Buyer beware: How Libra differs from Bitcoin
by ilene - September 21st, 2019 3:11 am
Buyer beware: How Libra differs from Bitcoin
Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)
Courtesy of Alfred Lehar, University of Calgary
Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.
The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with sovereign countries in issuing currencies.
Unlike Bitcoin, which has neither an owner nor a controlling body, Libra will be governed by a Swiss foundation comprised of several members that are well-established brands, including Uber, Visa and PayPal.
Libra operates within a much more controlled environment relative to many other cryptos like Bitcoin and Ether. It also doesn’t run on a blockchain.
Instead, the book-keeping of Libra transactions is bestowed upon a set of trusted computing nodes controlled by the members of the Libra foundation. In contrast, Bitcoin is a free-for-all where anybody can join the group of computers that verify transactions.
This difference in governance structure has wide-ranging implications for the economic gains and possible risks society faces from a possible widespread adoption of new currencies like Libra.
How to grow?
A fundamental issue most fintech companies face today is scaleability. The Visa network can authorize up to 65,000 transactions per second, while Bitcoin typically processes a few hundred thousand a day.
Technically, it’s possible to expand the Bitcoin network to a commercially viable scale, but due to the lack of a governing body, several attempts to increase capacity have ended up in endless debates, fights within the community and different camps going their own ways. It’s resulted in the creation of offspring currencies such as BitcoinGold and BitcoinCash.
Libra overcomes these struggles by a well-defined governance structure where necessary technical adaptations can be efficiently decided upon in an organized manner.
But Libra decision-makers may be tempted to put their own best interests ahead of the consumers’…
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Look Out Bears! Fed New QE Now Up to $165 Billion
by ilene - September 20th, 2019 10:14 pm
Courtesy of Lee Adler
I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.
In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.
That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 billion in less than 2 weeks. Things must really be bad out there. Much worse than we can imagine.
But is it bearish? Typically, massive money printing can only mean one thing for asset prices. Up, up and away.
Fed De Facto New QE Announcement
Here’s the NY Fed announcement covering this New Fed QE.
In accordance with the Federal Open Market Committee (FOMC) directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct a series of overnight and term repurchase agreement (repo) operations to help maintain the federal funds rate within the target range.
The Desk will offer three 14-day term repo operations for an aggregate amount of at least $30 billion each, as indicated in the schedule below. The Desk also will offer daily overnight repo operations for an aggregate amount of at least $75 billion each, until Thursday, October 10, 2019. Awarded amounts may be less than the amount offered, depending on the total quantity of eligible propositions submitted. Securities eligible as collateral include Treasury, agency debt, and agency mortgage-backed securities. Additional details about the operations will be released each afternoon for the following day’s operation(s).
Here’s Where the NY Fed Tells Us that New QE is Permanent
After October 10, 2019, the Desk will conduct operations as necessary to help maintain
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Partisan divide creates different Americas, separate lives
by ilene - September 20th, 2019 2:55 pm
Partisan divide creates different Americas, separate lives
Even in the physical world, it’s hard to cross partisan lines. igorstevanovic/Shutterstock.com
Courtesy of Robert B. Talisse, Vanderbilt University
When people try to explain why the United States is so politically polarized now, they frequently refer to the concept of “echo chambers.”
That’s the idea that people on social media interact only with like-minded people, reinforcing each other’s beliefs. When people don’t encounter competing ideas, the argument goes, they become less willing to cooperate with political opponents.
The problem goes beyond the online world. In my new book, “Overdoing Democracy: Why We Must Put Politics in its Place,” I explain that in the United States, liberals and conservatives do not only differ politically.
They also live separate lives in the physical world.
This phenomenon was first documented in journalist Bill Bishop’s 2004 book “The Big Sort.” Scholars have found it has persisted into more recent years as well.
It turns out that people’s physical communities, surroundings and lifestyles can be their own form of an echo chamber. This separation is so complete that it includes not only the communities and neighborhoods where people live, but also where people shop and what brands they buy, what sort of work they do, where they worship, what sorts of vacations they take and even how they decorate their homes.
How personal do political divisions get?
It’s common knowledge that liberals and conservatives live in different places. After all, the idea of “red states” and “blue states” is based in reality. But preferences are much more local than that.
Liberals and conservatives in the U.S. systematically favor different kinds of physical environments. Even when they live in regions that might overall appear more politically mixed, liberals prefer walkable and ethnically diverse communities, while conservatives gravitate toward areas with larger houses and more private land.
Different preferences govern the most personal surroundings: One study shows that liberals and conservatives decorate their homes differently. Clocks and flags for conservatives, art and maps for liberals. According to the same research, they also fashion different workspaces.…
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Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it
by ilene - September 20th, 2019 1:23 pm
Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it
The Fed’s Jerome Powell keeps his cards close to his chest. AP Photo/Patrick Semansky
Courtesy of Michael Klein, Tufts University
The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on.
The Fed lowered its target interest rate by a quarter point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago.
Judging by the words of Fed Chair Jerome Powell, this isn’t that big a deal. In his statement following the decision, he said: “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.”
True, the economy has been pretty strong for 10 years now, pushing the unemployment rate to a near record-low 3.7%. But in my view, as an economist and expert on monetary policy, Powell’s calm words belie a deeper concern. And, if a recession is on the way, the Fed may be ill-equipped to fight it.
Trouble brewing
A clear sign of the Fed’s concern is the back-to-back rate cuts, something that only happens during recessions or in anticipation of a downturn.
But there are many other troubling signs in the economic outlook.
For example, earlier this month, the Institute for Supply Management reported that manufacturing activity has slowed significantly. The sector actually contracted in August for the first time in three years. And although the unemployment rate remains historically low, jobs growth is slowing as a result of global trade turbulence.
Bond investors’ apparent deep unease about the state of the economy resulted in the inversion of the yield curve, which is often viewed as a harbinger of recession. Usually investors demand higher yields to lend for longer terms than for short periods. An inverted yield curve means that’s reversed, a sign investors are expecting trouble ahead.
The global outlook is also disconcerting. China’s economic growth…
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The Fed’s “Emergency” Actions this Week Were Dated 48 Days Earlier
by ilene - September 20th, 2019 10:35 am
Courtesy of Pam Martens
New York Fed Headquarters Building in Lower Manhattan
The storyline in the business press is that the lending rate on overnight repos had spiked to an unprecedented 10 percent, necessitating an emergency infusion of $53 billion by the New York Fed on Tuesday to ramp up liquidity for overnight loans and bring down the loan rate. (That was followed with $75 billion more on Wednesday, Thursday and today – raising the question that if the money is going to the same banks, isn’t that a term loan, not an overnight loan? We don’t know, however, if the money is going to the same banks because the Fed, as it did during the 2008 financial crisis, is staying mum about where the money is going.)
As it turns out, the Federal Reserve’s Federal Open Market Committee (FOMC) directive that authorized the Tuesday operation was dated July 31, 2019 – 45 days prior to the action. What was it that the Fed saw in the tea leaves back in July that prompted it to write that directive on July 31? This is the statement from the New York Fed indicating its first $75 billion operation on Tuesday, of which $53 billion was taken by the banks, was under a directive dated July 31:
“In accordance with the FOMC Directive issued July 31, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 9:30 AM ET to 9:45 AM ET today, September 17, 2019, in order to help maintain the federal funds rate within the target range of 2 to 2-1/4 percent.
“This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion…”
The largest banks on Wall Street are the Fed’s “primary dealers,” along with the U.S. units of numerous global banks. See the full list here.
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What Are Your Thoughts: Is Anyone Really “Middle Class”?
by ilene - September 20th, 2019 2:49 am
What Are Your Thoughts: Is Anyone Really “Middle Class”?
Courtesy of Joshua M Brown
On a new edition of What Are Your Thoughts?, Michael Batnick and Josh Brown discuss:
- The Repo Rate mini-panic
- Are we ready for the Daniel Jones Era?
- Does it really take $350,000 a year to live in cities?
- Standup comics up in arms over political correctness and “cancel culture”
- People got excited about value stocks recently. Again.
- More terrible sports takes from Josh
- Do you need a car to live in New York City?
- and lots more.
Be sure to subscribe to their channel so you never miss an update
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Plastic Apocalypse: Alarming Levels Of Plastic Found In Children
by Zero Hedge - September 19th, 2019 11:25 pm
Courtesy of ZeroHedge
In the last several months we have been one of the first to cover the plastic apocalypse.
New studies are being published that detail high levels of dangerous microplastics had been detected in some of the most remote regions of the world. Another study warned microplastics are turning up in human stool. Now there are new reports that show high levels of microplastics have been found in blood and urine samples of children.
The study, conducted by the German Environment Ministry and the Robert Koch Institute, found an alarming 97% of blood and urine samples from 2,500 children tested between 2014 and 2017 had traces of microplastics.
Der Spiegel, the German weekly magazine, published the findings over the weekend, which were part of a national study focused on "human biomonitoring" of 3 to 17-year-olds, found traces of 11 out of 15 plastic ingredients in the collected samples.
"Our study clearly shows that plastic ingredients, which are rising in production, are also showing up more and more in the body. It is really worrying that the youngest children are most affected as the most sensitive group," Marike Kolossa-Gehring, one of the study's authors, told the magazine.
Researchers found perfluorooctanoic acid (PFOA), also used in cleaning products, waterproof clothing, food packaging, and cooking utensils, was present in the blood and urine samples.
Half the plastics ever produced have been made in the last 15 years, & the substance is taking over Earth: Researchers just discovered microplastic in the remote Arctic: https://t.co/PNSVoeLuTA
That's bad, but it's just the tip of the iceberg. pic.twitter.com/EaKeFnWHiD
via WIRED— Tomthunkit™ (@TomthunkitsMind) September 17, 2019
PFOA has been described as a dangerous chemical that is toxic to the liver. The EU will outlaw the substance next year.
In at least 20% of the 2,500 children tested, microplastics were above safe government limits. Children from low-income regions were more susceptible to ingesting plastics than ones from the middle class and wealthy areas.
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Federal Reserve Bank of New York Statement On Repurchase Operation – Roll Over Beethoven!
by ilene - September 19th, 2019 10:19 pm
Courtesy of Lee Adler
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This is a syndicated repost courtesy of NY | Press Releases:
September 19, 2019In accordance with the FOMC Directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 8:15 AM ET to 8:30 AM ET tomorrow, Friday, September 20, 2019, in order to help maintain the federal funds rate within the target range of 1-3/4 to 2 percent.
This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion…
– Federal Reserve Bank of New York (Reposted with permission.)
Meanwhile, if you haven’t read it already, my extended take on this is here:
Show Me The Money Jerry! Here’s Why Fed TOMO Repos Will Be a Feature Not a Bug
The new Fed TOMO (Temporary Open Market Operations) are the first sign that the Fed must move aggressively to counter the tightening of the money markets.
Now, I’ve been forecasting this for months in Liquidity Trader. We were well aware the massive waves of Treasury supply would collide with a shortage of cash. We also knew that the exponential growth in margin and repo lending would end badly. But the necessity for the Fed to act aggressively has come upon us much quicker than I thought it would.
And this could be a game changer.
The Fed Has No Choice- It Must Print
The Fed must print wads of money to counter the immense supply pressure of wave upon wave of newly issued US Treasury securities of all durations. This supply pressure will virtually never end, as the government finances a booming US economy with constant, massive deficit spending, or, what some call “defecate” spending.
The Fed has actually been tight since 2014. It got tighter in 2017 with “normaliztion” of the balance sheet. The ECB and BoJ effectively tightened in 2018. All 3 of the big boy central banks were forced to reverse course over the past couple of…
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Lenders Raise Collateral Concerns Over WeWork CEO’s $500 Million Personal Credit Line
by Zero Hedge - September 19th, 2019 7:57 pm
Courtesy of ZeroHedge
And the hits keep coming for the 'trillionaire-to-be' CEO of WeWork as Bloomberg reports that the lenders are looking to revise terms on Adam Neumann's massive personal credit line amid collateral concerns as the real estate company's valuation plummets.
Bloomberg details that Neumann arranged a credit line of as much as $500 million from JPMorgan Chase & Co., UBS Group AG and Credit Suisse Group AG secured by some of his shares in WeWork, according to the company’s regulatory filings.
As of July 31, he had drawn $380 million of the principal amount available, the filings show.
The last few weeks of farce as WeWork's prospective valuation has collapsed along with the chances of it IPOing anytime soon, has raised concerns that the collateral value of the shares pledged to cover Neumann's massive personal line of credit may not cover the additional risks that are now evident to the once greedy consortium who were just weeks ago willing to fall over each other to lend him cash.
Additionally the cost of debt on the company itself has soared to almost 700bps over Treasuries as the IPO has fallen apart…
Source: Bloomberg
Neumann’s lenders have the ability to make a margin call if the stock declines below specific prices, regulatory filings show, without indicating what impact — if any — estimated valuations might have. The credit line is scheduled to mature next September, but may be extended at the discretion of lenders.
And remember, the company is still burning $2 in cash for every $1 of revenue that it takes in.
Of course, none of this is a real problem for Neumann, as he intends to live forever after all.
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Altria Tumbles To 5 Year Low As Mystery Vaping Disease Cases Rise To 530
by Zero Hedge - September 19th, 2019 7:55 pm
Courtesy of ZeroHedge
Altria stock, which already had a disappointing 2019, tumbled to fresh five year lows after the CDC announced during a Thursday briefing that 530 people have fallen ill from the mysterious vaping-related lung ailment that has raised alarms across the U.S., up from 380 "confirmed and probable cases" that the government reported last week. Worse, no less than seven people have already died from the mystery illness. Officials said they still hadn’t determined a cause of the ailment, and that there didn’t appear to be one product or substance involved in all instances. Cases have been identified in 38 states.
After hitting the market with a bang with the implicit endorsement of both regulators and established tobacco companies, vaping has found itself under fire from all sides, especially now that it was unveiled that vaping addicts tend to shift to traditional cigarettes, making vaping a wonderful "gateway" product for big tobacco… one which may now have served its purpose.
Vapers Are Quitting E-Cigarettes… And Switching To Regular Cigs Instead https://t.co/ynwGuNLZxr
— zerohedge (@zerohedge) September 17, 2019
"We are leaving no stone unturned," said Mitchell Zeller, director of the Center for Tobacco Products at the U.S. Food and Drug Administration.
The sudden and "unexpected" – because who could possibly anticipate adverse outcomes from inhaling heated water vapor infused with not only nicotine but countless unknown substances – surge of vaping illnesses, combined with an explosion of underage use of e-cigarettes, has forced public health officials to rapidly reassess what had been lax regulation of the fledgling industry.
As we reported previously, US doctors have now seen hundreds of cases where patients have shown up in the emergency room, suddenly stricken with dangerous respiratory damage. Their lungs looked like they’d been ravaged by a disease, or as if they’d been exposed to a noxious industrial chemical. What the cases all shared in common: they had all recently used vaping products.
As Bloomberg further notes, over the past several years, there have been a limited number of similar case reports, raising the question of whether there might have been other older incidents that were missed. But the severity and number of recent cases suggest that something has
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site