Saturday, August 17, 2013

BITCOIN vs GOLD: Getting the Most BANG For Your Buck

Here's what's in your Prime Interest today:
There's a new Bitcoin sherriff in town. It's called the Digital Asset Transfer Authority -- or DATA. And it's not just limited to Bitcoins, it will self-govern most of the actors in the digital currency space, including Ripple. Again, this is on a purely voluntary basis. With regulators increasingly cracking down on various crypto-currencies, DATA is attempting to get ahead of the game -- and craft best practices to interact with regulators. Bob talks with Trace Mayer, entrepreneur, and Andreas Antonopoulos, internet security expert, and asks if the new regulatory authority, DATA, goes against the original purpose of Bitcoins -- namely anonymity. Then we head to the hills of Virginia's gold belt to see what takes longer: mining bitcoin or mining gold. Finally Bob duels Mark Levine on the Snowden affair.

Plus, hedge funds are coming to a 401-K near you. The so-called "alternative investment" space has been morphed into something that "unsophisticated investors" can purchase. Mutual funds -- once the domain of the retail investor -- are increasingly being used to mimic hedge funds -- along with their high fees. And if the SEC ever gets around to implementing the JOBS Act legislation passed over a year ago, hedge funds themselves will be able to advertise their investment wares to the public. All we can say is caveat emptor.

And, we like to point out unintended consequences here. There's a glaring example in the planned economy of China. Except they didn't plan for a shadow banking network to destabilize their financial market. When reality stared them in the face, the Chinese authorities clamped down and ended up freezing short term lending markets. Turns out this led to a tremendous selloff in their burgeoning $4 trillion bond market. Sounds like 2008 redux to us.

Finally, it was a great day for high frequency traders. At least the ones who bought privileged access to key economic data released earlier this morning. The University of Michigan's Consumer Sentiment Survey fell by 5.1 points -- meaning consumers -- you and me -- don't have as much confidence in the economy. Fortunately, the HFT firms made a killing in the fifty milliseconds or so that they were able to front-run the markets.