Some Republicans in Congress say they’re interested in legislation that would prevent President Trump from firing special counsel Robert Mueller.
“No, Ivanka Trump didn’t stop José Andrés from getting into a party.”
Sen. Marco Rubio (R-Fla.) fired his chief of staff for alleged “improper conduct” with a subordinate.
Demonstrators across Russia called for a boycott of the presidential election in March.
A proposed law in Poland would prohibit blaming the country or its people for any part of the Holocaust, setting a three year prison term for referring to concentration camps as “Polish death camps.”
Sauli Niinistö was re-elected president of Finland in the first round of voting.
A French climber was rescued off “Killer Mountain” in Pakistan.
Grammys host James Corden and several performers wore white roses to the ceremony in support of Time’s Up.
Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.
In an incident that recalls the “almost simultaneous” bomb threats across Russia back in September that resulted in the evacuation of 45,000 people, briefly disrupting life in Russia’s largest city, a bomb threat targeting 25 buildings in Moscow prompted mandatory evacuations of Russia’s upper house of Parliament and the city’s stock exchange, according to TASS.
The threats also targeted hospitals in the city, a source within the city’s security services told TASS.
“We received an anonymous call about an explosive device planted in the building. In line with the security requirements, the staff members were evacuated and checks at the building are underway,” the statement said.
Meanwhile, the State Duma, the lower house of parliament, received two bomb threats over the past four hours, the source said.
Moscow’s famed Bolshoi Theater has also been targeted…
As we pointed out at the time, a wave of phone calls has swept across Russian cities and towns since September. The anonymous bomb threats targeted more than 4,000 facilities in 215 Russian cities, affecting more than 2.6 million people were evacuated. Emergency services combed through secondary and higher schools, shopping malls, airports, railway stations, hotels and governmental buildings.
As a reminder, Russian stocks just broke to new record highs, despite increasing US sanctions and the infamous “sell signal” from The White House.
After having traveled to more than 120 countries in my life, the only person I know who’s been to more places than I have is Jim Rogers.
Jim is a legend– a phenomenal investor, author, and all-around great guy.
(His book Adventure Capitalist is a must-read, chronicling his multi-year driving voyage across the world.)
Some time ago while we were having drinks, Jim remarked that he occasionally tells people, “If you can only travel to one foreign country in your life, go to India.”
In Jim’s view, India presents the greatest diversity of experiences– mega-cities, Himalayan villages, coastal paradises, and a deeply rich culture.
My answer is different: Japan.
To me, Japan isn’t even a country. Japan is its own planet… completely different than anywhere else in ways that are incomprehensible to most westerners.
(Watch my friend Derek Sivers explain it to a TED audience here.)
On one hand, this is a culture that strives to attain beauty and mastery in even mundane tasks like raking the yard or pouring tea.
Everything they do is expected to be conducted to the highest possible standard and precision.
They start the indoctrination from birth; Japanese schools typically do not employ janitors and instead train children to clean up after themselves.
Later in life, the Japanese salaryman is expected to practically work himself to death (or suicide) for his company.
Obedience and collectivism are core cultural values, and the tenants of Bushido are still prevalent to this day.
One of the most remarkable examples of Japanese culture was the aftermath of the devastating 2011 earthquake (and subsequent tsunami) in the Fukushima prefecture.
It was the worst natural disaster in Japanese history, causing nearly as much damage as the atomic bombs over Hiroshima and Nagasaki in 1945.
Yet rather than panic and pillage, the Japanese sat patiently outside of their ravaged homes waiting for direction from the local authorities.
Then again, this is also the place that brought us ‘Hello Kitty,’ and where men have to be admonished to not grope young girls on the subway.
The Japanese paradox also applies to its economy, which has effectively been in stagnation for nearly 30 years.
Japan’s government debt is more than 1 QUADRILLION yen (over $10 trillion) and more than twice the size of the entire economy.
This debt is so large that in the 2018 budget that was just released last month, the government reported that it will take more than 40% of tax revenue to make debt payments this year.
Despite such gruesome figures, however, there is no panic here on Planet Japan.
The government has told everyone to not worry, and that seems to be good enough.
Banks and and investment funds continue to plow their depositors savings into government bonds– which, by the way, carry NEGATIVE interest rates.
In other words, investors are loaning money at rates which are less than zero to a government that’s so heavily indebted it has to spend 40% of its tax revenue just to make debt payments.
This is pure insanity. But on Planet Japan, it’s perfectly normal behavior to engage in ritualistic financial suicide.
It wasn’t always this way.
After being demolished by the Allies in World War II, Japan set out to rebuild itself.
And the growth that came out of the next several decades was so astonishing that it became known as the economic miracle.
Japan ultimately became the world’s second largest economy after the United States.
And there certainly was cutting edge technology and productivity that contributed to that success.
Back then, some of the most popular consumer products in the world like Nintendo’s original game console, or the Sony Walkman, were Japanese.
And Japan’s production efficiency was the envy of the world.
But underpinning all that growth, especially during the later part of the boom in the 1980s, was a tidal wave of paper money.
Japan’s central bank was growing the country’s money supply at a dangerously unsustainable rate.
And, as with most cases where central banks conjure too much money out of thin air, the Bank of Japan created a dangerous asset bubble.
With so much money in the system, the prices of nearly everything– stocks, real estate, etc. skyrocketed.
The asset boom made people feel very wealthy, and that the good times would last forever.
They didn’t. Japan’s Nikkei 225 stock index finally peaked at nearly 39,000 points on December 29, 1989.
And over the next few years, the giant economic bubble rapidly deflated as the central bank gradually ‘tightened’ the money supply and raised interest rates.
Within two years the Nikkei 225 had lost half of its value. Within a few years more it had fallen to as low as 8,000.
Even today, nearly THIRTY YEARS later, Japan’s stock market is still 40% below its all-time high.
During the boom, some Japanese investors and businesses were astute enough to trade some of their overvalued yen for undervalued foreign assets while they still had the chance.
They bought real estate in California, businesses in Europe, etc. These investments ensured their prosperity even after the Japanese market collapsed.
But most Japanese kept all of their eggs in one basket. And they still haven’t recovered their losses.
There are very interesting lessons here. Namely– the good times NEVER last forever.
Markets never simply go straight up. There are always inevitable corrections.
Problem is, most folks tend to believe that market corrections will be very short lived, as if asset prices will fall 20% or 30% and then be right back to where they were before after a year or two.
Few of us can imagine the value of their retirement accounts collapsing– and NEVER recovering.
But Planet Japan shows us that the market can crash– and stay in the gutter– for DECADES…
… and that, when asset prices are at all-time highs, a prudent person ought to consider taking some money off the table and seeking undervalued alternatives.
Amid soaring credit card use, the tumble in Americans’ savings rate continued in December with a modestly better than expected 0.4% MoM rise in incomes and as expected 0.4% rise in spending (but upward revisions in spending).
Income is growing at 4.1% YoY – the most since Nov 2015 – but spending is still outpacing that growth…
Income growth is dominated by private worker gains – up 5.2% YoY, the highest since Nov 2015…
Which means,this is the lowest savings rate since the crisis… (in fact the lowest since September 2005)
Recall the stunning Gluskin Sheff chart we presented a month ago, which showed that 13-week annualized credit card balances in the U.S. had gone “completely vertical” in the last few months of 2017 which we said “should make for some great Christmas.”
And remember David Rosenberg’s “haunting math” from the GDP number:
“The savings rate fell from 3.3% to 2.6%.If it had stayed the same, real PCE would have been 0.8% (annualized) instead of 3.8% and GDP would have been 0.6% instead of 2.6%.“
Considering that President Trump declared himself “not a feminist” earlier this week, it’s unsurprising that the president was savagely mocked at the Grammy Awards this year – an event that, like the Golden Globes, was dominated by #MeToo.
But perhaps the most galling attack on the president came in a sketch featuring late-night host James Corden and a handful of celebrities – including Hillary Clinton, who was recently exposed for protecting a sexual harasser – reading passages from Michael Wolff’s controversial “Fire and Fury” book.
Other guests during the segment included John Legend, Cardi B, Snoop Dogg and Cher.
Following Clinton’s reading, Corden shouted ‘That’s it – that’s the one!’
However, rapper Cardi B’s reaction may have unintentionally touched on the truth about Wolff’s book: That many of the scandalous details were exaggerations or fabrications. She stopped mid-sentence and exclaimed “why am I reading this sh*t? I can’t believe this.”
Donald Trump Jr., Nikki Haley and a handful of other Trump associates lashed out at the Grammy’s for politicizing the awards:
I have always loved the Grammys but to have artists read the Fire and Fury book killed it. Don’t ruin great music with trash. Some of us love music without the politics thrown in it.
In a shocking development – shocking because as everyone obviously knows market are never rigged or manipulated – late on Friday Reuters reported that the CFTC was set to announce it has fined European lenders UBS, HSBC and Deutsche Bank millions of dollars each for “spoofing” and manipulation in the U.S. futures market.
The enforcement action by the U.S. derivatives regulator was said to be the result of a multi-agency investigation that also involved the Department of Justice and the FBI – the first of its kind for the CFTC.
Reuters also reported that the fines for UBS and Deutsche Bank would be north of ten million, while the fine for HSBC will be slightly less than that. Spoofing, as a reminder, involves placing bids to buy or offers to sell futures contracts with the intent to cancel them before execution. By creating an illusion of demand, spoofers can influence prices to benefit their market positions. Spoofing is what Navinder Sarao was criminally accused of doing when he singlehandedly launched the May 2010 flash crash, for which he is now imprisoned.
And yes, spoofing is a criminal offense under a provision implemented as part of the 2010 Dodd-Frank financial reform.
* * *
Following the Reuters report, many asked why Sarao was arrested and jailed, while major banks caught spoofing and manipulating futures will get away with paying a fine that is a tiny fraction of how much they made from rigging markets in the first place.
Well, it appears that someone else is going to jail after all, because as Reuters followed up this morning, US authorities were set to arrest several people on Monday as part of the spoofing and manipulation probe. The individuals who are set to be perp walked, were previously employed as traders by UBS, Deutsche Bank and HSBC, and will be charged as part of the multi-agency probe,
Last August, a U.S. appeals court upheld the conviction of former New Jersey-based high-speed trader Michael Coscia who was the first individual to be criminally prosecuted for spoofing in the US, aside from Sarao of course.
This is the first time the CFTC, DOJ and FBI have worked together to bring both criminal and civil charges against multiple companies and individuals, sources said.
As Reuters adds, “the bank investigations have been going on for more than a year, but the CFTC has pursued the charges against the traders as part of a more recent effort led by the agency’s head of enforcement, James McDonald, to hold individual employees accountable for corporate wrongdoing, two of the sources said.”
McDonald, a former prosecutor in the Southern District of New York who was appointed to the CFTC role in March, has said he aims to achieve that by encouraging companies and staff to report their own wrongdoing and cooperate with investigators in return for more lenient penalties.
Once the names of market riggers are revealed we will promptly follow up, although we are sad to advise readers that the biggest manipulator of all will sadly be spared.
It’s Merger Monday time: Dr Pepper Snapple Group and Keurig Green Mountain announced that the two companies will merge to create Keurig Dr Pepper, “a new beverage company of scale with a portfolio of iconic consumer brands and unrivaled distribution capability to reach virtually every point-of-sale in North America.”
The merger will combine such brands as Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with coffee brand Green Mountain Coffee Roasters and the Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig system.
Under the terms of the agreement, which has been unanimously approved by the Dr Pepper Snapple Board of Directors, Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company, for a total consideration around $135, or a 40% premium to the Friday close of DPS.
Some more transaction details via Bloomberg:
Dr Pepper holders to get $103.75/shr in special cash div
Dr Pepper Snapple expects to pay its 1Q ordinary course dividend of 58c-shr
KDP anticipates total net debt at closing to be about $16.6b and it anticipates maintaining an investment grade rating
Keurig shareholders will hold 87% and Dr Pepper Snapple shareholders will hold 13% of the combined company
Upon closing of the transaction, JAB will be the controlling shareholder, Mondelez International to hold about 13-14% stake in the combined company
JPM, BofAML, GS have provided committed financing for the transaction
According to the press release, Keurig Dr Pepper will have pro forma combined 2017 annual revenues of about $11 billion.
Why the deal?
The company believes its complementary portfolio, access to high-growth segments of the beverage industry and shareholder value-focused management team will enable it to achieve sustained growth through continued innovation, brand consolidation opportunities and enhanced household penetration for its leading brands.
KDP targets realizing $600 million in synergies on an annualized basis by 2021. Dr Pepper Snapple expects to pay its first quarter ordinary course dividend of $0.58 per share. At the close of the transaction, the company expects to deliver an annual dividend of $0.60 per share.
The company will deliver strong cash flow generation and accelerate its deleveraging, with a target Net Debt/EBITDA of below 3.0x within two to three years after closing. KDP anticipates total net debt at closing to be approximately $16.6 billion and it anticipates maintaining an investment grade rating.
And some cheerleading commentary:
Bob Gamgort, Chief Executive Officer of Keurig, said, “Our view of the industry through the lens of consumer needs, versus traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats. The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders.”
Bart Becht, Partner and Chairman of JAB Holding Company and Chairman of Keurig, said, “We are very excited about the prospect of KDP becoming a challenger in the beverage industry. Management’s proven operational and integration track record along with their commitment to innovation and potential future brand consolidation opportunities, while maintaining an investment grade rating, positions the company well for long-term success and material shareholder value creation.”
Dirk Van de Put, CEO of Mondelēz International, which will have a significant stake in KDP, said, “We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction. We look forward to continuing to participate in the compelling value-creation and long-term growth opportunities inherent in this powerful beverage platform.”
* * *
Goldman served as lead financial advisor to Keurig. BDT & Company, AFW LP, J.P. Morgan Securities LLC and Bank of America Merrill Lynch also acted as financial advisors to Keurig with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel and McDermott Will & Emery LLP serving as tax counsel. Credit Suisse served as financial advisor to Dr Pepper Snapple and Morgan, Lewis & Bockius LLP is serving as Dr Pepper Snapple’s legal advisor. Clifford Chance U.S. LLP is serving as legal advisor to Mondelēz International.
It’s Merger Monday time: Dr Pepper Snapple Group and Keurig Green Mountain announced that the two companies will merge to create Keurig Dr Pepper, “a new beverage company of scale with a portfolio of iconic consumer brands and unrivaled distribution capability to reach virtually every point-of-sale in North America.”
The merger will combine such brands as Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with coffee brand Green Mountain Coffee Roasters and the Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig system.
Under the terms of the agreement, which has been unanimously approved by the Dr Pepper Snapple Board of Directors, Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company, for a total consideration around $135, or a 40% premium to the Friday close of DPS.
Some more transaction details via Bloomberg:
Dr Pepper holders to get $103.75/shr in special cash div
Dr Pepper Snapple expects to pay its 1Q ordinary course dividend of 58c-shr
KDP anticipates total net debt at closing to be about $16.6b and it anticipates maintaining an investment grade rating
Keurig shareholders will hold 87% and Dr Pepper Snapple shareholders will hold 13% of the combined company
Upon closing of the transaction, JAB will be the controlling shareholder, Mondelez International to hold about 13-14% stake in the combined company
JPM, BofAML, GS have provided committed financing for the transaction
According to the press release, Keurig Dr Pepper will have pro forma combined 2017 annual revenues of about $11 billion.
Why the deal?
The company believes its complementary portfolio, access to high-growth segments of the beverage industry and shareholder value-focused management team will enable it to achieve sustained growth through continued innovation, brand consolidation opportunities and enhanced household penetration for its leading brands.
KDP targets realizing $600 million in synergies on an annualized basis by 2021. Dr Pepper Snapple expects to pay its first quarter ordinary course dividend of $0.58 per share. At the close of the transaction, the company expects to deliver an annual dividend of $0.60 per share.
The company will deliver strong cash flow generation and accelerate its deleveraging, with a target Net Debt/EBITDA of below 3.0x within two to three years after closing. KDP anticipates total net debt at closing to be approximately $16.6 billion and it anticipates maintaining an investment grade rating.
And some cheerleading commentary:
Bob Gamgort, Chief Executive Officer of Keurig, said, “Our view of the industry through the lens of consumer needs, versus traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats. The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders.”
Bart Becht, Partner and Chairman of JAB Holding Company and Chairman of Keurig, said, “We are very excited about the prospect of KDP becoming a challenger in the beverage industry. Management’s proven operational and integration track record along with their commitment to innovation and potential future brand consolidation opportunities, while maintaining an investment grade rating, positions the company well for long-term success and material shareholder value creation.”
Dirk Van de Put, CEO of Mondelēz International, which will have a significant stake in KDP, said, “We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction. We look forward to continuing to participate in the compelling value-creation and long-term growth opportunities inherent in this powerful beverage platform.”
* * *
Goldman served as lead financial advisor to Keurig. BDT & Company, AFW LP, J.P. Morgan Securities LLC and Bank of America Merrill Lynch also acted as financial advisors to Keurig with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel and McDermott Will & Emery LLP serving as tax counsel. Credit Suisse served as financial advisor to Dr Pepper Snapple and Morgan, Lewis & Bockius LLP is serving as Dr Pepper Snapple’s legal advisor. Clifford Chance U.S. LLP is serving as legal advisor to Mondelēz International.
While there are reasons to be bullish on global equities in 2018 and bear market risks are low, a correction is becoming increasingly likely, Goldman’s equity strategist Peter Oppenheimer writes in an overnight note, repeating our observation from Friday that this has been the strongest start for global equity markets in any year since the infamous 1987.
As Goldman notes, this “melt-up” has occurred despite the already strong returns last year. The S&P 500 had its second-highest risk-adjusted returns in more than 50 years and MSCI World ($) had its second-highest risk-adjusted returns since the index began in 1970. More concerning, at least for the risk-party folks, is that te year-to-date sharp rise in equity returns has also continued even as bond markets are experiencing sharp risk-adjusted losses.
Confirming that a major market move lower is likely imminent – something Bank of America cautioned on Friday – the Goldman Bull/bBar Market Risk Indicator is at elevated levels – in fact at the same level it was before the dot com and credit bubble crash – though, Goldman adds in an attempt to mitigate growing fears, “the continuation of low core inflation and easy monetary policy suggests a correction is more likely than a bear market.” And while monetary policy may be easy now, is getting tighter by the day…
In this context, and expecting the inevitable, Goldman writes that “drawdowns within bull markets of 10% or more are not uncommon” and points out that “there are many historical examples of corrections — drawdowns of 10-20% – – that are short-lived and do not turn into drawn-out bear markets associated with economic weakness.”
Of course, there are many drawdowns of 10% or more which turn into full blown recessions, if not a depression. GS defines a bear market as a drop of 20% or more.
So if Goldman is right what happens next? The Goldman strategist calculates that the average bear market experiences falls of 30% over 13 months and takes 22 months to recover to previous levels (in nominal terms). The average bull market ‘correction’ is 13% over 4 months and takes just 4 months to recover.
Furthermore, Goldman also brings up the troubling observation made over the past week by every bank from Citi to BofA, namely that 2018 has begun with the S&P 500 and VIX both rising, which however now appears to be driven by a frenzied buying of S&P calls to capture every last bit of levered upside.
The increase in volatility amid a market rally may, in part, reflect increasing risks, and may also reflect a bullish willingness to spend premium to add to upside exposure.
Whatever happens, however, Goldman remains optimistic and tells its clients that it “would buy the equity market on a correction and, while we recommend being fully invested, would look to hedge downside risks.”
In conclusion, while Goldman lays out a variety of potential catalysts for a market crash, it notes that “whatever the trigger, a correction of some kind seems a high probability in the coming months.”
We do not believe that this would be prolonged or morph into a bear market, and so would see it as a buying opportunity. That said, technical factors and positioning could make it rather painful.
Finally, not one to shy away from a trade and never letting a crisis trade away from its flow desk, Goldman is urging clients to buy puts ahead of the upcoming drop in the S&P: “We would buy the equity market on a correction and, while we recommend being fully invested, would look to hedge downside risks. Our options strategists have suggested doing this through various structures, including SPX put spreads, which we think could be a good hedge across many markets.”
Japan’s new cryptocurrency regulations were put to the test last week when CoinCheck – a popular, if unlicensed, Tokyo-based crypto-exchange – became the target of “the biggest heist in crypto history.” As we reported last week, hackers made off with more than 500 million NEM tokens, worth $400 million before news of the hack triggered a 20% devaluation in what was until recently the tenth most popular cryptocurrency.That sum makes it bigger than Mt. Gox at the time of its implosion in February, 2014.
To save face, Japan’s financial regulator said on Monday it would inspect the country’s cryptocurrency exchanges; it also ordered Coincheck to review and repair its security systems, which, as Reuters pointed out, were irresponsibly lacking.
Coincheck executives bowing in apology during a press conference
The exchange apparently hadn’t bothered to implement what’s called multi-signature security – the same flaw that led to the Bitfinex hack about 18 months ago.
Meanwhile, local media reports cited by Bloomberg say Japan’s Metropolitan Police Department has spoken to employees at Coincheck, has requested full access to the company’s servers, and will be conducting a full investigation. The police will also be analyzing records in Coincheck’s servers to identify the source of the hacking.
Coincheck – which halted withdrawals and trading in all cryptoassets except bitcoin last Friday following the hack, sending the market lower – said it would return 90% of its customers’ assets with internal funds, though it has yet to disclose how or when it will do this.
Japan started requiring exchange operators to register with the government in April 2017, and allowed pre-existing operators like Coincheck to continue ahead of being formally registered. So far, 16 exchanges have been registered by the FSA, Japan’s financial regulator.
The theft highlights the vulnerabilities in trading an asset that global policymakers are struggling to regulate and the broader risks for Japan as it aims to leverage the fintech industry to stimulate economic growth.
The Financial Services Agency (FSA) on Monday ordered improvements to operations at Tokyo-based Coincheck, which on Friday suspended trading in all cryptocurrencies except bitcoin after hackers stole 58 billion yen ($534 million) of NEM coins, among the most popular digital currencies in the world.
Coincheck said on Sunday it would return about 90% of losses with internal funds, though it has yet to figure out how or when.
The NEM coins were stored in a “hot wallet” instead of the more secure “cold wallet”, which operates on platforms not directly connected to the internet, Coincheck said. It also does not use an extra layer of security known as a multi-signature system.
Cryptocurencies were slightly lower on Monday as the customers wondered whether they would receive any reimbursement for their stolen funds. The FSA has given Coincheck roughly two weeks to improve its systems before it must submit a report on its progress:
The FSA said it ordered Coincheck to submit a report on the hack and measures for preventing a recurrence by Feb. 13, and that it will, if necessary, conduct on-site inspections of other cryptocurrency exchanges.
The regulator has yet to confirm whether Coincheck has sufficient funds to make the reimbursements. Hacks like these are particularly stressful for crypto traders because the collapse of Mt. Gox ended several months of torrid gains for bitcoin, sending it into a two-year bear market. And one researcher said the Coincheck hack underscores the need for exchanges to improve their security.
“It’s been long said that cryptocurrencies are a solid system but cryptocurrency exchanges are not,” said Makoto Sakuma, research fellow at NLI Research Institute.
“This incident showed that the problem has not been solved at all. If Coincheck screws up its crisis management, that could deal a blow to the current cryptocurrency fever.”
The Singapore-based NEM Foundation said it had traced the stolen coins, but it’s not clear if they’re contemplating the type of hard fork that Ethereum used to recover stolen coins following the hack of the DAO. That famously split the Ethereum blockchain into Ethereum and Ethereum Classic.
Of course, Coincheck hasn’t been the only high-profile hack since Mt. Gox; Last month, Youbit was hacked by what South Korean intelligence believes were North Korea-linked hackers.
As Reuters reminds us, world leaders meeting in Davos last week issued fresh warnings about the dangers of cryptocurrencies, with U.S. Treasury Secretary Steven Mnuchin relating Washington’s concern about the money being used for illicit activity. Japan’s top financial diplomat said regulating cryptocurrencies would be on the agenda for the G20 finance chiefs’ meeting in Argentina in March.
Deutsche Bank AG’s Wealth Management currently does not advise to invest in crypto-currencies, according to Markus Mueller, Global Head of Chief Investment Office, Bloomberg reported. Problematic issues include high volatility, possible price manipulation and data loss or data theft, he told Bloomberg News in an interview.
“We do not recommend that.It’s only for investors who invest speculatively,” he said. “There is a realistic risk of total loss.” According to Mueller, recent price increases reflect a lot of imagination, driven by the current situation in the market. There is hardly any return scope left in other asset classes such as fixed income, he said.
Mueller is not the only person warning against crypto-currencies.
While central bankers in the US have largely played down the risks cryptocurrencies pose to the broader economy, Bank of Spain Governor Luis Maria Linde said they are an asset that carries enormous risks. And Austria’s Financial Planners Association compared bitcoin investments with a “casino visit”.
In order to establish crypto-currencies as some kind of asset class in the future, more regulation, security and transparency, for example via official trading venues, are required, according to Mueller. “Important issues such as liability and documentation are unclear,” he said. “We are still at the very beginning.”
Still, Mueller maintains that blockchain technology – the distributed ledger system upon which cryptocurrencies are built – is still “interesting” and that the bank is still exploring ways to leverage that technology.
Some Republicans in Congress say they’re interested in legislation that would prevent President Trump from firing special counsel Robert Mueller.
