Archive - Dec 2013 - Story

While 6% believe Bitcoin is an "Xbox game", we are impressed that 42% of Americans polled by Bloomberg know what the virtual currency is. Furthermore, 55% believe it is "not better" that Bitcoin be regulated...

Update: the shooter, who was a student at the highschool, is reported to have been killed as a result of a self-inflicted shot.

Another day, another school shooting. In a flashback to the Columbine tragedy, moments ago news broke that there were two people injured during an incident at Arapahoe High School in the 2200 block of East Dry Creek Road in Centennial, Colorado. According to Colorado's 9news, Police are calling it an "active shooter situation." No one is in custody at this time. The identity of the victims is not being released at this time. Arapahoe High School is a part of Littleton Public Schools. There are 70 different classrooms in the high school which covers a 254,000-square-foot area. There are 2,229 students that attend the high school. The school was built in 1964.

The $2.5 trillion hedge-fund industry is headed for its worst annual performance relative to U.S. stocks since at least 2005. As Bloomberg Brief reports, the funds returned 7.1% in 2013 through November; that’s 22 percentage points less than the 29.1% return of the S&P 500, with reinvested dividends, as markets rallied to records. Hedge funds are underperforming the benchmark U.S. index for the fifth year in a row as the Fed's inexorable liquidity pushes equity markets higher (and the only way to outperform is throw every risk model out the window). Hedge funds (in aggregate) have underperformed the S&P 500 by 97 percentage points since the end of 2008.

"You better watch out, you better not Skype, you better Log Out, you better not type, The NSA is coming to town..."

We present the first half of Goldman's 100 best charts for 2013. 

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. We are now in a situation that looks like a dead end for the paper money system. After the last cycle, governments have bailed out malinvestments in the private sector and boosted their public welfare spending. Deficits and debts skyrocketed. So will money printing be a constant with interest rates close to zero until people lose their confidence in the paper currencies? Can the paper money system be maintained or will we necessarily get a hyperinflation sooner or later? There are at least seven possibilities...

Chinese investment in London between 2010 and Q3 of this year has risen by a "ludicrous speed" comparable 1,500%, or from a frugal GBP54 million to over GBP 1 billion! And boy do the Chinese love London - according to the same report, over 50% of European property investment by Chinese buyers is now in London.  As a result, China is now the third-largest overseas purchaser in U.K. behind Germany and U.S., which invested GBP 1.2 billion and GBP 1.1 billion respectively. "We expect the pool of investors from China targeting London to grow significantly in the coming years. They will consider everything from urban regeneration sites through to trophy assets." Which brings us to point number two: the latest target of the Chinese hot money colonization is none other than bankrupt Detroit.

"We are evaluating the situation and will make the appropriate response," is how Iran's lead negotiator Abbas Araqchi reacted after accusing Washington on Friday of going against the spirit of a landmark agreement reached last month by expanding its sanctions blacklist. As AFP reports, Iranian negotiators quit the implementation talks late on their fourth day Thursday after Washington blacklisted a dozen companies and individuals for evading US sanctions. US Secretary of State Kerry, ever the optimist we presume, said "we’re making progress, but I think we’re at a point in those talks where folks feel a need to consult, take a moment," but Araqchi's comments on State TV give them little room for compromise, America's move "is by no means constructive and we are seriously critical of it."

There has been much debate in Washington about how to get the economy growing again.  Unfortunately, fiscal policy has done little to address the core of economic growth, which is the consumer, or the productive investment required to generate real employment and wage growth. As Schumpeter observed, "there are no entrepreneurs without capital." Simply put, there are no companies, and no jobs, without investment first. For anyone irrespective of ideology to deny the latter brings new meaning to willful blindness. Until we focus on creating an environment that leads to greater investment opportunities by business owners we will likely see a further deterioration in personal consumption.  There is currently a fine line between expansion and contraction within the overall economy, and while hopes are that 2014 will be a "breakout" year for the economy, the current economic data trends suggest otherwise.

Quietly, while no one was watching, European stocks have been pummeled lower in the last 2 weeks. Since the start of December, Spanish and Italian stock markets are down 6% and the broad-based Bloomberg 500 Index is down 4.75% - its biggest such drop in 6 months - to 2-month lows. With the EUR testing multi-year highs against the USD, and the earnings picture fading dismalling into the dark, it seems all those "believers" in a European recovery (on the basis of some "soft" surveys) have been proved wrong (or early?).

As the surreal facts and fictions surrounding Nelson Mandela's death grow (as hundreds breached security and flooded his coffin), the story of the "fake" interpreter goes from the sublime to the ridiculous. eNCA is reporting that Thamsanqa Jantjie - who stood mere feet away from the world's leaders (and waved his hands like a muppet) is being treated for schizophrenia, has also faced rape (1994), theft (1995), house-breaking (1997), malicious damage to property (1998), murder, attempted murder and kidnapping (2003) charges. Many of the charges brought against him were dropped, allegedly because he was mentally unfit to stand trial. But apart from that... we are sure his mom says he is really good boy...

Before you buy the dip "because this Bull market will run until 2016," please ponder this chart... Empirically, the stock market advances when credit is expanding and declines when credit growth slows. If credit expansion leads the stock market, the market is in trouble...

With just over two weeks left in 2013, here is a reminder, via AFP, of the main technological developments of the year.

A major issue is the growing disparity between rich and poor, the 1% versus the 99%. While the president’s solutions differ from Republicans, they both ignore a principal source of this growing disparity. The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price. (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm… dun, dun, dun… the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.

Hot on the heels of JPMorgan's "web cash" developments in the virtual currency arena, the CEO of Russia largest bank - Sberbank - appears to be looking for alternatives...

• *SBERBANK CEO GREF SAYS FUTURE BELONGS TO VIRTUAL CURRENCIES
• *GREF SAYS DEVELOPMENT OF VIRTUAL CURRENCIES 'CAN'T BE STOPPED'
• *SBERBANK CEO CALLS FOR GREATER REGULATION OF VIRTUAL CURRENCIES
• *SBERBANK MAY FORM OWN VIRTUAL CURRENCY ON BASIS OF YANDEX MONEY

When a pseudonymous 'Japanese' coder creates a crypto-currency that gains acceptance among thousands of vendors, it's dismissed by the powers-that-be and called a ponzi scheme by the MSM. One wonders what happens when the largest banks of the US and Russia sanction the 'idea' of a decentralized, unregulated, 'money' transfer system.