Bitcoin

• J.P. Morgan, U.S. Reach Historic Settlement (WSJ)
• OECD cuts global growth forecast (AP)
• Guess the profit margin: Wal-Mart Touts $98 TV as Holiday Seen Weakest Since 2009 (BBG)
• Republicans defy threat, block another Obama judicial pick (Reuters)
• Fed Ponders How to Temper Tapering Without Rate Increase (BBG)
• Wall Street uses 'merchant' workaround to cling to commodity assets (Reuters)
• PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says (BBG)
• Italy’s leader warns Germany of rise of anti-European sentiment (FT)
• Yellen Nomination for Fed Chairman to Get Vote This Week (BBG)
• As U.S. default threatened, banks took extraordinary steps (Reuters)
• NSA vowed repeatedly to fix its collection errors (AP)

It is time for the centrally-planned markets to "try" for the round number trifecta of 16000, 1800 and 4000 again, although it may be a tad more difficult on a day in which there is no double POMO and just $2.75-$3.50 billion will be injected by the NY Fed into the S&P - perhaps it is Bitcoin that will hit the nice round number of $1000 first? Overnight, the Chinese Plenum news rerun finally was priced in and the SHComp closed red, as did the Nikkei 225 as the Asian euphoria based on communist promises about what may happen by 2020 fades.  What's worse, the Chinese 7-day repo rate is up 140bp this morning to 6.63% amid talk of tightening domestic liquidity conditions, and back to levels seen during the June liquidity squeeze. All this is happening as China continues leaking more details and hope of what reform the mercantilist country can achieve, and how much internal consumption the export-driven country can attain: overnight there were also additional reports of interest rate liberalization and that the PBOC are to set up a floating CNY rate. Good luck with that.

Putting to rest fears that today's Senatorial hearing on digital currencies would crater Bitcoin (if in the immediate term), moments ago the digital currency priced in USD on the Mt Gox exchange, rose to yet another unpredecented price, hitting $850 moments ago, or about 50% higher than where it was this morning.  But you ain't seen nothing yet. Because at the same time, the Renminbi-denominated price of Bitcoin on BTC China, has the digital currency at 6780CNY. At a USDCNY exchange rate of 6.09, this means a price over $1100 per Bitcoin. Naturally, at this point we would suggest picking up the 20%+ free arb, however it is unclear how one can short the CNY priced leg of the transaction, or if for that matter, there is even an actual, liquid market in the currency. Because as the final chart shows, taken literally moments before we were going to post this article, BitCoin touched $900 on Mt Gox... and promptly tanked to just under $700, entering a bear market in the span of seconds on what appears to be about 10,000 trades.

"Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies" is the title of today's Senate hearing (from Homeland Security) on th eperils of Bitcoin. We are sure the exaggeration and exasperation will run high as Government offers up its Financial Crimes (and missing and exploited children) directors, and the de-centralized unregulated crypto-currency faces them down...

600 is a Bitcoin Bubble and Dow 16000 is Efficient Markets at work?

Well you buy what's working, right? Don't fight the Fed? Oh wait...

As Silk Road emerged from the "dark-web", other sites have appeared offering services that are frowned upon by most. As Forbes reports, perhaps the most-disturbing is "The Assassination Market" run by a pseudnymous Kuwabatake Sanjuro. The site, remarkably, a crowdfunding service that lets anyone anonymously contribute bitcoins towards a bounty on the head of any government official–a kind of Kickstarter for political assassinations. As Forbes reports, NSA Director Alexander and President Obama have a BTC40 bounty (~$24,000) but the highest bounty - perhaps not entirely surprising - is BTC 124.14 (~$75,000) for none other than Ben Bernanke. Sanjuro's raison d'etre is chilling, "as a few politicians gets offed and they realize they’ve lost the war on privacy, the killings can stop and we can transition to a phase of peace, privacy and laissez-faire."

As Bitcoin soars over $600, another alternative to the fiat currency system is being monkey-hammered lower this morning as status quo support does everything it can to rotate stocks above the key levels we discussed earlier... because stocks rising on anything but fundamentals cannot be exposed for the liquidity-fueled excesses a rising precious metals price would unveil.

While the relentless multiple expansion (if not so much earnings growth and certainly not revenue contraction) looks set to push all three main stock indices over the key psychological levels of 16000, 1800 and 4000, with the all time bubble high on the Nasdaq increasingly looking like the next big target, the stock market mania has nothing on Bitcoin, which only yesterday crossed $500 for the first time ever, and as of this morning is already 20% higher, having just crossed $600 minutes ago. Which means that anything prices in Bitcoin has entered bear market in just the past day. How high BTC goes, is nobody's guess (Raoul Pal had a truly stunning price target): once the buying frenzy kicks in, step aside, especially since China is increasingly looking like it may be jumping on board the latest mania.

One day before the Senate's digital currency hearing titled "Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies", Bitcoin is largely oblivious to any potential regulatory threats, either at the legislative or the city level, where as reported previously the New York superintendent is in a rush to enforce BitLicenses on businesses that accept BitCoin, and moments ago crossed $500 for the first time ever. Instead, it appears that as we also reported previously, the Chinese Bitcoin craze has reached the parabolic threshold, going so far as making Bitcoin an acceptable payment for real estate, which means that while for the time being Bitcoin becomes the alternative inflation protection medium for hundreds of millions of Chinese, all bets on how high it can get are off.

Thailand is known for a lot of things – quintessential white sandy beaches, hard partying nightlife, quiet Buddhist reverence... But what a lot of people don’t realize is that Bangkok is probably one of the most important cities in the world when it comes to illegal trafficking. Human trafficking. Narcotrafficking. Money laundering. Weapons. Forged documents. Etc. Bangkok is just as vital to these industries as New York or London to the global financial sector. And now, thanks to India’s sagging economy, they can add one more to this list: gold smuggling... In Thailand, however, gold demand is up 125% from the 3rd quarter of 2012.

Ben Lawsky, the New York financial services superintendent, has made it clear: he wants to regulate BitCoin now by issuing BitLicenses for business that conduct transactions in Bitcoin, and to that end he will conduct a public hearing to discuss the "burgeoning world of digital money." Participants will discuss the feasibility of a license that would make the virtual currency market more like those for other forms of money. In other words: it will make Bitcoin just like the fiat currency it is trying to replace, at least in the eyes of the government. At which point the primary utility of Bitcoin - as an unregulated medium of exchange- itself disappears.

Many observers believe the U.S. dollar (USD) will lose its status as the world's reserve currency sooner rather than later. Proponents of this view often mention China's agreements with various trading partners to settle trade in their own currencies rather than the dollar as evidence of this trend. More substantial evidence can be found in the diversification of reserves held by many nations. One set of observers has long held that the ideal replacement for the dollar is a hybrid currency issued by the IMF called SDRs. However, since the SDR is just an aggregate of fiat currencies, it cannot really change the fundamentals of the current status quo. Boiled down to its essence, the SDR is presented as a shortcut solution to deeply seated problems. The reserve currency problem cannot be fixed by a basket of fiat currencies, as fiat currencies (and the trade imbalances they generate) are the problem.

With a shiny red ballon dog selling for $58 million, perhaps it was time to take a little profit in the equity exuberance. S&P futures are down 9 points from last night's close - which in the new normal is considerable (sadly) - with no macro data headlines this morning to spark a move, we will be watching JPY (which for now is rallying awkwardly) for signs of ignition. Meanwhile, as the USD flatlines (despite dispersion in FX), Bitcoin just toppped $400 for the first time ever - doubling in the last two weeks. Precious metals are up modestly; treasury yields are limping lower; and European equities (and sovereign bonds) are having another tough day.

• China Pledges Greater Role for Market in Economy (WSJ), China vows 'decisive' role for markets, results by 2020 (Reuters)
• China expected to cut growth target to 7% (FT)
• World Trade Center Tower Debuts in Manhattan Leasing Test (BBG)
• Job Gap Widens in Uneven Recovery (WSJ)
• Khamenei’s conglomerate thrived as sanctions squeezed Iran (Reuters)
• Swiss referendum on wages of high earners stirs debate (FT)
• Obama to Nominate Massad to Head CFTC (WSJ)
• Japan readies additional $30 billion for Fukushima clean-up (Reuters)
• Target Fills Its Cart With Amazon Ideas (WSJ)
• Shadow banks reap Fed rate reward (FT)