In the aftermath of the global financial crisis, in 2010 Andrew Haldane, then the executive director of financial stability at the Bank of England, wrote a seminal paper espousing the virtues of patience in financial markets.
According to Mr Haldane, now the bank’s chief economist, many studies had drawn a link between patience and growth and, conversely, between impatience and under-saving. The latter was thought to have adverse implications for long-run investment and growth. Unfortunately, he noted, impatience in the market was mounting.
Some of this, Mr Haldane suggested, was connected to financial innovation that encouraged short-term investing styles. High-frequency trading in particular, he argued, was leading to increased market volatility. For growth to really take off, more patience was needed.
Looking at the market today, however, it is hard to believe things are as simple as that. Take the growing number of established but lossmaking (or just-about break-even) businesses that have emerged from the tech sector — Uber, Tesla or Snap, for example. Companies like these exist largely because investors’ attitudes in recent years have become uniquely forgiving and long-termist in nature.
Of course, many authoritative investors and academics share Mr Haldane’s view of the deleterious effects of excessive short-termism. Many point to the requirement for public companies to update investors on their financials on a quarterly rather than yearly basis.
The practice, it is argued, draws the attention of investors away from long-term productivity-enhancing investment and towards activities that drive short-term returns and profits — stock-purchase programmes, financial arbitrage or predatory mergers and acquisitions focused on asset-stripping or monopolisation. The result is that low-value-added businesses are financed, while those with the capacity to innovate are not. And the implications for growth are negative.
Understandably, keeping companies private for longer (protected from the pressures and scrutiny of short-termist shareholders and investors) is now held up as a logical strategy for high-tech businesses with transformative ambitions.
Unfortunately this thinking has had two unintended, negative consequences. The first is the rise of the overly patient, and so potentially gullible, investor. The second is the rise of the sort of idealistic long-term thinking that can detach financial markets from reality entirely.
While there is little doubt that too much short-termism has negative effects, one should not assume that it follows that extreme long-termism is always for the best. The latter can be dangerous when long-term thinkers fall for fanciful narratives or investor cults.
In such cases, investment decisions are driven not by a realistic evaluation of what is or is not possible, but rather by the grandeur of the futuristic visions being touted. If the tale is bold enough — especially if it appeals to entrenched biases, belief systems or desires — the more likely an excessively patient investor is to forgive failure on the grounds that the end justifies the means. Whether the venture being invested in has scant chance of operating without losing money matters little at this point. The investment is now a religion.
Nowhere is this mindset more clearly displayed today than in the realm of cryptocurrencies, where narrative trumps reality on a daily basis. Whether cryptocurrency schemes are cultivating value for future generations, or are in fact systems whose growth depends on an elaborate bluff or deception, is impossible to evaluate. When the endless deferral of gratification becomes an end in itself, settling that question is more a matter of faith than quantifiable reality.
PASADENA, Calif. — NASA’s Cassini spacecraft, the intrepid robotic explorer of Saturn’s magnificent beauty, ended a journey of 20 years on Friday like a shooting star streaking across Saturn’s sky.
By design, the probe vanished into Saturn’s atmosphere, disintegrating moments after its final signal slipped away into the background noise of the solar system. Until the end, new measurements streamed one billion miles back to Earth, preceded by the spacecraft’s last picture show of dazzling sights from around our sun’s sixth planet.
“The signal from the spacecraft is gone and, within the next 45 seconds, so will be the spacecraft,” Earl Maize, the program manager, announced in the control room at NASA’s Jet Propulsion Laboratory here, just after 4:55 a.m. local time.
The team members, some of whom had spent decades on the mission, started hugging each other when news of the spacecraft’s demise arrived.
Never again would Cassini send home the images and data that inspired discoveries and wonder during the probe’s 13 years in orbit around the ringed planet.
The mission for Cassini, in orbit since 2004, stretched far beyond the original four-year plan, sending back multitudes of striking photographs, solving some mysteries and upending prevailing notions about the solar system with completely unexpected discoveries.
Its end closes the chapter on the exploration of Saturn for probably a decade or longer. Still, there is much left for scientists to study and decipher.
Cassini had its origins in the brainstorm of two scientists, Daniel Gautier of the Paris Observatory and Wing-Huen Ip, then at the Max Planck Institute for Aeronomy in Germany.
NASA’s two Voyager spacecraft flew through the Saturn system in 1980 and 1981. Voyager 1, in particular, provided a close-up look at Titan that was enthralling and maddening. Larger than the planet Mercury, Titan was enshrouded in haze. The atmosphere was thicker than Earth’s and contained methane and other carbon-based molecules. What lay below, no one knew.
“Those discoveries led to many more questions,” Dr. Ip recalled.
In 1982, Dr. Gautier and Dr. Ip proposed to the European Space Agency that it collaborate with NASA on a Saturn mission: an orbiter paired with a probe that would parachute onto Titan.
NASA’s Cassini spacecraft will plunge into Saturn on September 15, incinerating itself after 20 years in space.
The orbiter became Cassini, built and operated by NASA; the Titan probe was named Huygens, a project of the European Space Agency. The Europeans approved Huygens in 1988.
A year later, NASA gave the go-ahead for Cassini. The craft were named for a Dutch astronomer, Christiaan Huygens, who discovered Titan and figured out Saturn had rings, and Giovanni Domenico Cassini, a French-Italian astronomer, who discovered four other major moons of Saturn, each in the 17th century.
To take advantage of the gravitational boost from a flyby of Jupiter to accelerate Cassini-Huygens, the spacecraft was launched on Oct. 15, 1997.
Seven years later, Cassini swung into orbit around Saturn. A few months later, Huygens headed to its rendezvous with Titan, the first attempt to touchdown on a moon other than our own.
The lander was equipped with instruments to identify molecules in the air, measure the winds and haze, and take pictures on the way down.
Because the spacecraft designers did not know what the surface was made of, they had designed Huygens to handle several possibilities, including floating for a few minutes if it had turned out that Titan’s surface was a global ocean of methane.
Instead, Huygens bumped onto solid ground, surrounded by a complex network of small rivers.
Photographs at the surface showed what looked like rounded cobblestones that turned out to be blocks of water ice.
The data from Huygens, together with that gathered by Cassini in repeated flybys, revealed Titan as a world shaped by active geological processes with rivers, lakes and rain. But in the frigid temperatures there, about minus 290 degrees Fahrenheit, the fluid is not water, but methane. “Titan has really revealed an Earthlike world,” Dr. Lebreton said.
NASA spacecraft, if they survive to their destination, often just keep going.
Cassini stayed seven more years to watch changes in Saturn through the passing of seasons. It takes Saturn 29.5 years to orbit the sun, so Cassini has been there for almost half a Saturn year.
One of the mission’s most surprising discoveries was an ocean of water beneath the icy exterior of Enceladus that may be heated by hydrothermal vents similar to those at the bottom of oceans on Earth. The water on this moon and the carbon compounds it contains are some of the key ingredients needed for life that scientists would have thought unlikely on a moon just 313 miles wide.
Even at the end, 20 years after launch, Cassini and its instruments remained in good working shape.
The plutonium power source was still generating electricity. But there was not enough propellant fuel left to safely send Cassini anywhere except into Saturn.
Any spacecraft, even one launched two decades ago, has unwanted microbial hitchhikers aboard. In particular, planetary scientists wanted to ensure that there was zero chance of the spacecraft crashing into and contaminating Enceladus or Titan, which could also be hospitable for life. And NASA wants to leave the Saturn system pristine.
In the very last phase of the mission, Cassini dove through the gap between Saturn and the planet’s innermost ring. That provided new, sharp views of the rings and allowed the craft to probe the planet’s interior, as another NASA spacecraft, Juno, is doing at Júpiter.
The last photographs taken by Cassini started streaming back to Earth on Thursday. An infrared image marked the spot high above the planet’s cloud tops where Cassini would disintegrate hours later.
Once these had been sent back to Earth, the probe was reconfigured for the final plunge.
Usually, Cassini would make observations, store them in its memory and beam them back to Earth later. This time, there would be no later. Instead, on the final plunge, the spacecraft kept its antenna dish pointed at Earth, as its instruments gave scientists their deepest direct look ever into Saturn.
As it moved into Saturn’s atmosphere, the drag of gas molecules started twisting the spacecraft, and its small thrusters could no longer keep the 30-passenger school bus-sized craft upright.
Cassini tipped over, its antenna no longer pointing at Earth. That is when the signal disappeared, at an altitude of about 870 miles.
The spacecraft disintegrated at about 7:31 a.m. Eastern time, and much of it melted quickly.
The most resilient bits were probably the casings around its plutonium power source, designed to withstand re-entry into Earth’s atmosphere or an explosion at launch.
Dr. Ip, who helped propose the mission in the 1980s, flew from Taiwan, where he is now a professor at National Central University, to join a commemoration of Cassini’s end at the California Institute of Technology. Hundreds of people gathered for what was part reunion, part celebration, part wake. In the predawn hours of Friday, he and his family were watching the mission’s final moments on giant screens placed on the lawn.
Dr. Ip himself was more stoic and bemused. How was he feeling?
Not far away, William S. Kurth, a University of Iowa physicist who oversaw one of Cassini’s scientific instruments, was looking at a brightly colored plot on his laptop. The final data had already made the journey from Saturn to Australia to Pasadena to Iowa and back again to his computer on the lawn. He pointed out the radio emissions Cassini measured as it had entered Saturn’s atmosphere.
It was less than 10 minutes after word of Cassini’s death, and Dr. Kurth had homework to do.
The major indexes have hit fresh highs in part because fewer missiles are being lobbed between the White House and Capitol Hill.
Yardeni has come up with a cute throwaway line. But of course, stock market moves are never about nothing. There is always something going on to explain why stocks continue to hit fresh highs, even in the wake of news that North Korean missiles are getting dangerously close to the land masses of other countries.
In the past week, much of that good news is coming from Washington. For months before, relations between the White House and Capitol Hill had broken down to the point where the president was openly criticizing Mitch McConnell, the Senate leader of his own party. Many were worried whether tax reform, an issue of utmost concern to investors, would be a casualty of this rancor.
Many of Trump’s hardline supporters howled in protest, including alt-right website Breitbart, which wrote that the president was caving on the issue. But the news portrayed the president as a man willing to find common ground on a politically divisive issue.
As a general point, markets are made up mostly of pragmatists who much prefer a compromising president eager to get things done, not a populist bogeyman who doesn’t want to play ball with leaders of either party.
This is particularly true when it comes to a matter like tax reform. Investors no doubt want to see the parties working together for passage of a bill that knocks down the tax rate for both corporations and individuals.
And as Greg Valliere, the Washington-based chief global strategist with Horizon Investments wrote earlier this week, Trump is even willing to compromise on the tax rate that the wealthy pay.
Dan Clifton, a policy analyst with Strategas Partners, wrote Thursday that his institutional investor clients are starting “to believe” that tax reform will become law early next year.
And that new era of dealmaking in D.C. is helping to explain why stocks keep hitting new highs.
| Etiquetas: Bitcoins, Blockchains, Cryptocurrencies, Jamie Dimon, JP Morgan Chase and Co.
- Jamie Dimon called Bitcoin a fraud.
- The deep problem isn't that Bitcoin lacks value but instead that banks like JPM don't have power and control.
- He's smart enough to see how blockchain could richly reward banks and investors even if Bitcoin must be ignored for being too speculative.
You probably already heard that Jamie Dimon called Bitcoin a fraud. Here are some relevant quotes that matter for investors, which I will address one by one below.
So, while you might have zero interest in directly buying Bitcoin (e.g., Coinbase), and you can't buy "blockchain" directly, you can still invest in companies like IBM that are exploiting the technology.
Even if we agree with Jamie Dimon that Bitcoin is a fraud, nothing prevents us from agreeing that blockchain and cryptocurrency instantiations are here to stay.
Jamie Dimon likes blockchain. That's why he separated it from Bitcoin. He could have easily thrown out the baby with the bathwater. But, he didn't. That's significant because it demonstrates that he knows that blockchain is here to stay. It's important to him.
JPMorgan’s proposed system involves creating “virtual cash” that would sit in an online wallet, reminiscent of the computer files that hold Bitcoins on behalf of their users.
The JPMorgan system would also create a public record of transactions made using the technology – a feature that would appear to mirror Bitcoin’s use of “blockchain”, a massive block of code stored across a peer-to-peer network of computers that acts as a public ledger of all Bitcoin transactions.
...his team will use the same cryptographic techniques to add a “security layer” to Quorum, the system JPMorgan is developing to run smart contracts.
The key point is that Dimon really hates Bitcoin but he loves blockchain. We'll come back to this idea shortly because it's the number one thing you need to know as an investor.
"I'm not saying go short."
As he said this, there was a wink and a smile. There's nothing that indicates that he's got a crystal ball about Bitcoin and that he's not clear on how to properly trade it. That's because he can't control it.
"Bitcoin can go to $100,000 before it goes down."
The take away is that there is an uncertainty and volatility, with a total lack of control. This makes it very difficult to treat as a true and stable currency, in the mind of Jamie Dimon.
It's also clear Dimon doesn't see this as any opportunity for investment. But, those comments above are absolute indicators of a trading and speculation opportunity. This is a signal to traders; this won't trade sideways.
On the surface, there's seems to be a huge opportunity to facilitate trades and even market-making activity. JPM isn't shy about trading securities and is a dominant force in that space.
Uncertainty, volatility and speculation make JPM a lot of money so why wouldn't they jump into the fray in some way? It comes down to one word: control. With Bitcoin, JPM lacks power, authority and control.
"Governments, the first thing they do, is to form a currency. They like to control the currency. They control it through a central bank. They also like to know who has it. Where it is. Where it's going."
I absolutely see this as a "projection" of Dimon's thinking. This isn't really about central banks. Instead, Dimon doesn't like what Dimon can't control. And, despite the profit opportunities via a trading desk set up, Dimon steps JPM away from the ledge. Without control, this is dangerous territory.
Just like a central bank, JPM loves knowing who has what money, where it comes from, and where it goes. Just like Wells Fargo (WFC), JPM likes to be able to cross sell and upsell. That's next to impossible with Bitcoin because it's anonymous. Again, we're talking about a lack of control.
To be balanced and fair, it's important to consider the investment risk that JPM would soak up by playing with Bitcoin. That's because if the U.S. government wanted to get aggressive about Bitcoin, it could crush an investment in trading opportunities like we've seen in China. That risk is high, or even quite high. While that still wouldn't drive Bitcoin to zero, it would harm JPM investors.
"[Central banks] look at [Bitcoin] as a novelty."
I cannot speak to Dimon's knowledge or ignorance, but I admit I'm skeptical that the CEO of JPM doesn't know more about this. Look here and here. The summary is that central banks love blockchain and cryptocurrency, even if they don't love Bitcoin.
...permanently raise GDP by as much as 3% [emphasis added], due to reductions in real interest rates, distortionary taxes, and monetary transaction costs.
Jamie Dimon is either being disingenuous or he's ignorant. I doubt that he's ignorant. Instead, it seems more likely that he dislikes Bitcoin because it disturbs the "natural" balance of power.
Or perhaps he's worried that it could drain money out JPM's control and into the anonymous ether of Bitcoin.
"There's a good reason for it. If you're in Venezuela. Or Ecuador. Or North Korea. You're better off using Bitcoin than using their currency. It can't possibly be true in the United States. Unless you're speculating. And that isn't a reason to say something has value."
This is a really nuanced set of assumptions and conclusions. He's telling us Bitcoin is a fraud and yet it's a good thing for some countries that have runaway inflation or are in a state of chaos. That certainly sounds like Bitcoin has value, right? These are identified cases of where Bitcoin has utility as a currency. It has value; it's not a fraud. Put another way, Bitcoin seems to be an alternative to at least some fiat currencies and therefore has value.
Dimon also tells us that Bitcoin can't possibly make sense or be "true" in the United States.
What's odd to me, is that JPM heavily deals in derivatives which are used for hedging, and of course speculation. So derivatives have value because of the agreement between parties and the underlying value of the assets, at least in theory. But, Dimon's comment starts to unwind because you can agree to trade Bitcoin to buy "stuff" in the real world. It's digital, but it becomes real in a click or two.
The real point here is that JPM makes money with money. JPMorgan has understanding and control of money. However, that kind of control is next to impossible with Bitcoin. This, again, is why blockchain is beautiful in the eyes of all banks: faster transactions, lower transaction costs, data quality, more.
"It's not a real thing."
In some sense, this is 100% accurate. But, it's accurate in the sense that little men running across my computer screen in a video game don't exist. When you see those little men, they only exist in the code, in the computer. They aren't real. Yet, we still react to them here in the real world as we play.
In roughly the same way, our U.S. dollars are just little men floating through our economy. We all agree they are real but they are merely paper and ink, or 0's and 1's. The only real value of the U.S. dollar is faith, not commodities, like silver or gold. Certainly, that faith is strong inside the U.S. and outside.
Allow me to stretch the idea a little. In a sense, if Bitcoin can never be real then U.S. dollars can never be real. Ultimately, faith and belief between humans drives the value of dollars but also Bitcoin. That faith in the value of the U.S. dollar is strong and relatively hard to manipulate. The faith in the value of Bitcoin is weak and easily manipulated.
Jamie Dimon very clearly dislikes Bitcoin but he likes blockchain. This is a great opportunity to understand that Bitcoin is a threat to banks like JPM and WFC since it's largely anonymous, highly distributed and low friction.
Therefore, JPM is right to consider Bitcoin a threat to their moat. At the same time, Dimon and JPM clearly have embraced blockchain, which is a key part of what makes Bitcoin work the way it works.
At issue here, fundamentally, is control. JPM would be foolish to embrace Bitcoin unless they felt free to operate with low risk and low regulation. Furthermore, they would also need to have the additional technology and "add ons" to really make Bitcoin work in their existing banking profit infrastructure. It's strategic and logical for JPM to attack Bitcoin to maintain their moat.
Speculators can make money trading Bitcoin. It's highly volatile and the risks are enormous, but Dimon makes no good case that Bitcoin is limited in going up, and up again. If he felt that it was doomed right now, he would have called for a short approach, but he's clear that shorting isn't a slam dunk. No doubt about it, the uncertainty is high.
Investors should look through Bitcoin and into blockchain. Those companies exploiting blockchain will gain advantages as outlined above. I've documented how both IBM and JPM are examples of how investors can tap into the rise of "Bitcoin" without directly putting money into Bitcoin. That's the conservative play here.