Bitcoin

"Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals" the ICIJ's latest offshore weawlth expose begins. In addition to the usual list of who, what, where, why and when, we learn that once again the two largest Swiss banks are about to be embroiled in yet another money laundering scandal, this time involving the parking of wealth belonging to China's aristocracy - including its princelings - in various Caribbean, mostly British Virgin Island, tax havens. What is notable, if not unexpected, is just how pervasive the parking of offshore capital has been, and confirms that it is not inflow of money that the PBOC has to be afraid of when its internationalizes the Yuan, it is the outflow that will be far more worrysome. But the biggest stunner is the sheer size of the wealth transfer: according to ICIJ estimate, up to $4 trillion in "untraced assets" may have left China since 2000. These are truly epic numbers.

Fortune Magazine front page today: Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that "what I'm doing right now is a direct threat to fiat merchant banking."

"A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers. Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it. On the other hand, technologists — nerds — are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it. Eventually mainstream products, companies, and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start. What technology am I talking about? Personal computers in 1975, the Internet in 1993, and — I believe — Bitcoin in 2014."

The Forex market is dead and dying, in parallel with the US economy; which is fitting, considering the US is still the world reserve currency.  

Significant harbingers that have changed the Forex market forever:

Basically, I'm building a more efficient financial system.

• NSA phone data control may come to end (AP)
• China to rescue France: Peugeot Said to Weigh $1.4 Billion From Dongfeng, France (BBG)
• China to rescue Davos: Davos Teaches China to Ski as New Rich Lured to Slopes (BBG)
• Hollande’s Tryst and the End of Marriage (BBG)
• Iran has $100 billion abroad, can draw $4.2 billion (Reuters)
• Target Hackers Wrote Partly in Russian, Displayed High Skill, Report Finds (WSJ)
• Nintendo Sees Loss on Dismal Wii U Sales (WSJ)
• Goldman's low-cost Utah bet buoys its bottom-line (Reuters)
• Royal Dutch Shell Issues Profit Warnin: Oil Major Hit by Higher Exploration Costs and Lower Oil and Gas Volumes (WSJ)
• EU Weighs Ban on Proprietary Trading at Some Banks From 2018 (BBG) - so no holding of breaths?
• Sacramento Kings to Accept Bitcoin (WSJ)

Why the dollar may have a huge rally in 2014

Overstock CEO Patrick Byrne goes to town on Keynesian Crony Paul Krugman in this brief interview. Byrne blasts Krugman for everything from his "unethical" involvement in the Enron debacle to his present day view that "the market failed so we need more government; or freedom failed so we need more government." Noting that Krugman may have done "some great work before he went crazy," he rants against the Fed apologist for his "bitcoin is evil" comments adding that he hopes "Bitcoin can destroy central banking." Byrne pulls no punches in his attack on Krugman and his "Keynesian magic money tree theories," as he explains why the so-called 'economist' would be against a 'bounded currency'.

The Baltic Dry Index, a measure of commodity-shipping rates, has collapsed 39% in just the nine trading days of 2014. It has fallen from 2277 at the end of December 2013 to 1370 today (see chart). This key indicator of global economic health is a warning signal for the global economy in 2014. 

Earlier we pointed out that mortgage origination at Wells Fargo - the bank's bread and butter - is crashing at an unprecedented pace, and as per the conference call, Q1 isn't looking any better. Naturally, it stood to reason that the bank would seek alternative business and product lines to supplant the declining revenue it used to generate when it would originate some $100 billion in mortgages every quarter, now half that number. However, not even in our wildest dreams did we predict just what this "alternative" product would be. Because, as the FT reports, Wells Fargo, the largest US bank by market cap, is currently exploring Bitcoin as just that revenue replacement source. Per the FT: "Wells’ anti-money laundering chief, Jim Richards, has launched a group to examine how it might safely offer Bitcoin-related services or banking arrangements to virtual currency entrepreneurs, according to people familiar with the initiative."

"The Fed's policies have actually led to a lot of problems around the world," Marc Faber begins his discussion with Bloomberg TV's Trish Regan, especially "people in the lower income groups [who] spend say 30% of their income on energy, transportation, and so forth, electricity and gasoline." The Gloom, Boom & Doom Report author goes on to discuss everything from how the Fed is creating a two-class system around the world, the inexorable growth of governments, buying votes, Bitcoin, interest rates, wealth taxes, and overall market valuations. "We are in a gigantic financial asset bubble," Faber explains, "everybody's bullish," but he sees a slowing global economy (as do we e.g. Baltic Dry Index); "[The bubble] could burst any day. I think we are very stretched." Faber is on fire...

"Bond King" Bill Gross may not have had a good year following over $40 billion in redemptions from his $250 billion Total Return Fund, but another aspirational Bond King, DoubleLine's Jeff Gundlach, had an even worse year on an relative basis, when his Total Return Bond Fund saw $6 billion in redemptions ending the year at $30.9 billion in AUM following seven consecutive months of withdrawals. So in his attempt to start the new year on better footing, here is his first webcast (as usual open to the public), titled "Let the Race Begin! 2014 Markets: Year of the Horse", in which as usual Jeff will discuss the economy, the markets and his outlook for the best investment strategiest of 2014. Let's hope that for bond fund manager, that 2014 is not just another "year of the donkey", as was the case in the past year which everyone managing duration would rather forget.

Medical marijuana is already legal in 20 states plus the District of Columbia. It is also completely legal for recreational use in two states; Colorado and Washington State. Nevertheless, big daddy government still thinks it knows best and continues to classify the substance as a schedule one drug under federal law. As such, the banking system, (including state banks) is simply to afraid to get involved. Legal marijuana merchants business is conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards. “Banking is the most urgent issue facing the legal cannabis industry today,” said Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C. Enter Bitcoin - At least one marijuana dispensary in Colorado has reportedly begun accepting bitcoin.

With over 1,000 new merchants adopting Bitcoin every week, it is perhaps not surprising that, as NY Post reports, the first Bitcoin ATM is about to debut in New York City. Following success in Canada and Europe, Brooklyn native Willard Ling, 30, is set to introduce the first bitcoin ATM to New York City at the East Village bubble tea shop 'Just Sweet'. State regulators with the Department of Financial Services are expected to hold hearings later this month to discuss how the digital currency should be regulated; and until then, Ling’s bitcoin ATM will sit in his apartment.

#Bitcoin's first full day on @overstock.com was a huge success: 840 orders, $130,000 in sales. Almost all new customers. #stunned

— Patrick M. Byrne (@OverstockCEO) January 10, 2014

This is potentially big news (and has driven the price back above $1000) and any retail CEO worth their salt will likely begin to look into Bitcoin adoption.