Archive - 2013 - Story

Bitcoin is rapidly becoming part of the everyday lexicon. Following David Woo's investigation, National Australia Bank's Emma Lawson looks at its creation, use, and quality as "currency," and find that Bitcoin meets most, but not all the conditions required to be a currency. Lawson concludes Bitcoin may not be the most efficient monetary system, given the costs to create, and that the supply set-up can be seen as both an advantage (hyperinflation is not possible) but also a disadvantage (there are conditions which may create deflation). But, if enough people believe in it, and use it, it may be here to stay as a payment system. Simply put, its success (or failure) will depend on establishing trust and adoption.

With 72% of those polled believing "big Government" is more of a problem now than 4 years ago, it is hardly surprising that Ron Paul blasts "the failure of government is all around us" in this brief FOX news interview. Perhaps it is the fact that "Obamacare has been such a trasparent failure of big government," along with Keynesian economics, and the NSA debacles; that more and more of even the most liberal are realizing just what America has become. "It's really great news that people are starting to recognize this," Paul adds, because there is no way to replace the status quo "until people give up on what we have."

Only in the The Land Of The Free... (and always remember - it's for your own good).

In its preliminary proxy statement, Apple has responded publicly to Carl Icahn's proposal that it commit not less than a $50 billion share buy back program. Their response... an unequivocal, no! and here's why...

"The Board believes that the Company’s management team and Board are in the best position to determine what is in the best long-term interest of the Company’s business and recommends a vote AGAINST this proposal."

As they go on to explain - from already having the biggest dividend and buyback program to domestic cash use and knowing what best for their business, uncle Carl will not be happy.

Marc Faber has 3 very contrarian predictions for 2014 that we are sure will have the yammering yay-bobs screaming. While "everyone thinks stocks can continue to rise," Faber sees "the US market as expensive," and will return very little over the next few years. Furthermore, he adds, while "some stocks are not terribly expensive; but just like in the year 2000, [social media] stocks are grossly over-valued," and a short basket in the most egregious will return at least 30% next year. Lastly, Faber exclaims, "given all the money printing that is going on globally... physical gold is a good insurance."

"There's no near-term resolution in sight," warns TCW Group's David Loevinger, as "Thailand has entered an extended period of political instability." This uncertainty has led to foreigners abandoning the nation's stock market in record  size - and collapsing the Thai Baht at the same time. Why should US investors be worried? Thailand was the catalyst that started the 1997 Asian crisis, broke LTCM, and instigated the most epic experiments in central bank liquidity provision on record. With the Fed Tapering, both Indonesia and Thailand (and Turkey) are already seeing major currency collapses but of course, as long as US equities rise, no one cares (which is exactly what they said last time)...

As we slide into the last weekend of 2013, we read several articles this week that got us thinking about where the markets and economy are likely headed in 2014. There are many high hopes going into 2014.  Mid-term election years have a 67% chance of sporting positive returns, interest rates remain subdued along with inflationary pressures and the Federal Reserve is still pumping in $75 billion a month. Markets rising are not what we as investors should be thinking about.  Rising stock markets are easy.  What we should be pondering are the rising risks that could potentially take it all away when we least expect it.  Complacency has never been a hallmark of investor success.

TWTR collapsed ~15% off its highs (losing 1 BBRY or 2 JCPs) and FB tumbled 4%. Stocks overall broke their winning streak with a modestly red close but it was the action in the bond, commodity, and FX markets that stood out. Following copper's flash smash Tuesday, gold and even more so silver held their gains from the surge yesterday and pressed higher still today (silver's best week in 4 months). WTI crude closed at 2-month highs above $100. A massive range day in the USD driven by a EUR surge to test 1.39 (2-year high and fail) swung the world's reserve currency down 1% and back up 1% (in a mini-Bitcoin-like panic). Yield rose modestly on the day with 10Y crossing 3% early on, pulling back, then hovering there into the close for the highest close in 2.5 years. VIX was a one-way stret higher all day. All in all - a glance at these charts will make you wonder WTF...

Enter the Fed's recently announced Fixed-Rate Reverse Repo facility, which earlier today saw its greatest use to date in history, when a record $95 billion in Treasury paper was repoed out to the street for a 3 day term, at an 0.03% annual rate. Since there were 68 bidders in the operation, the average participant had an extra $1.4 billion in cash lying around to give to the Fed in exchange for holding Treasurys into year end.

It is time to crank up the Looney Tunes theme song because Wall Street has officially entered crazytown territory.  Stocks just keep going higher and higher, and at this point what is happening in the stock market does not bear any resemblance to what is going on in the overall economy whatsoever.  So how long can this irrational state of affairs possibly continue?  Stocks seem to go up no matter what happens.  If there is good news, stocks go up.  If there is bad news, stocks go up.  If there is no news, stocks go up.  On Thursday, the day after Christmas, the Dow was up another 122 points to another new all-time record high.  In fact, the Dow has had an astonishing 50 record high closes this year.  This reminds me of the kind of euphoria that we witnessed during the peak of the housing bubble.  At the time, housing prices just kept going higher and higher and everyone rushed to buy before they were "priced out of the market".  But we all know how that ended, and this stock market bubble is headed for a similar ending.

In order to finance the "culture industries' digital transition," France's Culture Ministry believes Facebook and YouTube should be included in the so-called "Culture Tax" that movie theaters and broadcasters currently pay. The argument is that these sites have become "professional" content providers of video-on-demand serives. But, not content in taxing our leisure time, Bloomberg Businessweek reports the French are considering taxing individual use of smartphones, tablets, and other electronic devices capable of accessing movies, music, or other media content. A "painless" 1% sales tax imposed on these items is expected to raise EUR 86 million annnually.

The only way this could be any better is if it was spotted on the back of a Tesla...

Can't go to bed without first spending 10 minutes on and then sleeping next to your smart, or cell, phone? You are not alone. According to a recent Pew study, America has never been more wired, or rather, unwired to some form of constant form of telecommunications. Among the findings: 91% of all American adults have a cell phone, with this number rising if one is male (93%), black non-Hispanic (93%), is between 18-29 (97%), college graduated (95%), lives in a city (92%), and makes over $75,000 (98%). But that's just the tip of the iceberg. As the chart below shows, Americans have never owned more, or had a broader selection of gadgets to chose from, than they do now.

As we noted earlier, political instability is spilling into social unrest:

*TURKISH POLICE SEEK TO BREAK UP PROTEST IN ISTANBUL: NTV TV
*TURKISH POLICE USE TEAR GAS, WATER CANNONS TO END PROTEST

The crowd was chanting "Thief Tayyip Erdogan" in reference to Turkey's graft-probe-implicated PM. And the nation's European cousins are "growing concerned" at events in Turkey, calling for "transparent, impartial justice."

In September 1939, six days after the United Kingdom declared war on Germany, Charlie Chaplin began filming one of his most epic films ever... and the first “talkie” for the silent film star. It was a courageous project - the ‘Great Dictator’ directly poked fun at Adolf Hitler. At the end of the movie, Chaplin looked into the camera and gave a stirring speech about timeless principles– peace, mutual respect, freedom from evil men who aspire to lead nations. This did not win Chaplin any friends in Washington who were keen to maintain official neutrality. And he paid dearly for it; the Great Dictator was the beginning of an entire decade of turbulent trouble between Chaplin and the US government. His rousing speech at the end of the Great Dictator calls for a world free of violence, intimidation, and government control. Unfortunately, we don’t get to live in that world. This our reality. The world is beautiful. Life is beautiful. But the leaders of humankind surely make it all damned hard to appreciate sometimes.