Warnings From the Crypto Crash

"Well, the party was fun while it lasted. But now the liquidity tidal wave is crashing as it always does when credit conditions tighten. This week's crypto-currency crash is the first body exposed on the beach, and let's hope the damage doesn't spread too far into the financial system and broader economy.

Some $200 billion in crypto assets have blown up in 24 hours, led by the collapse of the so-called stablecoin TerraUSD. The crypto universe used to be small and dominated by Bitcoin enthusiasts, but it has swelled as investors sought higher returns amid negative real interest rates.

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Hundreds of crypto currencies have been minted in a flurry of speculation.

Anyone can create a virtual currency, market it to investors and use the money as he pleases. While fiat currencies such as the dollar are backed by governments, crypto currencies are backed by faith in their developers.

What could go wrong?

Investors found out this week. Stablecoins are supposed to hold a fixed peg and let investors seamlessly trade crypto assets. Some are backed by fiat money, though their inventors don't always disclose what's in their reserves. Other stablecoins like TerraUSD are underpinned by algorithms, sometimes linked to another crypto currency -- in Terra's case, the token Luna.

To drum up demand for its currency, Terra's developers created a "decentralized lending" platform that offered interest rates of up to 20% on deposits. Terra was supposed to hold a $1 value. We were also told before the 2008 financial panic that prime money-market funds wouldn't break the buck. Then one did.

Despite its supposedly fail-safe algorithm, Terra was backed by nothing more than market confidence. And we've learned time and again what happens when investors panic. As investors sold off crypto, Terra's algorithm broke and its value plunged to 36 cents on Wednesday. What happens to Terra owners? Stay tuned.

One risk is that Terra's rout causes investors to lose faith in other virtual currencies and creates a market contagion. Crypto currencies are often used as collateral for trading, and other popular tokens are getting pummeled this week. The stablecoin Tether, which is backed by opaque hard currency reserves, wavered from its dollar peg on Wednesday.

Shares of Coinbase, the crypto exchange that benefited from enormous market liquidity and lack of investor discipline, have also tumbled. Coinbase assures customers it is at "no risk of bankruptcy." But on Tuesday it also disclosed that its customers would be unsecured creditors in the event of a bankruptcy, meaning their $256 billion in crypto and fiat currencies could be wiped out. Nice of Coinbase to tell us now.

Another danger is that the crypto turmoil bleeds into the banking system. Crypto enthusiasts claim that virtual currencies "disintermediate" financial institutions since you don't need a bank or broker to make transactions. That's true up to a point. But credit to buy crypto has to come from somewhere. Who's standing behind it? Nobody knows.

The crypto market ballooned to $2.9 trillion last November from some $500 billion in November 2020. This runup wasn't only driven by millennials gambling with stimulus checks. Central banks had made credit essentially free, which encouraged speculation.

The point is that there are always unexpected casualties when risk aversion returns with a vengeance. This is why junk bond prices are falling as concerns mount that some companies may struggle to roll over their debt, especially if the Federal Reserve's tightening tips the country into a recession.

The European Central Bank recently warned banks to hold extra capital against leveraged loans, which are sensitive to interest rates, to cover potential losses. As rates rise, some could default. About $800 billion in leveraged loans in the U.S. were issued last year, 60% more than in 2019. Regulators won't know who's overextended until markets shake out.

Debt covenants and market discipline were already deteriorating before the pandemic. When the economy shut down, the Fed was right to backstop financial markets. But it continued to provide support long after it was needed. As inflation heated up, the oracles of the Eccles building assured investors it was only "transitory" and monetary policy would remain supportive.

With inflation persisting and rising above 8%, the Fed had no choice but to tighten. Some investors who were overextended may be wiped out, but this is what happens when the Fed keeps conditions too easy for too long and then has to stop abruptly.

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Crypto currencies have passionate supporters, and the best may find a permanent place in the financial marketplace. But more than a few will wash out in this liquidity purge. As we learned in 2008, problems on Wall Street can quickly spread to Main Street. The challenge for regulators is to protect the financial system from damage that won't end with crypto. They'd better be preparing for the next casualties." [1]

1. Warnings From the Crypto Crash
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 13 May 2022: A.14.

Startuolių flotilė žada supaprastinti pasaulio tiekimo grandines

"FORTO ATRODO mažai tikėtinas technologijų numylėtinis. Jis negamina įtaisų, nekuria metaversijos, nekuria kriptovaliutų ir nepaleidžia raketų. Šešerius metus gyvuojantis startuolis iš Berlyno, kurio pagrindinė veikla yra krovinių pervežimo iš vienos vietos į kitą organizavimas, vis dėlto sugebėjo iš rizikos kapitalistų surinkti beveik 600 mln. dolerių. Jo rėmėjai mano, kad įmonė gali išjudinti archajišką krovinių ekspedijavimo pramonę. Per pastaruosius ketverius metus ji trigubai padidino savo verslą, gali pasigirti savo viršininku Michaelu Waxu ir dabar yra viena iš dešimties didžiausių ekspeditorių judrioje prekybos juostoje tarp Kinijos ir Vokietijos. Kovo mėnesį paskelbė apie 250 mln. dolerių naujo finansavimo, pasiekdama vertę 2,1 milijardo dolerių.

 

    „Forto“ nėra vienintelis krovinių gabenimo technologijų startuolis, pritraukiantis investuotojų dėmesį. Pasaulio tiekimo grandinėse susidarius kliūtims, uždarymui ir kitiems sutrikimams, rizikos kapitalo (VC) įmonės išleidžia milijardus į įmones, siūlančias būdus, kaip padidinti krovinių vežimo efektyvumą. Duomenų teikėjo „PitchBook“ duomenimis, 2021 m. tiekimo grandinės technologijų įmonės surinko daugiau nei 62 mlrd. dolerių, daugiau nei dvigubai daugiau, nei 2019 m. Iš jų beveik 9 mlrd. dolerių atiteko krovinių gabenimo technologijų startuoliams. „PitchBook“ skaičiuoja daugiau, nei tuziną privačių krovinių gabenimo technologijų „vienaragių“, kurių vertė siekia daugiau nei 1 mlrd. dolerių. Konsultantų įmonės „Transport Intelligence“ atstovė Viki Keckarovska šiais metais tikisi daugiau finansavimo.

 

    Dalis patrauklumo slypi pramonės dydyje ir galimybėje šią pramonę sutrikdyti. Vien tik krovinių ekspedijavimo verslo metinės pajamos yra 475 mlrd. dolerių, sako tiekimo grandinės tyrimų ir konsultacijų įmonė „Armstrong & Associates“. Platesnė „trečiųjų šalių logistikos“ rinka, apimanti transporto valdymą ir sandėliavimą, parduoda už 1,4 mlrd. dolerių.

 

    Tuo pačiu metu krovinių gabenimas išlieka technologiškai atsilikęs, ypač tarpvalstybinis. „Ši pramonė visiškai neprisijungusi“, – stebisi Zvi Schreiberis, skaitmeninės krovinių gabenimo rinkos „Freightos“ vadovas. „Galite tikėtis, kad konteinerio siuntimas bus toks pat skaitmeninis, kaip ir skrydžio užsakymas, – sako jis, – bet taip nėra. Vien gauti kainą gali sukelti galvos skausmą. „90 % ekspeditorių šiandien vis tiek užtrunka vieną ar dvi dienas, kad sugrąžintų kainą“, – sako J. Waxas.

 

    Tai pradeda keistis iš dalies dėl keistų naujų programinės įrangos platformų, skirtų supaprastinti krovinių gabenimo į užsienį procesą. „Flexport“, skaitmeninis ekspeditorius, įsikūręs San Franciske, automatizuoja daugelį tiekimo grandinės procesų, kurie tradiciškai buvo atliekami rankiniu būdu, įskaitant pasiūlymų gavimą, dokumentų pildymą ir koordinavimą su siuntėjais ir vežėjais tiekimo grandinėje.

 

    Devynerius metus gyvuojantis startuolis, 2021 m. uždirbęs 3,2 mlrd. dolerių pajamų, neseniai buvo įvertintas daugiau nei 8 mlrd. dolerių. „Project44“, tiekimo grandinės matomumo platforma iš Čikagos, leidžia mažmenininkams ir prekių ženklams stebėti savo krovinio kelionės etapus, pvz., kai krovinys pakraunamas į laivą, išplaukia iš uosto arba atvyksta į galutinę paskirties vietą – visa tai realiuoju laiku. Jie taip pat gali pakoreguoti arba nukreipti siuntas, jei reikia.

 

    Vienas iš bendrų tokių platformų bruožų yra galimybė iš duomenų gauti įžvalgų. Dideli siuntėjai ir logistikos paslaugų teikėjai paprastai valdo savo siuntas, naudodami programinę įrangą, vadinamą transporto valdymo sistema (TMS), kuri seka siuntas, kai jos keliauja logistikos tinklais, iš gamyklos į uostą ir galiausiai pas klientą. Tokios sistemos, kurios egzistuoja nuo devintojo dešimtmečio pabaigos, yra naudingos informacijos duomenų bazės, sako Evanas Armstrongas, Armstrong & Associates prezidentas. Bet jie nėra gudrūs. "Pirmasis žingsnis buvo perkelti viską į TMS. Dabar kitas žingsnis yra paimti tas TMS ir padaryti jas protingas."

 

    Nors pastarojo meto tiekimo grandinės šurmulys prisidėjo prie logistikos programinės įrangos paklausos didėjimo, jie nėra pagrindinė bumo jėga. Tai, pramonės stebėtojai sutinka, būtų „Amazon“. El. prekybos centras „yra absoliutus numeris vienas tiekimo grandinės transformacijos katalizatorius, be jokios abejonės“, sako Julianas Counihanas iš „Schematic Ventures“, rizikos kapitalo įmonės. Nors tiekimo grandinė istoriškai buvo laikoma sąnaudų centru, „Amazon“ ją pavertė pinigų uždirbančia šalimi. Didėjant pristatymui kitą ir tą pačią dieną, vartotojų lūkesčiai labai pasikeitė. Sparčiai mažėjant pristatymo laikui, logistika reikalauja „kur kas daugiau tiekimo grandinės technologijų“, – sako ponas Counihanas.

 

    Tam tikras skepticizmas yra čia tinkamas. Daugelis pradedančiųjų įmonių atrodo mažai kuo skiriasi nuo esamų įmonių, kurias daugelis pradedančiųjų įmonių siekia sužlugdyti. Kuehne + Nagel, stambus Šveicarijos ekspeditorius, daug investavo į skaitmeninimą, net jei „negieda ir nešoka, kad jie yra „skaitmeniniai“ ekspeditoriai“, kaip laisvai pripažįsta ponas Schreiberis iš Freightos. C.H. „Robinson“, didelė Amerikos logistikos įmonė, „tikrai yra skaitmeninė krovinių gabenimo brokerė“, sako J. Armstrongas. Ir nors kai kurie stambūs rinkos dalyviai remiasi pasenusiomis technologijomis, priduria jis, jie turi daug didesnį mastą, nei bet kuris iš naujokų. Tai leidžia jiems užsitikrinti žemesnes kainas iš vandenynų lainerių, oro vežėjų ir kitų vežėjų.

 

     Visgi, kaip pažymi M. Keckarovska, startuoliai turi parako. Krovinių ekspedijavimo rinka tebėra labai susiskaidžiusi, todėl startuoliams nereikia imtis didžiulio įsitvirtinusio operatoriaus. DHL ir Kuehne + Nagel, dviejų didžiausių brokerių, bendra pasaulinės rinkos dalis yra tik 6%. Ir nepaisant jų skaitmeninių siekių, esamų operatorių technologijos palieka daug erdvės tobulėjimui. Iš 20 didžiausių nusistovėjusių ekspeditorių 15, matyt, naudoja tą pačią paruoštą TMS siuntoms valdyti.” [1]

1. "Digital decongestants; Logistics." The Economist, 7 May 2022, p. 59(US).

A flotilla of startups promises to streamline the world's supply chains

"FORTO SEEMS an unlikely tech darling. It does not make gadgets, build the metaverse, forge cryptocurrencies or launch rockets. The six-year-old startup from Berlin, whose main business is arranging the transport of cargo from one place to an other, has nevertheless managed to raise nearly $600m from venture capitalists. Its backers reckon the firm can shake up the archaic freight-forwarding industry. It has tripled its business in each of the past four years, boasts Michael Wax, its boss, and is now one of the top ten forwarders in the busy trade lane between China and Germany. In March it announced $250m in new funding at a valuation of $2.1bn.

Forto is not the only freight tech startup attracting investors' attention. With the world's supply chains gummed up by bottlenecks, lockdowns and other disruptions, venture-capital (VC) firms are pouring billions into companies offering ways to make freight transport more efficient. In 2021 supply-chain-technology firms raised more than $62bn, according to PitchBook, a data provider, more than twice the figure in pre-pandemic 2019 (see chart). Of that, nearly $9bn went to freight-tech startups. PitchBook counts more than a dozen private freight-tech "unicorns", valued at more than $1bn. Viki Keckarovska of Transport Intelligence, a firm of consultants, expects more funding rounds this year.

Part of the appeal lies in the industry's size and potential for disruption. The freight-forwarding business alone is worth $475bn in annual revenues, reckons Armstrong & Associates, a supply-chain research and consulting firm. The broader "third-party logistics" market, which includes transport management and warehousing, generates sales of $1.4trn.

At the same time, freight remains technologically backward, especially the cross-border sort. "This industry is completely offline," marvels Zvi Schreiber, boss of Freightos, a digital-freight marketplace. "You would expect that shipping a container would be just as digital as booking a flight," he says, "but it is not at all." Just getting a quote can be a headache. "For 90% of the freight-forwarders today it still takes one or two days to come back with a price," says Mr Wax.

This is starting to change thanks in part to whizzy new software platforms designed to streamline the process of shipping freight overseas. Flexport, a digital freight-forwarder based in San Francisco, automates many of the supply-chain processes that were traditionally done manually, including getting quotes, filling out documents and co-ordinating with shippers and carriers along the supply chain.

The nine-year-old startup, which earned $3.2bn in revenues in 2021, was recently valued at more than $8bn. Project44, a supply-chain visibility platform from Chicago, lets retailers and brands monitor milestones in their cargo's journey, such as when it is loaded onto a ship, leaves the port or arrives at its final destination--all in real time. They can also make adjustments or reroute shipments if needed.

One common feature of such platforms is the ability to glean insights from data. Big shippers and logistics providers typically manage their shipments in software known as a transport-management system (TMS), which tracks shipments as they make their way along logistics networks, from the factory to the port and finally to the customer. Such systems, which have been around since the late 1980s, are useful databases of information, says Evan Armstrong, president of Armstrong & Associates. But they are not clever. "The first step was getting everything onto a TMS. Now the next step is taking those TMSs and making them intelligent."

Although recent supply-chain snarl-ups have played a part in boosting demand for logistics software, they are not the main force behind the boom. That, industry-watchers agree, would be Amazon. The e-emporium "is the absolute number-one catalyst for supply-chain transformation, no question", says Julian Counihan of Schematic Ventures, a VC firm. Whereas the supply chain has historically been seen as a cost centre, Amazon has turned it into a money-maker. With the rise of next-day and same-day delivery, consumers' expectations have changed dramatically. As shipping times plummet, logistics requires "way, way more supply-chain technology", says Mr Counihan.

Some scepticism is in order. Many of the startups look little different from the incumbents they are seeking to disrupt. Kuehne + Nagel, a big Swiss freight-forwarder, has invested heavily in digitisation even if it doesn't "sing and dance that they are a 'digital' freight forwarder", as Mr Schreiber of Freightos freely admits. C.H. Robinson, a big American logistics firm, is "really a digital freight broker", says Mr Armstrong. And although some of the big incumbents rely on antiquated technology, he adds, they have much more scale than any of the newcomers. That lets them secure lower prices from ocean liners, air freighters and other carriers.

Still, as Ms Keckarovska points out, the upstarts have a shot. The freight-forwarding market remains highly fragmented, so they need not take on a huge incumbent. DHL and Kuehne + Nagel, the two biggest brokers, have a combined global market share of just 6%. And despite their digital aspirations, the incumbents' tech nous leaves plenty of room for improvement. Of the 20 biggest established freight-forwarders, 15 apparently use the same off-the-shelf TMS to manage their shipments.” [1]

1. "Digital decongestants; Logistics." The Economist, 7 May 2022, p. 59(US).