Because BTFWWIII is so yesterday, we present BTFICBMD:
- *RUSSIA TEST FIRES INTERCONTINENTAL BALLISTIC MISSILE: INTERFAX
- *RUSSIA TEST FIRED MISSILE FROM RANGE IN ASTRAKHAN REGION: IFX
- *RUSSIA MISSILE LAUNCHED AT 10:10PM IN SOUTHERN RUSSIA: INTERFAX
- *INTERFAX CITES RUSSIAN DEFENSE MINISTRY ON MISSILE TEST
But, the talking heads said Ukraine was fixed and Putin had folded?
Topol missile launched from firing range in Astrakhan region at 10:10pm Moscow time, news service reports, citing Russia’s Defense Ministry.
Launch carried out by Russia’s Strategic Rocket Forces
Missile hit target in Kazakhstan: IFX
Russia said it had successfully test-fired an Intercontinental Ballistic Missile (ICBM) on Tuesday, with tensions high over its seizure of control in the Crimea and its threat to send more forces to its neighbour Ukraine.
The Strategic Rocket Forces launched an RS-12M Topol missile from the southerly Astrakhan region near the Caspian Sea and the dummy warhead hit its target at a proving ground in Kazakhstan, the state-run news agency RIA cited Defence Ministry spokesman Igor Yegorov as saying.
The Topol Missile:
And the reaction...USDJPY blips and the S&P 500 drops 5 points
Chinese internet stocks remain well bid as earnings for single stocks continue to support the entire space. The Emerging Money Chinese Internet Index has moved to another all-time high +4.1% as VipShop (VIPS, quote) and other ecommerce names are delivering on growth expectations.
Vipshop Ltd is an online fashion retailer who has indicated revenue will top $650m in the coming qtr. Make not mistake, the internet is growing in China and consumer spending is not wilting as many believe.
In fact, most market player has been reacting to a problem versus understanding the reality. State enterprises in China are saddled with debt.
Debt exists across the corporate world but that doesn’t change the fact that Chinese consumers have more disposable income.
Labor rates have risen. Dangdang (DANG, quote) the equivalent of online Amazon books or Barnes and Noble is +13% today as and 56% since announcing better than expected earnings last week.
Above: Chart of the YTD moves in the Emerging Money Chinese Internet Index (EMCHI)
The magical thinking highlighted in two charts, as WaPo reports; in his budget request, Obama projects public debt as a percentage of gross domestic project falling to 69% by 2024, while the CBO has it rising to 79% - a difference of 10 percentage points, or roughly $2.7 trillion. As WaPo notes, the likelihood of this scenario unfolding... zero.
The difference is due to hopeful expectations that aggressive revenue expectations come to fruition.
As WaPo notes, these revenue increases assume a compliant Congress that works with the White House to pass major new legislation in the coming years. And the likelihood of that particular scenario is almost zero.
One interesting "efficiency" gain, President Obama has proposed is the idea of either phasing out penny and nickel coins or using cheaper metals to produce them.
The fiscal 2015 budget, released on Tuesday, points out that the coins' manufacturing and circulation have not changed in decades and that the Treasury Department has been reviewing the coins' production. Obama has proposed similar reviews in the past but the measures stalled despite not being partisan points of contention.
The budget does not include a specific cost savings figure for the potential changes but it identifies the rise of electronic commerce as a reason to review the coins' makeup and distribution.
Obama's 2014 had pegged the cost of manufacturing a penny at two cents and the price of a nickel at 11 cents.
One wonders just how long it is before the Dollar bill is worthless too...
Hey it’s Tim at 1:15 with your strategy play for Russian and the Global Emerging Markets. Tune in to see how we are playing emerging markets and emerging market currencies.
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Hey it’s Tim at 1:15 with your strategy play for Russian and the Global Emerging Markets. Tune in to see how we are playing emerging markets and emerging market currencies.
First it was Amazon, now it's Facebook's turn. As was reported previously, hot on the heels of its $19 billion purchase of Whatsapp, Facebook announced the purchase of New Mexico-based Titan Aerospace for $60 million. Who is Titan? It is a maker of solar-powered drones which can reportedly stay airborne for five years and which many have suggested can help Facebook achieve its goal of providing global Internet access, especially in places where the "organic" growth of its audience may be otherwise limited by the lack of infrastructure.
Facebook is in negotiations to buy a drone manufacturer with the aim of using its high-altitude autonomous aircraft to beam internet connections to isolated communities in Africa, according to reports. The social networking company is one of the main backers of the internet.org project, which aims to connect the large parts of the world which remain offline.
Today, only 2.7 billion people – just over one-third of the world's population – have access to the internet, according to Facebook. Other founding members include Ericsson, MediaTek, Nokia, Opera, Qualcomm and Samsung.
Now TechCrunch reports that Facebook intends to buy the maker of advanced solar-powered drones which can remain in the air for up to five years at a time, in the hope that they can be modified to provide internet connectivity for those on the ground.
Titan Aerospace's drones fly so high – up to 65,000 feet - that they can effectively operate as satellites with far lower operating costs, which the company calls "atmospheric parking". The Solara 50 and 60 models can carry up to 100kg of equipment.
TechCrunch reports that Facebook intends to build 11,000 of the drones to provide blanket internet coverage to parts of the world that currently have patchy or non-existent connections.
The project would be in direct competition with Google’s Project Loon, which will see 30 balloons launched into the stratosphere where they would form a network and programmed to use varying wind currents at different altitudes to remain in a geostationary position.
If successful, the project would provide 3G-like speeds to isolated parts of the world. But the lifespan of the balloons would be just 100 days, after which they would return to Earth and have to be replaced.
So between Google balloons, Facebook's drones, and Amazon's instadelivery service, any hope of seeing the stars unobstructed in about a decade can be laid to rest. But at least everyone will have internet connectivity and same day delivery, even if it is goods that were never ordered in the first place.
The good news: it will make passage for the US military's remote controlled death machines somewhat more problematic with countless airborne objects flying to and fro across the increasingly unfriendly skies. What it means for commercial air traffic is unknown but will surely be spun as bullish for the stocks of public airlines.
It appears, given comments from Foreign Minister Lukashevich, that things are about to get ugly again...
"we will have to respond...if provoked by rash and irresponsible actions by Washington... and not necessarily symmetrically."
Russia said on Tuesday that it would retaliate if the United States imposed sanctions over Moscow's actions in Ukraine.
"We will have to respond," Foreign Ministry spokesman Alexander Lukashevich said in a statement. "As always in such situations, provoked by rash and irresponsible actions by Washington, we stress: This is not our choice."
And Interfax adds:
- RUSSIA WILL HAVE TO RESPOND TO POSSIBLE U.S. SANCTIONS, "AND NOT NECESSARILY SYMMETRICALLY" - RUSSIAN FOREIGN MINISTRY
Given that Russian boots remain on the ground in Ukraine and that the US (and the west - ex-UK) are still pressing for crushing sanctions against Russia; one has to wonder whether Putin's carefully worded "annexation" comment did nothing but enable exits for oligarchs... What really changed?
Volume is around 35% below yesterday's pro-rata but none of that matters. The S&P 500 is at record highs but it is the "most shorted" and most notably the Russell 2000 that is just exploding higher with a massive gap. Up over 3% on the day, smashing to new record highs, this is the best day in over 26 months. This is the biggest rise in stocks since October 2011 (when global central banks came to a co-ordinated rescue). Bear in mind that the Fed already noted small-cap multiples were over-extended (5% below here)... but BTFATH anyway.
Just an incredible surge in the Small Caps...
Which has ramped the Russell to play year-to-date catch up with the Nasdaq...
And the big winner since we the "most shorted" on 2/21... is the "most shorted"
It's just that kinda market - Thank You Janet
Some of our readers may have missed our post from September 2012 in which we showed that far from being used for their generally accepted purpose, student loans - now well over $1 trillion and more than the total credit card debt outstanding - in numerous instances are instead abused to fund virtually everything else besides paying for tuition. Recall: "Robert Thomas Price Jr. borrowed about $105,000 for his tuition at Harrisburg Area Community College from 2005 and 2007, federal authorities say. It doesn’t cost anywhere near that much to study at HACC, though. So Price, 45, of Newport, is facing federal student loan fraud and mail fraud charges. A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games."
At the time many derided this case study as an isolated example of fund abuse by an isolated individual. Nearly two years later, a study by the WSJ confirms what most have known: far from an isolated incident, "student" loans have become a primary source of funding for an every greater portion of the US population, and that when looking at total credit creation in the US economy, non-revolving student debt has as much if not more relevance than mere revolving credit, when it comes to determining how pays for what.
The WSJ takes on a more conservative tone when it says that "some Americans caught in the weak job market are lining up for federal student aid, not for education that boosts their employment prospects but for the chance to take out low-cost loans, sometimes with little intention of getting a degree."
Unfortunately, its examples demonstrate a pervasive culture of monetary abuse, which has become as rampant, if at a much lesser scale, as what the TBTF banks have been acused of doing in order to perpetuate the illusion that they are solvent - indirectly taking from taxpayers to fund an unsustainable lifestyle. Taxpayers, who will end up with massive losses on their involuntary "investment" in either case.
Take Ray Selent, a 30-year-old former retail clerk in Fort Lauderdale, Fla. He was unemployed in 2012 when he enrolled as a part-time student at Broward County's community college. That allowed him to borrow thousands of dollars to pay rent to his mother, cover his cellphone bill and catch the occasional movie.
Tommie Matherne, a 32-year-old married father of five in Billings, Mont., has been going to school since 2010, when he realized the $10 an hour he was making as a mall security guard wasn't covering his family's expenses. He uses roughly $2,000 in student loans each year to stock his fridge and catch up on bills. His wife is a stay-at-home mother who also gets loans to take online courses.
"We've been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don't have to worry about food," says Mr. Matherne, who owes $51,600 in federal loans.
Some students end up going deeper into debt. Early last year, when Denna Merritt lost her long-term unemployment benefits, the 49-year-old Indianapolis woman enrolled part-time at the Art Institute of Pittsburgh's online program, aiming for a degree in graphic design. She took out $15,000 in federal loans, $2,800 of which went to catch up on unpaid bills, including utilities, health-insurance premiums and cable.
"Obviously, it's better not to use it that way if you can help it, because you're just going to owe that much more later," says Ms. Merritt, a former bookkeeper.
The logic for why "students" (or not) chose the easy way out? "The only way I feel I can survive financially is by going back to school and putting myself in more student debt," says Mr. Selent, who has since added $8,000 in student debt from living expenses. Returning to school also gave Mr. Selent a reprieve on the $400 a month he owed from previous student debt because the federal government doesn't require payments while borrowers are in school.
In other words, running away from insolvency by adding on more debt. And not just any debt, but Federal debt, which has no liens on any assets, aside from converting the obligor into a non-dischargeable, indentured debt slave indefinitely, with wage garnishment rights afforded to the government. Of course, the borrowers know all about this, but that too is a bridge to be crossed in due course. For now, someone has to pay for the rent and the food, even if that someone is once again the US taxpayer.
Expect stories like these to continue. Here's why:
College officials and federal watchdogs can't say exactly how much of the U.S.'s swelling $1.1 trillion in student-loan debt has gone to living expenses. But data and government reports indicate the phenomenon is real. The Education Department's inspector general warned last month that the rise of online education has led more students to borrow excessively for personal expenses. Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and "miscellaneous" items made up more than half the costs covered by student aid.
The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didn't log any credits at the time. The report pointed to possible factors such as fraud in addition to cases of people enrolling without serious intentions of getting a degree.
Capella Education Co., which runs online schools, examined student costs and debt at institutions?public and private?in Minnesota and concluded that between a quarter and three-quarters of loans taken out by students were for non-education expenses. At one of Capella's master's programs, the typical graduate left with about $30,200 in student debt even though tuition, fees and book costs totaled roughly $18,800. Borrowers are prohibited under federal law, except in rare instances, from discharging student debt through bankruptcy.
The share of student borrowers taking out the maximum amount of loans—$12,500 a year for undergraduates—has risen since the recession. In the 2011-12 academic year, federal Education Department data show, 68% of all undergraduate borrowers hit the annual loan ceiling, up from 60% in 2008.
When one averages out the numbers, how many students are said to abuse their loans and use the proceeds to fund "other" uses? "About a quarter."
Research suggests a fair chunk of that is going to non-education expenses. In 2011-12, about a quarter of student borrowers took out loans that exceeded their tuition, after grants, by $2,500, according to research by Mark Kantrowitz, a higher-education analyst and publisher of the education site Edvisors.com.
And the one take home paragraph that summarizes this latest capital misallocation clusterfuck which has Fed bailout written all over it:
Mr. Selent, of Fort Lauderdale, knows he is getting himself deeper in a hole but prefers that to the alternative of making minimum wage. In his 20s, he earned a bachelor's degree in communications from a local for-profit school but couldn't find a job in the field after graduating and began falling behind on his student-loan bills. He is now taking courses for a degree in theater so he can become an actor.
What else is there to add? Maybe just the chart of student debt.
And this chart, showing where all the newly created money is really going:
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Is anyone surprised that the poorest and least credit worthy of Americans are being saddled with piles of debt in order to buy new cars? It’s not enough that a generation of our citizens will toil pointlessly to pay off more than $1 trillion of student loans, we may as well add some other form of debt burden on top of it.
It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is. Creative ways for people to purchase cars they can’t afford have been on my radar screen for some time now, and if you recall, I posted an article last April titled: Just Keep Dancing: Introducing the 97-Month Auto Loan.
Well the dancing has continued, and now we have Americans borrowing at all-time record levels to buy cars. USA! USA!
A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides.
According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.
According to Experian, the average auto loan in fourth quarter 2013 was $27,430—an increase of $739 compared with the same period of 2012. The average used car loan was $345 higher, coming in at $17,974.
Those with non-prime credit ratings—or credit scores between 620 and 679—had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385.
Not surprisingly, those with subprime credit ratings—credit scores between 550 and 619—had the highest average monthly payment, of $499.
Yep, no doubt this will turn out just peachy.
The payments are rising despite an increasing number of car buyers opting to stretch their loans over six or seven years. According to Experian, a record 20 percent of all new car auto loans in the fourth quarter were more than six years in length.
J.D. Power said last week that February was on track to have one-third of new car auto loans last at least six years.
Oh, and in case you forgot, we are also bringing back subprime home loans.
Full article here.
- *OBAMA BUDGET PREDICTS FASTEST GDP GROWTH THIS YEAR SINCE 2005 (US GDP estimates collapsing)
- *OBAMA BUDGET SAYS ECONOMY MOVING FORWARD, HOUSING `COMING BACK' (home sales plunge at fastest pace since 2011)
- *OBAMA BUDGET CITES 'ENCOURAGING SIGNS' ACROSS INDUSTRIES (US Macro worst start to year since 2008)
But apart from that, yeah, "nailed it"
President Barack Obama proposed a $3.9 trillion budget package Tuesday peppered with new taxes on upper-income Americans and businesses, plus numerous spending initiatives aimed at bolstering education, research and low-income work programs.
The president's spending plan for the fiscal year that begins Oct. 1 doesn't rest on new or lofty policy goals, reflecting a town hibernating from budget exhaustion and girding for midterm elections in November. Instead, it offers targeted and familiar proposals, including an overhaul of corporate taxes, which it says would boost job growth and make U.S. businesses more competitive.
Many of the proposals are likely to meet a cool reception on Capitol Hill, where both parties are preparing for November elections that could change the balance of power on Capitol Hill.
As Bloomberg adds,
President Obama proposed raising $104b over next 10 yrs in his fiscal plan for 2015 with new restrictions and taxes on multinational cos. that weren’t included in last yr’s budget.
* Changes would affect digital goods, deductions for “excessive” interest and so-called hybrid arrangements that can lead to income not taxed in any country, according to budget; Obama also wants to make it harder for cos. to expatriate
* In all, Obama’s budget wants to raise $276b over next 10 yrs from international tax changes, 75% more than it sought last yr
* Wants to dedicate revenue to lowering corporate tax rate to 28%
Having "condemned Russia's incredible act of aggression" which markets now appear to have forgotten about, we wonder just what Secretary of State John Kerry will have to say in this speech. Markets appear to think it's all over and east and west Ukraine can all sing Kumbayah with Putin leading the melody but other leaders continue to call for "crushing" sanctions against Europe's largest gas supplier. We are sure Kerry will clear it all up and explain where the line that was not crossed is... and for goodness' sake don't mention the Russian boots on the ground in Crimea.
Mission Accomplished? Stocks at all time highs...
One wonders just what Victoria "Fuck The EU" Nuland whispered to Tymoshenko...
Live Feed (embed) via NBC
By Brian Livingston, General Manager of SIACharts
If you are like most advisors, you have spent the beginning of the year rushing from meeting to meeting, gathering assets as clients both new and old tried to get money in before the RRSP deadline. What is likely happening now is that the money is being transferred into your accounts and you need to start making some informed decisions for these clients. Now what do you do? Do you have an actual defined investment strategy that you adhere to? Is this strategy consistent and based on anything other than your gut instinct? Do you have a system in place to protect your client against potential market downside losses like back in 2008, and take advantage of upside moves in the markets like we are currently experiencing now? If you can’t answer yes to all of these questions, then you owe it to your clients and to yourself to read on.
I was talking with someone last week, who said that he really did not feel confidence that his advisor had a strategy to deal with changing market conditions. Does this statement ring true of you as well? If we boil right down to it, as an advisor, you will make more money if you spend more time with your clients, and less time sitting behind a computer in an attempt to decipher what is going on with the overall macro direction of the markets, and then trying to figure what to do with individual investment selections. Should you be in the U.S. or Canadian Equity markets right now, or maybe you should be in Cash? How much time is wasted trying to do all the analysis by yourself? Spending all this time on analyzing securities minimizes your revenue generating opportunities. A recent study conducted by a research group concluded that advisors who spend in excess of 60% of their time in client facing activity earned 3 to 5 times more income than those that did not.
Potential clients, as well as current ones, are looking for something different and better. The days of Buy and Hold are gone as a strategy, as clients don’t want to hear that we may lose a decade or two of returns. There is a large group of investors, with huge sums of money moving ever closer to retirement, and they cannot afford to have 2008 happen again. They want to know that you have a systematic solution for these issues, not just a buy and hope strategy. Those advisors who recognize this change in the client landscape will have the greatest opportunity to prosper, while others will be left behind trying to figure out what happened.
How do you decide where to put this money that you just received? Maybe you should be in Commodities right now, Emerging Markets, Bonds, or Currencies? What is the rules based approach that you follow every time to help fully serve your clients? Growing your book is very difficult if not almost impossible without a systematic approach to help streamline your business.
Investment advisors using SIACharts take advantage of being able to have a macro to micro approach to markets, one that is consistent, easy to follow, and easy to explain to prospects and clients. In a few minutes a day, advisors can identify, track, and report their various strategies, so they easily know where to be placing all of their client’s assets. This strict approach to risk management has been able to help our clients reduce their risk significantly, while helping them stay in the markets for longer periods of time during bull markets improving their performance. And just as important, saving you time from rigorous in-depth analysis thus giving you more time to spend face to face with your clients and more opportunity to increase your book of assets.
So, how do we go about doing this? Our first step is an overall call on how we should be approaching the Equity markets for risk management, referred to as the SIA Equity Action CallTM. Depending upon where the call currently resides within 1 of 3 zones, our clients change their approach towards their purchases, to the point that they may not be making any equity purchases at all.
Once we have established how (and if) we are going to make an equity purchase, we then need to know more specifically which asset class and which equity market to purchase with the lowest risk. SIA provides this information to the Investment Advisor. What is stronger right now: US, International, or Canadian Equity? How do we know when to get defensive and go more into Cash and/or Fixed Income if needed? Using the SIACharts Asset Class Ranking SystemTM, we can again narrow down the purchase by selecting the strongest asset classes and then the strongest sectors within that asset class.
Staying in the strongest asset classes has done 2 things for our clients. First, it has helped minimize the amount of time spent on analysis giving advisors more time to market, prospect, and meet with their current clients. Second, it has also helped to minimize risk and increase their returns by keeping them out of the weakest asset classes. Knowing what asset classes currently present the highest risk is one of the most important elements to help eliminate possible drawdowns in their portfolio. Minimizing drawdowns is as important as generating returns, especially for your clients nearing retirement.
Looking at the SIACharts Asset Class Rankings, your strategy will be to stay up at the top of the list and avoid the bottom of the list. Turn your passive asset allocation strategy into an active asset allocation strategy to help mitigate risk. You can quickly and confidently determine what to invest in to, but more importantly, decide what to stay away from as the largest drawdowns usually happen in the lowest ranked asset classes. Using this approach helped our clients to successfully avoid the drop in 2008 and some even had positive returns that year.
Now, we need to take that final step in sharpening the pencil and decide what the positions are that we need to invest in. Once again, we employ our relative strength system for our advisors to narrow down the selection process even further. Whether you are looking at Stocks, ETFs, or Mutual Funds, the SIA system again ranks the holdings from strongest to weakest to show you what to buy and also what to avoid or sell.
In the example below, we are going to look at ETFs using our US Equity ETF Report as US Equity is the top ranked asset class currently in SIACharts.
The report is broken down into 3 different color-coded zones to help minimize the number of selections you need to analyze, as we only make purchases in the Favored Green Zone. Staying out of the other zones helps to yet again minimize the risk profile for your clients.
By taking this rules based, macro to micro approach, advisors using SIACharts know exactly how to approach their purchases and exactly what and when to buy and sell. We have heard from advisors using our service that last year was their best year ever, in terms of gathering assets and also in terms of returns. Some made over 50% returns for the clients in their growth models with very few transactions, and most importantly very little time spent behind the computer.
So, what are you going to do with all that new money you just brought in? Do the same thing that you have always done in hopes that something different happens this year? Or, would you rather develop investment management strategy that is successfully helping to minimize losses and maximize returns for hundreds of advisors across North America in minutes a day? Put that hard earned money to work with confidence in the markets with a rules based strategy today!
Want to see strategies that have been returning 13% to 25% annually for the last 6 years, regardless if you are using Stocks, ETFs, or Mutual Funds? Sign up now for a no obligation, FREE two week trial by clicking here and someone from our office will contact you right away about setting up a time to give you a free demonstration how to use the site to yours and your client’s best advantage.
The Bosphorus has been a busy place today where first two Russian ships, the Alligator Class landing ship 150 Saratov and the Ropucha class landing ship 156 Yamal have passed the Turkish strait in a northerly, Black Sea, direction, followed promptly by the Ukrainian frigate U130 Hetman Sahaydachniy. Full steam ahead to a Sevastopol rendezvous? Find out in a few hours.
Photos and captions courtesy of Bosphorus Naval News:
Saratov passing through Bosphorus on 4 March 2014. Photo TRT
Yamal passing through Bosphorus on 4 March 2014. Photo AA
Ukrainian frigate Hetman Sahaidachny is passing through Bosphorus with Ukrainian flag hoisted.
Just six days after proudly proclaiming that it was unscathed by the Mt.Gox debacle, another Bitcoin bank - Flexcoin - has admitted that it will be forced to close after hackers stole 896 bitcoin, worth around $600,000, in an attack on Sunday. As The Guardian reports, the company shut its website and posted a statement on Tuesday morning detailing the loss..."as Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately."
Six days ago:
We hold zero coins in other companies, exchanges etc. While the MtGox closure is unfortunate, we at Flexcoin have not lost anything.
— flexcoin (@flexcoin) February 25, 2014
Flexcoin will be shutting its doors.
— flexcoin (@flexcoin) March 4, 2014
“On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet,” the statement read. “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.”
Not all of the company’s assets were stolen. In line with best practices for running a bitcoin financial service, Flexcoin held some bitcoins in “cold storage”, keeping them on devices not connected to the internet. Those bitcoins are safe, but only users who explicitly requested their bitcoins be held in cold storage (and paid a 0.5% fee) benefit.
“Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity,” the statement continues. “Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. Flexcoin will attempt to work with law enforcement to trace the source of the hack.”
Flexcoin’s closure follows that of MtGox’s, blamed on hackers stealing 750,000 bitcoins by exploiting a bug known as “transaction malleability”. Several other bitcoin businesses, both high- and low-profile, have gone under. Services including Bitcoinica, Inputs.io and MyBitcoin have all been hacked, each losing thousands of bitcoins.
by Camilla Hall, Financial Times, New York
“Pimco, the world’s biggest bond investor, has slashed its exposure to Canada – one of its top country holdings – as it predicts home prices will start to fall this year amid broader concerns that it could be the next global housing bubble ready to burst.
Pimco’s flagship $237bn Total Return Fund, managed by Pimco founder Bill Gross, halved its exposure to Canadian debt – which includes provincial bonds – to 2 per cent of its portfolio in the third quarter from almost 4 per cent a year earlier, according to data compiled by Morningstar. It cut its exposure every quarter in that period, according to the data.
The fund has been “bearish” on Canadian housing for some time and expects a decline in housing activity and prices this year as mortgage credit tightens and borrowing rates increase, Ed Devlin, who oversees Canadian investments across Pimco, told the Financial Times.” … Read on
Read the rest of the article at Financial Times (FT.com)
Copyright © Financial Times (FT.com)
by Joshua Brown, The Reformed Broker
The 2013 Berkshire Hathaway annual letter to shareholders came out over the weekend and, as usual, it’s loaded with interesting insights from the chairman, Mr. Warren Buffett.
I have every Berkshire letter he’s written going back to 1965 (before he was even signing them for himself) collected in one PDF and it’s fun to watch the evolution of the company and the thought process of its leader evolve through time. This year, Buffett seems to be even more sentimental than usual about his own history. He’s also a bit more frank about the inevitability of his own death and how he sees the company adjusting in the aftermath – although next spring, on the 50th anniversary of Berkshire, we’ll hear a lot more about this topic from Warren and Charlie Munger in their own words, god willing.
Anyway, I’ve spent a chunk of the weekend going through this year’s missive and I’ve pulled out what I believe are the most important takeaways for a professional investor and young entrepreneur such as myself. I hope these are helpful and interesting for you. Direct quotes from the letter will appear in block italics…
1. Pride is not the same thing as arrogance
Warren Buffett loves Berkshire Hathaway like you’d love a family member. It’s his entire life and has been since he was a young man. He loves the companies that comprise the organization and the people who show up to run them each day. You can sense the pride – well-deserved – oozing from him as he praises various business units and their industry-leading strengths. Take for example, his two large regulated businesses, the railroads and the utilities:
Burlington Northern Santa Fe:
BNSF carries about 15% (measured by ton-miles) of all inter-city freight, whether it is transported by truck, rail, water, air, or pipeline. Indeed, we move more ton-miles of goods than anyone else, a fact establishing BNSF as the most important artery in our economy’s circulatory system. Its hold on the number-one position strengthened in 2013.
MidAmerican’s utilities serve regulated retail customers in eleven states. No utility company stretches further. In addition, we are the leader in renewables: From a standing start nine years ago, MidAmerican now accounts for 7% of the country’s wind generation capacity, with more on the way. Our share in solar – most of which is still in construction – is even larger.
When Warren Buffett talks about his portfolio companies and their impact on America and the world, he is not bragging, he is gushing. And it’s entirely acceptable for him to do so – and well-earned.
2. Setting realistic expectations for one’s investors is important
Warren and Charlie are seeking to increase the value of the company for shareholders over the long-term - in excess of what could be received from just owning the Standard & Poor’s 500 Index. And they’ve certainly done it – earning a compounded annual gain of 19.7% a year for 49 years vs just 9.8% for the S&P, with dividends included. This equates to a return over the last half-century of some 693,518% vs the not-too-shabby 9,841% of the broad index. But they are realistic about their inability to keep pace with a raging bull market during any given period, the deficit owing to an unwillingness to be fully-invested in stocks or to pay high valuations for the leading companies.
Charlie Munger, Berkshire’s vice chairman and my partner, and I believe both Berkshire’s book value and intrinsic value will outperform the S&P in years when the market is down or moderately up. We expect to fall short, though, in years when the market is strong – as we did in 2013. We have underperformed in ten of our 49 years, with all but one of our shortfalls occurring when the S&P gain exceeded 15%.
Berkshire’s portfolio companies tend to be mature businesses and the company always keeps a huge cash position on hand ($20 billion plus) which can act as a drag when markets are melting up. Good stewardship of capital means having the courage to underperform when the environment calls for it. Buffett was happy to underperform during the tech bubble, sacrificing a short-term feeling of belonging for the long-term strategic advantage. Can his investors control their impulses as well?
3. It’s never too late to innovate
Buffett’s having fun with his new partnership-purchase of Heinz. The structure of the deal: Both Berkshire and a Brazilian private equity firm bought the company’s common stock, and then Berkshire, as the financing partner, bought a preferred stock paying 9% interest with the ability to exchange it for even more common shares later. Early results of the takeover have been encouraging and Buffett seems tickled by the creativity of the transaction. “With the Heinz purchase, moreover, we created a partnership template that may be used by Berkshire in future acquisitions of size.” Including Heinz, Berkshire now owns 8 1/2 companies that would be included in the Fortune 500 if they were standalone entities, we are told. One could envision Berkshire doing a Heinz-like transaction once a year!
4. Everyone screws up, even the world’s greatest investor
No one bats 1000 and Warren Buffett doesn’t either. Relaying the results of some of the smaller divisions within Berkshire – those “ranging from lollipops to jet airplanes” – Warren candidly explains that not every investment has panned out as hoped…
Some of these businesses…generate good returns in the area of 12% to 20%. A few, however, have very poor returns, a result of some serious mistakes I made in my job of capital allocation. I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated. Fortunately, my blunders usually involved relatively small acquisitions. Our large buys have generally worked out well and, in a few cases, more than well. I have not, however, made my last mistake in purchasing either businesses or stocks. Not everything works out as planned.
…and then there’s the $873 million loss from a commodity-related bond bet the chairman undertook before the oil and gas price crash:
Most of you have never heard of Energy Future Holdings. Consider yourselves lucky; I certainly wish I
hadn’t. The company was formed in 2007 to effect a giant leveraged buyout of electric utility assets in Texas. The equity owners put up $8 billion and borrowed a massive amount in addition. About $2 billion of the debt was purchased by Berkshire, pursuant to a decision I made without consulting with Charlie. That was a big mistake.
Buffett doesn’t dwell on these missteps, large and small. He takes a lesson away from them and moves on. Liquidity and diversification give him the ability to screw up without the consequences being fatal.
5. Insurance is the greatest business on earth
In 1967, Buffett bought two property and casualty insurance companies to offset the cyclical loss-making realities of the textiles business. The decision to do this would alter the course of his life and career, and he’s been waxing poetic about the insurance business every year since. The cash premiums paid by the firm’s insurance customers are Berkshire’s to invest where he’d like – this is called the float and it is an incredible source of capital. In 1970, Berkshire’s float from the insurance division gave them some $39 million to invest in stocks, bonds and elsewhere. In 2013, this float totaled a colossal $77 billion and change. Now that’s a war chest – no wonder Dan Loeb and David Einhorn have both launched reinsurance businesses of their own.
6. Numbers can’t always capture the true value of a business
Berkshire Hathaway is typically judged based on the change in the company’s book value, an accounting metric that, while important, fails to be indicative of anything about the future value of the business. Both Warren and Charlie feel very strongly that the value of Berkshire – both on the whole and in terms of its parts – is drastically undervalued based on what traditional book value captures.
Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure.
Buffett notes that two people – himself and Munger included – can look at the same facts on a balance sheet and income statement and then come up with two different calculations for what the intrinsic value of that business really is.
Warren is absolutely thrilled with Todd and Ted, his two protege hedge funders-turned-Berkshire PMs:
In a year in which most equity managers found it impossible to outperform the S&P 500, both Todd Combs and Ted Weschler handily did so. Each now runs a portfolio exceeding $7 billion. They’ve earned it.
I must again confess that their investments outperformed mine. (Charlie says I should add “by a lot.”) If such humiliating comparisons continue, I’ll have no choice but to cease talking about them.
Todd and Ted have also created significant value for you in several matters unrelated to their portfolio activities. Their contributions are just beginning: Both men have Berkshire blood in their veins
Buffett always makes it a point to give credit where it’s due, to highlight the successes of his managers where applicable and, most of all, to give talented people room to do their thing:
Charlie and I are the managing partners of Berkshire. But we subcontract all of the heavy lifting in this business to the managers of our subsidiaries. In fact, we delegate almost to the point of abdication: Though Berkshire has about 330,000 employees, only 25 of these are at headquarters.
Charlie and I mainly attend to capital allocation and the care and feeding of our key managers.
8. Invest like an owner, acknowledge your weaknesses
Buffett loves his common stock positions and he’s accumulated large percentages in some of America’s most enduring businesses like Wells Fargo, Coke, IBM and American Express, even though he does not control them as he does his wholly-owned subsidiaries. And he’s fine with that:
At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business; it’s better to have a partial interest in the Hope diamond than to own all of a rhinestone.
These are Berkshire Hathaway’s fifteen largest stock positions, along with their dollar cost-basis:
He also doesn’t trade into or out of them based on macro-forecasting or the market-timing opinions of others. He hopes they come down in price so he can own more of them while many other investors are hoping their stocks go up so they can sell out of them. Without naming names, he intimates that Wall Street is the enemy and that investors ought to treat their stock portfolios more like real estate, despite the greater liquidity of the former.
Both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm…
The best piece of advice Warren Buffett imparts during this year’s letter also makes for a fitting close to this post, so I’ll let him take us out of here:
the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long-term results than the knowledgable professional who is blind to even a single weakness.
Thanks for everything you’ve taught us this year, Mr. Buffett.
Copyright © The Reformed Broker
It took just a few short hours after Putin's Cold War 2.0 "detente" overtures for Russia to show that there is a difference between actions and words. In this case, and as always, the former continue to outperform the latter, and Reuters reports that Russian navy ships have blocked off the Kerch Strait which separates Ukraine's Crimea region and Russia.
According to the news service, which however cites Ukraine border guards so it must be taken with a large grain of salt as last seen during yesterday's "ultimatum" escalation, the border guards have said that Russian servicemen are in control of the Crimean side of the narrow channel and that Russian armored vehicles have been sighted on the Russian side.
"The Kerch Strait is blocked by two Russian ships - from the north and from the south," Pavel Shishurin, the deputy head of the border guards, told reporters.
The Russian military has not confirmed his comments.
But as long as Putin contemplates whether or not to put troops in the Crimea, as in more, all is well. At least according to the "markets."
What? Us worry? Thanks to the magic of the 102.00 USDJPY tractor beam, the S&P 500 has decided that Ukraine is fixed, the worst macro data in 6 years, and a rapidly tumbling expectation of US GDP is just enough "news" to warrant BTFATH. Thanks to an epic squeeze of the shorts, once again, stocks are at all-time highs... rinse, repeat...
Spot the Difference...
As the squeeze is on once again...