Ancient Chinese Proverb: Where profit is… loss lies hidden nearby.

July 24th, 2014

https://twitter.com/Vlad_Roberto/status/491762022770417665/photo/1

 

Here comes everybody… at least the rich people who trust hedge fund operators.

http://www.logicoins.org/6-new-hedge-funds-seeking-bitcoin-returns/

 

And the Winkelvii on the Winkdex… it’s all about the community… and cool tools:

“We’ve spent a lot of time trying to build a really cool tool. Obviously the index will be big for us because it will be used to price any future ETF. But, we also wanted to build on this for the betterment of the bitcoin community.”

Scarecoin: If it only had a brain

July 23rd, 2014

Trying to see if we can pound some cents into this e-scrow Dorothy.

 

Dave’s been down on the crypto farm with Greg Brockman of Stripe learning a thing or two about Bitcoin and if there’s one thing I learned it’s that Greg is no dummy.  For the past couple of years Dave has been harping on two reasons why Bitcoin would be challenged for adoption on Main Street (Lawsky’s Law withstanding).  The first had to do with how long it takes to ring up a credit card transaction and receive approval in a brick and mortar retail environment and the second has to do with chargebacks.  Dave having started and run retail businesses for over thirty years knows a little bit about both these issues.

I’ve written about issues relating to “acceptance” and “honor” in particular as they relate to bank cards and the development of networks such as those pioneered by Dee Hock of Visa.  Dee’s a big thinker in the “chaos” and “order” space so much that he got some peanut butter in his chocolate when he tried to coin something known as “chaordic.”  Chaordic is the type of concept one comes up with when they attempt to ply the space between Heisenberg’s wave and the particle, Schrodinger’s cat-in-a-box or between zero and Michael Woodfords zero lower bound.

I actually knew a guy in the car business once that referred to his “pre-owned” lot as “newsed” cars… like new… only used… newsed which is similar to @RustyRockets Trews or what the news would be if it were true.  It’s tough to be two things at once such as being the President of the United States (POTUS) and Golfer of the United States (GOTUS).  Sometimes you simply have to choose how to spend your time and money, then sometimes you don’t have to spend money, but time gets spent either way.

I’ve also written quite a bit about the currency of reputation and how there is no forgiveness in the blockchain and that this is going to require an entirely new form of reputation management that revolves around “no-do-overs.”  It’s probably been two or three years since I first corresponded with Craig Newmark of CraigsList.com about the next generation of trust-based systems (or trustless networks) and how they would most likely develop.  Dave disagreed with Craig that there was something called a “culture of trust” (http://tradewithdave.com/?p=10567), but Dave most definitely does not disagree with Greg about the consolidation of trust.

Here’s what Greg of Stripe.com had to say in his recent article (emphasis Dave):

Ultimately, the message Visa delivers to consumers is that if they see the Visa logo, they are safe. If something goes wrong (such as the merchant delivering a bad product), the consumer will be made whole. This results in many transactions happening that otherwise would not, and makes the whole ecosystem more valuable.

And so, unless we solve decentralized reputation (which people are starting to think about), the Bitcoin ecosystem will see the emergence of a few centralized consumer “trust providers”.

You can already start to see the need for this with the emergence of Bitcoin escrow services. However, escrow isn’t actually a solution to trust—it’s a way not to trust. It makes sense only for a certain segment of purchases, and requires you to jump through stressful hoops like completing an inspection of the goods before irrevocably releasing the funds.

The winners in this space will instead be companies which inspire consumers to trust those they endorse. They’ll provide consumer protection services like chargeback mediation (and have a direct relationship with the merchant to actually recoup funds for those chargebacks). They’ll gain acceptance among Bitcoin-accepting merchants if they can boost sales:

Because the trust providers’ main assets are their brands, and those brands benefit from network effects, it’ll generally make sense for these companies to consolidate. Ultimately there will be one or a few major players, just like there are in the credit card world.

Other participants in the ecosystem will want to display the brand too. You’ll see gateways cobranding with the trust providers, just like today you see cards cobranded with Visa and their issuing bank.

As a result, the trust providers will be building a network of vetted merchants and gateways. To make sure only good actors are in the system, they’ll need to set and enforce rules and regulations for acceptable behavior—otherwise their brand will become less meaningful. This brings us back to a world of a few entities who get to set the rules.

 

Did you catch that? “Unless we solve decentralized reputation (which people are starting to think about), the Bitcoin ecosystem will see the emergence of a few centralized consumer trust providers.”  Are the advocates for a more fair and just system based on Bitcoin just going to roll over and roll up their straw mats like so many scarecrows who were occupying Zuccotti Park and now that Ben Lawsky has come through with his New York State sickle and cut down the harvest we’re “back to a world of a few entities who set the rules.”

Think about that for a minute.  Is that the “promise” that everyone has been so excited about Bitcoin bringing to the economy equanomy?  Are you convinced that simply because CNBC claims to be “First In Business Worldwide” and that New York City claims to be “the financial capital of the world” that Bitcoin is going to just hang there on that scare pole like it doesn’t even have half-a-brain… or half-a-heart… or half-a-courage… or the electronic ability to satisfy the double coincidence of needs half-of-money while transmitting the results of a means test back to headquarters every time you go through the check out line at Wal-mart with your SNAPcoin card… not to mention the Euro’s ability to function as the store-of-wealth-half  (they do have gold backing the Euro in case you didn’t notice – Deutsche Bank balance sheet withstanding even though it’s Germany’s gold – shoulda pushed those sanctions I guess)… but I digress.

What is going on with all this exactly?  Well, unless Dave gets a beach chair between Henry Kravis and Jeremy Allaire within the next 45 days (make that 44… 43… 42) and unless Barry Silbert and Vitalik Buterin decide to start working on their tans somewhere besides the Jersey shore (channel Islands version), the clock is ticking on Bitcoin when it comes to this side of the pond and that side of the pond while the Isle of Man in the middle is still fair game.  As I was reading Greg Brockman’s piece, I kept feeling a little bit like I was reading a piece about Ripple… not Bitcoin.  Then later on in the piece, Greg wrote this…

“There are a number of cryptocurrencies which already have gateways baked in at a protocol level (such as Open Transactionsand Ripple). However, there are huge network effects in any financial system, and to date these other systems have failed to win the necessary user support.”

Hmmm?  That really makes a scarecrow think.  Add on top of that no mention of Ethereum (clearly skiing outside of the Lawsky Lawski and across the Swiss Alps with their $750k crowdfunded “equity” raise in two hours today – isn’t equity crowdfunding illegal (cough)… guess not if you’re Goldman) and no mention of Hyperledger.com.  Where are we heading exactly Toto?  Dave gets a weird feeling that there are two Yellow Brick Roads that we’re going to be traveling concurrently. One of those roads is decentralized and one of those roads is distributed.

follow… follow… follow… follow… follow the escrow road… (i.e. follow the money)

If Lawsky is going to essentially ring fence the USA, is he going so far as to make sure something like Henry Kravis’ increased investment in First Data and Jeremy Allaire’s relationship with Accel Partners end up with a combined regulatory groomed ski slope such that they are “The winners in this space” as the space was defined so clearly by Brockman.  It doesn’t seem too far-fetched to Dave that First Data would love to get their hands on their own medallion (think the Bitcoin “B” in addition to the MC/V window stickers for merchant acceptance).  Sure “Visa CEO doesn’t see Bitcoin as a threat” (http://www.coindesk.com/visa-ceo-bitcoin-threat/) because of its “complexities” while the established payment providers have “established network rules” and an “understanding of how things operate”… what seems to be the problem?  I guess there isn’t a problem as long as you can trust First Data not to go into competition with you via Bitcoin and if you’re the CEO of McDonald’s I guess you don’t have to worry about Chipolte’ eating your lunch (read 17% SSS increase) while you try to compete with Starbucks by sending every self-respecting construction worker to Burger King while your staff spends ten minutes applying whip cream to your specialty drinks… heck of a job Brownie.

Here’s what OpenPodBayDoorsHal had to say about the Lawski-daddy on Reddit:

It’s worse than that. These regs cannot be followed. Coinbase is supposed to get me to tell them the name and physical address of anyplace I sent Bitcoin from my account, which they then have to keep for ten years. How am I supposed to do that? I bought something from a Bitcoin merchant in Guatemala, how do I know their address? How am I supposed to communicate that to Coinbase? Lawsky knows exactly what he’s doing, he’s doing exactly what his bosses told him to do. Stop Bitcoin and make it look like it’s just regulations.

So, there are some fairly unhappy Bitcointhusiasts out there and there may be some CEO’s who are sitting on Dee Hock’s laurels with a failure to appreciate just what kind of chaos it took to grow those self-similar fractalized laurels, but what’s the real plan?  Getting back to those two Yellow Brick Roads that diverged, distributed and decentralized in the yellow wood… I’m working on that one.  I’m pretty certain that the Euro has a partial yellow (read gold) backing and I’m pretty pretty sure that at least half of the new divorced currency model is going to be based on gold and the other half on the blockchain.  As far as the Bitcoin half, it looks like select places (think Jersey and the Isle of Man – see today’s story: http://www.coindesk.com/isle-man-clarifies-regulation-digital-currency-businesses/) are going to handle the coin cleansing much in the same manner they handled the wash dry and fold of paper money in the past.

Greg Brockman wasn’t the only one who earned their stripes this week, Brett King over at Medium.com did the yeoman’s work when he penned Bitcoin’s Failed Coup of Wall Street which includes an in-depth analysis of the all important payment systems metric of acceptance.

Brett King is Killing It

Here’s Brett expounding on the implications that Bitcoin global transaction volume peaked at US $180 million in June even though more users are downloading Bitcoin wallets they aren’t spending the money that they put in those wallets.

What we need is to get Bitcoin wallets on phones, being used everyday. For that consumers need places to spend their Bitcoin — this is good transaction volume, as opposed to bad transaction volume which curtails adoption growth. The only other way to go is to encourage stable growth as an asset class, so that Bitcoin outperforms the stock market on returns, while being less volatile — given Bitcoin’s nature as a pseudo commodity, that is extremely unlikely. If we encourage Bitcoin as an asset class, then the dreams of supplanting the centralized banking systems of the world dies.

In July Dell computer announced that they would start accepting Bitcoin for purchase of their products. That is a huge announcement for Bitcoin. Unfortunately, these types of announcements are just not coming quickly enough to stimulate the right type of growth for Bitcoin.

Let’s face it — when a mobile wallet in Kenya, or a coffee company out of Seattle has more merchant acceptance than Bitcoin, you know we have an uphill battle for adoption. Regardless of what you think of the Blockchain, or the fantastic decentralized model behind Bitcoin, consumer adoption and frequency of use is the best indicator of the ability of Bitcoin to disrupt either payments or the value store model of the existing banking system. That is the problem we have to fix if we don’t want to relegate Bitcoin to a hedge commodity in the medium term.

If you believe in Bitcoin — you need to start spending it, not holding it for asset gain. If you’re not spending it, you’re killing Bitcoin.

When Craig Newmark attempted to convince me that there was something called “a culture of trust.”  I answered the same way that the Dos Equis most interesting man in the world answered when asked about rollerblading…. “No.”  Today we have Greg Brockman saying that trust is an inspiration.   “The winners in this space will instead be companies which inspire consumers to trust those they endorse.”  Dave’s not so sure about that idea either.  Then Greg goes onto say “They’ll gain acceptance among Bitcoin-accepting merchants if they can boost sales.”  Now you’re talking.

And finally, Eric Vorhees expresses his opinion on the Lawsky Lawski

 

 

 

 

https://stripe.com/blog/bitcoin-the-stripe-perspective

https://medium.com/@brettking/bitcoins-failed-coup-of-wall-street-621bd309b18

The European Banking Authority recently published their study on a proposed regulatory framework

http://uk.reuters.com/article/2014/07/04/uk-eu-bitcoin-idUKKBN0F919320140704

Dave’s not new to the Bitcoin escrow party – here’s 9 articles on the subject for your consideration: http://tradewithdave.com/?s=escrow+and+bitcoin

On Dee Hock or why old guys rule: http://tradewithdave.com/?s=%22dee+hock%22+

 

Totalitarian With Ben

July 22nd, 2014

And yesterday they thought Dave’s use of the word “totalitarian” was a bit strong and inflammatory.

 

http://www.reddit.com/r/Bitcoin/comments/2b1jpl/dear_ben_lawsky_thank_you_for_the_totalitarian/

Bait Then Tackle

July 21st, 2014

Lawsky's Bitcoin expedition goes all in... hook, line and sinker

It was back on May 18, 2013 when Dave went all Robert Frost and dropped into Jon Matonis email box some cryptic thing-a-majig about "two roads in a yellow wood."  You see, that was precisely when Dave saw the Bitcoin crossroad a comin' and wondered just how an apparently well-meaning, yet possibly unprepared, self-appointed contingent would face what Dave (and Andy Haldane) like to describe as the "grown a third arm" of macroprudential regulation (aka totalitarianism).

 

“We recognize that – as the first state to put forward specially tailored rules for virtual currency firms – continued public feedback will be an important part of finalizing this regulatory framework. We look forward to carefully and thoughtfully reviewing public comments on our proposal.”

Superintendent Benjamin Lawsky ~ New York Department of Financial Services

 

Wondering just who the NYDFS has "tailored" their rules for?  Well, it doesn't appear to be exactly designed for innovation so much as designed for permission (think Dr. Evil "$1 million dollars" https://www.youtube.com/watch?v=jTmXHvGZiSY).  Here's what the self-proclaimed Two Bit Idiot has to say about the proposed regs.

 

The NYSDFS’s definition of “Virtual Currency Business Activity” must either narrow or additional exemptions must be made for businesses who do not provide hosted storage or exchange services.  Currently, any firm providing currency exchange (Coinbase/Circle/itBit), payment processing (BitPay/Coinbase/Stripe), hosted wallets (Coinbase/Circle/Xapo), or investment management services (Pantera, BIT, Winklevii) must register for a BitLicense.  No surprise or problem there.  

But then the department overreaches by including under its purview many services that never actually access user funds.  These include wallets like Blockchain.info, tipping apps like Changetip, and mixing services like CoinJoin.  The inclusion of non-hosted wallets is especially troubling as it essentially outlaws the personal possession of bitcoins for these users.  By imposing impossible reporting requirements on companies that in some cases literally cannot track user identity, the only solution for these services may be to restrict the IP addresses of users from certain locations. 

We can argue that the onus should be on law enforcement to track illicit funds transferred to and from user controlled wallets, but given Ben Lawsky’s comments yesterday and apparent prioritization of the BitLicense’s anti-money laundering provisions, it appears the NYSDFS is going to great lengths to prevent this type of “leakage” regardless of the cost.  This shouldn’t be a surprise given his previously expressed willingness to sacrifice innovation for militant money laundering compliance, but it remains disheartening nonetheless.  

The department is banning people from owning their own digital cash privately.  Not only is this morally questionable, but it would make New York State the most restrictive regulatory environment in the world - and much more restrictive than even its federal counterparts.  Lawsky and the NYSDFS must understand that this is unacceptable if bitcoin is to create jobs stimulate economic activity and foster much needed innovations in financial services.   

and...

Finally, the BitLicense provisions in section 200.10 have the effect of banning all unapproved innovation, an entrepreneurial thought crime with no real legal precedent or positive effect.  The NYSDFS would be asking all entrepreneurs to submit their ideas for review to a regulatory body that appears unlikely to grasp many of the much simpler elements of Bitcoin’s technology.

...and you thought Dave's use of "totalitarian" was an exaggeration.

I think I counted the word "hope" four times in the following insightful (if not naive) article and this comment was particularly interesting; "New currency innovators would be extremely unlikely to launch in the US, and would very likely follow the lead of Ethereum, Counterparty and other organizations in moving their legal operations overseas."  As far as the Two Bit Idiot's suggesting that you're going to "tackle" team Lawsky.  Good luck with that even if Barry Silbert gets his request for a 90 day comment period so that at least the lawyers get to enjoy their summer vacation.

 

Bitcoin at a Crossroads - Tackling the BitLicense

 

http://two-bit-idiot.tumblr.com/post/92143258184/bitcoin-at-a-crossroads-tackling-the-bitlicense

 

http://www.dfs.ny.gov/about/press2014/pr1407171.html

 

https://bitcoinfoundation.org/2014/07/17/early-returns-on-the-bitlicense-proposal-process/

 

Where Dave was coming from in May of 2013... Know Thy Winkelvii:  http://tradewithdave.com/?p=16662

Which side of the double slit experiment is Lawsky closing?  http://tradewithdave.com/?p=20965

Which side of history is Larry Summers siding with?  http://tradewithdave.com/?p=20832

Central & Son

July 16th, 2014

http://upload.wikimedia.org/wikipedia/commons/thumb/3/30/Redd_Foxx_Demond_Wilson_Sanford_and_Son_1972.JPG/384px-Redd_Foxx_Demond_Wilson_Sanford_and_Son_1972.JPG

Fred Sanford had a taste for Ripple fortified wine.  Dave is increasingly finding a taste for fortified payment protocols.

 

Ripple CEO Chris Larsen interview by Around The Coin:

 

http://www.faisalkhan.com/2014/06/29/around-the-coin-special-guest-chris-larsen-ceo-of-ripple-labs/

 

From David Andolfatto’s comments from the Federal Reserve Bank of St. Louis:

“There is (in my view) room for beneficial coexistence; for example:

A politically independent Fed operating an “elastic” currency supply with congressionally assigned mandates (e.g., price-level stability).

Together with Ripple, a currency-agnostic P2P payment system to facilitate low-cost payments.”

“In the U.S., the IRS has recently ruled that, for tax purposes, bitcoins will be treated as property and not a currency.

I.e., when you buy then sell bitcoins, you must report the resulting capital gain/loss. Compliance means added record-keeping costs.

The effect of this and similar rulings serve to diminish the attractiveness of bitcoins as a currency.”

 

http://www.coindesk.com/federal-bank-vp-bitcoin-threat-means-banks-must-adapt-die/

 

A look at some of the pros and cons of decentralized vs. distributed:

https://aworldofcurrency.com/how-worried-should-bitpay-be-about-the-rise-of-ripple/#

 

 

Stand With Dave (on a tightrope)

July 13th, 2014

How’s Dave’s standing?  I thought about titling this article “Bi-Trade With Dave”   You know one of those days when you’re not expecting anything much to happen and then suddenly the circus rolls into town when you least expect it and sets up in your backyard.

It’s a bit mind blowing when you take nearly five years of your life, hundreds of articles and countless hours of research and boil it down to a single article.  When you take all the novel concepts Dave could muster such as parlaying Mervyn King’s Divorced Currency meme, the prebit and Woodford’s zero lower bound of quantum deception into a semi-pro journalism career while you stand below the spectacle and watch Dave’s tome crystalized in a couple of sentences of rope strung between two (bicurrency) poles – it’s both humbling and exciting at the same time.

 

“We find that, hiding in banking, you have an exchange rate between money and antimoney, i.e. that the creation of banking actually splits a given currency into two—but without allowing markets to judge the performance of the banks and judging the banks with this hidden but nowadays fixed exchange rate,” Braun told Phys.org. “It was right in front of our eyes, but apparently was not seen.

“We also find that the these two currencies make it possible to do credit transactions without interest rates and without changing the quantity of money—and all this under a most dogmatic, neo-liberal, free market hypothesis. It is like finding an inherent contradiction right inside banking. And something we could not use before computers.”

Dieter Braun ~  LMU Munich

 

So, the key word to look for here is “standing.”  In the credit-enabled/debt-based economy your standing could have been considered your FICO score.  It was a “look-back” in an attempt to quantify the saying “past performance guarantees future results” (especially when backed with an FDIC guarantee on the asset side – read former “depositor” now known as “creditor” side of the balance sheet) as long as the saying “There’s an app for that” can be applied to credit default swaps and collateralized (fill in the blank) obligations.  The fact that driving the global growth economy forward while looking in the rear view mirror didn’t work so great even if it did work out pretty well for the too big to fail has come home to roost.  So, as Huey Lewis would say “I want a new drug.”  Well here you go.  Introducing Antimoney.  Think of it as  Baby Huey Meets Ken Lewis on the tightrope walk to the birth of a new global currency.

 

http://upload.wikimedia.org/wikipedia/commons/d/d2/Kenneth_Lewis.jpg

If only the Merrill Lynch Before & After Game had been called The After & Before Game

Future performance guarantees past results… or something like that.

Please allow me to explain how this works.  What the good professor seems to be saying is the real “news” is that Dave’s Occidental/Oriental see-saw is going to swing both ways.  Not only are loans going to be based on past performance (i.e. the credit economy) but the amount you pay back is going to be based on future performance of your financial institution.  Think of it this way.  If JPMorgan goes bankrupt they still have to pay back their debts, but you wouldn’t have to pay back your loan to the bank.  You see in the antimoney model Huey (or Youey) gets to judge the peformance of banks, not just be subjected to the banks judging the performance of Huey (aka Youey).

This works equally well for resolving the deflation/inflation debate that has been raging for years on the internets.  With a fixed money supply there is neither.  Think of it as a non-deflationary Bitcoin, only this time it’s based on your “Standing”…. by the way… how are you doing up there… on that rope…?  Remember, this is “a differential bet”.  The bank is no longer a bulwark in this model backed by say the FDIC, but rather the bank is a moving target just like its customers.  How much you can borrow and how much you have to pay back not only depends on where you stand, but where the bank stands also and believe me the “systemically important” too big to fail institutions we have today won’t be around when this plan gets implemented.

Here’s the original article on implementing the bicurrency system:

http://phys.org/news/2014-04-econophysics-antimoney-financial-crisis.html

If Jamie “That’s why I’m richer than you” Dimon was famous for saying “That’s why I’m an Amish physics professor from Germany” instead.
dieter_2014 Dieter Braun
  http://www.biosystems.physik.lmu.de/

 

 

The Smartest Guys In The Room

July 10th, 2014

Wasn’t that what they called the guys at Enron?  Who’s the smartest guy in the Bitcoin room?  If you ask me, it’s probably Jeremy Allaire of Circle.

 

So, what you’re seeing above is reportedly a tweet from the folks at Swarm sharing their logo and Joel Dietz addressing the audience at Coin Summit. What was the first thing that popped into Dave’s head?  Circle must be backing Swarm.  Where does Dave come up with such nonsense?  I guess that “phase in” idea is still bugging me.  Then again, if Dave was looking for someone to dip their toe in the cryptoequity space and break Wall Street’s exclusive franchise on crowdfunding (t-shirts, coffee mugs and Oculus Rift withstanding), he wouldn’t do it himself… that’s for sure, even if California did repeal “Lawful Money.”

http://www.crunchbase.com/organization/circle-internet-financial

 

That’s the second Allaire sighting in as many weeks:  http://tradewithdave.com/?p=21293

 

From Max Keiser’s interview with Joel Dietz of Swarmcorp

http://www.maxkeiser.com/2014/07/kr622-keiser-report-all-hail-the-blockchain/

Dave’s comment on the interview:

Great topic and a hat tip to Stacy and Max for being on top of this timely subject matter (crypto equity). Nonetheless, I am still not clear on what Joel described as a “phase in”. Swarm would seem to be on the surface a form of captive currency used for funding Kickstarter type projects on their proprietary network. In other words Swarm projects can only accept swarm coins, but it would appear that there is still a regulatory hurdle.

My sense is that Ethereum is also attempting to navigate this same regulatory workaround (albeit through a side chain rather than Swarm’s bitcoin exchange mechanism), originally through Switzerland (is that working?) and Bitpagos is “close” on a similar loophole via Argentina. But in the end it would come down to the property/currency question… no? At least from a CFTC regulatory perspective that would seem to be the case and the entire thing feels eerily similar to the Dodd-Frank treatment of swaps as insurance issue.

Crowdfunding seems like a neat idea, but am I wrong to say that since the advent of the Jobs Act that the concept of crypto equity has been outlawed and even crypto debt led to enthusiasts such as Candace Klein of Somolend watch their careers blow up in the tradition of Bernard von Nothaus and other innovators in the “e-money” space before them.

I want to see a genuine workaround and tell me if I am wrong, but “phasing in” means not phased in even if you can only spend Disney Dollars in Disneyland that isn’t all that revolutionary.

http://tradewithdave.com/?p=21293

http://tradewithdave.com/?p=21132

http://tradewithdave.com/?p=21053

 

Like Dave is fond of saying “There’s no forgiveness in the blockchain.”  In the absence of forgiveness there’s an absence of insurance and when there’s an absence of insurance there’s an absence of credit default swaps.

Dave on Credit Default Swaps and Insurance:

http://tradewithdave.com/?p=9866

http://tradewithdave.com/?p=15529

http://tradewithdave.com/?p=12754

http://tradewithdave.com/?p=9813

 

 

Jerry! Jerry! Jerry! Jerry!

July 9th, 2014

http://upload.wikimedia.org/wikipedia/commons/thumb/a/a6/Edmund_G_Brown_Jr.jpg/320px-Edmund_G_Brown_Jr.jpg

Technically speaking his name isn’t Jerry… it’s Gerald

Gerald!  Gerald!  Gerald!  Gerald!

 

http://upload.wikimedia.org/wikipedia/en/thumb/b/bd/Signature_of_California_Edmund_G._%28Jerry%29_Brown.png/320px-Signature_of_California_Edmund_G._%28Jerry%29_Brown.png

 

The California Code before sections 106-108 before section 107 was repealed:

106.  Any corporation heretofore or hereafter formed under this
division shall, as a condition of its existence as a corporation, be
subject to the provisions of the Code of Civil Procedure authorizing
the attachment of corporate property.

107.  No corporation, flexible purpose corporation, association or
individual shall issue or put in circulation, as money, anything but
the lawful money of the United States.

108.  The fees of the Secretary of State for filing instruments by
or on behalf of corporations are prescribed in Article 3 (commencing
with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2
of the Government Code.

The Corporations Code:  http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=00001-01000&file=100-195

Here’s a link to Assembly Bill no. 129 as signed by California Governor Jerry Brown repealing section 107 of the Corporations Code.  Notice the title of the bill… “Lawful Money.”

californiabitcoin

 

It’s no big surprise that California is the first state to change the definition of lawful money.  It’s not even that surprising that another form of money is being allowed to compete with Federal Reserve Notes, especially if you believe like many folks do that a “planned demolition” of the U. S. Dollar, courtesy of the Fed, is the order of the day.  Take for example today’s article on ZeroHedge where the question “Is The Fed Going To Attempt A Controlled Collapse?”   Although Dave doesn’t agree with the article entirely, it didn’t keep nearly 84,000 people from reading it.

The good news is when Dave “trades” such an “idea” at least I don’t have to say that I came up with it when I can merely say “Hey… what do you think about what NotQuant said about the Fed self-destructing the dollar?” kind of like when Mark Dice tries to trade someone his silver eagle for their $5 bill and of course they turn him down because a silver eagle clearly states “$1″ on its face.  I can probe without risking so much as a $20.

http://www.zerohedge.com/news/2014-07-08/fed-going-attempt-controlled-collapse

originating here: http://notquant.com/is-the-fed-going-to-attempt-a-controlled-collapse/

Sure all this interesting, but what was really interesting to Dave?  (I couldn’t wait for you to ask).  It was that Bitcoin for the purposes of the public relations campaign was equated to frequent flier points.  That’s right… Disney Dollars… Amazon Coins… Starbucks Stars.  I was about ready to hear him say something about Bitcoin being like Lucky Charms… pink hearts, yellow moons, orange stars and green clovers.


In an era of evolving payment methods, from Amazon Coins to Starbucks Stars, it is impractical to ignore the growing use of cash alternatives.

~California Democratic Assemblyman Roger Dickinson, the bill’s author~

Haven’t heard of Delta Skymiles or Amazon Coins and how they’re just like Bitcoin.  Then maybe you’ve heard of Berkshares or Letts or Bernard Lietaer.  They’re just like Bitcoin… no different (cough… cough).

… and from RT.com
Another type of a newly emerged payment system that the amendment is meant to apply to are the so-called “community currencies”; these are created by members of a local area to boost small business. Besides, as the explanation to the new legislation reads, they have “also become a form of political protest as some communities that use such currency do so in protest of US monetary policies, or large financial institutions.”

from: http://rt.com/usa/169164-california-bitcoin-bill-signed/

Wow!  Is  Bitcoin just another gift card or S & H Green Stamp (remember those?) or something you might find under the lid of a Snapple – I WON!  It’s only the largest distributed computer network in the world.  It’s only 8 times faster than the top 500 supercomputers… combined (http://www.geek.com/news/bitcoin-mining-network-8x-faster-than-top-500-super-computers-1554946/).

It should give anyone pause when the largest state in the Union with it’s 38 million residents changes the definition of “Lawful Money.”  Seriously… think about it.  You can now pay your taxes with Disney Dollars… whodathunkit?

 

You would have seen this coming if you were around in 2011…. then again, I guess this is a get out of jail free card for Bernard von Nothaus, or at least it should be. No?  Yes?

Dick Durban Does The Dollar… Disney style:  http://tradewithdave.com/?p=5883

Chases Bank prints their own dollars?:  http://tradewithdave.com/?p=6008

SkyMiles are now Sound Money?:  http://tradewithdave.com/?p=6676

Whose up for sending a letter to Judge Vorhees?:  http://tradewithdave.com/?p=9556

She’ll Scoot!

July 7th, 2014

http://upload.wikimedia.org/wikipedia/commons/thumb/f/f8/Red_scooter_rider_Avenida_Do_Mar%2C_Funchal%2C_Madeira_Island.jpg/480px-Red_scooter_rider_Avenida_Do_Mar%2C_Funchal%2C_Madeira_Island.jpg

photo: Red Rule

 

Dave loves the summer.  For the most part I don’t use my car.  I ride my scooter or my bike almost everyday.  I also walk a lot and spend lots of time at the beach and taking outdoor showers.  It’s great.  Where Dave came from there was a family named “The Loricks.”  Mr. Lorick was an engineer and the two Lorick brothers, when they weren’t getting arrested for robbing a convenience store, used to work on chainsaw engine powered two-cycle go-karts and minibikes in their driveway.  That’s where Dave learned about the power of the internal combustion engine and how to evade police when traveling at 60+ mph through the local subdivision on a dual-engine two-seater go-kart with slicks where terminology such as “the kid can go”, “that dog will hunt” and “she’ll scoot” were the primary vernacular and siphoning gasoline from our parent’s V-8 station wagons was the sole source of energy.

Dave’s been thinking a bunch about transportation lately as I have been attempting to take lessons learned from the $18 billion rocketship Uber and apply those to the world of cryptocurrencies.  One thing in particular about Uber had me blowing a gasket this weekend until I had a chance to dig into it a little bit by pulling the head and getting a better look inside the engine of commerce that is based in cronycurrency (aka The Fed).  You see the thing that has been really bugging Dave was that Uber is essentially illegal, yet Uber is on a roll… especially in Boston.  You see Dave’s son was visiting this past week from Boston and after the discussion turned to the amazing popularity of Uber and the new global standard in cab hailing known as simply hold up your lighted Uber screen on your Iphone and your designated whip whips right over to pick you up, Dave was scratching his head like a Lorick trying to work on a Tesla.

Just how exactly is Uber booming in Boston, a town where the establishment is, well, established and taxi medallions, well… you know they don’t come easy?  Dave has lots of questions about everything from Swarmcorp to Razorcoin to Ethereum and just how one or all of these may be to the Securities and Exchange Commission what Bitcoin was to the Federal Reserve Note, but before I go there how Uber seemed to walk right past the perp walk was just about more than I could handle.  How are they not simply shutting them down for breaking the law?  Could it really be that the genuine issue was about the use of a taxi meter rather than the use of a taxi itself?  Are you serious?

What seems to be the problem?

from Wikipedia:

United Kingdom

On June 11, 2014, London black-cab drivers, members of the Licensed Taxi Drivers Association, disrupted traffic as a protest against Transport for London‘s refusal to stop Uber’s calculation of fares based on distance and time taken, as they claimed it infringes upon their right to be the sole users of taxi meters in London.[26] The following week, London mayor Boris Johnson stated it would be “difficult” for him to ban Uber “without the risk of a judicial review”; however, he expressed compassion for the view of the black-cab drivers. Johnson explained:

I think it’s a very difficult [question] … We’ve gone to the high court to get a ruling on this, and the issue is basically: is the driver’s mobile in the cab equivalent to a taxi meter? I can see why m’learned friends might think that it is, because it’s receiving data about, or it’s calculating, the distance and time and the fare. And there are other lawyers who say that it isn’t, and that was the advice of the counsel to TfL. And so we’ve got a legal problem.[27]

In a blog post following the black-cab protest, driver Richard Cudlip conceded, “as a trade we failed to get our message across”. Cudlip further explained his perception of the salient concerns: safety in minicabs, slow issuing (and reissuing) of black-cab licences, a failure to prevent minicabs from illegally touting for business, and a lack of space outside key London tourist destinations.[27]

And so we’ve got a legal problem!?!  Are you kidding me?  We have an $18 billion valuation and some of the biggest investors in Uber are straight out of Boston (think Fidelity and other “growth equity” firms in Boston).  Hello?  Where’s the problem exactly?  That’s when it hits me like a limo bus.  Fidelity used to own Boston Coach.  Fidelity recently sold Boston Coach.  Fidelity is not only a huge super-rich organization run by Abigail Johnson, but they are also extremely knowledgeable about the cab and limo business and obviously they are divesting of the old paradigm by offloading Boston Coach to Harrison Global and changing horses to Uber.

Do you think that the Johnson’s over at Fidelity get their way?  You betcha…  just ask #34.

 

http://techcrunch.com/2014/06/06/uber-1-2b/

http://bostonherald.com/business/business_markets/2013/05/fidelity_sells_bostoncoach_to_harrison_global

http://www.forbes.com/profile/abigail-johnson/

Uberdave – Let them eat cupcakes from October 2013… why people Share With Dave.

http://tradewithdave.com/?p=18876

 

Sometimes you feel like a nut… sometimes you feel nuttier.

July 4th, 2014

http://upload.wikimedia.org/wikipedia/commons/thumb/6/6f/Candy-Mounds-Broken.jpg/640px-Candy-Mounds-Broken.jpg

Photo: Evan-Amos

 

Dave likes coconut.  I admit it.  Every year for my birthday my Mom would make me a coconut cake.  I loved that.  But coconut is not really a nut… per se.  Coconut is more like a fruit, inside of a nut.  I also enjoy the occassional Mounds bar.  I’m not a real candy bar person although I will occasionally partake of some chocolate.  I do really like a Mounds bar, but like Bill Gross turned Justin Bieber sometimes I feel like a nut and I will eat an Almond Joy bar, but sometimes I don’t.  Almond Joy’s got nuts… Mounds don’t.

It’s only normal to want something sweet and chocolaty, that’s why when I discovered that The New Normal had become The New Neutral and that the debate over volatility was no longer a debate over whether or not your nutty or not, but rather had now become a debate over whether or not “you’re nutty” or simply “nuttier”, I knew that Dave was onto something “neu” as in neutered.

The Guardian explains just what Andy Haldane means when he says the Bank of England has “grown a new arm”:

Andy Haldane, the Bank of England’s chief economist, explains that central banks have “grown a new arm, macro-prudential regulation” to prevent the markets becoming over-egged with risk.  He cites the BoE announcing measures to prevent the housing market overheating, last week.  So in conclusion, Haldane says, the financial markets today are nutty, but they’d be nuttier if central bankers hadn’t acted in the way they did since the collapse of Lehman Brothers.

- and Haldane on “the shape of risk… 

In the past we had periods of time when there was stability, and good availability of capital at reasonable prices, punctuated by the complete reverse – which we call banking crises, Haldane says.  No, instead of risks being hidden inside banks, it shows up each week in the “mark-to-market balance sheets of asset management firms.”  That means there will be, on average, more volatility than in the past, Haldane says.  The fear and greed cycles in the financial markets will be more obvious than in the past.  But that’s the price of avoiding a repeat of 2008.

http://www.theguardian.com/business/2014/jul/02/london-house-prices-nationwide-spain-unemployment-live?view=desktop#block-53b43170e4b03b90259d8457

 

But don’t forget what sunglasses wearing Pimco’s Bill Gross had to say about that same volatility.

“We sell insurance, basically, against price movements,” Gross, chief investment officer of Pimco, said in an interview today in Chicago at Morningstar Inc.’s Investment Conference. “At Pimco, that’s what we’ve tried in the last four or five weeks.”

The wager on low volatility by the $2 trillion asset manager is “part and parcel” of its outlook for the next three to five years, an era it calls the “new neutral,” Gross said. The outlook is characterized by low interest rates and lower, more stable global growth. Stocks and bonds will only return about 5 percent and 3 percent respectively, as any changes in Federal Reserve policy will be taken cautiously, the Newport Beach, California-based firm said in a report in May.

The firm’s money managers “all know all parts of the new neutral,” and incorporate it into their trading, Gross, 70, said. “Historically, Pimco has succeeded in selling volatility, and yes, it’s nice volatility’s come down.”

What is this new neutral exactly?  Bloomberg explained back in June.

In the aftermath of the 2008 financial crisis, Pimco’s co-founder Gross and his former co-Chief Investment Officer Mohamed El-Erian popularized “the new normal” to describe an era of subdued returns, heightened government intervention and increasing clout for emerging nations in the global economy.

Now, five years later, after El-Erian’s abrupt resignation in January, Gross refined that view. While the “new neutral” maintains an expectation for subpar returns, it’s a more stable outlook compared with Pimco’s previous forecast as the risks to the markets are lower. Generating returns is becoming increasingly difficult as central bank policies elevated prices on so-called risk assets, the report said.

http://www.bloomberg.com/news/2014-06-19/pimco-s-gross-wagering-on-low-volatility-in-new-neutral-.html

http://upload.wikimedia.org/wikipedia/commons/thumb/1/17/%2774_Ford_Gran_Torino_Starsky_%26_Hutch_%28Auto_classique_Jukebox_Burgers_%2711%29.JPG/320px-%2774_Ford_Gran_Torino_Starsky_%26_Hutch_%28Auto_classique_Jukebox_Burgers_%2711%29.JPG

Dave’s no Ford man, but I admit that I enjoyed the Striped Tomato but I’m not sure Bill Gross is enjoying his media tomato striping (not to mention $41 billion+ in redemptions, but does he even understand why this is really happening?  Probably not.  photo: Bull-Doser

 

Back in August of 2011, Dave warned of the risks associated with doing business with Huggy Bear as he slid across the hood of the new normal known as “Pimco My Ride.”

http://tradewithdave.com/?p=7838

This entire thing (read: Pimco/Goldman Cage Match) is getting a distinctly religious overtone to it.  Who was it that said?

“The global financial crisis has also undermined the standing and credibility of the Anglo-Saxon economic model that emphasizes liberalization, deregulation, interconnectivity, and unfettered markets.”

Oh yeah, the recently resigned co-chief over at Pimco Mohammed el-Erian.

http://tradewithdave.com/?p=5780

So, we’ve got these German citizens demonstrating against the Fed and being branded as Nazis (we’ll call that the nuts) while we have the German government patiently waiting seven years to get their gold back from the Fed and after some serious heat on the Deutsche Bank balance sheet, the German government is suddenly okay with not getting their gold back (we’ll call that the nuttier).

“The Americans are taking good care of our gold,” said Norbert Barthle of Angela Merkel’s Christian Democratic Union party.

“It’s my view that the gold reserves should be stored wherever they might be needed in an emergency,” said Juergen Hardt also of the Christian Democrats.

http://www.zerohedge.com/news/2014-06-23/germany-gives-trying-repatriate-its-gold-will-leave-it-feds-safe-hands

http://www.bloomberg.com/news/2014-06-23/german-gold-stays-in-new-york-in-rebuff-to-euro-doubters.html

So where is Germany’s Angela Merkel on the sometimes you feel like a nut, sometimes you feel even nuttier debate?

Well, initially the US and EU had given Putin until the end of June to quiet down in Eastern Ukraine.  Then on July 2, Merkel eased up a bit saying that the EU “cannot rule out” further sanctions which came a day after the EU itself said it will take no new action against Russia… at least not until next week.  I guess you could call this the “sometimes you feel like a new BMW… sometimes you don’t” strategery.

Hmmm?  So what is the neu shape of this “new risk” exactly that Andy Haldane explained?  Is it shaped like a mound or does it feel like a nut or is it simply a mound of nuts in the middle of the yield curve.  When you decide to slide on over and take a look under the Mercede’s hood (aka the Move index) and Gross’ self-described “very respectable structural template alpha generator” just make sure you get to the other side.  There’s nothing more embarrassing that attempting the hood slide and getting stuck in the middle.  Will there be a volatility flare up?  It’s hard to say for sure.  I do know that Michael Hasting’s Mercedes-Benz had a flare up… jus’ sayin’.

.
Does all this make you wonder what the CEO of Germany’s Allianz “likes” when it comes to nuts vs. nuttier.  According to Reuter’s, it’s not so much about whether or not Pimco’s Total Return Fund actually returns any nuts.  It’s the leadership structure that customers “like.”  If you ask Dave, that’s nuts.
“Customers like new Pimco leadership structure -Allianz CEO”
.

When it comes to bonds vs. stocks, redemptions vs. investments, Starsky vs. Hutch, volatility vs. inverse VIX  and coconuts vs… well, nuts, which do you like?  Starsky is the one with the black hair… or is that Hutch?

On being a 70 year old Justin Bieber: http://www.veooz.com/news/LHG_~nR.html