Fortess Investment Is Forming A Bitcoin Fund

Two months after the CIO of Fortress Investment Group recommended "putting a little money in Bitcoin," the massive fund is preparing to luanch its own Bitcoin Fund (likely considerably larger than the SecondMarket offering). As Fortune reports, details remain scarce, although there are some rumors that info .

 

The breadcrumb trail.. (Via Fortune),

Fortress earlier this year acquired Koru Ventures, a provider of patent-backed loans to tech companies, in order to launch an IP finance group. Among Koru's principals (and new Fortress employees) was Steven Waterhouse, the former chief technology officer of RPX Corp. (RPXC) whose LinkedIn profile yesterday said that he had just become a partner on an unnamed Bitcoin fund. After I sent Waterhouse an email requesting more info – and also placing a call with Fortress – the Bitcoin mention disappeared from his LinkedIn page (replaced only with "TBD").

 

My understanding, however, is that the Fortress effort will be something like an unlisted currency ETF (similar to Bitcoin Investment Trust), with Fortress also perhaps raising a separate vehicle to back Bitcoin-related startups. And there likely is some relationship to a new Bitcoin-related fund raised by Pantera Capital, a San Francisco-based hedge fund whose clients are known to include several Fortress executives.

 

Pantera founder Dan Morehead declined to discuss his Bitcoin efforts or relationship to Fortress – including if his effort and the Fortress fund were one in the same – but an SEC filing indicates that he already has raised around $150 million for Bitcoin vehicle, and Pantera recently participated in a VC round for crypto-currency payment network Ripple Labs. Moreover, calls to Pantera's main number are now met with a voicemail that only identifies the firm as "Pantera Bitcoin."

The Bitcoin New Year's Eve Bash is at Broad Street tonight


    



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Bonds Close 2013 At 30-Month High Yields

The Treasury bond has now closed for 2013 with the (highest duration) 30Y Treasury Future down 13% for the year. Of course, those invested in fixed income are not all long the long-end but across the whole complex yields are at highs. 10Y ended at 3.03% – its highest since July 2011 and 30Y at 3.97% – its highest since August 2011. The short-end remains under control (though 15bps higher than its mid-November trough and double the May lows at 40bps) but the 7Y yield has surged back to 2013 highs also not seen since mid 2011. Perhaps most notable is that despite all these moves, 5s30s is unchanged on the year, while 2s10s is +120bps.

 

 

and the curves…


    



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Previewing Tonight’s Uber Surge Pricing Schedule

During a recent East Coast snow storm, car service Uber got into hot water with various media outlets and the general public because due to a dramatic spike in demand the company announced, and got away with, surge pricing as high as 6x its normal rates.

As often happens, those most shocked by this outcome were pundits who have a problem with grasping the simplicity behind supply, demand and equilibrium pricing: if you don’t like Uber’s rates, use the competition. There is no competition? Then you are stuck with Uber’s rates, ethical concerns about price gouging and lack of government subsidies (for now) aside. Simple.

And as long as there is no futures market allowing over the horizon surge price hedging, this pattern will continue (incidentally, with Wall Street’s ingenuity for financial innovation we are surprised nobody has offered said futures market yet).

However, since no matter what, there will be yet another outcry against Uber tonight, mostly by its most fervent customers and the same confused media outlets, the company has preempted the sound and the fury, and has preannounced just what times riders can expect to pay up to 6x (or more) their usual fare as they contemplate going from point A to point B across the various metropolitan centers in which it operates.

To wit:

New Year’s Eve is upon us and we want to give you some quick pro tips for getting around with Uber. This New Year’s Eve we’ll have a record number of cars on the road ready to get you where you want to go. But, that doesn’t change one simple fact: on NYE, everyone wants to move around the city at exactly the same time!

 

We use surge pricing to help solve this problem. Higher prices bring more cars onto the system when you need them most, and prices return to normal as soon as there are enough open cars. When drivers are paid more to log on to Uber, they complete more trips on Uber.

 

But you can avoid the peaks of surge pricing with good timing on when you travel. Check out our smart tips below, and don’t forget you’ll always know the price before you request.

So for any enterprising business that seeks to steal away Uber’s client base, the best time would be when the backlash against Uber would be the highest, i.e., when the highest surge fares will be in effect. Uber has been kind enough to let everyone know in advance when this will be.

Capitalism (for those who remember how it works): take it away.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EZLk8zAU_gM/story01.htm Tyler Durden

Previewing Tonight's Uber Surge Pricing Schedule

During a recent East Coast snow storm, car service Uber got into hot water with various media outlets and the general public because due to a dramatic spike in demand the company announced, and got away with, surge pricing as high as 6x its normal rates.

As often happens, those most shocked by this outcome were pundits who have a problem with grasping the simplicity behind supply, demand and equilibrium pricing: if you don’t like Uber’s rates, use the competition. There is no competition? Then you are stuck with Uber’s rates, ethical concerns about price gouging and lack of government subsidies (for now) aside. Simple.

And as long as there is no futures market allowing over the horizon surge price hedging, this pattern will continue (incidentally, with Wall Street’s ingenuity for financial innovation we are surprised nobody has offered said futures market yet).

However, since no matter what, there will be yet another outcry against Uber tonight, mostly by its most fervent customers and the same confused media outlets, the company has preempted the sound and the fury, and has preannounced just what times riders can expect to pay up to 6x (or more) their usual fare as they contemplate going from point A to point B across the various metropolitan centers in which it operates.

To wit:

New Year’s Eve is upon us and we want to give you some quick pro tips for getting around with Uber. This New Year’s Eve we’ll have a record number of cars on the road ready to get you where you want to go. But, that doesn’t change one simple fact: on NYE, everyone wants to move around the city at exactly the same time!

 

We use surge pricing to help solve this problem. Higher prices bring more cars onto the system when you need them most, and prices return to normal as soon as there are enough open cars. When drivers are paid more to log on to Uber, they complete more trips on Uber.

 

But you can avoid the peaks of surge pricing with good timing on when you travel. Check out our smart tips below, and don’t forget you’ll always know the price before you request.

So for any enterprising business that seeks to steal away Uber’s client base, the best time would be when the backlash against Uber would be the highest, i.e., when the highest surge fares will be in effect. Uber has been kind enough to let everyone know in advance when this will be.

Capitalism (for those who remember how it works): take it away.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EZLk8zAU_gM/story01.htm Tyler Durden

Russian Banks Buy 181.4 Tons Of Gold In 2013

With headlines crowing of gold’s worst year since 1981 as a signal that the status quo is winning and proof positive that fiat-currency naysayers must be wrong, it would appear that the rest of the world’s central banks (and banks) have used the price depreciation to stack the precious metal. As Bloomberg reports,

  • *RUSSIAN BANKS BOUGHT 181.4 TONS OF RUSSIAN GOLD IN 2013: RIA
  • *RUSSIAN BANKS BOUGHT ALMOST 90% OF RUSSIA 2013 GOLD OUTPUT: RIA

This 5.834 million ounce addition (8.3% YoY) is more than double that of Russia’s central bank additions in 2013 with Bitcoin-favoring Sberbank piling up 48.5 tons alone in 2013.

 

Russia’s central bank added 2.485 million ounces to November – so the bank additions are very large…

 

Biggest buyers according to Finance Ministry include Sberbank (48.5 tons), VTB (38.9 tons), Gazprombank (29.1 tons), Nomos Bank (19.6 tons), Lanta Bank (8.6 tons).

So, like China, we are sure Russia will be sending a big “Thank You” to the Fed (and BIS) for their efforts.


    



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The Trends To Watch For In 2014

Submitted by Charles Hugh-Smith via Peak Prosperity,

At the beginning of this year (2013), I identified eight key dynamics that will play out over the next two to three years (2013-2015):

Trend #1: Central Planning intervention in stock and bond markets will continue, despite diminishing returns on Central State/Bank intervention

 

Trend #2:  The omnipotence of the Federal Reserve will suffer a fatal erosion of confidence as recession voids Fed policy and pronouncements of “recovery"

 

Trend #3: The Mainstream Media (MSM) will continue to lose credibility as it parrots Central Planners’ perception management

 

Trend #4:  The failure of what is effectively the “State religion,” Keynesianism, will leave policy makers in the Central State and Bank bereft of policy alternatives

 

Trend #5: Economic Stagnation will fuel the rise of Permanent Adolescence

 

Trend #6: Income, the foundation of real economic growth and wealth-distribution stability, will continue to stagnate

 

Trend #7: Small business—the engine of growth—will continue to decline for structural reasons

 

Trend #8: Territorial disputes will continue to be invoked to distract domestic audiences from domestic instability and inequality

I know it may strike some as “cheating” that my forecast is for these trends to be consequential within a three-year window rather than by a specific date, but note these are trends, not events, and trends tend not to matter until suddenly they do. This is the nature of Pareto Distributions, in which trends are inconsequential until they reach a critical-mass of 4% of the populace, at which point the “vital few” exert outsized influence on 64% of the populace.

Let’s see how the trends developed in 2013:

Trend #1:  Intervention yielded outstanding returns on corporate profits and stocks, but diminishing returns on employment, household incomes for the bottom 80% and growth, all of which are historically subpar.

Trend #2: The Fed’s members are still regarded as heroic demigods who benignly manage the Earth’s economy. When (not if) the stock market rolls over in 2014-15, Fed omnipotence will suffer.

Trend #3: This one is difficult to track but anecdotal evidence (declining circulation of many mainstream print media, declining viewership in some cable news channels, etc.) may reflect rising disenchantment with the media’s coverage of key issues.

Trend #4:  I think it is quite clear that the Fed and its posse of experts have no alternatives to ZIRP (zero interest rate policy) and QE (quantitative easing).

Trend #5:  This one is difficult to monitor. If we use the percentage of young people still living at home and the rise of “selfies” (photos taken of oneself), then perhaps a case can be made that this trend is already visible.

Trend #6:  Median household income has edged up, but I suspect this is the result of higher incomes for the top 10% rather than widely distributed gains. Since the top 10% collect 51% of all income, it stands to reason that increases flowing to the top will boost median income even if the bottom 90% saw declines in income.

Trend #7: The unintended consequences of the Affordable Care Act have yet to fully play out.

Trend #8: China’s recent invocation of a “defense zone” that includes the Senkaku Islands suggests this trend is definitely in play.

I also listed eight outcomes:

Outcome #1:  The counterfeiting of risk-free assets will continue to be a primary policy of the Status Quo

 

Outcome #2:  Risk will continue to be transferred en masse to the public

 

Outcome #3: Democracy in America is officially dysfunctional

 

Outcome #4:  Incentives will continue to be structurally perverse, and the rule of law will continue to be bent by individuals, enterprises, and the government

 

Outcome #5:  Healthcare (a.k.a. sickcare) will continue to be an enormous drag on the economy as diminishing returns, fraud, complexity, and defensive medicine add costs without equivalent improvements in health

 

Outcome #6:  The costs of complying with Obamacare will act as an inflection point in the decline of small business

 

Outcome #7:  The trend of the Status Quo “solving” perceived problems by adding layers of immense complexity to systems already suffering from marginal returns will continue

 

Outcome #8:  The informal cash economy will continue expanding, as those who choose to opt out of the Status Quo and those who must opt out as a survival mechanism do so

Without going into detail, I think a self-evident case can be made that each of these outcomes is already visible at the end of 2013.

Additional Trends to Watch in 2014

Since the trends listed above are still operant, these eight are additional rather than replacement trends:

Trend #1: The Number One growth industry in the private sector will increasingly be lobbying the government for favors.  When the State selects the winners and losers throughout the economy, then companies are essentially forced to make their case for special dispensations via campaign contributions and unrelenting lobbying. Elected officials benefit from their centralized powers, as the line of corporations anxiously pressing campaign cash on them lengthens in direct proportion to the expansion of State power.

This is the essence of what some call the Corporatocracy that effectively governs the U.S.A., and what I call the Neofeudal Cartel/State system, as the State and its chosen cartels dominate the economy and society in a fashion that can only be described as neofeudal.

Since organic growth from increases in wages and purchasing power are limited to the top 10%, the only sectors that can possibly gain growth from rising sales are Porsche dealerships and other luxury outlets that cater to the to
p 10%.  But since the number of households adding income is a thin 10 million out of 121 million households, moving more luxury goods offers little growth opportunities for the rest of the economy, which is stagnant at best.

As a result, lobbying the central State for favors is the default “growth industry.”

Trend #2:  The difference between anemic growth and recession will increasingly be semantic. This is another “how many angels can dance on the head of a pin?” debates in which Ivory Tower/State economists parse juiced or manipulated data to conclude the economy is “growing slowly” or slipping into negative growth, i.e. recession.

Experientially, if purchasing power and discretionary income (what’s left after paying taxes, rent, mortgages, food, utilities, etc.) are both declining for 90% of households, the “growth” in inventories, exports and other factors that feed into gross domestic product (GDP) are not reflecting the economy we actually inhabit.

Trumpeting what amounts to signal noise as “steady growth” is adept perception management (i.e. propaganda), but if it doesn’t include increases in purchasing power and discretionary income for the bottom 90%, it’s a propaganda embarrassment, like the Fed official hyping the declining cost of tablet computers while someone in the audience shouts, “I can’t eat an iPad.”

Trend #3: The decline in local government services will accelerate as rising pension/healthcare costs squeeze budgets.  Local governments (city, county, state) have avoided the politically combustible collision of rising pension/ healthcare costs and angry taxpayers tired of service cuts by accounting trickery and jacking up fees and taxes. Crunch-time has also been put off by rising home values that pushed property tax revenues higher.

These solutions are running out of rope: property values have topped out and accounting trickery hasn’t solved the fiscal impossibility of maintaining services and meeting pension obligations in a stagnant economy. When push comes to shove, services must be cut, either by bankruptcy or negotiation. Since the likelihood that taxes will drop is zero, taxpayers will get fewer services for their taxes.

Trend #4:  Middle class income, purchasing power and discretionary income will all continue to stagnate.  Unless you define “middle class” as those households earning $150,000 and up (9.1% of households)—and if you define the top 9% as middle class, your definition has lost all meaning—what’s left of the middle class will see real and discretionary income continue to stagnate. The causes of this decline in labor’s share of the economy are structural and cannot be remedied by lowering interest rates to zero or jacking up the stock market: zero-interest rates have deprived households of income and few in the bottom 90% own enough stock to affect their wealth. (Source: The Distribution of Household Income and the Middle Class)

Trend #5: Junk fees will continue to replace legitimate taxes.  Fearful of blowback from ever-rising taxes, local governments have turned to junk fees as the preferred method of “revenue enhancement.”  These include sharply higher fees for recreation, parking tickets, permits, etc., and a multitude of add-ons to property taxes and other existing tax structures. Local authorities are counting on the taxpayers to sigh but do nothing as long as the fee increases are small enough to avoid triggering political resistance.

In our small California town, the city has raised the fees for trash pickup by more than 100% in recent years—ironically, their reason is that recycling (which they encourage) has reduced the amount of trash being collected.  This sort of nonsensical rationalization for radically higher fees will join the usual justifications, i.e. “we can no longer fill potholes and pave streets unless we raise your taxes.”

How did they manage to perform these basic services 10 or 20 years ago with much smaller budgets? The answer: see Trend #3: skyrocketing pension and healthcare costs.

Trend #6:  The African oil exporting nations will move from the back-burner to the front ranks of geopolitical flash-points, joining the South China Sea, the Mideast and North Korea. I recently discussed The Scramble for Africa's Oil and the “resource curse” that is fueling the potential for conflict over Africa’s untapped oil wealth. 

Trend #7:  Americans will continue to passively accept the rise of the Police/National Security State. This may eventually change, but for the next few years the existing motivations for passive acceptance of increasing centralization of power will continue to hold sway.

The first is complicity: the 49% of all Americans—156 million out of 317 million—who receive direct transfers/benefits from the Federal government see little reason to rock the boat or put their cash from the government at risk.  (Source)

The second reason is a rational fear of State power: fear of getting tear-gassed and arrested should you join a protest, for example, and a generalized fear of putting whatever you still have at risk by confronting a government given to secrecy and retribution against whistleblowers, protesters, etc.

Trend #8:  The Federal government will quietly absorb the rising losses from defaulting student loans rather than reveal the bankruptcy of the entire Higher Education/Student Loan Cartel.  There are myriad ways to quash the recognition that the Higher Education/Student Loan Cartel is failing to provide useful education while it burdens younger generations with $1+ trillion in high-interest debt: quietly forgive some defaulted loans, stop enforcing collection of defaulted loans, etc.  The Federal government doesn’t want to call attention to its management of this powder keg, as widespread recognition that the system is broken will unleash calls for a general debt amnesty that will blow the big-debt-for-worthless-degrees system wide apart.

In Part II: Outcomes to Bet On in 2014, we’ll forecast the most likely consequences of these trends. With such understanding comes the opportunity to position ourselves in front of them for protection and/or profit.

Click here to access Part II of this report (free executive summary; enrollment required for full access).


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pz54lZSpRUY/story01.htm Tyler Durden

Apple Denies Ever Working With The NSA

Yesterday, we broke the story that during the 30th Chaos Communication Congress, it was revealed that according to the NSA (the slide in question) virtually every Apple product can be “backdoored”, and that the presenter of the discovery Jacob Applebaum openly asked Apple if it was just its “shitty software” that provided the NSA with this privacy invading loophole, or if it was Apple secretly working in collaboration with the NSA that permitted this betrayal of the iconic company’s customers.

Moments ago the WSJ reported that according to Apple, it was just the “shitty software”, as the company denied ever working with the NSA.

Somehow we doubt this will be the end of this particular story, especially since this is an implicit admission that Apple does, indeed, have “backdoors” in its products. Whether invited or not.

Perhaps as a follow up, Apple can also confirm that none of its products permit illegal backdoor access for the NSA or anyone else, especially now that the “implantation” mechanism has been made clear to the entire world?


    



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WTF Chart Of The Day: Fed Soaks Up Record $200 Billion In Year End Excess Liquidity

A week ago the Fed announced its latest expansion to its Fixed-Rate Reverse Repo facility, which boosted the maximum allotment per counterparty to a whopping $3 billion from $1 billion (initially this was “only” $500 million), to wit: “this week the Committee authorized the Desk to modify the terms of the exercise.  The maximum allotment cap will be increased to $3 billion per counterparty per day from its current level of $1 billion per counterparty per day, effective with the operation on Monday, December 23, 2013.” Some wondered why. Today we got the answer, when the Fed announced that an unprecedented $198 billion (that’s 20% of a trillion) among 102 entities was reverse repoed to it (an average of just under $2 billion per counterparty) in what can only be characterized as the most grotesque temporary open market operation conducted by the Fed in history.

 

We will leave it up to readers to decide what is more surreal: that the Fed is allowing banks to “window dress” to the tune of several times more than total Treasury holdings owned by the Primary Dealers as disclosed by the Fed, or that there is an unprecedented $200 billion in free liquidity floating out there.


    



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The Best And Worst Hedge Funds Of 2013

In a year when everyone was a winner (thank you Fed and BOJ) if some were bigger winners than others yet when virtually everyone underperformed the S&P, the biggest irony was that the very aptly named Keynes Leveraged Quantitative Strategies Fund was actually down -6.88% YTD and one of the 20 worst performing funds of the year. As for everyone else, hopefully their LPs are forgiving and don’t expect that in exchange for 2 and 20 that their funds would outperform the S&P for the first time in 5 years.

Best and Worst hedge funds of 2013:

The performance of select brand name hedge funds through mid/late December versus the S&P500:

And the full breakdown via HSBC:


    



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