Tag: finance

Yesterday, the ECB sent Benoit Coeure out to explain to the uneducated masses that the concern over negative interest rates is overdone because not everyone is saving money.

In Germany, the ECB has recently been repeatedly criticised for hurting savers through the currently very low interest rates. But people are not just savers – they are also employees, taxpayers and borrowers, as such benefiting from the low level of interest rates. Thanks to improved economic conditions, stimulated not least by monetary policy, real income and employment in Germany have increased in recent years. In other words, we need low interest rates now to ensure a normalisation of economic conditions, including higher returns on savings in the future.

Not to be outdone, the wizard behind the ECB curtain himself decided to comment on the matter. During a speech today at the annual meeting of the Asian Development Bank, Super Mario picked up where his colleague left off, and educated the people a bit further. Mario told everyone that if they would just take some of their savings and invest in stocks, those pesky negative interest rates wouldn't be a problem. Alas, if European savers could just be like their U.S. counterparts and have less than 15% of their assets sitting in cash instead of the unthinkable nearly 40% that those crazy Germans keep, all would be well with the world. 

For a start, savers can still earn satisfactory rates of return from diversifying their assets, even when interest rates on deposit and savings accounts are very low. For example, US households allocate about a third of their financial assets to equities, whereas the equivalent figure for French and Italian households is about one fifth, and for German households only one tenth. By contrast, German households keep almost 40% of their assets in cash and deposits, and French and Italian households approximately 30%. The equivalent number is less than 15% for US households.

So there we have it. For those who are saving for retirement, or just wish to be completely risk averse, the ECB's answer to you is too bad. The central planners would like you to invest in stocks so that the next time the market plummets, your cash can be transferred to those that know how the game works, leaving you with nothing at all…

Once again, for those who can't see the trend here, central banks only exist to take money from those that actually work (i.e. savers), and transfer it to their good friends who own all of the assets (i.e. those telling you not to save).

via http://ift.tt/1W2GtO0 Tyler Durden

Europe’s conservative, anti-immigrant and anti-Muslim tide is rising and spreading at an accelerating pace from nation to nation.

First it was the unprecedented ascent and surge in the polls of France’s National Front, whose Marine Le Pen has become the leading contender in next year’s presidential elections; then there was Austria whose Freedom Party swept the competition in last weekend’s first round of the local presidential elections; then over the weekend we learned that Germany’s brand new (less than three years old) Alternative for Germany (AfD) party has not only adopted an “Anti-Islam manifesto”, stating that “Muslims are no longer welcome in Germany”, but is now Germany’s third strongest party.

To be sure, not everyone was delighted by the AfD’s rapid move higher in the polls.

One such place is Germany’s Frankfurter Allgemeine, which just came out with a cover story to “reveal” how uncharacteristically conservative the AfD is, titled “How the AfD wants to live”, with a picture showing a retro family with dog and 3 kids. Oh, and a gun.

To which the AfD has a simple, if unrelenting response: it published its own mock cover titled “How our opponents want to live.“

We expect much more such back and forth between the “left” and the “right”, which just like in the US, will ultimately benefit the object the media has decided to target for ridicule, until – just like in Austria – Germany’s establishment is shocked when the AfD’s polling skyrockets in the coming months and leads to drastic changes in Germany’s political landscape.

via http://ift.tt/24jCIc0 Tyler Durden

"Sell in May and go away" — the old equity-market adage still holds water, but, as Bloomberg's Mark Cudmore explains, it's important to note how the seasonals have evolved since the great financial crisis.

In its original usage, the motto implied it’s advisable to cash out of equities at the end of May and enjoy a long summer of relaxation before returning to invest again. It wasn’t just a flippant saying; the facts tallied with the intuition.

For the 20 years until 2009, the Standard & Poor’s 500 Index lost an average of 1.47% from the start of June through September, according to data compiled by Bloomberg. Further, as BofAML's Stephen Suttmeier shows, seasonal data on the S&P 500 back to 1928 show that May through October is the weakest 6-month period of the year, while November through April is the strongest 6-month period of the year. May-October is up 63.6% of the time with average and median returns of 1.96% and 3.18%, respectively.

The explanation was that the summer holidays meant lower participation and hence greater volatility relative to returns. So the market stayed away to avoid stress and, as a result, the negative prophecy became self-fulfilling.

But something has changed since the global financial crisis. Whether it’s global warming, the impact of algorithmic trading, or just nervous investors trying to be proactive, the four-month “summer” slump has shifted forward.

Somehow, in the six years through 2015, May has gone from being the best month for the S&P 500 to the second-worst. Even in the midst of the historic bull market, the May to August period has seen average losses of 3.04%.

Furthermore, as BofAML's Stephen Suttmeier notes, the S&P 500 return of -0.68% for November 2015-April 2016 is well below average. When November-April is below average during secular bull market years, May-October is weaker with the S&P 500 up only 50.0% of the time with an average return of 1.18% (median of 1.71%)

So “Sell in May” now seems to mean the start of May rather than the end of the month. And there are solid reasons to heed the warning this year: the Fed’s data-dependency will raise volatility around U.S. economic reports, while the closer we get to June, the more uncertainties will build surrounding 2016’s big risk event: the "Brexit" referendum. So if you can start your vacation early, now may be the time.

via http://ift.tt/1W3ZXSQ Tyler Durden

One week ago when Morgan Stanley was lamenting the relentless buying by algos (or as he called them “macros” and saying “forgive the macros – they know not what they do“) who have taken over the function of setting the price of oil despite “increasingly bearish fundamentals”, the bank’s analyst Adam Longson asked one question: will the summer of 2016 be a rerun of last summer when oil jumped from $45 to $60 only to tumble into the end of the year.

We don’t know the answer, although at least for now it certainly appears that much of the euphoria that had gripped the oil market last year has returned with a vengeance, even if for the time being $45 appears to be the new $60.

However, what we do know is that what may have been the primary catalyst behind last year’s eventual drop in oil prices is back: hedging.

This is what Reuters writes in an article from earlier today:

The highlights:

U.S. oil producers pounced on this month’s 20 percent rally in crude futures to the highest level since November, locking in better prices for their oil by selling future output and securing an additional lifeline for the years-long downturn. The flurry of dealing kicked off when prices pierced $45 per barrel earlier in April. It picked up in recent weeks, allowing producers to continue to pump crude even if prices crash anew.

 

While it was not clear if oil prices will remain at current levels, it may also be a sign producers are preparing to add rigs and ramp up output.

 

“U.S. producers have been quick to lock in price protection as the market rallies given that the vast number of companies remain significantly under hedged relative to historically normal levels,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

And now compare the above article with the following Reuters story from exactly one year ago, when WTI had just hit $60 and would stay there for the next two months.

U.S. oil producers are rushing to take advantage of the rebound in oil markets by locking in prices for next year and beyond, safeguarding future supplies and possibly paving the way for a rebound in production. The flurry of hedging activity in the past month will help sustain producers’ revenues even if oil markets tumble again, which is bad news for OPEC nations, such as Saudi Arabia, that are counting on low prices to stunt the rapid rise of U.S. shale and other competitors.

 

Oil drillers are racing to buy protection for 2016 and 2017 in the form of three-way collars and other options, according to four market sources familiar with the money flows. In some cases, that means guaranteeing a price of no less than $45 a barrel while capping potential revenues at $70.

 

* * *

With rising prices, producers are locking in the upside, concerned that the rally may fizzle out with U.S. oil stockpiles at record highs – and as some producers, such as Pioneer Natural Resources start thinking about drilling again.

Last year, producers were very right to hedge prices because WTI proceeded to lose 30% of its value just over 6 months later. It is safe to say that this time they will again be right to hedge; the only question is when will the 2016 rerun of last year’s oil price leg lower begin. If last year was indeed a “deja vu” indication, we expect late June is when the next leg lower for oil begins in earnest, unless these same “macros” decide to frontrun the selling well in advance.

via http://ift.tt/1TqUPBK Tyler Durden

It appears the reality of the so-called "28 pages" – removed from the 9/11 Commission report – being unclassified may be getting closer and many suspect. Why do we say that? Because none other than CIA Director John Brennan did the Sunday talk-show circuit to start the propaganda, playing-down the report's significance, warning that information in the 28 pages hasn't been vetted or corroborated, adding that releasing the information would give ammunition to those who want to tie the terror attacks to Saudi Arabia – "I think there's a combination of things that are accurate and inaccurate [in the report]."

"This chapter was kept out because of concerns about sensitive methods, investigative actions, and the investigation of 9/11 was still underway in 2002," Brennan said on NBC's 'Meet the Press'. As The Hill reports,

He said information in the 28 pages hasn't been vetted or corroborated, adding that releasing the information would give ammunition to those who want to tie the terror attacks to Saudi Arabia.

 

"I think there's a combination of things that are accurate and inaccurate [in the report]," Brennan said. "I think the 9/11 Commission took that joint inquiry and those 28 pages or so and followed through on the investigation and then came out with a very clear judgment that there was no evidence that … Saudi government as an institution or Saudi officials or individuals had provided financial support to al Qaeda."

 

Former and current congressmen argue the pages show the existence of a Saudi support network for the hijackers involved in the terror attacks. The 28 pages were cut from a report on the 9/11 terror attacks in 2003 by the George W. Bush administration in the interest of national security.

 

Those critics say the vague wording in the report left open the possibility that less senior officials or other parts of the Saudi government could have played a role.

 

Former Sen. Bob Graham (D-Fla.), who helped author the report, says he believes it shows the 9/11 hijackers were "substantially" supported by the Saudi government, as well as charities and wealthy people in that country.

 

"I think it is implausible to believe that 19 people, most of whom didn't speak English, most of whom had never been in the United States before, many of whom didn't have a high school education — could've carried out such a complicated task without some support from within the United States," Graham said in an interview with "60 Minutes" in April.

One can't help but feel Brennan's appearance – and tone – has a sense of inevitability about the release of the '28 pages', which we are sure will be played down by the mainstream media now as inaccurate information that is more conspiracy than fact… because Brennan said so… and why would be lie?

via http://ift.tt/1re2zA2 Tyler Durden

In a disappointingly similar tone to the warnings, threats, and promises sent to Congress in 2008 when demanding the banks get their bailout (or else), Treasury Secretary Jack lew has released a letter he sent to Congress warning that if Puerto Rico’s situation is not “fixed” in an “orderly” manner “quickly” then the nation will face “cascading defaults.”

• *LEW: PUERTO RICO NEEDS ORDERLY RESTRUCTURING TO ADDRESS DEBTS
• *LEW WARNS OF `CASCADING DEFAULTS’ WITHOUT PUERTO RICO DEBT FIX
• *LEW SAYS CONGRESS MUST WORK QUICKLY ON PUERTO RICO LEGISLATION

As Bloomberg reports,

“With no orderly restructuring framework to address its debts, Puerto Rico will face a series of cascading defaults,” while litigation already under way will intensify and potentially take years to resolve, U.S. Treasury Secretary Jacob J. Lew says in letter to Congress.

 

“Unless Congress passes legislation that includes appropriate restructuring and oversight tools, a taxpayer-funded bailout may become the only legislative course available to address an escalating crisis”

 

Legislation must initially allow for voluntary negotiations in timely and fair fashion, offer responsible process especially for 330,000 citizens who depend on pension benefits; labor and federal land transfer issues should also be addressed

 

“Congress must work quickly to resolve the few outstanding issues on the proposed legislation to help Puerto Rico”

Treasury posts Lew letter on website…

Dear Mr. Speaker:

I am writing to follow up on my January letter regarding Puerto Rico’s debt crisis and to provide information on the mounting costs of congressional inaction.  More than six months ago, the Administration introduced a comprehensive legislative plan to resolve this crisis.  In my January letter, I noted that absent timely congressional action Puerto Rico’s fiscal, economic, and humanitarian situation would continue to deteriorate.

Since then, constructive, bipartisan discussions have taken place, and a bill has been introduced, but Congress has yet to produce a workable legislative response. Meanwhile, the crisis in Puerto Rico has deepened.  In an effort to protect government deposits at Puerto Rico’s Government Development Bank (GDB), the Governor has declared a state of emergency and invoked the temporary debt moratorium powers recently provided to him by the Puerto Rico legislature. Yesterday, the Governor announced that the GDB would be unable to make a $400 million principal payment due today on its $3.8 billion of debt.  While a portion of bondholders are negotiating a restructuring of this debt, any such deal would require the participation of all GDB creditors and thus effectively would be conditioned on federal legislation providing a restructuring authority.

Today’s expected default is only the latest in a series that began last summer.  Since last August, the Public Finance Corporation has failed to make debt service payments on its $1.1 billion of outstanding debt.  In December, the Governor invoked his constitutional “clawback” authority to transfer funds allocated to one set of bondholders in order to pay another.  This “clawback” in turn resulted in the default of $1.9 billion of rum tax bonds and likely has put Puerto Rico on a path to defaulting on another $5.1 billion of highway and hotel tax bonds over subsequent months.

More bond payments, some very large, are coming due soon.  On July 1, Puerto Rico will face nearly $2 billion worth of payments, including almost $800 million of General Obligation debt.  Puerto Rico does not anticipate having sufficient funds to meet these and other obligations, leaving it with the impossible choice of paying its creditors or providing essential government services.  Going forward, Puerto Rico’s $70 billion of debt is unsustainable by any measure.  It simply cannot afford to pay its debt.  And, with a shrinking economy because of people leaving Puerto Rico, further reductions in government spending will be difficult to implement.  Government expenditures, net of debt service, already have been reduced to the lowest level since 2005.

With no orderly restructuring framework to address its debts, Puerto Rico will face a series of cascading defaults.  Litigation—which is already underway—will only intensify.  This wave of litigation will be contentious and protracted, both among competing creditors and against Puerto Rico, and it could take many years to resolve.

This is not just a matter of financial liabilities and litigation.  As I underscored in my January letter, the human costs for the 3.5 million Americans in Puerto Rico are real.  And they are escalating daily.  Hospitals continue to lay off workers, ration medication, reduce services, and close floors.  Moreover, despite the intensifying threat from the Zika virus, financial constraints have made it extremely difficult to counteract.  Unsealed septic tanks, abandoned homes, cemeteries, and piles of old tires, where mosquito larvae grow, for example, must all be treated, but the government is struggling to pay for the work to be done.

Congress must work quickly to resolve the few outstanding issues on the proposed legislation to help Puerto Rico.  For example, the legislation must provide a functional and seamless debt restructuring process that initially allows for voluntary negotiations while ensuring a timely and fair resolution.  The bill also must balance important policy priorities more evenly, most significantly by offering a responsible process to ensure the retirement security of the 330,000 citizens in Puerto Rico who depend on their pension benefits.  Other troubling labor and federal land transfer provisions also should be addressed.  Small changes in text would address these issues in a fair and acceptable way.

In the coming days, it is important to keep in mind that further inaction only gives those seeking to deter Congress from passing a bill more time to continue making inaccurate and misleading claims about the legislation.  Absent enactment of a workable framework for restructuring Puerto Rico’s debts, bondholders will experience a lengthy, disorderly, and chaotic unwinding, with non-payment for many a real possibility.  The people of Puerto Rico will be forced to endure additional suffering.  And, unless Congress passes legislation that includes appropriate restructuring and oversight tools, a taxpayer?funded bailout may become the only legislative course available to address an escalating crisis. 

We appreciate you and those Members of Congress who have been working across the aisle to help put Puerto Rico on a sustainable path forward.  The Administration remains committed to working collaboratively with you and your colleagues to complete action on this critical legislation as soon as possible.

Sincerely,

Jacob J. Lew

*  *  *

NOTE: the letter has since been removed from the Treasury site.

via http://ift.tt/1ObAhvx Tyler Durden

Any moment now we expect Paul Krugman to come out with an op-ed suggesting that not just Time magazine, but Charlie Munger is the latest to join ZH payroll following what were some surprising comments by Warren Buffett’s right hand man earlier today on CNBC when he said that “the U.S. is looking more like Japan given the prolonged low-interest-rate environment.”

The one phrase which Krugman will surely have something to say about was the following: “I strongly suspect it was massively stupid for our government to rely so heavily on printing money and so lightly on fiscal stimulus and infrastructure,” Munger told CNBC’s “Squawk Box.”

Munger also blasted Japan’s decision to become the latest nation to implement negative interest rates: “It surprised all the economists of the world.”

But before we accuse Charlie Munger of transitioning into a full blown Austrian, his policy recommendation left something to be desired: “I think we would’ve been way better off if we’d used fiscal stimulus because … this [low interest rate] approach runs out of fire power.” Of course, “fiscal policy” is merely a more polite way to say take on more debt, which ultimately goes back to the fundamental problem: there is just far too much debt in the world, and the main reason why the Fed and other central banks have been forced to unveil unorthodox monetary policy is to keep interest rates as low as possible or else risk an out of control explosion in not just debt but servicing costs.

* * *

Meanwhile, in other, somewhat tangential news, none other than Warren Buffett went on an epic tirade over the weekend bashing Wall Street. According to the WSJ, just before lunch at the Berkshire Hathaway Inc. annual meeting on Saturday, Warren Buffett unloaded what he called a “sermon” about hedge funds and investment consultants, arguing that they are usually a “huge minus” for anyone who follows their advice.

The Berkshire chairman has long argued that most investors are better off sticking their money in a low-fee S&P 500 index fund instead of trying to beat the market by employing professional stockpickers. He used the annual meeting to update the tens of thousands in attendance – and others watching via a webcast – -about his multi-year bet with hedge fund Protege Partners. The bet, initiated by the New York fund back in 2006, was that over a decade, the cumulative returns of five fund-of-funds picked by Protege would outperform a Vanguard S&P 500 index fund, even when including fees.

 

Mr. Buffett showed a chart comparing the cumulative returns of the two since 2008. As of the end of 2015, the S&P 500 index fund had a cumulative return of 65.7%, outdoing the hedge fund teams’s 21.9% return. The S&P has outperformed in six of the eight individual years of the bet too.

 

The chart was preamble to the real point Mr. Buffett wanted to make: that passive investors can do better than “hyperactive” investments handled by consultants and managers who charge high fees.

“It seems so elementary, but I will guarantee you that no endowment fund, no public pension fund, no extremely rich person” wants to believe it, he said. “They just can’t believe that because they have billions of dollars to invest that they can’t go out and hire somebody who will do better than average. I hear from them all the time.” He was just getting started.

“Supposedly sophisticated people, generally richer people, hire consultants, and no consultant in the world is going to tell you ‘just buy an S&P index fund and sit for the next 50 years.’ You don’t get to be a consultant that way. And you certainly don’t get an annual fee that way. So the consultant has every motivation in the world to tell you, ‘this year I think we should concentrate more on international stocks,’ or ‘this manager is particularly good on the short side,’ and so they come in and they talk for hours, and you pay them a large fee, and they always suggest something other than just sitting on your rear end and participating in the American business without cost. And then those consultant, after they get their fees, they in turn recommend to you other people who charge fees, which… cumulatively eat up capital like crazy.”

Buffett said he’s had a hard time convincing people of this case. “I’ve talked to huge pension funds, and I’ve taken them through the math, and when I leave, they go out and hire a bunch of consultants and pay them a lot of money,” he said, earning a laugh from the crowd. “It’s just unbelievable. “And the consultants always change their recommendations a little bit from year to year. They can’t change them 100% because then it would look like they didn’t know what they were doing the year before. So they tweak them from year to year and they come in and they have lots of charts and PowerPoint presentations and they recommend people who are in turn going to charge a lot of money and they say, ‘well you can only get the best talent by paying 2-and-20,’ or something of the sort, and the flow of money from the ‘hyperactive’ to what I call the ‘helpers’ is dramatic.”

A passive investor whose money is in an S&P 500 index fund “absolutely gets the record of American industry,” he said. “For the population as a whole, American business has done wonderfully. And the net result of hiring professional management is a huge minus.”

As the WSJ adds, Buffett has long had a testy relationship with Wall Street, and he’s positioned himself for decades as an outsider to the world of New York finance. In addition to repeatedly attacking the fees charged by hedge funds and investment professionals, he’s criticized the tactics of activist shareholders, the danger of derivatives and the heavy use of debt by private-equity firms.

To be sure, the antipathy has run in the opposite direction as well. Over the years many on Wall Street believe the Berkshire chairman to be a hypocrite, hiding behind the image of a folksy, benevolent investor while pursuing some of the tactics that are the targets of his attacks. Others have rightfully and repeatedly accused the Oracle of Omaha of perpetuating his wealth while standing for nothing more than crony capitalism.

That did not stop Buffett from continuing his rant.

“There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” he said. “There are a few people out there that are going to have an outstanding investment record. But very few of them. And the people you pay to help identify them don’t know how to identify them. They do know how to sell you.”

As so many hedge funds have found out the hard way, at least under the global central bank put regime, Buffett’s assessment has so far proven correct but perhaps not for the reasons he thinks: after all when central bankers themselves have become Chief Risk Officers of the global equity markets, where even a 5% dip is immediately countered with relentless activist rhetoric by the money printers if not even further monetary action (there has been nearly 700 central banks easing decisions since the financial crisis, not to mention over $13 trillion in liquidity injections) who needs to hedge?

via http://ift.tt/1W3OjYe Tyler Durden

Submitted by Howard Kunstler via Kunstler.com,

In this decade of maximum peril, a prankish God delivers two maximally detested candidates to lead the faltering nation as events run ahead of all the convenient narratives. For instance: the idea that Republican “insiders” can block Trump’s path to the nomination. The insiders may be phantoms after all. For instance, the loathsome Koch brothers have already made their move onto Hillary’s side of the game-board. Trump won’t miss their campaign contributions for a New York minute (while Hillary might find a way to stuff the cash into some Cayman Islands lock-box of the Clinton Foundation).

Events played right into Trump’s smallish hands last week when protesters outside a Donald rally in Costa Mesa, CA, waved Mexican flags and placards calling for the reestablishment of Aztlán del Norte. Kind of proves his point about illegal immigration, don’t it? Trump also supposedly blundered in saying that Hillary had only “the women’s card” left to play in her donkey trot to the election. I’m not so sure he’s wrong about that — though the indignometer needle danced through the red-line after he said it.

Has it come to this? The women’s party against the men’s party? What kind of idiot psychodrama is this country acting out? Mom and dad mud-wrestling in an election year hog-wallow? A Reality TV show writ large from sea to shining sea? Are there no better ways of understanding the difficulties we face?

Lately Hillary has been boasting of her ability to bring Wall Street to heel, theoretically after Wall Street installs her in the White House. Voters (especially women) might want to pay attention to Hillary’s lavish praise for President Obama’s handling of the banking turpitudes still unresolved seven years after the crack-up of 2008. What did the Dodd-Frank Act (signed by “O” in 2010) accomplish except to provide more lucrative work-arounds, by Too-Complex-To-Comprehend legalese, for Too-Big-To-Fail banks. It was written by bank lobbyists and lawyers and was about 2,270 pages longer than the old Glass Steagall Act that Bill Clinton vaporized in 1999. Do you suppose that Bill and Hill might have talked about the repeal of Glass Steagall back then? Do you wonder what she thought about it at the time… being a lawyer and all?

This week attention is fixed on the Indiana primary where Devil Bat Ted Cruz desperately makes his last stand against the Trump juggernaut. It seems that former House Speaker John Boehner actually succeeded in driving a wooden stake through Cruz’s hypothetical heart by casually remarking that he was “the most miserable sonofabitch I ever worked with.” Kind of hard to explain that one away, though Ted tried by sending out his new attack dog Carly Fiorina and claiming that he never worked with the Speaker of the House — a risible claim for a national legislator in the same party.

All of this would be amusing if the USA wasn’t sliding into the twilight of what many people call “modernity” – which is code for the techno-industrial hyper-complexity we’ve been enjoying lately as a species. We have yet to comprehend the diminishing returns of heaping more complexity on what is already too complex. Exhibit A for most of the common folk must be the Affordable Care Act (also signed by “O” in 2010). Whereas the shrewd stylings of Dodd-Frank surely mystify the public, most full-functioning adults understand what it means when their health insurance premiums go up by 20 percent and the new deductible makes it unthinkable to even consider going to the emergency room.

The sad truth may be that rackets of this kind are unreformable, and that we can’t begin to do things differently until they collapse. It should be obvious, for instance, that American health care needs to move in the opposite direction from where it has been going — from giantism, as epitomized by colossal merged mega-hospital corporations, back to some kind of local clinic care in which doctors and their subalterns are not burdened by an oppressive matrix of Charge-Master grift. There may be less razzle-dazzle technology in that future model, but much more hands-on care, plus an end to the kind of financial pillage that bankrupts households for relatively routine illnesses (the $90,000 appendectomy).

Likewise in virtually all other areas of American life, the real trend as yet un-discussed in this election campaign, will be unwinding and downscaling of the onerous, toxic hyper-complexity of the age now passing and finding our way to a workable re-set of what used to be known as political-economy.

In the meantime: a clown show.

via http://ift.tt/1W2meQy Tyler Durden

Earlier today we reported that in what many are convinced is just another self-gratifying publicity stunt, Australian entrepreneur Craig Wright “outed” himself as bitcoin’s mysterious creator “Satoshi Nakamoto” by unleashing a major PR campaign and revealing his “identity” to three media organizations – the BBC, the Economist and GQ.

As Verge writes, after meeting with Wright, Bitcoin core developer Gavin Andresen stated unequivocally, “I believe Craig Steven Wright is the person who invented Bitcoin.”  But while established bitcoin figures were quick to agree with Wright’s claims, many remain deeply unconvinced, believing Wright has come forward to drum up interest in a new supercomputer venture. Others are even more skeptical, and are convinced that after digging through Wright’s claims, that “Satoshi” is anyone but the Australian.

As a reminder, this is not the first time Wright has made headlines in relation to bitcoin. In December, the Australian businessman was put forward as a possible founder of Bitcoin by Wired and Gizmodo. After the news broke, Bitcoin fans discovered a string of apparent fabrications from Wright’s past, and Wright was brought up on charges by Australian tax authorities on uncertain grounds.

Among the things that are perplexing is Wright’s sudden desire to “claim fame” for being Satoshi: why keep quiet for so many years then suddenly appears out of the blue. Then again, “even skeptics have to admit, Wright is the strongest candidate we’ve ever had. He claims to be Satoshi Nakamoto — and some of the biggest names in Bitcoin believe him.”

However, as the Verge adds, “what’s missing is the math. Wright’s demonstration showed both reporters and Andresen a signature produced by a unique private key believed to belong to Satoshi Nakamoto. But that signature seems to have be pulled from a public message signed by Nakamoto in 2009, as researcher Patrick McKenzie showed on Github. The message failed to verify when McKenzie attempted to test it, a result of changes made to the OpenSSL protocol in the last seven years.”

That was, more or less, all of his “evidence.”

Other proof has turned out to be difficult to come by. Wright says the early Satoshi-linked bitcoin are all owned by a trust, so he can’t prove his identity by spending them. Andresen claims to have witnessed more definitive cryptographic proof that Wright holds the keys, but without anything to verify, all the public has is his word.

It gets worse:

Beyond the technical details, the takeaway is simple: Wright doesn’t have any math to back up his claim. Even worse, he pretended to have something he didn’t, and seems to have fooled an awful lot of people along the way. As a result, many observers are still demanding proof, particularly now that Wright seems eager to establish himself as Bitcoin’s mythical inventor. “Wright needs to sign something new, today, to prove he holds the crypto keys,” said Bloq’s Jeff Garzik, a central developer in the Bitcoin world.

Cornell professor Emin Gun Sirer, who specializes in cryptocurrency, was far less tactful and even accused Wright of an attempt to mislead.”We have yet to see proper cryptographic proof,” Sirer said in a statement. “What we’ve seen looks like a deliberate attempt to mislead.”

There is currently no publicly available cryptographic proof that anyone in particular is Bitcoin’s creator.

— Bitcoin Core Project (@bitcoincoreorg) May 2, 2016

In short, the claims don’t add up. So what may be the real story here?

In addition to merely trying to trump up publicity to help his tangential business ventures, Wright could simply be a puppet in the escalating feud between the two proposed version of Bitcoin. As the Verge reminds us, even before the Wright news, the system was in bad shape, with transactions taking as long as 43 minutes to work through an overstuffed network. Efforts to fix those issues have split the community in two, as Core and Classic developers move forward with two different versions of the Bitcoin software.

Verge’s conclusion is that not only is Weight not “the” Satoshi, but that his appearance may simply serve to push the agenda of Bitcoin core developed Gavin Andresen.

Finding the One True Satoshi could be the perfect way to resolve that split and unite the two factions — but instead, Wright seems to have only deepened the divide. The Economist reports that Wright favors Andresen’s version of Bitcoin, furthering the political implications of this morning’s news.

The bottom line, “if Wright wants to convince the community, he’s picked a bad way to do it. So far, his case has been all authority and no math.“

Meanwhile, the search for the real Satoshi will continue.

via http://ift.tt/1rdIeuT Tyler Durden