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Wall Street technology will run new bitcoin exchange

Small exchanges and independents in bitcoin are about to get steamrollered by well-financed big players. Nobel, which has tentacles from our favorite vampire squid deep within it, will be powered by NASDAQ technology. Another deep-pockets exchange, Coinbase, is partially backed by NYSE and is the first regulated US bitcoin exchange. I’m guessing neither exchange will allow money to mysteriously vanish, as has already happened on too many other bitcoin exchanges and marketplaces.

However, regulation and anonymous transfer of money do not play well together. At some point governments will demand a transparent bitcoin paper trail so they can monitor and prevent money laundering and sales of illicit goods. When that happens, how does cryptocurrency continue being truly anonymous?

When I first heard the news that Nasdaq technology will be powering the Noble bitcoin exchange, which was founded by former Goldman Sachs head of electronic trading platforms John Betts, my immediate reaction was, “This is big.”

Coinbase announced in January that it had raised a massive $75 million round of funding that included the New York Stock Exchange (NYSE) among the investors. Two weeks later, the company launched the first regulated US bitcoin exchange with NYSE as a “partner.”

Once the banksters get into bitcoin in a big way, it’s game over for the small fry.

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Ideas

All our great ideas are dead or dying

ideas

When ideas that guide nations are no longer valid or have been corrupted, then new ideas must (and will) replace them. Without them, institutions, government, and societies begin to crumble. That’s what we’re seeing now. Few have respect for big government or big business today. Most everyone assumes both lie to us, that government spies on us continually and too many businesses are sleazy and dishonest. A lot of this is because the social contract is breaking down, a belief in working towards a common good is vanishing as the ideas that once guided us no longer seem valid.

The current vacuum will be filled. Maybe by new ideas. or maybe by violence.

Here’s a tiny question. Are we idearupt? As in: bankrupt of great ideas?

Go ahead. Name me an “ism” that still works.

I’ll wait.

Conservatism? #LOL. Liberalism? #lol. Capitalism, or what’s left of it? Sure, maybe for billionaires.

You can add socialism and communism to that, as both generally end up with authoritarian buttheads at the top looting the system too. None of our systems are working effectively.

We’re living through a kind of implosion. Not just of institutions—that much is obvious. But a collapse of institutions that was detonated by an implosion.

Of ideas.

Yesterday’s ideas about how to organize societies and economies simply don’t work anymore

And so we’re left in a vacuum.

Without guiding ideas, institutions implode, the citizenry gets pissed off and cynical, and it all spirals downward.

And already from that witches cauldron is rising the smoke. Of violence, animosity, extremism, hatred. Which will eventually, if the fire is left untended, kindle into a wildfire of war.

These wars could be really nasty populist uprisings, wars against other nationalities and cultures, extreme xenophobia, wars for resources due to the planet being plundered.

Or we could find some new ideas.

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Fracking: borrowed money, junk bonds, and napalm down wells?

What could possibly go wrong with financing fracking with with junk bonds? I mean, fracking means prosperity forever and this boom was supposed to be endless. Except for when the price of oil crashes and overly-leveraged drilling companies can’t make debt payments. Then they file for bankruptcy and all those junk bonds, which can sometimes  be used as leverage for other dicey “investments” crater in value, causing unexpected and unintended consequences. The bankruptcies have just started too…

One company, American Eagle Energy, couldn’t even make its first interest payment! Junk bonds like theirs are probably nearly worthless now, and were bought by bond funds and may even be in your retirement fund. Woo-hoo!

One thing we know already: after years in the desert, restructuring advisors are licking their chops.

The company has $13.6 million in negative working capital, only $25.9 million in cash, and its $60 million revolving credit line has been maxed out.

But here is the thing: the company sold these bonds last August! And this was supposed to be its first interest payment.

It’s the new waterless fracking method! How environmentally-friendly is that? Oh, wait…

A week later, GASFRAC filed for bankruptcy in Alberta, where it’s based, and in Texas – under Chapter 15 for cross-border bankruptcies. Not long ago, it was a highly touted IPO, whose “waterless fracking” technology would change a parched world. Instead of water, the system pumps liquid propane gel (similar to Napalm) into the ground; much of it can be recaptured, in theory.

Gotta love those theories. Or it could be the company was just a sleazy hustler selling snake oil to the rubes. I hope you don’t have to drink water that was near the napalm wells or have any of their now worthless bonds in your retirement accounts or investment funds.

But hey, the investment banks made good money underwriting this slop. And they probably shorted the bonds long ago.

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step-right-up

Michael Lewis on Flash Boys, one year later

step-right-up

High Frequency Trading corrupts the US stock market because big traders get prices before everyone else, which allows them to step up front of trades, raise or lower the price as needed, then make a quick profit. This happens in milliseconds. Flash Boys documented these sleazy doings in understandable language so that the public could understand how they are being fleeced.

Lewis writes about what is happening one year after the book was published. HFT is still corrupting the market. However Wall Street knows it is being watched and monitored. Fines have been imposed. Everyone knows their crooked game will be over soon enough. Remarkably, you and I, the small investor (and you may be invested through mutual funds or a pension) have a major inside ally. Goldman Sachs, yes the Vampire Squid itself, is in the forefront of reform, and the biggest user of IEX, a new exchange that cannot be gamed.

I like his analogy of HFT as a slumlord desperately trying to appear above reproach.

In the past 11 months, the U.S. stock market has been as chaotic as a Cambodian construction site. At times the noise has sounded like preparations for the demolition of a hazardous building. At other times it has sounded like a desperate bid by a slumlord to gussy the place up to distract inspectors. In any case, the slumlords seem to realize that doing nothing is no longer an option: too many people are too upset.

One of the largest fund managers found that HFT cost them one-third of 1 percent on every trade. Over the course of a year, this amounted to $240 million swept off the table by Wall Street parasites who provide no value or services.

A poll of institutional investors in late April 2014, conducted by the brokerage firm ConvergEx, discovered that 70 percent of them thought that the U.S. stock market was unfair and 51 percent considered high-frequency trading “harmful” or “very harmful.” And the complaining investors were the big guys, the mutual funds and pension funds and hedge funds you might think could defend themselves in the market.

Everyone needs to get involved.

That some minority on Wall Street is getting rich by exploiting a screwed-up financial system is no longer news. That is the story of the last financial crisis, and probably the next one, too. What comes as news is that there is now a minority on Wall Street trying to fix the system. Their new stock market is flourishing; their company is profitable; Goldman Sachs remains their biggest single source of volume; they still seem to be on their way to changing the world. All they need is a little help from the silent majority.

Because it is indeed time to declare war on Wall Street.

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homansquare

American Spring in Chicago?

homansquare

Let’s hope the upcoming Chicago mayoral election boots out the odious Rahm Emanuel and leads to special prosecutor investigation into the illegal detention center and torture chamber known as Homan Square. Maybe the election could even spur a genuine American Spring in Chicago, which sure needs one (as do many other US cities and the country as a whole.)

William Boardman does his usual, excellent advocacy journalism here, detailing the sewer that is Homan Square and Chicago politics in general, hoping for a political spring there.

In its essence, the story is simple and predictable: the Chicago police have a secure facility where they can take prisoners and hold them more or less indefinitely, keeping no official record of their whereabouts, while treating them with torture techniques made familiar by their application to prisoners at Guantanamo. The Guardian story by Spencer Ackerman, a reliable reporter who used to work for Wired, is based on public records and the personal accounts of both victims and attorneys, none of whom hide behind anonymity. The report provides ample detail that can be independently verified by any responsible public official or investigator or other news organization.

The Guardian report makes consistent allegations supported by testimony that can be independently verified:

  • that police take people into custody without arresting them;
  • that police hold prisoners incommunicado, sometimes for days;
  • that police deny prisoners their right to make a phone call;
  • that police deny prisoners any contact with their lawyers;
  • that police lie to lawyers about the whereabouts of their clients;
  • that police keep prisoners shackled hand and foot.

Additionally, there are allegations of further torture including threats and brutality. Most of this behavior is prohibited by the constitution.

Mayor Emanuel and Chicago PD are stonewalling. They know damn well allegations like this, if proven, means people (them) might be going to prison.

Remember the Chicago police riot of 1968: it was sanctioned by then Mayor Richard J. Daley who shouted anti-Semitic insults at the Connecticut Senator who spoke out against the violent rampage of city cops against unarmed anti-war protesters. Chicago policing was not good before that, and it hasn’t improved appreciably since. Government in Chicago, as in so many other places, remains tolerant of illegal, racist, brutal, and sometimes lethal police behavior.  That’s why it matters.

This is why Chicago needs a political Spring.

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Macau-gambling-revenues

Macau gambling revenue craters due to China anti-corruption campaign

Macau-gambling-revenues

China’s crackdown against corruption and money laundering has demolished Macau gambling. Revenues are expected to be down a whopping 53% this year. Macau gambling has too often been a front for Chinese to bring large amounts of cash to the casinos (with everyone taking a cut along the way) then remaining money would disappear into offshore banks and investments.

Here’s how the money laundering used to work.

China only allows 20,000 yuan ($3,200) to be moved out of the Mainland at a time and $50,000 a year. To circumvent that, Chinese high rollers can do one of two things. They can deposit money with junkets in the mainland and use that money in Macau, or they can borrow from junket agents.

If they choose to deposit the money, the junkets, who are basically gaming promoters, ferry money across borders. The gamblers can then use that money in Macau. Once they’re done gambling they can take their winnings in U.S. funds or Hong Kong dollars and invest it in property or offshore tax havens.

Casinos rely on “whales” (big spenders) for revenues. Shao Dongming was the biggest of the whales. He owes Macau casinos a stunning $160 million, has threatened to kill creditors, and is being investigated by China for corruption. It really does seem China is indeed relentless about stopping corruption, no matter who is involved.

Two years of time ago, this probably wouldn’t have been a problem, yet with a national anti-corruption crusade afoot in China — in which President Xi Jinping vowed to go after lowly “flies” and powerful “tigers” — and Macau’s casino industry going through a massive slow down, there is no longer any tolerance for the ‘red king’s’ excesses.

Unlike the pretend Rule of Law here in the US, China really does put elites in prison for corruption and sometimes executes them. And Macau is now hurting because of it. The whales have stopped coming and the little gamblers are gambling and spending less.

Despite a 7% rise in actual tourist arrivals to Macau from China during this Lunar New Year’s holiday, ‘The Year of The Goat’ is off to an extremely inauspicious start. As Bloomberg reports, even with expectations of a 40% drop, Macau casino revenues is now projected to crash a stunning 53.5% from last year.

Caesar’s in Las Vegas is being investigated by DoJ over allegations of failure to comply with money laundering laws.

The casino industry’s compliance with the Bank Secrecy Act, the primary U.S. anti-money laundering law, has come under scrutiny from the government in recent years. Authorities believe criminals around the world are using American casinos to launder their ill-gotten gains and move them into the U.S. financial system.

Authorities also believe the casino industry has done a poor job of complying with the banking law, which requires, among other things, that financial services businesses report suspicious transactions or those involving large sums of cash.

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trust-me

Snake oil bonds sold to school boards by banksters

trust me i'm a banker

That nice man from the Big Bank explained to us at the school board meeting how their nifty new bonds will save us a bunch of money. True, the bonds are a little hard to understand. But as long as something (I’m not sure what) goes up, our borrowing costs go down! So that means we can load up on debt for new construction because they’re practically giving the money away. We won’t have to impose new taxes which means avoiding all those tedious public hearings and screaming members of the public.

This magic is achieved by the wonderfulness of Capital Appreciation Bonds. California school districts loaded up the truck with them, because really, what could go wrong?

Unlike conventional bonds that have to be paid off on a regular basis, the bonds approved in AB1388 relaxed regulatory safeguards and allowed them to be paid back 25 to 40 years in the future. The problem is that from the time the bonds are issued until payment is due, interest accrues and compounds at exorbitant rates, requiring a balloon payment in the millions of dollars. . . .

Oh wait, maybe CABs aren’t so wonderful after all.

High cost, high risk, overly complex, and sold to the school boards as a way to finance capital projects without breaking the “no new taxes” pledges. The thought of paying out at 15:1 when the debt costs should have been no more than 3:1 is possibly worse than the ranting of Fauntleroy’s mother after the 5th grade play cast was announced.

The average functional life of a school building is 40 years. So, a capital appreciation bond could be issued for 40 years – go back to the unfortunate example of the Poway School District, wherein borrowing $150 million ended up costing $1 billion.

The Placentia School District in California has essentially bankrupted itself with CABs.

With no public discussion, the school board had hired George K. Baum & Co. and its staff of political strategists to help push the measure through so the district could continue an ambitious building spree.

After the election, the board allowed the bank to sell some of the costliest bonds ever issued by a California public agency. Just one $22 million borrowing from 2011 will cost taxpayers nearly 13 times that amount – $280 million – to repay.

Ouch. Gosh, didn’t Mafia loan sharks go to prison for things like that?

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Snake oil advertisement for pain

Tesla, and extraordinary delusions and the madness of crowds

 photo

Sorry, but Tesla just isn’t different or revolutionary. There is nothing new or startling about Tesla electric vehicles, which after all, use a technology that has been around since the 1890’s. Ditto for Telsa’s announcement it will build batteries to store solar power for homes. Again, this has already been done by many other companies, and Tesla has no new ideas here. Further, Tesla is not profitable and will not be until at least 2020, if ever.

However, that one-man hype machine Elon Musk spins an alluring tale of a wondrous EV future with solar panels everywhere. In reality, his company is heavily supported by subsidies. Wall Street traders love the hype because they use it to manipulate the stock and make a profit out of air – hot air, to be precise.

Much of the hot air is uncritically accepted by publications that should know better. In May 2014, Quartz published this gem of deliberate confusion, pretending Tesla made money, if you just exclude a bunch of money-losing stuff from the balance sheet, that is.

Tesla just posted a quarterly profit of $17 million.

Actually, using generally accepted accounting principles, it lost $49.8 million, or $0.40 per share, in the quarter that ended in March. A similar thing happened a year ago, when the company posted a surprising profit, if you exclude certain items.

Non-GAAP accounting, simply put, is snake oil. It says, well, if we hadn’t lost a bunch of money in this area or didn’t have to pay unexpected amounts of money over there, then we would have made money. It is junk accounting. Wall Street cheers these delusions because it basically stopped caring about rational stock valuations long ago. If Telsa says they made a non-GAAP profit, then the stock will pop.Wall Street algos will trade and profit from it before you can blink, much less react to the news.

The speculative mania on Wall Street has reached such absurd lengths that Telsa is being heralded and valued as the second coming of Apple and its circus barker CEO, Elon Musk, as the next Henry Ford. Indeed, so raptured were the day traders and gamblers that in the short span of 33 months between early 2012 and September 2014 they ramped up Tesla’s market cap from $2.5 billion to a peak of $35 billion.

That’s a 14X gain in virtually no time—-and its not due to the invention of a revolutionary new product like the i-Pad. Instead, we’re talking about 4,600 pounds of sheet metal, plastic, rubber and glass equipped with an electric battery power pack that has been around for decades, and which is not remotely economic without deep government subsidies.

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drug map

HSBC. Banker of choice for laundering drug money?

drug map

A consortium of India journalists detail meticulously how HSBC is at the center of laundering money from drugs. Oh, there is lots of dirty money in other high places, to be sure. From the opium wars of the 1800’s, to prominent American families profiting from illegal opium trade, to the west invading Afghanistan which curiously caused opium production to soar, far too many of our supposedly respectable elites are awash in drug money. It’s important to note they were not somehow recently corrupted but rather have always profited from the drug trade.

The edifice of international banking is very dirty and very corrupt indeed.

Drug money saved banks in in 2008, says the UN.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

Little or nothing has been done about this except for fining banks, which essentially is  a protection racket by governments. Governments pretend to enforce the law, dirty banks pay fines and pretend they will sin no more. Nothing changes. Government officials leave office and are then amply rewarded in any number of ways for their refusal to enforce Rule of Law.

Currently HSBC is smack in the middle of the drug trade, say the India journalists. Emphasis added.

For years, when banks have been caught laundering drug money, they have claimed that they did not know, that they were but victims of sneaky drug dealers and a few corrupt employees. Nothing could be further from the truth. The truth is that a considerable portion of the global banking system is explicitly dedicated to handling the enormous volume of cash produced daily by dope traffickers.

Contrary to popular opinion, it is not “demand” from the world’s population which creates the mind destroying drug trade. Rather, it is the world financial oligarchy, looking for massive profits and the destruction of the minds of the population it is determined to dominate, which organized the drug trade. The case of HSBC underscores that point. Serving as the central bank of this global apparatus, is HSBC.

CBS News on the charming dealings of HSBC with all manner of slime, criminals, and thugs.

A 37-year-old computer security specialist named Hervé Falciani stole the huge cache of data in 2007 and gave it to the French government. It’s now being used to go after tax cheats all over the world. 60 Minutes, working with a group called the International Consortium of Investigative Journalists, obtained the leaked files. They show the bank did business with a collection of international outlaws: tax dodgers, arms dealers and drug smugglers — offering a rare glimpse into the highly secretive world of Swiss banking.

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money laundering

HSBC illegally sheltered cash for wealthy and corrupt.

money laundering

Leaked documents show HSBC laundered and hid upwards of $100 billion, some of which was very dirty money indeed. HSBC is of course shocked it could have done such a thing. Brit politicians blame scalliwags in the other party for not enforcing laws but really it’s pot, kettle, black. Both parties are equally at fault for allowing it. Oh, your favorite pop star or celeb might be among those who hid money from the tax man, along with drug cartels and other assorted low life.

In a world where laws were actually enforced and corruption not permitted, HSBC would be shattered into pieces and those responsible for money-laundering would be imprisoned.

Secret documents reveal that global banking giant HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws.

In marvelously weasel-worded legalese, HSBC neither fully admits to previous wrongdoing nor says it has completely stopped doing so.

“We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”

The written statement said the bank had “taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.

When it comes to defending class interests of the wealthy, both parties act in lockstep. The same is of course true here in the States too.

Labour leader Ed Miliband said the government had “some serious questions to answer” and accused HM Revenue & Customs of failing to act on details it was given in 2010 about the claims.

But the government has hit back at Labour, accusing it of failing to act on tax evasion when it was in power.

You will note neither party is demanding existing laws be enforced. Instead we have the usual circus of blaming the other side for something both are doing.

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