Financial sources feeds


It appears Billionaire Clintonite Tom Steyer is surprised that the nationwide ad campaign he bankrolled to urge members of Congress to impeach President Trump hasn’t yielded results by now.

Steyer went off on both Republicans and Democrats Friday after a House vote on articles of impeachment garnered a paltry 66 votes.

"This vote is not a reflection of whether or not Trump has passed the threshold for impeachment, which he did months ago," Steyer said Friday in a press statement after the vote. "It is a failure by members of Congress to do what’s right to keep the American people safe."

Steyer, a billionaire former hedge fund manager from liberal California, launched his ‘Need to Impeach’ movement in October of 2017. While more than four million people have signed his petition, Democrats aren’t particularly happy with the initiative. Democratic leaders believe pushing for impeachment could hurt their party’s chances in the midterms later this year. Steyer underscored his campaign by sending copies of Michael Wolff’s book “Fire and Fury” to every lawmaker.



Nancy Pelosi has criticized an impeachment campaign as being impractical and suggested it distracts from special counsel Robert Mueller’s investigation.

Steyer, who supported former Secretary for State Hillary Clinton’s presidential run, backs the Mueller investigation but thinks there is an “open and shut case that [Trump] has met the criteria for impeachment” - though he has yet to produce specific evidence of this.

According to the Daily Caller, there was speculation that Steyer was using his $20 million impeachment drive to run for office. But he rebutted this earlier this month during a press conference in Washington. Steyer said he will spend 2018 dumping millions of dollars into campaigns to unseat Republicans instead of campaigning for California’s open gubernatorial seat.

But regardless of whether Steyer ultimately runs, this cringe-worthy video he made to kick off the "Need to Impeach" campaign will live on the Internet forever...

Author: Tyler Durden
Posted: January 20, 2018, 8:40 pm

Authored by Wolf Richter via,

Oops, they’re already rising.

The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008.

In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind.

September as the month of the QE-Unwind announcement keeps cropping up. All kinds of things began to happen, at first quietly, without drawing much attention. But then the trajectory just kept going.

The three-year yield, which had gone nowhere for the first eight months of 2017, rose to 2.20% on Friday, the highest since October 1, 2008. It has spiked 82 basis points since September 8:

The ten-year yield – the benchmark for financial markets that most influences US mortgage rates – jumped to 2.66% late Friday.

This is particularly interesting because the 10-year yield had declined from March 2017 into August despite the Fed’s three rate hikes last year, and rising short-term yields.

At 2.66%, the 10-year yield has reached its highest level since April 2014, when the “Taper Tantrum” was winding down. That Taper Tantrum was the bond market’s way of saying “we’re shocked and appalled,” when Chairman Bernanke dropped hints the Fed might eventually begin tapering what the market had called “QE Infinity.”

The 10-year yield has now doubled since the historic intraday low on July 7, 2016 of 1.32% (it closed that day at 1.37%, a historic closing low):

Friday capped four weeks of pain in the Treasury market. But it has not impacted yet the corporate bond market, and the spread in yields between Treasuries and corporate bonds, and particularly junk bonds, has further narrowed. And it has not yet impacted the stock market, and there has been no adjustment in the market’s risk pricing yet.

But it has impacted the mortgage market. On Friday, the average 30-year fixed-rate mortgage with conforming loan balances ($417,000 or less) for top-tier borrowers, according to Mortgage News Daily, ended at 4.23%, the highest in nine months.

But historically, 4.25% is still very low. And likely just the beginning of a long, uneven climb higher.

And the impact on mortgage payments can be sizable. When rates rise for example from 3.5% to 4.5%, the payment for a $250,000 mortgage jumps by $144 to $1,267 a month. This can move the payment out of reach for households that have trouble making ends meet.

A one-percentage-point increase takes on larger proportions in a place like San Francisco, where it might take a mortgage of $1.25 million to buy a median home. At 3.5%, the monthly payment is $5,613. At 4.5%, it jumps to $6,334, an increase of $721 a month and an increase of $8,652 a year.

A mortgage rate of 4.5% is still very low! And it is likely headed higher.

Since the Financial Crisis, the ultra-low mortgage rates were among the factors that have caused home prices to soar. But as rates are heading higher, the housing market is in for a big rethink. These higher rates are going to be applied to the now prevailing sky-high home prices.

This will come in addition to the rethink triggered by what the new tax law will do to the housing market.

There’s another aspect to this equation: Homebuyers who are willing and able to stretch to cough up those higher mortgage payments can’t spend this money on other things. Falling mortgage rates gave a huge boost to home prices and to the entire economy in numerous ways. But that process will go into reverse.

So where will it go from here? The 10-year yield is still historically low and has a lot of catching up to do with regards to the trajectory of shorter-term yields. In addition, the Fed will continue to push its buttons – gradually hiking its target range for the federal funds rate and proceeding with its “balance sheet normalization.” And as the 10-year yield rises, mortgage rates will respond, and Housing Bubble 2 will get a lot more costly to deal with.

Even the bond market’s inflation expectations now exceed the Fed’s target. Read… Bond Market Smells Inflation, Begins to React

Author: Tyler Durden
Posted: January 20, 2018, 8:10 pm

On Friday  we showed that according to the latest fund flow data, anecdotal speculation of a marketwide melt-up was indeed the case. As a reminder, earlier in the week, we discussed how  market optimism among both professional and retail investors had hit the highest level since just before the crash of 1987...


... with a recent E-Trade survey disclosed  that 8 out of 10 retail investors - the highest on record - were certain that stocks would continue to rise in Q1. Then, BofA calculated  that the 4-week inflows into equities was not only "thundering", it was the largest ever. This is the result of a massive $23.9bn weekly inflow into equities which brings the 4-week inflow to stocks to the biggest ever, $58bn as shown in the below...


and there was even some good news for active managers: the 4-week inflows to active equity funds was at a 4-year high, although the relentless market share theft by ETFs is unlikely to change any time soon, and certainly not if the market keeps levitating with virtually no volatility.

Also on Friday the S&P's Relative Strength Indicator rose to a new all time high, suggesting that as of this moment, the US stock market is the most overbought ever.



Now it's JPMorgan's turn to opine on recent market euphoria, which - in the aptly named weekly "Flows and Liquidity" report, arguably JPM's most interesting publication - it says that as of Friday, "momentum signals have reached extreme levels for the S&P" which to JPM's Nikolaos Panigirtzoglou suggests that "equities are vulnerable to near-term profit taking."

Why? JPM observes that after revisiting the bank's momentum-based indicators, shown in Tables A5 and A7 below which it uses to infer how CTAs and other momentum-based investors are positioned across various commodities as well as equity indices, US sectors, bond futures and currency pairs....


... JPM noted that "momentum was approaching extreme levels in the S&P 500, along with the Nikkei as well as crude oil futures."


The tables reveal, that in the just passed week, the continued strong momentum in risky asset prices saw the z-score of JPM's S&P signal triggering the mean reversion overlay on Thursday after pointing to longs for around a year and a half.

This means that at long last, the market "could be at levels where momentum-based investors would begin to take profit on their positions."

Additionally, the continued sell-off in bond markets has seen z-scores for US Treasury futures shift further into negative territory, "but they remain some way away from extreme levels." Finally, for oil, momentum retraced some of the recent strong gains after Brent oil prices declined from a peak of just over $70 per barrel, though as Chart A39 in the Appendix shows speculative.

To recap: CTAs and other momentum-factor based investors are now at and beyond levels where they traditionally take profits. This could start happening as soon as next week, especially should the market be spooked by the uncertainty surrounding the government shutdown, which as Goldman said yesterday "could last a few weeks", and near the date of the US debt ceiling D-date, some time in early March, by which point stocks will really sell off if there still is no funding deal.

Author: Tyler Durden
Posted: January 20, 2018, 7:38 pm

Foreigners are being asked by their respective governments to exercise extreme caution and stay within the perimeter of their resorts in Montego Bay, Jamaica, after a wave of out of control violence has overpowered local authorities. On Thursday, the country’s prime minister, Andrew Holness, declared the state of emergency in the St. James parish to “restore public safety,” and also thwart a mass exodus of international investment and tourism.

In response, the government deployed the Jamaica Defense Forces onto the city streets in what is described as a “major military operation.”

Maj. Gen. Antony Anderson, Jamaica’s national security advisor, told CTV News Channel on Friday that authorities imposed a military lockdown of the area, following 335 homicides in 2017, and as reported by CTV that is “twice the tally of any other parish” in the country.

Anderson noted that the number of shootings and homicides have been growing for some period of time, but last year, the surge in deaths could not be ignored rolling into 2018. He said much of the problem resides on the outskirts of Montego Bay and that “Jamaica is still open for business.”

Life in a state of emergency. #MontegoBay #JLPGovernment

— State of Jamaica (@JamaicaState) January 20, 2018

The recent crime surge in Jamaica has been driven by conflicts between criminal gangs over the control of the lottery trade, drug wars, and even turf wars.

Maj. Gen. Anderson describes the state of emergency which gives military troops “more freedom of action.”

“For instance, they can do searches without a warrant, so if they get information that something is occurring somewhere, they can respond rapidly to it. They can respond to a series of intelligence-driven operations to target and capture the people who are doing these things and generally disrupt the gangs in their activities,” he added.

Police officers in St. James have listed the top five most wanted men in the parish. They are urged to turn themselves in immediately. Call the Montego Bay Police at 953-6191, or call/text/WhatsApp information to the tip line @ 837-8888.

— Jamaica Constabulary (@JamaicaConstab) January 19, 2018

According to Loop Jamaica,

The entire parish of St James is now locked down by members of the military in what is being reported as a limited state of emergency that has been imposed by the Government. Soldiers are visible stopping and searching motor vehicles at various points in the parish where 335 murders were recorded last year.

There has been no let up to the bloodletting in the parish this year, with criminal attacks there moving to the point where in a daring attack by gunmen armed with AK-47 assault rifles, a man was killed and others injured in an incident on the roadway near the Sangster International Airport in Montego Bay, the parish capital and the national tourism centre, earlier this week.

Government forces are conducting door to door operations in St. James.

Police personnel search a house on Codac Lane in Flanker, St James while soldiers patrol the area where a major military operation is under way. #glnrNews

— Jamaica Gleaner (@JamaicaGleaner) January 18, 2018

Military checkpoints are situated throughout St. James.

Members of the Jamaica Defence Force at work in the parish of St. James. State of emergency limited to the entire parish has been declared.

— Abka Fitz-Henley (@AbkaFitzHenley) January 18, 2018

The U.S. State Department issued this warning: “Expect to encounter increased police and military presence, checkpoints, searches of persons/vehicles within St. James Parish.”

#Jamaica: Effective January 18, the Government of Jamaica has declared a limited state of emergency for St. James Parish, to counter criminal activity. Expect to encounter increased police and military presence, checkpoints, searches of persons/vehicles within St. James Parish.

— Travel - State Dept (@TravelGov) January 18, 2018

“Military forces have been deployed to the area in an attempt to stabilize the situation,” reads a safety and security notice posted by Travel Canada.


FCO travel advice for British nationals living and traveling abroad in Jamaica:

#Jamaica State of Emergency declared in St James Parish which includes Montego Bay, in response to recent violence including shooting incidents. Follow local advice including restrictions in selected areas, exercise particular care if travelling at night.

— FCO travel advice (@FCOtravel) January 18, 2018
Author: Tyler Durden
Posted: January 20, 2018, 7:16 pm

Authored by Finian Cunningham via The Strategic Culture Foundation,

Just as North and South Korea achieve important peaceful exchanges, Washington and its NATO allies appear to be moving with determination to sabotage the initiative for averting war on the East Asian peninsula.

Further, the reckless, gratuitous provocations beg the conclusion that the United States is indeed trying to start a war.

Meanwhile, unprecedented accusations this week by US President Donald Trump that Russia is supporting North Korea to evade United Nations sanctions also point to the danger that any conflict could spiral out of control to engulf world nuclear powers.

Moscow rejected the unsubstantiated claims leveled by Trump, saying that Russia is abiding by UN trade restrictions over North Korea, and that the American president’s allegations were “entirely unfounded”.

Trump’s verbal broadside suggests that Washington is trying to undermine the nascent talks between the two Koreas, talks which Russia and China have both applauded as a long-overdue diplomatic effort to resolve the Korean conflict.

Separately, Russia’s Foreign Minister Sergei Lavrov deplored a summit held in Vancouver, Canada, earlier this week in which the US and 19 other nations – most of them NATO members – called for sharper sanctions on North Korea that go beyond the remit of the United Nations. The conference, co-hosted by Canada’s Foreign Minister Chrystia Freeland and US Secretary of State Rex Tillerson, issued a stridently bellicose statement, calling in effect for North Korea to surrender its nuclear weapons or face US-led military action.

Significantly, and pointedly, China and Russia were not invited to the Canadian summit.

Most of the attending states were part of the original US-led military force which fought against North Korea during the 1950-53 war. A war which killed as many as two million North Koreans.

Russia admonished that the conference was “harmful” to current peace talks between North and South Korea. China rebuked the Canadian event as being stuck in “Cold War thinking”.

The anachronism of countries like Britain, Belgium, Denmark, France, Italy, Netherlands and Norway attending a conference on the Korean crisis while Asia-Pacific powers Russia and China being excluded was noted by Russia’s Sergei Lavrov. The anachronism is not only absurd, he said, it reprises a provocative “war summit” message.

Disturbingly, what the Vancouver gathering demonstrated was the willingness by the US and its allies to circumvent the United Nations Security Council and the previously established regional Six-Party forum involving the two Koreas, China, Japan, Russia and the US.

At the Vancouver event, Tillerson laid out a belligerent agenda that was endorsed by the other attendees. The agenda included the precondition of North Korea giving up its nuclear program unilaterally; and it also flatly rejected the proposal made by Russia and China for a “freeze” in all military activities on the Korean Peninsula as a step to get comprehensive settlement talks going.

Tillerson made the following sinister ultimatum:

“We have to recognize that that threat [of North Korea’s nuclear weapons] is growing. And if North Korea does not choose the path of engagement, discussion, negotiation, [that is, surrender] then they themselves will trigger an option [US military action].”

The US diplomat also warned that the American public must be “sober” about the possibility of war breaking out. Tillerson said the risk of such a war on the Korean Peninsula “continues to grow”. This was echoed by President Trump a day later in an interview with the Reuters news agency in which he also warned of possible war. It was the same interview in which Trump blamed Russia for aiding and abetting North Korea.

This sounds like US leaders are intensifying the conditioning of the American public to accept use of the military option, which they have been threatening for the past year in a pre-emptive attack on North Korea.

The Vancouver summit also called for proactive interdiction of international ships suspected of breaching UN sanctions on North Korea. That raises the danger of the US and its allies interfering with Russian and Chinese vessels – which would further escalate tensions.

These reprehensible developments are a reflection of the increasingly Orwellian worldview held by Washington and its partners, whereby “war is presented as peace” and “peace is perceived as war”.

Just this week, North and South Korea held a third round of peace negotiations in as many weeks. Even Western news media hailed “Olympic breakthrough” after the two adversaries agreed to participate in the opening ceremony of the forthcoming winter games next month as a unified nation under a neutral flag.

After two years of no inter-Korean talks and mounting war tensions on the peninsula, surely the quickening pace of peace overtures this month should be welcomed and encouraged. Russia, China and the UN have indeed endorsed the bilateral Korean exchange. Even President Trump said he welcomed it.

Nevertheless, as the Vancouver summit this week shows, the US and its NATO allies appear to be doing everything to torpedo the inter-Korean dialogue. Issuing ultimatums and warning of “military options” seems intended to blow up the delicate dynamic towards confidence and trust.

Two reports this week in the New York Times conveyed the contorted Orwellian mindset gripping Washington and its allies.

First, there was the report: “Military quietly prepares for a last resort: War with North Korea”. The NY Times actually reported extensive Pentagon plans for a preemptive air assault on North Korea involving a “deep attack” manned by 82nd Airborne paratroopers and special forces. The paper spun the provocative war plans as a “last resort”. In other words, war is sold here as peace.

Which raises the question of who is trying to wreck the Olympic Games being held in South Korea in February. For months, Western media have been warning that North Korea was intending to carry out some kind of sabotage. Now, it looks like the sabotage is actually coming from the US, albeit sanitized by the NY Times.

The second report in the NY Times had the telling headline: “Olympic détente upends US strategy on North Korea”.

So, let’s get our head around that display of dubious logic. A peaceful development of détente between two adversaries is somehow presented as a pernicious “upending of US strategy on North Korea”. In other words, peace is sold here as war.

Take for example this choice editorial comment from the NY Times in the second report:

“This latest gesture of unity, the most dramatic in a decade, could add to fears in Washington that Pyongyang is making progress on a more far-reaching agenda.”

And what, one wonders, would that “far-reaching agenda” entail?

Again the NY Times elaborates:

“White House officials warn that the ultimate goal of [North Korean leader] Mr Kim is to evict American troops from the Korean Peninsula and to reunify the two Koreas under a single flag… For the United States, the fear has been that North Korea’s gestures will drive a wedge between it and its ally, South Korea.”

Only in a perverse Orwellian worldview would an initiative to calm tensions and build peaceful relations be construed as something to “fear” and be opposed to.

Only in a perverse Orwellian worldview would peaceful dialogue provoke plans for pre-emptive war.

But that is precisely the kind of dystopian world that Washington and its lackeys inhabit.

Author: Tyler Durden
Posted: January 20, 2018, 6:40 pm

After the biggest two-week drop since 2011, cryptocurrencies continue their post-futures-expiration comeback with Bitcoin testing $13,000...

And Ripple up 80% off its lows...

Once again some headlines from South Korea were full of contradiction as there are reports that both Bithumb & Korbit, the two largest cryptocurrency exchanges in South Korea, are disabling Kookmin Bank deposits and withdrawals. Instead, they will allow Shinhan Bank (second largest bank) deposits and withdrawals. That means, Shinhan Bank will process payments for traders, and implies there is no ban looming.

For now prices are rising once again but yet another establishment type - though to be fair, he is a little less biased than most - Nobel-prize winning economist Robert Shiller, predicts the cryptocurrency will either implode or drag on, and - as always - compares the rise of Bitcoin to the tulip craze in the 17th century.

"It has no value at all unless there is some common consensus that it has value,” Shiller, who is also Yale professor, told CNBC. The 2013 Nobel laureate in economics says while “other things like gold would at least have some value if people didn’t see it as an investment,” he doesn’t know “what to make of bitcoin ultimately.”

It reminds me of the Tulip mania in Holland in the 1640s, and so the question is did that collapse? We still pay for tulips even now and sometimes they get expensive,” Shiller went on, referring to an economic bubble in the Netherlands in 1637, when after prices frantically grew the market suddenly fell apart.

“[Bitcoin] might totally collapse and be forgotten and I think that’s a likely outcome but it could linger on for a good long time, it could be here in 100 years,” Shiller said.

The economist has previously spoken of bitcoin on numerous occasions, calling it a “fad” and saying the “story” behind bitcoin drives enthusiasm for it.  “A new form of money that... sounds extremely revolutionary and involves a very clever use of cryptography” has inspired interest among people.

Notably, Bitcoin's slump this week has partially recovered to challenge $13,000, making it worth over 170 percent more than when Shiller made his previous bubble claims in early September, 2017.

Mike Novogratz remains extremely bullish, noting on Twitter that he has just finished 55 investor meetings in 6 days.

"I am very optimistic on the future of the Blockchain/Crypto space. Markets will trade up and down with events and sentiment shifts. regulators are coming which is a good thing. the revolution isn’t turning back. Long term bull."




Author: Tyler Durden
Posted: January 20, 2018, 6:05 pm

Authored by Paul Craig Roberts,

As my readers at home and around the world know, I supported giving Trump a chance as Trump, and only Trump, addressed the two most important issues of our time for both all of humanity and for Americans:

(1) avoiding nuclear Armageddon by normalizing relations with Russia, and

(2) restoring the American middle class, on whose success political stability in the United States depends, by stopping the offshoring of US jobs and bringing those offshored home.

Inattentive people have mistakenly characterized Trump as the ruling Oligarchy’s candidate from day one. They dismiss the idea that he was sincere about either goal. There are many large problems with their dismissing of Trump’s sincerity. One is that if he were the Oligarch’s candidate, why did all their money go to Hillary? The other is that if Trump was insincere about normalizing relations with Russia, why did the military/security complex, specifically the CIA and FBI, invent Russiagate and why is Russiagate being used in an effort to impeach Trump or to drive him from office if Trump is the Oligarch’s candidate? The presstitute media is owned by the Oligarchs. If Trump is the Oligarchs’ candidate, why is the presstitute media trying to drive Trump from office?

These most obvious of all questions do not get asked or answered. I have asked them now for more than a year. Instead of answering me, I, like Trump and Stephen Cohen, get branded a “Putin stooge.”

Stephen Cohen knows more about Russia and Putin than everyone in the Trump, Obama, George W. Bush, and Clinton regimes added together and multiplied by one million. Yet, it is the most knowledgeable person who is branded a stooge. The fact of the matter is that Washington and its presstitutes know that neither Trump nor I nor Stephen Cohen are Putin’s stooges. What they also know is that they do not want any truth introduced into their portrayal of their false picture of “the Russian threat” and its American collaborators.

What they are doing is protecting the $1,000 billion annual budget, and associated power, of the military/security complex and the West Coast and northeastern coast’s control over the White House. This small geographical area has a disportionate amount of population and electoral votes and rejects interference with its rule by scarcely populated “flyover America.”

Truth and all respect for truth has disappeared from American political discourse. Truth is no longer even respected in academia or courts of law. The entire purpose of the US system and its subsystems is to achieve selfish aims that are at the expense of truth, justice, and other peoples.

Trump has created himself as the Twitter President.

He believes, as many before him have, that he can combat powerful ruling vested interests with words, as I attempt to do. However, a President of the United States has powers in addition to words, and Trump does not use them. Indeed, Trump has assembled a government that prevents him from using the powers of the presidency to achieve his two goals. This reduces him to a captive who hyperventilates on Twitter while he is forced to abandon his goals to those of private interest groups more powerful than the US president.

My opinion is this: President Trump might have some chance of delivering on the two promises that got him elected — (1) normalize relations with Russia, and (2) stop the offshoring of US jobs and bring those offshored back home — if he would appoint to his government people who share his goals instead of people opposed to them.

Moreover, Trump’s constant, off-the-wall threats against Iran and North Korea undermine people’s belief that he ever intended to normalize relations with Russia. President Trump presents himself as a warmonger in league with the Neoconservatives, and his obvious service to Israel is humiliating for proud Americans.

President Trump is also undermining his support by permitting corporate polluters to further despoil the environment and the diminishing wildlife of America.

The presstitute media is deplorable, but Trump cannot make a success of himself by beating up on the media, which is controlled by Trump’s own military/security complex.

Why beat up on a corrupt media when you can terminate the government corruption that the media serves? And when you can use the Sherman Anti-trust Act to break up the concentrated media?

If Trump is real, he will arrest Mueller, Comey, Brennan, Hillary, Obama, the DNC, and break the presstitute media monopolies into a thousand pieces. He might also arrest senators and representatives who are engaged in a campaign to overthrow the elected government of the United States. Abe Lincoln provided the precedent by exiling a US Representative and arresting 300 northern newspaper editors.

If President Trump fails to defeat the agenda of those driving the world to nuclear war with Russia (and China), he will be the US President who failed humanity and snuffed out life on earth.

Author: Tyler Durden
Posted: January 20, 2018, 5:30 pm

The new year is barely three weeks old and already the US Navy’s “freedom of navigation” operations are eliciting furious threats of retaliation from the Chinese military.

Since President Donald Trump took office one year ago, the Navy and Air Force have increasingly sought to test the Chinese military response in the Pacific by sailing or flying within a certain perimeter - usually 12 miles - of one of China’s disputed territorial holdings in the South China Sea, according to RT.

In the latest clash, the USS Hopper missile destroyer sailed within 12 nautical miles of Huangyan Dao, a tiny island claimed by China, on Jan. 17.




As is common during US "Freeops," the US destroyer didn’t solicit Beijing’s permission for entering the waters and was subsequently intercepted by the Chinese Navy, with China’s Foreign Ministry accusing the US of violating “sovereignty and security interests” as well as posing a “grave threat” to its forces stationed in the area.

"China is strongly dissatisfied with that and will take necessary measures to firmly safeguard its sovereignty," Foreign Ministry spokesperson Lu Kang said in a statement on Saturday. He also warned US forces against further "provocative moves” for the sake of“China-US relations and regional peace and stability."

The spokesman added that China has “indisputable” control over the territory, which is also claimed by Taiwan (itself the subject of a sovereignty dispute with the mainland) and the Philippines.

China’s Defense ministry echoed Lu’s tone in a separate statement on Saturday, stressing that the military will step up vigilance against air and sea patrols to defend national and regional peace and stability.

The US and Chinese militaries have had frequent standoffs in the South China Sea. Despite Washington having no territorial claims in the area – unlike China, Vietnam, the Philippines, Indonesia, Malaysia, and Brunei – it has always stressed the necessity for freedom of navigation in the area and opposed China’s claims.

Short of directly challenging Beijing in the highly-contested, resource-rich region, the US has been increasingly flexing its muscles there, staging joint drills with Japan and South Korea amid growing tensions with Pyongyang. Meanwhile, China has carried out threatening exercises of its own, sending squadrons of fighter jets flying through Japanese, South Korean and Taiwanese airspace without warning.


Author: Tyler Durden
Posted: January 20, 2018, 4:55 pm

Authored by Chris Martenson via,

Believing The Impossible... necessary to rationalize today's bubble markets.

"Alice laughed: "There's no use trying," she said; "one can't believe impossible things."

"I daresay you haven't had much practice," said the Queen. "When I was younger, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast."

~ Lewis Carroll, Through The Looking Glass

To borrow from Lewis Carroll: To have confidence in today's central bank-created bubble markets, we have to believe in six impossible things.

Thing 1: Fundamentals Don’t Matter.

In our brave new world of money printing to infinity, we're supposed to buy into a “new paradigm” story. You know, that It’s different this time.

Spoiler alert: It never is.

Companies either make money or they don’t. They're either good investments or they aren't. They'll either return risk-adjusted cash to you over time, or they won't.

Here’s a simple exercise. Using a publicly available stock screener at, a favorite site of mine, I set two filter parameters to obtain a list of companies that have::

  1. A market cap of over $2B
  2. A P/E ratio in excess of 50x

These are the biggest companies that, in theory at least, require investors to wait 50 years (or more) to be paid back in profits for each dollar invested.

236 companies fit this description right now. 236!

Here’s a screenshot of page 11 of the results. Every company listed here has a P/E multiple of over 190(!). 

(Source – here’s the exact screen I used, so you can troll the results for yourself)

Again, these sky-high ratios mean that investors are willing to wait more than 190 years for these companies to earn back their principal at current stock earnings prices.

In a word, folks, this is nuts. Not even during the height of the 2000 and 2007 bubbles could we find such an enormous number of extreme results spread across every sector as we see today. The small selection in the table above includes companies from the stodgy food, machinery, energy, and insurance sectors, also joined by traditional high-fliers like biotech and internet.

This is exactly the sort of indiscriminate optimism that identifies a late-stage classic bubble market. Nothing can ruin the party vibe. Anything and everything is priced beyond perfection. Each sector has its own story to rationalize the exuberance. “Oh, energy is poised to rebound soon, and Amazon has monopoly pricing power that will never be challenged, and Netflix is investing in premium content, and food, well, uh, food…you know, this particular company is special…maybe a takeover target?”

In the table above, I’ve highlighted a few companies in yellow just as conversation starters.

Let's start with Yelp. I don’t even grasp how Yelp deserves a P/E of more than 15, let alone 192. Its business model of using crowd-sourced reviews to drive eyeballs/traffic to sell advertising against is facing competition from every possible direction. Google is squeezing them on every front, and new apps come along daily to parse the same review & locator territories.

Schlumberger is not a soon-to-recover story. Even if it were, that doesn’t help to justify the 21 other oil & gas companies returned for this particular filter I ran. Taken together, seeing so many super-high P/E companies from this sector is difficult to explain -- outside of the markets throwing all caution to the wind.

Netflix is almost a special case of willful investor denial, similar to Twitter, Uber, and Amazon. In each case “investors” have waited year after year after year for earnings to finally materialize, but none do. Worse, it’s been nothing but a steady parade of red ink.

Does this look like the sort of explosive earnings growth you’d want to see to justify a P/E of 220?


And those are "earnings", which are easily doctored by accounting gimmickry into telling a picture rosier than true reality. Netflix’s cash flow burns are much better at showing how colossally this company loses money:

Quarterly burn rates in excess of $500 million are not the sign of a maturing, successful company. This is a company that is completely dependent on continued access to new inflows of funds from generous suckers -- ahem!, investors -- in the capital markets.

If those inflows stop and the company have to actually earn positive results from what it has already built, then Netflix would have to abandon its current cash-bleeding business model. In a more normal market environment, such pause would justify a P/E ratio of perhaps 1/10th the current ratio of 220.

And one last example to show that stocks are not the only asset class experiencing a price bubble. Without getting bogged down too much into the details of bonds, seeing Greek 2-year debt trading today with a lower yield (i.e. a higher price) than US 2-year Treasury debt tells us that similar massive price distortions exist in the bond markets as well.

The bottom line here is that fundamentals have been entirely tossed out the window. To believe in today's asset prices you have to believe in a future so bright and full of explosive growth that it’s literally going to eclipse every other growth period in all of modern history.

In other words, you have to believe that This time is different.

Thing 2: You Can Print Prosperity.

For nearly a decade now, central banks have been pretending they are printing up prosperity.

Our weak-minded and subservient media has been dutifully parroting these claims, even though they're easily refutable by anyone willing to do a little fourth-grade math. 

Money printing can only ever do one thing: take from one group while giving to another. It's wealth redistributive, not additive.

As I've frequently said, if it were possible to create true prosperity by printing money, the Romans would have succeeded long ago and we’d all be speaking Latin. 

But the common narrative we're being told/sold is that financial markets are going up because more wealth is being created. Metrics like record total market capitalization and home values are used endlessly on the airwaves as unassailable proof of the "everything is awesome" meme.

But even a cursory examination of the underlying data reveals that these increases in price are not the same as an increase in wealth. In fact, the efforts of the central planners result in an increasingly unfair distribution of wealth, where the rich get richer at the expense of everyone else.

For example, savers are losing, while equity holders are gaining. That’s a redistribution forced upon the system by central banks that have crammed interest rates to never-before-seen 5,000 year lows while also directly supporting stock prices by buying them. Yes, Virginia, purchasing financial assets with freshly-printed thin-air money spikes their prices higher .

Is that the same as creating wealth? No. Not at all.

Thing 3: Currency, stocks and bonds are “wealth.”

We have to accept with the very simple, but difficult, concept that wealth is not money. It's not currency either. And it’s not debt, it’s not stocks, and it’s not Bitcoin. Those are all claims on wealth.

Real wealth is real things. Land, food, cars, houses and other tangible and/or productive assets that we can use or consume.

We use markers to make claims on real wealth. Those claims are always, by definition, in the future.

For example, if I have a pocket full of money, I don’t have to worry about going hungry. I can always exchange my money for food later on when I am hungry. I use my claims on wealth as convenient placeholders for when I want to consume or use something later on, in the future.

By way of example, suppose you're starving but your pocketful of money can't buy any food because none exists in the stores. How much “wealth” would you say you have in that situation? A lot, some, or none?

This very circumstance faces many people in Venezuela right now. People who recently believed themselves to be wealthy because they had money suddenly discovered to their dismay that holding those claims is not at all the same thing as holding real wealth.


At Peak Prosperity, we classify wealth into three categories: primary, secondary and tertiary.

Primary wealth is sourced from the land. It is rich soils, thick stands of timber and abundant reserves of ores and fossil fuels in the ground.

Secondary wealth is the means of production that has been extracted and/or converted from primary wealth and brought to market. It's lumber, steel, food in the grocery store, and factories.

Tertiary wealth, better known as 'paper wealth' (stocks, bonds, etc), is merely a claim on either primary and secondary wealth. Without either of those two forms of wealth, tertiary wealth has no value.

It was only recently that people somehow forgot this simple logical progression. Two hundred years ago, the answer to the question “Who are the wealthiest people around here?” was as simple as pointing to those who owned the most land (primary) or factories and stores (secondary).

But after 50+ years of intellectually-bankrupt experiments with “financialization”, people have entirely lost this thread and now confuse wealth with claims on wealth. Today the “wealthiest” are far too often composed of the skimmers and grafters that best learned how to exploit an ill-advised system of exponential credit expansion.

In order to believe in this system you have to believe that true wealth is created by the financial system, rather than by hard working people who take risks and deploy their talents to convert primary wealth into secondary wealth.

That just isn't the case.

Thing 4: The World Is Infinite.

To believe in the endless expansion of claims on wealth (i.e. that ever-rising stock and bond prices are rational) means that you also have to believe that the world is infinite.

To explain why, let's take a closer look at debt. Total credit market debt has been expanding exponentially in recent decades.

In order to believe the recent narrative of continued credit expansion alone (leaving aside the exponentially growing equity claims for the moment) you have to believe that somehow, magically, it’s possible to increase claims on wealth faster than actual real wealth…forever:

In the above chart, the green dotted line tracks the increase in global GDP while the blue dotted line tracks the increase in global debt. (Note: we're not including here under-funded liabilities such as pensions and entitlements which, if we did, make this story approximately 4x worse).

We can easily see that credit has been increasing much faster than GDP. This is an impossible, unsustainable condition -- mathematically certain to end in tears. Yet everyone is pretending as if we'll be able to continue this way perpetually, with no consequences.

Any grade-school child can work out the bad math involved here. It’s simply impossible for your debts to rise at a faster rate than your income forever.

So to be a believer in the current market's valuations and trajectory, you have to believe in a world with "no limits".

Thing 5: History Doesn’t Matter.

In every single case throughout history when claims on wealth have badly exceeded the real wealth itself, the claims have devauled. Usually quite painfully so.

World wars have resulted as a consequence. As have dark periods of great economic depression.

The core model of the central banks is predicated on endless growth on a finite planet. Do try your best to overlook the fact that hundreds of ecological warning lights are flashing bright red and clearly indicating the even more exponential growth is precisely what is not needed at this moment in history. Missing insects, bleaching coral reefs, eroding topsoil, plunging counts of everything from human sperm counts to oceanic phytoplankton, and plummeting migratory bird counts are all saying the same thing: the old economic model of endless growth is now destroying itself.

But this time we're supposed to believe that the lessons of history and scientific data don't apply to our unique situation in time. Our moment is special; magically so. This time is different.

It’s never different.

Thing 6: They Know What They're Doing.

A central theme of the dominant narrative is faith in authority. Our leaders have everything under full control.

Well, after watching the central banks get things wrong over and over again for decades, it’s quite impossible for me to believe that they suddenly have everything right.

They famously claim to not be able to spot bubbles in advance. They also firmly assert we are not experiencing an asset bubble now. Of course, they said the same thing right before the housing bubble burst in 2007.

This is just how large bureaucratic organizations operate. The toadies say what they think their bosses want to hear, and the higher ups are pleased to have someone to blame when things go awry.

But now, suddenly, as the central banks are conducting a massive globally-coordinated expansion of the world money supply at a magnitude higher than anyone has ever imagined, we're supposed to believe that now they’ve suddenly got everything under control and correctly divined?

Yeah, sure.

Interest rates have never in all of human history been this low. There’s no guide to steer by. But don’t worry – the central banks will get it exactly right this time. This time is different.

Further, negative nominal interest rates such as we see in the many trillions today, are not so much a monetary experiment as they are social engineering. The price of money is a very important social signal. What does it even mean that money has a negative price? Having to pay to lend your money has unknowable impacts on decision-making by businesses, banks and individuals. Could anyone truly have had an accurate prediction of what the implications would be?

Well, the results of this experiment are in and have been for years. Rather than spurring spending as the Bank of Japan supposed, negative interest rates spurred saving. Rather than driving corporate investment as the ECB imagined, negative rates instead drove corporate borrowing which was then spent on stock buy-backs and other financial gimmickry.

Now I can’t fault the central banks for trying something new; but I can fault them for failing to adjust after it became obvious the effects were deleterious and other than intended. How much longer should we permit these same fallible central banks to continue unchallenged as the stakes get increasingly higher?

In conclusion, it’s impossible for me to believe that the central banks know what they're doing.

Shifting From The Impossible To The Probable

Look, either I have all this very badly wrong, or I don’t.

If I do, that means that this time is indeed different, that it’s possible to print up prosperity, that history doesn’t matter, that fundamentals don’t matter, that the world really is infinite, and that the central banks know exactly what they're doing.

If I’m wrong, I’ll have to carefully reexamine all of my data and assumptions to find out where the error(s) lay. And issue a very humble public apology. Oh, and then go long the market.

But if I'm right, and I really would prefer not to be, then a brutal market collapse is nigh. One that may well end in war, ecosystem breakdown, or financial Armageddon -- possibly all three.

In Part 2: How To Avoid The Pain Of The Coming Market Downturn, we lay out the specific steps to take now, while the system is still tranquil and functioning, to position yourself to sidestep the wrath of the coming collapse(s).

Remember that bubbles end remarkably quickly. When they burst, their job is to create the greatest misery possible for the greatest number of people possible. 

The only way to avoid that fate is to be positioned wisely in advance. Take steps now to ensure you're one of those prudent few.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

Author: Tyler Durden
Posted: January 20, 2018, 4:20 pm

In a sharp escalation of Turkey's military campaign against the US-backed Syrian Kurdish YPG, on Saturday Turkish warplanes fired missiles and launched "massive bombing" of Kurdish targets in Syria's Afrin, NTV television reported.

Airstrike after airstrike pounding Afrin right now. Massive shock and awe campaign underway.

Big question is if Turkey can follow up with a competent ground campaign.

— Gissur Simonarson (@GissiSim) January 20, 2018

Moment where Turkish jets strike Aftin city center #Afrin

— Mutlu Civiroglu (@mutludc) January 20, 2018

Turkey launches Afrin operation - LIVE COVERAGE

— ANADOLU AGENCY (ENG) (@anadoluagency) January 20, 2018

“The TSK (Turkish Armed Forces) has started airborne operations,” Prime Minister Binali Yildirim said at a party congress on Saturday, quoted by Hurriyet. Yildirim said eight F-16 aircraft were involved in the aerial sortie, which is ironic when one considers that Turkey is using US-made warplanes to bomb a US-backed military organization which has been provided with weapons made in the US.

Turkish jets destroyed observation posts and many other targets of PYD/PKK terrorists in Afrin, Syria

— ANADOLU AGENCY (ENG) (@anadoluagency) January 20, 2018

NTV showing dusk shots of heavy bombardment- this mountain where we were reporting opposite of all morning until army made us all leave- had shelled several positions on mountain throughout day #afrin

— Stefanie Dekker (@StefanieDekker) January 20, 2018

Despite Assad's threats to shoot down Turkish planes, Turkish air force starts aerial bombardment of Afrin Canton in northwestern #Syria

— Michael A. Horowitz (@michaelh992) January 20, 2018

“As of this moment our brave Armed Forces have started the aerial offensive to eliminate the PYD and PKK and [Islamic State] elements in Afrin,” Yildirim said.

There have been conflicting reports whether the Turkish jets used Syrian airspace to conduct their bombing campaign.

Turkey’s General Staff officially declared the start of the military operation, calling it "Operation Olive Branch" according to a statement cited by Turkish newspaper Sol.


Operation Olive Branch

AP journalists at the Turkish border reported seeing at least five jets heading toward Afrin. Also sighted was a convoy of buses, believed to be carrying Syrian opposition fighters, and trucks mounted with machine guns.

At the same time, Reuters reports that US-backed Syrian Democratic Forces (SDF) have accused Turkey of using cross-border shelling as a false pretext to launch an offensive into Syria. The SD - an alliance of Kurdish and Arab militias fighting Islamic State - said it will have no choice but to defend itself if attacked. The alliance controls areas in Syria’s east and north.

Commenting on the offensive, Russia’s Foreign Ministry said Moscow is "carefully monitoring" the Turkish military operation, citing concerns over recent developments in the area. The ministry’s statement called on all sides in the conflict to "exercise mutual restraint" which in retrospect appears a little late.

The Russian warning comes after Turkish President Recep Tayyip Erdogan said earlier on Saturday that Ankara had “de facto” begun its operation against Kurdish forces in Afrin. He said the operation would be “followed by Manbij,” referring to the Kurdish-controlled town in northern Syria.

Author: Tyler Durden
Posted: January 20, 2018, 3:45 pm

NFA News Releases

January 12, Chicago—NFA has permanently barred Glendale, Ariz. commodity trading advisor BCD Forex Investments LLC (BCD) from membership and from acting as a principal of any NFA Member.
Posted: January 13, 2018, 5:59 am

Elite Forex Blog - Market Research & Analysis


TZero has been working on this technology for years - it is launching, not developing.
Few legitimate options for stocks that are deep into Blockchain technology.
Alternatives such as IBM are not as pure Blockchain plays as OSTK.
For those of you who are 'now' looking at Blockchain, see this article on Seeking Alpha we authored in March of 2016 urging investors to go long (OSTK) which we did, and profited nicely. Like the whole move with Bitcoin, it would have taken patience to sit and hold through the process, now almost 2 years. Things take time to build, develop, and grow. Now we're on the precipice of what we believe is the 'real' bull run for crypto, that being the regulated run. Until now, there hasn't been really a way to buy or invest in cryptocurrencies or businesses in a regulated way. Now there're futures on regulated exchanges, and the TZero ICO.
Posted: January 1, 2018, 6:24 pm
If you look from a systemic perspective, Bitcoin has been nothing more than another electronic asset bubble, while not a QE tool explicitly used by the Fed - it has accomplished the same thing, but much faster.  What took decades and years for QE to do in other markets, Bitcoin did inside of a few months.  While it's true that Bitcoin only goes up because US Dollars (USD) and other fiat currencies buys, the net effect is a near infinite velocity of money.  One subtle problem the Fed has dealt with perhaps more than inflation and others is Velocity of money, which is in steady decline since the credit crisis:
Basically, Velocity of money is how quickly money is 'spent' and moved around the economy.  Trillions of QE money on banks balance sheets is not helpful for the economy.  The Fed knows this, but is limited in its creativity.  Interestingly, if you look at the above chart when Velocity of money was in peak decline, it is about the time Bitcoin was introduced.  We have exposed how we believe anonymous forces inside the US Government are if not completely, somewhat responsible for the creation of Bitcoin, and in the very least participated in the design.  This isn't a conspiracy theory, it is macro analysis.  Who was the most capable group who had the world's best cryptographers, mathematicians, and huge budget? (NSA).  Who had an economic need for Bitcoin to solve the problem of Velocity of money (The Fed).  
Cash has the distinct advantage of being anonymous. You can put cash under your mattress or in a vault, and no one knows about it except you. A national cryptocurrency would make it far more difficult for criminals to hoard money because all transactions would be recorded in the government ledger. If a transaction was deemed illegal, the parties to the transaction could be identified. This is also true with bitcoin, whose ledger is viewable to anyone. Despite the negative press about bitcoin being used for illegal transactions, bitcoin is not anonymous, and criminals who use it often do not understand that their transactions are being recorded.
There is another reason for governments to like the idea of a national cryptocurrency: strengthening the power of monetary policy to help manage the economy.
We published this insight in multiple articles months ago and in our book Splitting Bits: Understanding Bitcoin and the Blockchain.
The WAPO story is clearly setting the stage for something, as WAPO has become the goto CIA mouthpiece for PsyOps and other agencies in "Big Intel." 
That's it, now go spend your Bitcoin!
For a detailed breakdown how the financial system really works, checkout Splitting Pennies.
Posted: December 22, 2017, 9:57 pm
In 2015 we wrote Splitting Pennies to show the world what the FX market really is.  Splitting Pennies is a metaphor, for what the global FX money markets have become.  It is a holistic, systemic overview of the global financial system, with practical examples and pitfalls to avoid.  Since then, Bitcoin has become so popular we conceived Splitting Bits, the logical sequel in the Splitting Finance series.  Now you can get both on Kindle or Paperback from Amazon - See for more info or go here and buy it.

Posted: December 22, 2017, 9:56 pm
Although Bitcoin is electronic and moves quickly, the real world doesn't.  Since Bitcoin (which is colloquially BTC/USD) has been in the news, millions have decided to put their own money into the Crypto world and press their luck.  So here's what's driving the price.  Let's say you want to buy Golem, it's not offered on Coinbase, you need to first get an account at Bittrex or Cryptopia which are only fundable in Crypto.  That means if you are not a hacker or computer expert, you need to first connect your Coinbase account to your bank account at Wells or BOFA and then buy BTC paying the egregious 7% fee (which ironically is similar to an FX transaction).  Then, and only then, you can fund your Bittrex with BTC and buy XRP or whatever.  So this is driving the price of BTC higher, as there is precious little supply of BTC.  We call this in FX 'real money flows' - as DB noted recently, Japanese men have become 'crypto day traders' - but the real upward pressure is by using BTC as a base/funding currency, which is only beginning.  Crypto exchanges are experiencing huge bottlenecks, which means this squeeze has only started.  This week the price of BTC/USD can run up 100% or more due to this demand.  

That means, millions of people investing thousands of dollars, is driving the price of BTC up, and will likely continue to do so, until there are viable alternatives, which there will be.  Currently BTC is really the only choice for many - although it is slow, inefficient, and feature poor.

Posted: December 17, 2017, 2:00 am
Elite E Services 12/10/2017 - As a Forex CTA for 12 years, we were happy to learn the CME will offer a Bitcoin futures contract, and called the CME to learn more.  Unlike most of these Bitcoin outfits, the CME has an office, a phone, which is answered, and we were routed to the correct person.  We don't want to name names as we still wait a response from legal about the publication of information (which will likely not happen before the contract goes live) so we will speak only generally about this contract and comment on what some of the market is saying:

 The problem, of course, boils down to Bitcoin’s volatility, something we flagged after the CME announced circuit breakers early last month.
Having taken a gamble on bitcoin futures, which are set to begin trading by the end of the year, the CME is now seeking to avoid the consequences of what has emerged as both the cryptocurrency's best and worst selling point: its unprecedented volatility…While the CME already uses daily vol limits on most other markets, including crude, gold and market futures, to temporarily halt trading when price swings get out of control, the CME has never before dealt with something like bitcoin
In June, Bloomberg showed how Bitcoin’s 30-day volatility had risen to 100%, which was comparable (at the time) with one of the most volatile financial instruments they (and we) could probably think of - a three-times levered ETF in junior gold miners.

The price of Bitcoin (notably, BTC/USD) has been exploding all week basically with the market expecting that with regulated futures contracts, it will bring institutional money into the Crypto market.  While that may be true, this futures contract is not exactly a conduit, as it is 'cash settled' which means effectively 'not settled' or 'self-cleared'.  CME will match buyers and sellers and not have any connection to any Bitcoin exchange or other clearing facility.  At the end of the day, each contract will have a profit or loss, against each other.  Crypto Market Makers could at their own risk, provide liquidity on-exchange and lay off risk independently, through the exchanges.  But practically, why would they?  Just to soak up 'newbie' liquidity from the moms and pops now able to trade the futures contract through their IRA?  Something certainly doesn't add up here, and given the chaos and volatility we saw all week, we are expecting at best, a total market meltdown; at worst, they may cease trading the contract.  There is certainly a lot of money waiting in the pipeline for the moment the contract goes live.  And it's not the only one, CBOE has a contract too, which is the first one which will go live.

Traders wait in anticipation this week to see how the market will react to the first regulated Crypto contracts.

To get in on the action checkout some Bitcoin resources we've added to our website by clicking here.  If you want to learn more about Bitcoin from the perspective of digital currency, which we've been doing for 15 years, checkout Splitting Bits - Understanding Bitcoin and the Blockchain.

Posted: December 10, 2017, 7:53 pm
If Jay Gould were alive today, he would've traded bitcoin.
Perhaps the most blatant hypocrisy perpetrated by bitcoin evangelists is their insistence that bitcoin and other digital currencies represent a return to a truly democratic financial system beyond the control of banks and other special interests, where players small and large can earn enormous profits simply by HODLing.
Of course, this idealistic take couldn’t be further from the truth. As Bloomberg points out, the markets for bitcoin and most of its cryptocurrency clones more closely resemble the US equity market of the Gilded Age, where a handful of powerful traders and brokers colluded to move prices in their favor. And because securities laws at the time were virtually nonexistent, the big players minted suckers with impunity.
According to Bloomberg, about 1,000 so-called “whales” control 40% of the bitcoin in circulation, giving them unrivaled leverage over the broader market. And because there are no laws explicitly banning collusion in digital currency markets, only the most blatant pump-and-dump operations risk being prosecuted as fraud.
And with the price skyrocketing like it has in recent days, the incentive for these traders to begin taking profits has never been more pressing.
About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.

“I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.
As Bloomberg explained, the manipulation in bitcoin is extreme because many of the big players know each other from having been involved in the digital currency space since its infancy. Add to this the fact that the risks are incredibly asymmetrical – there’s tremendous upside in terms of profits if they can successfully pull it off. And the chances of them drawing the scrutiny of law enforcement are relatively low.
“As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”

The recent rise in its price is difficult to explain because bitcoin has no intrinsic value. Launched in 2009 with a white paper written under a pseudonym, it’s a form of digital payment maintained by an independent network of computers on the internet‚ using cryptography to verify transactions. Its most fervent believers say it could displace banks and even traditional money, but it’s only worth what someone will trade for it, making it prey to big shifts in sentiment.
Case in point: Some of these so-called whales admitted in an interview with Bloomberg that they regularly incorporate what would in the equity market be considered material nonpublic information into their trading strategies.
Like most hedge fund managers specializing in cryptocurrencies, Samani constantly tracks trading activity of addresses known to belong to the biggest investors in the coins he holds. (Although bitcoin transactions are designed to be anonymous, each one is associated with a coded address that can be seen by anyone.) When he sees activity, Samani immediately calls the likely sellers and can often get information on motivations behind their sales and their trading plans, he says. Some funds end up buying one another’s holdings directly, without going into the open market, to avoid affecting the currency’s price. “Investors are generally more forthcoming with other investors,” Samani says. “We all kind of know who one another are, and we all help each other out and share notes. We all just want to make money.” Ross says gathering intelligence is legal.
And investors who buy into smaller tokens are at an even greater disadvantage.
Ordinary investors are at an even greater disadvantage in smaller digital currencies and tokens. Among the coins people invest in, bitcoin has the least concentrated ownership, says Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 bitcoin addresses control 17.3 percent of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40 percent of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90 percent. Many large owners are part of the teams running these projects.
Unsurprisingly, Bloomberg managed to find someone to defend the status quo: Whales won’t dump their holdings, this person argued, because they “have faith in the long-term potential of the coins.” This strikes us as a naïve assumption.
Some argue this is no different than what happens in more established markets. “A good comparison is to early stage equity,” BlockTower’s Paul wrote. “Similar to those equity deals, often the founders and a handful of investors will own the majority of the asset.” Other investors say the whales won’t dump their holdings, because they have faith in the long-term potential of the coins. “I believe that it’s common sense that these whales that own so much bitcoin and bitcoin cash, they don’t want to destroy either one,” says Sebastian Kinsman, who lives in Prague and trades coins. But as prices go through the roof, that calculation might change.
While the concentrated holdings of the modern bitcoin market should give potential investors pause, in some ways, it's not all that different from the modern equity market. As we pointed out back in September, the Bank of Japan owns a staggering 75% of the domestic ETF market. Increasingly, equity ownership in the US and around the world is becoming increasingly concentrated in the hands of central banks, sovereign wealth funds and the largest asset managers like BlackRock, Fidelity and Vanguard.
While the whales can exercise unrivaled influence over the price of bitcoin, they aren't the only players in the bitcoin market with a natural inclination toward self-dealing. As Bill Blaine pointed out, nearly every bank knows bitcoin's extraordinary gains are a crowd delusion fuelled by the extraordinary promise of free wealth.
Yet, many will be willing to trade and settle them for their clients – largely retail. So, while the bitcoin bubble has (for now) blessed hundreds of thousands of mom and pop investors with spectacular returns, these gains will only continue as long as the cartel allows them too.
Posted: December 9, 2017, 4:19 am
The whispers among employees had been around for years. They finally heard some facts during a conference call in June led by managers in Wells Fargo WFC +3.17% & Co.’s foreign-exchange operation: Some of its business customers had been cheated, according to two employees who were on the call.
An internal review showed that out of roughly 300 fee agreements based on anything from informal handshakes to emails to signed documents, only about 35 companies were charged the actual price they had been offered for currency trades handled by Wells Fargo, the employees say.
The phone call was part of a continuing cleanup that has led Wells Fargo to fire four foreign-exchange bankers and federal prosecutors to open their own investigation of the operation, people familiar with the matter have said.
“Wells Fargo remains committed to our foreign exchange business,” the bank said in a statement Monday. “If we find a problem, we fix it.” The bank said its foreign-exchange business is “under new management.”
The business is tiny compared with foreign-exchange operations at J.P. Morgan Chase & Co. and Citigroup Inc. but could become another huge headache for the San Francisco bank, still grappling with fallout from the sales-practices scandal in its retail operations. The scandal led to last year’s abrupt retirement of Wells Fargo’s chief executive, a $185 million regulatory settlement and numerous federal and state investigations, which are continuing.
Wells Fargo retail employees had to hit lofty goals to keep their jobs or get bonuses, which led some employees to open potentially 3.5 million accounts with fictitious or unauthorized customer information from 2009 to 2015.
Foreign-exchange employees got bonuses based solely on how much revenue they brought in, say more than a dozen current or former Wells Fargo employees. No other big bank in the U.S. calculated bonuses of currency traders in such a defined and individual way. Wells Fargo said Monday that it began making changes to those compensation plans earlier this year.
The bank also charged some of the highest trading fees around, according to current and former employees. For more than a decade, customers were sometimes charged anywhere from 1% to 4% on basic transactions such as converting euros to dollars and complicated trades like hedging.
Those percentages can be at least two to eight times higher than the middle-market industry average of 0.15% to 0.5%, depending on the trade, customer and volume, according to foreign-exchange bankers throughout the industry.
Wells Fargo disputes the descriptions of its foreign-exchange fees by current and former employees. The bank said Monday its fees in 2016 had a weighted average of 0.09 percentage point across all transaction sizes. Clients served by its middle-market banking team were charged a weighted average of 0.18 percentage point, according to Wells Fargo.
Some foreign-exchange bankers at Wells Fargo relied on the fact that customers often didn’t bother to double-check how much they were charged, fee levels weren’t straightforward, and complaints could be batted away, the current and former employees say.
‘Time fluctuation’
One former Wells Fargo manager says employees would tell customers who expressed surprise at the size of a trading fee that market prices were different at the moment when the transaction was executed and blame “time fluctuation” for any difference.
The bank’s foreign-exchange customers have included telecommunications firm CenturyLinkInc., vehicle-parts supplier Federal-Mogul Holdings Corp. and nonprofit groups such as the National Bone Marrow Donor Program.
Regulators have been investigating the foreign-exchange business at Wells Fargo, including a big trade involving Restaurant Brands International Inc., the owner of Burger King, Tim Hortons and Popeyes Louisiana Kitchen, according to people familiar with the matter.
A Burger King in Tokyo. The fast-food chain’s owner got a refund from Wells Fargo after disputing a trade handled by the bank.
A Burger King in Tokyo. The fast-food chain’s owner got a refund from Wells Fargo after disputing a trade handled by the bank. PHOTO: KIM KYUNG-HOON/REUTERS
The trade resulted in a loss to Restaurant Brands, people familiar with the matter have said, which led to a dispute between the Oakville, Ontario, company and the bank. The dispute centered on how bank employees handled the trade, rather than its pricing. Wells Fargo refunded about $900,000 to Restaurant Brands, people familiar with the refund say.
The foreign-exchange business’s problems run far deeper than what is known inside Wells Fargo as “the Burger King trade” or what has been previously reported. The extent of the trouble seems to have become apparent to top Wells Fargo executives earlier this year.
Small FryForeign-exchange spot contracts as apercent of a bank's total derivativesportfolioTHE WALL STREET JOURNALSource: Office of the Comptroller of the Currency
Bank ofAmericaCitigroupJ.P. MorganWells Fargo0%102030
The business was moved in early 2017 from Wells Fargo’s international division into its investment-banking and capital-markets operation. Since then, executives have changed internal systems, added more stringent rules around pricing and required more frequent compliance checks, current and former employees say.
Issues with the Burger King trade were found following those checks and customer complaints, people familiar with the matter say. The continuing internal review of Wells Fargo’s foreign-exchange operation is separate from the review sparked by the sales scandal, some of the people said.
A compliance training session in early November detailed what Wells Fargo called “approved margins” for different volumes of foreign-exchange transactions, according to an internal document reviewed by The Wall Street Journal. Employees say fee levels remain higher than industry norms, and some compensation practices aren’t due to change until next year.

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Foreign-exchange trading has been a problem area for many banks. In 2015, several large U.S. and European banks agreed to multibillion-dollar settlements with U.S. regulators and pleaded guilty to criminal charges filed by U.S. authorities over alleged collusion among currency traders.
Bank of New York Mellon Corp. agreed in 2015 to pay $714 million to resolve allegations it defrauded pension funds and other clients by overcharging them on currency transactions.State Street Corp. agreed in 2016 to pay $530 million to settle similar allegations.
Both banks admitted giving some clients far worse pricing on currency transactions than the banks implied the clients would get.
The Journal reported in October that the U.S. Attorney’s Office for the Northern District of California is investigating the Restaurant Brands currency trade and has subpoenaed information from Wells Fargo.
Potential issues related to that trade also are being examined by the Federal Reserve, the Journal reported. Examiners from the Office of the Comptroller of the Currency are auditing Wells Fargo’s foreign-exchange business, according to employees at the bank. A Wells Fargo executive says the audit is “normal course of business.”

Payment Plans

Some current and former Wells Fargo employees say its charges on foreign-exchange trades encouraged employees to cheat customers.

Fees for some currency trades
Industry average
Wells Fargo
Fee: 0.15 - 0.5%
Fee: 1% - 4%
For a $10 million trade
$100,000 - $400,000
$15,000 - $50,000
How Wells Fargo compensated bankers
If a banker had a revenue target of $5 million
and brought in $6 million ...
Revenue target: $5 million
Revenue that exceeded target: $1 million
.. the banker would earn a bonus of $100,000,
or 10% of the $1 million
Source: People familiar with the bank
Current and former bank employees say its pricing practices were rooted in a culture and compensation system that looked to maximize revenue. Bonuses were defined as 10% of revenues exceeding revenue targets.
If a banker’s revenue target was $5 million and the person brought in $6 million, he or she would earn a $100,000 bonus, or 10% of the additional $1 million in revenue. Bankers typically received such bonuses twice a year in cash, rather than stock, as part of a signed contract, they added.
It’s rare among foreign-exchange groups in other banks to have so-called defined-bonus plans focused on individual earnings, according to people in the industry.
After Wells Fargo moved the foreign-exchange business into its investment bank earlier this year, managers began telling employees that bonuses would become “discretionary” by the end of 2017. Under this more typical arrangement, management would decide employee bonuses, and bankers wouldn’t know exactly how much they would receive. It would be based on a variety of factors, not just revenue.
Wells Fargo has 18 foreign-exchange sales and trading offices, including in New York, San Francisco, Charlotte, N.C., London and Hong Kong. A few hundred people work in the group world-wide.
Current and former employees say Wells Fargo’s foreign-exchange customers are largely midsize businesses that don’t tend to trade in large volumes. As a result, those clients don’t have the same insight into the market as larger firms that are more-active traders.
Some Wells Fargo clients have complained to the bank. In November 2016, Ecolab Inc., a water, hygiene and energy company based in St. Paul, Minn., bought and sold currency in a so-called swap arranged by the bank, according to people familiar with the deal. These people say Wells Fargo collected 1% on one part of the $100 million deal.
Ecolab contested the fee charged by Wells Fargo on a transaction arranged by the bank.
Ecolab contested the fee charged by Wells Fargo on a transaction arranged by the bank. PHOTO:ARIANA LINDQUIST/BLOOMBERG NEWS
After Ecolab compared the full trade, including fees, to overall market prices, the company contested the bank’s fee. Wells Fargo refunded hundreds of thousands of dollars to Ecolab in December 2016, according to current and former employees.
A spokeswoman for Ecolab confirmed the details of the trade and said it was the only fee issue Ecolab had with Wells Fargo.
Fee issues arose for some Wells Fargo clients even when they had a pricing agreement. The bank agreed within the past 18 months to a specified rate with data-management firm Veritas Technologies LLC, according to bank employees. After making one trade on behalf of Veritas, Wells Fargo bankers told Veritas that the bank’s fee was 0.05 percentage point higher than the agreed rate, the employees say.
Unusually high fees
The result: The bank made an extra $50,000 on a $100 million trade, the employees say. Wells Fargo later made a refund to Veritas, according to people familiar with the matter. A Veritas spokeswoman declined to comment.
Wells Fargo’s foreign-exchange business also charged unusually high fees for trades with different currency conversions, known as “Bswift” transactions, current and former employees say.
“And if anybody did complain, it was an easy tap dance,” one former employee says. He says employees would say the pricing had been done automatically by the bank’s computer system so “there’s no accountability for the spread.”
Wells Fargo sent an internal email Nov. 2 detailing new guidelines for Bswift transactions, according to a copy of the email reviewed by the Journal. The guidelines include specific handling and pricing procedures for those trades.
The operation also charged high fees to other parts of Wells Fargo. Wells Fargo Rail, which leases locomotives and railcars, and the bank’s corporate-trust division are often charged 1% to 1.5% on currency transactions, according to current and former employees.
The bank’s foreign-exchange management often celebrated big trades and the money they made for the bank, the current and former employees say. Sara Wardell-Smith, who led the foreign-exchange group, emailed the group to hail big trades, naming clients and spelling out revenue generated. The employees say managers used to encourage employees to ring a brass bell in the San Francisco office when the bank made a lot of money on a trade.
In mid-October, the bank announced that Ms. Wardell-Smith would lead its financial institutions group in the Americas region, according to a memo reviewed by the Journal and confirmed by a bank spokeswoman.
Current employees say the move was viewed within Wells Fargo as a demotion, coming just months after Ms. Wardell-Smith had been promoted to co-lead the bank’s division focusing on trading of rates, currencies and commodities. She didn’t respond to requests for comment.
The other co-leader, Ben Bonner, now leads that group on his own and is overseeing foreign-exchange trading, a bank spokeswoman confirms.
Mr. Bonner has been working with other executives to fix the problems in the currency business, according to several current employees.
Last month, the bank sent a memo to foreign-exchange employees that instructs them not to create informal or oral pricing agreements. The memo, reviewed by the Journal, also said employees are “responsible for ensuring customers are not misled regarding” pricing.
Current and former employees say some Wells Fargo employees expressed concerns about pricing practices to top executives before the bank’s internal cleanup efforts began earlier this year. Some employees say they were reluctant to press for sweeping changes, citing what they saw happen to one manager in the foreign-exchange operation about a decade ago.
During a meeting of foreign-exchange managers in the mid-2000s, Cathy Witt said it wasn’t right to celebrate high fees by ringing a bell, people familiar with the situation say. Ms. Witt, an employee in the bank’s Chicago foreign-exchange group, warned that Wells Fargo could become known as a “bucket shop,” a derisive term for a disreputable finance firm, some of the people say.
A few weeks later, Ms. Witt was summoned to a meeting in St. Louis, told that her comments had been offensive and demoted on the spot, according to people familiar with the matter. She also was told to apologize to other managers for her unprofessional behavior, the people say. She later left the bank.
—Aruna Viswanatha contributed to this article.
Posted: November 28, 2017, 8:51 pm
Update: Bitcoin's surge continues as Asia re-opens, pushing the cryptocurrency above $9500 as Korea's second largest bank tests Bitcoin vault and wallet services for its clients.
As Coinivore reportsShinhan, the second largest commercial bank in South Korea by market valuation in the country is testing a Bitcoin vault and wallet service for its customers that is expected to be released by mid-2018.
A representative of Shinhan Bank told Naver News, a media publication in South Korea in an interview that the bank will launch a Bitcoin vault and wallet platform in response to recent hacking attacks of leading South Korean cryptocurrency exchanges including Bithumb.
“Shinhan is testing a virtual bitcoin vault platform wherein the private keys of bitcoin addresses and wallets are managed and issued by the bank. The bank intends to provide the vault service for free and charge a fee for withdrawals,” the representative said.
In 2016 the bank reported a total of US $192 billion in assets and over 13,000 employees according to News Bitcoin. The bank stated that the service wouldn’t be ready until the second quarter of 2018 but has begun testing the network for the services.
The service will incur zero fees to deposit Bitcoin to store in their cold storage instead a slight fee will be taken during the withdrawal process. They will also be rolling out a mobile app that will contain a dashboard for viewing stats and deposit information for their customers.
It’s unclear whether or not Shinhan will offer Bitcoin brokerage and trading services to enable their existing clients and customers to purchase or sell Bitcoin.
South Korea has been a hub for cryptocurrency and somewhat of a safe haven for established digital currencies since, unlike other countries, they have embraced digital currency as a means for change. Earlier this month, Choe Heung-sik, chief of the Financial Supervisory Service (FSS), stated that the South Korean government would not impose strict regulations on cryptocurrency exchanges in the foreseeable future.
“Though we are monitoring the practice of cryptocurrency trading, we don’t have plans right now to directly supervise exchanges. Supervision will come only after the legal recognition of digital tokens as a legitimate currency,” Choe said.
Truly allowing the growth of Bitcoin, as of this writing, South Korea holds the largest markets in Bitcoin exchange Bithumb with a volume traded of $356,126,000 today at the time of this writing.
*  *  *
Update: Bitcoin has continued to soar intraday - now topping $9,300 - with a total market cap over $156 billion, leaving the cryptocurrency worth more than Merck, Disney, and GE.
Coinivore notes that the digital currency, once a toy for computer nerds, is now soaring in price, triggering a new gold rush. Is it just another bubble, or a glimpse into a radically different financial future?
As Rick Falkvinge, CEO of BitCoin Cash and founder of the Swedish Pirate Party, warns “bitcoin is an extinction-level event for banks” and probably governments too...
*  *  *
As we detailed earlier, less than 24 hours ago, we noted that Bitcoin had broken above the recent resistance level around $8,300 and hit a fresh all time high of $8,650, observing that the world's biggest cryptocurrency by market cap is now rising at a pace that has put the $10,000 price target by both Mike Novogratz (and Jose Canseco) firmly in its sights. It didn't take long however for bitcoin to find a new round of eager buyers, and in early Asian trading, a burst of buying out of Korea's Bithumb exchange, has sent bitcoin surging another several hundred dollars higher, and around midnight ET bitcoin had surpassed $9,000, sending its market cap to $150 billion, making it more valuable than corporations like Siemens, Mastercard or McDonald’s.
The sharp gains come as the combined market capitalization for all cryptocurrencies also peaks at new highs – currently standing at just shy of $300 billion.
At this rate of appreciation, the crypto may hit the key psychological level of $10,000 in under a week. Needless to say, the long term chart is about as exponential as it gets, so as usual, buyer beware.
Bitcoin started the year just above $1,000, and the YTD gain is now over 900%, which however pales in comparison to Ether's nearly 5,000% YTD return and Litecoin's 20x.
However, it's not just Asian demand as CoinTelegraph reports that in a sign of growing mainstream acceptance, digital currency exchange Coinbase now boasts more accounts than brokerage firm Charles Schwab.
According to its website, Coinbase has 13 mln users while the number of Schwab brokerage accounts stood at 10.6 mln as of the end of 2016. These numbers don’t paint a complete picture, since the amount of assets controlled by Schwab certainly vastly exceeds those of Coinbase users. Nevertheless, the actual number of users indicates a massive volume of adoption, as the public begins to dabble in cryptocurrencies. Coinbase user numbers have grown by 167% this year.
One month ago, Mike Novogratz was the first to predict a $10,000 price in 6 to 10 months. It may come in that many weeks instead.  As a store of value, Novogratz likened bitcoin to digital gold, and said the technology is beginning to make "more and more sense" as we move increasingly into the digital. Novogratz continued to say that, while bitcoin is a bubble, the mania is justified, because it is a technological advancement that promises to fundamentally alter our lives.
"I can hear the herd coming" Novogratz said.
And bubble or not, Novogratz concluded eloquently on the extreme nature of cryptocurrencies' potential...
“Remember, bubbles happen around things that fundamentally change the way we live,” he said. “The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.”
Bitcoin is set to become "the biggest bubble of our time," he added, and could reach $10,000 very soon due to fast-building interest. In retrospect, he may be right much faster than even he anticipated.
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    Posted: November 21, 2017, 5:15 pm
    (GLOBALINTELHUB.COM) — 11/10/2017 We’d just like to note here that amidst Bitcoin’s historic rise there’s been a flurry of announcements with few ‘releases’ of finished products.  In fact only one company in the US, TZero, has a real regulated product that’s ready to go (which we noted as early as March 2016, but who was listening back then?).  Only one major Forex Broker, IC Markets, is offering 5 Crypto pairs in the MT4/5 platform.
    Let’s take a look at what Bitcoin in Meta Trader 5 looks like:
    Amazing, when you put it like that, it looks like FX!  That’s because Bitcoin and Ethereum are Currencies, no different from the Euro and Yen from a trading / investment perspective.  Obviously, there are the fundamental differences that Crypto is not backed by a Government, but that can change soon.  Traders can sign up free to see this screen above by clicking here: Open an account with IC Markets
    So we all know someone who bought Bitcoin in 2011 or several years ago – so what?  Today BTCUSD is down.  So what?  Like is the fashion with many bubbles, it seems that traders have become irrational.  The big question that we have at Elite E Services is that – why jump into something completely risky and unknown when there are proven systems with a long track record that are independent of market movement, like Magic FX.  The point is that it will take time for such algos to be developed for Bitcoin, the market is just starting to mature and evolve.
    We did something, we didn’t just announce that we have plans to get into Bitcoin – we wrote a book.  A sequel to our Splitting Pennies it’s logically called Splitting Bits – your user guide for the regulated side of Bitcoin and Blockchain which are posed to cannibalize half of the world’s banking industry.
    Calling all traders – this is a traders market!  Now is the time to start building your bots!  The real wave of the Crypto market is going to be the investment grade products, such as the Bitgos (Bit-Algos).  We’re launching a marketplace for them, stay tuned..
    Posted: November 13, 2017, 4:49 pm
    Elite E Services has teamed up with IC Markets to provide non-US and US-QEP Forex clients with the ability to trade BTC/USD in MT4.  For those of you who are not familiar with Bitcoin or MT4 you can read our books Splitting Pennies and the sequel Splitting Bits.

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    Posted: November 6, 2017, 7:25 pm
    Last week, WSJ stoked fears that the Feds might be ramping up another probe into abuse and manipulation in the foreign exchange market when it reported that Wells Fargo had abruptly terminated four bankers from its FX business and transferred another. Now, Wall Street’s paper of record is reporting that Federal prosecutors are investigating Wells for abuses in its FX shop - but the scope of the investigated is limited to one disputed trade.
    According to WSJ, prosecutors have subpoenaed information from Wells and from the recently fired bankers as they investigate a trade and ensuing dispute between Wells and one of its clients, Restaurant Brands International Inc.
    RBI owns several fast-food franchises, including Burger King, Tim Hortons and Popeyes Louisiana Kitchen. In an amusing twist, both companies count Warren Buffett’s Berkshire Hathaway as one of their largest shareholders.
    In a statement, Wells Fargo said it “learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue, and Wells Fargo leadership took steps to hold accountable the individuals who were involved. Wells Fargo remains committed to our foreign exchange business, meeting our clients’ financial needs in an ethical way, and ensuring ongoing review of this and all business operations.”
    The foreign-exchange issue revolves around a trade made within the past three years that included positions running into the billions of dollars, the people said. The trade resulted in a loss to Restaurant Brands, the people added, which led to a dispute between it and the bank. WSJ pointed out that the investigation into Wells Fargo’s foreign-exchange business, which is housed within its investment bank, are separate from sales-practices issues that rocked the bank more than a year ago. Wells Fargo is planning to refund Restaurant Brands hundreds of thousands of dollars related to the trading loss, WSJ's sources said.  The Federal Reserve is also looking into the issue. Specifically, Federal prosecutors are looking into the sequencing of the trade in question and whether it could have involved so-called front-running, some of the people familiar with the matter said. That should send a chill down the spine of the fired bankers, as earlier this week a US jury found a former HSBC currency trader guilty of fraud related to front-running a large trade that netted the bank some $8 million in profits. The US is also in the process of extraditing another UK-based FX trader to face front-running related charges in the US.
    Last year, a wide-ranging investigation into abuse and front-running in the global foreign-exchange market led to a rash of settlements worth billions of dollars involving Barclays and a handful of other global banks. 
    While probes like this are never convenient, the investigation comes at a particularly trying time for the bank and its management. Earlier this month, WFC CEO Tim Sloan received a widely publicized tounge lashing from Massachusetts Senator Elizabeth Warren during Congressional testimony (Sloan became the second straight Wells CEO whom Warren said should resign during a public hearing). He has also participated in a handful of media interviews lately as he tries to burnish the bank's once-wholesome reputation and bolster its lagging share price, which has never quite recovered from last year's cross-selling scandal.
    However, as WSJ explains, front-running is often difficult to gauge given the ambiguity around pre-hedging strategies in currency trading. Typically a bank must purchase currency as part of a trade and price it differently than it would price a stock. Wells Fargo’s investment-banking, securities and markets division, known as Wells Fargo Securities, is a fraction of the size of its U.S. big-bank peers, as is its foreign-exchange business. The bank doesn’t break out financial results or metrics for that group or its foreign-exchange business.
    And while the investigation is the latest embarassment for the bank, which over the summer disclosed that it had overcharged mortgage and auto-loan borrowers, there is, at least, one mitigating factor: Unlike the retail banking scandal, which stoked widespread public outrage, few Americans understand how the foreign-exchange market works - indeed, many don't even realize that such a market exists. This means that even in the worst-case scenario, Wells's brand should remain untarnished from this latest scandal.
    The US Attorney’s Office for the Northern District of California is leading the investigation.
    Posted: October 27, 2017, 8:15 pm
    It's not shaping up to be a great week for a group of former HSBC FX traders who decided to front-run a massive $3.5 billion currency trade placed by one of their clients and net their bank some $8 million in illicit profits in the process.  Earlier this week, Ex-HSBC currency trader Mark Johnson, who was unwittingly captured on an audio recording saying "I think we got away with it," was convicted by a jury in New York of fraud. 
    Now we learn that Johnson's partner in crime (allegedly, of course), Stuart Scott, has lost his court battle in the U.K. and will be extradited to the U.S. to face charges.
    Not surprisingly, Scott expressed some "disappointment" with the ruling shortly after being dismissed from court.
    As we've noted previously, Mark Johnson was arrested at New York’s Kennedy Airport in 2016 before he could return to the U.K. but Stuart Scott has remained free at his home in the London suburbs...until now.  Per Bloomberg:
    Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was taken into custody at John F. Kennedy International Airport Tuesday and is scheduled to appear before a judge in federal court in Brooklyn Wednesday morning, said the people, who asked not to be named because the case hasn’t been made public. He’s charged with conspiracy to commit wire fraud, the people said.

    According to Bloomberg, Johnson’s arrest comes more than a year after five global banks pleaded guilty to charges related to the rigging of currency benchmarks. HSBC, which wasn’t part of those criminal cases, in November 2014 agreed to pay $618 million in penalties to U.S. and British regulators to resolve currency manipulation allegations. HSBC, which still faces investigations by the Justice Department and other authorities for the conduct, has set aside $1.3 billion for possible settlements, according to an August filing.

    Rob Sherman, an HSBC spokesman, and Peter Carr, a Justice Department spokesman, declined to comment.
    A few weeks ago, details of court filings began to leak from Scott's British extradition case which allowed us to learn exactly how much each HSBC trader made for his trading book in the illicit scheme that netted a total of $8 million in profits...Scott took second place with a total profit of $585,105.  Per Bloomberg:
    "The defendant personally obtained over $500,000 profit," the U.S. Justice Department, represented by British lawyer Mark Summers, said in written arguments prepared for the hearing. "The offenses of which he is accused are highly serious. They involve a systematic and organized conspiracy to defraud, committed in breach of trust."

    Scott was charged, along with his ex-boss Mark Johnson, by the Justice Department in July 2016 with using insider knowledge to front-run a $3.5 billion currency deal by Cairn Energy Plc that made the bank $8 million. Johnson is on trial in New York and a jury there could begin deliberations this week.
    Here's how everyone else made out per the DOJ:
    Trading Gains
    For those who haven't followed the story closely, according to the original DOJ complaint, HSBC was selected by Cairn Energy Plc to execute a foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  But, before executing that trade, he tipped off a bunch of HSBC traders who loaded up their proprietary accounts with Pounds just before the massive trade sent the currency higher.
    “As alleged, the defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” stated United States Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

    “The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”
    Of course, we're sure this is all just an effort to "criminalize behavior that is normal" least on Wall Street. 
    Posted: October 26, 2017, 6:26 pm
    Ex-HSBC currency trader Mark Johnson, who was unwittingly captured on an audio recording saying "I think we got away with it," has just been convicted by a jury in New York of fraud for front-running a $3.5 billion transaction that netted his firm some $8 million in illicit profits.  Per Bloomberg:
    Former HSBC Holdings Plc currency trader Mark Johnson was found guilty of fraud for front-running a $3.5 billion client order, a victory for U.S. prosecutors as they seek to root out misconduct in global financial markets.

    He was convicted on Monday after a month-long trial in Brooklyn, New York.

    Johnson was the first person to be tried since the global currency-rigging scandal that resulted in global banks paying more the $10 billion in penalties. The charges stemmed from HSBC’s execution of a trading order from Cairn Energy Plc in 2011 to convert the proceeds of a unit sale from dollars into pounds.

    "This sends a signal to traders and banks that this type of behavior is absolutely inappropriate and will be pursued by the government," Michael Weinstein, a former Justice Department trial attorney, said. "That’s a big hammer over the banks -- it may force them to monitor and self-regulate their people."
    For those who haven't followed this particular story, Mark Johnson was arrested at New York’s Kennedy Airport in 2016 before he could return to the U.K. following a nearly 3-year investigation into efforts on the part of several large investment banks to rig FX markets but Stuart Scott has remained free at his home in the London suburbs pending the outcome of the extradition proceedings.  Per Bloomberg:
    Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was taken into custody at John F. Kennedy International Airport Tuesday and is scheduled to appear before a judge in federal court in Brooklyn Wednesday morning, said the people, who asked not to be named because the case hasn’t been made public. He’s charged with conspiracy to commit wire fraud, the people said.

    According to Bloomberg, Johnson’s arrest comes more than a year after five global banks pleaded guilty to charges related to the rigging of currency benchmarks. HSBC, which wasn’t part of those criminal cases, in November 2014 agreed to pay $618 million in penalties to U.S. and British regulators to resolve currency manipulation allegations. HSBC, which still faces investigations by the Justice Department and other authorities for the conduct, has set aside $1.3 billion for possible settlements, according to an August filing.

    Rob Sherman, an HSBC spokesman, and Peter Carr, a Justice Department spokesman, declined to comment.
    According to the original DOJ complaint, HSBC was selected by Cairn Energy Plc to execute a foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  But, before executing that trade, he tipped off a bunch of HSBC traders who loaded up their proprietary accounts with Pounds just before the massive trade sent the currency higher.
    “As alleged, the defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” stated United States Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

    “The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”
    As we've noted over the past couple of weeks, tidbits of the prosecution's case has made it's way into the media recently, including reports last week that Johnson used the code phrase "my watch is off" to trigger trading by HSBC traders all around the globe.  Meanwhile, as Law360 recently pointed out, jurors also had the opportunity to hear some rather damning recordings of Johnson's phone conversations with traders, including the one below in which he says "I think we got away with it."
    Prosecutors played a recording of a call between Johnson and Stuart after the 3 p.m. fix as they debrief, with Johnson telling Stuart, “I think we got away with it,” but Stuart replies that HSBC executive Dipak Khot — who acted as the go between with Cairn and HSBC — thinks otherwise and suspects that Cairn will protest.

    Johnson in turn argued that Cairn is still in a better position than it would have been if it had taken any other offers to execute the deal in alternate methods as opposed to the fix. “They don’t really have a lot of room to complain,” he said on the call.

    But as Cahill was trading ahead of the 3 p.m. fix on the day of the transaction, Johnson sounded more concerned about “ramping it up” too much. Jurors heard another recording of a call between Johnson and Scott, with Scott talking to Cahill in the background as he trades, in which Johnson cautions against spiking the price of sterling too high out of concern that Cairn will "squeal."

    “Frank, Frank if it rates above 30 at the fix, I think they’ll start to ah ... if you need to buy them, obviously, but ideally don’t ramp it above 30,” Scott tells Cahill. “Do what you need to do, but ... sorry I know I’m probably not helping much...I’ll leave you alone.”

    “Is he getting a bit tetchy?” Johnson asks.

    “No, he’s not,” Scott replies.

    “He can’t, fucking moaning bastard,” Johnson said. “I do all the work and he gets all the glory.”

    Jurors heard that days later in a call with HSBC forex trader Ed Carmichael in Hong Kong, Johnson told him that HSBC’s London forex trading desk, “just had a bonanza” on the Cairn deal, and described his response when Cairn sought an explanation on the less than stellar result for the oil and gas developer.
    Of course, when HSBC's client complained about their less than stellar execution price, Johnson admits that he blamed all the usual suspects: "Russians, other central banks, all that sort of stuff."
    “And they said, well you know it jumped up a bit, who else was buying? And we said the usual Russian names, other central banks, all that sort of stuff,” Johnson said on the call.
    As we noted last week, nearly a dozen HSBC traders around the globe netted over $8 million in profits by allegedly front-running their own client.
    Trading Gains
    Of course, while the DOJ will undoubtedly celebrate their conviction in the media, there is little doubt that Mark Johnson's "pre-hedging" scandal is hardly unique for an industry that has been built on front-running clients.

    Posted: October 23, 2017, 5:10 pm
    (Elite E Services) 10/17/2017 — Dover, DE — It’s no secret that the US economy has diverged into a massive 2 world system where there is also a massive gap in between; the employed and the wealthy have increasingly good lives while the poor and unemployed have a deteriorating quality of life.  As we have explained in Splitting Pennies, it is monetary policy that ‘Trumps’ all else.  Using The Gini Coefficient we can visualize what this means:
    In economics, the Gini coefficient (sometimes expressed as a Gini ratio or a normalized Gini index) (/d?ini/ jee-nee) is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation’s residents, and is the most commonly used measure of inequality. It was developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper Variability and Mutability (ItalianVariabilità e mutabilità).
    Taking a look at basic 2013 data (it’s worse since then) we get a picture of reality vs. what is said in the media.  Using Russia as a good example to stay with the Trump theme, USA (41) has roughly the same Gini as Russia (40.9):
    Remember that Russia is the unfair system that is a top-down Byzantine oligarchy, right?  Then why Russia and USA share almost identical Gini, being surpassed only by the Banana Republics in South America?
    Everyone in finance knows there are several things that Trump can do to fix the economic problems of USA in about 5 minutes:
    • Surprise increase interest rates to 5% or 10%
    • Import tariffs on Chinese crap
    • Unwind USA’s Petro Dollar system (drink it!)
    • Repeal the Dodd-Frank Consumer Rip-Off Fraud Act that has caused billions to flow out of USA.  Make America the world’s banker once again.  (This is our industry – FX – we know that this alone would create thousands and thousands of jobs and be a huge boost for the economy – billions would flow into USA and we’d again be the world’s banker.  But this same approach likely applies to many industries.  Dodd-Frank regulations killed FX and have cost millions of jobs.)  We’ve outlined this in previous articles.
    It’s not really practical to bring factories back to USA, however we have robot technology and the financial sector is a great example of how we can create high skilled high paid white collar jobs.  But Trump seems to be more obsessed with form not essence (and his form is not good).
    Oh – you’re thinking that a President can’t do that, right?  President is a figurehead, only Congress can pass laws.  That’s true.  But Nixon did it.  Somehow, Nixon was able to accomplish all these things in 1 day and created the floating FX market as it exists today.  It was not Nixon’s only genius move, there were many.  Was Nixon’s real genius just listening to his advisors like Henry?  Either way, in practice, it fixed the problem – only to be unwound by future administrations.  Was it a temporary fix?  Of course – but that’s what we need.  We need to unwind QE which is practically impossible, so jacking up rates is a first good start.  Wall St. and the stock market will suffer.  But they’ve had a long bull run.
    Winter is coming – it’s bear time.
      Posted: October 17, 2017, 3:42 pm
      Brian Stauffer
      Black Monday. Although the event to which those two words refer occurred 30 years ago, they still carry the weight of that day—Oct. 19, 1987—when the Dow Jones Industrial Average shed nearly a quarter of its value in wave after wave of selling.
      No one in living memory had seen anything like it, at least not in the U.S., and in the postmortems conducted to understand just how the Dow managed to drop 508 points in one day, experts found a culprit: so-called portfolio insurance, a quantitative tool designed to use futures contracts to protect against market losses. Instead, it created a poisonous feedback loop, as automated selling begat more of the same.
      Since that day, markets have rallied and markets have tumbled, and still we marvel at the unintended consequences of what, in hindsight, was an obviously misguided strategy. Yet in the ensuing years, market participants have come to rely increasingly on computers to run quantitative, rules-based systems known as algorithms to pick stocks, mitigate risk, place trades, bet on volatility, and much more—and they bear a resemblance to those blamed for Black Monday.
      The proliferation of computer-driven investing has created an illusion that risk can be measured and managed. But several anomalous episodes in recent years involving sudden, severe, and seemingly inexplicable price swings suggest that the next market selloff could be exacerbated by the fact that machines are at the controls. “The system is more fragile than people suspect,” says Michael Shaoul, CEO of Marketfield Asset Management.
      THE RISE OF COMPUTER-DRIVEN, rules-based trading mirrors what has happened across nearly every facet of society. As computers have grown more powerful, they have been able to do what humans were already doing, only better and faster. That’s why Google has replaced encyclopedias in the search for information, why mobile banking is slowly replacing bank branches, and why—someday—our cars will be able to drive us to work. And it is also why Wall Street has embraced computers to help with everything from structuring portfolios and trading securities to making long-term investment decisions.
      In the years since 1987, huge strides have been made in understanding what drives stock performance and how to apply it to portfolio construction. At first, researchers focused on “factors,” such as a stock’s volatility relative to the market—known as beta; whether a stock is large-cap or small—the size factor; and whether it is cheap or expensive—the value factor. More recently, the use of factors has proliferated to include many others, such as quality and momentum. (The latter involves buying the best-performing stocks and shunning the worst performers.)
      Quantitative investors understood early on that betting on stocks based on their characteristics—and not the underlying business fundamentals of a particular company—was a good way to outperform the market. So good, in fact, that many fundamental, or “active,” money managers now use quantitative tools to help construct their portfolios and ensure that they don’t place unintended bets. Nomura Instinet quantitative strategist Joseph Mezrich says that 70% of an active manager’s performance can be explained by quantitative factors. “Factors drive a lot of the returns,” Mezrich says. “Over time, this has dawned on people.”
      Has it ever. One result has been the rise of indexing and exchange-traded funds. The ability to buy an index fund based on the Standard & Poor’s 500—effectively a bet that large companies will outperform small ones—made the need for traditional fundamental research and stock-picking unnecessary. Since then, indexes and ETFs have been created to reflect just about any factor imaginable—low volatility and momentum among them. Some funds even combine multiple factors in a quest for better performance.
      As a result, an increasing amount of money is being devoted to rules-based investing. Quantitative strategies now account for $933 billion in hedge funds, according to HFR, up from $499 billion in 2007. And there’s some $3 trillion in index ETFs, which are, by definition, rules-based. The upshot: Trillions of dollars are now being invested by computers. “We’ve never seen so many investment decisions driven by quantitative systems,” says Morningstar analyst Tayfun Icten.
      That’s quite a change from the 1980s. If you wanted to place a trade 30 years ago, you picked up the phone and called your broker; your broker called the firm’s trader; the trader would ring up a specialist, the person in charge of running trading in a given stock; and the trade would be executed. The process was slow, cumbersome, and inefficient. As computer technology advanced, machines gradually took most of these steps out of the hands of humans. Today, nearly every trade is handled by an algorithm of some sort; it is placed by a computer and executed by computers interacting with one another.
      The entity handling trades isn’t the only thing that has changed in the past 30 years. Trading now occurs in penny intervals, not fractions such as eighths and 16ths. While that has made it cheaper for investors to buy and sell a stock, pennies made trading far less lucrative for market makers, who historically profited by playing the “spread” between the highest bid to buy and the lowest offer to sell. Consequently, market makers have been replaced by algorithms programmed to instantaneously recognize changes in liquidity, news flow, and other developments, and respond accordingly. At the same time, the proliferation of exchanges helped to lower trading costs but also created a fragmented market that can make shares hard to find during dislocations.
      Most of the time, none of this matters. If you want to buy a stock, you boot up your computer, log in to your brokerage account, and place an order that gets filled almost immediately. The fee you pay is so low that it would have been unimaginable 30 years ago. The system has worked well for individual investors, and will continue to do so—as long as nothing goes wrong.
      BUT MISTAKES HAPPEN. In 1998, the “quants” at Long-Term Capital Management, led by Nobel Prize winners Myron Scholes and Robert Merton, nearly caused a massive market selloff when the hedge fund’s highly leveraged trades, based on quantitative models of expected market behavior, suddenly lost money after Russia unexpectedly defaulted on its debt. The damage was magnified by the borrowing that LTCM had used to supersize its bets. Only a bailout organized by the Federal Reserve prevented the broad market from plummeting.
      In August 2007, a selloff occurred in quantitative funds that would become known as the “quant quake.” To this day, no one knows what sparked the selling, but once it began, computer models kicked in, causing further selling. Humans added to the mess as risk managers looking at losses dumped shares. Funds specializing in quantitative investment strategies reportedly suffered massive losses: The Renaissance Institutional Equities fund was thought to have lost nearly 9% early in that month, while Goldman Sachs ’ Global Alpha suffered a double-digit decline.
      The impact on the market wasn’t huge—the S&P 500 dropped just 3.3% during the first two weeks of August—but the event demonstrated what happens when a trade sours and too many funds are forced by their models to sell at the same time. It was a wake-up call for quants, who have since created more-sophisticated systems to reduce the kind of crowding that led to the selloff.
      More recently, problems have been caused by algorithms that are supposed to provide stock for investors to buy, or buy when investors sell, creating liquidity. On May 6, 2010, the S&P 500 dropped 7% in just 30 minutes, as bids and offers for stocks moved far away from where stocks had been trading, in some cases leaving bids down as low as a penny and offers as high as $100,000.
      Again, no one knows what caused the sudden decline. Investors had been on edge because of an unfolding European debt crisis, but that alone seemed unlikely to have triggered the flight of automated market makers. The U.S. Commodity Futures Trading Commission blamed the swoon on fake orders placed by a futures trader, while the Securities and Exchange Commission fingered a massive sell order in the futures market allegedly placed by a mutual fund company seeking to protect itself from a potential downturn. That order, it argued, had been handled by a poorly designed algorithm—yet another reminder that an algorithm is only as good as the inputs used by the people designing it.
      While the rout was over quickly, and the S&P 500 finished the session down a more modest 3.2%, the episode raised concerns about the potential for computerized trading to exacerbate selloffs.
      REGULATORS AND EXCHANGES have made changes since then, but so-called flash crashes continue to happen, even if they are no longer quite as disruptive as the 1987 selloff. On Aug. 24, 2015, for instance, the Dow dropped almost 1,100 points during the first five minutes of trading. The selloff was spurred by a plunge in China’s stock market, which led to a drop in Europe. All of this happened when U.S. markets were closed, which meant that investors turned to the futures and options markets to place their trades.
      Chaos prevailed when the stock market opened: Only about half of the stocks in the S&P 500 had started trading by 9:35 a.m.; a quarter of the Russell 3000 index was down 10% or more intraday, and many large ETFs traded far below the value of their underlying assets. Algorithms, sensing something amiss, simply stepped back from the market. Once again, the S&P 500 recovered much of its sudden loss, but savvy market observers detected eerie echoes of an earlier era. In a much-read note at the time,JPMorgan strategist Marko Kolanovic cited the feedback loop of selling and compared it to the Black Monday selloff of 1987.
      Flash crashes have not been limited to stocks—or even crashes. On Oct. 15, 2014, the price of the 10-year Treasury note soared, causing yields to tumble 0.35 of a percentage point in mere minutes before quickly reversing. The SEC blamed the increasing role of automated high-frequency algorithms for the sudden move.
      The most recent scare occurred on May 18, when the iShares MSCI Brazil Capped ETF(ticker: EWZ) dropped as much as 19% in a single trading session before closing the day down 16%. To put that move in perspective, the Brazil ETF’s worst single-day decline at the height of the financial crisis in 2008 had been 19%. While there was bad news in May—reports that Brazilian President Michel Temer had been ensnared in a corruption scandal—that seemed insufficient cause for such a precipitous decline.
      Shaoul, of Marketfield, attributes the Brazil ETF’s plunge to a combination of factors, including the growth of passive investing, which has made it easy to buy and sell an entire country’s market with the press of a button, combined with computer-driven trading. “There was no way of knowing what was a human being pressing a button, or a computer pressing a button,” he says. “But it generates the potential for sudden spikes in volatility that come out of nowhere.”
      The Brazil ETF recovered its losses fairly quickly. By the end of August, it was trading above its May 17 close.
      U.S. markets haven’t suffered declines like that, but have experienced numerous “fragility events”—sudden one-day declines—during the current rally, says Chintan Kotecha, an equity derivatives strategist at Bank of America Merrill Lynch. But because stocks have been in a bull market, there has been little follow-through after the initial selloff. As a result, some quantitative strategies reposition for more volatility, but none arrives. Kotecha attributes the lack of follow-through, in part, to central bankers’ continued bond-buying, which has provided much-needed support for the markets.
      Follow-through was all the market had in 1987, as selling automatically triggered more selling. To some observers, the risks of a similar scenario are growing. One particular area of concern: volatility-targeting strategies, which try to hold a portfolio’s volatility constant, and risk-parity strategies, which attempt to equalize the risk in a portfolio among bonds, stocks, and other assets—and sometimes use leverage to do it. When volatility is low, these portfolios can hold more-risky assets than when volatility is high. But as soon as volatility rises—and stays high—these types of funds will need to start selling stocks and other assets to keep the risk of their portfolios at the same level. If they sell enough, volatility could spike higher, leading to even more selling.
      The PROLIFERATION of COMPUTER-DRIVEN INVESTING has created an illusion that RISK can be measured and managed. But several anomalous episodes in recent years involving sudden, severe, and seemingly INEXPLICABLE PRICE SWINGS suggest the next MARKET SELLOFF could be exacerbated by the fact that the MACHINES are at the controls.
      In a market selloff, commodity-trading advisors similarly could exit their long positions quickly and look to short stocks, creating further selling pressure as they head for the exits. “Action leads to more action,” says Richard Bookstaber, chief risk officer at the University of California and author of The End of Theory, a book about financial crises caused by positive feedback loops.
      PERHAPS THE BIG QUESTION is who might be left to buy. Warren Buffett once quipped that investors should be fearful when others are greedy and greedy when others are fearful, but the current market structure has turned that maxim on its head. Algorithms provide less liquidity in a downturn than a human market maker, who might be thinking about how to profit from a dislocation.
      The rise of momentum and passive strategies has caused some $2 trillion to shift away from active money managers, who could be counted on to look for bargains as stocks sold off, says Kolanovic, the JPMorgan strategist. “We think the main attribute of the next crisis will be severe liquidity disruptions resulting from market developments since the last crisis,” he says.
      But most strategists acknowledge that such an occurrence isn’t a high-probability event. Much will depend on the cause of any disruption, as well as seasonal factors—stocks are more thinly traded in summer, for example. Also, computers aren’t the only cause of selling cycles; bear markets, after all, long predate machine-driven trading.
      Quantitative investors argue that they have learned from past mistakes and are less likely to be leveraged or crowded into the same trades. Moreover, regulators and exchanges have instituted rules that could help arrest a bout of unchecked selling, with trading halts imposed when the S&P 500 falls 7%, 13%, and 20%.
      Maybe these precautions will work to stem a tidal wave of selling. One of these days—possibly soon, given stocks’ lofty valuation and the Fed’s plan to shrink its balance sheet—we’ll find out.
      Posted: October 16, 2017, 11:55 pm
      (GLOBALINTELHUB.COM) — 10/15/2017 Dover, DE — The Bit Paradigm has arrived; with billions being thrown into projects that no one knows who are the founders, or if the profiles they use for their ‘team’ pages are guys working from home or have day-jobs at the local grocery store.  It is transforming the landscape so rapidly, we compiled a sequel to Splitting Pennies entitled Splitting Bits – Understanding Bitcoin and the Blockchain – available on Amazon Kindle for $2.99 and Paperback $9.99.
      As Currency experts, we found nothing unusual in the Bit World, it’s just FX 2.0 and hopefully a catalyst for real global financial reform beyond the scope of the myopic Dodd-Frank Consumer Rip Off and Exploitation Regulation that have plagued the US consumer going on 5 years now.  As we’ve explained in our previous work, Splitting Pennies – FX is the basis for the global financial system.  Don’t forget that Bitcoin is denominated in US Dollars.  While FX is the least understood market in the world it is also the most important.
      Just remember one thing – customers (business) need currency, they don’t need stocks or Crypto.  Take any business as an example, McDonalds (MCD) is always a great FX example – they need foreign currency as they accept it in more than 110 countries worldwide.
      And being based in Chicago, they need to repatriate those currencies into US Dollars, making them one of the biggest FX traders in the world.  So where does Bitcoin fit into all this?  At the moment, it doesn’t.  Of course that’s all changing – and changing quickly.  The news changes by the day – as the Bit Paradigm goes mainstream.  The current market cap of the entire CryptoCurrency Market is $170 Billion according to
      While that is still far away from traditional markets, the growth rate is beyond parabolic.  Skeptical traders should remember the late 90’s when fears about the Euro kept investors away.  Just take a look at this Monthly EUR/USD chart showing the Euro’s rise against the dollar from lows of .83 to highs of 1.58 before settling into the range that it’s been in recently:
      Euro Historical
      The Red line from .83 to 1.58 is about 190% or double – and traders should also bear in mind in FX there is a lot of leverage, so the 100% return in 6 years could have been 1000% or greater (many funds did profit from this simple trade).
      Of course, the real money in FX is in algorithmic trading, what the banks learned the hard way.. But the Euro is a great example of a synthetic currency that was created artificially, and finally succeeded to be an alternative to the US Dollar as a world reserve.  Although the technicalities of Bitcoin are far different, the gestalt is the same – Bitcoin is a currency created artificially, backed by nothing, and is increasing in value because people believe that it will be used in the future and that the price will go up.  Just like there’s nothing behind Bitcoin, there’s really nothing behind the Euro – with one key difference.  It’s possible for the ECB to print (mint) as many Euros as they want, but it’s not possible to do this with Bitcoin because of the design (there is a limited number of Bitcoin) and because there’s no central bank behind it.
      The big story of currency trading Crypto is of course, new alt-coins other than Bitcoin, which are being issued so rapidly it’s impossible to even keep track of them. lists 1170 different Cryptocurrencies, you can see the full list here.
      For a detailed breakdown of how you can profit from trading Bitcoin, checkout our new book Splitting Bits.
      Posted: October 15, 2017, 6:51 pm
      ( - 10/10/2017 Dover, DE -- Elite E Services, a FinTech virtual corporation in the Currency business for 15 years, has today published a digital book about Bitcoin and the Blockchain entitled "Splitting Bits : Understanding Bitcoin and the Blockchain" available on Kindle exclusively, for $2.99 digitally.  Get it now from

      With the world of Bitcoin and Blockchain moving faster than ever, EES felt an urgent need to research this Currency niche and publish our findings in a book.  Bitcoin is a Currency, and EES has been in the Currency management business for 15 years.  What we learned is fascinating, that Bitcoin isn't just a 'fad' but quite the opposite - Blockchain technology seems that soon it will be used everywhere.  Get it now from

      Book Description:

      Splitting Bits takes the Bit World of Bitcoin and the Blockchain and splits it into bite sized pieces for your digestion pleasure. We explain Bitcoin for what it is - a digital currency, not so different from fiat currencies such as the Euro or Yen. Splitting Bits is the natural sequel to Splitting Pennies - Understanding Forex. A new Bit Paradigm has begun and the computer arms race to mine and hash and mint your own coin is important for everyone to understand. Blockchain is the most explosive, potent technology ever which is about to change the world, starting with Wall St. Bitcoin may be a 'fad' but the underlying Distributed Ledger Technology (DLT) is the new standard in Currency Trading, Banking, Securities, and new markets yet to be created. Old systems will be renovated and re-invented. Blockchain is spreading faster than a virus around the world where soon a "Kodak Moment" will make businesses obsolete (such as when Smartphones make Kodak irrelevant). If you're feeling as you missed the opportunity to make 500,000% return by not buying some Bitcoin in 2011, now is an even greater opportunity - as we explain in this book. Bitcoin isn't actually going up in price, it's the US Dollar going down - there is a limited supply of Bitcoin, but the supply of US Dollar is unlimited. If you want to integrate Bitcoin for your business, Splitting Bits is your practical guide to simple steps of how you can accept Bitcoin payments and manage the risk of a volatile currency. For traders and investors, we explore the markets as they exist now and what the short term future holds. Splitting Bits has something for everyone, including our own proprietary Better Coin - learn how to make your own Coin logically, algorithmically. Learn how to avoid the fraud, which exists everywhere. Splitting Bits also includes how to guide for Bitcoin mining, and practical information for anyone who is confused, curious, or otherwise wants to improve their Bitcoin knowledge. Of course, we describe many Cryptocurrencies but use Bitcoin as the prime example. Join the Bit Paradigm and buyer beware - you won't think the same about investing after reading. WARNING: Crypto trading is contagious!

      Get it now from

      Posted: October 10, 2017, 1:53 pm
      Authored by Kip Herriage of | October 7, 2017
      Note: This is an update to my article of 10/7/17. Nothing has been removed or edited from the original article. This updated article includes additional financial/trading anomalies I have uncovered since posting the original piece.
      Included in this updated article:
      1) Additional trading research on OSIS (OSI Systems), the global leader in baggage, shipping and people detection systems (airports and now MUCH more, like hotels/casinos). Like the other 4 co’s that I have found, OSIS also began to rise on 9/11/17 (remember this date as you will see it in each company) and it rose on large share/option volume increases. The shares of OSIS would rise as much as 16% from its 9/11/17 lows to just after the attack.
      2) OLN (Olin Corp) makes Winchester ammunition. Beginning on 9/11/17 their shares began to rise on a large increase in volume and a HUGE increase in call option purchases (so far I’ve found more than 6000 calls were purchased in OIH the week prior to the attack with someone making a ton of money in these calls). The shares of OLN would soar as much as 23% from their 9/11/17 lows to just after the attack.
      Insider Trading and Financial Anomalies Surrounding the Las Vegas Attack
      Note: With this report, I make no claim to specific knowledge of any wrongdoing or improprieties. Instead, this report includes trading patterns, news releases and/or public record SEC filings.
      We will examine the share price movements of two gun manufacturers (American Outdoor Brands and Sturm Ruger) and the share price movement of MGM (which owns Mandalay Bay). We will also examine additional financial events surrounding MGM, including what can only be referred to as massive levels of insider selling in the shares of MGM, by the CEO/Chairman and MGM officers/directors. As you’ll see, more than $200 million in MGM shares were sold in the weeks leading up to the attack.
      Background. Interesting Trading Patterns in AOBC, RGR and MGM.
      Over the course of my 32 years in the investment industry I have constructed a proprietary investing model that I refer to as the “VRA Trading & Investing System”. In short, its design is to track money flows in the stock market and detect sector and stock analysis/movements that then alert me as to when/where money is flowing in the markets.
      For example, prior to the 2016 Presidential Elections, the VRA System noticed that the share price of gun manufacturers had begun to decline rapidly. This was one of our first financial clues that Trump might beat Clinton (Trump’s strong support of 2A). As you can see below, American Outdoor Brands (AOBC, formerly Smith & Wesson), hit a high of $31/share in August of 2016. As the bottom began to fall out, it would ultimately drop 55% in price, before hitting its low price of just over $13 on 9/11/17.
      The market is referred to as a “discounting mechanism” and as such, it often predicts future events. It certainly did so in the case of the election and the share price of AOBC.
      We see the same trading pattern in gun manufacturer Sturm Ruger (RGR). RGR traded as high as $73 in March of 2016 before ultimately dropping 37%, when it too bottomed within one trading day of AOBC hitting it’s lows (9/8/17). Again, my system noted the rapid decline in gun stocks, which led me to believe that Trump may in fact win the election. Remember this point; both AOBC and RGR hit their lows at the same time, just over two weeks prior to the Las Vegas shooting.
      Something Changed in September
      Let’s now examine the trading patterns of AOBC and RGR in detail, just over two weeks “prior” to the attack. As you can see, AOBC bottomed on 9/11/17 at $13.30 before the spike higher began. From 9/11 to just after the attack, AOBC rose 23% in price. It did so on a noticeable increase in buy-side trading volumes.
      Below, we see the same chart and reaction in the shares of Sturm Ruger (RGR). From its 9/8/17 lows, RGR bottomed at $46.24 and then spiked to $55.90 just after the attack, for a move higher of 21%.
      After falling in price from early-mid 2016 to their early September 2017 lows, the two largest publicly traded gun manufacturers bottomed, then spiked higher, at almost exactly the same time. In addition, buy-side volume increases rose sharply as well.And, while not covered in this report (more work is needed), we also saw a spike in call option purchases in both AOBC and RGR, in the days/weeks leading up to the attack.
      This final chart shows the share price of MGM (owner of Mandalay Bay) in the days leading up to the attack to present. MGM shares declined more than 10%, from 9/7/17 to recent lows. This decline occurred as some $200 million in insider selling was taking place.
      Bottom line: Beginning in early-mid September to this report, gun manufactures AOBC and RGR rose in price 23% and 21% (on higher trading volumes), while the shares of MGM fell in price by 11% (as $200 million in insider selling occurred).
      MGM: Heavy Levels of Insider Selling
      As the SEC insider transaction reports below detail, from 9/5/17 to 9/12/17, approximately 6 million shares of MGM were sold by officers and/or directors of the company, totaling approximately $200 million in proceeds to sellers. Included in this group is the selling of approximately 450,000 shares by MGM CEO and Chairman James Murren (a seller of size since late July) and who appears to have sold more than 85% of all holdings. We also see that MGM Board member Grounds William Warwick sold 176 million shares of his MGM stock on 9/6/17.
      We have no indication that MGM insiders sold these 6 million shares due to any advance knowledge of the 10/1 attack. I am not making that claim. I am simply pointing out facts that cannot be in question.
      But I will make a few observations:
      1) If MGM/Mandalay Bay were to lose law suits associated with this attack, the downside risks to MGM share price may be extensive.
      2) We also know that MGM CEO James Murren was appointed to the Homeland Security National Infrastructure Advisory Council by President Obama in December 2013. This fact could make for some interesting depositions, as it relates to exactly what type of advanced security systems Mandalay Bay had in place, leading up to and on the night of 10/1/17.
      “The National Infrastructure Advisory Council is tasked with providing the president with advice on the “security of the critical infrastructure sectors and their information systems.” The council is composed of a maximum of 30 members, appointed by the president, from private industry, academia and state and local government.”
      3) I am also aware of the fact that MGM put options activity spiked as well (needs more work), beginning at the same time gun stocks were rising and MGM was falling in price.
      4) For those curious about the trading in other major Las Vegas Hotel casino stocks, during this same time frame, this also needs more work. However, I can report that at the same time MGM’s share price was falling, the share prices of Las Vegas Sands (LVS) and Wynn Resorts (WYNN) were actually rising.
      There’s more…like the recent trading pattern in OSIS, which makes “detection systems” of all kinds (similar to their subsidiary “Rapiscan”, which makes the TSA body scanners that were put in place following 9/11). Many are wondering how long it might be before we are forced to walk through similar devices, as we enter hotels/casinos.
      In my original piece I only mentioned OSI Systems (OSIS) and their trading pattern around the Las Vegas attack. I’m updating this to include the chart from the same time frame and additional comments.
      Below is the chart of OSIS. From the lows of 9/11/17 to after the attack, the shares of OSIS have jumped 16%. In addition (more work is being done here), call option volume also spiked higher, 2 weeks before the attack.
      I have also confirmed that OSIS is working on plans to place their baggage/people detection systems in hotels/casinos around the world. Deepak Chopra is the CEO and Founder of OSIS.
      Here’s another interesting piece to the puzzle. Olin Corp (OIH) makes Winchester ammunition (among other things). Beginning on 9/11/17 their shares began to rise on a large increase in volume and a HUGE increase in call option purchases (so far I’ve found more than 6000 calls were purchased in OIH the week prior to the attack. Someone is making a ton of money in these calls). The shares of OLN would soar as much as 23% from their 9/11/17 lows to just after the attack.
      I am also including the anonymous 4 chan post (below) that everyone is talking about. As I see it, these are (among) the 5 publicly traded companies that the planner of the Las Vegas attack would want to target. It is most interesting that each of these stocks began their moves on 9/11/17, just one day after the 4chan post. This is what we know after less than 1 week after the attack. What might we know in another week?
      In closing, let me repeat; I make no claims or assertions that anyone mentioned in this piece has done anything nefarious. They likely did not.
      The question I might ask is, “Did someone else profit from the heinous acts of 10/1/17? Possibly the planners?”
      Like many of you, I am interested and I am asking questions. I also remember that during 9/11/01, reports surfaced widely in the financial media that “many, many millions” in profits were made off of the purchase of put options in the shares of United Airlines and American Airlines, the two airliners that operated the four aircraft that were hijacked on 9/11 (among other well-documented reports of large put option purchases in numerous companies that had the most exposure to a shocked US economy).
      There’s more…like the recent trading pattern in OSIS, which makes “detection systems” of all kinds (similar to their subsidiary “Rapiscan”, which makes the TSA body scanners that were put in place following 9/11). Many are wondering how long it might be before we are forced to walk through similar devices, as we enter hotels/casinos.
      I will continue to follow this story. Should you have information that might assist in my research, you can reach me at
      I am a proud American. I want the best for our country. Wherever the truth leads us, that is where we must go. Follow the money.
      Kip Herriage
      Posted: October 9, 2017, 12:36 am
      That didn't take long.
      After issuing a ruling in July that officially declared that the tokens sold during initial coin offerings must be registered as securities - a ruling that many hoped would lend a badly needed veneer of legitimacy to the shady ICO market - the SEC is following through with what we imagine will be the first of many civil actions against ICOs and the individuals who launch them.
      The agency on Friday announced civil actions against two companies and their founder, businessman Maksim Zaslavskiy, for violating anti-fraud and registration provisions of federal securities laws after misleading investors in a pair of so-called initial coin offerings (ICOs) purportedly backed by investments in real estate and diamonds.
      It's important to remember that this is civil complaint - the SEC doesn't have the power to make arrests; to do that, it must work in tandem with the FBI. Zaslavskiy is a free man. However, his assets - and those belonging to his companies - have been frozen. Instead, the agency is seeking to permanently ban Zaslavskiy from participating in any future digital-currency offerings, along with what we imagine will be hefty fines.
      In its press release, the SEC accused Maksim Zaslavskiy and his companies of selling unregistered securities, while also alleging that the digital tokens or coins he was peddling didn't really exist. According to the SEC's complaint, investors in REcoin Group Foundation and DRC World (also known as Diamond Reserve Club) were told (presumably by Zaslavskiy) that they could expect sizeable returns from the companies' operations, when neither had any real operations to speak of.
      As we've previously reported, the ICO market has exploded since late last year. The total sum raised has already reached $1.3 billion, with more expected by year's end. However, the ease with which unscrupulous people could fraudulently market their tokens (and earn big money) has attracted attention from regulators all over the world. China cited fears about abuses related to ICOs as the reason for shuttering all local digital-currency exchanges. Russia briefly flirted with the idea as well.
      Earlier today, FINMA, the Swiss government body responsible for regulating markets, said it was investigating several ICOs for possible fraud. In its press release announcing the investigations, the regulator explained that because ICOs are structured in a similar way to traditional stock offerings, they fall under the agency's purview. So every time it has received a complaint related to ICOS, its representatives have pursued that complaint.
      To the best of our knowledge, these are the first indications that any official regulatory action is being taken against ICO purveyors in either the US or Switzerland.
      In its civil complaint, the SEC alleges that "from July 2017 to the present, Zaslavskiy, the President and sole owner of the Companies, fraudulently raised at least $300,000 from hundreds of investors, through various material misrepresentations and deceptive acts relating to supposed investments in digital “tokens” or “coins” offered, first by REcoin, then by Diamond, during the ICOs."
      Zaslavskiy allegedly touted REcoin as "The First Ever Cryptocurrency Backed by Real Estate."  Alleged misstatements to REcoin investors included that the company had a "team of lawyers, professionals, brokers, and accountants" that would invest REcoin's ICO proceeds into real estate when in fact none had been hired or even consulted. Zaslavskiy and REcoin allegedly misrepresented they had raised between $2 million and $4 million from investors when the actual amount is approximately $300,000.
      Zaslavskiy then carried his scheme over to Diamond Reserve Club. He marketed the organization as one that invests in diamonds and obtains discounts with product retailers for individuals who purchase "memberships" in the company. Despite their representations to investors, the SEC alleges that Zaslavskiy and Diamond have not purchased any diamonds nor engaged in any business operations. Yet they allegedly continue to solicit investors and raise funds as though they have.
      Read the rest of the complaint below:

      Posted: September 30, 2017, 4:27 pm
      Former Fortress Principal Michael Novogratz left the firm's colossal macro hedge fund almost two years ago, but has been discussing investments in virtual currencies since 2013 when he told a UBS conference...
      "Put a little money in Bitcoin...Come back in a few years and it’s going to be worth a lot."
      He was of course correct, Bitcoin was trading around $200 at the time and as recently as three weeks ago was worth $5000...
      The last time we heard from Novogratz was in June 2017, at the CB Insights Future of Fintech conference in New York, where he told attendees that he has cut holdings (in Bitcoin and Ethereum) after the cryptocurrencies' latest "spectacular run," warning that "Euthereum had likely hit its highs for the year," and "cryptocurrencies were likely the biggest bubble of his lifetime."
      However, while this all sounded desperately downbeat, Novogratz was still very "positively constructive" on the space overall. He should be - he has 20% of his net worth invested in the sector... and now, as Bloomberg reports, Mike Novogratz is reinventing himself as the king of bitcoin.
      Novogratz has had a very good run. Aside from his epic call in Bitcoin, he has done extremely well in Ethereum, as Bloomberg details...It started with a late-2015 visit to a friend’s startup in Brooklyn.
      “I expected to see Joe, a dog and one assistant. Instead I saw 30 dynamic young people crammed in a Bushwick warehouse, coding, talking on the phone, making plans for this revolution,” Novogratz said.

      “Macro guys are instinctive. My instinct was, ‘I want to buy a chunk of this company.”

      He decided instead to invest in ether, the cryptocurrency token used on the Ethereum network.

      Novogratz bought about $500,000 at less than a dollar per ether and left on a vacation to India. By the time he returned a few weeks later, the price had risen more than fivefold. He bought more.

      Over the course of 2016 and into 2017, as ether surged to almost $400 and bitcoin topped $2,500, Novogratz sold enough to make about $250 million, the biggest haul of any single trade in his career.

      He said he paid tax on the profits, bought a Gulfstream G550 jet and donated an equal amount to a philanthropic project for criminal justice reform.
      Novogratz was hooked, and according to a person familiar with his plans, Bloomberg reports that the outspoken macro manager is starting a $500 million hedge fund to invest in cryptocurrencies, initial coin offerings and related companies. Novogratz will put up $150 million of his own money and plans to raise $350 million more by January, mainly from family offices, wealthy individuals and fellow hedge fund managers.
      “This is going to be the largest bubble of our lifetimes,” Novogratz said.

      “Prices are going to get way ahead of where they should be. You can make a whole lot of money on the way up, and we plan on it.”
      At that size, the Galaxy Digital Assets Fund would be the biggest of its kind and signal a growing acceptance of cryptocurrencies such as bitcoin and ether as legitimate investments.
      Where others see volatility and liability, Novogratz, a former Goldman Sachs partner, smells opportunity.
      “In a lot of ways, this is a market like any other market,” Novogratz said.

      “You see the psychology of fear and greed in the charts the same way you’d see it in charts of the Indonesian rupiah or dollar-yen or Treasuries. They’re exaggerated because of less liquidity and because you can’t get short.
      “I sold at $5,000 or $4,980,” he said.

      “Then three weeks later I’m trying to buy it in the low $3,000s. If you’re good at that and you’re a trading junkie, it’s a lot of fun.”
      And bubble or not, "Novo" as his friends call him, concluded eloquently on the extreme nature of cryptocurrencies' potential...
      “Remember, bubbles happen around things that fundamentally change the way we live,” he said.

      “The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.” 
      Posted: September 27, 2017, 5:05 pm
      New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC - retail and wholesale - and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.1
      JEL classification: E41, E42, E51, E58.
      In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen - with ups and downs - from a few cents per coin to over $4,000. In the meantime, hundreds of other cryptocurrencies - equalling bitcoin in market value - have emerged (Graph 1, left-hand panel). While it seems unlikely that bitcoin or its sisters will displace sovereign currencies, they have demonstrated the viability of the underlying blockchain or distributed ledger technology (DLT). Venture capitalists and financial institutions are investing heavily in DLT projects that seek to provide new financial services as well as deliver old ones more efficiently. Bloggers, central bankers and academics are predicting transformative or disruptive implications for payments, banks and the financial system at large.2
      Lately, central banks have entered the fray, with several announcing that they are exploring or experimenting with DLT, and the prospect of central bank crypto- or digital currencies is attracting considerable attention. But making sense of all this is difficult. There is confusion over what these new currencies are, and discussions often occur without a common understanding of what is actually being proposed. This feature seeks to provide some clarity by answering a deceptively simple question: what are central bank cryptocurrencies (CBCCs)?
      To that end, we present a taxonomy of money that is based on four key properties: issuer (central bank or other); form (electronic or physical); accessibility (universal or limited); and transfer mechanism (centralised or decentralised). The taxonomy defines a CBCC as an electronic form of central bank money that can be exchanged in a decentralised manner known as peer-to-peer, meaning that transactions occur directly between the payer and the payee without the need for a central intermediary.3 This distinguishes CBCCs from other existing forms of electronic central bank money, such as reserves, which are exchanged in a centralised fashion across accounts at the central bank. Moreover, the taxonomy distinguishes between two possible forms of CBCC: a widely available, consumer-facing payment instrument targeted at retail transactions; and a restricted-access, digital settlement token for wholesale payment applications.4
      But what might the two types of CBCC offer that alternative forms of central bank money cannot? For the consumer-facing kind, we argue that the peer-to-peer element of the new technology has the potential to provide anonymity features that are similar to those of cash but in digital form. If anonymity is not seen as important, then most of the alleged benefits of retail CBCCs can be achieved by giving the public access to accounts at the central bank, something that has been technically feasible for a long time but which central banks have mostly stayed away from.
      On the wholesale side, the assessment of CBCCs is quite different. Wholesale payments today do not offer cash-like anonymity. In particular, transactions that occur in wholesale systems are visible to the central operator. Hence, the case for wholesale CBCCs depends on their ability to improve efficiency and reduce settlement costs. Here, the answer depends on a number of technical issues that still need to be resolved. Some central banks have experimented with wholesale CBCCs, but none has announced yet that it is ready to adopt this technology.
      The first section presents the taxonomy underlying our definition. The following two sections discuss the features of the two basic CBCC types, retail and wholesale, drawing on historical examples and projects that are currently under way. A concluding section reflects on some of the issues that central banks need to consider in this area going forward.

      A new form of central bank money

      Our starting point for defining CBCCs is a report on cryptocurrencies published in 2015 by the Committee on Payments and Market Infrastructures (CPMI (2015)).5 This report sought to provide a definition of the new class of currencies represented by bitcoin and altcoins (alternatives to bitcoin) that had emerged using the same technology. The report identifies three key characteristics of cryptocurrencies: they are electronic; are not the liability of anyone; and feature peer-to-peer exchange.6
      Cryptocurrencies utilise DLT (Box A) to allow remote peer-to-peer transfer of electronic value in the absence of trust between contracting parties. Usually, electronic representations of money, such as bank deposits, are exchanged via centralised infrastructures, where a trusted intermediary clears and settles transactions. Previously, peer-to-peer exchange was restricted to physical forms of money.
      Some - but not all - of these features are also common to other forms of money (Graph 2, left-hand panel). Cash is peer-to-peer, but it is not electronic, and it is a central bank liability. Commercial bank deposits are a liability of the bank that issues them. Nowadays, they are in electronic form and are exchanged in a centralised manner either across the books of a given bank or between different banks via the central bank. Most commodity monies, such as gold coins, may also be transferred in a peer-to-peer fashion but are neither the liability of anyone nor electronic.7
      It may seem natural to define CBCCs by adapting the CPMI's definition to say that they are electronic central bank liabilities that can be used in peer-to-peer exchanges. But this ignores an important feature of other forms of central bank money, namely accessibility. Currently, one form of central bank money - cash - is of course accessible to everyone, while central bank settlement accounts are typically available only to a limited set of entities, mainly banks (CPSS (2003, p 3)). In this spirit, Bjerg (2017) includes universally accessible (ie easy to obtain and use) in addition to electronic and central bank-issued in defining the new concept of central bank digital currency (Graph 2, right-hand panel).
      Box A

      What is distributed ledger technology?icon

      Distributed ledger technology (DLT) refers to the protocols and supporting infrastructure that allow computers in different locations to propose and validate transactions and update records in a synchronised way across a network. The idea of a distributed ledger - a common record of activity that is shared across computers in different locations - is not new. Such ledgers are used by organisations (eg supermarket chains) that have branches or offices across a given country or across countries. However, in a traditional distributed database, a system administrator typically performs the key functions that are necessary to maintain consistency across the multiple copies of the ledger. The simplest way to do this is for the system administrator to maintain a master copy of the ledger which is periodically updated and shared with all network participants.
      By contrast, the new systems based on DLT, most notably Bitcoin and Ethereum, are designed to function without a trusted authority. Bitcoin maintains a distributed database in a decentralised way by using a consensus-based validation procedure and cryptographic signatures. In such systems, transactions are conducted in a peer-to-peer fashion and broadcast to the entire set of participants who work to validate them in batches known as "blocks". Since the ledger of activity is organised into separate but connected blocks, this type of DLT is often referred to as "blockchain technology".
      The blockchain version of DLT has successfully powered Bitcoin for several years However, the system is not without drawbacks: it is costly to operate (preventing double-spending without the use of a trusted authority requires transaction validators (miners) to employ large amounts of computing power to complete "proof-of-work" computations);icon there is only probabilistic finality of settlement; and all transactions are public. These features are not suitable for many financial market applications. Current wholesale DLT payment applications have therefore abandoned the standard blockchain technology in favour of protocols that modify the consensus process in order to allow enhanced confidentiality and scalability. Examples of protocols currently being tested by central banks include Corda and Hyperledger Fabric. Corda replaces blockchain with a "notary" architecture. The notary design utilises a trusted authority and allows consensus to be reached on an individual transaction basis, rather than in blocks, with limited information-sharing.
      Distributed ledger system
      icon See also Chapman et al (2017), CPMI (2015) and Benos et al (2017).icon The amount of energy currently being used by Bitcoin miners is equal to the energy consumption of Lebanon and Cuba (see For a detailed description of proof-of-work, see
      We combine the properties discussed in CPMI (2015) and Bjerg (2017) to establish a new taxonomy of money. Our properties are: issuer (central bank or other); form(electronic or physical); accessibility (universal or limited); and transfer mechanism (centralised or decentralised, ie peer-to-peer). This taxonomy reflects what appears to be emerging in practice and distinguishes between two potential types of CBCC, both of which are electronic: central bank-issued and peer-to-peer. One is accessible to the general public (retail CBCC) and the other is available only to financial institutions (wholesale CBCC). Again, a Venn diagram is useful for illustration.8 The four-ellipse version in Graph 3, which we call the money flower, shows how the two potential types of CBCC fit into the overall monetary landscape.
      Two taxonomies of new forms of currency
      In principle, there are four different kinds of electronic central bank money: two kinds of CBCCs (the shaded area) and two kinds of central bank deposits. The most familiar forms of central bank deposits are those held by commercial banks - often referred to as settlement accounts or reserves. The other form is, at least in theory, deposits held by the general public. Tobin (1987) refers to this form as deposited currency accounts (DCAs).9 So far, central banks have generally chosen not to provide DCAs.
      Universally accessible forms of money that are not issued by the central bank include (privately created) cryptocurrency, commodity money, commercial bank deposits and mobile money.10 Cryptocurrency borders CBCC given that only one of its properties differs. The other three currency forms are more removed because they are, in addition, either physical or "not peer-to-peer". A number of other forms of money are not universally accessible. Local (physical) currencies, ie currencies that can be spent in a particular geographical location at participating organisations, populate the right-hand petal of the flower. The upper left-hand petal contains virtual currencies, which are "electronic money issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community" (ECB (2012)). There is also the possibility of a private sector wholesale version of cryptocurrency. It would be transferred in a peer-to-peer fashion by means of a distributed ledger, but only between certain financial institutions.
      The money flower: a taxonomy of money
      Box B uses this taxonomy to classify different examples of money from the past, present and future according to where they would fit in the money flower. The remainder of this feature discusses the two types of CBCC in further detail and highlights some of the many issues central banks will need to consider if they ever chose to adopt them. We start with the retail variant and then turn to the wholesale one.
      Box B

      The money flower with selected examples

      Graph B fills out the money flower with examples of money from the past, present and possibly the future. Starting at the centre, we have Fedcoin, as an example of a retail CBCC. The concept, which was proposed by Koning (2014) and has not been endorsed by the Federal Reserve, is for the central bank to create its own cryptocurrency. The currency could be converted both ways at par with the US dollar and conversion would be managed by the Federal Reserve Banks.icon Instead of having a predetermined supply rule, as is the case with Bitcoin, the supply of Fedcoin would, much like cash, increase or decrease depending on the desire of consumers to hold it. Fedcoin would become a third component of the monetary base, alongside cash and reserves. Unlike Bitcoin, Fedcoin would not represent a competing, private "outside money" but would instead be an alternative form of sovereign currency (Garratt and Wallace (2016)).
      CADcoin is an example of a wholesale CBCC. It is the original name for digital assets representing central bank money used in the Bank of Canada's proof of concept for a DLT-based wholesale payment system. CADcoin has been used in simulations performed by the Bank of Canada in cooperation with Payments Canada, R3 (a fintech firm), and several Canadian banks but has not been put into practice.
      The money flower: example
      In Sweden, the demand for cash has dropped considerably over the past decade (Skingsley (2016)). Already, many stores do not accept cash and some bank branches no longer disburse or collect cash. In response, the Riksbank has embarked on a project to determine the viability of an eKrona for retail payments. No decision has yet been taken in terms of technology (Sveriges Riksbank (2017)). Hence, the eKrona is located on the border between deposited currency accounts and retail CBCCs.
      Dinero electrónico is a mobile payment service in Ecuador where the central bank provides the underlying accounts to the public. Citizens can open an account by downloading an app, registering their national identity number and answering security questions. People deposit or withdraw money by going to designated transaction centres. As such, it is a (rare) example of a deposited currency account scheme. As Ecuador uses the US dollar as its official currency, accounts are denominated in that currency.
      Bitcoin is an example of a non-central bank digital currency. It was invented by an unknown programmer who used the pseudonym Satoshi Nakamoto and was released as open-source software in 2009 along with a white paper describing the technical aspects of its design (see Box A for further details).
      PokéCoin is a currency used for in-game purchases in the Pokémon Go game and an example of a virtual currency.
      Utility Settlement Coin (USC) is an attempt by the private sector to provide a wholesale cryptocurrency. It is a concept proposed by a collection of large private banks and a fintech firm for a series of digital tokens representing money from multiple countries that can be exchanged on a distributed ledger platform (UBS (2016)). The value of each country's USC on the distributed ledger would be backed by an equivalent value of domestic currency held in a segregated (reserve) account at the central bank.
      The Bank of Amsterdam (the Amsterdamse Wisselbank) was established in 1609 by the City of Amsterdam to facilitate trade. It is often seen as a precursor to central banks. A problem at the time was that currency, ie coins, was being eroded, clipped or otherwise degraded. The bank took deposits of both foreign and local coinage at their real intrinsic value after charging a small coinage and management fee. These deposits were known as bank money. The Wisselbank introduced a book-entry system that enabled customers to settle payments with other account holders. The Dutch central bank was established in 1814 and the Bank of Amsterdam was closed in 1820 (Smith (1776), Quinn and Roberds (2014)).
      The 1934 series gold certificate was a $100,000 paper note issued by the US Treasury and used only for official transactions between Federal Reserve Banks. This was the highest US dollar-denominated note ever issued and did not circulate among the general public. It is an example of non-electronic, restricted-use, government-backed, peer-to-peer money.
      Examples of privately issued local currencies include the Bristol Pound and BerkShares, located in the right-hand petal. Stores in Bristol, United Kingdom, give a discount to people using Bristol Pounds, whereas BerkShares are purchased at 95 cents on the dollar and are accepted at retail stores in the Berkshires region of Massachusetts at face value.
      Precious metal coins are examples of commodity money. They can be used as an input in production or for consumption and also as a medium of exchange. This is in contrast to fiat money, which has no intrinsic use. Although commodity money is largely a thing of the past, it was the predominant medium of exchange for more than two millennia.
      E-gold account holders used commercial bank money to purchase a share of the holding company's stock of gold and used mobile phone text messages to transfer quantities of gold to other customers. Payments between e-gold customers were "on-us" transactions that simply involved updating customer accounts. E-gold ultimately failed. But before it shut down in 2009, it had accumulated over 5 million account holders.icon Many current private mobile payment platforms, such as Venmo(a digital wallet with social media features popular with US college students) and M-pesa™ (a popular mobile money platform in Kenya and other East African countries), employ a similar "on-us" model. Users transfer either bank deposits or cash to the operator, who gives them mobile credits. These credits can be transferred between platform participants using their mobile devices or redeemed from the operator for cash or deposits. The daily number of M-pesa transactions dwarfs those conducted using Bitcoin. However, in terms of value, worldwide Bitcoin transfers have recently overtaken those conducted on the M-pesa platform (Graph 1, right-hand panel).
      icon Straightforward arguments derived from Friedman (1959) and Klein (1974) suggest that if the Federal Reserve were to maintain one-to-one convertibility with Fedcoin, it would also need to control the supply of Fedcoins.icon The company ran into trouble with the authorities over anti-money laundering violations and for operating a money transmitter business without the necessary state licence; see E-gold account statistics can be found at

      Retail central bank cryptocurrencies

      Retail CBCCs do not exist anywhere. However, the concept of a retail CBCC has been widely discussed by bloggers, central bankers and academics. Perhaps the most frequently discussed proposal is Fedcoin (Koning (2014, 2016), Motamedi (2014)).11 As discussed in Box B, the idea is for the Federal Reserve to create a cryptocurrency that is similar to bitcoin. However, unlike with bitcoin, only the Federal Reserve would be able to create Fedcoins and there would be one-for-one convertibility with cash and reserves. Fedcoins would only be created (destroyed) if an equivalent amount of cash or reserves were destroyed (created) at the same time. Like cash, Fedcoin would be decentralised in transaction and centralised in supply. Sveriges Riksbank, with its eKrona project, appears to have gone furthest in thinking about the potential issuance of a retail CBCC (Box C).
      A retail CBCC along the lines of Fedcoin would eliminate the high price volatility that is common to cryptocurrencies (Graph 1, centre panel).12 Moreover, as Koning (2014) notes, Fedcoin has the potential to relieve the zero lower bound constraint on monetary policy. As with other electronic forms of central bank money, it is technically possible to pay interest on a DLT-based CBCC. If a retail CBCC were to completely replace cash, it would no longer be possible for depositors to avoid negative interest rates and still hold central bank money.
      Any decision to implement a retail CBCC would have to balance potential benefits against potential risks. Bank runs might occur more quickly if the public were able to easily convert commercial bank money into risk-free central bank liabilities (Tolle (2016)). There could also be risks to the business models of commercial banks. Banks might be disintermediated, and hence less able to perform essential economic functions, such as monitoring borrowers, if consumers decided to forgo commercial bank deposits in favour of retail CBCCs. These benefits and costs are, however, not unique to retail CBCCs. They are the same for DCAs. What, then, is the key difference between retail CBCCs and DCAs? The answer lies with the peer-to-peer aspect of CBCCs and, more specifically, with anonymity.


      Bitcoin was designed to be a "peer-to-peer version of electronic cash" (Nakamoto (2009, p 1), and this allows transactions to be anonymous. All bitcoin transactions are publicly recorded using the payer's and the payee's public addresses.13 However, very much like e-mail addresses, bitcoin public addresses do not need to reveal the true identity of users.14 This means that a person sending bitcoin to a public address need not reveal his/her true identity to the recipient (counterparty anonymity) or to other members of the Bitcoin community (one form of third-party anonymity).15
      Box C

      The case of Sweden

      Sweden has one of the highest adoption rates of modern information and communication technologies in the world. It also has a highly efficient retail payment system. At the end of 2016, more than 5 million Swedes (over 50% of the population) had installed the Swish mobile phone app, which allows people to transfer commercial bank money with immediate effect (day or night) using their handheld device (Graph C, left-hand panel; see also Bech et al (2017)).
      The demand for cash is dropping rapidly in Sweden (Graph C, right-hand panel). Already, many stores no longer accept cash and some bank branches no longer disburse or collect cash. These developments are a cause for concern for the Riksbank (Skingsley (2016)). Will the payment system continue to be safe and efficient without cash? Even if cash is not used every day, it is a backup option in crisis situations. Will those without access to bank services still be able to manage their payments?
      The Riksbank currently has a so-called eKrona project under way to determine whether it should supply digital central bank money to the general public. The project is considering different technical solutions, but no decision has been taken as to whether to focus on a DCA or a retail CBCC structure. The project is expected to be finalised in late 2019 (Sveriges Riksbank (2017)).
      Kahn et al (2005) and McAndrews (2017) emphasise legitimate reasons for counterparty anonymity in transactions. Payees and payers may want to reduce the risk of identity theft, the possibility that the counterparty might follow them home and rob them, or more innocuous annoyances like directed advertising and solicitations (spamming). Similarly, a lack of third-party anonymity may be regarded as revealing too much information about a person's private activities. In his proposal for Digicash, David Chaum (1983) makes this argument by pointing out that "knowledge by a third party of the payee, amount, and time of payment for every transaction made by an individual can reveal a great deal about the individual's whereabouts, associations and lifestyle".16
      Counterparty anonymity seems less controversial than third-party anonymity. Many observers have argued that third-party anonymity in payments should not be allowed because it facilitates criminal activity, such as tax evasion, terrorist financing or money laundering. Rogoff (2016) argues that $100 bills should be removed from circulation for the same reasons.
      It is unclear how much consumers actually value anonymity of either sort in order to protect their privacy. Athey et al (2017) look at how much effort people make to protect their privacy in relation to digital currencies. In an experimental setting, they find that subjects, in general, do not devote the small amount of time needed to read through the e-wallet description that is necessary to meet their own stated preferences for privacy. Similar findings emerged from a survey of economics students at the University of California, Santa Barbara, on usage of Venmo (a digital wallet with social media features). Of the 669 respondents, 80% were users. Of these users, 44% allowed their Venmo transactions to be public (visible to everyone on the internet) and another 21% allowed all of their Facebook friends to see their transactions. Finally, while Digicash is regarded as a precursor to bitcoin, there may not have been sufficiently high demand for the third-party anonymity it provided as it was never widely adopted. It filed for bankruptcy in 1998.17
      The technology behind CBCCs could allow central banks to provide a digital cash substitute with anonymity properties similar to those of cash. In its role as issuer, the central bank would need to decide whether or not to require customer information (the true identity behind the public address). This would determine the extent to which the retail CBCC would provide third-party anonymity.
      While it may look odd for a central bank to issue a cryptocurrency that provides anonymity, this is precisely what it does with physical currency, ie cash. Perhaps a key difference is that, with a retail CBCC, the provision of anonymity becomes a conscious decision. It is worth recalling that the anonymity properties of cash are likely to have emerged out of convenience or historical happenstance rather than intent.

      Wholesale central bank cryptocurrencies

      While CBCCs for retail payments remain at the conceptual stage, some central banks have completed proofs of concept for DLT-based applications.18 One of the reasons for the interest in DLT is that many central bank-operated wholesale payment systems are at the end of their technological life cycles. The systems are programmed in obsolete languages or use database designs that are no longer fit for purpose and are costly to maintain.

      Projects Jasper and Ubin

      Project Jasper at the Bank of Canada (Chapman et al (2017)) and Project Ubin at the Monetary Authority of Singapore (MAS (2017)) simulate real-time gross settlement (RTGS) systems on a DLT platform. In an RTGS system, payments are processed individually, immediately and with finality throughout the day (CPSS (1997)).
      Unlike the retail payment applications discussed above, wholesale systems have restricted access, ie they are permissioned rather than permission-less. Usually, access is restricted to financial institutions. Moreover, the costly proof-of-work validation (Box A) needed to prevent double-spending in retail schemes is replaced by less energy-consuming alternatives, such as a trusted notary (eg the central bank).
      A key challenge in any CBCC application is how to transfer central bank money to the distributed ledger.19 Both Jasper and Ubin chose a digital depository receipt (DDR) approach. A DDR is a claim on central bank reserves held in a segregated account against which the central bank issues digital tokens on the distributed ledger. In Jasper, the digital tokens - initially known as CADcoins20 - are created at the beginning of the day and redeemed at the end. In Ubin, banks acquire or redeem digital tokens at any point during the day and can keep them on the distributed ledger overnight. Hence, transfers on the DLT platform of the Singaporean proof of concept are not restricted to the opening hours of MAS.
      Project Jasper also implements a liquidity-saving mechanism (LSM) on the DLT platform. While RTGS systems minimise settlement risk, they can be demanding in terms of liquidity. Consequently, many RTGS systems around the world are augmented by mechanisms that periodically seek to offset payments against each other in a queue and settle only the net amounts (Bech and Soramäki (2001)). Distributed ledgers are decentralised, so implementation of a centralised queue requires a clever work-around (Project Jasper (2017)).
      The two projects show that central bank money can be transferred on a distributed ledger in real time, in realistic volumes and with an LSM. Nevertheless, none of the current initiatives to update or replace existing wholesale payment systems are considering the adoption of DLT. Both the Bank of England (2017) and Bank of Canada (Ho (2017)) conclude that DLT is not yet mature enough for current adoption. Yet most central banks that are considering modernising their core payment infrastructure stress the need to make new systems inter-operable with future DLT platforms.

      Securities settlement

      Looking beyond the immediate horizon, many industry participants see significant potential for DLT to increase efficiency and reduce reconciliation costs in securities clearing and settlement.21 One potential benefit of DLT-based structures is immediate clearing and settlement of securities, in contrast to the multiple-day lags that currently exist when exchanging cash for securities (and vice versa).22 Progress in this direction was recently achieved by a joint venture between the Deutsche Bundesbank and Deutsche Börse, which developed a functional prototype of a DLT-based securities settlement platform that achieves delivery-versus-payment settlement of digital coins and securities (Deutsche Bundesbank (2016)).


      As it stands, cash is the only means by which the public can hold central bank money. If someone wishes to digitise that holding, he/she has to convert the central bank liability into a commercial bank liability by depositing the cash in a bank. A CBCC would allow consumers to hold central bank liabilities in digital form.23 But this would also be possible if the public were allowed to have central bank accounts, an idea that has been around for a long time.24 We argue that the main benefit that a consumer-facing retail CBCC would offer, over the provision of public access to (centralised) central bank accounts, is that the former would have the potential to provide the anonymity of cash. In particular, peer-to-peer transfers allow anonymity vis-à-vis any third party. If third-party anonymity is not of sufficient importance to the public, then many of the alleged benefits of retail CBCCs can be achieved by giving broad access to accounts at the central bank.
      Whether or not a central bank should provide a digital alternative to cash is most pressing in countries, such as Sweden, where cash usage is rapidly declining. But all central banks may eventually have to decide whether issuing retail or wholesale CBCCs makes sense in their own context. In making this decision, central banks will have to consider not only consumer preferences for privacy and possible efficiency gains - in terms of payments, clearing and settlement - but also the risks it may entail for the financial system and the wider economy, as well as any implications for monetary policy (Bordo and Levin (2017)). Some of the risks are currently hard to assess. For instance, at present very little can be said about the cyber-resilience of CBCCs, something not touched upon in this short feature.


      Andolfatto, D (2015): "Fedcoin: on the desirability of a government cryptocurrency", MacroMania, blogpost, 3 February.
      --- (2016): "Is bitcoin a safe asset?", MacroMania, blogpost, 27 March.
      Athey, S, C Catalini and C Tucker (2017): "The digital privacy paradox: small money, small costs, small talk", Stanford University Graduate School of Business, Research Papers, no 17-24.
      Bank of Canada (forthcoming): "White paper on Project Jasper".
      Bank of England (2017): "Bank of England extends direct access to RTGS accounts to non-bank payment service providers", press release, 19 July.
      Bank of France (2016): "La Banque de France mène une expérimentation de 'blockchain' interbancaire", press release, 15 December.
      Bech, M, Y Shimizu and P Wong (2017): "The quest for speed in payments", BIS Quarterly Review, March, pp 57-68.
      Bech, M and K Soramäki (2001): "Gridlock resolution in payment systems", Danmarks Nationalbank, Monetary Review, December.
      Benos, E, R Garratt and P Gurrola-Perez (2017): "The economics of distributed ledger technology for securities settlement", Bank of England, Staff Working Papers, no 670, August.
      Bjerg, O (2017): "Designing new money - the policy trilemma of central bank digital currency", Copenhagen Business School (CBS) Working Paper, June.
      Bolt, W and M van Oordt (2016): "On the value of virtual currencies", Bank of Canada, Staff Working Papers, no 42, August.
      Bordo, M and A Levin (2017): "Central bank digital currency and the future of monetary policy", NBER Working Papers, no 23711, August.
      Broadbent, B (2016): "Central banks and digital currencies", speech at the London School of Economics, 2 March.
      Chapman, J, R Garratt, S Hendry, A McCormack and W McMahon (2017): "Project Jasper: are distributed wholesale payment systems feasible yet?", Bank of Canada, Financial System Review, June, pp 1-11.
      Chaum, D (1983): "Blind signatures for untraceable payments", Advances in Cryptology, proceedings of Crypto '82, pp 199-203.
      Committee on the Global Financial System (2015): "Central bank operating frameworks and collateral markets", CGFS Papers, no 53, March.
      Committee on Payment and Settlement Systems (1997): Real-time gross settlement systems, March.
      Committee on Payments and Market Infrastructures (2015): Digital currencies, November.
      Deutsche Bundesbank (2016): "Joint Deutsche Bundesbank and Deutsche Börse blockchain prototype", press release, 28 November.
      European Central Bank (2012): Virtual currency schemes, October.
      Friedman, M (1959): "The demand for money: some theoretical and empirical results", The Journal of Political Economy, vol 67, no 4, pp 327-51.
      Garratt, R (2016): "CAD-coin versus Fedcoin", R3 Report, 15 November.
      Garratt, R and N Wallace (2016): "Bitcoin 1, bitcoin 2, - : an experiment in privately issued outside monies", University of California, Santa Barbara, Department of Economics, Departmental Working Paper, October.
      Ho, S (2017): "Canadian trial finds blockchain not ready for bank settlements", Reuters Business News, 25 May.
      Hong Kong Monetary Authority (2016): Whitepaper on distributed ledger technology, 11 November.
      Kahn, C, J McAndrews and W Roberds (2005): "Money is privacy", International Economic Review, vol 46, no 2, pp 377-99.
      Klein, B (1974): "The competitive supply of money", Journal of Money, Credit and Banking, vol 6, no 4, pp 423-53.
      Kocherlakota, N (1998): "Money is memory", Journal of Economic Theory, vol 81, no 2, pp 232-51.
      Koning, J (2014): "Fedcoin", Moneyness, blogpost, 19 October.
      --- (2016): "Fedcoin: a central bank issued cryptocurrency", R3 Report, 15 November.
      Luther, W and J Olson (2015): "Bitcoin is memory", The Journal of Prices & Markets, vol 3, no 3, pp 22-33.
      Mainelle, M and A Milne (2016): "The impact and potential of blockchain on the securities transaction lifecycle", SWIFT Institute Working Papers, no 7.
      McAndrews, J (2017): "The case for cash", Asian Development Bank Institute Working Paper Series, no 679.
      Monetary Authority of Singapore (2017): The future is here - Project Ubin: SGD on distributed ledger.
      Motamedi, S (2014): "Will bitcoins ever become money? A path to decentralised central banking", Tannu Tuva Initiative, blogpost.
      Project Jasper (2017): "A Canadian experiment with distributed ledger technology for domestic interbank payments settlement", white paper prepared by Payments Canada, R3 and the Bank of Canada.
      Quinn, S and W Roberds (2014): "How Amsterdam got fiat money", Journal of Monetary Economics, vol 66, September, pp 1-12.
      Raskin, M and D Yermack (2016): "Digital currencies, decentralized ledgers and the future of central banking", NBER Working Papers, no 22238, May.
      Rogoff, K (2016): The curse of cash, Princeton University Press.
      Santander InnoVentures (2015): The Fintech 2.0 Paper: rebooting financial services.
      Skingsley, C (2016): "Should the Riksbank issue e-krona?", speech at FinTech Stockholm 2016, 16 November.
      Smith, A (1776): An inquiry into the nature and causes of the wealth of nations, W Strahan and T Cadell, London.
      Sveriges Riksbank (2017): Project plan for the eKrona, 14 March.
      Tobin, J (1985): "Financial innovation and deregulation in perspective", Bank of Japan Monetary and Economic Studies, vol 3, no 2, pp 19-29.
      --- (1987): "The case for preserving regulatory distinctions", in Proceedings of the Economic Policy Symposium, Jackson Hole, Federal Reserve Bank of Kansas City, pp 167-83.
      Tolle, M (2016): "Central bank digital currency: the end of monetary policy as we know it?", Bank Underground, blogpost, 25 July.
      UBS (2016): "Utility settlement coin concept on blockchain gathers pace", press release, 24 August.
      Venn, J (1881): Symbolic logic, MacMillan and Co, London.
      Yermack, D (2015): "Is bitcoin a real currency?", in D Lee (ed), The Handbook of Digital Currency, Elsevier, pp 31-44.
      1 The views expressed in this article are those of the authors and do not necessarily reflect those of the BIS. We thank Claudio Borio, Stijn Claessens, Benjamin Cohen, Dietrich Domanski, Hana Halaburda, Krista Hughes, Jochen Schanz and Hyun Song Shin for comments as well as Aleksander Berentsen, James Chapman and Paul Wong for insightful discussions. We are grateful to Codruta Boar for excellent research assistance.
      2 See Andolfatto (2015, 2016), Broadbent (2016), Raskin and Yermack (2016) and Skingsley (2016).
      3 The purest form of peer-to-peer transaction is a cash exchange. On a computer network, the peer-to-peer concept means that transactions can be processed without the need for a central server.
      4 It is common to divide payments into retail and wholesale segments. Retail payments are relatively low-value transactions, in the form of eg cheques, credit transfers, direct debits and card payments. By contrast, wholesale payments are large-value and high-priority transactions, such as interbank transfers. The distinction might become less relevant in a world with CBCCs. In that case, our usage would reflect the types of payment primarily targeted by CBCCs.
      5 The report's title is Digital currencies, but it notes that such schemes are frequently also referred to as "cryptocurrencies", reflecting the use of cryptography in their issuance and their validation of transactions.
      6 Cryptocurrencies have no intrinsic value and are only held in the belief that they might be exchanged for goods or services at a later point in time.
      7 In the Middle Ages, payments at times required the services of a money changer to assay and value the coins being used.
      8 A four-circle Venn diagram covers only 14 of the 24 = 16 possible combinations. Hence, in the case of four sets, Venn (1881) suggested using ellipses in order to show all cases.
      9 In a 1987 speech, Nobel laureate James Tobin argued that, in order to avoid relying too heavily on deposit insurance to protect the payment system, central banks should "make available to the public a medium with the convenience of deposits and the safety of currency, essentially currency on deposit, transferable in any amount by check or other order" (Tobin (1987, p 6); see also Tobin (1985)). That is, people should be able to store value without being subject to the risk of bank failure.
      10 Mobile money is an electronic wallet service that allows users to store, send and receive money using their mobile phones. The value stored in the wallets may be liabilities of the service provider or claims on money held in trust at a commercial bank.
      11 The Federal Reserve has not endorsed or officially commented on the proposal.
      12 See Yermack (2015), Bolt and van Oordt (2016) and Garratt and Wallace (2016) for discussions relating to digital currencies and price volatility.
      13 Luther and Olson (2015) argue that bitcoin is a practical application of what is termed "memory" in the monetary economics literature. Kocherlakota (1998) shows that both money and memory are devices capable of facilitating exchange. Memory can, however, implement more allocations than money, so that money can be viewed as a form of memory but not the other way around.
      14 See Nakamoto (2009, Section 10).
      15 Third-party anonymity means that a person's true identity is not revealed to anyone not directly involved in a transaction. In more general applications, this would include a system operator.
      16 Digicash was launched in the 1990s as a means of transferring bank deposits from one customer to another without revealing the payer's identity to his/her bank (ie it provided third-party anonymity). It did this by using cryptographic techniques to create a pool of untraceable Digicash from customer deposits. Digicash is interesting in that it provided third-party anonymity without requiring autonomy from commercial banks. Commercial banks still held and transferred the deposits held by customers using the Digicash scheme.
      17 One potential reason for its lack of success is that it did not provide autonomy from a central authority. Nick Szabo's proposal for "bit gold" offers an autonomous version of e-gold that uses proof-of-work chains. Bit gold represents a big step in the evolution of digital cash towards bitcoin (
      18 Central banks have not limited themselves to wholesale payment applications of DLT. The Hong Kong Monetary Authority (HKMA) has developed proofs of concept for trade finance and mortgage loan applications in collaboration with industry participants (HKMA (2016)). The Bank of France has developed a DLT version of its Single European Payments Area (SEPA) Creditor Identifier database (Bank of France (2016)).
      19 The CPMI-IOSCO Principles for Financial Markets Infrastructures hold that settlement should occur in central bank money whenever practical and available.
      20 See Garratt (2016).
      21 Mainelle and Milne (2016) estimate that synchronised share databases can reduce back office costs by up to 50%. A study led by Santander InnoVentures (2015) estimates that $15-20 billion could be saved annually in the broader banking industry.
      22 Through the use of smart contracts, the technology also allows for the settlement time/date of a transaction to be specified by the relevant parties.
      23 One simple reason why a consumer might want to do this is to avoid the credit risk associated with commercial bank liabilities.
      24 Who should and should not have access to central bank money is a recurring policy issue. See CPSS (2003), CGFS (2015) and Bank of England (2017) for more detailed discussions.
      Posted: September 24, 2017, 7:04 pm
      What’s next? A unicorn captured in Tennessee? The world I grew up in has changed. American Universities are handing out Play-Doh to comfort distraught liberals and “Never Trump” students. Protestors defaced a Thomas Jefferson statueat the University of Virginia due to his slave ownership. Race baiters attacked Hobby Lobby for displaying raw cotton in vases. The P.C. Police have continually demonstrated their desire to attack the America many of us love.
      Now, the snowflake class is writing articles stating Ron Paul – the former Texas congressman that made a career out of criticizing bloated defense budgets and hawkish foreign policy decisions – is shilling for the defense industry. Their “evidence” is that he received five-year-old campaign contributions from some employees of Boeing and Lockheed Martin, which they falsely credited with coming directly from the companies themselves.
      Dr. Paul’s alleged wrongdoing was writing an op-ed mildly critical of Elon Musk, a government subsidy-eating machine and poster boy for left-wing environmental causes.
      In the article, Paul, an Air Force veteran, expressed his opposition to Section 1615 of the National Defense Authorization Agreement (NDAA), which many speculate was written with the congressional intent of quietly extinguishing all serious competition to Musk’s SpaceX.
      Section 1615 would bar the Air Force from funding any new launch vehicles. Coincidentally, in just a few short years, there will only be one established launch vehicle left in the marketplace -- Musk’s SpaceX.
      If the NDAA is passed as is, it will stay that way for a long while.
      Talk about a get-rich quick scheme.
      This provision has the potential of putting a lot of taxpayer money in Elon Musk’s already fat pockets. As Dr. Paul already noted, “government contracts account for about 70 percent of SpaceX’s contracts. U.S. taxpayers have provided SpaceX more than $5.5 billion in the form of Air Force and NASA contracts.” Should Section 1615 be passed by the Senate today, that percentage will likely increase exponentially.
      The P.C. Police are easy prey for the cult of personality that is Elon Musk. They reject even the possibility of Musk, one of their heroes having ulterior motives – whether it’s support of the carbon tax, support for the Paris Accords which he indirectly profits from, or now – you guessed it – possibly pushing 1615 through to passage.
      Since 2003, Musk has given over $500,000 to Washington politicians, almost evenly split between Republicans and Democrats. SpaceX has even handed money to lobbying firms to work on pushing through past NDAAs, which contained language that would have seemingly benefitted his company – including expediting the already-planned-on government Russian engine ban, which SpaceX’s only serious competitor relies on.
      All this Washington meddling is really sad when considering that the whole beauty of SpaceX’s founding was how it cut into what was once the unchecked market share of an industry giant and proceeded to cut costs by sizeable margins. Now, the founder of that same company may be working to bring the industry back to its glum past -- muscling out not just established veterans. Musk has shown himself to be a merciless competitor, claiming scalps throughout the industry and even not ruling out martians’ interference for his failures.
      Musk’s blogging army points to how Section 1615 still allows for the funding of new rocket engines as push back that it will create a de facto SpaceX monopoly, claiming that it will keep his Russian engine-dependent revival afloat. And it might – on paper. But, as Pentagon officials have said time and time again, replacing the engine will lead to significant cost increases, making Musk’s company the only affordable option left for use in the United States.
      Even if 1615 didn’t jeopardize the security of established market participants, would that make it an admirable provision? Is that what the followers of Musk, the so-called free market visionary, have resorted to -- keeping the status quo intact, but shutting the door on anyone else that may come next? 
      The Musk followers see no wrong in their leader. He is the man that has promised to take them to the stars. He can do no wrong.
      The Trump administration agrees with Dr. Paul, saying 1615 would “restrict development of new space launch systems, including those whose development is significantly funded by industry … [limiting] domestic competition, which will increase taxpayer costs by several billions of dollars through FY 2027 and stifle innovation.”
      Dr. Paul is the antithesis of a crony. It’s as absurd as believing a craft store is racist for publicly displaying cotton arrangements. It’s time for the Musk sycophants, and the rest of the P.C. police, to take a step off Fantasy Island.  If anyone is a risk to America’s national security, it’s Elon Musk, not Dr. Paul. 
      Posted: September 18, 2017, 8:16 pm
      (GLOBALINTELHUB.COM) — 9/14/2017 — Trading is difficult, if it were easy there would be no losers – in order for there to be winners in markets, there have to be losers.  But trading is not impossible, and Wall St. has developed an industry out of it called “money management” which is effectively conservative trading.
      But sometimes there are companies who simply mislead investors in to thinking that trading is easy, and these guys ‘putting golf clubs in their Porsche trunks’ simply discovered the ‘secret’ of life that it’s possible to click click click and get millions.  As hundreds of customers discovered, trading is not that easy.
      NFA orders Chicago, Ill., introducing broker Kingsview Futures LLC to pay a $50,000 fine
      September 14, Chicago—NFA has ordered Chicago, Ill., introducing broker Kingsview Futures LLC to pay a $50,000 fine.
      The Decision, issued by an NFA Hearing Panel, is based on a Complaint authorized by NFA’s Business Conduct Committee (BCC) and a settlement offer submitted by Kingsview Futures.
      The Hearing Panel found that Kingsview Futures failed to diligently supervise its operations and activities.
      The complete text of the Complaint and Decision can be viewed on NFA’s website.
      Reading NFA complaints is always interesting.  Here’s the highlights:
       217 Kingsview Futures customers with self-directed accounts traded in 2015.
      203 of these customers (or 9 %) incurred total losses that exceeded $1.9 million.
      More than 70% of the customers experienced losses exceeding $1,000, and
      approximately 10% of them experienced losses exceeding $20,000. One
      customer’s losses exceeded $225,000. In contrast, thirteen customers reported
      gains in 2015, and only three of them had net profits exceeding $1,000. During
      the same period, Kingsview Futures made commissions totaling more than
      $208,000 from these customers.
      235 Kingsview Futures customers with self-directed accounts traded in 2014.
      226 of these customers (or 96%) incurred total losses of more than $1.5 million.
      They claim that FX is the ‘risky market’ where 95% of traders lose.  At Oanda, 51% of customer accounts are profitable.
      In any event, it’s always sad to see customers pay for something like ‘training and education’ lured by videos with private planes and fancy cars, and then to lose money.  Trading futures is really difficult.  Training and education isn’t always sufficient to make you a trader.  In fact, traders who go through ‘real’ training often don’t succeed.
      As we’ve said often, FX provides a lot of opportunity for algorithmic systems – trading FX yourself, futures included – is nearly impossible.
      Stick to a system or manager with a track record.  That doesn’t guarantee success of course, but it at least puts you in the spectrum of statistically possible success.
      Posted: September 14, 2017, 8:08 pm
      (GLOBALINTELHUB.COM) — 9/9/2017 As Hurricane Irma approaches US borders, investors should note the forces of the ‘invisible hand’ in nature and not only in markets.  As we explain in our groundbreaking work Splitting Pennies, the financial markets are not ‘as seen on TV’ and in fact, are the subject of constant manipulation, and this storm is no exception.
      Weather Modification technology is simple and has been around for a long time, starting with the use of dry ice, evolving to use of ‘supersonic booms’ and finally aerosols.  The Pentagon has technologies that are far, far, far more advanced than weather modification.   See an extensive list of weather modification patents here.
      The amount of evidence is overwhelming (of course they do not broadcast this on TV, but they have a profit motive, we’ll get to that) and some groups such as have toiled to create a resource, summarized by this video here:
      Hurricane Harvey brought an abrupt and catastrophic end to the 12 year long major hurricane landfall drought in the US. Were climate engineering programs a factor in the Harvey disaster scenario? Available data has already made clear the answer is yes. How much decimation will the manipulation of Hurricane Irma inflict? The US government has been actively engaged in hurricane modification programs for a minimum of 70 years, historical documents prove this fact conclusively. Yet, the power structure controlled circles of academia (and corporate media) continue to fuel total denial of the climate engineering hurricane modification reality, this should not be a surprise. How much decimation have global geoengineering / weather warfare programs already caused? What are the primary objectives and agendas? How much worse will it get? The short video below provides verifiable data to confirm that climate engineering is a reality, and exposes some of the primary objectives.

      Exposing and halting the ongoing climate engineering / weather warfare / biological warfare assault is the great imperative of our time. The best chance we have of accomplishing this monumental task is by raising an army of the awakened, by reaching a critical mass. 
      Is it really so hard to believe, that the military has the power to control hurricanes?  Anyone who is either in the military or who ‘does business’ with the military knows this and that compared to some of the other fun toys the military has controlling the weather is easy.  Much of the known info about weather modification comes from HAARP but HAARP has closed what they have now is far more powerful:
      Environmental modification techniques have been applied by the US military for more than half a century. US mathematician John von Neumann, in liaison with the US Department of Defense, started his research on weather modification in the late 1940s at the height of the Cold War and foresaw ‘forms of climatic warfare as yet unimagined’. During the Vietnam war, cloud-seeding techniques were used, starting in 1967 under Project Popeye, the objective of which was to prolong the monsoon season and block enemy supply routes along the Ho Chi Minh Trail.
      The US military has developed advanced capabilities that enable it selectively to alter weather patterns. The technology, which is being perfected under the High-frequency Active Auroral Research Program (HAARP), is an appendage of the Strategic Defense Initiative – ‘Star Wars’. From a military standpoint, HAARP is a weapon of mass destruction, operating from the outer atmosphere and capable of destabilising agricultural and ecological systems around the world.
      The technology clearly exists, but as it is ‘classified’ having any smoking gun evidence without a Snowden whistleblower is impossible; it’s a paradox, as evidence by CIA’s FOIA request if they are investigating us:
      This really is an intelligence agency, their logic is impeccable.  They cannot confirm or deny if information does or does not exist.  So let’s go with what we know.
      NOAA is the official US Government agency that monitors the weather, and provides official information at – anyone from Florida knows this URL and has gone through the agonizing wait for the next update which can mean a big change of plans.
      Like most of the US Government, it’s actually not ‘NOAA’ that provides us this valuable data it’s Raytheon, black ops corporate master – the largest defense contractor in the world, with 60,000 + employees and a market cap of 50 Billion.  See their product info here, and their interesting note in bold: 
      Owned and operated by NOAA, JPSS is an “end-to-end” system that includes sensors; spacecraft; command, control and communications; data routing; ground based processing and dissemination of weather data to users around the globe, such as NOAA’s National Weather Service and the National Hurricane Center. The data provided by Suomi NPP and the JPSS satellites contribute to NASA’s study of earth climate trends.
      JPSS polar orbiters carry a complement of advanced imaging and sounding sensors, which increase NOAA and DoD capabilities to monitor the entire planet and produce weather and climate predictions at a much higher fidelity and frequency. These advanced capabilities enable NOAA to better fulfill its mission to protect lives and property by increasing the timeliness and accuracy of public warnings and forecasts of weather and climate events.


      Raytheon brings more than four decades of high-availability, reliable, precision-based, command-and-control systems experience to Suomi NPP and future JPSS missions. Suomi NPP is the bridge between existing polar-orbiting satellites and the launch of JPSS-1, scheduled for 2017. Providing critical data for Earth observation, Suomi NPP data is used to generate environmental data products, such as measurements of clouds, vegetation, ocean color and land and sea surface temperatures — all significant inputs to improve weather forecasting capabilities.


      While Suomi NPP and JPSS will not prevent severe weather events such as hurricanes, tornadoes or blizzards from occurring, Raytheon’s advanced technologies enable meteorologists and forecasters to make more timely and accurate weather predictions that support NOAA’s “Weather Ready Nation” campaign and help save lives, protect property and decrease the devastating economic impacts caused by severe weather.
      Raytheon’s proven radars and sensors work together to help experts see further, track longer and prepare smarter.
      Our Air and Missile Defense Radar stacks together like building blocks to increase detection ranges and accuracy on naval destroyers. Our VIIRS sensor — famously known for its ”Blue Marble” photo of Earth — orbits the planet to provide meteorologists with unparalleled environmental data. And our Multi-Spectral Targeting System combines lasers with infrared sensors to enable pinpoint military operations.
      Raytheon Company is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The IDS segment develops and produces sensors and mission systems. The IIS segment provides a range of technical and professional services to intelligence, defense, federal and commercial customers. The MS segment is a developer, integrator and producer of missile and combat systems. The SAS segment is engaged in the design, development and manufacture of integrated sensor and communication systems for missions. The Forcepoint segment develops cybersecurity products.
      Interestingly, a small uptick on Irma.  For the uninformed, a hurricane is a military operation however you look at it, in the aftermath when there’s no power, only the military (and in partnership with FEMA) has the logistic resources to swoop in and restore order.  During Hurricane Andrew strange rumors persisted about the quarantine and control of information that the Army imposed around the devastated areas.  This is a great resource with photographic evidence, and they suggested that even it may have contributed to George Bush losing the election later that year.  The government seemed helpless to do anything to battered Miami.  And it was after Andrew that Hurricane manipulation efforts went into overdrive.
      So why now, after so long with no major hit to Florida?  Are they gunning for Trump?  Or Trump ordered it, to distract the population from what’s really going on and as a means of control?  (Remember that the one strong power Trump has is leader of the Military, the US President has almost no political power).  We’ll never know.. but let’s look at the big picture.
      After World War 2 the US “Military Industrial Complex” or “Iron Triangle” (Government, Defense Contractors, Wall St.) hasn’t really had an enemy.  Hitler and Japan were real enemies, although funded and allowed to grow by US companies, the fact remains that if Hitler wasn’t stopped we’d all be speaking German and eating poor tasting frankfurters and drinking beer.  WW2 was the peak of show of industrial power and how factories could make bombs that would destroy infrastructure.  The “Marshall Plan” and other post WW2 economic plans led the intellectual Elite (who were hired by the now rich military contractors) to create several doctrines that would keep them in business with or without an enemy (with all the happiness of the 50’s they probably thought – what if there is no more Hitler?  How will we make money?  War is good for business… ) hence we have the Report from Iron Mountain MUST READ BOOK  – to explain plainly, companies like RAND corporation have created enemies most notably “Russia” and most recently “Terrorists” but their plan is so deep, they are not to rely on a single artificial enemy, so they resort to the most basic Earth element, the weather.  What does this mean?  A group of scientists hired by these corporations post WW2 (you can call them pseudo economists) created studies and reports showing that investing $1 in the Military equalled $2 in economic output.  This is the most ridiculous and twisted thinking, based on this logic if we firebomb Los Angeles we’ll be the richest economy in the world.  But remember, twisted or not – this is their doctrine.  A great example of this in practice was during the Ford days when the CIA was tasked with the job of collecting intelligence on Russia – did they pose a security threat to the United States?  The CIA found no evidence of any capability sufficient of posing even a limited threat, nor any motive or evidence of irrational intent to attack the US or any other country (and Russia has a history of never invading any country- only defending themselves).  This report was released and Donald Rumsfeld famously retorted that “Just because the CIA didn’t find any weapons doesn’t mean that they don’t exist” – Rumsfeld went on to make a fortune consulting for defense contractors.  During this period one General really believed the Russians were hiding a missile base on the dark side of the moon.  The US Military is big business, and business is good.  But threats change and the battlefield changes.  Contractors, planners, developers, and many others will make a fortune rebuilding South Florida.  And it’s a lot closer than Iraq.  And heck, is it really so bad?  Raytheon (RTN) employs 60,000 people and the US Government itself is the largest employer in the world.  People need to put food on their families (-George W Bush).

      There’s a number of reasons humans would want to control the weather:
      • To make it rain
      • For military purposes
      • Pollution control
      • Terraforming (For example what they are doing in UAE)
      So what are the ‘known’ applications of weather modification?  Cloud Seeding, and Terraforming in UAE:
      Cloud seeding is the opposite of cloud busting. For one thing, it’s a real thing. The process has been replicated numerous times both in the lab and in the field and is backed up by years of peer-reviewed scientific research. For another, it impregnates clouds to instigate the precipitation process rather than magically gathering them using dark energies.  Cloud seeding is currently used all over the world—including throughout the United States, China (where it is used to clear smog in Beijing), India, and Russia—to enhance precipitation, both rain and snow, while inhibiting hail and fog. And it actually works.

      The UAE’s Ionizers: Tearing the Sky a New One

      The United Arab Emirates is a land rich in wealth but poor in precipitation. That’s why president Sheikh Khalifa bin Zayed Al Nahyan has had the nation’s top scientific minds secretly toiling for years to create a new means of weather manipulation that would work more effectively in the region’s extreme temperatures. The result: The biggest Ionic Breeze on Earth.
      Ionic Breeze devices are giant ionizers mounted atop tall steel poles and were built by the Swiss company, Metro Systems International. The devices generate massive ionic fields, positively charged ions ground back to the Earth while the negatively charged ions rise into the atmosphere. As they rise, the negative ions (electrons) collect particles of dust on the way up. These flecks act as seeds for ice crystal formation, much as silver iodide does except without the need for clouds. As long as the atmospheric humidity is at least 30 percent, the system supposedly works even in clear skies.
      In the summer of 2010, 100 such emitters were spread over five sites in the Al Ain region. During July and August alone, when the area typically receives zero rainfall, it reportedly rained on 52 separate occasions, often with gusting winds and sometimes hail. The Max Planck Institute for Meteorology monitored the project and backed the study’s findings. This could be huge for the Middle East, where water is often in short supply and desalinization plants are nine-figure investments (and another eight-figures a year to run). The ionizers reportedly only cost $10.5 million to build and $8.9 million a year to operate.
      $10 Million to make it rain, literally.  So what does a multi-billion dollar black budget get us in USA?  Think about the positive economic impact of Hurricanes for a moment, such as the obvious Billions in rebuilding and reconstruction projects.  But there’s also a political benefit and military benefit, the military can test their logistics and new non-lethal crowd control weapons, as well as the general population control (those evacuating south Florida are not likely to participate in right wing anti-government protests, for example).  Confuse, obfuscate, and conquer has been the mantra of the world’s leading Elite for centuries “Divide and Conquer” – and there’s no better Fog of War than a Hurricane most intelligently because 90% of the population will not believe that it’s controlled.  It’s pure genius.
      There’s not any proof that this is manufactured or controlled, but like many things with the government – if they have spent millions developing weather modification technology including Hurricane manipulation technology (both to create Hurricanes and divert Hurricanes or weaken them) – what are they doing with it if not using it?  Clearly, there have been strange phenomenon at play in the region over the past 20 years that are not explainable as ‘Global Warming’ – which would mean more frequent stronger storms, not a 20 year + lull.
      Traders from FL enjoyed the free money Lowes and Nov FCOJ pop that always comes with a slight delay after the announcement that a storm is headed for central FL where the majority of Orange Juice is grown.  But this is really a perception trade, as OJ is grown in many places around the world and the increase in Lowes purchases are not really relevant.  Also note that unlike other disasters, there are usually few human casualties in Hurricanes.  Remember even during Katrina, it was only the people who refused to evacuate that were trapped on rooftops, and even they were mostly saved.  It’s not as if the Military is ‘killing’ people – although that IS what they do during WAR (including US Citizens, not only the enemy).
      What is the conclusion of this information, simply that:
      • The weather is controlled, USG owns the tech for years, this is likely organized by Raytheon (RTN) although there’s no public information to prove this (it’s classified)
      • There can be political motivations for storms, for hitting or not hitting populated rich areas like Miami or Tampa.  There is a clear economic and military benefit to such operations as PsyOps and as logistic tests of population control, i.e. FEMA camps and other new systems to be tested
      Finally, there’s an elephant in the room – the bubble of bubbles.. South FL real estate.  There’s literally groups of investors waiting for the big crash to come, but no one is buying – there isn’t panic selling yet, but there is a glut of Miami real estate.  Investors are so called ‘hot money’ from foreigners who have never been to Miami but think it’s a good solid investment because real estate ‘always goes up’ – but the city of Miami is spending $500 Million to build levees and dams Dutch style around low lying areas.
      After this event no matter how small the damage, it will do much bigger damage to the perception of FL real estate.  Many investors will now think twice about FL as the golden ticket to USA investing success.  FL residents damaged by the storm, many of them will take their checks and move to higher, more defensible ground.  Suddenly, with one storm, the argument of Preppers in the Cumberland Plateau all makes sense.  Real Estate in the mountains just doubled in value.
      All the development in South FL is based on one axiom – no Hurricanes.  The same could be said about Los Angeles and Earthquakes.  But there are thousands of places in USA with reasonable property values that have no natural disasters, but they aren’t good ‘locations’ in ‘trendy’ places.  Of course if you work online or from home then it doesn’t matter where you live, so it would be logical to choose such a place vs. the over inflated FL which is a disaster zone.  Although New York City is also on the ocean, NYC is mostly built on bedrock and has elevations as high as 33 feet, comparing with Miami’s 6 feet, that’s a big difference.  FL is a big swamp mostly that was turned upside down by developers.  Unlike cities that formed by natural geo-politics and economics, Miami and most of FL is an artificial construct like Las Vegas.  The point is that it was poor investment decisions leading to a mass of capital flooding the development of FL but this will stop likely or slow down to a trickle after this storm.  A giant wall could be erected around the state but at what cost?  All of these hidden costs and risks are now exposed as realities, and we will see how the re-insurers handle failing insurers already suffering from Harvey.
      The positive effect on the markets is that these storms will likely pop the first and possibly the biggest real estate bubble which is the most frothy, south FL.  That’s because unlike other markets, FL doesn’t have such a robust ‘natural’ industry, as for example seen in Chicago or San Francisco.  In fact real estate is an industry in itself in FL and something like 60% of home ownership is by vacationers.  Money will flow elsewhere, into other projects, and investors will think different.
      The reason is simple – it’s one thing to ‘tell’ someone that the market is going to crash, or Miami is sinking into the sea, but having a devastating event happen, going through the process whatever your involvement in FL (As Jimmy Buffett says, everyone has a cousin in Miami).. this event will change your thinking about FL investing and doing business.  Miami was a happy sleepy beach town before this boom, alligators and old folks and flamingoes.
      Markets are manipulated, storms are too.  So what?  We live in a fake world with fake people who stare into a Fake book.  If you’ve read through this article you should congratulate yourself and take pride in knowing you are part of the real one percent, the one percent that understands how the world really works; the real global elite – the emergent intelligentcia.
      If you want a deeper understanding how this can impact your investing, checkout Splitting Pennies and learn how basically everything is manipulated for profit, as a business.  If in Shakespeare’s time ‘the world is a stage’ – now the world is a ‘platform’ to launch new products.  Welcome to the real New World Order.


      Posted: September 10, 2017, 3:15 am