Archive - Mar 2014

The bankruptcy of the once largest Bitcoin exchange may be history, but now the real drama begins.

It should now be evident that America's foreign policy is to an extent being driven by our banking mess. Again and again, we see Washington, including Wall Street's handmaiden, the Fed, exporting monetary chaos implicitely in order to weaken the status of potentially competing reserve currencies. Until democratic governments around the world become strong enough to counteract the power of the plutocrats by taxing them, both their income and their wealth (as Sweden does) the revolving looting of sovereign governments and demolition of middle classes by the plutocrats and their corporations will continue.

3,000 Americans around the world renounced their citizenship last year. CNN Money introduces us to five U.S. citizens who have given up their passports -- or are thinking about it...

Following a triumvirate of macro misses from AsiaPac (South Korea unemployment surged, Aussie confidence plunged, and Japanese inflation tumbled), the credit concerns running riot through the collateral underlying China's shadow banking system continue to crush Copper (and iron ore) prices. Copper is limit down in Shanghai at its lowest since July 2009 - these size moves have only occurred twice in history (Lehman and the US downgrade). Japanese stocks are ignoring any ramp efforts in USDJPY and US equity futures are fading qucikly with AUDJPY....

Heinz was bought by Warren Buffett's Berkshire Hathawy (and 3G Capital) in February 2013 for $28 billion. Since then the firm has cut 3,400 jobs and closed factories in an effort to boost profits as they pay current boss Bernardo Hees $9.2 million. However, as The BBC reports, the most stunning dichotomy in this tale is former Heinz CEO William Johnson's $110.5 million payday for the final eight months of 2013... Perhaps more worryingly, Buffett has proclaimed this a "model for future buys." When will the President replace Immelt with Buffett as his jobs advisors?

Is America the greatest nation on the planet? The reality is that the United States is in a deep state of decline, and it is getting harder to deny that fact with each passing day.

And to think, all this medieval, zombie defense splendour can be yours for under $1 million!

It May be time for Obama to explain to Putin the whole thing about "costs" and "red lines" one more time, maybe over a two hour phone call this time so the former KGB spy finally gets it, because while Russia has been seemingly confused for the past two weeks, Moscow just successfully annexed Crimea, without spilling a drop of blood. Which is what Ukraine essentially just confirmed after its acting president, who attained his position after a violent coup and remains unrecognized by Russia, told AFP in an exclusive interview saying Ukraine will not attempt a military move to prevent the southern Crimean peninsula's breakaway in order not to expose its eastern border.

Having been vociferous over her support for the NSA's domestic espionage programs, we couldn't help but see the ironic hypocrisy of Senator Diane Feinstein's accusations that the CIA secretly removed documents from computers used by her panel to investigate a controversial interrogation program. As WaPo reports, Feinstein "is not taking lightly" the fact that the CIA appears to have violated the Fourth Amendment, which bars unreasonable searches and seizures, as well as various federal laws and a presidential executive order that prevents the agency from conducting domestic searches and surveillance. President Obama has since expressed "great confidence" in CIA chief John Brennan (unless of course he crossed a red line).

With Venezuela declaring war on the black-market dollar (and any and all capitalist free-market activity that produces margins above government mandates) the stories of empty shelves of toilet paper and food continue - as do the bloody protests (despite President Maduro's proclamation that the 'terrorists' have been beaten). But to truly get a sense of life in Venezuela, the following image may bring back ugly memories for some...

The news last week that bitcoin's founder had been sort-of/maybe/not-so-much “found” got ConvergExs's Nick Colas thinking about the importance of creation myths in business and economics. A key part of bitcoin's current appeal is anonymity, so the fact that the digital currency’s inventor is unknown highlights that central value proposition. The tech industry is full of creation myths that resonate with both general social messages and specific business models.  Hewlett and Packard, Jobs and Woz, Page and Brin – all began their businesses in garages, showing that anything is possible with a great idea. However, as Colas details below, the truth behind all these stories is, of course, far more complex than the idealized creation myths we tell about them.

With Goldman proclaiming that half the recent downturn in US macro data is due to "weather" and the rest of the hockey-sticking sell-side extrapolators fully entrenched on the Spring-will-save-us-all bandwagon (despite the manifold examples of the worst macro data misses being from regions that simply were unaffected by the winter storms), we thought the following chart would be of interest. RBC finds only a mere 19% of those surveyed "spent less" due to the weather - and 27% spent more!

While central bankers, asset-gatherers, and TV 'personalities' remain nonchalant of stocks being in a bubble, some are positively vociferous over the manipulated mania US investors are currently re-experiencing. Until the last few months, the new dot-com bubble had been quietly hidden behind the walls of the private equity world (as we noted here), but as the following chart shows, the bankers have found a willing audience for 'stories' and 'spin' as the percentage of firms IPOing with negative earnings soars to its highest since Feb 2000... that didn't end well and we suspect "peak-greater-fool" won't this time either.

In setting the price of money, we have given central bankers the power to effectively set the price of... everything. Make no mistake, this is a form of price controls; and one day (probably soon), future historians are going to look back and wonder how so many people could be bamboozled. We have somehow been conned into believing that the path to prosperity is for the grand wizards of the financial system to conjure paper currency out of thin air. Yet this notion of 'money backed by nothing' is an absurd fantasy that has failed every single time it has ever been tried before in history. We bring this up because the following chart highlights the Fed's margin of safety before confidence wanes...

It's that time in the quarter, when Jeff Gundlach takes the mic to walk everyone though his latest thoughts on the market, as well as the most recent capital allocation of his fund, DoubleLine, which like PIMCO, had a less than memorable 2013, although 2014 is certainly starting off on a far better foot for bond funds everywhere. Also who knows: with MBS guru, "convexity maven" Harley Bassman announcing today he is leaving Credit Suisse and joining Pimco, maybe Gundlach will shock everyone with an announcement that El-Erian is moving from Newport Beach and making Doubleline, and West LA, his new home?