Salt, Wampum, Benjamins – Is Bitcoin Next?

Authored by Michael Lebowitz via 720Global.com,

Currency was first developed about 4000 years ago. Its genius was in the ability to supplant barter thus greatly improving trade and providing a better means for storing value. As illustrated in our title, currency has taken on many different physical forms through the years. Given the recent advances in technology, is it any surprise the latest form of currency resides in the ether-sphere? In this article we explore the basics of cryptocurrencies and the important innovation they support, blockchain. We also offer an idea about whether or not Bitcoin, or another cryptocurrency, can become a true currency worthy of investment.

A Primer on Cryptocurrency and Blockchain

Cryptocurrency is an independent, digital currency that uses cryptology to maintain privacy of transactions and control the creation of the respective currency. While not recognized as legal tender, cryptocurrencies are becoming more popular for legal and illegal transactions alike. Bitcoin (BTC), developed in 2009, is the most popular of the cryptocurrencies. It accounts for over half the value of the more than 750 cryptocurrencies outstanding. In this article we refer to cryptocurrencies generally as BTC, but keep in mind there are differences among the many offerings. Also consider that, while BTC may appear to be the currency of choice, Netscape and AOL shareholders can tell you that early market leadership does not always translate into future market dominance.

Before explaining how BTC is created, acquired, stored, used and valued, it is vital to understand blockchain technology, the innovation that spawned BTC. As we researched this topic, we read a lot of convoluted descriptions of what blockchain is and the puzzling algorithms that support it. In the following paragraphs, we provide a basic description of blockchain. If you are interested in learning more, we recommend the following two links as they are relatively easy to understand.

The Ultimate 3500-word guide in plain English to understand Blockchain – Mohit Mamoria

A blockchain explanation your parents could understand – Jamie Skella

Blockchain is an open database or book of records that can store any kind of data. A blockchain database, unlike all other databases, is stored real time and is accessible for anyone to view its complete history of data.

The term block refers to a grouping of transactions, while chain refers to the linkages of the blocks. When a BTC transaction is completed BTC “miners” work to solve the cryptology algorithm that will enable them to link it to the chain of historical transactions. As a reward for being the first to solve the calculation, the miner receives “newly minted” BTC. As the chain grows, the effort needed to solve and verify the algorithms increase in complexity and demand greater computing power. As an aside consider the following statement by Bitcoin Watch (courtesy Goldman Sachs): “BTC worldwide computational output is currently over 350 exaflops – 350,000 petaflops – or more than 1400 times the combined capacity of the top 500 supercomputers in the world.” Needless to say, a tremendous amount of computing resources and energy are being used by BTC miners, and it is still in its infancy. Could these resources be better employed in other industries, and if so, how much productivity growth is BTC leeching from the economy?

The takeaway is that blockchain is an open, real-time database that provides anonymity to its users. It is not controlled or regulated (yet) by any government. BTC miners, driven by the incentive to earn BTC, and fees at times, verify and authenticate the database. Blockchain technology is incredibly powerful and will likely revolutionize data management regardless of whether cryptocurrencies thrive or disappear.

BTC

Bitcoin Mining (Creation): New Bitcoins are created as payment to BTC miners that solve the aforementioned calculations that verify transaction data and link it to the blockchain. This ingenious reward system incentivizes miners to compete to perform these calculations, enabling the blockchain to exist. Currently there are approximately 16 million bitcoins outstanding out of a proposed limit of 21 million. As the blockchain grows, the calculations required to mine BTC and add to the chain become more complex, making each bitcoin harder and more costly to earn than the prior one.

Obtaining and Storing Bitcoin: Other than mining Bitcoin, the only other way to obtain them is via transactions and exchanges. One can earn bitcoin by selling a product or service to someone willing to pay in BTC, or one can purchase them with traditional currency through a BTC exchange. BTC can be exchanged for cash or goods and services in a similar fashion. There are reportedly over 100 BTC exchanges, and BTC ATMs are gaining in popularity. BTC’s are stored in a so-called “wallet”. Wallets may reside on a mobile phone or a desktop computer. The decision to use one versus the other largely comes down to a trade-off between security and ease of use.

Transacting with Bitcoin: Each wallet has a unique key which serves as a personal identifier. When one wishes to transact, the buyer and seller swap their personal keys and the transaction information is posted for miners to verify and post to the blockchain. The identity of the buyer and seller is never revealed. This is one reason that black market, money laundering and tax avoidance transactions are popular on BTC exchanges. While not 100% accurate, you can think of a BTC transaction process as similar to a debit card transaction, but instead of banks verifying, approving and transferring cash to fund the transaction, miners fill that role.

Valuing Bitcoin: Valuing BTC is just like valuing any other currency. One can compare BTC to U.S. dollars or to any other currency. One can also compare the value of BTC to its purchasing power or what one may buy given a set amount of BTC. Currently, BTC is rising rapidly versus all major currencies thus its purchasing power is following suit. As marginal interest in BTC versus sovereign nation currencies increases, the rise in value could continue.

In trying to provide a succinct summary of BTC, we left out many details which you may find pertinent and/or interesting. As blockchain technology represents an important innovation and will certainly find many other uses besides cryptocurrencies, we would encourage you to apply further rigor and read beyond the scope of this article.

BTC – Currency or Investment Fad?

Since BTC started trading in July of 2010, it has risen over 51,000 percent! This meteoric rise in the price of a bitcoin, as graphed below, has certainly attracted many traders and speculators to the cryptocurrency space. While price gains are certainly drawing short term players, others are buying it for its promise as an alternative currency. It is this aspect of BTC that we believe is most relevant.

Data Courtesy: Bloomberg

BTC is a pure fiat currency, meaning it is backed by nothing tangible other than the value users ascribe. Currencies, whether fiat or hard money (backed by something tangible of value) derive value from their utility and scarcity. As the Weimar Republic and many other nations throughout history have learned, economic disasters occur when governments ignore the value proposition and recklessly print money.

The U.S. dollar, also a fiat currency, is backed by the full faith and credit of the United States as well as a small amount of gold. While some may not ascribe too much value to “faith and credit”, almost 250 years of economic progress, military might, and the most powerful tax base in the world strongly argue otherwise. The dollar is globally accepted for almost any kind of transaction, and, despite recent actions of the Federal Reserve, dollars remain relatively scarce. Put another way, even billionaire Bill Gates would stop to pick up a dollar bill laying on the ground. Visit a third world nation and notice how many vendors not only accept U.S. dollars but encourage their use over the domestic currency.

The question investors, not short term speculators, are tasked with answering is, “Will enough people value BTC to make it a respected and often used currency?” In our opinion, the most crucial information needed to answer that question is understanding how governments will respond to the rise of BTC. Gaining a sense for what is at stake for existing currencies and the economies that employ those currencies offers keen insight into the future of BTC and its ability to become more than an afterthought in global trade.

The preamble to the U.S. Constitution states the purpose of the Federal government is to: “form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.” In other words the government’s role is to protect the freedoms and liberties of its citizens. If the government has no ability to fund itself and is unable to provide defense and law enforcement it cannot uphold the Constitution. More precisely - the sovereignty of any nation, regardless of its form of government, rests upon the strength and integrity of its currency.

All transactions, and their participants, that occur with BTC are anonymous. Accordingly taxes cannot be efficiently assessed, black market transactions are made easier, and fraud can easily escape the eye of law enforcement.

If BTC continues to gain in popularity there is little doubt in our opinion the government will seek control or at a minimum the personal data from the transactions. In fact the SEC has recently opined on the matter claiming that “tokens” such as BTC can be deemed securities and may need to be formally registered. This is just a first step but given the potential threat, we envision government will impose a way to remove the secrecy BTC offers, allowing taxation and legal supervision to occur.

We strongly believe the government will not allow BTC to become a full-fledged currency, at least in its current form, but we think they are enamored with the technology. It is possible that a deeply regulated and controlled version of BTC or a new government cryptocurrency could at some point usurp the dollar as we know it today.

Before summarizing this article we leave you with a few pros and cons of BTC:

Pros

  • BTC is unregulated, allowing users to avoid taxes or any other kind of governmental, banking, and law enforcement scrutiny.
  • BTC is in limited supply which should help it to retain its value over time. We caveat that with the fact that there are many competitors, each with their own rules about creation.
  • BTC creation is not subject to the whims of central bankers that appear constantly looking to devalue their respective currencies via inflation.
  • Transacting in BTC is easy. As more sellers of goods and services accept BTC its flexibility improves.
  • Typically storing BTC is less expensive than most other national currencies as well as precious metals. Additionally, transaction fees and other banking costs are largely avoided.

Cons

  • Bitcoin is unregulated. Regulations to enforce market structure and prevent fraud are not available.
  • There are over 750 cryptocurrencies and the number is growing rapidly. Which one will emerge as the dominant currency beyond the first mover stage? Conversely, which ones will fail and leave holders with nothing?
  • BTC security is not fool proof. Wallets have been hacked on both desktop computers and mobile phones. Due to the anonymous nature of the exchanges, remediation of such actions is difficult.
  • Price volatility makes accepting BTC a risky proposition. Accordingly transaction fees are becoming popular by many merchants.
  • The energy costs and computing power associated with mining BTC is massive and will increase as the complexity of the blockchain and the number of users grow. Seemingly these resources could be put to better use.

Summary

The U.S., E.U., Japan, China and Great Brittan have devalued their currencies significantly over the past ten years. The recent success of cryptocurrencies is a meaningful sign that central banker actions have not gone unnoticed by the users of traditional currencies. While we applaud the concept of a currency that is scarce and avoids the whims of bureaucrats, we do not own, nor do we have plans to own cryptocurrencies in the future. The current market is one of significant volatility and heavy speculation. Additionally, the bigger concern is that global governments have the means to make or break cryptocurrencies. Until these powers more fully reveal their intentions on BTC, the risks are too speculative to warrant involvement.

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FBI Unexpectedly Releases Confidential Employee Evaluations Of James Comey

In an unexpected, impromptu release, on Tuesday morning the FBI's "Records Vault" twitter account released a trove of information, divulging "Field Office and Headquarters Climate Survey Results" among which are annual results for the years 2013 through 2017, but more notably, the confidential employee evaluation results for now-former Director James Comey.

It is unclear why the FBI releases this data now, although like on previous occasions, it was likely prompted by an external FOIA request.

In the description of the survey results, the FBI notes the following:

The FBI Annual Employee Survey (AES) provides an opportunity for employees to anonymously share their perspective on the performance of FBI leaders and the organization.

 

The AES is comprised of two surveys: the Leadership Survey, measuring employees' perceptions of their supervisors' leadership abilities; and the Climate Survey, measuring employees' attitudes about their work, work environment, and the FBI as a whole. The FBI analyzes the data to help improve current leadership, pick new leaders, and encourage employees to express ideas on how management and the FBI can improve.

 

Each survey item is rated on a five-point scale. Each rating is averaged by the number of respondents. The following scoring breakdown is congruent with the scoring ranges identified by Human Resources senior level executive in the Senior Leader selection process:

 

  • Average scores between 1.0 and 2.99 indicate potential areas of concern which could worsen if not addressed. A focus on development in these areas would be recommended.
  • Average scores between 3.0 and 3.80 indicate positive feedback in these areas with potential for improvement.
  • Average scores between 3.81 and 5 indicates success in those areas.

 

FBI Field Office and Headquarters Climate Survey Results (2013)
FBI Field Office and Headquarters Climate Survey Results (2014)
FBI Field Office and Headquarters Climate Survey Results (2015)
FBI Field Office and Headquarters Climate Survey Results (2016)
FBI Field Office and Headquarters Climate Survey Results (2017)
FBI Director James Comey Climate Survey Results (2015-2017)

In the charts below, we have summarized the disclosed results from Comey's survey results, broken down across 4 key verticals: i) Personal Characteristics and Values, ii) Leading People, iii) Managing Work and iv( Miscellaneous. While there are not drastic changes over the roughly 3 years during which Comey was FBI Director, there appears to be a notable downward shift in Comey's evaluations by anywhere from 36 respondents (in 2015) and 48 (in 2017).

While there are more details in the full evaluations, here is the core breakdown:

Personal Characteristics and Values:

Leading People:

Managing Work

Miscellaneous.


The full Comey Survey Results are below (link)

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Why We’re Doomed – Our Economy’s Toxic Inequality

Authored by Charles Hugh Smith via OfTwoMinds blog,

Anyone who thinks our toxic financial system is stable is delusional.

Why are we doomed? Those consuming over-amped "news" feeds may be tempted to answer the culture wars, nuclear war with North Korea or the Trump Presidency.

The one guaranteed source of doom is our broken financial system, which is visible in this chart of income inequality from the New York Times: Our Broken Economy, in One Simple Chart.

While the essay's title is our broken economy, the source of this toxic concentration of income, wealth and power in the top 1/10th of 1% is more specifically our broken financial system.

What few observers understand is rapidly accelerating inequality is the only possible output of a fully financialized economy. Various do-gooders on the left and right propose schemes to cap this extraordinary rise in the concentration of income, wealth and power, for example, increasing taxes on the super-rich and lowering taxes on the working poor and middle class, but these are band-aids applied to a metastasizing tumor: financialization, which commoditizes labor, goods, services and financial instruments and funnels the income and wealth to the very apex of the wealth-power pyramid.

Take a moment to ponder what this chart is telling us about our financial system and economy. 35+ years ago, lower income households enjoyed the highest rates of income growth; the higher the income, the lower the rate of income growth.

This trend hasn't just reversed; virtually all the income gains are now concentrated in the top 1/100th of 1%, which has pulled away from the top 1%, the top 5% and the top 10%, as well as from the bottom 90%.

The fundamental driver of this profoundly destabilizing dynamic is the disconnect of finance from the real-world economy.

The roots of this disconnect are debt: when we borrow from future earnings and energy production to fund consumption today, we are using finance to ramp up our consumption of real-world goods and services.

In small doses, this use of finance to increase consumption of real-world goods and services is beneficial: economies with access to credit can rapidly boost expansion in ways that economies with little credit cannot.

But the process of financialization is not benign. Financialization turns evertything into a commodity that can be traded and leveraged as a financial entity that is no longer firmly connected to the real world.

The process of financialization requires expertise in the financial game, and it places a premium on immense flows of capital and opaque processes: for example, the bundling of debt such as mortgages or student loans into instruments that can be sold and traded.

These instruments can then become the foundation of an entirely new layer of instruments that can be sold and traded. This pyramiding of debt-based "assets" spreads risk throughout the economy while aggregating the gains into the hands of the very few with access to the capital and expertise needed to pass the risk and assets off onto others while keeping the gains.

Profit flows to what's scarce, and in a financialized economy, goods and services have become commodities, i.e. they are rarely scarce, because somewhere in the global economy new supplies can be brought online.

What's scarce in a financialized economy is specialized knowledge of financial games such as tax avoidance, arbitrage, packaging collateralized debt obligations and so on.

Though the billionaires who have actually launched real-world businesses get the media attention--Bill Gates, Jeff Bezos, Steve Jobs, et al.--relatively few of the top 1/10th of 1% actually created a real-world business; most are owners of capital with annual incomes of $10 million to $100 million that are finance-generated.

This is only possible in a financialized economy in which finance has become increasingly detached from the real-world economy.

Those with the capital and skills to reap billions in profits from servicing and packaging student loan debt have no interest in whether the education being purchased with the loans has any utility to the indebted students, as their profits flow not from the real world but from the debt itself.

This is how we've ended up with an economy characterized by profound dysfunction in the real world of higher education, healthcare, etc., and immense fortunes being earned by a few at the top of the pyramid from the financialized games that have little to no connection to the real-world economy.

Anyone who thinks our toxic financial system is stable is delusional. If history is any guide (and recall that Human Nature hasn't changed in the 5,000 uears of recorded history), this sort of accelerating income/wealth/ power inequality is profoundly destabilizing--economically, politically and socially.

All the domestic headline crises--culture wars, opioid epidemic, etc.--are not causes of discord: they are symptoms of the inevitable consequences of a toxic financial system that has broken our economy, our system of governance and our society.

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Cash-Strapped Qatar Unexpectedly Cuts Credit Suisse Stake

Is the ongoing Qatar blockade starting to seriously squeeze the finances of the tiny, but rich (or maybe not so rich any more) Gulf nation?

Overnight, Credit Suisse's largest shareholder, Qatar, announced it has lowered its direct shareholding in the largest Swiss bank to 4.94% through the nation's sovereign wealth fund - the Qatar Investment Authority - marking a rare sale of the Swiss bank’s stock. The QIA previously owned 5.01% in voting rights and is reporting a sale of shares for the first time since 2008. Qatar’s overall holding - including convertible bonds - declined to 15.91% from 17.98% after a rise in the number of outstanding Credit Suisse shares because of its capital increase.

In June, Credit Suisse, which is halfway through a three-year strategy revamp, raised about CHF4.1 billion after tapping shareholders for a second time since CEI Tidjane Thiam took over in mid-2015, Bloomberg reported. The fresh funding would boost its common equity Tier 1 capital to 13.4% of risk-weighted assets, up from 11.7% in the first quarter.

Qatar's sovereign wealth fund has been the Zurich-based bank's biggest shareholder since the financial crisis of 2008-09. Then, the cash-rich emirate helped Credit Suisse avert a state bailout by injecting billions in capital into the bank; now Qatar itself may be on the verge of needing a bailout.  The sale has come at a price: the infusion was designed as convertible bonds in Credit Suisse, for which the bank has paid a coupon of between 9 and 9.5%. However, in a harbinger of what's to come, in February Credit Suisse said that Bin Hamad J.J. Al Thani, who represented the Qataris on Credit Suisse’s board of directors, won’t stand for re-election. Saudi Arabian group Olayan is also a major shareholder in Credit Suisse.

As shown below, Qatar boasts one of the world’s largest sovereign wealth funds, with stakes in companies from Glencore to Barclays to Volkswagen (come to think of it, all companies that have one or major major "structural" issues). The small peninsular nation also hosts the regional headquarters for U.S. Central Command, making it a critical outpost for the US military's ongoing involvement in the middle east.

In the nearly ten years since the capital investment, Credit Suisse has made hundreds of millions in annual payments to Qatar. That changed in February of this year when as noted above, Qatar's board representative, Jassim Bin Hamad J.J. Al Thani, left the bank with little explanation and no replacement. However, Qatar did participate in Credit Suisse's CHF4.1 billion capital-raising to full up its depleted cushion of capital.

Now, Qatar has sharply lowered its overall stake in Credit Suisse. The emirate now holds 4.94% of shares and 10.97% in converts, down from 5.0%1 in shares and 12.96% in the securities, or from 17.98% to 15.91% in total.

The sale comes against the backdrop of tensions between the emirate and Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates, which according to some have led to a sharp deterioration in the country's finances.  The move has unpleasant consequences for Credit Suisse as well: Abu Dhabi has reportedly boycotted banks in which Qatar is invested. Besides Credit Suisse, those include Germany's Deutsche Bank and London's Barclays Bank, also a crisis beneficiary of Qatar's generosity.

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Gary Cohn Reportedly “Disgusted & Deeply Upset” At Trump’s Last Few Days

Former Goldman Sachs President and current National Economic Council chair - who is also Jewish - is said to be "disgusted" and "deeply upset" by President Trump's comments on white nationalists according to The New York Times.

Axios also reports: "we're told Cohn - who was standing next to Trump in anticipation of questions about infrastructure legislation - was somewhere between appalled and furious."

NYT reporters cite thre people who are familiar withe the matter...

Presumably this corners Cohn to either publicly deny the story or pressures him to resign if this is truly how he feels.

With CEOs dropping like flies from his various councils, President Trump would be in grater trouble if a close aide were to resign, the floodgates could open.

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Frontrunning: August 16

  • White House braces for fallout from Trump remarks (Reuters)
  • Trump Drags GOP Onto Dangerous Ground, This Time Over Race (BBG)
  • Trump Gives White Supremacists an Unequivocal Boost (NYT)
  • Trump orders faster permitting on infrastructure projects (Reuters)
  • Trump’s U.S. Senate Pick Advances in Alabama Republican Race (BBG)
  • Uber Shareholders Fight for Control as Leadership Vacuum Weighs (WSJ)
  • The Most Over-Hyped U.S. Trade Deal Is About to Get a Makeover (BBG)
  • CEOs Walk Trump Tightrope Into New Era of Corporate Politics (BBG)
  • Trump’s Loyal Sidekick on North Korea: Japan’s Shinzo Abe (WSJ)
  • House tax chairman confident on reform, others less so (Reuters)
  • Confederate Statues In Baltimore Taken Down Overnight (CBS)
  • UnitedHealth CEO Stephen Hemsley to step down (Reuters)
  • India, China soldiers involved in border altercation: Indian sources (Reuters)
  • Fired UBS Adviser Reignites Palm Beach Scandal Over Rich Widow (BBG)
  • Women Charge Past Men in U.S. Job Market (BBG)
  • Heroin-Era Antidotes Can’t Handle Overdoses in Age of Synthetics (BBG)
  • Amazon adds 'Instant Pickup' in U.S. brick-and-mortar push (Reuters)
  • U.S. confident of 'peaceable' Venezuelan solution: Pence (Reuters)
  • Cuban trade with Venezuela plunges over two years (Reuters)
  • Neo-Nazi group moves to 'Dark Web' (Reuters)

Overnight Media Digest

WSJ

- President Donald Trump, in a combative news conference, said "both sides" were to blame in violent weekend clashes in Charlottesville, Virginia, a day after putting the responsibility squarely on white nationalists. on.wsj.com/2w0gQqA

- Cohu Inc, which tests semiconductors, wants to persuade the United States Committee on Foreign Investment that the proposed sale of Xcerra Corp to a Chinese state-backed fund would threaten national security. on.wsj.com/2w0GZWk

- President Donald Trump's response to the weekend violence in Charlottesville, Virginia, has sparked soul-searching in U.S. corporate boardrooms over whether they should keep working closely with the White House. on.wsj.com/2w0dQL3

- Uber agreed to two decades of audits as part of a settlement with the federal government over allegations that the company didn't have sufficient data-privacy protections for its users. on.wsj.com/2w0oiSr

- Premiums for middle-priced plans on Affordable Care Act's individual market would climb by 20 percent in 2018 if the government halted payments to insurers under the health law, the Congressional Budget Office estimated. on.wsj.com/2w02NkT

- Evangelical conservative Roy Moore was leading in a special Senate election Tuesday, out-polling Senator Luther Strange despite support for the incumbent from President Donald Trump and the GOP establishment in Washington. on.wsj.com/2w09SSt

 

FT

- Britain has proposed that the Irish border remain free of physical customs posts and the proposal will raise questions about how Britain and European Union would control trade and immigration on either side of the 310-mile land border after the UK leaves the EU.

- The U.S. Securities and Exchanges Commission has slapped KPMG with a fine of more than $6.2 million after it signed off the audit of the Tennessee-based oil and gas company, Miller Energy Resources, which had overvalued certain assets by more than 100 times.

- The UK's largest provider of adult learning and apprenticeships, Learndirect, will see its funding cut off by the Department for Education, following a damning report about the company's performance.

- Bank of England staff in a blog post wrote on Tuesday that even though UK car sales have faltered in recent months, they remain at historically high levels as car finance providers are taking ever more risks to attract consumers as import prices and falling vehicle sales take effect.

 

NYT

- The chief executive of Wal-Mart Stores Inc, the world's largest retailer, criticized President Trump in front of his 1.5 million U.S. employees, widening a rift between the White House and the business community that has been growing since the weekend's violence in Charlottesville, Virginia. nyti.ms/2fJ6yVc

- U.S. President Trump announced on Tuesday that he had signed a sweeping executive order to eliminate and streamline some permitting regulations and to speed construction of roads, bridges and pipelines, declaring that the moves would fix a "badly broken" infrastructure system in United States and bring manufacturing jobs back to the country. nyti.ms/2fJvbkP

- Charlotte School of Law, an embattled for-profit law school, has shut down, state officials confirmed — making it the second accredited law school in U.S. to close its doors this year. nyti.ms/2fIUd3e

- Stephen Sanger will retire as chairman of the scandal-plagued bank Wells Fargo & Co and will be succeeded by Elizabeth Duke, a former Federal Reserve Board governor. nyti.ms/2fISs6s

- A federal district court judge has ordered Costco Wholesale Corp to pay Tiffany & Co more than $19 million for selling generic diamond engagement rings that were marketed using Tiffany's name. nyti.ms/2fKerK0

- Dozens of solar industry executives, government officials and foreign diplomats gathered in Washington on Tuesday to urge federal trade commissioners to reject a petition from two troubled domestic solar equipment manufacturers to impose steep tariffs and minimum price guarantees on similar imports. nyti.ms/2fJ90LA

 

Canada

THE GLOBE AND MAIL

Apple Inc has tapped the maple bond market for the first time, raising C$2.5 billion ($1.96 billion), the single biggest offering ever for this unique corner of the debt market. Apple said it plans to use the funds for general corporate purposes that may include share buybacks and acquisitions. tgam.ca/2w0GrQj

The Anishinabek Nation in Ontario has signed the largest self-governing education agreement with the federal government, giving it control over its classroom curriculum and school resources. tgam.ca/2w0QV1S

Natural Resources Minister Jim Carr says the federal government is focused on regulatory efficiency as it overhauls Ottawa's environmental assessment regime amid fears the liberals are burdening the resource sector with too much regulation. tgam.ca/2w15Ady

NATIONAL POST

The federal banking regulator is reviewing domestic retail sales practices at Canadas key banks, focusing on the inherent "reputational risks" and the potential impact on the institutions' financial stability. bit.ly/2wcOxET

Grocery retailer Metro Inc is battling industry pressures with an e-commerce push that includes extending online shopping to customers throughout Quebec and selling meal kits, its chief executive, Eric Fleche, said. bit.ly/2wNgdy7

 

Britain

The Times

- Air Berlin Plc filed for insolvency on yesterday when Etihad, its main shareholder, pulled the plug on further financial support. The emergency government funding of 150 million euros ($176.07 million) to enable Air Berlin to keep its aircraft in the air for the next three months triggered a furious response from Ryanair Plc, which accused German Government of preparing for Lufthansa to take over Air Berlin in breach of German and European rules. bit.ly/2vYMLI8

- One of Britain's biggest providers of maintenance for social housing Mears Group Plc has been forced to issue a profit warning and slash its revenue forecasts as clients delay new contracts after the Grenfell Tower disaster. Mears said that new orders were being put on hold. bit.ly/2vZtUwv

The Guardian

- Royal Bank of Scotland Group Plc is preparing to cut nearly 900 IT jobs, union officials have warned, as the bailed-out bank continues to trim costs in its battle to regain profitability. bit.ly/2vZBfMl

- China's credit-fuelled economic strategy has been branded as dangerous by the International Monetary Fund in a strongly-worded statement warning that its approach risks financial turmoil. The IMF used its annual health check on the world's second biggest economy to stress that faster expansion in 2017 was coming at the cost of a jump in private sector debt and an increasing use of complex financial instruments. bit.ly/2vZ1hiW

The Telegraph

- Energy companies face a fresh public battle after new findings revealed that consumers have still been overcharged by an "unacceptable" 100 million pound ($128.63 million) as a result of billing blunders, even as complaint rates fall. The report, from energy switching site uSwitch, said consumers were typically overcharged by 79 pound ($101.62)each, at a total cost of 102 million pound ($131.20 million)to consumers. bit.ly/2vZFNCv

- Company directors are increasingly being held personally accountable for excessive executive pay and other corporate governance failings, according to the City investors. Data from the Investment Association reveals that the rate of protest against individual board members at shareholder meetings has increased more than fivefold this year. bit.ly/2w0dO5A

Sky News

- TPG Capital is preparing to open formal talks with Spotify over the terms of a $1 billion bond in the music service as it prepares to go public. bit.ly/2vFKJd1

- Ministers hope to negotiate and complete trade deals with other countries during any Brexit transitional period, a British Government document has said. Brexit Secretary David Davis revealed future customs proposals, including an interim customs union with the EU aimed at avoiding a "cliff-edge" for manufacturers after Brexit. bit.ly/2vZqVEk

The Independent

- Many rail fares in UK will rise by 3.6 percent from January 2018, as a result of the high rate of inflation in July this year - which has been attributed to the EU referendum vote leading to a slump in the value of the pound. ind.pn/2vZKEDy

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World’s Largest Hedge Fund Bridgewater Buys $68 Million of Gold ETF

World’s Largest Hedge Fund Bridgewater Buys $68 Million of Gold ETF

 - World’s largest hedge fund Bridgewater buys $68 million of gold ETF in Q2
- Investors poured $870 million into SPDR Gold in Q2

- Billionaire Paulson keeps 4.36 million shares in SPDR Gold
“Risks are now rising and do not appear appropriately priced in” warns Dalio on Linkedin
- Investors should avoid ETFs and paper gold and own physical gold
- Given negative interest rates, companies should consider allocating some of corporate deposits to physical gold as done by Munich Re

From Bloomberg:

Hedge-fund managers including billionaire John Paulson are being rewarded as investor worries over everything from uneven economic data to U.S.-North Korean tensions fuel a rally in bullion.

At the end of June, Paulson & Co. owned 4.36 million shares of SPDR Gold Shares, a U.S. government filing showed Monday. That’s unchanged from the three months through March. Bridgewater Associates, the world’s largest hedge fund, added the ETF to its portfolio in the quarter, with the purchase of 577,264 shares valued at $68.1 million, a regulatory filing showed Aug. 10. Templeton Global Advisors Ltd. boosted its stake in Barrick Gold Corp.

Investors poured $870 million into SPDR Gold in the second quarter, taking the fund’s total assets to $34 billion as U.S. inflation continued to undershoot the Federal Reserve’s target, putting at risk policy makers’ projection for rising interest rates. While the prospect of monetary policy tightening remains, investors recently turned their focus on geopolitical strains as North Korea’s Kim Jong Un threatened the U.S. territory of Guam, boosting demand for bullion as a haven.

“Prospective risks are now rising and do not appear appropriately priced in,” billionaire Ray Dalio, who manages Bridgewater, said in a LinkedIn post, as he recommended investors allocate 5 percent to 10 percent of their assets to gold.

Dalio also flagged rising odds that the U.S. Congress may fail to raise the debt ceiling, “leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system.”

 Full article on Bloomberg here


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News and Commentary

Gold falls on easing North Korea tensions, strong U.S. data (Reuters.com)

Gold prices inch up ahead of minutes from latest Fed meeting (Reuters.com)

Asian Shares Mixed, Korea Advances as Calm Returns (Bloomberg.com)

UK car lenders vulnerable after surge in risky loans - BoE (IrishTimes.com)

‘Deep’ Subprime Car Loans Hit Crisis-Era Milestone (Bloomberg.com)

Bank of America Warns of an ‘Ominous’ Sign for Stocks (Bloomberg.com)

Investors should be looking at gold (Barrons.com)

UK debt tide is rising – how can you avoid drowning? (TheGuardian.com)

Prepare for negative interest rates in the next recession - Rogoff (Telegraph.co.uk)

US dollar's fall could become a self-fulfilling prophecy (SCMP.com)

Own a few bitcoin but realise it is speculation (StansBerryChurcHouse.com)

Gold Prices (LBMA AM)

16 Aug: USD 1,270.15, GBP 985.13 & EUR 1,082.29 per ounce
15 Aug: USD 1,274.60, GBP 986.92 & EUR 1,084.05 per ounce
14 Aug: USD 1,281.10, GBP 987.34 & EUR 1,085.48 per ounce
11 Aug: USD 1,288.30, GBP 993.67 & EUR 1,096.47 per ounce
10 Aug: USD 1,278.90, GBP 985.39 & EUR 1,091.67 per ounce
09 Aug: USD 1,267.95, GBP 974.80 & EUR 1,079.79 per ounce
08 Aug: USD 1,261.45, GBP 967.78 & EUR 1,068.20 per ounce

Silver Prices (LBMA)

16 Aug: USD 16.68, GBP 12.96 & EUR 14.25 per ounce
15 Aug: USD 16.89, GBP 13.12 & EUR 14.38 per ounce
14 Aug: USD 16.97, GBP 13.09 & EUR 14.39 per ounce
11 Aug: USD 17.09, GBP 13.18 & EUR 14.53 per ounce
10 Aug: USD 17.08, GBP 13.14 & EUR 14.57 per ounce
09 Aug: USD 16.59, GBP 12.76 & EUR 14.14 per ounce
08 Aug: USD 16.39, GBP 12.57 & EUR 13.87 per ounce


Recent Market Updates

- Diversify Into Gold Urges Dalio on Linkedin – “Militaristic Leaders Playing Chicken Risks Hellacious War”
- Gold Has Yet Another Purpose – Help Fight Cancer
- Gold Up 2%, Silver 5% In Week – Gundlach, Gartman and Dalio Positive On Gold
- Great Disaster Looms as Technology Disrupts White Collar Workers
- Gold Sees Safe Haven Gains On Trump “Fire and Fury” Threat
- Silver Mining Production Plummets 27% At Top Four Silver Miners
- Gold Consolidates On 2.5% Gain In July After Dollar Has 5th Monthly Decline
- Gold Coins and Bars See Demand Rise of 11% in H2, 2017
- Greenspan Warns Stagflation Like 1970s “Not Good For Asset Prices”
- What Investors Can Learn From the Japanese Art of Kintsukuroi
- Bitcoin, ICO Risk Versus Immutable Gold and Silver
- This Is Why Shrinkflation Is Making You Poor
- Gold A Good Store Of Value – Protect From $217 Trillion Global Debt Bubble

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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NC Governor: “Monuments Should Come Down”; Durham Antifa Leader Charged With Felony

On Tuesday evening North Carolina Governor Roy Cooper posted a public statement to the website Medium, weighing in on the now raging Confederate memorials controversy: "These monuments should come down," he said. Cooper further called for the state legislature to repeal a law which seeks to prevent state and local authorities from removing them permanently. Cooper published the statement in the wake of a Confederate statue being unlawfully removed by protesters in Durham as local police reportedly stood by. 

On Monday Americans beheld the spectacle of an angry mob pulling down the nearly century old Confederate memorial in front the historic Durham County Court House in North Carolina with no police in sight. Hundreds of antifa protesters which had converged at the location for what organizers called an "emergency protest" in response to racial violence turned fatal in Virginia over the weekend surrounded the monument - a bronze statue of a lone Confederate soldier marching - and quickly pulled it down using a heavy duty rope. The 15-feet tall monument was erected in 1924 and engraved at the base with the words, “In memory of ‘the boys who wore the gray.’ ”

But on Tuesday the Durham County Sheriff’s Office arrested one of the leaders and organizers of the event, Takiya Thompson, a 22-year old student who is depicted in the video as tying the rope around the statue. Thompson was assisted by a few others as she brought a ladder to the base from the back and ascended to the top with the rope - after which the statue and a stone base came crashing down with protesters immediately kicking and spitting on the toppled bronze soldier to the cheers of the crowd.

Students chant: "Cops and Klan go hand in hand!" as Takiya Thompson is arrested.

The chaotic scene included a crowd of mostly young people circling the statue chanting anti-KKK slogans and yelling for it to be ripped down. Video of the incident quickly went viral and was featured on evening cable news - with some commentators like Fox's Tucker Carlson questioning why the police didn't appear to be present and failed to prevent the vandalism and destruction of a state monument on county court house grounds.

Thompson was arrested at her college - the historically black North Carolina Central University - on various charges which include misdemeanor and felony offenses. Specific charges according to the Durham County Sheriff’s Office are injury to a statue, damage to real property, participation in a riot with property damage in excess of $1,500 and inciting others to riot with property damage over $1,500. The latter two charges are felonies which carry the potential for a combined sentence of up to 22 months behind bars.

Video of Thompson's arrest was also circulated widely online accompanied with demands for her release. Various "antifa" associated groups have framed the issue as a necessary step in combatting racial hatred and violence, though chants and signs at the statue site clearly had a much broader political agenda with messages such as, "No Trump, No KKK, No Fascist USA!". Thompson herself, who is part of the far-left Workers World Party described her actions as tearing down "vestiges of white supremacy" to a local news station, and further stated at a Monday news conference, “I’m tired of white supremacy keeping its foot on my neck and the necks of people who look like me... That statue glorifies the conditions that oppressed people live in, and it had to go.”

On its website Workers World Party defines itself as, "a revolutionary Marxist-Leninist party dedicated to organizing and fighting for a socialist revolution in the United States and around the world." Other groups present at the statue vandalism included the Triangle People’s Assembly, Industrial Workers of the World, Democratic Socialists of America, and a mix of other extreme left antifa protesters. One member with the Workers World Party told local station WRAL-TV that "we are at war":

We know that after Charlottesville and all of the racist incidents beforehand, all of the police killings, we are at war. This is war.

Responding to criticism that no state or local authorities intervened as the mob pulled down the statue, Durham county sheriff Mike Andrews said at a press conference on Tuesday that police were worried the crowd would get violent. Sheriff Andrews said:

Don't mistake restraint for inaction. Had I ordered my deputies to engage a hostile crowd, there would have been serious injuries. Statues can be replaced; lives cannot... Let me be clear, no one is getting away with what happened. We will find the people responsible... We can all agree yesterday went too far. Yesterday was not the Durham that I know."

The question of whether the country is facing more racially charged violence in the days and weeks ahead is now the chief issue in national public discourse - it's a question that many Americans likely didn't expect to be asking in 2017. As we reported Tuesday, the issue is now raising the temperature at White House press briefings, and is set to supplant even the Russia probe. In a highly contentious and apparently improvised White House press conference addressing the weekend violence in Charlottesville and the issue of removing Confederate statues across the country, President Trump controversially stated:

This week it's Robert E. Lee. I noticed that Stonewall Jackson is coming down. I wonder is it George Washington next week and is it Thomas Jefferson the week after? You know, you really do have to ask yourself where does it stop.

As discussed previously, it is unlikely that the majority of Americans will readily identify with the representative camps on either side. White nationalists and neo-Nazis on the one hand, and counter-protesters declaring "socialist revolution in the United States" and "war" on all historical monuments deemed tainted by a racist past on the other, are unlikely to attract most ordinary Americans increasingly sickened by the entire escalating spectacle.

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