"The most definite thing that can be ascertained from his writing is that he is not a cryptologist and may not appreciate the specific way Bitcoin differs from other virtual currencies, many of which are not much more than virtual debts."
Daniel, what's your insight exactly?
In a way all money is debt or credit, depending on how you look at it. Except that it is a special kind of debt/credit - it is targeted potentially at everybody and can be used for any economic purpose. In a way society creates a pool of debts and credits which is divided into small abstract pieces - money.
I agree the current monetary paper-based system created huge transaction costs. As a Visa and MasterCard shareholder I benefit form it. You can do so too.
It's also true that more efficient payment systems could be devised. But the bitcoin is obviously not that efficient system.
Bitcoins have a very high volatility inbuilt.
The solution is simply for the governments to convert the current paper based system into something like bitcoin. But abolishing monetary policy, if that is what you mean, is plain stupid. That is the point Krugman is making too.
More on Bank of America (BAC) Q1 earnings: Cost-cutting efforts paying off, with non-interest expense of $18.15B off nearly $1B from a year ago (total income is $2.6B) - headcount of 262.8K vs. 278.7K a year ago. Net interest income of $10.9B, down from $11.1B a year ago, thanks to lower loan balances and low rates - NIM of 2.43% vs. 2.51% a year ago. Credit loss provision of $906M, up $29M Y/Y "as improvement in portfolio trends have stabilized." $25M in mortgage loans funded - nearly all refinances - up 56% Y/Y. Shares flat. (PR) [View news story]
BAC at USD 10,5 would be a great buying opportunity. Let's hope the sell off continues.
The debate about this tax is going on for many months, if not a year now...
Sounds good at first sight but in reality it's a populist measure that won't really raise much money. At least in France it won't work as the additional revenue would be little bigger than the additional cost of administrating the tax.
But it's definitely driving rich investors out of France...
The Fed Is Not Pushing Stock Prices Higher [View article]
Silver,
I think you are right that the Fed indirectly lifts the price of stocks and that happens because of the confidence boost effect of QE.
The author is debunking the myth about the direct flow of QE money into equities because there are so many people that believe that there is a direct link. It that were so then Ben Bernanke could as well start buying Caterpillar or FedEx just to push the stock indexes up.
The Fed Is Not Pushing Stock Prices Higher [View article]
What Paul says sounds more credible to me.
If the money supply (M2) is declining despite QE3 that means most of this new money goes into excess reserves. That is also the reason why there is no inflation in the US.
The other thing is that if what you were saying were true the Fed would have stopped QE as inflating stock indexes is definitely not what they are aiming for.
And finally, why a financial institution that holds a virtually no risk bond will suddenly roll that money into highly risky assets? Just because the Fed buys the bond? Doesn't seem likely to me.
The Fed Is Not Pushing Stock Prices Higher [View article]
Lawrence,
Do you know for sure that what the primary dealers borrow against the primary securities indeed is invested in publicly tradeable stocks? I am sure some of that money goes indeed in stocks but my gut feelings says that those primary dealers must be total nuts (much worse than the traders of CDOs and DSOs in 2006-2007) to put any significant portion of that money into stocks.
Do you have any proof of that or is it just a guess that serves the notion that all QE money goes into the stock market?
My Upcoming 'Swing For The Fence' Investment [View article]
For an investor with at least 2-3 years time horizon even now is not a bad time to buy.
I bought some at USD 117 and thought that's expensive but now looking back I am very pleased with the result. (I slightly regret selling part of my Visa position at 157 to obtain AXP)
As the US economy is picking up speed (unemployment slowly dropping, consumer confidence increasing, housing market recovering) the story about how terribly bad QE was is becoming less and less credible.
The Fed has always been setting the interest rates as lever to boost confidence and borrowing (or to cool down an overheated cycle). And QE is just an extreme extension of the same thing.
It is also factually incorrect to say that the stock market reacts only to QE. It reacts on a daily basis to the information about the basic economic indicators.
After posting Y/Y share gains in the U.S. for much of calendar Q4, the iPhone's (AAPL -3.2%) U.S. share fell 350 bps Y/Y to 43.5% in the 3 months ending February, per Kantar Comtech. Android (GOOG +1%) claimed 51.2% of the market, up 580 bps Y/Y. In "Urban China," the December iPhone 5 launch helped the iPhone's share rise to 25.8%; Android's share is at 68.7%. Windows Phone (MSFT -0.1%) is making slow-but-steady progress (previous): its share is now at 4.1% in the U.S., 6.7% in the U.K., 6.8% in Germany, and 13.1% in Italy. [View news story]
Profit margins are very important. Margin compression means intensification of competition and, all other things being equal, lower profit. That's why people look at them.
The problem is that Apple is not growing EPS much and with the margin compression there is risk profits will go down. I hope not but the risk is there and the market is pricing it in.
Don't worry if you believe in Apple, once they demonstrates strong EPS growth the share price will go up.
Krugman Missed Bitcoin's Value [View article]
Daniel, what's your insight exactly?
In a way all money is debt or credit, depending on how you look at it. Except that it is a special kind of debt/credit - it is targeted potentially at everybody and can be used for any economic purpose. In a way society creates a pool of debts and credits which is divided into small abstract pieces - money.
I agree the current monetary paper-based system created huge transaction costs. As a Visa and MasterCard shareholder I benefit form it. You can do so too.
It's also true that more efficient payment systems could be devised. But the bitcoin is obviously not that efficient system.
Bitcoins have a very high volatility inbuilt.
The solution is simply for the governments to convert the current paper based system into something like bitcoin. But abolishing monetary policy, if that is what you mean, is plain stupid. That is the point Krugman is making too.
More on Bank of America (BAC) Q1 earnings: Cost-cutting efforts paying off, with non-interest expense of $18.15B off nearly $1B from a year ago (total income is $2.6B) - headcount of 262.8K vs. 278.7K a year ago. Net interest income of $10.9B, down from $11.1B a year ago, thanks to lower loan balances and low rates - NIM of 2.43% vs. 2.51% a year ago. Credit loss provision of $906M, up $29M Y/Y "as improvement in portfolio trends have stabilized." $25M in mortgage loans funded - nearly all refinances - up 56% Y/Y. Shares flat. (PR) [View news story]
Sodastream Continues Its Growth Strategy In 2013 [View article]
McDonald's Offers Dividends And Growth At A Reasonable Valuation [View article]
Sodastream Continues Its Growth Strategy In 2013 [View article]
My only regret is I didn't increase my stake in SODA when it was 47-48. Was sucking again my thumb.
10 Undervalued Bank Stocks For The Long Haul [View article]
Ticker - HBAN.
Flying High On Borrowed Wings [View article]
The debate about this tax is going on for many months, if not a year now...
Sounds good at first sight but in reality it's a populist measure that won't really raise much money. At least in France it won't work as the additional revenue would be little bigger than the additional cost of administrating the tax.
But it's definitely driving rich investors out of France...
The Fed Is Not Pushing Stock Prices Higher [View article]
I think you are right that the Fed indirectly lifts the price of stocks and that happens because of the confidence boost effect of QE.
The author is debunking the myth about the direct flow of QE money into equities because there are so many people that believe that there is a direct link. It that were so then Ben Bernanke could as well start buying Caterpillar or FedEx just to push the stock indexes up.
The Fed Is Not Pushing Stock Prices Higher [View article]
If the money supply (M2) is declining despite QE3 that means most of this new money goes into excess reserves. That is also the reason why there is no inflation in the US.
The other thing is that if what you were saying were true the Fed would have stopped QE as inflating stock indexes is definitely not what they are aiming for.
And finally, why a financial institution that holds a virtually no risk bond will suddenly roll that money into highly risky assets? Just because the Fed buys the bond? Doesn't seem likely to me.
The Fed Is Not Pushing Stock Prices Higher [View article]
You are wrong about this:
"we see Germany with its pristine balance sheet and the US with deficits running at 100% of GDP"
Germany runs a huge deficit which amount to around 82% of GDP. In the case of Germany it is more about "do what I tell you to do, don't do what I do".
By the way, nice article! I like your theses!
The Fed Is Not Pushing Stock Prices Higher [View article]
Do you know for sure that what the primary dealers borrow against the primary securities indeed is invested in publicly tradeable stocks? I am sure some of that money goes indeed in stocks but my gut feelings says that those primary dealers must be total nuts (much worse than the traders of CDOs and DSOs in 2006-2007) to put any significant portion of that money into stocks.
Do you have any proof of that or is it just a guess that serves the notion that all QE money goes into the stock market?
Flying High On Borrowed Wings [View article]
QE, low unemployment rate and economic growth are horrible things if you have invested in gold, that useless metal...
My Upcoming 'Swing For The Fence' Investment [View article]
I bought some at USD 117 and thought that's expensive but now looking back I am very pleased with the result.
(I slightly regret selling part of my Visa position at 157 to obtain AXP)
Flying High On Borrowed Wings [View article]
The Fed has always been setting the interest rates as lever to boost confidence and borrowing (or to cool down an overheated cycle). And QE is just an extreme extension of the same thing.
It is also factually incorrect to say that the stock market reacts only to QE. It reacts on a daily basis to the information about the basic economic indicators.
After posting Y/Y share gains in the U.S. for much of calendar Q4, the iPhone's (AAPL -3.2%) U.S. share fell 350 bps Y/Y to 43.5% in the 3 months ending February, per Kantar Comtech. Android (GOOG +1%) claimed 51.2% of the market, up 580 bps Y/Y. In "Urban China," the December iPhone 5 launch helped the iPhone's share rise to 25.8%; Android's share is at 68.7%. Windows Phone (MSFT -0.1%) is making slow-but-steady progress (previous): its share is now at 4.1% in the U.S., 6.7% in the U.K., 6.8% in Germany, and 13.1% in Italy. [View news story]
The problem is that Apple is not growing EPS much and with the margin compression there is risk profits will go down. I hope not but the risk is there and the market is pricing it in.
Don't worry if you believe in Apple, once they demonstrates strong EPS growth the share price will go up.