Will The Blockchain Render This Multibillion-Dollar Industry Obsolete?

Blockchain technology is on the cusp of disrupting another billion-dollar industry that most Americans (particularly members of the millennial generation) rarely think about: Boring old title insurance.

Since the blockchain technology craze swept the US in 2015, technologists working to pinpoint new use-cases for the technology have been squawking about its potential to revolutionize how governments store and track ownership of land. The system used by most modern governments was developed centuries ago: In the US, property titles are public documents recorded with roughly 3,600 counties, towns and other jurisdictions. In some cases, the record is available only in writing and can be viewed only by visiting a town clerk’s office. Since the system in its present form leaves plenty of room for error, many homeowners purchase title insurance to protect against the possibility that their claim to the property is challenged – either because the records were lost of destroyed, or for any other reason.

Several countries, including Ukraine, the Republic of Georgia, Honduras and Sweden have already partnered with Bitfury and other blockchain startups to develop a blockchain-based title-registry system. As WSJ reports, some of these systems are nearly ready to be implemented.

For anybody familiar with how blockchain technology works, the utility here is obvious: Since the blockchain provides an immutable record of transactions, storing property titles on a blockchain-based system would substantially decrease the risk that a landowners’ claim is challenged. WSJ posits that title insurance could be among the industries that's most ripe for blockchain disruption. It's just one example of a multibillion-dollar industry that could be rendered obsolete overnight.

To help get ahead of the problem, WSJ says many title insurers are investing resources into studying and developing blockchain technology, which could allow these companies to pivot by developing and managing the systems that otherwise would’ve put them out of business.

As a precaution, many title-insurance companies are studying the use of blockchain to ensure they are “in the drivers’ seat versus being in the passenger’s seat” if these changes take place, said Steven Gottheim, senior counsel of the American Land Title Association, a trade group. “The lesson you can see in the industries that have been disrupted” is that the greatest danger is to companies that “don’t realize new technology is coming,” he said.

 

Mr. Gottheim said initial tests of the use of blockchain technology for title recording by IBM and startups like R3 CEV look promising. But he pointed out that enormous hurdles face the use of blockchain technology and businesses are in the “really early stages of trying to figure out if this is hype or reality."

Several US states are also studying the technology, hoping to develop land-title registries of their own. Unsurprisingly, sparsely populated states with vast tracts of uninhabited land are leading the charge. According to WSJ, the state that’s furthest along is Vermont. The state has already passed legislation legalizing the use of blockchain technology to store land titles for when the technology is finally ready.

Several state governments in the U.S. also are paving the way for the use of the new technology. Earlier this year, Arizona Gov. Doug Ducey signed legislation that enables local municipalities to substitute blockchain technology for the conventional method of recording property ownership and sales. “It establishes blockchain as a usable format for smart contracts,” said Patrick Ptak, a spokesman for the governor.

 

Last year, Vermont enacted a law that said that transactions recorded with blockchain technology “have the presumption of admissibility from an evidentiary perspective,” said Mr. Pieciak. It would allow people to “authenticate a blockchain real-estate transaction whether it’s over a title dispute or divorce proceeding,” he said.

 

Mr. Pieciak said the legislation is part of an effort by Vermont to encourage financial technology companies to base themselves in the state or to boost their businesses through the use of blockchain technology in a wide range of industries. “We’re looking at ways Vermont could do anything to make our regulatory environment more hospitable,” he said.

 

Mr. Pierciak said a number of questions remain, such as how mortgages would be incorporated and how title insurance world work. But technically local municipalities in Vermont now have the legal framework to switch to recording deeds using blockchain technology, although none has made that move so far.

As we’ve previously pointed out, realtors in some parts of the US are warming to the idea of settling home sales in bitcoin. Several of these transactions have already conducted, including one homeowner in Texas who purchased their home with bitcoin. These transactions are also happening outside the US: A San Francisco-based startup named Propy in September said ethereum had been used to buy an apartment in Ukraine.

Someday, real-estate transactions might be conducted in bitcoin, and stored in a blockchain-based ledger.

“I think it’s going to happen much faster than everyone anticipated,” said Alex Voloshyn, Propy’s chief technology officer.
 

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Saudi Aramco and Sabic to build world’s largest <b>oil</b>-to-chemicals plant

Saudi oil and chemical majors Aramco and Sabic have signed an agreement to build one of the world's largest oil-to-chemicals facilities, valued at US$20 billion, as Riyadh continues to diversify its economy away from reliance on crude revenues. The integrated complex, said to be located on the ...

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“Jones Would Be A Disaster” – Trump Tweets “The Last Thing We Need In Alabama” Is A Democrat

President Trump has been active on Twitter this morning, taking aim at the Alabama Senate race...

President Trump's de facto endorsement of Roy Moore comes after his comments last week that "We don't need a liberal Democrat in that seat ... [Moore] totally denies [the accusations]."

And as Duane Norman from the Free Market Shooter blog explains, it is the extreme platform of Roy Moore that has been lost amid the Roy Moore saga.

In spite of an endorsement by President Trump, Luther Strange was defeated by Roy Moore in the Republican primary on September 26th for Alabama’s special Senate election, to fill the seat vacated by now-Attorney General Jeff Sessions.

Doug Jones (left), Roy Moore (right)

On November 9th, allegations against Moore began to surface in The Washington Post, alleging that Moore engaged in sexual misconduct with minors in the 1970s:

Leigh Corfman says she was 14 years old when an older man approached her outside a courtroom in Etowah County, Ala. She was sitting on a wooden bench with her mother, they both recall, when the man introduced himself as Roy Moore.

 

It was early 1979 and Moore — now the Republican nominee in Alabama for a U.S. Senate seat — was a 32-year-old assistant district attorney. He struck up a conversation, Corfman and her mother say, and offered to watch the girl while her mother went inside for a child custody hearing.

The allegations quickly began to dominate national headlines; questions began to circulate regarding the conspicuous timing of the accusations, which surfaced with very similar timing to those against President Trump in his election.  After holding a substantial lead, Moore’s polling took a nosedive, as Fox News reported on November 18th…

Alabama hasn’t elected a Democrat to the Senate since 1992. But a Fox News poll taken in the wake of the Moore allegations and released Thursday shows Jones leading Moore 50 percent to 42 percent.

…and the betting odds for a Moore win mirrored Moore’s polling drop.  Though we would normally use Betfair’s exchange for betting odds on this election

…Betfair’s exchange has extremely thin depth, with only $57,900 wagered on the election, likely due to Betfair’s European location, and this election being a US event.  Instead, we will turn to Predictit, a US-based prediction market “for politics”.  After trading around 90% prior to the allegations, Moore’s odds took a hit, reaching a low of 36%…

…but have subsequently recovered to over 60%. 

And while much of Moore’s recovery can be attributed to voters not trusting the timing of misconduct allegations that occurred in the 1970s, the mainstream media has overlooked another important reason that Jones hasn’t been able to poll higher:

Doug Jones holds absolutely zero moderate positions.

This might not seem like a problem, as “extreme” Senators from both sides of the aisle are commonly elected.  However, for a “blue” candidate to win in a “red” state like Alabama, there has to be at least some moderation on a few key issues to attract Republicans.

Some notable examples are:

  • North Dakota’s Heidi Heitkamp: has an “A” rating from the NRA, supports the Keystone XL pipeline, and votes with President Trump’s positions 51% of the time
  • Indiana’s Joe Donnelly: has an “A” rating from the NRA, considered “pro-life”, and is a staunch supporter of defense spending
  • West Virginia’s Joe Manchin: “identifies” as “pro-life”, co-sponsored Republican balanced budged amendments, and was the only Democrat to support the Energy Tax Prevention Act

All three of the above face re-election this year, and only Heitkamp is expected to even have a chance of a winning re-election bid; Donnelly and Manchin are widely expected to lose.  In particular, Manchin’s re-election bid has been hindered due to his co-sponsoring the 2013 Manchin-Toomey amendment to implement universal background checks on gun sales.  Five years after the fact, West Virginia voters have not forgotten Manchin’s “betrayal” on gun rights.  As this author has stated in the past, gun control is not a winning political position, but it is a particularly difficult one to take in a “red” state.

It should be obvious by now; for a Democratic candidate to win a Senate seat in a “red” state, he/she must hold at least some “red” political positions.

With that in mind, if you look at the positions of Jones, you’ll see that he by and large toes the “blue” party line.  Jones has come out in support of increased restrictions on gun rights:

But Jones has said enough in small soundbites to make clear that he supports expanding background checks to cover gun shows. The Washington Post quoted him saying such an expansion “would be helpful.”

 

His support for gun show regulation is the logical outgrowth of his overarching belief that the Second Amendment has “limitations.”

 

In fact, Jones believes every natural right protected by the Bill of Rights is limited. The Alabama Political Reporter quoted Jones saying, “We’ve got limitations on all constitutional amendments in one form or another.”

…and on abortion

The Jones campaign, last week, doubled-down on the candidate’s pro-choice platform: “I support a woman’s right and freedom to choose what to do with her body. This is a decision between a woman, her doctor and her Lord. Who am I to tell a woman what to do with her body?”

…and Jones also supports more federal spending, does not support tax cuts, supports climate change regulations, and does not support repealing Obamacare.  In fact, if you look closely through his platform, he is about as “blue” as the majority of Democratic Senators.

Not exactly a formula for success in “red” Alabama.

Even worse, as Free Market Shooter’s Jon Hall has pointed out, Jones has been “promoted” by Hillary Clinton, a state where President Trump nearly doubled Hillary’s vote total:

It has become obvious; no matter how much (hypocritical) Democrats point the finger of blame at Roy Moore…

…the Democrats have virtually no chance of winning a Senate seat in deep-red Alabama if the candidate doesn’t tailor their positions to attract “red” voters, something Doug Jones’s party-line platform completely fails to do. 

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Pentagon To Admit To 2,000 Troops In Syria; Number Likely Far Higher

Authored by Jason Ditz via AntiWar.com,

General Had Previously Said US Had 4,000 Troops There...

US officials said on Friday that the Pentagon is expected to concern confirm that there are “about 2,000” US ground troops in Syria, a major increase from the roughly 500 that they officially claim is the case.

An accounting system, known as the Force Management Level (FML), was introduced in Iraq and Syria under the Obama administration as a way to exert control over the military.

 

But the numbers do not reflect the extent of the US commitment on the ground, since commanders often find ways to work around the limits, sometimes bringing in forces temporarily or hiring more contractors.

 

Current FML figures are officially 5,262 in Iraq and 503 in Syria, but officials have privately acknowledged that the real number for each country is more.

The US has overtly lied about troop levels in Syria consistently throughout their deployment.

Less than a month ago, Gen. James Jarrard told reporters the US had about 4,000 troops in the country...

 

though the Pentagon at the time claimed he was wrong and the real number was only 503.

 

Adding to the confusion, the Defense Department had also offered figures to Congress on overseas deployments, and those figures said 1,723 troops were in Syria at the time.

Despite this, the official troop figure has not changed.

President Trump has made a point of troop levels needing to be kept secret from “the enemy,” but consistent lies from the Pentagon about their deployments have made the figures less a closely guarded secret than a mockery of transparency.

While 2,000 is almost certainly closer to the truth than 500, it’s not necessarily the actual figure.

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“When To Worry?”: How Long After The Curve Inverts Does The Recession Begin

The recent (bear) flattening of the US yield curve to levels not seen since before the GFC, a move which has only accelerated in recent weeks as the stock market hit all time highs, has prompted some to question the strength of the US economic cycle, and others to ask outright how long before the curve inverts, signaling an imminent recession. Here, as Citi's Jeremy Hale notes, just as "Dr. Copper" can sometimes be viewed as a stock market precursor, so "Professor Curve" (particularly when inverted or aggressively flattening) can be viewed as a signal of that policy is too restrictive relative to economic fundamentals (especially when using term premium suggests the curve should already be inverted). That said, during an expansion it’s generally normal for the curve to flatten, as the economy expands and the output gap closes, as shown in the chart below. This can be attributed to expectation of a higher Fed funds rate, but also a lower term premium, or more ominously, an inability to pass through inflation to the broader economy, leading to tighter financial conditions which ultimately manifest in an economic contraction.

Putting the recent 2s10s flattening in context (blue line on chart above), assuming this cycle started at the December 2013 steepness of 264bps, the curve has flattened for the past 60 months. On average, historic flattening cycles last for 2-2.5 years and flatten ~270bps from peak to trough. As Citi notes, we have flattened three quarters on the way there, or roughly 204bps so far in this cycle, therefore in comparison to previous episodes; perhaps this flattening dynamic is growing grey hairs... but it’s certainly not finished yet.

Indeed, if history repeats, then another 67 bps flattening is implied before we see an inversion of the curve. And while this cycle of curve flattening has been particularly slow, assuming a runrate of 40bps of flattening per year, then we could see a flat curve within 18 months (Figure 3, left). So "should we be worried?" Citi asks and answers that, rightly or wrongly, market participants with grey hairs would preach that all is well until the curve begins to invert. Ah yes, but that's not the full story, as Citi explains below:

Sometimes inversion provides a timely signal for the economic cycle a la 2000, where Professor Curve predicted almost the ding-dong high in the SPX. However the 2006 episode of inversion dished up 7 months of pain for equity bears, with 18% further upside for the SPX. Ditto for the 1989 episode where equities continued to rally 22% into the 1990 recession (Figure 3, RHS). For now, we’re comfortable with the flattening dynamic with regards to other markets but would become increasingly cautious as the curve approaches zero.

In other words, once the curve inverts, it could either mark the top-tick of the market right there... or leave up to 22% more in equity upside before stocks finally crash.

Citi's optimism - for now - aside, one notable distinction about the current flattening is that, unlike much of the curve move in 2016, this one has been driven by the front end, i.e. a bear flattening.  The front end of the US curve has significantly re-priced since September with the extension of the debt ceiling and the realization that fiscal easing could be achieved by the Trump administration.

Also worth noting is that while the short end has been driving curvature, the long end has been relatively rangebound, at least over the past year. What Citi finds particularly interesting is that even with ‘impending’ fiscal expansion in the US and balance sheet normalization by the Fed, term premia are actually still negative and suggest that the nominal 10y UST should trade closer to ~1.6% if the priced in forward short rate was at end pre-Election levels (Figure 6, LHS). This would suggest that there is, of course, a risk that the unusually low term premium - pushed to near record low levels by foreign central banks QE and NIRP, herding investors into long-term US duration - could suddenly rise; of note, perceived inflation risk could reverse its course quickly if inflation
suddenly trended up.

Some Fed estimates suggest that term premium is ~0.9% lower than it would be without the Fed’s large securities holdings, and that this term premium effect will gradually diminish with the reduction of the Fed’s balance sheet. But the Fed’s normalization has been well telegraphed; therefore the market has had the opportunity to anticipate this for several months (this goes back to another point made by Citi's Matt King that the market has lost the ability to discount the future). In fact, the central bank depresses the term premium by limiting the uncertainty surrounding monetary policy. In short, Citi is skeptical of the material  impact that BSA may have on nominal yields given a relatively hawkish Fed. Furthermore, as the Fed continuing to tighten, it is possible the US economy is ‘locking in’ any gains that may be passed through to CPI. It is worth noting that in the last two cycles, US firms (and others) have had trouble - if not found it impossible - passing wage costs through to prices.

So even if a curve inversion does not spell imminent recession, what is next for the (shape of the) curve? Well, more of the same flattening it appears, as the curve takes more aggressive steps to flatten.

As Hale explains, the term premia and the forward curve suggests further flattening ahead (Figure 10 bottom LHS and top RHS). It’s also worth noting that in the past throughout Fed hiking cycles, the curve flattens on average between 100-125bps (Figure 10  bottom RHS), we’re currently around half way through on that basis assuming the Citi Fed call is right. But relative to other cycles at this stage, perhaps we have moved far enough for the time being. Citi's fair value model using ACM term premium, the breakeven curve and a proxy for the r* also suggest flattening is close to fair value for now (Figure 10 top LHS).

But more medium term as the Fed keeps tightening, the curve will likely continue to flatten, and may even begin to bull flatten, should inflation expectations fall further. Ironically, Citi concludes, if the Fed wants higher long-term rates, and with them a steeper yield curve, it may need to hold back on further interest rate hikes until inflation surpasses the target/ backward driven inflation expectations rise.

Until then, however, expect people to keep talking about the flattening yield curve.

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GPCA ’17: Saudi Aramco, SABIC to build <b>crude</b> to chemicals complex in S Arabia

DUBAI (ICIS)--Saudi Aramco and chemicals major SABIC have signed an agreement to develop a fully integrated crude oil to chemicals complex (COTC) in Saudi Arabia which is expected to start operations in 2025, the Saudi energy giant said on Sunday. The complex is expected to process 400,000 ...

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US And South Korea To Conduct Massive Air Force Exercise Aimed At North Korea

Via TheAntiMedia.org,

The U.S. and South Korea announced Friday they will conduct a massive air force exercise over the Korean Peninsula next month as a notable show of force targeting North Korea - despite warnings that the Trump administration’s decision earlier this week to add North Korea to the United States’ list of state sponsors of terrorism could further provoke the isolated country.

Six F-22 Raptor stealth fighters—which are among the world’s most advanced warplanes—will be sent to South Korea for the drill, a U.S. Air Force spokesman told AFP, which reports:

The massive five-day annual exercise comes as Washington pushes what President Donald Trump has called a “maximum pressure campaign” against Pyongyang over its nuclear program.

 

The exercise, named Vigilant Ace, starts on December 4 with 12,000 U.S. personnel and an unspecified number of South Korean airmen flying more than 230 aircraft at eight U.S. and South Korean military bases.

Reuters reports that U.S. Marine Corps and Navy troops will also participate in the exercise.

Although the drill is conducted annually, it comes as U.S. President Donald Trump continues to antagonize North Korean leader Kim Jong-un on the world stage.

As Common Dreams reported this week, after Trump designated North Korea as a state sponsor of terrorism on Monday, the North Korean Central News Agency called the decision a “serious provocation,” and warned that “our army and people are full of rage and anger toward the heinous gangsters” who made the decision.

Concerns about the escalating conflict, and the Trump administration’s vocal opposition to engaging in diplomatic discussions with North Korea, continue to rise in the U.S. as well as among North Korea’s neighbors, particularly South Korea.

When Trump visited Asia earlier this month, South Koreans greeted him with massive protests - denouncing him as a “war-threatening, weapons salesman” - while Pyongyang claimed the president “begged for war” during his trip.

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Iraq to build new <b>oil</b> pipeline to Turkey

Iraq is to build a new pipeline to allow oil exports to resume from the northern province of Kirkuk to neighbouring Turkey, the oil ministry said Sunday. Oil Minister Jabbar al-Luaybi has ordered documents to be prepared towards building the new pipeline to "transport crude oil from Kirkuk's oilfields to the ...

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Saudi Aramco, SABIC plan to build $20 bln <b>oil</b>-to-chemicals complex

The project is a sign that the Saudi government plans to spend heavily on diversifying the economy beyond crude oil exports. ... producer Saudi Basic Industries Corp have signed a memorandum of understanding on Sunday to build a $20 billion complex converting crude oil to chemicals in the kingdom.

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<b>Crude Oil</b> Prices – Weekly Outlook: Nov. 27 – Dec. 1

Investing.com - Crude oil prices finished higher in an abbreviated session on Friday, with the U.S. benchmark surging to its best level since July 2015, as the shutdown at North America's Keystone pipeline continued to cut deliveries to storage facilities. U.S. West Texas Intermediate (WTI) crude futures ...

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