Morning Report: Jamie Dimon hates Bitcoin 9/13/17

Vital Statistics:

Last Change
S&P Futures 2490.8 -3.5
Eurostoxx Index 381.0 -0.5
Oil (WTI) 48.7 0.5
US dollar index 85.0 0.0
10 Year Govt Bond Yield 2.17%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.82

Stocks are lower this morning on no real news. Bonds and MBS are flat.

Mortgage applications increased 10% last week as purchases rose 11% and refis rose 9%. This includes an adjustment for the Labor Day holiday. Rates hit a low of 2.03% last week on fears that Hurricane Irma would cause major damage. Rates have fallen almost 20 basis points since July, although much of that was given back early this week after Irma turned out to be much less destructive than originally feared.

Inflation at the wholesale level increased 0.2% in August and is up 2.4% YOY. Ex-food and energy, it rose 2% YOY, more or less right at the Fed’s target. Surging gasoline prices at the end of the month pushed up the PPI. Note that Hurricane Irma will cause higher food prices, so we may see a temporary spike in inflation over the next few months.

Vikram Pandit (who ran Citigroup back in the day) says that AI and automation will replace up to 30% of all banking jobs, primarily in the back office. For the mortgage business, I suspect we will see AI and automation help increase the capacity of personnel, but not necessarily replace them. Underwriting a mortgage is much more complicated than clearing a foreign exchange trade. Still, there is no doubt that technology is impacting the business.

Cryptocurrencies are all the rage these days, but J.P. Morgan CEO Jamie Dimon thinks they are a fraud on par with tulip bulbs. In fact, he said he would fire any employee trading bitcoin for “stupidity.” His view is that governments will not tolerate an extra-governmental medium of exchange that they cannot control. In fact, China recently shut down its Bitcoin exchanges. Bitcoin prices are up fourfold this year.

Donald Trump is beginning to work on selling tax reform by hosting 3 Democrats to dinner at the White House last night. He is targeting Democrats in states he won. All Democratic Senators except these 3 (Manchin, Heitkamp, and Donnelly) have signed a pledge that they will only support tax reform if (a) it doesn’t add to the deficit, (b) doesn’t increase the burden on the middle class, and (c) goes through the regular order process.

The gap between the homeowner’s and the appraiser’s perception of a house’s value decreased in August, according to Quicken’s Home Price Perception Index. In August, the difference was 1.35%, while in July it was 1.55%. Interestingly, out West, the appraised value is coming in higher than the homeowner’s perception, while in the Midwest and Northeast it is lower. I have to say I am surprised to see that appraisals ever come in higher than the homeowner’s perception, but it does happen. Note that their home value appraisal index (which only tracks appraisal prices) rose 0.2% in August and is up 2.6% YOY, well below the more popular home price indices like Case-Shiller or FHFA.

30 Responses

  1. Bitcoin is the epitome of the Emperor’s New Clothes. If it can be traded on faith, however, it becomes real for as long as the faith holds. It reminds me of William James’ example in The Will to Believe.

    A single train robber can take everything of value from everyone on the train, but if enough passengers believe that if they make a move on the robber that others will help, then the robber has no chance.

    Seems we saw that work on a French train when two American GIs in civvies and a Brit cop on vacation all gambled at the same time on not being alone and took down a terrorist.

    As soon as no one believes in Bitcoin it will be dead. We also say that about fiat money, but in that case there is ample evidence that belief will be unshakable.

    Like

    • mark:

      Bitcoin is the epitome of the Emperor’s New Clothes.

      I tend to agree. Yesterday Jamie Dimon compared it to the infamous tulip craze.

      As soon as no one believes in Bitcoin it will be dead.

      That is true of any medium of exchange that has no intrinsic value.

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      • I’ll have cigarettes, liquor and condoms in the FEMA camps.

        Liked by 1 person

      • No medium of exchange has intrinsic value. A willingness of the other party to honor a particular value ultimately determines worth. Gold may be a finite resource, but much of its value stems from the fact we decide to value it, and can exchange it on markets with others who decide to value it.

        Thus, fiat money has no intrinsic value, but neither does gold currency. Gold, at least, can have conceptual value both as a currency and as a valued metal.

        Market demand (and market faith) determine value. Intrinsically, things are just another arrangement of atoms. 😉

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        • KW:

          No medium of exchange has intrinsic value.

          Cigarettes, liquor, and condoms do. That’s why they end up as mediums of exchange in places where there is no fiat money. Pretty much anything that can be personally used or consumed has some intrinsic value.

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        • Nope. There value is in the desire of someone to treat it as currency or trade. Someone who doesn’t smoke and doesn’t want to sees no value in cigarettes. The value is to the beholder(s), not within the item. Liquor is worthless within a group where nobody likes the taste, or nobody wants to get drunk. More likely to be valued than pieces of green paper after a market collapse, to be sure. But the value still isn’t intrinsic. The value is assigned by external actors.

          Admittedly, oxygen, water, and food all have intrinsic value to humans. Antibiotics could probably fall into this category, too.

          The problem with this intrinsic items (and why money is a much better medium of exchange) is, whatever intrinsic value you see in your liquor, if I’m you’re only trade partner, and I find them worthless, then they are worthless. Even food and water: if I don’t need any more than what I already have, I put little value in your proffered trade.

          Money makes it possible to exchange green paper for something you want from me, so that I might exchange green paper (or digital bits) for something I want from someone else. Cigarettes, liquor, and condoms are just a poor man’s fiat currency.

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        • KW;

          There value is in the desire of someone to treat it as currency

          Seems to me their value is in the fact that they can be personally consumed/used. Given that in our society there is no substantial desire of anyone to treat them as currency, yet people are still willing to exchange what they do use as currency in order to obtain and consume them, that pretty much proves that their value lies somewhere beside the desire to use them as currency.

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        • Value still has an outside locus. Consumability doesn’t create the value, just the desire, if there, of others to consume. One can argue that because of the predominance of available consumers, there is thus intrinsic value, you’ll always be able to trade your smokes or toilet wine, but then the same thing can also be said about fiat currency presently: you’ll find someone to take it in exchange for goods or service. I don’t see a significant difference in the intrinsic value.

          I suppose we could argue that the ability not to produce something on a printing press (or worse, via digital replication) creates intrinsic value (so burritos have intrinsic value where as a digital streaming copy of Spiderman: Homecoming does not). But I think “intrinsic” value is always determined by the market, whatever that market is, so I don’t find a consumable commodity to have more intrinsic value that fiat currency, gold, or tulip bulbs. But that just might be me.

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    • The only dissenting point I would note is that companies like Dell do accept it as payment.

      Liked by 1 person

    • Bitcoin has numerous problems. A digital currency, to function, ultimately has to have transparency (the creator of bitcoin was unknown for a long time, still quasi-denies it, and is obviously squirrely).

      I regret that I started mining bitcoins near the beginning and lost interest and stopped paying attention. I could have a thousand dollars, or more, worth of bitcoins today.

      That being said, that’s not how to establish a digital currency. First, they should call it “Galactic Credits”. 🙂 You’d need to get a number of exchanges and governments to recognize the currency, have at least legitimate-seeming standards body. You need a reserve bank to determine the number of credits in circulation. A transparent process for who is on the board of that bank. Etc. It would essentially be a global, or country-less, fiat currency.

      The value of this is questionable except for globalists seeking one-world government. Thus, I’m not sure how much motivation there will be.

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  2. Maybe you can answer this question Kevin, why would an image of a server be of any value, falsified or not?

    http://dailycaller.com/2017/09/12/exclusive-dws-it-guy-was-banned-from-house-after-trying-to-hide-secret-server/

    Like

    • The premise being that they use imaging software to provide a copy to law enforcement so that they can still keep the actual server in operation.

      If it’s honestly done, it’s an exact duplicate of the software image and can be searched for any relevant data.

      Like

    • Because the image is essentially (or should be) all the data on the server, so a basic forensic analysis of the server image could tell somebody a great deal (almost everything) about the original. It’s essentially a direct duplicate of the server’s drive-or-drives, and can tell you anything about the server that the original can, except a potentially bit-by-bit magnetic analysis of the hard drive searching for overwritten files (which they almost certainly wouldn’t have done in any case).

      I don’t know how he faked the image, but the most likely way was he set up a fake server, real or virtual, and imaged that. However, expecting this, I expect they look at signature data that notes the machine, whether it’s in a virtual box or not, and other stuff I’m not even aware of. But just diving into the registry would give them a clue about the server and it’s age. It would be very difficult for a regular IT guy to provide a convincing fake server image. I wouldn’t know how, and would suspect there’s identifying data of a nature and in a location that I know nothing about.

      Also, can save time an effort and avoid downtime of a perhaps legitimately useful server. Ask the suspect for a server image. Get it. Check the image to see if its fake. Is it fake? Dude is almost certainly doing something criminal.

      Like

  3. This is great:

    “Jacobin Sells Out

    Years ago, we warned you — it was only a matter of time before we capitulated to liberalism. Now we’re selling tote bags.”

    https://www.jacobinmag.com/2017/09/jacobin-sells-out

    Everyone sells out eventually.

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    • What is the demographic that accepts HRC’s story as the the truth?

      Like

    • Mind blowing

      I knew that I am not someone who will say things that aren’t true, that will not take responsibility. I had to run as me.

      Oy.

      they want to have a constitutional convention to rewrite our Constitution to make it friendlier to business, to inject religious and ideological elements.

      Again, Oy.

      Because we don’t control media the same way the right does; it’s harder for our message to get out.

      Pick one.

      I’m for universal health care coverage that is high-quality and affordable for every American.

      It’s not the cost driver you dumb broad.

      we can to sort of break the stranglehold that a lot of the pharmaceutical companies, which are unfortunately still driving prices, have on health care costs.

      Bullshit.

      I always thought the election would be close.

      Why were they feeling it?

      he hit every single area of resentment and grievance that people were feeling.

      What’s Obama’s opinion of this?

      but gender is not the motivating factor that race was for President Obama.

      Hillary doesn’t think broads have agency.

      And I have so much anecdotal evidence for this. You know, all of a sudden the husband turns to the wife: “I told you, she’s going to be in jail, you don’t want to waste your vote.” The boyfriend turns to the girlfriend and says, “She’s going to get locked up!” All of a sudden it becomes a very fraught kind of conflictual experience. And so instead of saying I’m taking a chance, I’m going to vote, it didn’t work.

      Like

      • “And I have so much anecdotal evidence for this.”

        = I have no evidence for this.

        Most of those men and boys would have been saying nasty things about Hillary to their HRC-hating significant others. This is not a case of the election being swayed by testosterone-addled men.

        “Because we don’t control media the same way the right does; it’s harder for our message to get out.”

        True: they control the MSM almost completely, where the Republicans have reasonably sympathetic mouthpieces on AM talk radio and Fox and the Wall Street Journal.

        What she’s really saying is: we are incompetent at forming a message that resonates with the general public, and appeal primarily to our hardcore base and people who don’t pay any attention to what we actually say. We blame right-wing media for this.

        Liked by 1 person

  4. Finally getting around to watching the recent Apple keynote. They may be a progressive behemoth, but I just love that company. Still got that reality distortion field.

    Like

  5. Seen in tonight’s Plum Line happy hour:

    The ability of foreign nations to use social media to manipulate and influence elections and policy is increasingly seen as the soft underbelly of international espionage, another official said, because it doesn’t involve the theft of state secrets and the U.S. doesn’t have a ready defense to prevent such attacks.

    That’s just insane. International espionage? Facebook ads?

    This, we will say later, is why Trump was reelected.

    Like

    • that and defining white supremacy down to the policy difference. It is about censorship..The government won’t do it, but the Professional Left will..

      Liked by 1 person

  6. One Star reviews of Clinton’s “What Happened” deleted from Amazon . . .

    http://www.washingtontimes.com/news/2017/sep/13/amazon-deletes-one-star-reviews-clinton-book/

    Eh, they should stop accepting reviews (especially on non-fiction books) that aren’t from verified purchasers of the book, and then they wouldn’t have to worry about the spammers. Political books, whether from Clinton or Coulter, attract spammers who one-star the book without reading it, and then it’s just a competition of spammers who haven’t and probably will never read the book expressing their ideological preferences in place of an actual review.

    Like

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