Tag: finance

As the US session starts, despite a dearth of news and actvity in other markets, the precious metals complex is being smashed lower (on heavy volume). Gold just hit 2013 lows at $1182 and Silver at $18.837 is near its 2013 lows also.

 

 

It seems someone wants the status-quo-defying precious metals going out at their lows as central-planning-supporting stocks go out at their highs…

 

on heavy volume…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/I_5u0ThUs04/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If the gambler has no feedback from his bets because the casino reimburses his losses, then he will continue gambling wildly and losing spectacularly.

Risk is an ever-present characteristic of life; it cannot be eliminated, it can only be masked or hedged. We know this intuitively, yet we blithely accept official assurances that risk can be eliminated by the monetary machinations of the Federal Reserve, the Central Bank of China, the Bank of Japan and the European Central Bank.

To confuse masking risk with the elimination of risk is the acme of hubris and the perfect setup for disaster. In my view, the global central bank response has been directed at masking risk and presenting this as the "solution" that has sent risk back to its lair, defeated. But cloaking risk does not eliminate it; official obfuscation merely pushes risk beneath the surface where it accumulates unseen.

Once the built-up risk reaches criticality, it explodes in "unforeseen" volatility that is often triggered by a seemingly unimportant event.

One way that risk is systemically and deliberately hidden is by separating it from the gain or loss that results from taking the risk. This is also called "moral hazard," and the example everyone now knows is private banks that "privatized profits and socialized losses" by keeping their outsized profits skimmed in the go-go years and transferring their staggering losses to the public ledger.

From the point of view of risk analysis, the risk of losses from malinvestment and speculation were separated from the gains. The banks kept the gains but then diverted the losses (risk) to the taxpayers via the $14 trillion TARP bailout and $16 trillion in "secret" subsidies and give-aways only revealed by a FOIA release of 30,000 pages won by Bloomberg.

We can understand this disconnect as the severing of the feedback loop from risk to gain. If the gambler has no feedback from his bets because the casino reimburses his losses, then he will continue gambling wildly and losing spectaularly. After all, why not?

This explains why the Fed and the Obama administration will not just fail, but fail spectacularly: not only are they individually distant from the risks incurred by their policies, those entities they are protecting (the banking sector, the higher education cartel, sickcare, etc.) are also protected from risk.
Without feedback (we might also call it the possibility of loss or defeat), the players and the system are both intrinsically doomed to failure. There is no other end-state possible if you start from this initial condition.

Thanks to globe-trotting correspondent Toby B., who sent me the book and several other fascinating histories, I have read a deeply insightful history of the pivotal battle of Midway, June 1942: Shattered Sword: The Untold Story of the Battle of Midway.

The book is unique among war histories in that it explores the culture and internal conflicts of the Japanese Imperial Navy which contributed (as initial conditions) to the unexpected defeat at Midway by the inferior forces of the American Navy.

Having studied Japanese history, language, geography and literature in university, the culture of the Imperial Navy was not entirely new ground. But the internal conflicts over differing strategies in the Japanese central command and Imperial Navy were new and of great interest, for they reflected not just Japanese culture but (not unexpectedly) human nature.

Japan's remarkably decisive successes in the first months of the Pacific war left the high command with the unusual problem of "what do we do next?" Having achieved all their tactical goals, debates raged over what to attempt next.

Admiral Yamamoto, the chief architect (though by no means uncontested) of Japan's strategy, opted to draw out America's aircraft carriers into a "decisive battle"–the heart of Japanese Naval doctrine. He devised the Midway campaign to do exactly this.

After such an amazing string of victories over the American, Dutch and British navies following Pearl Harbor, the idea of defeat did not enter the computations or the debates, nor did the idea that all the various strategies proposed were highly risky.

The denial and disorientation caused by the catastrophic loss of Japan's four finest aircraft carriers in a single day did not deter the Japanese commanders from pressing on to Midway; their mindset did not allow for defeat, and so they had no choice but to press on to victory.

Eventually Admiral Yamamoto conceded the campaign had failed to reach its objectives–destroy the U.S. aircraft carriers and capture Midway Island, and that pressing on would only endanger what was left of the Japanese fleet.

All of this struck me as absolutely telling in regards to the Fed's campaign to restart the U.S. economy by lowering interest rates to zero and flooding the system with free, cheap money (liquidity). The strategy is simple: drive the cost of borrowing money so low that people will once again buy homes with 3% down payments and huge mortgages, and plow their money into the stock market, the asset class (along with real estate) which is inflated monthly as an official Fed policy.

This is the Fed's strategy: drive "risk assets" like stocks up until some magical point is reached and households feel wealthy and confident again, and start borrowing and spending with abandon. The fact that only 10% of U.S. households own enough stock to expereince this "wealth effect" simply doesn't register in the Fed's mindset: risk has been eliminated and thus victory is assured.

The idea that this strategy is flawed does not occur to the Fed leadership; this mindset is so narrow and atrophied that the Fed has no alternative but to "press on to victory," even as the ship is sinking beneath them.
The same can be said of President Obama, who appears unable to grasp that his policies have been catastrophically misguided.

I suspect
2014 will be the year–after five long years of the same battle plan–that the total and complete failure of this strategy will be revealed to all. The Fed and Obama administration are steaming their flagships toward the booming guns on the horizon, confident of victory even as the undetected squadrons of risk are high above, setting their bombsites on the foaming white wakes of hubris below.
 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GZrtDzkht54/story01.htm Tyler Durden

What can one say but: “because of the recovery?”

As Italy’s ISTAT reported yesterday, poverty in Italy has reached its highest level in at least 16 years “as the economic crisis has bitten, driving up unemployment and cutting wages, according to a report on social cohesion issued on Monday. Relative poverty, defined as a family of two living on a monthly income of 991 euros (847.61 pounds) or less, affected 12.7 percent of families, the highest level recorded since the current series of data began in 1997, the report by statistics agency ISTAT said.”

It was immediately unclear if this beat expectations of a 13% print, and thus was bullish for the Stalingrad and Propaganda 500.

The report, a compendium of data on issues ranging from employment to demographics, said poverty had deepened in all areas of Italy between 2011 and 2012. Relative poverty rose from 4.9 percent to 6.2 percent in the richer north and from 23.3 percent to 26.2 percent in the poorer south.

More from Reuters:

The report painted a grim picture of the impact of the country’s worst post-war recession, with joblessness at record levels, incomes squeezed and permanent, full-time employment declining. “As one of the countries most affected by the crisis, Italy registered a progressive decline in the main macroeconomic and social indicators in 2012,” Labour Minister and former ISTAT chief Enrico Giovannini said in the introduction to the report.

 

“Nonetheless social cohesion has held up, enabling the country to support sacrifices aimed at recovering financial stability and passing important reforms,” he said.

Well as long as “social cohesion” has held up, i.e., no civil war has broken out yet, all is well. Then again, some disagree:

The relatively optimistic tone contrasted sharply with recent comments from employers’ federation Confindustria, which warned this month that the recession had inflicted damage on the Italian economy comparable to that left by a war.

 

The hardships caused by unemployment and measures taken to keep straining public finances under control have fed mounting discontent, typified by a long series of occasionally violent street protests earlier this month.

 

Unemployment in Italy is at its highest level since at least the late 1970s with the overall jobless rate at 12.5 percent and youth unemployment as high as 41.2 percent in October, according to the latest ISTAT figures.

With recoveries like these, who needs depress… hey – look over there, the FTSE MIB is up 20% for 2013!

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• Firms to Face new Rules Over Pay, Taxes (WSJ)
• US to test commercial drones at six sites (CNN)
• China’s Local Debt Swells to 17.9 Trillion Yuan in Audit (BBG) – which is about 2 trillion less than where it actually is (Reuters)
• Fears after key China debt level soars 70% (FT) and in reality the debt level is saoring far more
• Pot Shops in Denver Open Door to $578 Million in Sales (BBG)
• China Says It Will Shun Abe After Shrine Visit (WSJ)
• De Blasio Taking Office Citing Wealth Gap as Crime Falls (BBG)
• China Approves $353 Million of Share Sales as IPOs Resume (BBG)
• Obama Seeks Way to Right His Ship (WSJ)
• Netflix Tests Subscription Fees Based on Number of Account Users (BBG)
• Three big macro questions for 2014  (FT)
• Australia cyclone heads inland after battering iron ore ports (Reuters)
• Latvia sees joining euro as extra protection against Russia (FT)
• Berkshire Swaps $1.4 Billion in Phillips 66 Stock in Deal (BBG)

 

Overnight Media Digest

WSJ

* In the best year for U.S. stocks since 1995, the smart way to play the markets has been to follow the dumb money.

* Private-equity firms are set to return a record amount of cash to their investors for 2013, after taking advantage of buoyant markets to sell hundreds of billions of dollars of investments.

* Regulators are set to unleash new business rules in 2014 that will push companies to re-examine issues ranging from their taxes and suppliers to auditor relationships and interest-rate hedges.

* Cooper Tire terminated its $2.2 billion merger pact with Indian suitor Apollo Tyres, ending a deal that had unraveled in recent months.

* Prices have tumbled 20 percent this year, capping the biggest two-year plunge in a decade and highlighting commodity markets’ struggle with a supply deluge.

* A feud between Apple and a lawyer appointed by a federal court judge to monitor the company’s e-book pricing reform is getting more acrimonious.

* Hertz Global Holdings Inc enacted a one-year shareholder-rights plan to prevent investors from gaining sizable control of the car-rental firm, a move the company attributed to “unusual and substantial” trading activity.

* Hewlett-Packard Co on Monday said it is in advanced talks with two U.S. regulators to settle investigations concerning allegations of bribery.

 

FT

Paul Tucker, former deputy governor for financial stability at the Bank of England, is knighted in the new year’s honours list for his services to central banking.

The UK’s financial markets watchdog is on track to receive a record number of pleas for help from overseas authorities in 2013 as cross-border scandals such as Libor-rigging underscore the global nature of regulatory investigations.

The heads of Britain’s electricity networks will be grilled by MPs in the new year amid rising anger over the amount of time it has taken to restore power to tens of thousands of homes affected by last week’s storms.

Local government debt levels in China have soared to almost $3 trillion in less than three years, according to an official audit highlighting one of Beijing’s most daunting challenges as it attempts to sustain economic growth while avoiding a financial crisis.

London Underground is throwing its stations open to greater commercial development as part of an overhaul of the world’s oldest metro system designed to boost the network’s takings.

 

NYT

* Despite challenges that have stymied even giants like Wal-Mart Stores Inc, some American technology entrepreneurs are seeking to pursue India’s untapped opportunities, and are ready to risk their money on start-ups.

* Banks in 16 countries are using a psychometric test to predict whether someone will pay back a loan. Originally a Harvard doctoral project, the Entrepreneurial Finance Lab’s test has increasingly won the confidence of risk-averse bankers in places where, many economists believe, credit bottlenecks are severely stunting growth. A new partnership with MasterCard Inc has potential to speed the model’s proliferation.

* Parents and advocacy groups have been using websites and social media as powerful megaphones to force titans of the food industry to reconsider the ingredients in their foods and the labeling and processing of their products. In several instances in the last year or so, major food companies and fast-food chains have shifted to coloring derived from spices or other plant-based sources, or changed or omitted certain labels from packaging.

* The number of Americans who signed contracts to buy existing homes in November was nearly unchanged from October, suggesting sales are stabilizing after several months of declines.

* Hertz Global Holding LLC, one of America’s biggest car rental companies, has adopted a one-year shareholder rights plan, commonly known as “poison pill,” to thwart an investor from gaining control of the board.

* Private equity firm Bain Capital said it had agreed to buy a majority stake in Bob’s Discount Furniture, the chain of stores known for its low-tech commercials featuring its founder, Bob Kaufman.

* The restaurant chain Cracker Barrel Old Country Store Inc’s board fired back at Sardar Biglari, the activist investor, on Monday, saying that it plans to continue business as is despite Biglari’s push to put Cracker Barrel on the block.

 

Canada

THE GLOBE AND MAIL

* Support for Prime Minister Stephen Harper’s government is dropping sharply, according to a new poll showing a majority of Canadians believe the country is headed in the wrong direction.

* The world’s central banks are stashing away Canadian dollars at a faster rate than any other major currency, a vote of confidence at a time when the loonie, the Canadian one dollar coin, has lost some of its shine in foreign exchange markets.

* Canada’s first gold coins had barely been minted before Ottawa yanked them out of circulation a hundred years ago in an effort to stop gold from leaving the country during the First World War. After a century of sitting in cloth bags inside the Bank of Canada
vault, they are among a wide range of assets the Conservative government is liquidating – in this case literally – to save taxpayers a few dollars and help balance the books.

* Toronto City Council will debate asking the Ontario government to help pay for cleanup after an ice storm that left hundreds of thousands of people without power, a bill that may ultimately be shared by Ottawa if costs rise.

Reports in the business section:

* BlackBerry Ltd Chief Executive John Chen continues to swat at critics and competitors, issuing an open letter that takes some direct shots at the company’s rivals as he tries to convince the market the smartphone company can turn itself around.

* Canadian Imperial Bank of Commerce signed a new deal with the Greater Toronto Airports Authority earlier this month, becoming the only bank allowed to advertise in Toronto’s Lester B. Pearson International Airport. Canadian banks are developing new tactics to attract business from immigrants, devoting greater effort to locking down newcomers even before they settle in their new country.

* Bombardier Inc says it received a firm order for 10 Challenger 350 business jets worth $259 million at list price. The Montreal-based plane and train maker did not disclose the customer’s name.

* The province of Ontario has experienced a rash of plant closings recently, and with a lacking currency cost advantage, new investment doesn’t seem to be in the cards.

NATIONAL POST

* Alberta’s opposition leader, Danielle Smith, says she is determined to win the legislature come 2016 against a government posting unbalanced budgets amid a series of petty scandals and outrages.

* Ontario Premier Kathleen Wynne says her vow to set up an Ontario pension plan is no bluff to twist Ottawa’s arm on enhancing the Canada Pension Plan (CPP). She says she’ll forge ahead because the federal government has shut down any discussion about CPP to provide Canadians with a more secure retirement income.

FINANCIAL POST

* Kitsault Energy Ltd has applied to federal regulators to export 20 million tons of chilled natural gas per year from the site of an abandoned mining town on Canada’s West Coast, joining much bigger companies looking to tap British Columbia shale gas for delivery to overseas markets.

* Two directors, Douglas Reeson and Greg Hall, have resigned from Colossus Minerals Inc, a formerly high-flying junior mining company that is now on the verge of financial collapse.

* Canadians may be the heaviest Internet users in the world but their homegrown online retailers have yet to catch up to the performance of U.S. stores with sites in Canada, according to a report by Vancouver-based digital consultancy Chasm Digital Inc.

 

China

CHINA SECURITIES JOURNAL

– China’s Ministry of Land and Resources is drafting rules to ensure the supply of arable land. China must improve land efficiency to meet a level of at least 120 million hectares for agriculture, ministry vice minister Wang Shiyuan said.

– The scale of China’s outward direct investment is estimated to reach $90 billion this year, said Wang Yiming, a vice president of macroeconomic research under the National Development and Reform Commission (NDRC).

SHANGHAI SECURITIES NEWS

– China will implement five institutional and five functional changes in the Shanghai Free Trade Zone (FTZ) next year, including setting up a separate accounting unit and establishing markets for bulk products, sources told the official paper.

SHANGHAI DAILY

– Authorities in Shanghai have blacklisted 29 hospitals for failing to implement tougher smoking rules as China cracks down on public smoking. The move follows a ban in China on officials smoking in public places.

CHINA DAILY

– China’s urban smog reached a 52-year high in 2013, according to the National Meteorological Center. Cities suffered on average 29.9 days of smog over the course of the year.

PEOPLE’S DAILY

– Revealing China’s government debt to the public will help make the government’s economic work more transparent, so improving debt management and supervision, said a commentary in the paper that acts as the Party’s mouthpiece.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Haemonetics (HAE) downgraded to Hold from Buy at Benchmark Co.
Blucora (BCOR) initiated with a Hold at Jefferies
Ring Energy (REI) initiated with a Buy at SunTrust
Hertz (HTZ) potential spin-off could spur investor interest, says Wells Fargo
ITT Educational (ESI) CFPB settlement risk manageable, says William Blair
Penn National (PENN) Q4 revenue estimate cut to $651M at FBR Capital

HOT STOCKS

NASDAQ (NDAQ), Borsa Instanbul signed agreement; NASDAQ to take 5% equity stake
Berkshire Hathaway (BRK.A) acquired flow improver business from Phillips 66 (PSX)
Hertz Global (HTZ) board unanimously adopted one-year shareholder rights plan
Maui Land & Pineapple (MLP) doesn’t comment on unusual market activity
Safeguard Scientifics (SFE) partner company ThingWorx acquired by PTC (PTC) for $112M

NEWSPAPERS/WEBSITES

• Symantec Corp. (SYMC), which makes anti-virus and data security software sees many opportunities for growth in China. The U.S. remains Symantec’s largest market, accounting for nearly half of its revenue, but its presence in the Asian Pacific region has increased over the past several years, and the region now generates roughly 20% of its revenue, the Wall Street Journal reports
• The question being raised by bankers trying to assess the flood of new regulation continuing to wash over their firms is what’s the endgame. While many are resigned to the fact their business will be very different due to the financial crisis, they are unsettled by the lack of an overarching framework for the multitude of regulatory initiatives, the Wall Street Journal reports
• Dallas Fed President Fisher said his votes on the central bank’s policy panel in 2014 will reflect his concern that the Fed’s bond-buying risks stoking inflation and exposing the institution politically, Reuters reports
• The American Bankers Association dropped its request for a federal judge to temporarily block Volcker Rule restrictions on collateralized debt obligations backed by trust-preferred securities after regulators said they are reviewing challenged aspects of the rule, according to a filing in federal court in Washington, Bloomberg reports
• Apple (AAPL) faces opposition from the U.S. in its bid to block an antitrust monitor appointed in a electronic books price-fixing case from interviewing top executives and directors, including CEO Tim Cook and board member Al Gore, Bloomberg reports

SYNDICATE

Air Methods (AIRM) files automatic mixed securities shelf

ACTIVIST/PASSIVE FILINGS

KKR reports 6.8% stake in Marvell (MRVL), says may talk to management

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/rTMtFTc8KXQ/story01.htm Tyler Durden

A year which showed that central planning works (for the fifth year in a row and probably can continue to “work” at least a little longer – in the USSR it surprised everyone with its longevity before it all came crashing down), is drawing to a close. This is what has happened so far on the last trading session of 2013. As market participants head in to the New Year period, volumes are particularly thin with closures being observed across Europe with only the CAC, IBEX and FTSE 100 trading out of the major European indices, with German, Switzerland, Italy and the Nordic countries are already closed. The FTSE and CAC are both trading in the green with BP leading the way for the FTSE earlier in the session after reports the Co. have asked a federal appeals court to block economic loss payments in its settlement of the Gulf of Mexico oil spill. European stocks rise, with real estate, travel & leisure leading gains. Retail shares underperform as Debenhams slumps following its IMS. A number of major markets will close early today. The euro falls against the dollar. Fixed income market are particularly quiet with the Eurex being shut. Whilst Gilts are seen down this morning following on from yesterday’s short-covering gains.

Market recap

• S&P 500 futures little changed at 1835.3
• Stoxx 600 up 0.2% to 327.8
• US 10Yr yield up 2bps to 2.99%
• German 10Yr yield little changed at 1.93%
• MSCI Asia Pacific up 0.1% to 141.3
• Gold spot up 0.5% to $1202/oz

EUROPE

• 18/19 sectors rise, led by real estate, travel & leisure
• Greek October Retail Sales Fall 1.9% y/y
• Gainers: CRH +1.9%, Taylor Wimpey +1.8%, Persimmon +1.8%,
• Berkeley Group +1.8%, Land Securities +1.6%, Endesa +1.7%, SBM Offshore +1.5%, Telenet Group +1.4%
• Decliners: Debenhams -10.1%, Banco Comercial Portugues -2.7%, International Personal Finance -2%, Essentra -1.9%, Petrofac -1.9%, Delta Lloyd -1.5%, Inchcape -1.5%, Lonmin -1.4%

ASIA

• Asian stocks rise, with Chinese shares leading gains. Australian shares underperform.
• MSCI Asia Pacific up 0.1% to 141.3
• Nikkei 225 up 0.7%, Hang Seng up 0.3%, Kospi up 0.5%,
• Shanghai Composite up 0.9%, ASX down 0.1%, Sensex up 0.1%
• All 10 sectors rise, led by energy, utilities
• Singapore Economy Grew 3.7% in 2013, Prime Minister Lee Says
• S. Korea’s Dec. Consumer Prices Rise 1.1% Y/y
• Gainers: BBMG Corp +6.6%, GOME Electrical Appliances +5.9%, Synnex Technology International +5.2%, China Gas Holdings +4.2%, Rural Electrification Corp +4.1%, Power Finance Corp +4.1%, Byd Co +4%, NWS Holdings +3.1%
• Decliners: Vangaurd International -3.9%, MMC Corp -3.4%, Parkson Holdings -2.8%, TSRC Corp -2.8%, Taiwan Mobile -2%, Newcrest Mining -1.9%, China Resources Cement -1.9%, Idea Cellular -1.9%

Overnight news bulletin from Bloomberg

• Treasuries decline in the last trade day of the year, 10Y yield holding near 3%, closed at 1.757% on Dec. 31, 2012.
• Treasuries delivered a total return of -2.3% this year, according to BofAML’s U.S. Treasury Index, the first yearly loss since 2009 as Fed scales back bond buys
• U.S. investment-grade corporates lost 1.3% this year while high yield bonds returned 6.8%, also according to BofAML indexes; the S&P 500 rallied 29%, while the DJIA is headed toward its biggest annual gain since 1996
• The yuan rose 2.9% this year, its fourth annual gain in Asia’s best performance for 2013; JPY has fallen 17.4% vs USD while EUR has gained 4.3%
• Gold is headed for the biggest slump in three decades and the first annual loss since 2000; silver is poised for the worst annual performance since 1981
• Latvia becomes the 18th member of the euro area tomorrow even as opponents of the currency switch outnumber proponents two-to-one as public expectations for accelerating inflation mount, opinion polls show
• Fourteen pot shops are scheduled to open in Denver tomorrow, just over a year after Colorado and Washington voters made their states the first to legalize recreational use; Colorado expects $67m in tax revenue
• Sovereign yields mostly higher. Nikkei closed for holiday; Japan reopens Jan. 6. Shanghai +0.9%. U.S. equity-index futures little changed. WTI crude declines, copper  little changed, gold rises

Asian Headlines

The PBoC said that China’s economy and consumer prices are basically stable and reiterated it is to pursue prudent monetary policy, according to a statement on the Q4 monetary policy committee meeting.

Nomura forecasts 2014 year-end Nikkei 225 average at 18000 and added that the Nikkei 225 could reach 25000 in 2018.

EU & UK Headlines

German Chancellor Merkel says that eliminating the budget deficit is a priority of her third four-year term. (Newswires)

Separately, the German finance minister has said Latvia’s joining of the Eurozone will structurally strengthen the monetary union.

Liquidity in the Eurozone area has risen from EUR 200bln to EUR 274.8bln following yesterday’s MRO and LTRO operations alongside the ECB’s failure to sterilise the aimed quantity in the SMP programme.

ESM has said that the Spain assistance program has expired with a successful exit.

Barclays pan-Euro agg month-end extensions: +0.03y

Barclays Sterling month-end extensions:+0.07y

US Headlines

Fed’s Fisher said his votes on the central bank’s policy panel in 2014 will reflect his concern that the Fed’s bond buying risks stoking inflation and exposing the institution politically.

Barclays US Tsys month-end extensions:+0.07y

Equities

The CAC and FTSE 100 are seen in the green albeit with thin volumes. In terms of stock specific news, BP have asked a federal appeals court to block economic loss payments in ITS USD 9.2bln settlement of the 2010 Gulf of Mexico oil spill unless they can be directly linked to the disaster. UK retailers are under pressure after Debenhams’ profit warning, with the likes of Sainsburys and Marks and Spencers consequently seeing some downside.

Elsewhere, pre-market it was reported for Sanofi that France may allow substitutes for Co.’s Doliprane, France’s most prescribed medicine which led to EUR 276mln of health-system reimbursements in 2012.

FX

In FX markets, EUR is seeing some downside amid signs liquidity in the Eurozone area rising from EUR 200bln to EUR 274.8bln following yesterday’s MRO and LTRO operations alongside the ECB’s failure to sterilise the aimed quantity in the SMP programme. GBP has managed to benefit from GBP/USD holding above the 1.6500 level. Overnight, JPY continued to strengthen which saw USD/JPY test the 105 handle to the downside. USD/JPY has steadily fallen since yesterday after failing to test 105.50 to the upside where there are large option barriers and a key Fibonacci level. However, there has been little in the way of movement for the pair in the European session.

Commodities

Production resumes at Libya’s 25,000 bpd Messla oil field, state-owned National Oil says on its website. China may buy more Iranian oil next year as a state trader is negotiating a new light crude contract that could raise imports from Tehran to levels not seen since tough Western sanctions were imposed in 2012.

Residents of a small town in North Dakota were urged to evacuate after a BNSF train carrying crude oil collided with another train on Monday, setting off a series of explosions and fires,
the latest in a string of incidents that have raised alarms over growing oil-by-rail traffic.

Berkshire Hathaway Inc. will swap about USD 1.4bln in shares of Phillips 66 for full ownership of the energy firm’s pipeline-services business, at billionaire Warren Buffett expands his bet on oil transportation.

SPDR Gold Trust said its holdings fell 0.37% to 798.22 tonnes on Monday from 801.22 tonnes on Friday.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nLu3SZqeqCM/story01.htm Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Over the weekend, Heather Linebaugh wrote a powerful Op-ed in The Guardian newspaper lamenting the lack of public understanding regarding the American drone program. Heather should know what she’s talking about, she served in the United Stated Air Force from 2009 until March 2012. She worked in intelligence as an imagery and geo-spatial analyst for the drone program during the occupations of Iraq and Afghanistan.

Here are some key excerpts from her article:

Whenever I read comments by politicians defending the Unmanned Aerial Vehicle Predator and Reaper program – aka drones – I wish I could ask them a few questions. I’d start with: “How many women and children have you seen incinerated by a Hellfire missile?” And: “How many men have you seen crawl across a field, trying to make it to the nearest compound for help while bleeding out from severed legs?” Or even more pointedly: “How many soldiers have you seen die on the side of a road in Afghanistan because our ever-so-accurate UAVs [unmanned aerial vehicles] were unable to detect an IED [improvised explosive device] that awaited their convoy?”

 

Few of these politicians who so brazenly proclaim the benefits of drones have a real clue of what actually goes on. I, on the other hand, have seen these awful sights first hand.

 

I knew the names of some of the young soldiers I saw bleed to death on the side of a road. I watched dozens of military-aged males die in Afghanistan, in empty fields, along riversides, and some right outside the compound where their family was waiting for them to return home from the mosque.

What the public needs to understand is that the video provided by a drone is not usually clear enough to detect someone carrying a weapon, even on a crystal-clear day with limited cloud and perfect light. This makes it incredibly difficult for the best analysts to identify if someone has weapons for sure. One example comes to mind: “The feed is so pixelated, what if it’s a shovel, and not a weapon?” I felt this confusion constantly, as did my fellow UAV analysts. We always wonder if we killed the right people, if we endangered the wrong people, if we destroyed an innocent civilian’s life all because of a bad image or angle.

Moreover, the many civilians being incinerated without a trial are not the only victims here. So are the actual drone operators themselves, many of whom end up committing suicide. Recall my article from December 2012: Meet Brandon Bryant: The Drone Operator Who Quit After Killing a Child. Of course, our so-called political “leaders” never get their hands dirty, other than to take a lobbyist bribe that is. Now more from Heather:

Recently, the Guardian ran a commentary by Britain’s secretary of state for defence, Philip Hammond. I wish I could talk to him about the two friends and colleagues I lost, within a year of leaving the military, to suicide. I am sure he has not been notified of that little bit of the secret UAV program, or he would surely take a closer look at the full scope of the program before defending it again.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/D7soUUcoNFM/story01.htm Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Over the weekend, Heather Linebaugh wrote a powerful Op-ed in The Guardian newspaper lamenting the lack of public understanding regarding the American drone program. Heather should know what she’s talking about, she served in the United Stated Air Force from 2009 until March 2012. She worked in intelligence as an imagery and geo-spatial analyst for the drone program during the occupations of Iraq and Afghanistan.

Here are some key excerpts from her article:

Whenever I read comments by politicians defending the Unmanned Aerial Vehicle Predator and Reaper program – aka drones – I wish I could ask them a few questions. I’d start with: “How many women and children have you seen incinerated by a Hellfire missile?” And: “How many men have you seen crawl across a field, trying to make it to the nearest compound for help while bleeding out from severed legs?” Or even more pointedly: “How many soldiers have you seen die on the side of a road in Afghanistan because our ever-so-accurate UAVs [unmanned aerial vehicles] were unable to detect an IED [improvised explosive device] that awaited their convoy?”

 

Few of these politicians who so brazenly proclaim the benefits of drones have a real clue of what actually goes on. I, on the other hand, have seen these awful sights first hand.

 

I knew the names of some of the young soldiers I saw bleed to death on the side of a road. I watched dozens of military-aged males die in Afghanistan, in empty fields, along riversides, and some right outside the compound where their family was waiting for them to return home from the mosque.

What the public needs to understand is that the video provided by a drone is not usually clear enough to detect someone carrying a weapon, even on a crystal-clear day with limited cloud and perfect light. This makes it incredibly difficult for the best analysts to identify if someone has weapons for sure. One example comes to mind: “The feed is so pixelated, what if it’s a shovel, and not a weapon?” I felt this confusion constantly, as did my fellow UAV analysts. We always wonder if we killed the right people, if we endangered the wrong people, if we destroyed an innocent civilian’s life all because of a bad image or angle.

Moreover, the many civilians being incinerated without a trial are not the only victims here. So are the actual drone operators themselves, many of whom end up committing suicide. Recall my article from December 2012: Meet Brandon Bryant: The Drone Operator Who Quit After Killing a Child. Of course, our so-called political “leaders” never get their hands dirty, other than to take a lobbyist bribe that is. Now more from Heather:

Recently, the Guardian ran a commentary by Britain’s secretary of state for defence, Philip Hammond. I wish I could talk to him about the two friends and colleagues I lost, within a year of leaving the military, to suicide. I am sure he has not been notified of that little bit of the secret UAV program, or he would surely take a closer look at the full scope of the program before defending it again.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/D7soUUcoNFM/story01.htm Tyler Durden

One question that keeps popping up, and was addressed to some extent by NAB’s recent report, is whether all the elements of the current Bitcoin are necessary for a viable alternative currency.  And, as Citi’s Steve Englander asks (from a libertarian and pragmatic perspective), if they are not, or can be improved on, where does that leave Bitcoin’s first mover advantage?

 

Via Citi’s Steven Englander,

The libertarian streak in me likes the anonymity of Bitcoin transactions, but there  is a rational part of me that asks whether that aspect is essential if I am paying for a latte in Soho.  Similarly if the Bitcoin wallet can be made more secure by dropping  anonymity, how many transactors will give up transactional security for libertarian principle? Giving up anonymity may make Bitcoin transactions more secure, and I suspect almost all transactors will value security much more than anonymity.

Going further, Bitcoin’s decentralized nodes are not needed, if there was less concern about keeping Bitcoin outside the current payments/fiat currency system. The nodes allow transactions to be validated by the Bitcoin community, but you can have efficient transactions without the particular validation system used by Bitcoin.   The secure ledger of transactions can be centralized rather than decentralized. Bitcoin’s particular approach may be attractive for those who really want to operate outside the current financial system. There may be both legitimate and illegitimate reasons for this, but the vast majority of  transactions do not have this need. 

Going even further, if Bitcoin or an alternative currency embraced the financial regulatory system to make it more secure, how much payments efficiency is lost? You can still have secure, instantaneous transactions but inside the financial system there may be more security against fraud and more recourse if your Bitcoins are contained in your PC which gets hit by a meteor.

So there is this story about a special recipe for potato fritters (a very good recipe that I have tried). When a chef is handed the recipe, she decides to  ‘improve’ it by replacing each ingredient one-by-one with something more familiar. Having done so, she and her husband decide that the final result isn’t nearly as good as advertised and is pretty close to what they prepare all the time.  In eliminating anonymity, decentralization and non-regulation, much of the original intent of the Bitcoin developer(s) is being thwarted. The question is whether the core innovation of Bitcoin has been compromised or whether unneeded baggage is being  dropped.

For the record, mining Bitcoin is waste of resources from a social perspective. The amount of CPU and electricity needed to mine Bitcoin is high, and from a social viewpoint about as valuable as building defenses against attacks from Mars. What the mining  does is decide the allocation of the limited amount of Bitcoin produced each period and encourage the ledger to be kept. There is a  real social cost to the decentralization designed into Bitcoin.

If Bitcoin is a payments technology, much of what makes it efficient and attractive can be retained, while dropping some features that most users find unnecessary. Bitcoin may become less attractive to illicit users as a result, but that is a sacrifice many will be willing to make. Culturally, the developers of Bitcoin may find this evolution extremely unattractive, because the distrust of the financial system and of financial authorities was one of the motivations for its development. However attractive philosophically, many users will vote for pragmatism over principle and a Bitcoin clone that satisfied this pragmatic streak could be able to overcome the first mover advantage.

So far I have ignored Bitcoin as a store of value, but the proponents of Bitcoin as a store of value/speculation crucially need Bitcoin to be unique and have strong barriers to entry, despite the replicability of the technology. If it turns out that investors/miners will arbitrage between Bitcoin and other mined alternative currencies, the outcome will be that there are many perfect or near perfect substitutes for Bitcoin, and the effective supply will be much larger than would be suggested by the gradually increasing and ultimately capped supply of the original Bitcoin.  This will mean that valuations will be very fragile because in the long-term there will be no ability to limit the supply of Bitcoin lookalikes … unless some subset of Bitcoin-like currencies gain government/central bank endorsement which gives them an advantage over non-endorsed Bitcoin-like currencies.

Further, the Fed is now started on tapering and the BoE is talking about tightening, however slowly. Whatever sins major central banks commit, they are forgiven rapidly when they show any sign of moving back to orthodoxy,  provided they have not hugely compromised price stability, and sometimes even when they have. Improved confidence in some G4 fiat currencies is giving gold bad days, and the willingness to take the risk on alternative currencies may be inverse to how unrestrained major central banks are in their reserves creation.  Investors and central banks are looking for improved stores of value beyond fiat currencies, and Bitcoin possibly may be one of them. There are scenarios in which it could work as a store of value  but there are clearly many, many outcomes in which Bitcoin is one of a bunch of alternatives with a very indeterminate value.

Bottom line, there is the possibility that Bitcoin represents a big step forward in payments technology, but there are also seem to be straightforward ways to improve on its security, make it less attractive to criminals and more attractive to governments. It is far from guaranteed that that it will emerge as a stable store of value. Either function would be enhanced if it were within the financial system and embraced by the authorities, but it is unclear whether the Bitcoin philosophy will change fast enough or whether an alternative alternative will pip Bitcoin’s original first mover advantage.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-jKzrGa7PR0/story01.htm Tyler Durden

For the first time in a week, the PBOC has decided not to intervene in the interbank liquidity market… the result so far… 7-day repo jumped 157bps to 6.5%… yep, clearly the "liquidity crisis" is behind us… as long as China does not "taper" on any given day by doing nothing instead of injecting liquidity.

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KE6NMwxNQzc/story01.htm Tyler Durden