market.“The market is under quite a bit of duress,” Kenan Ogelman, Ercot’s vice president of commercial operations told Texas lawmakers Thursday. Moody’s Investors Service downgraded Ercot one notch from A1 to Aa3 and revised the grid operator’s credit outlook to “negative.”Retroactively adjusting the power price would ease the financial squeeze on some of the companies facing astronomical power bills in the wake of the energy crisis. EDF Renewable Energy and Just Energy are among those asking the Public Utility Commission to reset the power price for the days after the immediate emergency while others have also asked regulators to waive their obligation to pay until price disputes are resolved.“If we don’t act to stabilize things, a worst-case scenario is that people will go under,” said Carrie Bivens, the Ercot independent market monitor director at Potomac Economics. “It creates a cascading effect.”The erroneous charges exceed the total cost of power traded in real-time in all of 2020, said Bivens, who spent 14 years at Ercot, where she most recently was director of market operations before becoming its watchdog. “It’s a mind-blowing amount of money.”While prices neared the $9,000 cap on the first day of the blackouts, they soon dipped to $1,200 -- a fluctuation that the utility commission later attributed to a computer glitch. The panel, which oversees the state’s power system, ordered Ercot to manually set the price at the maximum to incentivize generators to feed more electricity into the grid during the period of supply scarcity. The market monitor argues that Ercot should have reset prices once rotating blackouts ended because, at the point, the emergency was over.It’s asking the commission to direct Ercot to correct the real-time price of electricity from 12 a.m. Feb. 18 to 9 a.m. Feb. 19. Doing so could save end-customers around $1.5 billion that otherwise would be passed through to them from electricity providers, Bevins said.But power generators that reaped substantial profits from the high prices during the crisis week are likely to push back. Vistra Corp. on Thursday submitted comments to the utility commission arguing against repricing. During a Texas senate hearing the same day, utilities South Texas Electric Cooperative and the Lower Colorado River Authority also voiced opposition.Texas Competitive Power Advocates, a trade association representing generators, said retroactively changing prices could discourage future investments in Texas’s electricity market. “Changing prices after the fact creates additional instability and uncertainty,” Michele Richmond, the group’s executive director, said in an email.Bivens acknowledged the market monitor isn’t typically in favor of repricing, but noted in her letter to the commission that the move wouldn’t result in any revenue shortfalls for generators. Instead, the new price would reflect the actual supply, demand and reserves during the period.“This isn’t some Monday morning quarterbacking,” she said in an interview. “Ercot made an error and we don’t let errors slide.”The utility commission on Wednesday adopted a prior recommendation made by the market monitor, voting to to claw back some payments to power generators for services they never actually provided during energy crisis. The commissioners also expressed support for capping the price of certain grid services -- a request made by several retailers -- but didn’t take action on it. Another commission meeting is scheduled for Friday.(Adds Ogelman quote, Moody’s downgrade in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
It appears the breakdown is underway, and this could turn into an outright collapse into mid-March.
(Bloomberg) -- As the leader of crypto exchange Kraken, Jesse Powell is bound to be bullish on Bitcoin. Yet he’s projecting a disruptive future that would stretch the imagination of even the most ardent crypto fans.In a Bloomberg Television interview, Powell said Bitcoin could reach $1 million in the next decade, adding that supporters say it could eventually replace all of the major fiat currencies.“We can only speculate, but when you measure it in terms of dollars, you have to think it’s going to infinity,” he said. “The true believers will tell you that it’s going all the way to the moon, to Mars and eventually, will be the world’s currency.”The CEO also said San Francisco-based Kraken is considering going public, possibly next year.Extreme predictions are nothing new in the world of Bitcoin, where adherents stand to profit from convincing a wider audience that crypto is a legitimate asset class, rather than a speculative fad. The dollar remains the world’s reserve currency and is the benchmark for global trade, though its value has softened in the past year.Powell said Bitcoin bulls see it one day exceeding the combined market cap of the dollar, euro and other currencies.The dollar “is only 50 years old and it’s already showing extreme signs of weakness, and I think people will start measuring the price of things in terms of Bitcoin,” he said.The digital currency slipped 3% in early U.S. trading on Thursday, hovering around $49,000. Prices have surged almost 600% since the start of 2020 on the back of wider mainstream adoption, with bulls seeing it as both an inflation hedge and speculative asset.Critics argue that Bitcoin is in a giant, stimulus-fueled bubble destined to burst like the 2017 boom and bust cycle.Kraken benefits from higher prices as it reaps fees from increased trading. Bloomberg reported last month that the exchange was in talks to raise new funding, which would double the company’s valuation to more than $10 billion.“Personally, I think $10 billion is a low valuation,” Powell said. “I wouldn’t be interested in selling shares at that price.”The CEO did acknowledge the potential for wild market swings, saying prices can “move up or down 50% on any given day.” That kind of volatility has long been one of the negatives of Bitcoin, relegating the market to one of speculation, rather than a means of doing business.“If you are buying into Bitcoin out of speculation, you should be committed to holding for five years,” Powell said. “You have to have strong convictions to hold.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Congress is nearing passage of the third economic stimulus check it will send out to you and other taxpayers as part of its Covid-19 relief bill.
Prominent gold advocate and Bitcoin skeptic Peter Schiff has criticized billionaire investors Mark Cuban and Kevin O’Leary for turning positive on Bitcoin. What Happened: “Bubbles typically peak when rational investors capitulate,” said Schiff on Twitter, calling them the newest skeptics to “join the cult.” Congratulations to those who bought Bitcoin early, pumped up the price, and who've been dumping into the hype. You succeeded in getting Wall Street to buy into the mania. When I first learned about #Bitcoin I didn't think smart investors would be dumb enough to buy. I was wrong. — Peter Schiff (@PeterSchiff) March 1, 2021 Schiff’s criticism comes after Kevin O’Leary announced he would be allocating 3% of his portfolio to the digital asset while also looking at investing in the most energy-efficient Bitcoin mining companies. Earlier this week, Mark Cuban commented on some of Schiff’s most recent remarks saying, “Gold is dead Peter. Move on.” Why It Matters: Schiff has often criticized Bitcoin as an asset class, calling it inferior to gold as a store of value. His most recent comments on Twitter invited criticism from Mark Cuban, who commented that gold is hyped just as much as cryptocurrencies. “As tech continues to get better/cheaper/faster there will be new applications and maybe even something that supersedes what we know as crypto today. But gold won't ever change. Which is why it will die as a SOV (Store of Value),” said Cuban on Twitter. According to Schiff, the fact that gold won’t ever change is part of its appeal to investors. Jeffrey Gundlach, a well-known gold bull, commented earlier today that Bitcoin is up over 467% in the past 12 months while gold is down by 11% for the same period. The price of gold is down 11% over the past twelve months. The S&P 500 is up 27% over the past twelve months. Bitcoin is up 467% over the past twelve months. Great dispersions often precede great reversions. We shall see. — Jeffrey Gundlach (@TruthGundlach) March 4, 2021 According to him, dispersions of this size between asset classes often come before reversions to the mean. Price Action: After a volatile week, the market-leading cryptocurrency was trading at $48,171 at the time of writing. Earlier this week, Bitcoin recorded a low of $43,867 and a high of $52,535. Image: Dmitry Demidko via Unsplash See more from BenzingaClick here for options trades from BenzingaFantom Is Top Performing Cryptocurrency Again: Here's What You Need To KnowGoldman Sachs To Restart Crypto Desk After Abandoning The Idea In 2018© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.