UBER Assessed (Posted on 29 June 2014)

Now the shit stirs!!!
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Uber Technologies Inc is known as Everyone’s Private Driver. Uber operates an on-demand car service used all over the world. With the touch of a button from your phone, you can experience your own private driver.

Working as an Uber driver is one of the buzziest careers in America. With uberX, essentially anyone with a car can sign up to be a driver. And Uber makes it pretty easy to do. The first step is to head on over to this website. If you’re at least 21 years old, have a license, personal auto insurance, and a four-door car in good condition, you can sign up to be a driver. The next step is passing Uber’s background check. You’ll need to provide the company with standard information like your address, driver’s license number, and social security number. If you pass the background test, Uber requires you to take an online training course that covers standard operating procedures, how to get 5 stars, and what not to do. Upon completing the course, Uber will send you a phone. From start to finish, the registration process takes about two weeks.

Opinion: UBER just went for a fund raising among PE funds at a valuation of $17bn, yes thats amazing for a relatively simple app. UBER is now a big buzz not just in the US but even in Malaysia. This is a disruptive technology. The buzz is dying down slightly in the US because the real effective earnings of UBER drivers were not so hot. Available data showed that they gross around $15 an hour. But accounting for tolls, Uber’s 20% cut, gas, car insurance, vehicle financing, and self employment taxes, the driver really only made $54.50 for 12 hours of driving. So that’s just $4.54 an hour — far below minimum wage. 

Its still a good alternative to get that UBER spot for part timers or people who like to work when they want/need to. That's in developed nations.

 

UBER will be a lot more disruptive in developing economies with near pathetic taxi service, such as Malaysia and Indonesia. What UBER provides more readily: speed, clarity, safety, cleanliness, a workable rating system that truly incentivise the drivers, and a pay scale that is more than decent. UBER is akin to a private drivers' service that is a lot cheaper than those "private car bookings" from hotels.

The rise and rise of taxi apps in Malaysia is only reflective of apps helping the taxi system to "be more like UBER". Its a long slog but methinks in many countries the taxi drivers will be up in arms against UBER and will protest and seek the government's help to turn the tide.

What is UBER really in Malaysia... it basically legitimises the private taxi touts and louts at airports and malls. Unfortunately owners of taxi licenses in Malaysia are well connected politically, and soon we will see a clampdown on UBER.

 

As an open country that is so called MSC, MDC ... centric ... we must be open to even disruptive technologies. Yes, it may disrupt and even change the current status quo, but it is notching efficiencies and delivering a service that is "unserviced", meeting a demand that is not met, or creating new demand out of the blue. It is not all cannabalism of an existing industry. Existing taxi drivers would do well to try and be an UBER driver now. All the while, the taxi license owners will be knocking on doors of powerful politicians and crying wolf.

SGD Appreciation Bodes Well For Other Asian Currencies

Busy these couple of days, saw an interesting article, thought you all should read it:

RGE: On 14 April, the Monetary Authority of Singapore (MAS) made an aggressive policy tightening move. The MAS re-centered the SGD target band at the prevailing level of SGD’s nominal effective exchange rate and changed the band’s slope from a zero percent appreciation to one of “modest and gradual appreciation.” Judging from past experience, we believe the slope of the new target band is likely to be around 2% a year.

Source: RGE, Bloomberg

The MAS’s move reflected the growing confidence about the strength of the recovery as well as concerns about inflation risks associated with domestic demand later this year. The MAS has just revised its GDP growth forecast for 2010 from 4.5-6.5% to 7-9% and its CPI projection from 2-3% to 2.5-3.5%. RGE fully shares this view. Singapore’s growth and inflation have surprised significantly on the upside and the recovery is broad-based led by the rebound in manufacturing and services. RGE expects Singapore to grow 8.0% in 2010—the strongest performer in Southeast Asia—and inflation to average 3.0%.

Source: RGE

A rebound in economic activity, high food and commodity prices, closing output gaps, rising private demand and wage pressures will increase headline and core inflation in the coming months (see Figure 3). Upside surprises to growth and record low policy rates are leading Malaysia, Singapore and India to frontload monetary tightening into H1 2010 in order to contain inflation expectations. Capital inflows, potential CNY appreciation in Q2 2010 and slower growth at home and in U.S. and China in H2 2010 will lead EM Asia to maintain caution over the pace of rate hikes in H2 2010, but rely more on currency appreciation to curb inflation.

Source: RGE, Bloomberg

We started to track a “Long Asia” currency basket in December 2009 and formally introduced it in January 2010. “Long Asia” is an equal-weight long basket of four Asian currencies—CNY, INR, IDR and KRW—against JPY (see Figure 4). The basket appreciated by 9.1% (spot) since its inception.

Source: RGE, Bloomberg

As we noted above, our outlook on Asian FX is generally bullish, but we believe this is the right time to rebalance the ‘Long Asia” basket by replacing IDR with MYR. First, Malaysian GDP growth has surprised significantly on the upside. RGE forecasts Malaysia to grow 5.4% in 2010 as supportive private demand, commodity prices and exports to China, reviving global electronics cycle and Asian inventory cycle drive exports and industrial activity in the near term. The rate hike in March—which came earlier than its neighbors—will support capital inflows and the currency. Malaysia will hike rates by 25 basis points (bps) in May and by another 25 bps in H2 2010—more than what RGE initially forecasted—to contain speculative investment and lending to households. By contrast, there was little upside surprise to growth in Indonesia, while inflation is rising slower-than-expected and core inflation continues to ease. RGE also believes that Indonesia will delay rate hikes at least to Q3 2010—later than RGE’s initial forecast—amid political uncertainty.

Second, Bank Indonesia’s decision to phase out a 1-month certificate facility (SBI) by June can lead to a near-term IDR weakness. 1-month SBIs account for about 50% of all open-market operations. In addition, 1-month tenor attracts the bulk of foreign capital (besides SBIs, non-residents can also invest in government bonds). In the past, changes in foreign holdings of SBI had a noticeable impact on IDR. BI hopes that non-residents will switch into longer-term instruments, but this remains an open question at the moment.

As such, we choose to close our current “Long Asia” recommendation (long CNY, KRW, IDR, INR against JPY) and open a new “Long Asia” basket which tracks long CNY, KRW, MYR and INR positions (equal weights) against JPY.

An important caveat here is that unlike Singapore, the larger Asian economies will be more prone to use a sequence of policy measures—including credit curbs, raising reserve requirements and interest rates hikes—in addition to the exchange rates, as recovery and inflation risks gather momentum. Another key consideration is that growth and interest rate differentials will drive capital inflows, prompting further tightening (or at least no further liberalization) of real estate regulation, credit controls (such as margin requirements) and soft capital controls. The difference is of course that a very small, very open economy can do much less with these alternative routes to tightening than a larger, more closed one. Even though this will not be enough to reverse the general currency appreciation trend, it can increase volatility and limit or reduce risk-adjusted returns.

Looking For Mr Goodreason

Markets are dwindling not because of the Goldman Sachs issue. The markets were all waiting for a good reason to correct, they certainly found it in the Goldman Sach case, plus in itself will drag down financials, which makes up most of the gains in US markets. Its likely to be localised in the US, which will not hamper financials in other markets, but once the tide has turned, better to wait for a proper rally rather than to hope and pray that suddenly things will turn very bullish overnight. Ties in well with Sell In May & Go Away mantra.

Goldman Sachs is facing fraud charges for the first time in its history as a public company, setting the stage for the Wall Street powerhouse's biggest-ever showdown with the US government.

On Friday, the US Securities and Exchange Commission charged Goldman with hiding from investors the involvement of a prominent hedge fund manager in helping it structure a subprime mortgage debt product that he was betting against.

The incipient swoon in the synthetic collateralised debt obligation - created as a way for hedge fund manager John Paulson to bet against the housing market - cost investors more than $US1 billion ($1.1 billion), according to the SEC complaint.

Goldman vowed to vigorously defend itself against the charges and denied that it had structured a portfolio that was designed to lose money, claiming that the firm itself invested in the equity portion of the deal.

The news sent Goldman's shares tumbling and cast a shadow over the dominant Wall Street firm.

The charges follow a very profitable 15-month stretch for Goldman in the aftermath of the financial crisis. But the bank's prosperity during a period of wider economic pain has come at a cost: rising public anger over gold-plated bonuses even as the firm benefited from government rescue programs.

The charges filed against Goldman could take months or even years to be resolved. But here are some possible outcomes:

A quick resolution

Goldman may look for a quick resolution to its SEC problems.

A settlement within a few months, even one which could cost Goldman hundreds of millions of dollars, would be one way for Goldman to try to move on quickly and seek to avoid long-term damage to its brand.

Even if the firm seeks such a settlement, the authorities may not want to risk it given how much of a political hot potato Goldman has become. All parties will also be fully aware that a judge rejected an initial settlement between the SEC and Bank of America over the disclosure of bonuses paid in the bank's takeover of Merrill Lynch.

And, this will not prevent the potential for lawsuits from clients who feel they have suffered losses because of Goldman's actions.

Goldman fights and wins

Such vindication would likely take many months and probably years - and wouldn't be without damage to Goldman, its management and its brand. Media scrutiny would be even more intense over this period.

In a sign of trouble to come, British Prime Minister Gordon Brown on Sunday said he wanted Britain's financial watchdog to investigate Goldman, while in Germany, a government spokesman said its regulator would also seek information.

Goldman would not only face a big legal bill, and additional compliance costs as it sought to prevent any other problems from surfacing, but it might also impose more restrictions on its bankers and traders, which could reduce making money.

Jesse Derris, a crisis communications consultant with Sunshine, Sachs & Associates, said the charges are already "incredibly damaging."

"To me, it doesn't feel like a PR problem anymore," said Derris, who represents John Thain, a former Goldman executive and former Merrill Lynch chief executive whose stewardship of the firm during the financial crisis drew widespread criticism. Thain is now CEO of CIT Group, a commercial lender that recently emerged from bankruptcy.

"There is a structural problem that has led many people, including some in government, to think they weren't just actively trying to make money, but they were trying to do it on the backs of regular people who were invested in pension funds. You can't have much worse imagery."

Fighting a long battle could also expose Goldman to a greater extent to lawsuits from investors who feel they were wronged. It will create a public record of its transactions that could help would-be plaintiffs.

Goldman fights and loses

The worst case scenario is that Goldman fights the authorities, and investigators discover more problem transactions and charge more executives. Lawsuits from clients pile up and get very expensive to settle or fight. And while criminal charges are seen as unlikely they cannot be completely discounted.

In these circumstances, some question whether Goldman will be permanently damaged and lose a lot of its power and status, especially if it faces a major exodus of clients worried about the reputation questions.

Most think this unlikely but it can't be discounted.

"The $US64 million question would be is there some sort of unraveling of Goldman that will be coming down the pike, and I'd rather doubt it," said Joseph Battipaglia, a market strategist with Stifel Nicolaus.

Under the worst case, the future of CEO Lloyd Blankfein and other top executives would be in doubt. Veteran banking analyst Richard Bove, of Rochdale Securities, said on Friday that the charges could lead to Blankfein's resignation.

"People wonder how Goldman was able to make as much money in trading as they did at a time when nobody else was doing anything and maybe this is a reason why," said Malcolm Polley, chief investment officer, Stewart Capital Advisors. "How widespread this is, time will tell. If the SEC has brought charges on one instance my guess is it will open a can of worms."

Wider implications

The impact goes well beyond just Goldman - here are some of the implications for Wall Street as a whole and the broader financial markets:

- Advocates of tougher Wall Street regulations are already citing the Goldman fraud allegations to bolster their case for tighter oversight of derivatives and other financial products.

"That's the question," said Jason Tyler, senior vice president and part of the investment committee at Ariel Capital Management. "Will this fuel a fire and get a more aggressive form of financial reform in Washington? The timing of this works out well to get some legislation done ... it gives (lawmakers) another arrow in the quiver.

- Goldman could be just the first Wall Street player to be targeted in what could become a much larger investigation.

SEC investigators may see the Goldman case as a shot at redemption after they missed the boat on Ponzi-schemer Bernard Madoff and alleged swindler Allen Stamford. Indeed it hardly seemed like a coincidence that the Goldman charges were filed hours before - and largely overshadowed - a government watchdog's report excoriating the agency for failing to go after Stamford years earlier.

A resurgent SEC eager to restore its credibility could prove a major risk for Goldman and the rest of Wall Street in the coming months.

"The SEC is on the hotseat," plaintiffs Lawyer Jacob Zamansky said. "They missed Madoff ... It's a big moment for the SEC to see if they can stand up to Goldman Sachs and the best lawyers and experts on Wall Street."

Reuters

p/s photos: Jessica C (of Wacoal fame)