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Hot on the heels of JPMorgan’s “web cash” developments in the virtual currency arena, the CEO of Russia largest bank – Sberbank – appears to be looking for alternatives…

• *SBERBANK CEO GREF SAYS FUTURE BELONGS TO VIRTUAL CURRENCIES
• *GREF SAYS DEVELOPMENT OF VIRTUAL CURRENCIES ‘CAN’T BE STOPPED’
• *SBERBANK CEO CALLS FOR GREATER REGULATION OF VIRTUAL CURRENCIES
• *SBERBANK MAY FORM OWN VIRTUAL CURRENCY ON BASIS OF YANDEX MONEY

When a pseudonymous ‘Japanese’ coder creates a crypto-currency that gains acceptance among thousands of vendors, it’s dismissed by the powers-that-be and called a ponzi scheme by the MSM. One wonders what happens when the largest banks of the US and Russia sanction the ‘idea’ of a decentralized, unregulated, ‘money’ transfer system.

Via Bloomberg,

“We are at a new stage of technological development. I can’t imagine how it can be stopped,” Sberbank CEO Herman Gref tells reporters in Moscow.

 

Gref says virtual currencies need greater regulation

 

“These experiments must end in one or two crashes” before virtual currencies become firmly established, Gref says

 

Says Yandex Money isn’t “a currency but it’s a first step in that direction”

 

Of course, the difference is – the banks want to own it…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/etc5q9NHbLE/story01.htm Tyler Durden

While the good times are about to end for the Japanese Bond Market (as shown in yesterday in Counting Down To Japan’s D-Day In Two Charts), the reality is that anyone who bet on an surge in Japanese bond yields in the past few years has been carted out feet first. Which is also why shorting the Japanese bond market has been widely known as the “Widowmaker” trade in the investing community. However, according to Charles Gave, another “Widowmaker” has emerged in the past year: “It looks like the euro is competing to grab title for itself. Many traders have been shorting the currency, with poor results so far.”

Paradoxically, ever since Mario Draghi’s “whatever it takes” speech in July of 2012 when redenomination risk (i.e., the collapse of the Eurozone and the end of the Euro) was the biggest threat for the Eurozone, the Euro has risen by a staggering 1700 pips against the dollar. It has gotten so bad that not only are European corporate profits getting crushed on the back of the strong currency, but despite the ECB’s repeated attempts to talk down the Euro, they consistently achieve the opposite.

So what explains the persistent strength of the Euro? Here are some perspectives by Charles Gave of Evergreen Gavekal.

How to explain the strange and irrepressible strength of the euro? Let’s start with a simple idea: if the euro is going up, it is probably because we have more buyers than sellers. Armed with this profound knowledge, we can start to try to identify who these buyers are. In my opinion, the largest buyers fall into two categories:

1. German companies. Contrary to popular opinion, Germany is not struggling against the burden of an overvalued currency. In fact, as the chart below shows, for Germany the euro is basically as undervalued as the dollar. For France, however, the euro is 11% overvalued against the dollar; and for Italy and Spain, the single currency is 11% overvalued. Ergo, Germany is undervalued against these countries by the same amounts. And as a result of Germany’s global currency competitiveness, it has moved from a current account deficit (ex-Europe) in 2005, to an annual surplus with the world (ex Europe) which is now around €125bn.

 

Now, most of the German exports outside of Europe must be billed in US dollars—let’s estimate about €100bn annually worth. Since the net costs incurred by Germany in producing these exports have to be paid in euros, then it means that German companies must buy roughly that same amount of euros per year (unless German FDI was also this high, but is not). If the deutschmark still existed as an independent currency, this would push the unit higher. Instead, it pushes the euro higher, which leads to the French, Italian or Spanish companies becoming even less competitive against their German competitors, which leaves the markets wide open for the said German companies. Needles to say, the Germans are willing to fight up to the last French or Italian soldier.

 

 

2. Japanese retail investors. As we all know, France has a major budget deficit and close to 70% of its government debt is owned by foreigners. In the last 12 months, Mrs Watanabe has in effect financed the €75bn French budget deficit. As Japanese investors pile into euro-denominated debt (with gross purchases of nearly €400bn year to date!), they are obviously putting upward pressure on the euro, and downward pressure on the yen.

 

Of course, Japanese are not the only foreigners buying French debt (so are the Middle Easterners, Russians, etc). But if we add up just these two categories alone—an approximation of euro purchases by German corporates and Japanese financing of the French deficit—we get €175bn in the past year. No wonder the euro has been going up.

 

* * *

 

What could stop this relentless drive? Two things: i) the German current account surplus ex-euroland starts to fall—this should start to happen given the restored competitiveness of Japan (the German and Japanese product mix are 90% similar); or ii) foreigners decide they have enough of French debt, or even worse, that the time has come to take profits.

 

The funny thing is that in both cases one discovers that Japan, and not the US, will be prominent on the other side of these transactions. The time to short the euro will eventually come, but when it does investors will have to short it against the yen, and not against the dollar. Given the monetary policy in Japan right now, this time is probably not imminent. In the meantime, instead of shorting the euro, one could short the French, Italian or Spanish industrial companies, or perhaps the German financials

Well, there’s all that. A far simpler reason is that capital flows away from where central banks are wantonly devaluing their currency, in this case the US and Japan both monetizing 70% of gross Treasury issuance every month. Furthermore, with the ECB still largely unable to enact outright monetization (not only over Germany’s stern refusal but due to the legal structure of the Eurozone, where the primary beneficiaries of such monetization would ironically be German Bunds), and with excess liquidity materially declining every week with LTRO repayments by northern European banks (today’s €22.7 billion LTRO repayment for example was the largest since February and pushed the ECB’s excess liquidity to the lowest level since December 2011), it is no surprise why the latest New Normal carry trade involves either shorting the USD or JPY and offseting these with a long EUR leg.

Whatever the reason, the trade will continue making widows until something radically changes in the global central bank arrangement in which the Fed and BOJ are injecting copious amounts of liquidity, while credit creation in Europe continues to decling at a record pace.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XsgvKX7rtwE/story01.htm Tyler Durden

While the good times are about to end for the Japanese Bond Market (as shown in yesterday in Counting Down To Japan’s D-Day In Two Charts), the reality is that anyone who bet on an surge in Japanese bond yields in the past few years has been carted out feet first. Which is also why shorting the Japanese bond market has been widely known as the “Widowmaker” trade in the investing community. However, according to Charles Gave, another “Widowmaker” has emerged in the past year: “It looks like the euro is competing to grab title for itself. Many traders have been shorting the currency, with poor results so far.”

Paradoxically, ever since Mario Draghi’s “whatever it takes” speech in July of 2012 when redenomination risk (i.e., the collapse of the Eurozone and the end of the Euro) was the biggest threat for the Eurozone, the Euro has risen by a staggering 1700 pips against the dollar. It has gotten so bad that not only are European corporate profits getting crushed on the back of the strong currency, but despite the ECB’s repeated attempts to talk down the Euro, they consistently achieve the opposite.

So what explains the persistent strength of the Euro? Here are some perspectives by Charles Gave of Evergreen Gavekal.

How to explain the strange and irrepressible strength of the euro? Let’s start with a simple idea: if the euro is going up, it is probably because we have more buyers than sellers. Armed with this profound knowledge, we can start to try to identify who these buyers are. In my opinion, the largest buyers fall into two categories:

1. German companies. Contrary to popular opinion, Germany is not struggling against the burden of an overvalued currency. In fact, as the chart below shows, for Germany the euro is basically as undervalued as the dollar. For France, however, the euro is 11% overvalued against the dollar; and for Italy and Spain, the single currency is 11% overvalued. Ergo, Germany is undervalued against these countries by the same amounts. And as a result of Germany’s global currency competitiveness, it has moved from a current account deficit (ex-Europe) in 2005, to an annual surplus with the world (ex Europe) which is now around €125bn.

 

Now, most of the German exports outside of Europe must be billed in US dollars—let’s estimate about €100bn annually worth. Since the net costs incurred by Germany in producing these exports have to be paid in euros, then it means that German companies must buy roughly that same amount of euros per year (unless German FDI was also this high, but is not). If the deutschmark still existed as an independent currency, this would push the unit higher. Instead, it pushes the euro higher, which leads to the French, Italian or Spanish companies becoming even less competitive against their German competitors, which leaves the markets wide open for the said German companies. Needles to say, the Germans are willing to fight up to the last French or Italian soldier.

 

 

2. Japanese retail investors. As we all know, France has a major budget deficit and close to 70% of its government debt is owned by foreigners. In the last 12 months, Mrs Watanabe has in effect financed the €75bn French budget deficit. As Japanese investors pile into euro-denominated debt (with gross purchases of nearly €400bn year to date!), they are obviously putting upward pressure on the euro, and downward pressure on the yen.

 

Of course, Japanese are not the only foreigners buying French debt (so are the Middle Easterners, Russians, etc). But if we add up just these two categories alone—an approximation of euro purchases by German corporates and Japanese financing of the French deficit—we get €175bn in the past year. No wonder the euro has been going up.

 

* * *

 

What could stop this relentless drive? Two things: i) the German current account surplus ex-euroland starts to fall—this should start to happen given the restored competitiveness of Japan (the German and Japanese product mix are 90% similar); or ii) foreigners decide they have enough of French debt, or even worse, that the time has come to take profits.

 

The funny thing is that in both cases one discovers that Japan, and not the US, will be prominent on the other side of these transactions. The time to short the euro will eventually come, but when it does investors will have to short it against the yen, and not against the dollar. Given the monetary policy in Japan right now, this time is probably not imminent. In the meantime, instead of shorting the euro, one could short the French, Italian or Spanish industrial companies, or perhaps the German financials

Well, there’s all that. A far simpler reason is that capital flows away from where central banks are wantonly devaluing their currency, in this case the US and Japan both monetizing 70% of gross Treasury issuance every month. Furthermore, with the ECB still largely unable to enact outright monetization (not only over Germany’s stern refusal but due to the legal structure of the Eurozone, where the primary beneficiaries of such monetization would ironically be German Bunds), and with excess liquidity materially declining every week with LTRO repayments by northern European banks (today’s €22.7 billion LTRO repayment for example was the largest since February and pushed the ECB’s excess liquidity to the lowest level since December 2011), it is no surprise why the latest New Normal carry trade involves either shorting the USD or JPY and offseting these with a long EUR leg.

Whatever the reason, the trade will continue making widows until something radically changes in the global central bank arrangement in which the Fed and BOJ are injecting copious amounts of liquidity, while credit creation in Europe continues to decling at a record pace.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XsgvKX7rtwE/story01.htm Tyler Durden

Instead of kicking the can and maintaining the zombie nation, Iceland ripped its over-levered bank-based-debacle band-aid off and has slowly but surely emerged from its own crisis (notwithstanding capital controls and pain for many) unlike the rest of the Western world which has reverted to the mean of ignorance and status quo. Now, however, The Guardian reports Iceland has one more lesson to teach the world – an Icelandic court has sentenced four former Kaupthing bankers to jail for market abuses.

 

Via The Guardian,

An Icelandic court has sentenced four former Kaupthing bankers to jail for market abuses related to a large stake taken in the bank by a Qatari sheikh just before it went under in late 2008.

 

Weeks before the country's top three banks collapsed under huge debts as the global credit crunch struck, Kaupthing announced that Sheikh Mohammed bin Khalifa bin Hamad Al Thani had bought 5 of its shares in a confidence-boosting move.

 

A parliamentary commission later said the shares had been bought with a loan from Kaupthing itself.

 

On Thursday, a Reykjavik district court sentenced Hreidar Mar Sigurdsson, Kaupthing's former chief executive, to five and a half years in prison while former chairman Sigurdur Einarsson received a five-year sentence.

 

Magnus Gudmundsson, former chief executive of Kaupthing Luxembourg, was given a three-year sentence and Olafur Olafsson – the bank's second largest shareholder at the time – received three and a half years.

 

In what is by far the largest case brought by Iceland's special prosecutor against former employees of Iceland's failed banks, it was argued that the market had been deceived by information indicating that financing was coming directly from Al Thani's own funds.

Instead of fining the banks (in nothing more than a cost-of-doing-business line item), there are real consequences for the actors involved…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZdwM8Ry8hbI/story01.htm Tyler Durden

In the aftermath of a series of “better than expected”, and thus “taper on” economic data, there is just one wildcard remaining for the Fed: inflation, or rather the lack thereof. And while next week’s CPI report will be very closely watched in this regard, producer prices also provide a glimpse into pricing pressures and resource slack. And judging by the just announced -0.1% drop in finished goods producer prices in the month of November, below the 0.0% expected if up from last month’s -0.2%, which happens to be the third consecutive decline in overall PPI, a first in the past year, the Fed’s December taper decision just got even more complicated. Looking into the components, core PPI rose by the tiniest possible fraction, or 0.1%, in line with expectations, while it was energy prices that dipped 0.4%, pulling the overall number lower with the BLS noting that home heating oil’s 5.7% decline was among the key culprits for the drop. Food producer prices were unchanged for the month, with higher prices for pork offset by lower prices for processed young chickens.

At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 0.5 percent, and the crude goods index fell 2.6 percent

Monthly breakdown by component:

Broken down by processing stage:

Finished goods

In November, the decrease in the finished goods index can be traced to a 0.4-percent decline in prices for finished energy goods. By contrast, prices for finished goods less foods and energy advanced 0.1 percent. The index for finished consumer foods was unchanged.

Finished energy: The index for finished energy goods declined 0.4 percent in November after falling 1.5 percent in October. Nearly three-quarters of the November decrease is attributable to gasoline prices, which moved down 0.7 percent. Lower prices for diesel fuel and home heating oil also were factors in the decline in the index for finished energy goods. (See table 2.)

Finished core: The index for finished goods less foods and energy inched up 0.1 percent in November, the third consecutive advance. Leading the November rise, prices for light motor trucks increased 0.6 percent. Higher prices for agricultural machinery and equipment also contributed to the advance in the finished core index.

Finished foods: Prices for finished consumer foods were unchanged in November subsequent to a 0.8- percent rise a month earlier. In November, higher prices for pork were offset by lower prices for processed young chickens.

 

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components fell 0.5 percent in November, the largest decline since a 0.6-percent drop in April 2013. Accounting for over two-thirds of the broad-based November decrease, prices for intermediate energy goods moved down 1.5 percent. The index for intermediate foods and feeds fell 0.9 percent and prices for intermediate materials less foods and energy inched down 0.1 percent. For the 12 months ended in November, the intermediate goods index declined 0.5 percent, the third straight 12-month decrease. (See table B.)

Intermediate energy: The index for intermediate energy goods moved down 1.5 percent in November, the largest decrease since a 1.8-percent decline in April 2013. Nearly three-fifths of the November drop can be traced to prices for diesel fuel, which fell 5.6 percent. Decreases in the indexes for jet fuel and lubricating oil base stocks also contributed to the decline in prices for intermediate energy goods. (See table 2.)

Intermediate foods: In November, the index for intermediate foods and feeds decreased 0.9 percent after falling 1.5 percent a month earlier. More than half of the November decline is attributable to prices for prepared animal feeds, which moved down 2.4 percent. A decrease in the index for refined sugar and by-products also factored into lower prices for intermediate foods and feeds.

Intermediate core: Prices for intermediate materials less foods and energy edged down 0.1 percent in November, the same as in October. The November decrease was led by the index for basic organic chemicals, which fell 2.0 percent.

 

Crude goods

The Producer Price Index for crude materials for further processing declined 2.6 percent in November. For the 3 months ended in November, prices for crude goods fell 3.0 percent following a 1.3-percent decrease for the 3 months ended in August. The monthly decline in November was led by the index for crude energy materials, which dropped 6.6 percent. Lower prices for crude foodstuffs and feedstuffs also contributed to the decrease, declining 0.3 percent. By contrast, the index for crude nonfood materials less energy advanced 1.4 percent. (See table B.)

Crude energy: The index for crude energy materials decreased 6.6 percent in November. From August to November, prices for crude energy materials fell 7.4 percent after rising 1.8 percent from May to August. In November, most of the monthly decline can be traced to an 11.7-percent drop in the index for crude petroleum. Lower prices for coal also were a factor in the decrease in the index for crude energy materials. (See table 2.)

Crude foods: The index for crude foodstuffs and feedstuffs moved down 0.3 percent in November. For the 3 months ended in November, prices for crude foodstuffs and feedstuffs rose 0.5 percent compared with a 5.4-percent decrease for the 3 months ended in August. The monthly decline in November was led by the index for corn, which fell 4.5 percent. Lower prices for slaughter barrows and gilts also contributed to the decrease in the crude foods index.

Crude core: The index for crude nonfood materials less energy advanced 1.4 percent in November. From August to November, prices for crude nonfood materials less energy were unchanged after moving down 0.8 percent from May to August. Leading the monthly increase in November, the index for carbon steel scrap rose 6.0 percent. Higher prices for gold ores also were a factor in the advance in the crude core index.

Source: BLS

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-6P59t7Dhqg/story01.htm Tyler Durden