An annona for your bitcoin caput

A quick update on developments in the Craig Wright [is] or [is not] Satoshi story.

In the last 24 hours Wright has posted on his blog that extraordinary claims require extraordinary proofs and that he will provide such proof over the coming days in the form of “a transfer from an early block”. This could be the much touted miracle of the movement of the Satoshi funds we’ve all been waiting for.

At the same time Gavin Andresen, a lead developer in bitcoin, has stated that it was a “mistake” to have posted a personal blog testifying that he was “convinced beyond a reasonable doubt” of Dr Wright’s case. He told Dan Kaminsky, a noted security expert, in correspondence: Read more

Remember Target2 imbalances? Well, they’re back…

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Markets Live: Wednesday, 4th May, 2016

Live markets commentary from 

Is QE4 (still) coming?

From Citi’s global head of G10 strategy, Steven Englander, who wonders if markets have begun pricing another round in:

US economic data have been soggy, other than labor market data, which means that we get one positive data release a month followed by a series of disappointments. This is reflected in the Citi’s economic surprise index (Figure 1), which has been dropping since mid‐April and where a 0 level would be considered strong outperformance.

My conjecture is that investors have begun to price out June/July hiking risk they are beginning to reject the view that there is a high‐probability fed funds path that is as shallow as the market is pricing in. If you really think that a full hike is not likely until May 2017 (as is now priced in), you have to think there is a non‐negligible probability that the economy is so bad that you would want to cut.

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Transferwise gets slammed for *those* ads

UK-based “peer-to-peer” money transfer service TransferWise has been dubbed the darling of the European fintech start-up scene. Developed in 2011 by Estonian Kristo Käärmann and Taavet Hinrikus, it famously scored a $1bn valuation (and precious UK unicorn status) in 2015 when it raised $58m in a funding round. And the company’s founders have been anything but modest about the platform’s growth projections. And anything but worried about the platform’s poor profitability.

Then there were those ads.

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Further reading

Elsewhere on Wednesday,

- The mythology of Trump’s ‘working class’ support.

- China would really like its economists, analysts and business reporters to cheer up. And Balding comments.

- New Gorton paper on the economics of safe assets.

- Leicester were preseason 5000-1 shouts to win the Premiership. USD/JPY is 2500-1 to hit 325 within 5 years.  Read more

FirstFT – Cruz quits, the scourge of Wall Street and the likelihood of human extinction

Ted Cruz has suspended his campaign for the White House after a resounding defeat at the hands of Mr Trump in the Indiana primary Read more

If Larry Summers is right about secular stagnation, he’s also right about Harvard’s endowment

Sticking with a plan after it seems to have stopped working can be admirable persistence — or it can be bull-headed stubbornness. The question is whether recent difficulties are just temporary setbacks bound to reverse or, instead, you’re on the wrong side of a fundamental change in the way the world works.

Consider the steady decline in real yields since the early 1980s. Back then, long-term US Treasury bonds paid more than 15 per cent each year and American stocks traded at less than 7 times earnings, cyclically-adjusted. Nowadays 30-year Treasury bonds yield less than 3 per cent and, on a cyclically-adjusted basis, US equities are priced at roughly 25 times earnings. These changes delivered huge capital gains for investors. Read more

Blockchains and blood reserves

Reserves. Something not needed for immediate use but available if required, or the act of keeping back something today for future use or for a special purpose.

Also construed to be a form of purposeful rationing. A form of risk management. A form of operational smoothing.

Are reserves expensive? Of course they are. The flip-side to any reserve is the wastage associated with not using stocks in time before they spoil or depreciate. Reserves are inherently costly. But, as the story of Joseph and the pharaoh teaches us, they’re also essential for sound economic planning in systems exposed to unexpected externalities. Read more

This re-correlated world

ICYMI, RoRo — or risk on/ risk off — is apparently back.

It’s not quite at peak levels but that bane of interesting narrative, that supporter of the yen, that acronym of dubious origin is getting back up there:

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Satoshi latest

Markets Live: Tuesday, 3rd May, 2016

Live markets commentary from 

Financial backer of wannabe terminal disrupter says terminals will be disrupted

Morgan Stanley is a backer of the bank-led chat project, Symphony, crafted to woo trader talk back to a channel the banks can control.

And here’s a Morgan Stanley built theory of the terminal business:

We view the evolution of the industry in three stages:

Phase 1 (now to 2018): High-Cost, Bundled Products Prevalent: Historically, the network effect has been a gating factor that led participants in the market data terminals industry to keep their existing high-cost terminals. Legacy terminals have comprehensive functionality, so customers only need to purchase one main product. Counterparties purchase the same product, so that business can transact through the terminals (i.e. through chat). Learning of specific shortcuts enhances stickiness. Changes to workflow is typically disruptive, which leads to high retention rates. Examples include Bloomberg and TRI’s Eikon product.

Some current products in the market contain full-functionality, but do not have the network effect (FDS, CapIQ). Customers requiring less frequent interaction with outside parties (i.e. trading) may choose to use these products. The cost of the products is often lower than the premium legacy products with network effects, but remains high given switching costs and bundling of the underlying products.

Phase 2 (2017 – 2019): Facilitating Escape:

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FT Opening Quote

HSBC is the latest bank to see a bite taken out of its profits, Aberdeen’s assets under management are down by £38bn, Just Eat’s takeaway orders are up 41 per cent. 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,

- “’It’s the Burning Man 1%,‘ said Charles, a documentary filmmaker with spikes pierced through his ears and a brainwave meditation startup. ‘It’s curated.’ Eric Schmidt was backstage leaning against a tower of palettes and wearing an ornate top hat and a vest made of mirrors. He said he was at Further Future mostly because these were his friends.”

- Theranos: blame the (Silicon Valley tech) press?

- Preet Bharara, scourge of Wall St, hero of Turkey, lover of PR.

- Oliver Shah’s sweary battle with Philip Green. Read more

FirstFT – Leicester crowned champions, a cancer breakthrough and the curse of the Japanese salaryman

Leicester City claimed a piece of sporting history when they were crowned English Premier League champions for the first time in their 132-year existence Read more

Oh my! Craig Wright’s ‘Keys of Revelation’

As the clairvoyant FT Alphaville said on March 31, Australian Craig Wright has come out to claim he is Satoshi Nakamoto, the pseudonymous creator of Bitcoin both in a personal blog post and in media interviews with The Economist, a former newspaper, blokes’ mag GQ, and the gullible old BBC.

And he chose Monday, May 2 (a Bank holiday in the UK), to do the ‘Big Reveal’, which just happens to coincide with the first day of Consensus, a hullabaloo blockchain event in New York featuring famous self-styled bitcoin/blockchain radicals like Balaji Srinivasan of 21 Inc, Jack Markell, governor of Delaware State, and Larry Summers. (Yes, that Larry Summers.)

As the world’s media now embraces a manufactured ‘Craig Wright media storm’, we should probably add some detail on how this story has developed and we need to look at the evidence thus far presented. Read more

FirstFT – Halliburton and Baker Hughes abandon tie-up, Obama’s comedy calling and the booming popularity of escape rooms

The $28bn deal has been terminated due to regulatory approval challenges Read more

Thought for the weekend

(Bloomberg LP competes with Zero Hedge in providing financial news and information.)

Bloomberg LP Read more

How Greece restructured its debt, and a Jamaican success story

Alphachat is available on Acast, iTunes and StitcherRead more

Decentralised courts and blockchains

In the beginning, there was the promise that blockchain-supported smart-contracts could disintermediate the powers that be and replace them with a self-organising decentralised system where every contract entered into could be depended upon to perform as expected, with risk and costs entirely eliminated.

Furthermore, it was thought, both human and state involvement could be taken out of the process too. Instead, we’d achieve an autonomous financial utopia within which capital flowed from each according to his ability, to each according to his needs — guided only by faceless protocols and algorithms.

Yet, from the beginning, there was an inconvenient truth buried in the promises being made by blockchain advocates. Read more

Markets Live: Friday, 29th April, 2016

Live markets commentary from 

Warren Buffett: A dream deferred

Our colleague Stephen Foley wrote a compelling analysis last year noting how much Warren Buffett’s Berkshire Hathaway Inc had taken advantage of deferred taxes to build its empire:

“In the latest and largest example, Mr Buffett’s Berkshire Hathaway has been able to defer $61.9bn of corporate taxes, the company revealed in its annual report. This figure — about eight years worth of taxes at Berkshire’s current rate — is a reminder that Mr Buffett understands how putting off the moment when taxes are due gives him more money today to invest elsewhere. Read more

Explaining the BoJ’s reticence

You’ll have noticed that the yen and Nikkei were displeased yesterday. Like throw your toys out of the pram because you didn’t get what you wanted displeased. Like one of the worst one day JPY moves in the past decade displeased.

What they didn’t get, and what prompted that tantrum, was any auld bit of easing from the Bank of Japan.

And here are eight potential reasons why the BoJ disappointed, from SocGen: Read more

Further reading

Elsewhere on Friday,

- Zuckerberg gets to control Facebook a while longer.

- ‘Normal America’ is not a small town of white people.

- “Surely no campaign has ever before had a divisive internal fight over whether the candidate should be presidential or not…”

- When Ted Cruz signed a copy of The Communist Manifesto. Read more

US growth slows, Mallya defiant and China’s robot revolution

GDP growth of 0.5 per cent was less than half the rate set in the previous quarter due to tumbling corporate investment and lower exports Read more

Are we over depending on capital gains?

David Levy’s April forecast, by way of Jerome Levy Forecasting Center, presents three notable viewpoints worth sharing this month.

The first is that capital gains are accounting for an increasing share of total investment returns, now making-up probably the majority of them. But, says Levy, it will be challenging to maintain those capital gains from now on.

The second is that whilst there is a popular view that foreign exchange can explain the extreme volatility so for in 2016, this is probably wrong. According to the prevailing view, Davy notes, the stability of the global economy leans heavily on currency stability and especially on a benign set of stable dollar exchange rates. Read more

Markets Live: Thursday, 28th April, 2016

Live markets commentary from 

Today in disappointed markets…

UPDATE: JPY through Y108 as Kuroda says helicopter money is illegal. Of course, definitions matter where that is concerned.

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FT Opening Quote

Five large companies are expected to suffer big executive pay moans from shareholders today, Lloyds’ bank profits are down 46 per cent, WPP’s billings are up 8 per cent. 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