“They Can No Longer Squeeze Pershing Square”: Ackman Converts Entire Herbalife Short Into A Put

Pershing Square’s Bill Ackman, who has been engaged in a 5-year long feud with Herbalife, betting its stock price would tumble to zero, came one step closer to admitting defeat on Wednesday when he told CNBC that his hedge fund recently restructured its position in the nutrition and supplements maker. “We converted the short position into a put position,” Ackman said in an interview with CNBC, adding that his firm’s potential losses on Herbalife will now be capped at 3 percent of the firm’s capital. “We can still lose money but the loss is capped.”

But the best part of the interview was the following admission:

“We’ve been entirely right on our Herbalife investment in terms of the fundamentals of the business. We’ve been wrong on the share price. A big part of that is the fact that companies repurchase a huge amount of shares,” Ackman said, confirming what we said back in 2012, namely that as a result of the company’s ongoing preference – following the advice of Carl Icahn – to reuse every dollar of cash flow to fund stock buybacks, those short the name stand to suffer tremendous pain… like Ackman. It’s also why HLF stock price just hit $73, more than 3x higher from where Ackman put on his short, and up more than 50% YTD.

“A big part of this is trying to cause a short squeeze. We just did something, which we will announce later this afternoon,” he added. “What we did recently in the last few weeks is we converted our entire [Herbalife] short position into a put position. And as a result there is no longer an opportunity to squeeze Pershing Square.”

That remains yet to be seen.

Ackman also said that his firm has 3 percent of its capital in derivatives betting against Herbalife’s share price.

“Ultimately the [negative] fundamentals will prove right,” he told CNBC. “Because it is in the form of derivatives, the upside is great and we don’t have these risks associated with a short squeeze.”

Of course, with puts Ackman just has that whole theta decay thing to worry about, but let’s just ignore that.

It has not been a good year for Ackman, with herbalife shares up 51% year to date through Tuesday, more than 3x the S&P 500’s 15% return. Ackman has also been hit in recent years with not only his terrible investment in Valeant Pharmaceuticals but also Chipotle Mexican Grill.

There was some good news for long-suffering investors: Ackman revealed his fund is “well” off its bottom by 20%,  and return recently turned positive for the year.

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Is It Time To Reconsider A World View Where Most People See The Glass Half-Empty?

"If you can't beat 'em, join 'em" seems to be the clarion call from many in the markets as traders who should, and do, know better, hold their noses, pluck out their eyes, plug their ears and buy stocks with both hands and feet. As former fund manager Richard Breslow noted this morning, there's something different with this equity rally.

Different indeed…

Via Bloomberg,

The first thing I thought of after watching the markets trade today was, “boy this is going to hurt.” Oh, and that I would have to get additional toner because the almost universal sea of green on my equity screens is using up a lot of one color of ink. I realize everyone hates them, but what a waste of an opportunity watching the ship sail further and further away without you.

But today does feel a little different.

 

You’re not seeing headlines that say things like, Asian stocks are mostly up following New York indexes. You see Nikkei 225 absolutely flying as reported earnings surprise strongly to the upside. And it’s not limited to Japan. Korea’s Samsung rose to an all-time high after “a leadership reshuffle and increasing dividends amid record profits.” It’s not even just tech (Sony), the Hang Seng was led higher by insurers and casinos on “October revenue data.” The MSCI Asia Pacific Index has been moving higher impulsively.

 

European shares didn’t sit back and watch their Pacific counterparts have all the fun. They’re adding to the “longest winning streak in a month, with Nokian Renkaat leading gains in auto shares after its earnings.” I’ll bet you’ve never even heard of NRE1V.

 

As the Bloomberg Commodity Index goes into hyper-drive, mining stocks are following. Metals prices do this when demand is strong, i.e. economy is expanding. It may not be a coincidence that Swiss manufacturing PMI surprised to the upside as they catch some European tailwind.

 

As my colleague Courtney Dentch pointed out, both year-over-year improvement in results and earnings upside surprises are running at quite a high pace for the S&P 500 companies that have reported so far. The E-Mini future printed an all-time high this morning after a night of steadily rising. I know it’s natural to be skeptical about all things Washington, but if earnings are going to propel prices higher, you have to put politics, and apparently tax policy, on the analytical back-burner until something breaks. Despair not, one day it’ll happen.

 

We can have all the debates we want about stretched valuations and the like. We can agree the Fed has prompted some fiercely aggressive investing (euphemism). That’s all fair. But if demand and earnings keep rising we’ll have to reconsider a world view where most people see the glass as half-empty.

 

And it also will explain why the Fed has been able to embark on a series of dovish hikes. Who knows, they really might be behind the curve.

Breslow ends on with a darker tone still with a note to would-be sellers: it’s not a viable investment thesis to hope the boat sinks just because you failed to get on board.

Agreed, but sometimes hubris comes right before the fall…

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5s30s Curve Collapses To Flattest Since November 2007

Ignoring the bullish ADP report, the yield curve, and especially the 5s30s has collapsed, bear flattening to 82.8bps, the lowest level since November 2007.

The long end leads the gains across the curve, with 30Y yields richer by 1.7bp on the day, breaching 2.86% for first time since Oct. 20; while 5Y yields are cheaper by 1.5bp.

The catalyst, as reported moments ago, was the refunding announcement by the Treasury, which kept refunding auction sizes fixed contrary to expectations by some that there may be an increase in some auctions, as well as the lack of mention of ultra-long issuance, confirming Mnuchin’s comments from earlier this week. The TBAC minutes also suggested the February 2018 announcement would contain increased issuance in bills, 2-, 3-, and 5-year sectors, shifting new issuance to the short-end and leaving the long-end untouched.

As a reminder, on Monday Treasury Secretary Mnuchin said that the Treasury doesn’t see a lot of demand on ultra-longs and that they will continue to monitor the market for ultra-longs, which was surprising considering the recent Argentina 100 year issuance was 3.5x oversubscribed.

Finally, putting the divergence in context, since the announcement of QE3…

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Stockman Slams Mueller’s Mugging Of America: The Case Of Baby George Papadopoulos

Authored by David Stockman via David Stockman's Contra Corner blog,

This is how the Deep State crushes disobedience by the unwashed American public. It indicts not only ham sandwiches but, apparently, political infants in diapers too, if that's what it takes. Hence the sudden notoriety of Baby George Papadopoulos, who pled guilty to "lying" about an essentially immaterial date to the FBI.

Oh, and by all signs and signals that plea came after this 30 year-old novice had been wearing a wire for several months.

So here's how this noxious act of bullying by Robert Mueller's Federally-deputized thugs came down. It seems that during the early months of 2016, when Trump was winning primary after primary against all mainstream media expectations, the Donald's establishment betters began attacking his foreign policy credentials with special malice aforethought.

That was mainly owing to his sensible suggestion that it would be better to seek rapprochement with Russia rather than pursue Hillary's Cold War 2.0 and that 25 years after the disappearance of the Soviet Union from the pages of history that NATO was obsolete.

Since this totally plausible (and correct) viewpoint was deeply offensive to the Imperial City's group think and threatened the Warfare State's existential need for a fearsome enemy, Trump's ruminations about making a deal with Putin were belittled. They were, in fact, attributed not to a fresh look at the realities abroad or the possibility that homeland security does not require a global empire, but to the candidate's lack of any pedigreed foreign policy advisors.

Indeed, when it came to the Republican-oriented foreign policy establishment—nearly all of which had joined the Never Trump cause—-the Donald added insult to injury. That is, by suggesting he got his foreign policy views watching TV (like most of Washington) and that he could do a better job against terrorism than the Pentagon generals (not hard).

At length, however, the "who are your foreign policy advisors" meme got so relentless that the Donald relented. On March 21, 2016 he announced a group of five advisors that exactly no one who was anyone in the Imperial City had ever heard of, and for good reason.

The group included two recycled DOD flunkies, an anti-Muslim fanatic from the Lebanon religious wars and two kids of no accomplishment in the foreign policy field whatsoever. In a word, the foreign policy establishment's boycott of the Trump campaign at that stage was 100% effective.

Indeed, under a snarky headline the next day about how the new Trump foreign policy team "baffles GOP experts", Politico laid on the disdain good and hard:

“I don’t know any of them,” said Kori Schake, a research fellow at Stanford University’s Hoover Institution and a former official in the George W. Bush State Department. “National security is hard to do well even with first-rate people. It’s almost impossible to do well with third-rate people.”

One of the five, of course, was Carter Page who had actually spent time in Moscow years earlier working as a stock broker and didn't exactly share Hillary's fulminations that Putin was Adolph Hitler incarnate.

So Politico made very clear that Mr. Page was apparently some kind of Kremlin stooge for uttering true facts about Russia.

To wit, that Russia had not "invaded" Ukraine, but to the contrary, the February 2014 coup on the streets of Kiev was fomented, funded, and illegally installed in power by Washington agents on the ground. Among others, these included the US Ambassador to Ukraine, Assistant Secretary Victoria Nuland ("Yats is our man"), CIA operatives under embassy cover, the National Endowment for Democracy and its NGO subalterns and, especially, the War Party's roving Viceroy, Senator John McCain:

Page, who has worked for Merrill Lynch in Moscow, has accused the State Department's top official for Ukraine and Russia, Victoria Nuland, of "fomenting" the 2014 revolution that overthrew Ukraine's government. That charge is often lodged by pro-Kremlin media outlets but is strongly disputed by the Obama administration.

In this context, Politico made short shrift of young Mr. Papadopoulos and properly so. This kid had no more qualifications to be named among the top five foreign policy advisors to the then near-presumptive GOP nominee than anyone else in the DC phone book—-although at the time Baby George was called to duty he was apparently domiciled in London and perhaps listed in its phone book.

Indeed, after rounding up an ex-Pentagon bean counter, a washed-up general who had "managed" (not well) the US "occupation" of Baghdad in 2003-2004 and Walid Phares, the Lebanese war veteran who claimed that the Moslem Brotherhood had infiltrated the State Department and was fixing to spread "Sharia law" to the towns and villages of America, you almost have the impression that the Donald instructed Ivanka and Jared to check out the Mar-A-Logo sandbox for candidates to round out the rooster.

That's apparently where Papadopoulos came from because he had graduated from college only in 2009, got two more degrees by 2011 in London, functioned as a junior researcher at Hudson Institute for several years and then "worked" on Ben Carson's presidential campaign for three months—- if you consider that an actual job.

Per Politico at the time of the announcement:

One of them, George Papadopoulos, is a 2009 college graduate and an international energy lawyer. Papadopoulos had previously advised Ben Carson's presidential campaign. According to his LinkedIn page, he was a researcher at the conservative Hudson Institute in Washington, D.C., before joining the London Center of International Law Practice, which describes itself as dedicated to "peace and development through international law and dispute resolution."

 

Papadopoulos' LinkedIn page also boasts about his role at the 2012 meeting in Geneva of Model U.N., the student role-playing exercise on international diplomacy. It adds that he has "had experience lobbying foreign policy resolutions on Capitol Hill by means of coherent and concise arguments."

In a word, Baby George's "crime" came about in the process of trying to put on his Big Boy Pants and get noticed by higher-ups in the campaign. So doing, he came into contact on about March 14 with a London professor who claimed to be plugged into Russian sources with "dirt" about Hillary.

Needless to say, the London professor, one Joseph Mifsud, who had formerly served in a high ranking government position in his native land of, well, Malta (as assistant to the Maltese foreign minister), didn't know anybody in the Kremlin, either. That is, Mifsud was actually a no count talking to a another no count.

Prior to his appearance on the FBI's fake stage of international intrigue, in fact, Mifsud had been a "director" of some sort at the London Academy of Diplomacy—–a place that grants masters degrees to young people earnestly endeavoring a career in making diplomacy, not war. That is to say, by the standards of the Imperial City it's a kind of Quaker Meeting for idealistic diplomats on the road to Nowhere.

As it turned out, George never made any contact with any Russian state officials, didn't have any meetings with clandestine Putin operatives and came up with no anti-Hillary dirt at all—-despite months of trying and sending loads of essentially unanswered emails up the chain of command at Trump Tower.

In fact, despite sending six emails volunteering his eagerness to set up a meeting between the Donald and Vlad Putin nothing happened. Even the government's charging document admits these missives were based on Papadopoulos' conversations with a "Russian National" who claimed to be Putin's niece, but wasn't; and someone who claimed to have contacts at Russia's Ministry of Foreign Affairs (MFA), but also, apparently, didn't.

As it turns out, the latter unnamed go-between was one Ivan Timofeev,  a program director at a Russian government-funded think tank called the Russian International Affairs Council. The latter was actually a glorified welcome wagon which hosts public meetings with prominent visiting politicians and public figures from the U.S. and other countries.

Indeed, one guest speaker at this forum had been none other than Obama's former US Ambassador to Russia, Michael McFaul. The latter is actually a fire-breathing Russophobe who can hardly be considered a pal of Putin's.

In any event, the government's charging document makes clear that Baby George's emails got nowhere. Indeed at one point the zealous Mr. Papadopoulos got swatted away by Paul Manafort, who—

…. replied to one such request by saying that "Trump is not doing these trips. It should be someone low-level in the campaign so as not to send any signal."

So finding no contacts, no meetings, no"collusion" or anything else validly related to Mueller's mandate, the latter's legal gunslingers came up with the usual default "crime" when a criminal investigations comes up empty. To wit, Papadopoulos allegedly perjured himself by telling the FBI early this year that he had met the no count London professor before beginning his service as a Trump advisor.

And that was true enough—except by the lights of the hair-splitting Torquemadas on Team Mueller.

It seems young George met the London Professor on March 14, about a week before the Trump campaign's official announcement of its Team of Five. But in the kind of twisted gotcha that only jerks with a badge and gun can come up with, Papadopoulos stands guilty of perjury by his own (coerced) plea.

That's because at the time of the meeting he had already been recruited from the sandbox and "knew" he would be appointed to an advisory committee.

So what!

Trump apparently met with the Five only once and that was for a photo op, and no one running the campaign paid much attention to them, either.

Still, Baby George's carelessness about the exact dates and sequences of utterly irrelevant and inconsequential events is enough to get him time in one of Uncle Sam's hospitality suites:

Defendant PAPADOPOULOS acknowledged that the professor had told him about the Russians possessing "dirt" on then-candidate Hillary Clinton in the forms of "thousands of emails", but stated multiple times that he learned the information prior to joining the Campaign. In truth and fact, however, defendant PAPADOPOULOS learned he would be an advisor to the campaign in early March, and met the professor on or about March 14, 2016……

That's all she wrote. This damning nugget appears on page 2 of the "Statement of Offense" and the balance of the 14 pages is a complete farcical joke. Papadopoulos' failure to get anywhere with the Russians in his digging for dirt on Hillary would make for a worthy episode starring the rascals of South Park, but that's about all.

Anyone not involved in the campaign to reverse the 2106 election and remove the Donald from office should be forgiven for splitting a gut laughing when reading this hideous and utterly bogus case against Baby George Papadopoulos.

Every single player in the cast of characters identified by Team Mueller—mostly unnamed by the prosecutors but already sussed out by the press—had no ability to influence anything, let alone 139 million voters in a US election bombarded with upwards of $20 billion worth of reported and unreported campaign expenses, and the mainstream media's free nonstop campaign in behalf of Hillary.

Yet the document and Monday morning's announcement are also cause for alarm. The "crime", if there was any, was the $10 million that the DNC and Clinton campaign spent on the Trump Dossier. Those scurrilous documents were actually purchased for real money on the back streets of Moscow and do cite actual, live Russian MFA sources, not allegedly "MFA-connected" people, who apparently weren't.

But, of course, that's not what's coming down. The self-righteous Mueller, who turned a blind eye to the massive stench of corruption coming out of the Uranium One deal in 2009/2010 when he was FBI director, has only one mission in mind: To mug the American electorate for its audacity in electing Donald Trump President, thereby disturbing the equanimity of the Deep State's untethered rule.

The truth of the matter, however, is nearly the opposite. Prosecuting anyone—one either side of the partisan aisle—-for marginal and tangential contacts with a Russian government purportedly wishing to "influence" the US election amounts to the height of hypocrisy.

Meddling in the political life, elections and governance of virtually every nation on planet earth—-enemy, foe, rival, neutral and friend, alike—is what Imperial Washington does.

It spends more than $1 billion per year on propaganda operations by the NED and the various agencies of the Board for International Broadcasting. And that's to say nothing of the tens of billions spent by the CIA, NSA and other elements of the $75 billion per year intelligence community hacking and stealing virtually all communications that course through the worldwide web.

But all of this is lost on the beltway media brats who front for the Deep State. Here is what one of the worst of these scolds and toadies, a "journalist" named Mike Allen, had to say about the Baby George case on his pretentious Axios platform this AM:

Be smart: There is zero doubt — and piles of new evidence — that Russia manipulated our election. This next phase will show if Trump himself was aware or involved, or has any interest in doing anything about it — and how extensively America's most powerful companies enabled the mass manipulation.

Is this guy kidding?

If there is any evidence of Russia meddling or of hacking the Podesta and DNC emails, it lies right there in the massive NSA server farms which capture all incoming communications to the US and outgoing, too. It is retrievable in an instant, but hasn't been because it's not there.

We didn't need Mueller's bully boys to bushwhack Baby George to find that out.

Then again, if you don't recognize that the Deep State and its minions in the press and both party establishments in Washington are pushing the nation to an extra-constitutional removal of a sitting President, you simply aren't paying attention.

So at least stay out of the casino. That's where the temblors will hit first.

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Trump Blames Terrorist Attack on Chuck Schumer, Notre Dame to Drop Contraception Coverage, Cops Fail at Halloween Photoshop: A.M. Links

  • New York Gov. Andrew Cuomo announced this morning that a note found at the scene of last night’s New York City attack references the Islamic State.
  • Donald Trump is blaming the NYC attack on U.S. immigration policies he attributes to New York Democratic Sen. Chuck Schumer. “The terrorist came into our country through what is called the ‘Diversity Visa Lottery Program,’ a Chuck Schumer beauty,” Trump tweeted Wednesday morning. “I want merit based.” (The program was approved in 1990 and signed into law by George H.W. Bush.)
  • Americans have a lot of terrible ideas about free speech.

  • The University of Notre Dame is the first prominent organization to announce that it will cease to cover birth-control under its health-insurance plans following the Trump administration’s rollback of the Obamacare contraception mandate.
  • A USA Today headline invites people to “read the names” of 57 men the FBI helped take down for attempting to have consensual sex with another adult.
  • Twitter is expected to soon roll out 280-character posting capabilities for all users.
  • The feds are interfering with Maine’s new food sovereignty law.
  • A study out of Chile suggests “20 percent of currently-enrolled poor students will lose seats to wealthier students under a free-tuition policy that fixes capacity.”
  • Lol:

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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Treasurys Gain, Curve Flattens After Refunding Auction Sizes Remain Unchanged

When previewing today’s FOMC announcement, we said that at least according to some, this morning’s refunding announcement may have a bigger impact on the market as there is less consensus (and more confusion) about what would be unveiled. As JPM analyst Jay Barry told Bloomberg, the quarterly refunding announcement at 8:30am ET Wednesday “has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon” as participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February:

“There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,” specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective. “If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening.”

Furthermore, as Bloomberg summarizes, going into today’s announcement, market participants were divided leading into the announcement with most seeing no increase immediately to auction sizes just yet, seeing only bill auction changes for now: Barclays, NatWest, Bank of America, Credit Agricole, Jefferies, Stone & McCarthy Research Associates and Citigroup all saw no change; JPMorgan Chase, among other, looked for small increases across maturities.

Well, moments ago the US Treasury reported the breakdown of the refunding auctions, which led to Treasuries promptly paring some early losses (and leading to the predicted muted curve flattening) after the Treasury Department maintained its coupon auction sizes over the next three months, while the refunding statement did not comment on ultra-long issuance.

Specifically, the Treasury announced a $62.0 billion Refunding package this morning, unchanged from recent Refundings. The Refunding auctions will consist of a $24.0 billion 3-year note, a $23.0 billion 10-year note and a $15.0 billion 30-year bond. Treasury has held the 3-year note auction size steady at $24.0 billion since the beginning of 2015, and the 10-year and 30-year Refunding auction sizes steady since February 2016.

However, while Treasury said again this morning that they will not change the size of nominal coupon auctions during the quarter ahead, they did note that the beginning of the Fed’s balance sheet roll-off means they expect to announce “gradual adjustments” to nominal coupon and 2-year FRN auction sizes at the February Refunding. While the sizes of those changes remain to be decided, they expect the result will be that the weighted average maturity of debt outstanding will stabilize around current levels, “with the caveat that unexpected large changes in borrowing needs could have an unforeseen impact on future issuance and ultimately the level of WAM.”  To wit:

Given the announced changes to the Federal Reserve’s reinvestment policy for its System Open Market Account (SOMA) portfolio and projections for the fiscal outlook, in addition to increasing bill supply, Treasury anticipates announcing gradual adjustments to its nominal coupon and 2-year FRN auction sizes at the February 2018 refunding.  The magnitude and allocation of increases to auction sizes will depend in part on projections for the fiscal outlook, as well as feedback from market participants.

 

Based on current fiscal forecasts and internal Treasury modeling, it is anticipated that these changes will likely result in a stabilization of the weighted average maturity (WAM) of debt outstanding at or around the current levels, with the caveat that unexpected large changes in borrowing needs could have an unforeseen impact on future issuance and ultimately the level of WAM.  Any adjustments will be made in a manner consistent with our practice of being regular and predictable.

The take home for the market, however is that the TSY punted on the decision for rising auction sizes, saying it plans to address changes in any seasonal borrowing needs over the next quarter through changes in regular bill auction sizes and/or cash management bills.

As Bloomberg details, the Treasury said given Fed balance sheet unwinding plans, it “anticipates announcing gradual adjustments to its nominal coupon and 2-year FRN auction sizes at the February 2018 refunding.” These changes are anticipated to result in “a stabilization” of the weighted average maturity of debt outstanding at or around the current levels; while unexpected large changes in borrowing needs could have an “unforeseen impact on future issuance ultimately.”

The TBAC minutes also signaled an increased issuance in 2-, 3-, 5-year sector “is attractive” and added that extraordinary measures will allow the government to continue to meets its payment obligations through January 2018,

The Treasury concluded that “it is currently too early to provide a more precise forecast as to how long the extraordinary measures will last” and, perhaps most importantly, the Treasury did not comment on study of issuing ultra-long bonds in quarterly refunding statement.

And an interesting note at the end of the TBAC minutes:

Treasury believes that it is prudent to regularly test its contingency auction infrastructure.  Treasury’s contingency auction system has been used routinely over the last several years to conduct mock auctions.  Within the next quarter, Treasury intends to conduct a small-value test auction using its contingency auction system. More details about this small-value auction test will be announced at a later date. This small-value auction should not be viewed by market participants as a precursor or signal of any pending policy changes regarding Treasury’s existing auction processes.

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Is Blockchain Ushering in a New Era of Deal-Making?

 

In the ever-expanding modern global economy, international deal-making is an integral part of trading, investments, and exchanging value across national borders. Dealings on a domestic platform are easier to conduct, where contract-driven activities can be verified in person and more reliably, without leaving much room for fraudulent activity or valuable information to be compromised.


For international economic ventures to proceed, contracts must be signed and managed remotely. This may prove to be a dubious notion when operating with the help of today’s array of unstandardized and haphazard online circuits, which can often prove inauthentic and put either or both parties at risk. Signatures can be superimposed illegally, data can be stolen, and the overall sanctity and confidentiality of the contract violated, not to mention the harried process of maintaining these relationships. For these issues and more, blockchain is increasingly considered a fitting solution.


The Status Quo is Stuck

One will encounter several counterintuitive digital infrastructures online when attempting to locate desirable personnel and contractors. These include posting advertisements in local forums or websites like Craigslist. There are often delays in delivery with little accountability, and few records to prove the reliability of applicants.

Foreign exchange regulations often hinder the flow of broader online dealings as well, and can put significant roadblocks in the timely completion of a contract. Often the wait for a payment to be processed lasts for days, and the banks involved on either side may unduly halt payment processing, owing to rigid governmental mandates. Platforms like Upwork, Freelancer and PayPal impose draconian rules on contractors and vendors, requiring minimum deposits and taking absurd fees. Dispute settlements on these platforms can lead to sizable monetary losses for either party involved and are often drawn out, crippling smaller businesses who suffer from greater exposure to cash flow volatility.

Start-ups and other smaller businesses also use content management systems and other traditional platforms like email to maintain contracts with their clients and employees, make economic transactions, and guide personnel. These carry the risk of hacking, levy fees, and insist upon a level of maintenance that adds to overhead. Keeping these hindrances in mind, it is evident that one needs a more autonomous solution for smoother dealings across the world: a medium that will help overcome the hiccups and larger shortcomings, and guarantee security for all involved.


How Blockchain Can Help

Blockchain is a distributed ledger that decentralizes deals in a way that encourages transparency and autonomy, without the threat of hacks or hefty fees. Professionals and businesses across numerous fields of work will soon be able to transact via platforms like Confideal, which put a familiar interface on the once-complicated process of creating smart contracts. These blockchain-based agreements allow two parties to exchange value based on a set of conditions, and blockchain can automate their operation without oversight because of its data irrefutability. There is no longer an advantage in hiring an intermediary to enforce proper conduct in business relationships.

A Confideal blogpost explains that prior to the mass adoption of smart contracts, their legal status needs to be assessed in order to choose the appropriate smart contract model suitable for a particular jurisdiction. “To put it simply, code is not law, but smart contracts created on a platform enabling the execution of said contracts and dispute resolution may be one.”

 

There is greater transparency in conducting dealings through blockchain technology. The permanent ledgers in a blockchain environment require transactions to be permanently recorded, and the cryptographic standards in use make it impossible for third parties to hack or compromise deals. Data tampering is impossible because of the strict node consensus rules required to alter blockchain entries, and every transaction is easily trackable, complete with validated digital signatures that keep everyone accountable.


As blockchain is a decentralized solution, it naturally eliminates the role of middlemen in helping recruit service-providers and removes the risk of costly mediation. It also drastically reduces the time spent in looking for potential clients and employees. Dealings can be done directly between participants, creating a truly free market exempt of mediating parties. Forex regulations are also irrelevant, and stringent governmental oversight of economic deals can be bypassed, which helps boost smaller businesses.

Concerning contract arbitration, an unfortunate necessity in some cases, the two parties involved must rope in an external third-party arbitrator, one who is objectively unaware of the terms of the smart contract and its details. Smart contract platforms can provide a rating system for arbitrators, so that clients can effectively choose arbitrators of superior quality. Platforms such as Confideal give parties equal footing when negotiating and arbitrating, removing asymmetric dynamics and ensuring the most optimal outcome in any situation for both signees.

The New Deal

What will the future of online dealings look like? An ecommerce store will be able to easily set up smart contracts with its vendors to automatically withdraw cryptocurrency, fulfill inventory, or onboard new products. Arbitrators with experience can specify their skills and services (including language preferences, experience, and other personal markers) so that the store can find them if necessary. Even finding outlier skills will be simple, like hiring a Korean-speaking arbitrator with knowledge of real estate laws in Florida, USA.

By helping contracting parties to save considerable time and money, and avail of higher efficiency in such transactions, blockchain will further empower individuals and businesses (small and large alike) to gain greater control over the exchange of products and services, with the ease and security of negotiating face to face.

                                                     


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Invest In Gold To Defend Against Bail-ins

Invest In Gold To Defend Against Bail-ins

 – Italy’s Veneto banking meltdown destroyed 200,000 savers and 40,000 businesses
– EU bail-in rules have wiped out billions for savers and and businesses, with more at risk 
– Bail-ins are not unique to Italy, all Western savers are at risk of seeing savings disappear
–  Counterparty-free, physical gold bullion is best defence against bail-ins

One of Italy’s twenty regions is calling for more autonomy from the state following a nonbonding referendum. Why? Because a government supported ‘rescue package’ caused the lifesavings of 200,000 savers to be wiped out during the  implosions of Popolare di Vicenza and Veneto Banca.

Since then the banks have been rescued in one way or another yet the impact of the collapse on individuals and small businesses is only just becoming clear.

As in Spain’s Catalonia the region of Veneto is wealthier than the average Italian region, with its own industries and language yet it has been left with a pile of ash when it comes to its banking sector.

The region is proud to be the home of successful brands such as Benetton, De’Longhi, Geox and Luxottica. But it is the 40,000 small businesses that are in a state of limbo unable to pay workers, find credit or operate on a day-to-day basis.

Sadly the case of Veneto is one of a growing list of regions of banking customers that have been destroyed due to the incompetence of national authorities and the overbearing powers of the EU.

Profitable businesses take the hit

What is seen is as surprising to many reading about the story of Veneto is that profitable, stable businesses are also suffering as a result of a banking collapse.

When someone’s savings are wiped out, that isn’t the end of the nightmare. Many businesses were exposed to those banks both through credit and shares.

Many businesses operate on credit. This happens in companies of all scales and levels of success. The businesses that borrowed from the two Veneto banks are now in a state of limbo. They have no line of credit due to their exposure to the collapsed banks.

This is despite a government-led body stepping into help manage the fallout and finances of the ruined institutions. Bloomberg explains:

Even a perfect credit score is useless in Veneto now if your only collateral is stock in either bank, which were coveted investments for generations of locals.

Bail-in of the first resort 

Italians are in very deep financially when it comes to their banking system. The 2015 IMF report states:

Retail holdings in Italy are relatively large compared to other countries, comprising about one- third of about €600 billion worth of bank bonds and half of about €60 billion worth of subordinated bonds.

That is all money that will just disappear overnight in the case of bank failure. In some cases, it already has.

In Italy a common problem has been that savers and businesses were persuaded to invest in subordinated (junior) bonds by their bank managers.

By 2015 over €31 billion of retail sub bonds had been sold to retail investors. Retail investors are ordinary savers and small businesses.

‘Households hold about one-third of senior bank debt and almost half of total subordinated bank debt.’ – IMF

These bondholders are seen as creditors. The same type of creditor that EU rules state must take responsibility for a bank’s financial failure, rather than the taxpayer. This is a bail-in scenario.

In a bail-in scenario the type of junior bonds held by the retail investors in the street is the first to take the hit. When the world’s oldest bank Monte dei Paschi di Siena collapsed ordinary people (who also happen to be taxpayers) owned €5 billion ($5.5 billion) of subordinated debt. It vanished.

A 2015 IMF study found that the majority of Italy’s 15 largest banks a bank rescue would ‘imply bail-in of retail investors of subordinated debt’. Only two-thirds of potential bail-ins would affect senior bond-holders.

Nothing will respect you like gold does

Why put so much faith in the bank? Because, despite many financial crises in the last 100 years, savers and businesses still believe their money will be safe.

The graph above shows just how much we still trust our banks. The least trusting country is Italy yet their exposure has been so great, imagine what damage will be done when the likes of the UK, US or Germany face a bail-in situation.

In Italy where banks have been around for literally hundreds of years, many family business owners are still dealing with bank accounts, investments and loans their ancestors organised a century ago.

This kind of relationship can lead to an almost Stockholm Syndrome situation. Despite receiving consistency bad treatment from your bank you want to support it and help it out. You still trust it. So when the bank suggests you hold shares then you take their advice.

“We jealously guarded those shares like you would gold bars,” A 60 year old baker told Bloomberg, “Buying your bank’s stock was the traditional thing to do. We got it badly wrong.”

Of course what everyone forgets is that banks are not there to look after you. They are there to make money. They do this almost instantly the second you deposit funds, it’s their money. The second you take out a loan, they own you. The second you buy shares, they have a license to be reckless.

Naively treating anything other than gold like gold is the first step in financial mismanagement. Nothing is like physical, allocated and segregated gold. For a start it is all yours.

Is your government or the EU there for you? Don’t bet on it 

A bail-in forces creditors of a bank to shoulder losses when the firm fails. The term covers cover every case of creditor loss-sharing when a bank goes belly-up.

This is different to events we saw during the 2008 financial crisis when taxpayers tended to bail-out banks. Since 2016 European Union rules have stated there must be a bail-in before a government bailout is allowed.

Governments would clearly like to prevent savings of hardworking individuals and businesses from being wiped out. However they are fearful of the EU, trying to skirt their bail-in rules would no doubt sour relations with a body that is keen to stick to rules it only recently passed.

There is a conflict of interest it seems between pleasing the EU and doing the right thing by voters.

Given Brexit and now Catalonia the EU is unlikely to be in the mood to bend its rules for another troublesome country. This is despite it costing the EU’s own citizens billions of euros in lost savings and investments.

This is a risk for the EU, especially in Italy where there is already strong anti-EU sentiment. The case of Veneto, where 75% require more power and 15% would like to see total autonomous rule is another Catalonia again. A further sign of increased populism thanks to an overbearing and indifferent EU.

Invest in gold, or prepare to fail

Depositors and investors should be aware of their country’s requirements when it comes to keeping their money safe in the banks. Whilst bail-ins will at present only hurt those who hold deposits above EUR 100,000, there is little stopping the protected amount being decreased, or ignored altogether.

 

For those living in the EU, the European Commission has forced all 28 countries to implement bail-in legislation. This means depositors must be more vigilant than ever about the health of a particular bank, and the risk exposure of their portfolio.  This means diversifying your invesments and decreasing the level of counterparty exposure.

One area of portfolio diversification that is growing due to concerns over the safety of bank accounts, is gold investment which saw a 15% climb in Q2 of 2016. Europe, in 2015, showed the largest regional demand for gold bars and coins (an increase of 12% year on year).

Unallocated gold is as much at risk as any other asset exposed to counterparties. Savers and businesses can protect their wealth by investing in allocated gold, in segregated accounts. This gives your outright legal ownership. There are no counterparties who can pop along after going bust and take what is legally theirs. It cannot be made to disappear overnight.

Gold is the financial insurance against bail-ins, political mismanagement and overreaching government bodies.

 

Read our guide on how to protect yourself from bail-ins here

News and Commentary

Gold logs a 1.1% monthly loss in October (MarketWatch.com)

Gold falls as dollar recovers, Fed chair in focus (Reuters.com)

Small Caps Lead U.S. Stocks Higher as Dollar Gains (Bloomberg.com`)

Consumer confidence climbs to a nearly 17-year high in October (MarketWatch.com)

CME to launch bitcoin futures in fourth quarter subject to approvals (Reuters.com)

Credit: Wall Street Journal

Gold vs. Bitcoin: Goldman Sachs Weighs In (DailyReckoning.com)

Why Is Bitcoin a Big Deal? (CharlesHughSmith)

One Misstep Now Would Cost the Bank of England Its Credibility (Bloomberg.com)

Britain accelerates Brexit plans, divorce talks also to speed up (Reuters.com)

China has grand ambitions to dethrone the dollar. It may make a powerful move this year (CNBC.com)

Gold Prices (LBMA AM)

01 Nov: USD 1,279.25, GBP 961.48 & EUR 1,099.52 per ounce
31 Oct: USD 1,274.40, GBP 964.21 & EUR 1,095.60 per ounce
30 Oct: USD 1,272.75, GBP 966.91 & EUR 1,093.80 per ounce
27 Oct: USD 1,267.80, GBP 968.35 & EUR 1,090.18 per ounce
26 Oct: USD 1,278.00, GBP 968.34 & EUR 1,082.34 per ounce
25 Oct: USD 1,273.00, GBP 964.81 & EUR 1,081.67 per ounce

Silver Prices (LBMA)

01 Nov: USD 16.94, GBP 12.74 & EUR 14.55 per ounce
31 Oct: USD 16.82, GBP 12.72 & EUR 14.45 per ounce
30 Oct: USD 16.74, GBP 12.69 & EUR 14.39 per ounce
27 Oct: USD 16.72, GBP 12.76 & EUR 14.38 per ounce
26 Oct: USD 16.97, GBP 12.84 & EUR 14.37 per ounce
25 Oct: USD 16.89, GBP 12.75 & EUR 14.34 per ounce


Recent Market Updates

– Stumbling UK Economy Shows Importance of Gold
– Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top
– Russia Buys 34 Tonnes Of Gold In September
– Gold Will Be Safe Haven Again In Looming EU Crisis
– Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video
– Gold Is Better Store of Value Than Bitcoin – Goldman Sachs
– Next Wall Street Crash Looms? Lessons On Anniversary Of 1987 Crash
– Key Charts: Gold is Cheap and US Recession May Be Closer Than Think
– Gold Up 74% Since Last Market Peak 10 Years Ago
– How Gold Bullion Protects From Conflict And War
– Silver Bullion Prices Set to Soar
– Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures
– Puerto Rico Without Electricity, Wifi, ATMs Shows Importance of Cash, Gold and Silver

 

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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Bitcoin Surges To New Record High $6600 On Futures Hope & Fork Dividends

Amid hopes for more mainstream adoption, thanks to CME launching Bitcoin futures, and expectations of another 'fork dividend' as the SegWitzx software update looms, Bitcoin prices have soared above $6600 this morning

It appears traders are rotating out of other cryptos into Bitcoin once again…

Sending Bitcoin above $108 billion market cap and over $6600…

 

Mati Greenspan, an analyst with trading platform eToro, said on Wednesday about CME launching Bitcoin Futures…

"Not only is this a monumental testament to the belief in bitcoin and the demand in the market but it will also boost the liquidity by opening the market to many more interested players."

There is also speculation that this most recent surge is being driven by another upcoming "fork" in bitcoin's underlying software. The SegWit2x software update is scheduled for November 16 and could split bitcoin in two, creating a new currency.

This has happened in the past with Bitcoin Cash and Bitcoin Gold, and in those cases, bitcoin holders got those new coins for free.

As a result, investors may be piling into bitcoin in the hopes of a SegWit2x dividend.

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ADP Private Payrolls Highest Since March: Jump 235K In Post-Hurricane Rebound

Following September’s big hurricane-precipitated slowdown in the labor market, moments ago ADP reported that in September private payrolls rebounded from a downward revised 110K (from 135K), which was still significantly higher than the BLS’ own negative print, to 235K beating expectations of a 200K print (which emerged from a decided wide range of estimates, from 135K to 340K) and the highest since March.

Commenting on the stronger than expected print, Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said “The job market remains healthy and hiring bounced back with one of the best performances we’ve seen all year. Although the service providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains.”

ADP’s Mark Zandi, also chief economist at Moody’s Analytics, said, “The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust.”

 

Some more details, starting with Change in Nonfarm Private Employment:

Change in Total Nonfarm Private Employment

The full breakdown:

The ADP inforgraphic:

<br />
      ADP National Employment Report: Private Sector Employment Increased by 235,000 Jobs in October<br />
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