Category Archives: Christmas

Swiss Bank Becomes First To Offer Bitcoin To Its Clients

A Swiss bank is now offering to buy bitcoins for its clients. As of Wednesday, investors can ask their asset manager at Falcon Private Bank, a boutique investment firm headquartered in Zurich, to purchase and store bitcoin on their behalf – a first for conventional banks. Despite the cryptocurrency’s infamous volatility, this is another indication that is here to stay.

“We have various clients that are interested in buying bitcoin for investment purposes, and we’re making it very convenient for them,” says Arthur Vayloyan, the global head of products and services at Falcon. Because Falcon will be doing the buying and storing of the digital coins, its customers won’t require any specialist knowledge to switch their cash into bitcoin. The Swiss financial authority, FINMA, granted Falcon regulatory approval on Tuesday.

But some worry that people may be underestimating the importance of decentralisation to the digital currency. Traditional banks that hold large sums of bitcoin for their customers will be obvious targets for hackers. “It’s a lot easier to steal digital currency than a traditional currency,” say Andreas Antonopoulos, host of the Let’s Talk Bitcoin podcast.

Spaced out

“This is why decentralisation is so important,” Antonopoulos says. Indeed, Bitcoin is built on decentralization. Instead of central banks and governments, Bitcoin relies on a network of computers that anyone can join to check the legitimacy of transactions. Every Bitcoin is accounted for on a digital ledger called the blockchain that records how many coins each digital wallet holds.

Whenever currency changes hands, everyone on the network updates their copy of the blockchain too. Underpinning the whole system is some complex mathematics that makes it incredibly difficult to deceive or control without infeasible amounts of computing power.

The wallets are decentralized too. Instead of bank accounts, anyone can create and store their own bitcoin wallet. Because there is no centralised collection of wallets, there is no central target for hackers to try to steal large amounts of digital currency. Or at least that’s the idea (in practice centralised pockets can emerge).

Put lots of wallets in the same place, and the system may no longer hold. If a thousand people each hold a single bitcoin, a certain level of security will be sufficient protection. However, if one place holds a thousand bitcoin, you increase the appeal to hackers a thousand-fold too, which means you have to similarly up the security. “But there is no way to do this. By putting in more eggs you make the basket weaker,” says Antonopoulos.

Hack attack

We have seen this problem before in exchanges, where people trade different digital and traditional currencies. The biggest of these until 2014 was Mount Gox, which at the time was handling more than half of all bitcoin transactions. In February of that year, 850,000 bitcoins corresponding to $450 million at the time went missing, with most thought to have been stolen by hackers.

Only a few years ago, many conventional banks still thought that bitcoin was doomed to fail, but as the price has soared and it has continued to survive, it has become too attractive for investors to resist. In 2012, you could buy a bitcoin for less than $10, last month they were selling for a record high of $3000. Illustrating the currency’s volatility, it’s currently trading at just under $2500, but overall has tripled in value in the last year alone.

Users of Falcon’s bitcoin service will have to sign a waiver to show that they understand the risks, as they would with other high risk investments. In future, the bank plans to expand to other digital currencies.

We’ve definitely come a long way since Mt. Gox …

By Timothy Revell | New Scientist

2016 Ends With A Whimper: Stocks Slide On Last Minute Pension Fund Selling

Nobody has any idea what will happen, or frankly, what is happening when dealing with artificial, centrally-planned markets …

When we first warned 8 days ago that in the last week of trading a “Red Flag For Markets Has Emerged: Pension Funds To Sell “Near Record Amount Of Stocks In The Next Few Days”, and may have to “rebalance”, i.e. sell as much as $58 billion of equity to debt ahead of year end, many scoffed wondering who would be stupid enough to leave such a material capital reallocation for the last possible moment in a market that is already dangerously thin as is, and in which such a size order would be sure to move markets lower, and not just one day.

Today we got the answer, and yes – pension funds indeed left the reallocation until the last possible moment, because three days after the biggest drop in the S&P in over two months, the equity selling persisted as the reallocation trade continued, leading to the S&P closing off the year with a whimper, not a bang, as Treasurys rose, reaching session highs minutes before the 1pm ET futures close when month-end index rebalancing took effect.

10Y yields were lower by 2bp-3bp after the 2pm cash market close, with the 10Y below closing levels since Dec. 8. Confirming it was indeed a substantial rebalancing trade, volumes surged into the futures close, which included a 5Y block trade with ~$435k/DV01 according to Bloomberg while ~80k 10Y contracts traded over a 3- minute period.

The long-end led the late rally, briefly flattening 5s30s back to little changed at 112.5bps. Month-end flows started to pick up around noon amid reports of domestic real money demand; +0.07yr duration extension was estimated for Bloomberg Barclays Treasury Index. Earlier, TSYs were underpinned by declines for U.S. equities that accelerated after Dec. Chicago PMI fell more than expected.

Looking further back, the Treasury picture is one of “sell in December 2015 and go away” because as shown in the chart below, the 10Y closed 2016 just shy of where it was one year ago while the 30Y is a “whopping” 4 bps wider on the year, and considering the recent drop in yields as doubts about Trumpflation start to swirl, we would not be surprised to see a sharp drop in yields in the first weeks of 2017. Already in Europe, German Bunds are back to where they were on the day Trump was elected.

So with a last minute scramble for safety in Treasures, it was only logical that stocks would slide, closing the year off on a weak note. Sure enough, the S&P500 pared its fourth annual gain in the last five years, as it slipped to a three-week low in light holiday trading, catalyzed by the above mentioned pension fund selling.

The day started off, appropriately enough, with a Dollar flash crash, which capped any potential gains in the USD early on, and while a spike in the euro trimmed the dollar’s fourth straight yearly advance, the greenback still closed just shy of 13 year highs, up just shy of 3% for the year.

Meanwhile, the year’s best surprising performing asset, crude, trimmed its gain in 2016 to 52%.

The S&P 500 Index cut its advance this year to 9.7 percent as it headed for the first three-days slide since the election. The Dow Jones Industrial Average was poised to finish the year 200 points below 20,000 after climbing within 30 points earlier in the week. It appears the relentless cheer leading by CNBC’s Bob Pisani finally jinxed the Dow’s chances at surpassing 20,000 in 2016. Trading volume was at least 34 percent below the 30-day average at this time of day. A rapid surge in the euro disturbed the calm during the Asian morning, as a rush of computer-generated orders caught traders off guard. That sent a measure of the dollar lower for a second day, trimming its rally this year below 3 percent.

Actually, did we say crude was the best performing asset of the year? We meant Bitcoin, the same digital currency which we said in September 2015 (when it was trading at $250) is set to soar as Chinese residents start using it more actively to circumvent capital controls, soared, and in 2016 exploded higher by over 120%.

For those nostalgic about 2016, the chart below breaks down the performance of major US indices in 2016 – what began as the worst start to a year on record, ended up as a solid year performance wise, with the S&P closing up just shy of 10%, with more than half of the gains coming courtesy of an event which everyone was convinced would lead to a market crash and/or recession, namely Trump’s election, showing once again that when dealing with artificial, centrally-planned market nobody has any idea what will happen, or frankly, what is happening.

Looking at the breakdown between the main asset classes, while 30Y TSYs are closing the year effectively unchanged, the biggest equity winners were financials which after hugging the flat line, soared after the Trump election on hopes of deregulation, reduced taxes and a Trump cabinet comprised of former Wall Streeters, all of which would boost financial stocks, such as Goldman Sachs, which single handedly contributed nearly a quarter of the Dow Jones “Industrial” Average’s upside since the election.

The FX world was anything but boring this year: while the dollar soared on expectations of reflation and recovery, the biggest moves relative to the USD belonged to sterling, with cable plunging after Brexit and never really recovering, while the Yen unexpectedly soared for most of the year, only to cut most of its gains late in the year, when the Trump election proved to be more powerful for Yen devaluation that the BOJ’s QE and NIRP.

The largely unspoken story of the year is that while stocks, if only in the US – both Europe and Japan closed down on the year – jumped on the back of the Trump rally, bonds tumbled. The problem is that with many investors and retirees’ funds have been tucked away firmly in the rate-sensitive space, read bonds, so it is debatable if equity gains offset losses suffered by global bondholders.

And speaking of the divergence between US equities and, well, everything else, no other chart shows the Trump “hope” trade of 2016 better than this one: spot thee odd “market” out.

So as we close out 2016 and head into 2017, all we can add is that the Trump “hope” better convert into something tangible fast, or there will be a lot of very disappointed equity investors next year.

And with that brief walk down the 2016 memory lane, we wish all readers fewer centrally-planned, artificial “markets” and more true price discovery and, of course, profits. See you all on the other side.

By Tyler Durden | ZeroHedge

Remembering Christmas, 1776

The American Revolution and its ultimate victory was hinged on a pivotal time in history, Christmas 1776, and it was all due to George Washington…

This Christmas, remember this lesson from history when Patriot George Washington gave the greatest Christmas present to the United States. The gift of hope. The gift of victory. The gift of America.

The Continental Army and the American Revolution was all but over in December 1776 and on the American side, despair and hopelessness were the order of the day.. The United States of America was finished.

It appeared that New York and New Jersey would be firmly back under King George’s “protection” within just a few months. They had already humiliated the Continentals out of New York, inflicting heavy damage on Washington’s army. The Continental Army was disintegrating. Unpaid, ill-equipped, cold, and hungry, soldiers in the Continental Army were deserting or walking away as soon as their enlistments expired.

There was no reason for the British to mess up their Christmas in 1776. Everything was going their way.

In those days, it was customary that armies rest and refit in the winter months in preparation for the campaign seasons of spring and summer. And the British were all about custom and tradition.

The situation was worse than grim for the Americans and the cause was all but over. Except for one man, that is – a man who refused to give up. George Washington.

In spite of countless setbacks and up against incredible odds, Washington never threw in the towel. He never gave up.

In a display of desperation and determination, on Christmas night 1776, General George Washington led the rag-tag Continental Army across the Delaware River to attack the outpost at Trenton, New Jersey.

Washington’s army commenced its crossing of the half-frozen river at three locations. The 2,400 soldiers led by Washington successfully braved the icy and freezing river and reached the New Jersey side of the Delaware just before dawn.

Washington’s force, separated into two columns, and reached the outskirts of Trenton. Trenton’s 1,400 defenders were groggy from the previous evening’s festivities and underestimated the Patriot threat after months of decisive British victories throughout New York. Washington’s men quickly overwhelmed their defenses, and surrounded the town. Several hundred escaped, and nearly 1,000 were captured at the cost of only four American lives.

It was a brilliant victory for George Washington – and a tremendous morale boost for the Americans. Within a few days, Washington followed up his victory with another at Princeton, and then quartered his troops at Morristown. The British were forced to redeploy in a way that gave up most of New Jersey and limited their reach in New York. It was a masterful campaign that stabilized the American Revolution and made victory possible.

The lesson learned…
Unconventional warfare, thinking outside the box, and a surprise attack when the enemy was most vulnerable – all made the difference in the ultimate victory. One battle, although itself not extremely significant, made all the difference for the eventual outcome. It boosted moral. It gave hope to those on the fence… You see, one person can make a difference. It could even be you…

Easy Money Martin

Real Estate Lending