The Mt.Gox Bitcoin bubble

Come with us on a journey back to March 3, 2014. A time just after the premier bitcoin exchange Mt.Gox suspended operations (on Feb 22) and when nobody really knew why.

The in vogue explanation was that Mt.Gox had suffered an unfortunate technological fault in the shape of a “malleability” issue.

But it was also a time when the likes of Marc Andreessen were keen to reassure the Bitcoin faithful that: “MtGox price decline has little do with BTC price itself, has lot to do with MtGox-specific issues”, that “like collapse of MFGlobal in commodities trading, the collapse of MTGox posed no system risk. Didn’t affect broader system” and that “In wake of MtGox shutdown, BTC is trading at same level as it was .. two months ago. (Up strongly since shutdown itself.) Markets work”. Read more

How much gold should you have in your portfolio?

Since the peak in early September, 2011, the dollar price of gold has plunged more than 40 per cent. Given the human tendency to expect the future to look like the recent past, sentiment seems to have become relentlessly bearish.

Hedge funds have gone net short gold for the first time since data began being collected in 2006.

For the sake of argument, suppose you agree with this “smart money”. (Maybe you were persuaded by this or this.) What should you do?

Knowing the strength of your conviction and your risk tolerance is necessary for determining whether you should simply stop buying more gold than you already hold, go to the other extreme of dumping everything and loading up on ETFs like this, or something in the middle — but it’s not sufficient.

To articulate your view into an actual position you also need a sense of what constitutes “neutral”. In other words, how much gold, if any, would you own in a purely passive savings portfolio? Read more

Just another sovereign default

Another sovereign issuer started defaulting on its debt on Monday — treading a path well-worn by governments who run out of money.

This is Puerto Rico and the US muni market however, so the actual statement from its Government Development Bank, on missing a Public Finance Corporation bond payment, might make it appear as if things are different this time: Read more

GIO and African Minerals: crimewatch edition

Have you seen this man?

Below is security camera footage of a targeted attack which took place in West London in June 2014. There is a reward for information leading to a successful prosecution.

The victim was Michael Memarian, a London-based architectural consultant. Mr Memarian is also one of the subjects of a series of defamatory and untrue malicious blogs targeting people involved with Global Iron Ore, a commodity trading firm at the heart of a controversy surrounding large payments made by African Minerals in 2012, the failed Sierra Leone mining company previously listed in London and controlled by Frank Timis.

Police investigations into both the assault and the blogs are ongoing. They are yet another twist in the strange tale of a Sierra Leone iron ore mine once listed in London and worth billions of pounds, but now placed in administration as creditors fight over the future of one of the West African country’s most valuable resources. Read more

Markets Live: Tuesday, 4th August, 2015

Live markets commentary from 

People are worried about people being worried about bond market liquidity

Matt Levine in particular has been acting as collator of the collective angst for quite a while.

And the latest addition to that angst would suggest that (t)he(y) may well have a point:

That’s from Goldman’s Top of Mind, its regular outpouring on topic x. Where x = liquidity this time round. Read more

FT Opening Quote – RBS 5.4% freer of government interference

The UK government’s stake sale in RBS may mark the end of its meddling in the bank’s affairs, JustEat has 57 per cent fatter profits. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Tuesday,

- How I gave up alternating current, and other thoughts on saving the world by the founder of Soylent.

- Balding on Chinese capital outflows, why they matter and the transmission mechanisms to the larger economy.

- Pettis: China’s stock market and revisiting 2011 predictions.

- I’m not convinced Keynes saw a future where we will hack our brains and be able to change what we want.  Read more

FirstFT – Libor trader sentenced to 14 years, the disappearing monk and hypersonic aircraft

Tom Hayes found guilty of eight counts of conspiring to rig Libor Read more

WTI is retesting $45

WTI prices were sliding again on Monday:

And we’re probably going lower due to a glut of Saudi and Middle Eastern crude entering the market. Read more

Markets Live: Monday, 3rd August, 2015

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Of China’s capital outflows and foreign banks

Look! More attention!

Both the FT and Bloomberg have weighed in on one of the larger China Rorschach tests — capital outflows.

So, what exactly do you see when you look at this?

 Read more

Shocking Greek thirtysomethings

You can see what we were going for…

You can follow the ASE, off 22 per cent at pixel, here. There’s more from markit here: Read more

FT Opening Quote – HSBC backs out of Brazil

HSBC’s $5.2bn disposal of its Brazilian business is no “End of Empire” move, but represents a renewed focus on Asia. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Elsewhere on Monday,

- Mark Dow on why EM won’t crash — it is different this time.

- Secular stagnation: a monetary-financial problem or a fundamental-technological problem?

- Tracking inflation in Russia: The value of a bribe has been cut in half.

- PetroChina and nutty volatility in Chinese markets.

- When can investors talk to companies?  Read more

FirstFT – Chinese manufacturing contracts, Biden time and space-aged whiskey

Manufacturing activity in China is at its weakest in three years Read more

Some optimistic charts out of the euro area

The euro area’s economic performance over the past few years has been an almost unmitigated disaster, largely caused by unforced policy errors. And things could get a lot worse if the focus remains on threats to force the rest of the currency bloc to look like Germany. Yet we would be remiss if we ignored some mildly encouraging data that’s emerged in the past 12 months.

Start with the composition of growth in output and household incomes across the single currency. Via CreditSights: Read more

A Cambrian robotic explosion

Space. The final frontier. We look out into it to seek out new life and new civilizations so that we can boldly go where no man has gone before. But also to overcome the unsettling feeling that we might be all alone in the cosmos.

So what do we do to overcome this angst? We develop high-grade instruments to peer ever deeper into the universe. We do this to try to make sense of the vast big black expanse. To see into the darkness. To extract meaning from the data.

In so doing, we discover new mysteries like dark matter and dark energy. We get up close and personal with PlutoRead more

Markets Live: Friday, 31st July, 2015

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Alphachat: Nikkei buys the FT, Gillian Tett’s forthcoming new book, and an Alphavillain returns from Greece

This episode was recorded on Wednesday, 29 July. You can find Alphachat on iTunes and Stitcher. Thanks for listening! Read more

The “whatever China needs” trade is over

Pragmatic sentences about the Chinese slowdown are often in short supply, so…

In our view, the worst thing about China’s slowdown is not the risk of some kind of cataclysmic economic meltdown or financial crisis but that – in sector after sector – the investable ways to “play” China shrink to the local names on the right side.

 Read more

When financial inclusion stands for financial intrusion

A standard line you hear from fintech promoters is that innovative digital technologies can liberate the world by bringing financial services to the financially excluded.

Yet, as we’ve noted on numerous occasions, there’s something disingenuous about this claim.

You see, the only way financial technology can drive financial inclusion is by de-risking people who would otherwise be too risky to lend to, who can’t be trusted to use funds allocated to them productively and who certainly can’t afford the extortionate rates which would make it worth lending to them. Read more

Could America’s financial reform candidate be…Rick Perry?

If you had asked us last week which American presidential candidate would be the first to use terminology devised by the Basel Committee for Banking Supervision in an intelligent discussion of the importance of higher capital requirements for the big banks, we probably wouldn’t have guessed that it would be Rick Perry, the former governor of Texas.

After all, this was the man who, despite a 14-year record as the executive of America’s second-largest state, is best known in the rest of the country for a gaffe. Yet the discussion of GSIB surcharges was just part of a detailed speech he gave on Wednesday at the Yale Club of New York, which we attended. Afterwards, we also had a chance to talk with Avik Roy, one of Perry’s senior policy advisers. (Roy had invited us.)

While there were certain ideas that struck us as potentially contradictory, the general thrust was promising. In fact, it’s possible Perry has outlined the most coherent and sensible financial regulatory agenda of any of the candidates so far. Read more

FT Opening Quote – Lloyds banks 38% profits rise

On another big day of banks reporting, Lloyds has announced a substantial rise in profits, but also recorded yet another large PPI charge. FT Opening Quote, with commentary today by deputy head of Lex Oliver Ralph, is your early City briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Friday,

- Destination unknown: Increasing the minimum wage and the lure of machines.

- The Economist plays “what if?”

- Bill Gross: I’m not what you would call a “prayerful” type of guy.

- Quants and black box trading: Why they all “blow-up”.

- Are the wheels already coming off the Greek deal?  Read more

FirstFT – Tsipras prevails, sky-high tensions and an end to invasive insertions

Tsipras wins battle with Syriza’s far-left faction Read more

Disrupting FREEDOM!

Citi’s back with the upcoming third edition of its Disruptive Innovations report, with ten new big opportunities to stop and think about.

These include:

  • Autonomous driving
  • Drones
  • Machine learning/artificial intelligence
  • Biosimilars
  • Floating LNG
  • Public API
  • Sharing economy
  • Virtual reality
  • Marketplace banking
  • Robo-advisors

 Read more

Lessons in distorting your own market from China’s “national team”

There’s a wild new theory going around that China’s (new and old) stock market slide is less down to this kind of thing….

Speaking before the investigation [into Avic Heibao, a listed manufacturing subsidiary of Mr Lin's company Avic, by the securities regulator on suspicion of illegal and irregular share transactions] was revealed, Mr Lin cast his company’s actions as part of a heroic struggle against foreign aggression.

“This stock disaster was a premeditated plot, a well-prepared case of malicious short selling and part of a powerful, tumultuous economic war launched against China,” Mr Lin said in an interview with state media. “The war launched against [the Chinese stock market] is an attack on the five-starred red [Chinese national] flag.”

In an editorial he penned for a state-run nationalist newspaper, Mr Lin also blamed US plots for the problems in the Japanese economy in the early 1990s and for the 1997 Asian financial crisis.

… and more down to distortions in China’s own markets. Now, particularly, those distortions introduced by China’s powers-that-be while trying to put a floor under the slide and target a level of 4,500 for the index, using a raft of measures. Read more

AIs desperately seeking an imagination model

What is imagination? How does it work? And what role does it play in consciousness?

Cognitive scientists have long hypothesised that imagination equals a “mental workspace” within which information can be processed across specialised subdomains. In other words, it’s a place where the brain can simulate the physical world around it and manipulate that simulation according to new variables to anticipate future scenarios. What’s always been a mystery, however, is how the mind knows what rules to use when manipulating that simulation.

Don’t worry. FT Alphaville isn’t turning into a bad science blog (Pluto fraud excluded). We raise the query mainly because of the current hubbub surrounding artificial intelligence systems and existential risk. On which note, do see John Gapper’s latest on killer robots and our own post from Wednesday. Read more

Markets Live: Thursday, 30th July, 2015

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