Saturday, August 27, 2016

Toward a Global Realignment

As its era of global dominance ends, the United States needs to take the lead in realigning the global power architecture.
Zbigniew Brzezinski is a counselor at the Center for Strategic and International Studies and was the National Security Advisor to President Jimmy Carter from 1977-81. He is the author, most recently, of Strategic Vision: America and the Crisis of Global Power.

Friday, August 26, 2016

Big banks buckle down to build better bitcoin

UBS, Deutsche Bank, Santander and BNY Mellon have partnered up to create a new digital currency to facilitate intra-bank settlements, the FT reports. The cryptocurrency will use blockchain technology underpinning the Bitcoin.
The banks are working with London-based blockchain startup Clearmatics, and the official launch is expected in 2018, according to the media.
“Today trading between banks and institutions is difficult, time-consuming and costly, which is why we all have big back offices. This is about streamlining it and making it more efficient,” Julio Faura, head of R&D and innovation at Santander told the FT.
All four banks are members of the 50-strong R3 consortium of financial institutions exploring ways of blockchain usage in the financial system.
“You need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies. What that allows us to do is to take away the time these processes take, such as waiting for payment to arrive. That frees up capital trapped during the process,” said Hyder Jaffrey, head of financial technology innovation at UBS.
According to a report by a consulting firm Oliver Wyman, the world spends up to $80 billion every year to clear and settle trades.
This post sponsored by LIQUID CLAIMS

Thursday, August 25, 2016

"Central Banks Now Own $25 Trillion Of Financial Assets"

With 85% of Wall Street telling Citi they expect a "dovish hike signal" from Yellen tomorrow, which means a polite request for another BTFD opportunity, even if as BofA says "expectations for a dovish Fed are coinciding with macro strength in the US (most obviously in housing & consumer spending) as well as highest level of wage inflation since Jan’10"...
... here is a quick reminder of where we currently stand from BofA's Michael Hartnett, from a brief note titled The Liquidity Supernova & the "Keynesian Put."
* * *
Risk assets are now supported by the new ”Keynesian Put”, the expectation that fiscal measures will be deployed to combat any renewed weakness in the economy/markets (independently of any larger political projects). But asset prices remain primarily supported by excess monetary abundance across the world:
  1. There have been 667 interest rate cuts by global central banks since Lehman;
  2. G7 central bank governors Yellen, Kuroda, Draghi, Carney & Poloz have been in their current posts for a collective 17 years, yet only one (Yellen in Dec’15) has actually hiked interest rates during this time;
  3. Central banks own $25tn of financial assets (a sum larger than GDP of US + Japan, and up $12tn since Lehman);
  4. There are currently $12.3tn of negative yielding global bonds (28% of total);
  5. There is currently $8tn of negative yielding sovereign debt (54% of total).
Do not expect any unwind of this $25 trillion in risk asset support to be unwound any time soon, or perhaps ever, or else...
The Crab Nebula supernova

YOUR POCKET GUIDE TO BE A FOREX GENIUS - SPLITTING PENNIES


Blockchain Pitched as Way to Simplify FX Trading Databases

A year-old technology firm wants to simplify currency markets by streamlining the way trading data is stored using blockchain-based technology.
Cobalt DL, a London-based firm created last year by former Traiana Inc. Chief Executive Officer Andy Coyne, announced Wednesday that it began beta testing on a distributed ledger network, which the firm hopes can cut post-trade costs and provide a singular database for foreign-exchange transactions. Set to launch in 2017, the network will create a single record for each trade.
“The execution in the FX markets over the last 10 years has really accelerated,” Coyne said. “If you’re not simplifying, if you’re not taking the opportunity to recreate the whole shared trade system, I think you’re missing an opportunity.”
The platform, according to a statement, is expected to save “billions of dollars” for market participants by avoiding things like charges for ticketing, staffing and licensing. Currently, many are burdened by having to maintain multiple systems and layers to maintain records, Coyne said.
The network will use blockchain concepts like encryption and digital signatures to create the unified system. Blockchain, the software that powers bitcoin, is a type of distributed database that’s being touted as a way to upend the financial industry.
Cobalt already has eight “leading institutional FX participants” signed on to use the system. The firm declined to specify the firms. The announcement comes 18 months after Coyne left Traiana, which was owned by ICAP Plc, an independent brokerage firm that provides a similar system.

For more FX info checkout Splitting Pennies - Understanding Forex

Monday, August 15, 2016

Will Ireland Be First Country In World To See Bail-in Regime?

Deposit bail-in risks are slowly being realised in Ireland, after it emerged overnight that FBD, one of Ireland's largest insurance companies, have been moving cash out of Irish bank deposits and into bonds.
Revelations regarding deposit bail-in risks came in the wake of warnings of a new property crash centred on the housing market in Ireland. The former deputy governor of the Central Bank warned in an op-ed in a leading international financial publication, Project Syndicate, that Ireland is at risk of another housing market crash.
Insurer FBD has moved over €150 million out of the Irish banking system and into corporate and sovereign bonds over the past year. The move was prompted by low returns offered by bank deposits and the risks that deposit bail-in rules could see deposits confiscated.
FBD chief executive Fiona Muldoon told the Irish Independent that the "extremely low returns offered on term deposits by banks, coupled with fears that new bail-in rules introduced this year by the European Union could expose bank bondholders and depositors to bailing out a failed lender, meant it has shifted investments away from banks."
The new deposit bail-in mechanism is designed to protect banks and is touted as a way to prevent taxpayers being liable for bailing out collapsed lenders. It is believed that it leaves bank bondholders and deposit customers with more than €100,000 on deposit at risk of footing the bill.
There is a belief that bail-ins only relate to “the wealthy” and "rich" depositors as they will be imposed on those with deposits greater than national deposit guarantees. These deposit “guarantees” are generally the ‘big round’, arbitrary number of say €100,000, $250,000 and £75,000. These are not particularly large amounts and could amount to the entire life savings of a pensioner, a family or indeed it could be the entire capital of a small to medium size business enterprise.
An example of this is the UK where the deposit guarantee was arbitrarily, suddenly and with little fanfare quietly reduced from £100,000 to £75,000 just last year in July 2015.
Thus, it is important to note that the arbitrary round number in the various government deposit guarantees can be, and probably will be, reduced to a lower number – say the new round number of €50,000, £50,000 and $50,000 -  depending on the severity of the next banking crash.
In the event of bail-ins, governments and banks are likely to seek to impose deeper haircuts on creditors including depositors in order to bail-out and protect the failing banking system.
FBD's deposits with Irish banks were reduced from €451 million to €305 million in recent months. FBD made a €3.1m loss in the first half of the year.
As reported by the Irish Independent:
"As they mature, and as the bank bail-in rules come into play, it's no longer the case that for corporate investors depositing at a bank is risk free," she added.
"To be honest, the return is abysmal now. We've gone back to a more typical investment portfolio for an insurance company."
"You have to be paid for the risk you take," she added. "You might entertain the bail-in risk if you were being properly paid. But if you've a bank trying to charge you for leaving your money with them, you're not inclined to take any risk at all."
The recent bank stress tests showed that Irish banks are the most vulnerable in the EU in the event of another financial crisis.
Meanwhile, the risk of another property crash centred on the housing market has been warned of by a respected economist. Stefan Gerlach, who left the Central Bank of Ireland earlier this year to become Chief Economist at BSI Bank in Zurich, asked:
"Having endured the collapse of its housing market less than a decade ago, Ireland has lately been experiencing a blistering recovery in prices, which already have risen in Dublin by some 50% from the trough in 2010, is Ireland setting itself up for another devastating crash?”
Among the concerns he expresses in an article titled 'The Return of Ireland’s Housing Bubble' for the global finance think-tank Project Syndicate is that the Central Bank here is coming under undue pressure from the construction industry and politicians to relax the loan to value and loan to income ratios on mortgage lending it introduced last year.
He warns that while housing bubbles are easy to spot, there are a number of conflicts of interest that make it hard to take action as the market gets out of control as reported by Newstalk:
"The obvious question is why nobody stepped in before it was too late. The answer is simple: while the bubbles are inflating, many people benefit. With the construction sector thriving, unemployment falling, and banks lending freely, people are happy – and politicians like it that way."
"Many in Ireland might find that conclusion overly pessimistic. Maybe they are simply hoping that, this time, the luck of the Irish will hold. Perhaps it will, and this time really is different. But there isn’t much evidence of that," he concludes.
The 'Bail-in regime' is one of the greatest financial risks to investors, savers and indeed companies internationally today. Yet it remains the most poorly covered financial risk and is largely ignored by financial advisers, brokers and not surprisingly governments and banks.
The growing financial risk in all western countries has not been properly analysed. In a world already beset with huge deflationary pressures and still insolvent banks, the bail-in regime and confiscating deposits, especially from job creating companies, would be extremely deflationary and would likely contribute to severe recessions.
This is something we warned of when we first conducted our extensive research on the developing global bail-in regimes after the Cyprus bail-ins in 2013. Diversification of deposits remains vital and one important way to protect against a bail-in is owning physical gold. Taking delivery of gold coins and bars and owning bullion in allocated and segregated storage in the safest vaults in the world is a prudent way to protect against the deposit bail-in regime.
Gold and Silver Bullion - News and Commentary
Gold Prices (LBMA AM)
15Aug: USD 1,339.20, GBP 1,037.21 & EUR 1,198.85 per ounce
12Aug: USD 1,336.70, GBP 1,032.60 & EUR 1,199.02 per ounce
11Aug: USD 1,344.55, GBP 1,037.05 & EUR 1,206.06 per ounce
10Aug: USD 1,351.85, GBP 1,035.11 & EUR 1,209.23 per ounce
09Aug: USD 1,332.90, GBP 1,025.80 & EUR 1,201.74 per ounce
08Aug: USD 1,330.00, GBP 1,019.84 & EUR 1,198.86 per ounce
05Aug: USD 1,362.60, GBP 1,036.39 & EUR 1,222.53 per ounce
Silver Prices (LBMA)
15Aug: USD 19.90, GBP 15.40 & EUR 17.81 per ounce
12Aug: USD 19.87, GBP 15.33 & EUR 17.81 per ounce
11Aug: USD 20.21, GBP 15.56 & EUR 18.13 per ounce
10Aug: USD 20.34, GBP 15.55 & EUR 18.19 per ounce
09Aug: USD 19.70, GBP 15.18 & EUR 17.77 per ounce
08Aug: USD 19.66, GBP 15.04 & EUR 17.74 per ounce
05Aug: USD 20.22, GBP 15.36 & EUR 18.14 per ounce

Recent Market Updates
- Money "Madness" Negative Interest Rates Sees Gold Buying Surge
- Gold Investment Demand Reaches Record In First Half 2016 On “Perfect Storm”
- Peak Gold – Did Gold Production Peak in 2015?
- Financial Times: “Victory For Gold Bulls Is Only Just Beginning”
- Irish Banks Most Vulnerable In Stress Tests – Banking Contagion In EU Cometh
- Gold In Sterling 2.2% Higher After Bank Of England Cuts To 0.25% and Expands QE
- Silver Kangaroo Coins – Sales Surge To Over 10 Million
- Trump, Clinton, "Ugliest" Election Coming - Gold's "Summer Doldrums" Prior To Resumption of Bull Market
- Marc Faber: Invest 25% Of Investment Portfolios In Gold Bullion
- “Could Not Invent A More Bullish Story For Gold Bullion”
- Gold In Bull Market – “Every Reason For It To Continue” – Frisby In Money 
- Is Gold Set To Hit $1,500 Per Ounce?
- Why Italy’s bank crisis could be a ‘ticking time bomb’

http://www.zerohedge.com/news/2016-08-15/deposit-bail-warning-ireland-bail-risk-uk-very-high

Saturday, August 13, 2016

EES: The secret of linear progression in FX exposed

Forex is the largest market in the world and the most widely misunderstood.  For this reason we wrote Splitting Pennies - Understanding Forex - to educate and entertain.  As we explain in the book, in Forex there's things which are possible simply not possible in other markets.  For example, Forex trades all day and all night during the week.  There's no waiting for 9:30 am 'market open' - and while even Forex is closed on the weekends, some brokers offer the ability to trade on the weekends, with a wider spread.  Forex markets offer higher leverage, and unique features such as 'swap' payments, meaning that you are paid to hold positions (or pay, depending on the currency pair and your side of the market, long or short).  Because of the nature of how the Forex market trades, there's a number of strategies that can work on Forex markets that simply can't work on other markets such as stocks, commodities, or bonds.
In Forex it's possible to have a simple linear progression account (function, as equity).  Take this chart as example, it's a real live account statement from the past 3.5 years at a European broker:
Such equity curves simply aren't possible in other markets, without having some kind of advantage (such as HFT).  If we saw equity curve's from prop shops they'd probably look like this.  
How is this possible in FX, and not in other markets?
In Forex there's a number of strategies that are possible that just don't work in other markets.  For example, let's take the strategy 'triangular arbitrage' - this is an arbitrage where there are price discrepancies between 3 currency pairs.  Forex is traded in pairs, i.e. EUR/USD EUR/GBP EUR/CHF.  What can happen during a big market event, for example a failed coup in Turkey as an extreme example, EUR/USD will move faster than it should have to keep in ratio with the rate of EUR/GBP.  That can be just a market function, traders sell EUR/USD before EUR/GBP without algorithms.  Or, large orders can cause the difference between EUR/USD and EUR/GBP to be off slightly.  Even if only off by a fraction of a dollar, this can be millions in profits - hence the name of our book "Splitting Pennies."
How can you participate in it too 
Well, the straight answer is that if you're a retail US investor, you probably can't.  You can buy our book and understand why.   But for the rest of the world, and ECP US Citizens, the strategy is offered as a managed account, as an investment.  Investors open an account with the regulated broker based in London, United Kingdom with a minimum of $20,000 (doesn't matter, US Dollars, Euros, Great British Pounds..).  Investors pay only for profits; there's no fees other than a performance fee of 30% calculated above a high watermark (it's not possible for paying fees to make back losses).  The strategy has a live track record going back 3.5 years with no losing month.  There was a 10% + drawdown during the 2015 Swiss Franc 'event' which was an excellent 'stress test' of the strategy; it recovered and continued to profit (no loss was booked during this event).  
How ECP Americans can participate in it
If you were interested in this strategy and are an ECP (Eligible Contract Participant) defined by the CFTC:
Eligible Contract Participant: An entity, such as a financial institution, insurance company, or commodity pool, that is classified by the Commodity Exchange Act as an eligible contract participant based upon its regulated status or amount of assets. This classification permits these persons to engage in transactions (such as trading on a derivatives transaction execution facility) not generally available to non-eligible contract participants, i.e., retail customers.
..your next step would be to be vetted as an ECP, and proceed to open account.  But the minimum for you would be $1,000,000 - this is similar to the hedge fund account minimum of $1,000,000 - the idea being, outside of being vetted as an ECP, if you can open an account with 1m in cash, you're likely a qualified investor.  Also, as the carrying broker is in the UK, you'll have to report this account on your FBAR, if you don't already have foreign accounts, this is another moving part that you'll have to have your team of advisors dig into.  Many do it, but also many don't.  In fact, many Americans don't even have passports, even rich Americans.  
And frankly, if you are an ECP, you should receive a special status from the Treasury department - like the priority boarding on flights.  All ECPs should be mailed lapel pins from the CFTC they can proudly wear over their Zegna "ECP."  But, we live in a world where only the disabled, minorities, and other degenerates get special priviledges.  
Forex as an investment
This strategy is by no means the only strategy in the world, there are many.  The point is that many of these strategies can't be executed on other markets.  Forex provides a unique market to develop such systems, that can produce linear progression equity curves.  Strategies include statistical arbitrage, grid trading, latency arbitrage, triangular arbitrage, broker arbitrage, matrix trading, least squares trading, momentum oscillator trading, and countless others.
If you want to get started looking at investing, checkout Fortress Capital Forex