Wednesday, December 13, 2017

Why Victory In Alabama Imperils The Future Of The Democratic Party -- And A Few Other Thoughts

A humble tweet from Trump accurately puts the loss of the Alabama Senate Seat in perspective...the 2% who chose write-ins.

As a Democrat, I do not think the party has any future, and this is how whatever future we do have left will play out:

The Democrats romantic illusion of a supposed "Resistance" is going to quickly become a sad reality -- but since it was more of a loose and decentralized "coalition", it will be hijacked by the well organized factions on the Extreme Left who will view it as a mandate to adopt an ill-conceived Socialist Platform.

From there, Northern/Coastal Elitists -- who are still out of touch with the realities of the Blue-Collar core of the party itself -- will drive away the remaining Moderate, Rust Belt, and Reagan Democrats still left in the party. Identity politics and issues such as removing Confederate Statues ARE NOT THE MOST IMPORTANT THING in the minds of people who cannot find a job, let alone barely afford to put food on the table.

Vetting potential Democratic Presidential Candidates for 2020 will be priority number one here on out, while going ALL IN on the idea the Trump being impeached is a foregone conclusion.

Economic plans to revitalize the Rust Belt are based on the failures of Soviet Collectivization -- what is extremely more worrisome is this obsession of glorifying Communism and washing away the stains of a man just as evil as Hitler -- Josef Stalin.

In a few months, Trump's Infrastructure bill will pass with bi-partisan support. David Petraeus - a very fine man and the best American General in decades - is poised to join the administration and right the ship (possibly along with Newt Gingrich, which pretty much implies the GOP is going to get its act together and deal with an outlandish Trump by reducing his role as President by 99% and using the Dick Cheney/W. model).

Finally and most importantly...hubris. Simply put, who needs the First Amendment when someone you disagree with should be physically removed/shut up...yeah, 50% of Millennials will go that far.

Who the hell needs the Constitution anyway?

Trump won in 2016, what makes anyone sure he cannot do the same in 2020? Four more years of Trump on top of the three we have left is the diagnosis --- unless, ironically, we start listening to people like Charles Barkley, and Democrats move BACK TO THE CENTER.

Tuesday, December 12, 2017

Tuesday, December 12, Night Wall Street Roundup: S&P, Dow Close Higher; Brent Falls After Hitting $65

By Stephanie Kelly
December 12, 2017

The S&P 500 and the Dow closed higher on Tuesday along with major European stock indexes a day ahead of the Federal Reserve’s expected U.S. interest rate hike, while Brent crude oil fell after reaching $65 per barrel for the first time since mid-2015.

The Fed, whose two-day policy meeting ends Wednesday, is widely expected to raise its benchmark rate to between 1.25 and 1.50 percent.

The S&P and the Dow hit record closing highs, boosted by bank stocks as investors focused on a potential cut in U.S. corporate tax rates and continued strong economic growth.

“As investors become more comfortable (that) the economic recovery appears to be expanding, they’re starting to dip their toes into the value sectors like industrials, financials and energy that need earnings growth to expand,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

The Dow Jones Industrial Average .DJI closed 118.77 points, or 0.49 percent, higher at 24,504.8, the S&P 500 .SPX gained 4.12 points, or 0.15 percent, to 2,664.11 and the Nasdaq Composite .IXIC dropped 12.76 points, or 0.19 percent, to 6,862.32.

Mergers and acquisitions helped boost European stocks, with the pan-European STOXX 600 index closing up 0.66 percent.

Shares of Gemalto (GTO.AS), a Netherlands-based digital security services company, surged 34.6 percent after a 4.3 billion euro bid from French tech consultancy Atos (ATOS.PA).

The earlier jump in oil prices also boosted energy-heavy European stock indexes, with the STOXX 600’s oil and gas sector .SXEP jumping 1.56 percent.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.02 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.43 percent.


Brent LCOcv1 was last at $63.56 per barrel, down 1.75 percent. Oil prices rose to a more than two-year high earlier after Britain’s Forties pipeline was shut due to cracks as a cold snap swept the country.

U.S. crude CLcv1 fell 1.26 percent to $57.26.

The Forties pipeline is important for the global oil market because the crude it carries normally sets the price of dated Brent, a benchmark used to price physical crude around the world and which underpins Brent futures.

The shutdown comes as oil supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) have helped drain some of the excess inventories built up following a global supply glut which began to emerge in late 2014.

Investors will keep their focus on policy decisions worldwide, with a slate of central banks, including the Fed, the European Central Bank and the Bank of England, set to meet this week.

The U.S. dollar rose against a basket of currencies as the Fed began its meeting. Investors will watch for any signs that Fed officials are more optimistic on the prospect of faster growth as lawmakers appear close to passing a major overhaul of the tax code.

The dollar index .DXY rose 0.19 percent, with the euro EUR=down 0.2 percent to $1.1745.

The Japanese yen strengthened 0.05 percent versus the greenback at 113.51 per dollar JPY=, while sterling GBP= was last trading at $1.3317, down 0.15 percent on the day.

The New Zealand dollar NZD= reached a one-month high earlier as investors welcomed the appointment of national pension fund chief Adrian Orr to head the Reserve Bank.

U.S. Treasury yields rose as stronger-than-forecast data on producer prices in November offset average demand at a $12 billion auction of 30-year bonds.

The two-year yield reached its highest in more than nine years as traders anticipated a Fed rate increase.

Benchmark 10-year notes US10YT=RR last fell 4/32 in price to yield 2.3993 percent, from 2.385 percent late on Monday.

The 30-year bond US30YT=RR last fell 2/32 in price to yield 2.7746 percent, from 2.772 percent late on Monday.

Article Link To Reuters:

Hooray For Bitcoin (But Don’t Buy It)

The price reached $19,000 last week. It is certain to hit zero.

By Lawrence Baxter
The Wall Street Journal
December 12, 2017

The price of bitcoin broke $19,000 last week, and traders and speculators are giddy. Fortunes are being made. But in the long run, the smart bet is against bitcoin, for at least four reasons.

First, bitcoin is too volatile to be a reliable store of value. National currencies rest on the real productivity and fiscal capacity of citizens. With bitcoin there is no there there—only some kind of euphoric trust. But this trust is undermined by hackers who have breached bitcoin repositories.

Second, the bitcoin community is using breathtaking amounts of electricity—about as much as all of Denmark, according to one recent estimate. The currency is built so that recording transactions, and thereby generating new bitcoin, requires solving complex mathematical problems. This keeps bitcoin scarce, but it also means that massive server farms are tasked with essentially wasteful calculations. When environmentalists begin to understand this, there will be a firestorm.

Third, the currency is a vehicle for criminal transactions and for avoiding government restrictions on moving capital. This is why bitcoin has been so popular in Venezuela and China, and why such countries are cracking down.

Fourth and most important, bitcoin is on a collision course with sovereign states. Bitcoin was founded on a libertarian ethos, and its proponents zealously resist licensing and regulation. Taken to its logical conclusion, this philosophy would entail the elimination of central banks.

So far, the volume of actual bitcoin transactions has been minuscule. Western governments are dozing. But if bitcoin ever grew to critical mass, politicians around the world would wake up.

King Philip IV of France once could not repay his debts to his bankers, the Knights Templar. So in 1307 he had their leaders arrested on trumped-up charges and then burned at the stake. No modern sovereign will give up the power of the purse without a similar fight, if perhaps a less bloody one.

At the first serious (and likely coordinated) move by governments to regulate or bank the digital currency, bitcoin’s price will crash to zero. Panicked owners will rush to exit and the bubble will burst. Bitcoin futures and options may just as well be based on pixies and fairies. Nothing will be able to save them. Speculators will depart for the next lunacy, leaving behind the greater fools to wonder where their supposed wealth went and demand that government do something about it.

All the same, the bitcoin bubble is doing some good. How can this be? The high price of bitcoin, though wildly fluctuating, is attracting attention to the underlying platform, called blockchain. This technology could revolutionize future transactions of many kinds, providing secure execution of “smart contracts,” as well as fast, efficient claims processing that eliminates expensive middlemen.

Eventually those platforms will be stable and secure. But it will take a lot longer than the frenzied bitcoin market suggests. Before this frontier is reached, bitcoin itself—neither stable nor secure—will have crashed to zero.

Article Link To The WSJ:

Bitcoin Hits Another Record High In March Toward $20,000

By Gertrude Chavez-Dreyfuss
December 12, 2017

Virtual currency bitcoin hit another all-time peak on Tuesday, two days after the launch of the first ever bitcoin futures on a U.S. exchange and ahead of the start of another futures contract next week, as investors grew optimistic that the $20,000-mark is within reach.

On Sunday, Chicago-based derivatives exchange Cboe Global Markets (CBOE.O) launched bitcoin futures, enabling investors to get exposure to the currency via a large, regulated exchange.

The CME Group (CME.O) is expected to launch its futures contract on Dec. 17.

“We’re going to see bitcoin emerge as a payment network,” said Trevor Koverko, chief executive officer of Polymath, a securities token platform.

“Currently bitcoin is being used as a speculative asset and store of value. But as scaling solutions...emerge, bitcoin’s utility dramatically increases along with its price,” Koverko said.

Bitcoin, the world's biggest and best-known cryptocurrency, was quoted at $17,310 on the Luxembourg-based Bitstamp exchange BTC=BTSP, up 5.1 percent on the day. Earlier on Tuesday bitcoin hit a record high of $17,428.42, registering a roughly 20-fold increase in its price for the year as it drew in millions of new investors.

A Reuters technical analysis that measures the ups and downs in trading prices, known as waves, showed bullish momentum for bitcoin.

The technical analysis suggests an extension of a wave, which could mean that bitcoin would easily surge above the psychologically important level of $20,000, according to the Reuters analysis.

”It’s remarkable how back in November $10,000 seemed like a psychological end-of-year target,“ said Lukman Otunuga, research analyst at FXTM. ”With the current gravity-defying bullish momentum, it may be no surprise if bitcoin concludes 2017 on $20,000.

But as bitcoin set a new record, digital currency exchange operators Coinbase and Bitfinex reported problems with service through their websites on Tuesday, frustrating traders seeking to cash in on the latest surge in the value of bitcoin and other cryptocurrencies.

The newly launched one-month bitcoin futures on the Cboe Futures Exchange were slightly tepid, with prices generally steady and volumes about a third of those seen on Monday. Bitcoin futures maturing in January XBTF8 were at $18,450, with just 1,416 contracts traded as of late afternoon in New York, compared with 3,956 contracts on the first day.

A total of $26.4 million was notionally traded so far on Tuesday, compared with around $73 million on Monday.

“The trading volume was huge yesterday as bitcoin price fluctuated in a wide range over the weekend,” said Park Nok-sun, a cryptocurrency analyst at NH Investment and Securities in Seoul.

“Now that the exchange price is relatively calm, it is obvious for futures trading volume to fall.”

While market participants are still heavily divided over the digital currency’s utility, value and safety, they expect the futures contract to offer a legitimate means for institutions to bet on bitcoin. Some investors even expect the futures will offer markets an easier means to take short positions on the cryptocurrency.

The futures are cash-settled contracts based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss.

Article Link To Reuters:

The Force Behind Bitcoin’s Meteoric Rise: Millions Of Asian Investors

Retail investors, mostly in Asia, are pushing the price of bitcoin to new heights.

By Steven Russolillo and Eun-Young Jeong
The Wall Street Journal
December 12, 2017

Behind the stunning rise of bitcoin lies a new force in global financial markets: millions of individual Asian investors.

Despite the attention focused on the launch of bitcoin futures in the U.S. this weekend, the center of gravity for trading the virtual currency, measured by volumes, has been in the East—starting in China, before shifting earlier this year to Japan, and recently to South Korea as the latest hot spot.

And unlike past financial frenzies—such as the dot-com bubble of the late 1990s, when U.S. retail investors only piled in at the later stages of the rally—individual investors have been first to the party, fueling bitcoin’s 1,600% rise this year.

“Bitcoin is one of the few markets we’ve ever had in history where you’ve seen these astronomical gains around the world and the retail investors in Asia are the ones driving it,” said Chris Weston, chief market strategist at IG Group, one of the world’s largest online trading platforms. “It feels like this whole thing is being driven by the average Joe who isn’t nearly as financially literate as a professional fund manager.”

Various forces have stoked Asia’s bitcoin fever. While individual wealth has been growing in recent years, particularly in China and South Korea, lucrative investment opportunities can be hard to find, with property markets expensive and stock markets fully valued.

Anecdotal evidence suggests that Asians are more comfortable with the concept of virtual currencies such as bitcoin, particularly younger people who have grown up in a world of e-commerce and mobile payments.

China last year made up the bulk of trading volume before regulators clamped down. But by the end of November, Japan, South Korea and Vietnam accounted for nearly 80% of bitcoin trading activity globally, according to research firm CryptoCompare, while U.S. trading was about one-fifth of the volume. In the past few weeks, the U.S. share of the overall total has increased.

And while the numbers can fluctuate significantly on a daily basis, South Korea at one point last week accounted for as much as a quarter of bitcoin trading activity, exceeding that of the U.S., according to Coinhills, a data firm that tracks digital currencies. South Korea has a population of about 51 million, compared with 323 million in the U.S.

“Asia in general has a lot of interest in trading cryptocurrencies…[They] are the cool new thing that young people are excited about” said Vitalik Buterin, the creator of another type of cryptocurrency called ethereum, in a recent interview in Seoul.

Lee Sang-chul, 32, is one of the millions of South Koreans who have become besotted with bitcoin. Mr. Lee, who runs a car-detailing shop in the southern port city of Busan, invested 100 million South Korean won (about $92,000) into the virtual currency in October, a decision he describes as life-changing thanks to the gains he has made.

“Before bitcoin, I’d be at my shop from morning to evening. Now, I close shop when I have an appointment or leave early,” said Mr. Lee. He has hired two people at his shop since he started investing in bitcoin, and bought his wife an expensive Chanel handbag for their wedding anniversary.

“My goal is to accumulate as many bitcoin as I can,” Mr. Lee said, adding that he expects the virtual currency to replace standard currencies in the future.

In Hong Kong, cryptocurrency fans gathered one recent Friday evening at what was advertised as a “Bitcoin Bubble Bash.” The meetup was organized by BitMEX, a local trading platform, which arranged for pizza, wraps, beer and wine to celebrate “the most successful year of bitcoin history yet (again!),” according to the event invite. Nearly 200 people registered, with attendees including teachers, equity traders and insurance brokers.

“I’ve doubled my money. It’s only going up. I’m getting rich so quick,” said one person who attended the event.

It is people like these across Asia who have propelled bitcoin’s prices higher this year. Analysts reckon traditional Wall Street professionals won’t become the market’s main driving force for some time.

“It’s the first ever bankerless bubble,” Joshua Brown, chief executive of New York investment-advisory firm Ritholtz Wealth Management, wrote on his blog this month. “There’s never been a phenomenon like this where the general public beats the ‘big money’…We have a full-blown mania on our hands and Wall Street is still at the drawing board.”

Bitcoin’s popularity in South Korea has led to the cryptocurrency often trading at a higher price there than elsewhere. When bitcoin surged past $17,000 last week for the first time, according to CoinDesk, a research site that distributes the most widely quoted price across the crypto space, it hit almost $25,000 on Bithumb, South Korea’s biggest cryptocurrency exchange. Two other Korean exchanges, Coinone and Korbit, also displayed prices well above $20,000. Those spreads have since narrowed.

“Every market had its own local rules and that creates all different types of discrepancies,” said Cedric Jeanson, founder and chief executive of BitSpread, a bitcoin-focused hedge fund.

The bitcoin frenzy in Asia has triggered a backlash from regulators and politicians. China has already this year banned cryptocurrency exchanges and initial coin offerings, a form of fundraising that uses cryptocurrencies.

Late Monday, Hong Kong’s market regulator issued a warning that some unregulated cryptocurrency exchanges could be illegally offering futures and other cryptocurrency-related investment products.

Earlier this month, Pan Gongsheng, deputy governor of China’s central bank, warned investors about bitcoin at an event in Shanghai. “There’s only one thing we can do—watch it from the bank of a river,” he said. “One day you’ll see bitcoin’s dead body float away in front of you.”

South Korean Prime Minister Lee Nak-yon has also sounded the alarm. “If we let things continue, I feel that it will lead to some serious distorted or pathological phenomenon,” he said in a speech last month.

The chairman of Korea’s Financial Services Commission, Choi Jong-ku, on Monday told reporters the government wouldn’t officially authorize any cryptocurrency exchanges or introduce bitcoin futures trading.

“Too many people have jumped in to invest without knowing the basics,” said Josephin Jung, a former teacher turned bitcoin trader in her mid-40s, who regularly gives private lectures on bitcoin in Seoul. “And too many are getting cheated in the process.”

Article Link To The WSJ:

20% vs. 22%: The Tension Over Two Points In The Corporate Tax Rate

President Trump has raised possibility of increase, which amounts to about $200 billion over a decade.

By Theo Francis
The Wall Street Journal
December 12, 2017

Two percentage points are generating a big tussle in the debate over the right corporate tax rate.

As House and Senate lawmakers continue hashing out differences between their tax-overhaul bills, the prospect lingers that they could push the new corporate tax rate to 22%.

Both chambers passed bills that would have cut it to 20%, down from 35% today, as part of a broader package of tax-law changes, and lawmakers are eager to keep it there. Still, President Donald Trump has raised the possibility of such a change, and pressure is growing in some quarters to find money for a variety of interests, from lower-income workers to small grocers.

A 22% corporate rate instead of a 20% one is significant, amounting to about $200 billion in tax revenue over 10 years, based on a rule of thumb that puts each percentage point of corporate tax at about $100 billion over that period, tax experts say.

For U.S.-based companies, either cut would be sharply lower than today’s 35% statutory corporate rate, and push the U.S. rate below that of most major developed countries. “In the end, Corporate America will write a lovely thank-you note to the Congress of the United States, regardless which of those tax rates ends up being imposed,” said University of Southern California law professor Edward Kleinbard.

Moody’s Corp., the bond-rating giant, offered a glimpse of that contrast in a presentation to investors and analysts last week. The company’s effective tax rate under current law is about 30%, Chief Financial Officer Linda Huber said. Each percentage-point reduction in that figure would increase earnings by 7 cents to 8 cents a share.

So cutting the firm’s effective tax rate to 20% would raise earnings by 70 to 80 cents a share, Ms. Huber said, or between $134 million and $153 million using the company’s Sept. 30 share count. She suggested the difference between that and a 22% rate would mean giving up between 14 cents and 16 cents of that benefit. In 2016, Moody’s reported earnings of $1.36 a share, or about $267 million.

Lawmakers are seeking to give companies a reason to invest in the U.S. rather than overseas, and they worry that effort will fail if they adopt a tax rate that isn’t low enough—particularly because other countries are likely to cut their rates in response.

“That’s the whole idea, is to come in at below the average,” Sen. Rob Portman (R-Ohio) told reporters last week. “If we go ahead and take it up to the average or above, then we’re not giving our workers the competitive advantage we’re trying to provide here.”

Companies might be more amenable to a slightly higher rate if that means lawmakers ditch other tax-overhaul provisions they don’t like.

That could include a Senate proposal to maintain the corporate alternative minimum tax, or AMT, or provisions that postpone some tax cuts—the Senate bill puts off the corporate cut until 2019—and make others temporary.

Delays encourage gaming the tax system, as companies consider putting off or accelerating spending to maximum effect, while temporary provisions complicate corporate-tax planning, said Steven Rosenthal, senior fellow at the Tax Policy Center, a nonpartisan think tank run by a former Obama administration official.

“Whatever changes we want to make to the corporate tax rate, we should make it immediate and make it permanent and pay the price,” Mr. Rosenthal said.

Article Link To The WSJ:

The Cost Of The Republicans' Tax Delusion

Sweden could teach the U.S. a lesson in effective tax-cutting. Unfortunately, the GOP's leaders are bad at math.

By Justin Fox
The Bloomberg View
December 12, 2017

Last June, the center-left government in Sweden proposed cutting the country's top corporate tax rate, already a below-the-international-average22 percent, to 20 percent. The rate cut would be offset by a set of limitations on the deductibility of interest, so overall the Swedish government -- currently running a fiscal surplus of more than 1 percent of gross domestic product -- did not expect any revenue loss from the changes.

The proposal has been slowly working its way through the Swedish system since then. After a comment period that ended in September, the government began composing legislation that is due out the first half of next year and expected to take effect on July 1. The interest-deductibility changes, aimed at making "aggressive tax planning" harder and reducing corporate debt, are the centerpiece of the plan, so the reduction in the corporate rate may become bigger or smaller once the interest provisions are finalized.

Here in the U.S., lawmakers are also close to finalizing legislation that would cut the top corporate tax rate to 20 percent and limit interest deductions by corporations. Just like Sweden! Except for this part: Given how much higher the U.S. corporate tax rate was to start with (35 percent), the revenue loss from the rate cut is going to overwhelm the gains from the interest deduction limits. As a result, a fiscal deficit that's currently at 3.5 percent of GDP seems likely to pass 4 percent, even if the legislation delivers a substantial boost to economic growth.

I have written several columns lately about Republican claims that tax cuts will pay for themselves from the resulting increase in economic growth, and have been wondering why I get so worked up about them. The obvious reason is that the claims are false: No serious analysis by even the most sympathetic economist has found any of the big tax-cutting legislation enacted or proposed since 1980 to be even close to revenue-neutral. And so while I really can't say with confidence whether the tax bill being hammered out by House and Senate conferees this week will be good for the U.S. economy or bad, I can say with confidence that when Senate Majority Leader Mitch McConnell asserts that the bill will be revenue-neutral or better, or Treasury Secretary Steven Mnuchin trots out a joke of an "analysis" to make the same claim, they are full of baloney.

But I think what may bother me even more is that this insistence on the magical properties of tax cuts seems to have prevented the U.S. from taking full advantage of the actual positive properties of tax cuts and tax reforms that other wealthy countries such as Sweden have discovered over the past few decades. Since Ronald Reagan was elected president in 1980, it has worked something like this in the U.S.: Republican true believers push for tax cuts that often have quite sensible aspects but leave gaping holes in the budget, which subsequently have to be filled by Republican realists (George H.W. Bush in 1990) or Democrats, who generally try to do so by increasing taxes on the wealthy.

The result is a tax system that relies more heavily on income taxes than is the norm among members of the Organization for Economic Cooperation and Development, the club of the world's affluent democracies, and also levies those taxes more progressively (that is, there's a bigger gap between the top rate and the middle and bottom) than most other rich countries do.

The U.S. also has the highest statutory corporate tax rate among OECD members (which of course may be about to change big time), but the actual taxes it collects from corporations are below the OECD norm. Not coincidentally, the U.S. runs one of the biggest government deficits in the OECD. Its economy has also failed to grow significantly faster than those of other OECD countries (Sweden, for example) with much bigger overall tax burdens -- a result, economist Peter Lindert has convincingly argued, of much more economically efficient tax and social-welfare systems outside the U.S.

Now it's possible that I have the causation backward. Maybe it's mainly Democratic unwillingness to consider the economic benefits of a flatter, more consumption-oriented tax system that has kept the U.S. from moving more in that direction. But given that it's the Republicans who have mostly driven the national discussion on taxes since 1980, and are certainly driving it right now, it seems fair to focus on what they're doing and what they say.

What they've been doing this fall is pushing through a tax bill with some sensible aspects (and some not-so-sensible ones!), while not just largely ignoring its negative impact on government revenue but claiming against all evidence that it won't have a negative impact. Instead of responsibly advancing their priorities, they're leaving a mess for somebody else to clean up. And it's unlikely to be cleaned up in a way that either Republicans or Swedes would approve of.

Article Link To The Bloomberg View:

‘Buy the Dip’ Has Never Been More Popular In U.S. Stocks

By Luke Kawa
December 12, 2017

The practice of treating any and all pullbacks in risk assets as opportunities to accumulate more has become entrenched in global equity markets, especially in the U.S., according to analysts at Bank of America Merrill Lynch.

“Investors no longer fear shocks but love them,” a team led by global equity derivatives researcher Nitin Saksena wrote in a note Tuesday. “Since 2013, central banks have stepped in (or communicated that they may step in) to protect markets, leaving investors confident enough to ‘buy-the-dip.’”

Intraday realized volatility for the S&P 500 Index relative to the realized volatility in the open-close ratio for the benchmark gauge has soared to record highs this year, emblematic of an environment in which buying the dip has become gospel for traders, according to the bank’s analysis of price action going back to 2003. This ratio is also above the 90th percentile for the Euro Stoxx 50 Index and Nikkei 225.

Bank of America Merrill Lynch

In practice, this suggests any early weakness in stocks is being met with an onslaught of buying that propels the index back to where it opened by the time the closing bell sounds.

BofA equity derivatives strategist Clovis Couasnon puts it this way:

Imagine the S&P 500 Index is down 1 percent at midday, only to rebound and finish broadly unchanged. The open-to-close return would be close to zero, but under the surface there were two moves of about 1 percent.

“So if the buy-the-dip behavior is strong enough to cause mean reversion, this will cause intraday vol to be more supported than open-to-close vol,” he explained.

That mentality has been rewarded in 2017 as the market has climbed, with bounce-backs from some of the biggest retreats happening in record time. It took just three sessions for the S&P 500 Index to fully repair the damage caused by May 17’s 1.8 percent decline -- the quickest recovery from a five-sigma selloff since 1962, according to BofA.

Article Link To Bloomberg:

Gillibrand-Trump Fight Is On After Nasty Tweet: ‘He’s Trying To Silence Me’

The New York senator, who called on the president to resign over sexual harassment allegations, responded forcefully to the president's tweets slamming her.

By Annie Karni
December 12, 2017

Democratic Sen. Kirsten Gillibrand’s phone buzzed Tuesday morning while she sat in the Hart Senate Office Building, participating in her bipartisan Bible study group.

She ignored it. But when a member of her senior staff rang her again, and then again, the junior senator from New York finally stepped out into the hallway, bracing herself for a potential crisis.

Instead, one of the staff members on the line alerted Gillibrand to a political gift — a tweet from President Donald Trump, which was read to her over the phone:

“Lightweight Senator Kirsten Gillibrand, a total flunky for Chuck Schumer and someone who would come to my office ‘begging’ for campaign contributions not so long ago (and would do anything for them), is now in the ring fighting against Trump. Very disloyal to Bill & Crooked-USED!”

Less than 24 hours earlier, Gillibrand had joined four male senators in calling on Trump to resign because of the multiple allegations of assault and sexual misconduct. (Hawaii Democratic Sen. Mazie Hirono became the second female senator to join the call Tuesday.) Trump has repeatedly denied those allegations. But it was Gillibrand alone who managed to bait him into a response.

“What do you want to say?” two of Gillibrand’s senior staff members asked her, as she paced in the hallway. Her response, according to an aide, was immediate and visceral: “He’s trying to silence me.”

After crafting a tweet to that effect – “You cannot silence me or the millions of women who have gotten off the sidelines to speak out about the unfitness and shame you have brought to the Oval Office” – Gillibrand returned to Bible study, filling in her colleagues about the cause of the disruption, according to an attendee.

One of the members of the Bible study group, Oklahoma Republican Sen. James Lankford, later defended his prayer partner. “Our leaders should focus on the issues, not personal attacks,” Lankford said in a statement to POLITICO.

Gillibrand’s aides, meanwhile, clarified to reporters that she had met with Trump just once, in 2010, during a period when he gave money to many Democratic elected officials. Ivanka Trump, they noted, had also been present at the meeting.

The confrontation with Trump elevated a fight against sexual harassment that Gillibrand has been waging for years — and distinguished her from the pack of potential 2020 challengers all vying to play the role of Trump slayer.

In recent weeks, Gillibrand has made it clear she is outraged by the charges of sexual harassment being lodged against powerful men in media, politics, entertainment and other industries – and doesn’t want to litigate the gradations between unwanted touches and full-blown sexual assault. “Let’s say the line is here, and it’s all bad,” Gillibrand said last week, during POLITICO’s Women Rule conference.

Her no-tolerance policy drew cheers from the majority-female audience. But on Tuesday, some Democrats worried her rush to the frontlines of the #MeToo movement – she was one of the first senators to call for Minnesota Democratic Sen. Al Franken to resign last week, and earlier this month said President Bill Clinton should have resigned over his affair with Monica Lewinsky – carries with it some potential risk in a moment where the rules of the game are being figured out in real time.

“There should be rigorous pursuit of these kinds of charges, but right now there are no rules,” said David Axelrod, a former top adviser to President Barack Obama. “She’s been a leader on the issue [of sexual assault]. But the danger for her is looking so craven and opportunistic it actually hurts her.”

Another top Democratic operative worried Gillibrand risked putting the conviction before the trial. “If you cared about the Democrats and 2018,” said the operative, “you would be calling for hearings [for Trump]. When you call for resignation, you’re jumping the gun.”

The operative added: “I’d rather have congressional candidates being asked, ‘do you support hearings?’ Calling for resignation is not really what’s best for the party, but it’s good for her.”

On Tuesday, Democrats who had left Gillibrand in the wilderness after her comments on Clinton rushed to her defense. Warren accused Trump of trying to “slut-shame” Gillibrand by insinuating she might have traded sexual favors for campaign cash. But White House officials defended the president’s tweet, arguing that the intention was not to launch a sexist broadside – but to underscore that Gillibrand was a “swamp” politician who relied on wealthy donors like Trump to get where she is today.

White House aides on Tuesday went on the defensive Tuesday, sifting through vintage Trump tweets, looking for similar attacks on male politicians like New York Attorney General Eric Schneiderman, to prove that Trump’s attack of Gillibrand was not sexist.

“He’s talking about the way our system functions as it is,” press secretary Sarah Huckabee Sanders said at Tuesday’s press briefing. “Politicians repeatedly beg for money... there’s no way it’s sexist at all.” Calling Gillibrand a “wholly owned subsidiary” of her campaign donors, Sanders added: “This president is someone who can’t be bought.”

The White House did not argue, however, that Trump was attempting to delegitimize a potential political challenger.

“His legitimacy as president is widely questioned, and his reaction is to question the legitimacy of someone else,” said Stu Loeser, a Democratic operative and a former aide to New York Democratic Sen. Chuck Schumer. “His implication is that Gillibrand is only where she is because of people like him, which undermines her legitimacy.”

It’s a similar strategy to the one Trump has employed against another potential female 2020 challenger: Warren. By calling her “Pocahontas,” Trump has attempted to remind voters that as a professor at Harvard Law School, Warren had identified herself as a minority with Native American heritage. Trump’s implication is that Warren furthered her own career with a false affirmative action claim – a question of legitimacy.

Trump’s effort to delegitimize Gillibrand on Tuesday, however, only boosted her profile. A pre-scheduled press conference on tractor- trailer truck safety suddenly became must-see TV. Gillibrand called Trump’s tweet a “sexist smear.”

For Gillibrand, who for years has made issues of sexual assault in the military and sexism in Congress central to her political platform, Trump’s tweet was widely seen as a fundraising boon.

“I’m going to keep speaking out with the millions of women who are raising their voices,” Gillibrand wrote in a fundraising email her staff blasted out Tuesday afternoon. “We won’t be silenced by a tweet.”

The comedian Samantha Bee tweeted: “May this tweet be @SenGillibrand’s superhero origin story and ignite her 2020 campaign to replace your sexist ass.”

Testimonials defending Gillibrand flooded in from feminist icons like Gloria Steinem, local politicians like New York City Mayor Bill de Blasio, celebrities like actress Connie Britton—Gillibrand’s college roommate—and colleagues like Warren. (Hillary Clinton did not weigh in.)

But Axelrod added that it remains to be seen who emerges as the overall political winner from the #MeToo movement. “The important thing is that there is an established set of rules,” he said. “It may be that the person who emerges here may be the one who says, let’s be rigorous and let’s be consistent, about how we approach these things.”

Article Link To Politico:

Alabama Senate Election: 5 Things To Watch

Doug Jones' chances hinge on African-American turnout and college-educated crossover voters, while Roy Moore is banking on an animated conservative base.

By Daniel Strauss
December 12, 2017

Alabama’s tumultuous special Senate election will take a final unconventional turn on Tuesday, either electing a Republican facing allegations of child predation or giving Democrats their first statewide win in nearly a decade in one of the reddest states in America.

Republican Roy Moore was presumed to be the favorite, despite a history of controversial comments and actions, after defeating appointed Sen. Luther Strange in the GOP primary. But Moore’s standing fell after multiple women accused him of sexual misconduct when they were teenagers. Remarkably, Moore remained competitive despite Senate Republicans pulling their support and some calling for him to be expelled from the Senate if elected, but Democrat Doug Jones has surged into contention for Attorney General Jeff Sessions’ old seat.

Polling of the race has been all over the place, and the results will hinge on just who decides to vote in the highly unusual December special election. Jones’ campaign has made a massive push to turn out black voters and convince Republicans he’s a Democrat worth backing, while the controversy surrounding Moore has inflamed committed backers who are sticking with him.

Polls close at 8 p.m. Eastern. Here are POLITICO’s five things to watch as Moore and Jones face off:

Do black voters turn out in force for Jones?

The single biggest piece of the Democratic coalition in Alabama is the African-American vote, and Jones likely needs at least one-quarter of the electorate to be black in order to win. As a result, even as Jones kept most of the national Democratic Party at arm’s length this fall, he has campaigned with Georgia Rep. John Lewis, the civil rights legend, and other African-American politicians including New Jersey Sen. Cory Booker and former Massachusetts Gov. Deval Patrick. Former President Barack Obama and Vice President Joe Biden recorded late robocalls urging Jones supporters to vote. And Jones has spoken incessantly on the trail about prosecuting Ku Klux Klansmen responsible for the 16th Street Baptist Church bombing when he was a U.S. attorney.

The black vote is concentrated in Alabama’s biggest cities as well as the stretch of smaller “Black Belt” counties, like Selma’s Dallas County and Tuskegee’s Macon County, running through the middle of the state. High turnout there is a must-have building block for a Jones victory.

How will college-educated white voters break?

College-educated whites have become a bigger and bigger part of the Democratic vote in other states around the country. But they have remained reliably Republican in Alabama — except when it comes to Roy Moore.

When the controversial Moore ran for state Supreme Court in 2012, he ran well behind GOP presidential nominee Mitt Romney in Alabama’s most-educated counties, and he performed poorly there in this year’s Republican primaries, too. Since then, lawn signs backing Jones have sprouted in some more moderate Republican suburbs.

“Hoover, Vestavia [Hills], Homewood, Mountain Brook — that’s your college-educated white box,” Alabama Republican strategist Blake Harris said of several Birmingham suburbs.

Public polling has shown Jones peeling off more support from this group than from blue-collar whites, but it’s unclear just how much crossover support Jones can count on — or whether a big chunk of these voters will simply throw up their hands at both candidates and not cast ballots at all. Watch Shelby County, a big suburban county south of Birmingham. It leans heavily Republican, but it has more college degrees per capita than anywhere else in Alabama, and Jones will likely need to run well ahead of Hillary Clinton and other past Democratic presidential nominees there to win.

Will rural conservatives stick with Moore?

While Jones wants to crank up turnout in Alabama’s big cities, Moore can outdo him by piling up decisive wins in Alabama’s more numerous rural counties. That’s where Moore drew his strength from in both this year’s Republican primaries and in his past runs for statewide office, thanks in part to strong support from religious conservatives.

“He's got a real solid core of supporters who are going to stick with him come hell or high water. You're just not going to be able to pry any of those folks away,” said Democrat Bob Vance, who lost to Moore in the 2012 state Supreme Court race.

Moore’s path looks much like President Donald Trump’s in that sense — and Trump gave him a late boost in the campaign, affirming his support with days left and prompting the Republican National Committee to reengage in the race. (The RNC had previously pulled out of Alabama after the sexual misconduct allegations against Moore.) Trump’s help, including a last-minute get-out-the-vote robocall, could be critical.

“If Judge Moore does not carry the rural counties, which are his stronghold, within about a 57-60 [point] margin, then he’s probably going to have a more difficult time than he would expect to have,” said Alabama Secretary of State John Merrill, a Republican.

Does the write-in vote hurt Moore?

While Trump went all-in for Moore, other Republican leaders — including Alabama Sen. Richard Shelby — have declared that they can’t support him, and a large write-in vote from voters who typically support the GOP could have a big effect if the race is close.

“I couldn't vote for Roy Moore. I didn't vote for Roy Moore,” Shelby said Sunday on CNN’s “State of the Union.” “But I wrote in a distinguished Republican name. And I think a lot of people could do that. Will they do it? I'm not sure.”

Shelby’s call has been joined by Romney and others, and Democrats are also stoking the write-in flames. The Democratic opposition research organization American Bridge has also released a video urging voters who can’t bring themselves to vote for Jones or Moore to write-in University of Alabama football head coach Nick Saban. Over past elections, Saban has received hundreds of write-in votes, according to the Tuscaloosa News.

How will the Republican Party react to the results?

Trump is sure to herald a Moore win if it comes to pass, as he has with other special election victors this year. But other than that, it’s hard to say how the rest of the GOP will react Tuesday night, whether Moore or Jones wins the election.

The National Republican Senatorial Committee pulled its support from Moore last month, and its chair, Sen. Cory Gardner of Colorado, called for him to be expelled if he were elected to the Senate. Many other Republican senators want nothing to do with Moore. Senate Majority Leader Mitch McConnell has said he wished Moore had dropped out of the race and reiterated that Moore should expect to face an ethics inquiry if he is elected. Moore has explicitly run against the GOP Senate leader during his campaign. Needless to say, their relationship may be a difficult one if Moore goes to D.C. For example: If Moore is elected and sworn in as a senator, the Senate Republican Conference doesn’t have to assign him to committees, though he could still vote and offer amendments on the floor.

But a Jones victory would present plenty of other problems for Washington Republicans, reducing their Senate majority to a spare 51 seats and putting control of the chamber up for grabs in the 2018 midterms. And either way, the special election could cause the GOP to accelerate deliberations on its tax bill while Strange, a reliable Republican vote, is still in the Senate. (It may take weeks for Alabama to certify the results and seat the new senator.)

Article Link To Politico:

Alabama's Safe GOP Senate Seat Becomes A Toss Up

Candidates make final pitch for Tuesday’s Senate election; Democrat campaigns in Birmingham as GOP hits small town.

By Arit John
December 12, 2017

Alabama’s U.S. Senate race should have been an easy victory for a Republican candidate in a state that hasn’t sent a Democrat to the chamber in a generation and overwhelmingly backed President Donald Trump in last year’s election.

Instead, Tuesday’s election is a dead heat that defies easy prediction.

The two candidates -- Republican Roy Moore and Democrat Doug Jones -- cast their votes early this morning. Moore rode a horse to his polling place 60 miles northeast of Birmingham, while Jones voted in a Baptist church in a Birmingham suburb. Now their campaigns are doing everything they can to encourage their supporters to go to the polls before they close at 7 p.m. Central Time.

Moore had held a steady lead in polls of Alabama voters until allegations that he initiated a sexual encounter with a 14-year-old girl and assaulted a 16-year-old, along with accounts he pursued relationships with other teenage girls, when he was in his 30s. He has denied the accusations and sought to tar Jones as a pro-abortion liberal who is out of sync with voters in a conservative state.

Broader Implications

The outcome will reverberate beyond Alabama as both parties prepare for next year’s congressional elections.

An upset win by Jones in the heavily Republican state would add to a string of victories for Democrats in other statewide elections this year, raising the prospect of a swing in voter sentiment that could give them control of one or both chambers of Congress in 2019. It also would complicate the Republican legislative agenda by leaving them with thin 51-49 majority in the Senate.

A Moore win would keep the Alabama seat in Republican control but with a senator who’s vowed to battle the party’s leadership in Washington. Majority Leader Mitch McConnell has said Moore would likely face an ethics inquiry over the allegations against him, and Democrats are certain to use his presence in the Senate against Republicans in their campaigns. Moore could only be seated after the state certifies the election, which could occur as late as Dec. 23.

The two candidates made their closing arguments on Monday night in settings that evoked the cultural and political divide that’s come to define the two parties in modern America.

Jones held a rally in Birmingham, Alabama’s biggest city. With him were local and national celebrities: retired NBA player and Alabama native Charles Barkley, actress Uzo Aduba and newly elected Birmingham Mayor Randall Woodfin.

Nearly 200 miles away Moore held a “drain the swamp” themed election night eve event in a barn in Midland City, a small town in rural southeast Alabama. He also was backed by a small team of celebrities, including Breitbart News Executive Chairman Steve Bannon, Texas Representative Louie Gohmert, and former Milwaukee Sheriff David Clarke.

Trump wasn’t there, but his presence was felt. Bannon, who had served as Trump’s chief strategist, told the crowd of about two hundred Moore supporters that Tuesday’s election is “greater than Judge Moore, it’s even greater than the people of Alabama.” At stake, according to Bannon, is whether the Washington establishment and the country’s elites can thwart what voters wanted when they elected Trump.

“It is the Trump miracle versus the nullification project,” he said.

Political Divide

The race to fill the Senate seat once held by Attorney General Jeff Sessions likely will be decided along the urban-rural lines that played a major role in last year’s presidential election and the votes are being cast amid shifting attitudes about sexual misconduct, intense partisanship and deep anti-establishment resentment in parts of the electorate.

The controversies that have dogged Moore through the final weeks of the election continued into Monday night’s rally, as his wife, Kayla, attempted to respond to allegations that her husband has made comments that were anti-Semitic while blaming “fake news” reporters in the audience.

"Fake news," she said, "would tell you that we don’t care for Jews. I tell you all this because I’ve seen it all, and I just want to set the record straight while they’re all here." After a pause, she added, "One of our attorneys is a Jew. We have very close friends that are Jewish and rabbis and we also fellowship with them."

Trump’s Agenda

Robert Cay, a 73-year-old veteran from Enterprise, Alabama, said after the Moore event that it’s about “our existence and the fate of the country.” He said that Tuesday’s vote “means that we’re going to help as much as we can to help Trump with his agenda and to keep things moving forward.”

Three polls released Monday showed how hard the outcome is to predict: An Emerson College poll found Moore up by nine percentage points, a Fox News poll showed Jones up by 10 points and a Monmouth University poll showed the candidates tied with 46 percent each.

Spencer Kimball, pollster at Emerson University, said the difference between his and Fox’s polls came down to estimates about what the electorate will look like on Tuesday.

Gauging Turnout

“Because it’s a special election, does a certain demographic turn out disproportionately than how they normally turn out?” Kimball said.

Moore latched on to the anti-establishment, populist message that helped Trump win the White House. It helped him win a primary run-off against the candidate backed by Trump, Senate Majority Leader Mitch McConnell and other senior GOP officeholders.

The same themes -- particularly disdain for outside elites -- are central in his race against Jones and in his response to the allegations of sexual misconduct. One recent fundraising email is titled “Defeat the Elite” with pictures of Republicans, Democrats and the logos of national news organizations including CNN and the Washington Post.

Jones initially kept national Democratic Party figures at arms length to avoid feeding resentment among moderate Republicans. In recent weeks the outside help has been pouring in.

Former President Barack Obama and former Vice President Joe Biden recorded phone calls to be blasted out to potential Jones voters. In the weekend leading up to the election, Jones campaigned with prominent black politicians.

Article Link To Bloomberg:

Monday, December 11, 2017

Monday, December 11, Night Wall Street Roundup: Wall St. Ends Higher With Help From Tech, Energy

By Sinead Carew
December 11, 2017

Wall Street indexes closed higher on Monday and the biggest drivers were technology and energy sectors as oil prices rose and investors waited for an expected U.S. Federal Reserve rate hike later in the week.

Technology stocks were back in favor with the biggest boost from Apple Inc (AAPL.O) as investors eyed a continuation of strong fundamentals in the sector.

“Investors are a little exhausted from the rise of the market and making sector moves,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey. “They’re not willing to commit a whole lot of new money at these levels but they’re rotating a bit. Some of it is year-end tax planning.”

Traders, waiting for the Fed’s two-day rate setting meeting to begin on Tuesday, see an 85-percent probability for a 25 basis point hike to the Fed funds rate target and a 15-percent chance of a 50 basis point hike, which would be the third rate hike this year, according to CME Group’s Fedwatch tool.

“Valuations are getting to the point where even good news on the economy might pose some additional risks to the market. There’s the risk that good news for the economy may be bad news for markets because the Fed is at the cusp of a level of tightening that could dampen growth,” said Mark Heppenstall, CIO at Penn Mutual Asset Management in Horsham, Pennsylvania.

The Dow Jones Industrial Average .DJI rose 56.87 points, or 0.23 percent, to 24,386.03, the S&P 500 .SPX gained 8.49 points, or 0.32 percent, to 2,659.99 and the Nasdaq Composite .IXIC added 35.00 points, or 0.51 percent, to 6,875.08.

Most of the 11 major S&P sectors ended higher, with the biggest boost from a 0.8 percent gain in information technology stocks .SPLRCT. The S&P energy .SPNY index rose 0.71 percent as oil prices rose after a North Sea pipeline shut for repairs. [O/R]

The S&P’s financial .SPSY and industrial .SPLRCI sectors were the benchmark’s only decliners for the day with losses of around 0.2 percent.

Healthcare investors focused on makers of drugs for blood disorders after clinical data presentations at the annual American Society of Hematology four-day meeting in Atlanta.

Shares of Bluebird Bio (BLUE.O) closed up 17.9 percent at $201.8, after hitting a record high of $222.03, following news of positive responses in an early stage myeloma study of its experimental gene-modifying immunotherapy drug co-developed with Celgene (CELG.O). Celgene’s shares rose 1.8 percent.

Interest in the surge in digital currency bitcoin and the Sunday debut of futures trading in the cryptocurrency continued to fuel bets on related stocks. Shares of Marathon Patent (MARA.O) rose 42.9 percent while Xunlei (XNET.O) climbed 29.4 percent. Riot Blockchain (RIOT.O) rose about 45.5 percent. The equity market appeared to shrug off an early morning explosion that officials called an attempted terrorist attack at one of New York’s busiest commuter hubs. The suspect wounded himself and three others.

Advancing issues outnumbered declining ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.14-to-1 ratio favored decliners.

The S&P 500 posted 31 new 52-week highs and no new lows; the Nasdaq Composite recorded 84 new highs and 55 new lows.

More than 5.85 billion shares changed hands on U.S. stock exchanges compared with the 6.5 billion average for the last 20 sessions.

Article Link To Reuters:

Bitcoin Futures Suggest Breakneck Rise In Price To Slow

By Saqib Iqbal Ahmed, Jemima Kelly, Gertrude Chavez-Dreyfuss
December 11, 2017

Newly launched bitcoin futures on Monday suggested that traders expect the cryptocurrency’s blistering price gains to slow in the coming months, even as it blasted above $17,000 to a fresh record high in the spot market.

Chicago-based derivatives exchange Cboe Global Markets (CBOE.O) launched the futures late on Sunday, marking the first time investors could get exposure to the bitcoin market via a large, regulated exchange.

The one-month bitcoin contract <0> opened at 6 p.m. local time (2300 GMT) on Sunday at $15,460. By late afternoon on Monday in New York, it was trading at $18,650, roughly 8 percent above bitcoin's spot price of $16,900 on the Bitstamp exchange BTC=BTSP.

Bitcoin earlier hit a record high of $17,270.

Its steep gains and rapid rise have attracted investors around the world as well as intense scrutiny from government regulators, which is the very opposite of what its creators wanted when it first launched bitcoin more than eight years ago.

“The bitcoin founder should be horrified seeing it rise so quickly, as any serious focus on it and its recent explosive move higher will soon end its freedom,” said John Taylor Jr, president and founder of research firm Taylor Global Vision in New York.

Taylor believes that based on his charts, bitcoin has not yet peaked, but as soon as the “upmove ends, it will crash.”

Given bitcoin has almost tripled in value over the past month, and was up more than 15 percent on Monday alone, the futures pricing suggested investors see price increases moderating.

Bitcoin futures were already offered on some unregulated cryptocurrency exchanges outside the United States, but backers said the U.S. market debut would confer greater legitimacy on the volatile cryptocurrency and encourage its wider use.

The CME Group (CME.O) is expected to launch its futures contract on Dec. 17.

Volatility Concerns

Although there are hopes that the futures will draw in new investors, most fund managers at larger asset managers and institutional investors said bitcoin remains too volatile and lacks the fundamentals that give other assets value.

“There’s no place for bitcoin in a multi-asset portfolio given the very high volatility,” said Robeco Chief Investment Officer Lukas Daalder.

The two-month contract was trading at $18,750, an 11 percent premium over the spot price, while the three-month contract was changing hands at $18,140, a roughly 12 percent premium.

While modest when compared with bitcoin’s 270 percent increase over the past three months and 230 percent rise in the last two months, those levels still indicated a lack of large “short” positions betting against bitcoin.

“Anyone, especially a professional trading outfit, would be crazy to actually short sell this bull market,” said Nick Spanos, founder of Bitcoin Center NYC. “But just because it doesn’t happen on day one doesn’t mean it won’t in the future.”

Bitcoin was up more than 1,600 percent so far in 2017, having started the year at less than $1,000.

"March Toward Legitimization" 

As of early afternoon trading in New York, 3,951 one-month contracts had changed hands, meaning around $73.1 million had been notionally traded. That compares with daily trading volumes of more than $21.5 billion across all cryptocurrencies, according to trade website Coinmarketcap.

There had been speculation that the futures launch would trigger more gyrations in the market. But while volatile compared with traditional currencies or assets, the rise on Monday was relatively tame for bitcoin.

Bitcoin surged more than 40 percent in 48 hours last week, before tumbling 20 percent in the following 10 hours.

“(Bitcoin futures) will speed up the march towards legitimization of an asset class that only a few years ago many law enforcement agencies would have argued had limited legitimate reasons for people to use,” said Jo Torode, a financial crime lawyer at Ropes & Gray in London.

The futures are cash-settled contracts, allowing investors exposure without having to hold any of the cryptocurrency.

The futures are based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs and brothers Cameron and Tyler Winklevoss.

Dramatic Gains

Bitcoin was set up in 2008 by an individual or group calling themselves Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation difficult if not impossible.

Central bankers and critics of the cryptocurrency have been ringing the alarm bells over its surge in price and other risks such as whether the opaque market can be used for money laundering.

“It looks remarkably like a bubble forming to me,” the Reserve Bank of New Zealand’s Acting Governor Grant Spencer said on Sunday.

Somebody who invested $1,000 in bitcoin at the start of 2013 would now be sitting on around $1.2 million.

Heightened excitement ahead of the launch of the Cboe futures gave an extra kick to the cryptocurrency’s scorching run this year.

The launch has so far received a mixed reception from big U.S. banks and brokerages.

Several online brokerages, including Charles Schwab Corp (SCHW.N) and TD Ameritrade Holding Corp (AMTD.O), did not allow trading of the new futures immediately.

The Financial Times reported on Friday that JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) would not immediately clear bitcoin trades for clients.

Goldman Sachs Group Inc (GS.N) said on Thursday it was planning to clear such trades for certain clients.

Article Link To Reuters:

People Are Taking Out Mortgages To Buy Bitcoin

-- Bitcoin is in the "mania" phase, with some people even borrowing money to get in on the action, regulator Joseph Borg said.
-- "We've seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines," he said.
-- Bitcoin has been soaring all year, starting out at $1,000 and rocketing above $19,000 on the Coinbase exchange last week.

December 11, 2017

Bitcoin is in the "mania" phase, with some people even borrowing money to get in on the action, securities regulator Joseph Borg told CNBC on Monday.

"We've seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines," said Borg, president of the North American Securities Administrators Association, a voluntary organization devoted to investor protection. Borg is also director of the Alabama Securities Commission.

"This is not something a guy who's making $100,000 a year, who's got a mortgage and two kids in college ought to be invested in."

Bitcoin has been soaring all year, starting out at $1,000 and rocketing above $19,000 on the Coinbase exchange last week. The price on Coinbase, which accounts for a third of bitcoin trading value, is often at a premium over other exchanges.

The cryptocurrency was trading at just under $16,700 on Coinbase at 2:21 p.m. New York time Monday.

"You're on this mania curve. At some point in time there's got to be a leveling off. Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don't know," Borg said in an interview with "Power Lunch."

He also doesn't think futures contracts legitimize the digital currency.

Bitcoin futures, trading under the XBT ticker symbol, debuted on the Cboe futures exchange on Sunday night. The CME plans to launch its bitcoin futures Dec. 18.

While futures contracts are regulated, bitcoin itself is not. Borg said that's because innovation and technology always outrun regulation.

"As [technology] continues to accelerate and continues to increase, regulators have got to understand what it is that the innovation's coming up with and we're still trying to get educated," he said.

"We're looking at it from a money transmission point of view but that doesn't cover the entire bitcoin space."

Article Link To CNBC:

How The Fed Could Surprise The Markets At Yellen's Farewell Meeting

-- The Fed begins its two-day meeting Tuesday, and it is expected to bump interest rates by a quarter point Wednesday.
-- The wild card for the markets, however, is what the Fed says and does with regard to tax legislation.
-- Many economists and strategists expect the Fed to retain its three-rate-hike forecast, but Seth Carpenter, UBS chief U.S. economist, says the Fed could add a fourth rate hike to its forecast based on an improving economy and stimulus from tax cuts.

By Patti Domm
December 11, 2017

The Fed is expected to raise interest rates Wednesday, but it's how the Fed responds to the tax bill that is the wild card for markets.

Many strategists and economists expect the Fed to leave its interest rate forecast in place, but there's a case to be made that Fed officials could acknowledge the tax bill could create stimulus, bumping their outlook for GDP and interest rates. One argument against that is that it is the last meeting for Fed Chair Janet Yellen, and the Fed may stick with the status quo ahead of the expected transition to Jerome Powell as Fed chair early next year.

"The surprise we have to look for is how the Fed may interpret tax changes going forward. They've had three rate hikes for 2018. Does this move them to four? There's a very low threshold to move up to four hikes. It just takes three voters. That's really what people are going to focus on," said Jim Caron, portfolio manager and fixed income strategist at Morgan Stanley Investment Management.

Even before Yellen's departure, the makeup of the Fed is changing, as are the voting members for next year, and the market expects to hear a slightly more hawkish majority.

"I really can't see it but they could surprise," said Caron, adding the Fed could acknowledge just slight growth from the tax cuts, which should not be much of a bump for the broader economy. Yellen would then have to use her press briefing to explain a changed interest rate forecast, but Caron said he does not expect a change in forecast or any surprises from Yellen.

Seth Carpenter, chief U.S. economist at UBS, however, says he is an "outlier" and believes the Fed could up its forecast to four interest rate hikes for 2018, instead of the current three. Carpenter said it would not be a radical departure for Fed officials, since some were already willing to consider the impact of fiscal stimulus earlier this year even when there was no legislation pending before Congress.

Now that the House and Senate are working on a combined tax bill, he said Fed officials have more reason to include a small increase in GDP growth. He expects the tax bill to add a quarter percentage point to growth in each of the next several years.

"I think they could make a change to their GDP projection. They could potentially change inflation," he said. They also could change the Fed's current 2018 forecast for three hikes, presented on the "dot plot," a chart which includes each official's forecast, presented as an anonymous dot.

Michael Gapen, chief U.S. economist at Barclays, said he expects the Fed to stick with its forecast for three interest rate hikes but some officials could up their individual forecasts to four. He said concerns about sluggish inflation could keep some Fed officials with a two or three rate hike forecast but the more they lean toward fiscal stimulus, the more chance individual officials could move up to four.

Gapen said he thinks what will happen is a "little uptick in GDP" although his guess is "inflation looks the same. That should argue for just a modest adjustment in the interest rate path. I think you have to wait for tax cuts really to have passed."

Gapen did revise higher his own forecast for rate hikes from two to three for next year, based on the falling unemployment rate and the arrival of Powell. Barclays economists now expect three rate hikes — in March, June and December — taking the federal funds rate to 2 to 2.25 percent by the end of the year. The tax cuts could begin to impact economic activity in 2018, and that could lead to a faster Fed hiking cycle if economic activity picks up.

The Fed comments are unlikely to provide much new information, and Yellen is unlikely to say much at her briefing, Gapen said. "She's probably not wanting to make news because her role is getting diminished and Powell's getting elevated. I would just look for things to be balanced."

Article Link To CNBC:

Bitcoin Is A Bit Of A Miracle At Any Price

The trading range of $15,000 to $20,000 doesn't seem crazy when you compare it with other assets.

By Tyler Cowen
The Bloomberg View
December 11, 2017

There is a joke circulating on Twitter: “A boy asked his bitcoin-investing dad for 1 bitcoin for his birthday. Dad: What? $15,554??? $14,354 is a lot of money! What do you need $16,782 for anyway?”

To put it mildly, the price of bitcoin has been volatile as of late. Last week, the price rose about 40 percent in 40 hours, with plenty of seesawing before and after.

In August I argued that bitcoin is here to stay, due to its role in helping people transact without a gatekeeper, and its function as a store of value and for portfolio diversification. The next question, of course, is what the price of bitcoin should be, and whether the recent range of $15,000 to $20,000 is insanely high, just right or still undervalued.

One approach is to ask what role bitcoin and other cryptoassets are likely to play in global portfolios. Under one (very rough) estimate, total global wealth is about $241 trillion. Because the total value of cryptoassets has been hovering in the neighborhood of $300 billion, that constitutes about one-eighth of 1 percent of the total global portfolio. If you think of cryptoassets as taking on some of the hedging functions of gold or government securities, that valuation doesn’t sound so crazy.

To consider some other rough estimates, the total estimated value of the above-ground gold stock is about $7.5 trillion. Diverting 1 percent of gold holdings into bitcoin gets its value up to about $5,000. The current bitcoin price is several times beyond that, but a range of $15,000 to $20,000 again seems within the bounds of reason, at least to this observer. To the extent bitcoin is a store of value and a hedge, it is competing with gold more than with government fiat currencies, which ultimately are defined by their transactions uses.

Or compare a $200 billion to $300 billion market cap for bitcoin to a $450 million price for a single painting by Leonardo da Vinci -- one that is arguably mediocre and perhaps not by Leonardo’s hand at all. Bitcoin values seem at least as easy to defend, even if they have a subjective component just as artworks do. In recent years, the world has moved more broadly to much higher valuations for focally important stores of wealth, whether they be Swiss government bonds, famous paintings or bitcoin. We don’t know those higher valuations will prove correct in the longer run, but seeing bitcoin as part of that broader trend is very different from simply asserting it is a bubble to be banned, as Nobel laureate Joseph Stiglitz has done.

On one common view, the high and rapidly fluctuating price of bitcoin is a sign of a malfunctioning market. Maybe so, but there is an alternative hypothesis that bitcoin is still not very well understood. That means even small pieces of information can cause big revaluations. Perhaps it will take us a very long time to understand the properties ruling the value of bitcoin and other crypto-assets. That could mean the asset’s price gyrations become the new normal rather than an exceptional period of unusual froth.

One striking feature of bitcoin is the sociology of its acceptance and promotion. There is a small coterie of people who have mastered the details of its operation, and ownership is quite concentrated. You can take that as evidence for a manipulative clique and thus a bubble, or it may be a sign that the price could yet rise. I am regularly struck by how many people, including business sophisticates and my professional economists, have little idea how bitcoin works. They seem to have no interest in buying it, but perhaps that will change, if only through their pensions and mutual funds.

The real story of bitcoin is a heartening one of community. Less than 10 years ago, the bitcoin asset was worth virtually nothing, but a small group of people believed in it and worked tirelessly to promote it, and now the whole world is watching. It’s a tale at least as old as Christ and the Apostles. Maybe the bitcoin believers are as much of a miracle story as that of the brilliant inventor Satoshi.

The thing is, I don’t always believe in miracle stories of community, not in these days of declining governance and possibly fraying social order. Yet I’ve become emotionally involved in tracking the bitcoin price, perhaps because I realize that if one such miracle of “ex nihilo” creation can be sustained, others are on the way. I don’t think bitcoin is a bubble, but every morning I wake up doubting.

Article Link To The Bloomberg View:

Is Alexa Really Eavesdropping On You?

By Brad Stone
December 11, 2017

I've gone all-in on Amazon's line of Alexa-powered speakers, installing them throughout my home and buying them for family members. We use them to play music and news, tell jokes and get the weather. And I get to talk to a computer like I’m Captain Picard in Star Trek.

But stories like this one, in Gizmodo last week, suggest that the popular and inexpensive line of voice-activated speakers pose a threat to user privacy. The writer argues that devices like the Amazon Echo and Google Home contain microphones that are "always on" and sending volumes of data back to their parent companies. These speakers might also make it possible for hackers and law enforcement authorities to drop a secret wiretap into your living room, the article says.

The American Civil Liberties Union agrees, inveighing against the Echo and other connected speakers. Boing Boing’s Cory Doctorow writes that they “normalize surveillance.” Even InfoWars conspiracy theorist Alex Jones got into the act last week, interrogating an Echo on his show with hilarious earnestness. “Alexa, do you work for the CIA?... Alexa, you are lying to me!... Alexa, who is Jeff Bezos?”

Now, I don’t mean to defend these companies as much as to rationalize my own enthusiasm for these devices. But all these concerns seem a bit overheated. If the companies are telling the truth about how they operate—and lying about it would draw ire from both government regulators and customers—the privacy threat is not as big of a problem as it might appear.

First, devices like the Echo and Google Home are not really “always on.” They’re in passive listening mode, using a small amount of power for something called “device keyword spotting.” In effect, the companies say, the device is recording about one second of ambient sound, hunting for the acoustic signature of their wake words, “Alexa” or “OK Google,” and then constantly overwriting and discarding that fraction of sound.

When the wake word is uttered, the Echo glows with a blue crown of light. Only then does it send the command to the cloud and fetch a response from Amazon’s servers. Users can look at their personal history in the Alexa smartphone app to see exactly what sound Amazon has sent to its servers. These are typically anodyne commands (“Alexa, play Harry Potter trivia”) or expressions of frustration when the device has misinterpreted a request and is going haywire (“Alexa, STOP!”).

The Gizmodo piece acknowledges this but raises some hypothetical scenarios. What if hackers get a hold of the device and change how it operates? This apparently happened once, when a British security researcher had to physically disassemble the device to demonstrate an Echo vulnerability.

Then there’s the sensational example from earlier in the year when police officials in Bentonville, Arkansas subpoenaed a customer’s Alexa records in connection with a 2015 homicide at his home. (Bloomberg’s Nico Grant and Aki Ito recorded a great episode of our Decrypted podcast about the case.)

Amazon initially fought the subpoena, then acquiesced when the suspect’s lawyers agreed that the data could be turned over. They likely realized that the police, like some of Alexa’s critics, were overestimating the amount of data Alexa might gather.

None of this means we should blindly trust Amazon and Google in other parts of their business, or take our eyes off how these devices evolve. Amazon has talked about handing over customer Alexa transcripts to third party developers. Surely privacy-concerned Echo owners should get a chance to opt out of that program.

For now, though, I am going to keep enjoying this new class of devices. And if I’m having a truly sensitive conversation in my dining room? I’ll try to stifle the impulse to go outside and whisper.

Article Link To Bloomberg:

What Bond And Currency Traders Are Looking For From Yellen’s Fed Decision

Uncertainty over tax reform and inflation could reintroduce volatility.

By Anneken Tappe and Sunny Oh
December 11, 2017

Bond and currency traders on Wall Street are focusing on how the Federal Reserve will factor pending legislative moves, like tax cuts, in their policy measures, according to market participants.

Traders and strategists are expected to keenly watch for references to fiscal stimulus and the threat of market volatility next year in its updated policy statement, which could influence Treasury and dollar-pair trades.

Wall Street is pricing in near certainty of a quarter-percentage point increase to benchmark interest rates at the conclusion of the Fed’s meeting on Wednesday, which will be the penultimate one for outgoing Chairwoman Janet Yellen, as Fed Gov. Jerome Powell is set to replace her next year.

Both the U.S. dollar, which has ticked up since hitting a year-to-date low in September, and the flattened Treasury yield curve reflected how widely the move is anticipated.

That said, the unlikely downside risk of a surprisingly dovish Fed, would send the buck and bond yields all swinging wildly, market participants said.

There was a lot of uncertainty around the U.S. tax reform and its ramifications for monetary policy, as well as the change of the guard at the Fed after Yellen’s departure, which could dampen expectations for changes in the so-called “dot plot”, the Fed officials’ forecasts for interest rates, said Ward McCarthy, chief financial economist at Jefferies.

“Precedent suggests that FOMC participants will likely update their projections to partially reflect the impact of tax reform, though the full impact—especially on the rate projections—will likely come later,” according to a note from Goldman Sachs published on Friday.

“While we expect four rates hikes next year, we think it’s premature to expect the median dot at end-2018 to move up from three,” the note said. Roughly half of the three predicted rate hikes are currently priced in, according to HSBC FX strategists David Bloom and Daragh Maher.

Bond and currency markets could see increased volatility if there were any changes made to the dots. Since the last time the Fed’s projections for interest rates were released on Sep. 20, the 2-year Treasury yield TMUBMUSD02Y, -0.22% rose more than 50 basis points to 1.81% and the ICE U.S. Dollar Index DXY, +0.01% which measures the buck against a half-dozen major currency rivals, has strengthened somewhat. The move in Treasurys has helped lead to a compression in the yield gap between short-term maturities and long-dated ones, narrowing the gap, or flattening the yield curve, as it is often described.

Given all the unknowns, this could mean a change for the Fed’s forward guidance, which has informed trading in the past and has become a de facto policy tool of its own.

One reason the so-called dot plot could shift higher is the recent improvement in readings of inflation. Stubbornly low inflation has been on of the Fed’s biggest bugaboos, hovering below its 2% annual target, considered an appropriate level in a healthy U.S. economy. Charged with the mandate of price stability, the Fed tends to move its rate-hike forecasts in line with their expectations for inflation.

A combination of rate hikes and low inflation have stoked worries of a policy misstep by the Fed that could result in further flattening, or an inversion, of the yield curve. An inverted yield curve, where short-dated yields are higher than their longer-dated counterparts, has often been viewed as a precursor to a recession.

Recently, however, core consumer-price data, which strips out the more volatile oil and food prices has improved, leading to some speculation that the Fed might ramp up its pace of rate increases. Core CPI edged higher to 1.8% year-over-year in October after hitting its midsummer lows.

In fact, some analysts are anxious that inflation may accelerate too quickly in 2018, leading the central bank to raise rates more aggressively than it would prefer. Yellen said the Fed should gradually raise rates to avoid rattling markets.

The Fed’s efforts to provide guidance has taken some of the drama out of central bank decisions, HSBC’s Bloom and Maher said in a note on Monday, adding that it also reduced volatility, for example in the foreign exchange market. Now, however, forward guidance might lose its ability to send a clear message to the market.

“If the internal consensus within the Fed begins to wobble, providing meaningful forward guidance becomes problematic,” Bloom and Maher wrote, saying that this could prevent clarity and cause the Fed-funds rate to move up to a level where there is less consensus that it should rise much further.

“If the Fed, due to the data releases and hike already in place, becomes less confident about the path of future policy then the forward guidance will become either less strident, more opaque, prone to change or less accurate,” they wrote. “This could be one of the catalyst to reintroducing volatility to a low volatility world.”

That could mean the gradual pricing in of policy action could be exchanged for more pronounced reactions by markets.

Article Link To MarketWatch: