Be Careful with the Cryptocurrency You Invest in

Cryptocurrency has turned a lot of heads in recent years. Despite its original intent to be the future of currency, it has become a promising source of investment for many out there. Cryptocurrency investors are ranging from business professionals to amateurs – thanks to its accessibility. It has become a prospective alternative to other commodities such as stocks, bonds and so forth. What’s more, is that these cryptocurrencies have successfully attained over billions of dollars from investors in these few years. As a result, it has captured worldwide attention from major organizations and media.

Updates about cryptocurrency have surfaced as a consequence of the steep decline and frequent fluctuations in its value. Several media organizations including CNBC have informed the public about the action taken by the SEC towards some of the major firms in the cryptocurrency industry. Since then, SEC have reached out to educate investors about these firms.

SEC have come up with several guidelines for investors to take into consideration. They are urging investors to do some research prior to the transaction. Investors should ask for clarification regarding their criterions in the process of choosing the quality assets. In addition, they should find out the status of the market under the National Securities Exchange. More facts and figures should be acquired from the Financial Industry Regulatory Authority concerning the people behind the market if possible.

“Amid signals that the SEC would check online platforms for violations of registration or exchange rules… some of the markets have requested or received approvals as alternative trading systems,” proclaimed Nick Morgan, one of the partners at Paul Hastings LLP. Morgan was previously part of the SEC senior trial counsel.

“Likewise, the SEC does not review the trading protocols used by these platforms, which determine how orders interact and execute, and access to a platform’s trading services may not be the same for all user,” as disclosed in a statement by the SEC Enforcement and Trading and Markets divisions.

SEC have stepped out to remind investors about the truth behind these platforms. The digital commodities offered by these servers are not endorsed by the SEC, and the list of criterions they follow are not associated to SEC.

“The so-called standards shouldn’t be equated to the listing standards of national securities exchanges,” the regulator reminds investors.

SEC continues to clarify and distance themselves from these servers.

The values of cryptocurrencies have suffered a decline in value, once again, on Wednesday.  Bitcoin value decreased to 7.1%, an improvement from the initial 9%, to $10,030 with Ethereum and Litecoin following behind, as announced by CoinMarketCap. This happened following a warning by the Securities and Exchange Commission concerning potentially unlawful trading websites that does not have regulatory oversight. The chief federal regulator of the United States financial markets has informed the public of the fact that these trading websites are not SEC-registered and regulated.

Bitcoin remains to be the most noteworthy cryptocurrency at this moment.

Cryptocurrency is a highly demanded choice of investment because of its convenience and availability. It allows beginners and youths to invest without feeling restricted by the amount. However, it also belongs to the “high risk high reward” classification. With this new piece of information from SEC, nonetheless, the risk that it entails have become more apparent and severe. Public confidence in cryptocurrency is already quickly slipping away with its severe decline. Will this statement from SEC further affect the demand for cryptocurrency?

There is no such thing as a meaningful Bitcoin price prediction. It just isn’t possible with the current structure. Bitcoin was never really intended to be a store of value. You have separate classes of investors, each with different goals for what Bitcoin should be. Miners and holders want it high, and the currency crowd wants it low. Those forces will pull at each other in unpredictable ways. Besides, the major exchanges and trading platform are all amateur hour, and most have perverse incentives to front run, which can tilt prices even more dramatically. Market manipulation is rampant and structurally impossible to solve short of mass action or outside regulation.

Featured Image via Flickr/Steve Garfield

Bitcoin plummets as economists, regulators express skepticism of cryptocurrency boom

Bitcoin’s value, which nearly quintupled from the first of the year through the first of September, peaking at $4,950.72 per coin on the latter date, has fallen more than 20 percent this month and over 15 percent in the past seven days, as of 4:15 p.m. EST Wednesday.

The decline comes as a number of regulatory agencies and economic experts around the globe express skepticism regarding Bitcoin and other cryptocurrencies.

China banned Initial Coin Offerings (ICOs)—the means by which creators introduce and raise capital for new cryptocurrency projects—earlier this month, and Chinese news outlet Caixin reported Friday that the country might prohibit cryptocurrency exchanges entirely in the near future, Business Insider notes. 

But, Bloomberg’s Lulu Yilun Chen tweeted Friday that the Chinese government had yet to mandate the shutdown of Okcoin and Huobi PRs, two of the country’s most prominent cryptocurrency exchange platforms.

Some say China will relax the pressure it has placed on the cryptocurrency market once the government has found a viable means of regulating that market.

“China [is] saying, ok, we need to push back on these for now until we figure out how to deal with them,” said Zennon Kapron, director of the Shanghai-based financial technology consultancy Kapronasia, per Reuters, in reference to the country’s ICO ban. Kapron added that he expects the country’s government to eventually ease the ban.

Previous Chinese regulations against cryptocurrencies have proved temporary. The country prohibited the withdrawal of Bitcoin investments in February, but allowed withdrawals to resume in June, Business Insider points out.

Chinese regulators are not the only ones wary of the cryptocurrency boom.

Tuesday, the U.K.’s Financial Conduct Authority released a statement cautioning investors about the risks of ICO investors, Business Insider reports. These risks, according to the FCA, include the lack of regulation governing the cryptocurrency market, the volatility of cryptocurrencies, the potential for fraudulent ICOs, and the experimental nature of cryptocurrency projects.

“ICOs are very high-risk, speculative investments,” the FCA’s warning reads. “You should be conscious of the risks involved … and fully research the specific project if you are thinking about buying digital tokens. You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (e.g., business plan, technology, people involved) and prepared to lose your entire stake.”

Also on Tuesday, Business Insider says, JP Morgan CEO Jamie Dimon predicted an imminent crash of what he sees as the Bitcoin bubble. His prediction, so far, has been self-fulfilling. Dimon said he “would fire any trader that transacted Bitcoin for being stupid” (Business Insider’s paraphrasing).

As of 5:15 p.m. EST, Bitcoin’s value has fallen six percent on Tuesday’s news.

Business Insider notes that early this month, in an interview with Quartz, Yale economics professor and Nobel Prize winning author Robert Shiller, who predicted the crash of the housing and technology markets in his 2000 book “Irrational Exuberance,” called Bitcoin the best example in today’s market of a speculative bubble.

A “speculative bubble” occurs when unrealistic expectations amongst investors of an asset’s future performance drive the market value of that asset beyond any real gains it is capable of accruing.

In the aforementioned book, Shiller argues that the tech bubble formed because “a fundamental deep angst of our digitization and computers” compelled investors to seek a false sense of understanding and comfort by gobbling up tech stocks.

“Somehow Bitcoin…gives a [similar] sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst,” Shiller told Quartz.

There is no question that investors have been exuberant about cryptocurrencies this year. ICOs have raised over $2 billion in 2017. The question is whether the exuberance is irrational. As a number of financial experts answer that question in the affirmative, once-exuberant cryptocurrency backers are growing skittish.

Featured image via Wikimedia Commons

Equifax stares down almost two dozen class actions after cyberattack

Credit reporting and monitoring company Equifax is facing at least 23 proposed class action lawsuits in the wake of its announcement Thursday that a cyber attack compromised the personal information of up to 143 million Equifax customers, USA Today reports.

Various law firms have filed suits in 14 different states as well as D.C., according to USA Today. More suits will likely come. Victimized customers may receive a pretrial settlement from Equifax, and/or may be entitled to some portion of any financially pejorative judgment levied against the firm.

“Equifax probably injured 143 million people, which is kind of a record…with 143 million people it doesn’t surprise me there are already 23 suits,” said John Coffee, who directs the Center on Corporate Governance at Columbia Law School.

USA Today notes that the number of people the breach potentially victimized represents 44 percent of the U.S. population.

“Assume that if you’re an American with a credit card or a mortgage, your data has been leaked,” Zach Whittaker, security editor for CBS’s ZDNet, tweeted.

Hackers carried out the attack from mid-May through July, seizing customers’ names, social security numbers, birth dates, addresses and, in some cases, driver’s license numbers. Equifax says it became aware of the breach in late July. The company alerted the public of the incident on September 7. In the interim, Equifax hired third-party consultants to investigate the crime and provide suggestions as to how the company might bolster its cyber-defenses.

Many of the lawsuits take issue with the lag time between Equifax’s discovery of the attack and the firm’s notification of the public. USA Today says one suit calls the delayed disclosure “willful, or at least negligent.” Another argues that the delay “deprived [consumers] of their opportunity to meaningfully consider and address issues related to the potential fraud, as well as to avail themselves of the remedies available under the FCRA (U.S. Fair Credit Reporting Act) to prevent further dissemination of their private information.”

The company would presumably argue that it was justified in assessing the nature and extent of the attack before alarming the public.

A third suit notes that Equifax fell victim to similar attacks earlier this year, as well as in 2013 and 2016. Therefore, said suit argues, Equifax “knew and should have known of the inadequacy of its own data security.”

Other filings take aim at TrustedID, an Equifax service that provides identity theft protection and credit monitoring. One document says the company “failed to disclose to consumers that it owned TrustedID,” and baited customers into signing up for the service.

To help customers identify whether their information was compromised by the attack, Equifax is offering free TrustedID service to all U.S. customers

New York Attorney General Eric Schneiderman, who is investigating the Equifax case, took issue with a clause in the agreement Equifax requires TrustedID members sign. The clause in question says that in signing up for TrustedID, a user waives his/her “right to bring or participate in any class action…or to share in any class action awards.”

“This language is unacceptable and unenforceable,” Schneiderman tweeted Friday. “My staff has already contacted @Equifax to demand that they remove it.”

Equifax subsequently explained that the waiver does not prohibit TouchID members from participating in class actions regarding the cyber security incident.

In addition to Schneiderman, other government entities are pursuing the Equifax case. USA Today obtained a copy of a letter Senators Omin Hatch and Ron Wyden, both of whom hold key positions on the Senate Committee on Finance, sent to Equifax requesting details about the attack and the manner in which the company is handling it.

The letter requests a timeline of the breach and asks how Equifax is identifying affected customers and what measures the company is taking to limit consumer harm. The document also asks Equifax to clarify the amount of information that was compromised.

Legal arguments must take place before the proposed suits achieve class action status. If the court grants class action status, USA Today says, a “federal panel on multi district litigation” will likely consolidate the suits into a single case, then assign that case to a judge, who would, in turn, appoint one law firm or a group of law firms as plaintiff counsel.

At the market’s close Tuesday, Equifax stock has dipped 18.7 percent since the original announcement. 4.7 percent of the drop has come since Monday morning when news of the proposed class actions broke.

Featured image via Pixabay

Chinese authorities crackdown on cryptocurrency ICOs

Monday, the Chinese government banned the practice of creating and selling new cryptocurrencies, Reuters reports

With the rise of Blockchain technology, initial coin offerings (ICOs)—which give investors the opportunity to buy newly-created cryptocurrencies—have gained popularity. In total, Reuters says, ICOs have raised $2.32 billion since the inception of the cryptocurrency market; $2.16 billion of that amount has come in 2017.

In China this year, 65 ICOs have raised a combined 2.62 billion yuan ($394.6-million) and attracted 105,000 investors, according to Reuters.

The value of Ethereum, the cryptocurrency in which most ICOs are transacted, has plummeted on the news. On Sunday, one Ethereum token was worth $349.93. Late Monday, that figure had fallen 14.3 percent to $299.72. As of 1:33 p.m. Eastern Tuesday, Ethereum has recovered slightly; the USD-Ethereum exchange rate sits at 307.56 to one.

The Bitcoin-USD exchange rate has dropped 5.9 percent since midnight Monday morning on China’s news. Late Sunday night, one bitcoin was worth $4,632.46. As of 1:39 Eastern Tuesday, the value of a single bitcoin token is $4,359.07.

The market capitalization of the cryptocurrency industry as a whole dropped 11.66 percent Monday, from $165.095 billion to $145.833 billion. Since midnight Tuesday morning, though, the industry’s market cap has gained 1.7 percent. As of 1:55 p.m. Eastern, the industry is worth $148.358 billion.

“The large price falls can be attributed to panic amongst traders and profit-taking,” said Cryptocompare founder Charles Hayter, per Reuters.

Indeed, China’s announcement had many investors across the internet predicting doom and gloom. A participant in one chatroom set up for an upcoming ICO said “the music has stopped” for the cryptocurrency boom, Reuters reports.

“Sell all your bitcoins now,” another advised, again per Reuters.

The organizer of the ICO to which the chatroom was dedicated, which was meant to launch a new cryptocurrency called SelfSell, has suspended the project.

Regulators around the world are struggling to understand cryptocurrency investment and the risks associated with it, said Zennon Kapron, director of the Shanghai-based financial technology consultancy Kapronasia, per Reuters.

Prior to China’s announcement, the U.S. Securities and Exchange Commission, as well as similar agencies in Singapore and Canada, warned that regulations would likely be needed to control the cryptocurrency market.

The lack of regulation governing cryptocurrency and investment in it is unprecedented. Blockchain, the backbone of cryptocurrency transactions, functions without a centralized overseer.

The nature of investment in cryptocurrency is also unconventional. When one contributes to a fundraiser for a traditional company, one generally receives a share in the company and/or a security. ICO investors, Reuters notes, receive neither.

Therefore, Reuters points out, an investment in a cryptocurrency is little more than a bet that demand for that currency will exceed supply, driving up value. It is a risky bet, considering the volatility of cryptocurrencies.

With risks to investors so high, government regulators are purportedly taking strides to protect their citizens. Cryptocurrency expert and Blockchain proponent Oliver Bussman said, per Reuters, that the lack of private financial advice firms in China obligates the government to be especially vigilant in protecting the finances of its constituents.

Of course, many would argue that it is an investor’s own responsibility to protect him/herself.

Despite some predictions that China’s move spells the beginning of the end of the cryptocurrency boom, many experts believe the regulatory shutdown is but a temporary measure designed to give the country’s government time to develop a strategy by which to handle cryptocurrencies.

“China, in many ways, is no different than the U.S. or Singapore in saying, ok, we need to push back on these for now until we figure out how to deal with them,” Kapron said, per Reuters, adding that he expected regulators in China to eventually ease the ICO ban.

Bussman says, per Reuters, that cryptocurrency technology is too revolutionary, too integral to the future of global economics, to be shutdown. Cryptocurrency, he says, has already worked itself into the fabric of modern investment.

“The initial coin offering is a new business model leveraging blockchain technology and it will remain. This is not the end of the ICO – absolutely not,” he said.

Featured Image via Flickr/BTC Keychain

U.S. Labor Department releases August 2017 employment data

Friday, the U.S. Labor Department released hiring and unemployment data for August, The New York Times reports. Employers created 156,000 jobs last month—less than analysts expected.

Employers added more than 200,000 in June and July (the Department revised each of those figures downward by 41,000 in this most recent report). August’s figure marks a sequential decrease of 22%. Analysts anticipated a dip, but not one so pronounced. August job-creation figures have come in below analyst expectations in four of the last five years.

Still, job creation rose 50 percent year-over-year last month.

The unemployment rate saw a marginal sequential increase, up to 4.4 percent in August from 4.3 percent in July. Joblessness continues to hover around a 16-year low. The so-called participation rate, which reflects the percentage of able workers who are either working or looking for work, came in at 62.9 percent. It has remained more or less static over the past 12 months.

Average hourly wages rose just 0.1 percent, coming in below analyst expectations. Wages generally rise with hiring rates, but the data has gone against that trend in recent years.

As wages rise, theTimes notes, the Federal Reserve raises the federal funds rate—that is, the interest rate at which banks lend money to one another—so as to guard against inflation. But the flatness of hourly wages means inflation is minimal.

“There’s no sign of inflation, which keeps the Federal Reserve on hold in terms of interest-rate hikes, and it suggests stocks should keep doing well,” Torsten Slok, chief international economist at Deutsche Bank, said, per the Times.

Stocks are up slightly today. The DOW Jones Industrial Average is up 0.18 percent, and the Nasdaq Composite is up 0.10 percent.

There is a 30 percent chance the Federal Reserve will raise the federal funds rate when it meets in December. The Fed will also meet later this month, but will not modify the interest rate.

The Federal Reserve is watching whether workers who exited the workforce during the latest recession (which took place from January 2008 through May 2009) are re-entering now. In 2010, ten percent of Americans were unemployed. That figure has dropped by more than 50 percent as of today.

The hiring and unemployment report comes on the heels of the Department of Commerce’s publication Wednesday of national economic data for the second quarter of the year. The Department reported 3.0 percent GDP growth, up from 1.2 percent in quarter one.

Last recession hit the manufacturing sphere particularly hard. Two million jobs (just under 15 percent of the industry’s workforce) vanished. Since January 2010, though, have of those jobs have come back.

The growth is accelerating. Over the first seven months of 2017, the Times notes, factories hired 101,000 workers. In August, 36,000 more employees came on board.

Mack Truck is hiring in at its assembly plant in Pennsylvania’s Lehigh Valley, the Times notes. in illustration of the rebound of the manufacturing sector. Since 1905, Mack has built every truck it sells in North America at the Lehigh Valley plant.

In 2016, Mack lost nearly a third of its workers at the plant: the facility employed 1,875 workers at the end of 2015 and 1,287 after 2016.

Today, 1,800 people take a paycheck home from the plant, which is currently offering 26 jobs.

Because the failure of the housing market largely spurred the recession, the construction industry took arguably the biggest hit. At the beginning of 2008, 7.49 million people held construction jobs in America. The recession slashed that figure by almost 25 percent, and the industry continued to decline in the recession’s wake. At the end of January 2011, employment across the sector hit a ten-year low. 5.45 million people held construction jobs—37 percent less than of at the end of 2007.

Today, the industry employs 6.9 million people—just under 27 percent more than on March 1, 2011. It has added 101,000 jobs in 2017, including 28,000 in August.

Featured Image via Pixabay

What is Bitcoin?

Bitcoin is a peer-to-peer digital currency system that uses mathematical formulas (“cryptography”) in lieu of traditional, centralized financial institutions to protect users’ currency and verify and process transactions.

The currency was created in 2009 by an unidentified developer or group of developers operating under the alias Satoshi Naskomoto, who wrote this white paper describing the technology behind the system and the advantages Bitcoin offers in the marketplace.

The writer of the paper argues that a monetary system that depends upon a third party to verify transactions cannot make transactions irreversible, as said third-party must always mediate disputes. Moreover, the mediator charges for its services, and the cost of commerce rises.

Bitcoin employs two layers of verification: a user’s “wallet” and the Blockchain, a collective, public ledger that records every bitcoin transaction.

A wallet ties a specific amount of bitcoins to a specific user via two unique, encrypted “keys,” one public and one private. The private key contains a confidential “signature” which proves a user’s right to spend certain bitcoins. The public key derives from the private key by way of a mathematical process so complex it is impossible to reverse engineer. In other words, although a wallet’s public and private keys are linked, no user can deduce another user’s private from his/her public key.

The public key is hashed (read: condensed) to form an address. Like a physical address or an e-mail address, a bitcoin address is how users find and send things to one another. In order to maintain anonymity, it is recommended that users only use a given address once. In other words, users should generate a new address for each transaction. One wallet can contain multiple addresses, but the Bitcoin website advises that users spread their bitcoin stakes across multiple wallets so as to preserve anonymity.

A host of bitcoin wallet services, such as Electrum and Armory, offer an array of different types of wallets. Wallets can be stored on a desktop, a mobile device, a piece of hardware, or the internet. Some wallets store the entire blockchain, which currently consists of more than 100 GB of data, and is growing all the time, locally. Others store only the most recent blocks in the chain.

As mentioned, the blockchain a public ledger. Every ten minutes, a new “block” containing multiple transactions is published on the blockchain. Each block is marked with a timestamp, verifying that a user gave a certain amount of bitcoins to another user at a certain time.

The timestamp acts to prevent double spending, to which other decentralized exchange systems are inherently vulnerable. “Double spending” is the practice of spending the same currency in multiple transactions. If transaction records are private, and no authority has access to them, those dealing in an abstract form of currency like electronic payment cannot verify that a buyer has not already spent the funds he is appropriating for a given purchase. The blockchain, on the other hand, checks time stamps and rejects any transaction User A makes with User C using bitcoins he/she has already transferred to user B.

When a transaction is submitted to the blockchain, bitcoin “miners” use computing power to work to solve a “proof-of-work” problem that allows for the block to be added to the chain. The miner whose computers first solve the “proof-of-work” problem is rewarded in bitcoins. Thus, new bitcoins enter circulation.

By ensuring that a certain amount of work must be done to create a new block and new bitcoins, the system guards against an overload of requests and prevents inflation. As bitcoin’s popularity increases, more and more people will become miners. As more and more people become miners, it will be harder and harder to solve the “proof-of-work” problem. This method ensures that bitcoins are created at a decelerating pace.

Bitcoin’s founders only allowed for 21 million bitcoins to be mined. So, like any commodity, bitcoins are finite, cannot be obtained without work.

In an effort to preserve decentralization, bitcoin mining is open to anyone with an internet connection and the appropriate hardware.

Rather than mining, one can buy bitcoins using traditional currencies via an exchange service such as Coinbase.

BitCoin’s value surges despite looming scalability challenges

As of 2:18 Eastern Monday, a single bitcoin is worth $4,282—an all time high for the cryptocurrency, invented in 2008. The bitcoin-USD exchange has soared more than 200% this year, as investors in Korea and Japan increasingly seek to buy the cryptocurrency—some such investors are willing to pay premiums of up to 30%—and May’s New York Agreement helps it to accommodate expansion.

A wide array of investors have jumped on the bandwagon, some more enthusiastically than others. “Whether or not you believe in the merit of investing in cryptocurrencies…real dollars are at work here and warrant watching,” Goldman Sachs analysts wrote in a note to clients, per Bloomberg.

Joshua M. Brown, a financial advisor at Ritholtz Wealth Management, is among those who, despite their skepticism, cannot resist BitCoin’s upside. When the cryptocurrency first became part of investors’ vernacular seven years ago, Brown observed in a blog post in mid-July describing his first-ever BitCoin purchase, it was subject to all the volatility that accompanies a “new and unproven” investment opportunity.

Now, though, the cryptocurrency has been hanging around in the public eye for quite a while, and recent developments such as the New York Agreement may lead to stabilization.

As a limited resource as well as a medium of exchange, Bitcoin has properties of a commodity as well as a currency, Goldman Sachs’ note to clients points out. The United States IRS does not recognize Bitcoin as legal tender but, rather, treats it as property for tax purposes.

BitCoin’s value is not supported by some inherently valuable asset like gold or silver, but the lack of such a standard is par for today’s currencies, according to Tim Courtney, CIO at Exencial Wealth Advisors.

“The first thing to understand is that, just like every other currency, there is no asset backing digital and cryptocurrencies,” Courtney told TheStreet. “In the past, some currencies were backed by gold or silver, but that’s no longer the case.”

Without any sort of backing, Bitcoin derives all of its value from supply and demand. BitCoins, in other words, are only worth what someone is willing to pay for them.

“When you see returns on digital currencies moving up, that means demand for them has outnumbered the sellers out there,” Courtney explained to TheStreet.

BitCoin will face a minefield of obstacles as it scales up to satisfy increasing demand. One such challenge could be unprecedented volatility. In late June, Ethereum, a cryptocurrency similar to Bitcoin, dropped from $300 dollars to $0.10 on a single, multi-million-dollar exchange, CNBC reports.

Courtney observes, per TheStreet, that there was no way to reverse the trades, as there would have been had the crash involved “established assets.”

“…there is no security to your [cryptocurrency] trades if something unexpected happens,” Courtney told TheStreet.

‘”What we’ve been doing in the stock market to prevent flash crashes, they’re nowhere near that in the cryptocurrency market,” adds Joe Saluzzi, co-founder of Themis Trading, per CNBC.

Bitcoin also runs the risk of devaluing itself as it expands, Courtney says. He cites the “constrained supply” of Bitcoin as an integral part of its value—basic microeconomics principles hold that if a commodity is in high demand but short supply, its price will rise.

Yet, as Bitcoin expands to serve increasing demand, it will become less and less scarce, and may, therefore, lose much of its value. In other words, like any other currency that loses its scarcity, Bitcoin will be subject to inflation.

BitCoin has long been vulnerable to cyberattacks. As its popularity grows, it will increasingly become a target for hackers. Exchange services BTC-e and Bitfinex both reported being hacked last week, according to CNBC.

The security and anonymity of BitCoin make it a suitable platform through which to launder money, demand ransoms, and carry out other nefarious transactions. All transactions carried out on contraband distribution websites like the AlphaBay and Hamsa, both of which authorities shut down in July, are conducted via BitCoin. Late last month, alleged BTC-e operator Alex Vinnik was arrested on suspicion of having laundered more than $4 billion his clients generated through a variety of criminal enterprises.

“It’s hard to imagine the IRS, Treasury etc allowing anonymous transactions without any reporting becoming a global standard for US persons,” Brown wrote in his blog post.

Still, Brown says, he is not willing to miss out on the potential upside of an investment in BitCoin. “I’m old enough to realize that just because I don’t see a use for something, that doesn’t mean I won’t be proven wrong by others who do,” he writes.

Judging by the spikes in the cryptocurrency’s value—it seems to hit a new high every day, of late—plenty of other investors are indeed anxious to prove Brown wrong.

Featured Image via Flickr/Zach Copley

Disney’s quarterly report provides information on ABC-BPI settlement

In September 2012, South Dakota meat processor Beef Products, Inc. (BPI) sued ABC for defamation over the news agency’s reports concerning a meat additive called Lean Finely Textured Beef (LFTB), which became widely known as “pink slime” following ABC’s story. The suit claimed that the network’s extended coverage of LFTB throughout March 2012 falsely indicated that the product was unsafe, unhealthy, and “not even meat” (Reuters’ words).

BPI sought $1.2 billion in damages, alleging that ABC’s coverage of LFTB cost the beef company “hundreds of millions of dollars in profit and roughly half its employees” (Reuters’ words). Indeed, several major players in the food industry, including Wendy’s, McDonald’s, Wal-Mart, ConAgraFoods, SaraLee, and Kraft took steps to distance themselves from LFTB, which BPI calls its “signature beef.”

The case bounced around the court system for years before going to trial in Elk Point, South Dakota on June 5. On June 28, while the trial was in process, ABC and BPI reached a settlement, the amount of which was not disclosed.

In its most recent quarterly earnings report, published Tuesday, Disney, ABC’s parent company, reported a $177 million “charge…incurred in connection with the settlement of litigation.” Radio Iowa noted that the report mentioned no case aside from the BPI agreement, and therefore surmised that Disney settled with BPI for $177 million.

However, BPI’s attorney, Dan Webb, said in a statement that “$177 million is not the total settlement amount,” and that, “based on Disney’s disclosure, it appears that Disney is funding 177 million dollars of the settlement and its insurers are paying the rest.”

Webb told CNN following the settlement that BPI was “extraordinarily pleased to have reached a settlement.”

BPI maintains that its case was justified, but has indicated that the legal process was growing burdensome. Webb says the case was “a long road to travel for BPI,” and that the settlement “allows [the company] to grow [its] business back.”

Webb says he and BPI “felt the trial was necessary to rectify the enormous financial harm” the company had suffered,” and “we’re looking forward to taking the case all the way to the verdict,” Webb says. He believes the evidence he presented on behalf of BPI and LFTB was well-received by the jury, CNN reports.

ABC, like BPI, stands by its case but is pleased to be free of the burdens of litigation.

“Throughout this case, we have maintained that our reports accurately presented the facts and views of knowledgeable people about this product,” the company said in a statement. “Although we have concluded that continued litigation of this case is not in the Company’s interests, we remain committed to the vigorous pursuit of truth and the consumer’s right to know about the products they purchase.”

Much of ABC’s report on LFTB was based on the statements of Gerald Zirnstein, a former USDA scientist. In 2002, Reuters says, the USDA tasked Zirnstein with analyzing the constitution of ground beef to ensure that ingredients met federal regulations.  LFTB was among the products he examined. According to ABC, he found among other things, that the product, use of which had previously been constrained to cooking oil and dog food, was treated with ammonia. (You can view a brief snippet of ABC’s 12-part report on LFTB here).

When the USDA approved the product, Zirnstein sent an e-mail to a co-worker in which he coined the term “pink slime.” That e-mail went public, and Zirnstein became an “involuntary whistleblower,” CNBC report

“The whole thing went viral … Just blew the top off everything,” said Zirnstein per CNBC.

According to BPI’s website (link above), LFTB “is simply the lean beef trimmed from sirloins, ribeyes and other whole muscle cuts.” The product, says BPI, is “100%” beef, and is free of organs tendons, bones and fillers.”

Disney reported $14.2 billion in revenue; that figure is identical to the one reported in the same quarter last year. However, net income fell 9% year over year to $2.37 billion, while earnings per share (EPS) fell 5% to $1.51.

Moreover, CNN cites Webb as saying “he believes the plaintiff’s evidence was well-received by the jury, and that the trial ‘vindicated’ the lean, finely textured beef product” (paraphrased by CNN).

Featured image via Flickr/U.S. Department of Agriculture

U.S. Housing Prices Out of Touch with Reality

U.S. home resales have been unable to match expected projections in June as prices reach record highs, keeping first-time buyers hesitant on the peripheral. The record high housing prices are a result of a small property supply being pursued by a large customer demand, meaning that the value of each property increases as the supply dwindles.

The housing market has been facing a severe shortage of homes available for sale for about two years, all the while new individuals are entering the housing market searching for accommodation. As the labor market releases more jobs while builders simultaneously struggle to secure land, building materials, and skilled labor, the situation is set to worsen.

On one hand, the high demand for housing signifies a positive and encouraging economic health that enables laborers to have the means and intent for housing, but when it comes to the housing markets, buyers tend to be less enthusiastic. While this climate impacts current and future homeowners, those especially impacted are first-time buyers who are now in a difficult position when trying to find entry-level homes for sale.

The shortage of properties has led to customer bidding-wars, as the demand ensures real estate the ability and flexibility to ask a higher sales price on the basis that there are customers willing to pay more. This has quickly resulted in house price increases outpacing wage gains, making it but nigh impossible for lower salary wage earners to afford housing.

The National Association of Realtors has reported that existing home sales have dropped 1.8 percent to a seasonally adjusted annual rate of 5.52 million units last month. Economists including Svenja Gudell, chief economist at Zillow, predict that sales will fall a further 1.0 percent to a 5.58 million unit-rate, despite sales being up 0.7 percent from June 2016.

There were 1.96 million houses on the market last month, which was done 7.1 percent from a year ago, however, this is not the first dip in a trend. In fact, housing inventory has dropped for 25 months on a year-to-year basis. As the supply diminishes, prices rise, and considering the increasing demand for housing, the prices greatly rise. The median house price has increased 6.5 percent from a year ago to a record high of $263,800 in June, as part of the unbroken 64-month chain of year-on-year price increases.

Despite the constant price increase as well as the persistent housing shortage, the NAR believes that the price surge does not suggest another housing market bubble is building. This is based on the fact that the inflation-adjusted median price was below its peak in 2016.

Houses are typically staying on the market for 28 days last month, lower than the 34 days’ average that was present a year ago. Demand is being driven by a tight labor market, which currently holds a 4.4 percent unemployment rate that is boosting employment opportunities for young workers. But the tight labor market has not stimulated a faster wage growth, with an annual wage growth struggling to break above 2.5 percent, creating a distinct and increasing gap between the two.

First-time buyers are accounting for a smaller share of home sale transactions at 32 percent, which is well below the ideal 40 percent share that is needed for a robust and thriving housing market. This is not something that is simply corrected by reducing housing prices or increase wage growth but requires a combination on the two alongside other qualities including a maintained housing demand.

Property economists expect the housing demand to continue, which does encourage future sales growth. However, the issue is that expectation that the inventory shortage will improve this year, suggesting continued price increases. While it may not be solved this year, the sooner labor and effort is invested in building and providing new homes, the sooner the housing sales growth will adjust to better match the wage growth.

Euro Reaches Two-Year Dollar High

Last Friday the euro strengthened to a two-year high against the dollar, raising 1.8 percent over the week and has gained 11 percent year to date. The euro was valued at $1.1680 on Friday as the highest settlement since Jan. 15, 2105. This raise comes a day after European Central Bank president Mario Draghi to press down comments in late June.

During a news conference on Thursday Draghi said that the central bank would continue its $60 billion a month asset-buying program until December as planned. Draghi also reported that policy makers would the discuss quantitative-easing program this autumn. This flux in value occurred as a response to his statements, which come after the European Central Bank president’s comment that the central bank may scale back its accommodative policies despite projected increases in the European economy.

While the increase does have an impact on priorities, the European Central Bank retains its emphasis on its stubbornly low inflation concerns. Trader’s response to Draghi’s impact on the euro was one of almost indifference, because no matter what the president said the European Central Bank would gradually lessen those higher euro purchases later in 2018, resulting in an eventual wind down.

In order to clarify this attitude, Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, speculated that the increased euro value was more a representative of the dollar’s weaknesses as opposed to the euro’s strength. This circumstance arose due to the pressure the dollar faces around latest political headlines suggesting the continued intensity of the turmoil within the U.S. administration.

While the euro has increased, it is not as high as it used to be, being well below its long term average against the U.S. dollar of $1.21. This coupled with the fact that the euro is even further below its average in trade-weighted terms, the euro’s current strength does not warrant a large reaction from Draghi. Considering that the central bank is keen to taper its QE program, not only due to the reduced pool of assets for potential purchase, analysts suspect that it would take a further rise to $1.20 or more before the end of the year for the bank to abandon or significantly address its plans.

Returning to the relationship between the euro and the dollar, due to the focus of the dollar weakening being the cause for the euro’s strengthening, the key factor preventing a further euro rise will be a tighter U.S. policy. There are also expectations that the Federal Reserve will raise interest rates in December, and a further scale of four times in 2018 to compensate for the decreased dollar strength.

Looking at this from another angle, the ICE U.S. Dollar Index which compares the dollar against other currencies fell 0.5 percent to 93.85, its lowest level in more than a year, which is 8.2 percent lower than the start of the year. The British pound remained below the $1.30 level, but increasing slightly over the past week from $1.2973 to $1.2999.

Finally, the Canadian Dollar has also strengthened against the dollar as Canadian retail sales and inflation data came back stronger than anticipated. However, in the case of the Canadian dollar, its strength could face a threat in the housing market that would then bring it back down again.

While the euro is indeed strengthening, sentiment towards the euro has become very negative as of late, resulting in many clients attempting to short the euro/dollar relationship. This might result in a shift with the dollar becoming stronger in the future, as while better sentiments towards the Eurozone helps the euro, any uncertainty will be funneled back into the U.S. dollar and treasury bonds. As such, these relationships are always in flux, and therefore subject to change.

Featured Image via Flickr/Images Money

Lobbying Spending Spikes Against Paul Ryan’s Border Tax

Obamacare has proven unexpectedly difficult for Republicans to dismantle. As a result, the GOP is anticipated to focus the bulk of its future efforts on tax reform instead.

The new GOP tax plan put forth by House Speaker Paul Ryan includes a border-adjustment tax. Under this type of tax system, all domestic consumption would be taxed, while exports would be untaxed. Over the course of a decade, this provision is anticipated to bring in about a $1 trillion, which could be used to offset the tax cuts promised by the GOP.

Under the proposed plan, the corporate tax rate of 35% would be replaced by the border-adjustment tax. Corporate exports would not be taxed under this plan. So the proposed tax change is anticipated to benefit large corporations who have strong footholds in foreign markets and export large quantities of goods.

The recent legislative shift in focus from healthcare to taxes has already had repercussions in lobbying spending.

Healthcare companies are beginning to spend less on lobbying as a result of the legislative stall on the healthcare front. Companies such as Novartis AG and Teva Pharmaceuticals Industries Ltd. decreased their spending in 2017 from the first quarter to the second quarter, as did the American Hospital Association and insurers such as Aetna Inc. Meanwhile, outlier Cigna Corp. increased its lobbying spending by $690,000.

Even as healthcare companies relax spending on lobbying, retail coalitions are spending more on tax lobbying.

The National Retail Foundation is a trade group of retailers who rely on imports and are vehemently opposed to the proposed border tax. They claim it amounts to an import tax, which would harm their import-heavy business. The NRF also claims the tax would raise prices on consumer goods.

In the three months before June 30, the National Retail Foundation spent almost $5 million to fight the proposed levy. That’s an increase of about $3.32 million over spending in the same time period in 2016. The National Retail Foundation has spent $7.3 million on lobbying in 2017.

The Retail Industry Leaders Association is yet another trade association to increase its tax lobbying spending. In the second quarter the group increased its spending by $120,000 dollars. The RILA has already spent $1.5 million total on lobbying in 2017.

Nike Inc. and Best Buy Co. Inc. similarly increased their lobbying spending in the second quarter. Earlier in 2017, companies such as Target Corp., Best Buy Co. Inc. and Gap Inc. dramatically increased their lobbying spending as well.

Export-focused companies and other supporters of the proposed tax are also upping spending. Companies such as General Electric Co. and Dow Chemical Co. claim that the proposed tax would improve U.S. business by strengthening the dollar. General Electric Co. has accordingly increased its lobbying spending in 2017 by $410,000.

Groups are also increasing spending in opposition to other aspects of the proposed tax law. The Save Our Savings coalition formed in April to fight a proposed tax change which would reduce tax advantages for retirement savings accounts. The White House has stated that 401(k)s will not be affected by the proposed tax changes, since 401(k)s are not funded by taxed dollars. Still, the proposed tax change might have serious implications for people who rely solely on their savings to survive.

IMF to lend Greece $1.8 Billion

The International Monetary Fund has resolved to bail Greece out yet again, Bloomberg reports. To be precise, the IMF has approved “in principle” a loan of up to $1.8 billion to Greece.

Just over two years have passed since Greece was unable to make a payment on a previous IMF loan. Greece has endured severe economic conditions since the 2008 financial crisis, but in recent years conditions have been improving.

The phrasing of the IMF’s approval may at first appear noncommittal. But the IMF’s website explains that “approval in principle” is in fact a regular IMF procedure which fell into disuse after the 1980s debt crisis.

Loans which have been approved “in principle” are conditional. They are contingent upon the country in question and its creditors coming to an agreement on debt relief. Thus approval in principle functions as a kind of escrow in the IMF’s debt relief negotiations.

The IMF contends that Greece’s current debt is unsustainable, and that substantial relief will be necessary to reduce the debt to a manageable level. Even if the IMF’s loan is approved, disbursement will not occur immediately. In the meantime, in order to continue with its economic recovery, Greece is in desperate need of debt relief from its creditors.

Frequently the IMF’s strategy is to dangle funding before creditors in order to motivate them to offer more generous terms to debtors. In this instance, IMF is asking that European creditors offer Greece lenience. Creditors might forgive some of Greece’s debt or offer more sustainable repayment terms. Under this compromise, both European creditors and the IMF would bear some of the burden of Greece’s unpayable debt.

Some of Greece’s creditors have proven recalcitrant. Germany, which will face elections in the fall, has refused so far to offer debt relief to Greece. Many German voters are staunchly opposed to offering relief to Greece.

But the IMF, too, is recalcitrant in its claim that significant debt relief will be necessary. Although programs undertaken to reduce Greece’s debt have had some success, reform alone will not be sufficient to pull Greece out of debt, IMF officials say. The IMF predicts that by 2030, despite the enactment of promised economic reforms, Greece’s debt will have risen to 150% of its GDP. At that point the trajectory of Greece’s debt would become explosive.

The IMF hopes that after the German election cycle has closed, it will be able to reach a compromise with Greece’s creditors and turn the loan’s approval in principle into approval in reality.

Amazon Meal Kit Plans

Amazon is proceeding with its expansion plan to diversify into surrounding markets and innovate in order to establish a dominant position. In recent news, Amazon expressed its intent to redesign and push the boundaries in the prepared meal kit world that is currently dominated by Blue Apron Holdings Inc.

Amazon is throwing itself in the deep end by competing with an already established IPO by challenging to compete with its major project. However, Amazon’s research team is well-experienced and confident that they can in fact provide a competitive edge in the food industry.

This announcement comes after Amazon filed a trademark for the phrase: “We do the prep. You be the chef,” which is closely related to prepared food kits similar to what Blue Apron provides. Meal kits provide the customer with recipes and the corresponding ingredients that enable the customers to prepare fresh food while having most of the preparations already being completed. This service caters well to an audience that is more time-starved but still looking to eat more fresh food.

With their intentions revealed, Amazon has helped elaborate the reasoning behind its recent acquisition of Whole Foods, which would act as a supply base for the meal kits while also generating income through its retail locations. Amazon is trying to incorporate more incentive into being a loyal customer instead of trying to attract new customers, capitalizing on the similar consumer base of customers who are young, urban and affluent.

The focus on having loyal customers spend more instead of attracting new customers is supported by the fact that about 81 percent of customers who have visited Whole Foods on more than one occasion are already Amazon customers. Furthermore, about just over half of all Whole Foods shoppers are Amazon Prime members, customers who are willing to pay $99 for free two-day shipping amongst other member benefits.

Due to the supposed correlation between Amazon and Whole Foods customers, Amazon’s acquisition of Whole Foods is estimated to increases its customer base by 5 percent. While this does have a large enough impact on Amazon’s revenue stream, as Amazon will accrue all revenue generated by customers of both, this shows that increasing its customer base was not Amazon’s prime concern.

The customers that do consistently shop at Whole Foods while also being Amazon Prime members spend average about $306 more, looking at an average of $1,371 spent during six visits during a 12-month period. But what has the most impact is the percentage of shoppers who online as compared to other food retailers, with 10 percent of Wholes Foods customers shopping online compared to the 6 percent for Albertsons and 5 percent for Kroger.

Amazon is using the opportunity that Whole Foods shoppers provide by offering more online food delivery services, and in doing so they ensure they have the largest consumer base for their new meal kit plans. Research firm NPD Group shows that while only 5 percent of consumers have purchased a meal kit over the past 12 months, 60 percent of millennials have purchased something from Amazon over the same time frame. Amazon’s priority is discovering a way to transition its customers into using meal kits, increasing its revenue stream by creating a greater dependence on online food delivery services.

Usually the meal kits have a high entry barrier, with Blue Apron requiring about $94 to acquire a new customer. Amazon advantages comes in the form of its Prime membership fees which should act as a reliable and effective way of managing its costs. Furthermore, Amazon already has a strong supply chain that can easily adapt to ensuring that customers receive their meal kit in the timeliest and efficient manner.

Amazon’s expansion plan proves troublesome to its competitors in the food industry, as its meal kit plans narrows the opportunities for other smaller food retailers to enter the meal kit market. Amazon has considerable experience with retail, and that might translate in food, which is by far the largest category in retail. If Amazon is successful in establishing a market leader position in food, then the possibilities for its growth into other markets will be that much easier.

Featured Image via Flickr/simone.brunozzi

Netflix Subscribers Surpass Target

Netflix Inc. has surpassed the expectations of Wall Street for its second quarter by adding 5.2 million new streaming customers. Netflix predicts further continued growth due to the momentum generated by foreign subscriptions, which overcame U.S. subscribers. As a result of its customer base growth, Netflix shares have increased by 10.4 percent on Monday.

Regarding shares more specifically, the streaming television innovator’s stocks rose $16.82 to $178.55 per share in after-hours trading. This is a new record for intraday trading that beats the previous record of $166.87 which was reached on June 8.

Netflix is anticipating that due to the influx of foreign subscribers the company will accomplish its first full-year profits for overseas markets. This is supported by the fact that the end of June was the first time that Netflix had more recorded subscribers from abroad than in the U.S., with 52.03 million foreign subscribers versus 51.92 million U.S. subscribers.

The second quarter is typically the slowest quarter of the year, however the introduction of the popular show “13 Reasons Why” and the latest season of “House of Cards” brought in a higher number of subscribers than what Netflix initially predicted.

According to Wall Street, Netflix was predicted to bring in 3.2 million new customers worldwide, which broken down was based on an estimate of 2.59 foreign subscribers and 631,000 U.S. subscribers. Instead, Netflix bested both estimates by accruing 4.14 million monthly foreign market subscribers , and a further 1.07 million subscribers domestically.

Netflix is hedging their bets that this growth will continue on for its third quarter, considering it usually is more successful than its second quarter, however Netflix has been known to make far too optimistic forecasts at times.

It is important to remember the expenses that Netflix pays to attract new customers: spending $6 billion a year on content in order to become the world’s top movie and TV streaming service despite facing a decrease in the rate of its U.S. customer growth. What helps is that a good portion of the costs go to customizing content for different countries and adding shows in various languages.

By tailoring to different regions, you adapt and serve the needs of the customer, instead of projecting what you believe the customer needs. However, by making new content accessible to different audiences, you are reaping more profits out of the same content, which requires less labor to offer in a different language than the show’s original production cost.

Based on the amount invested to deliver a large variety of content, Netflix has estimated negative free cash flow in the coming years as it continues to buy more content. The heavy costs help assert its place in the market amongst stiff competition from streaming video providers such as Amazon Inc.’s Prime Video and Alphabet Inc.’s YouTube. This shows that despite possibly overestimated customer growth, Netflix is maintaining a strict assessment of its financials to ensure that it can continue to provide its services.

Revenue rose by 32.3 percent to $2.79 billion in the second quarter, with the net income rising to $65.6 million, or 15 cents a share, from $40.8 million, or 9 cents a share, from a year earlier. While this falls just short of the anticipated 16 cents a share, this is still a monumental growth.

Investors are willing to tolerate the exuberant spending as long as it is compensated by such a booming customer growth, as the trade-off did results in 2 million subscriber surplus. This goes to show that if companies have well-established future plans and a good financial health, then investors are willing to hurt a little now for better profits in the future. This is something that Snap Inc. and Blue Apron Holdings Inc. can learn as an example to ensure stocks are not overpriced.

Yellen Reports Fed Rate and Portfolio Plans

Fed Chair Janet Yellen has reported that the U.S. economy is healthy enough for the Fed to raise rates and to begin tackling its massive bond portfolio. However, Yellen also cautions that a low inflation and a low neutral rate may leave the central bank with diminished leeway.

Yellen appeared before Congress to depict an economy that is still continuing to grow despite its slow pace. These incremental growths have continued to add jobs while simultaneously benefiting from a steady household consumption and a recent jump in business investment. The economy is even now continuing to be supported by stronger economic conditions abroad, according to Yellen.

In response to such a positive economic climate, coupled with the anticipation for a persistent evolution of the economy, the Fed believes that the current economic environment warrants gradual increases in the federal funds over time. This will, in turn, lead to reductions in the Fed’s portfolio of more than $4 trillion in securities, which have been stated to begin later this year.

Yellen notes that given current fund estimates, the federal funds rate would not require a dramatic increase before reaching a neutral level that neither encourages nor discourages economic activity. This neutral state is important as it ensures a more balanced status quo that does not require tinkering on the Fed’s part, therefore allowing business to be conducted in a more sustainable and predictable manner.

The Fed is leaning towards a looser or accommodating monetary policy, which would result in a lower neutral rate. To compensate for this, the Fed may be compelled to slow down the pace of rate incremental increases, but as to whether the ultimate rate stays the same but just over a longer duration or the rate is reduced remains to be seen.

Yellen has responded to doubts voiced by lawmakers and informed the House Committee on Financial Services that she expects the gradual reduction of the balance sheet will refrain from having drastic effects in markets, ensuring that all operations and practices are smooth moving forward. A reduction in the balance sheets will allow the economy and federal rates to diverge from crisis-related policies.

There is opposition from lawmakers who believe that the Fed is able to exercise too strong an influence over the economy through the tailoring of rates that results in an unnatural progression of the economy’s state. These lawmakers propose the further use of mathematic formulas to discern the rates, moving from a more rule-based monetary formula to one that is independent of the agency behind it.

As with all opposition, this has been met with criticism, as Committee Chair Jeb Hensarling compliments the work that the Fed has produced, expressing respect for the comparisons between rule-based monetary policies with some of the more common formulas. While this discussion remains in its infantile stages as far as the current economic climate is concerned, perhaps a combination of both rule-based policies with the relevant monetary formulas will establish the best results.

Yellen herself responded to such criticisms by stating that their current regulatory agenda is rather light. In fact, there are plans to ease some of the requirements imposed on banks boards of directors following the financial crisis. Furthermore, Yellen has expressed concern over proposals that policymakers worry may grant elected officials influence over what are supposed to be independent Fed interest rate decisions.

It is difficult to predict what the results of this discussion will be, especially considering that Yellen will soon be replaced when her term ends in February. However, Yellen is positive about the end of her term, as the economy appears to be a continuous cycle of hiring, spending, and investment that should foster a stronger pace of wage and price increases.

Featured Image via Pixabay

Seattle City Council Passes Measure to Tax the Wealthy

By a 9-0 vote this week, Seattle’s city council passed a measure that would require residents to pay a 2.5% tax on income over $250,000. Couples who file jointly would be taxed on household income over $500,000, Rick Anderson of the LA Times reports. Though conservative activists have already taken legal action against the tax, it is scheduled to be implemented in 2019.

As the Trump administration reduces federal funding to cities, Seattle’s local government is seeking alternative revenue sources, so as to continue its climate change, affordable housing, transit, and education programs.

Mayor Ed Murray wants to “ensure Seattle stands up to President Trump’s austere budget,” he said. The Mayor has called the new tax a “formula for fairness.”

Proponents of the new tax say it will combat gentrification—housing prices and rents are “soaring” in Seattle, according to Mr. Anderson—and counter the strain the current tax system places on those with low-income.

“We have an increasing affordability gap between the have and have-nots. The middle class is being squeezed as well,” said city councilwoman Lisa Herbold, who co-sponsored the new tax. “And one of the reasons is our outdated, regressive and unfair tax structure.”

According to John Burbank of the pro-tax Economic Opportunity Institute, “households with incomes below $21,000 are paying, on average, 16.8% of their income in state and local taxes, while those with incomes above $500,000 pay just 2.4%.”

Moreover, Burbank says the new tax will have little effect on most high-income taxpayers. It only taxes income above $250,000. So, those who make, say, $275,000, will pay the 2.5% tax on just $25,000; that’s $625 annually.

Many of Seattle’s mega-rich, including Jeff Bezos, CEO of Seattle-based Amazon; Bill Gates, founder of Microsoft; Steve Ballmer, owner of the LA Clippers and former Microsoft CEO, do not live within city limits, and so would not be subject to the tax.

Opponents of the tax initiative, such as the aforementioned Mr. Ballmer, say it “drive up wages” will incentivize local businesses to move out of Seattle. Moreover, a local income tax in the largest city in a state with no income tax is a tough pill for many to swallow.

“We’re known across the world as a place that doesn’t have an income tax,” says Paul Guppy of the Washington Policy Center think tank in Seattle. “[But an income tax in Seattle would send] a certain signal to people planning to make a life here.”

Of course, the implication is that said “signal” would prompt potential Seattle denizens to move elsewhere.

Expected legal pushback against the measure began just hours after it was passed when a lawsuit was filed by the Freedom Foundation, a conservative activist group, on the grounds that the tax would “violate state law.” According to the LA Times’ Anderson, “[Washington] state law… bars cities from taxing net income and requires state approval for enactment of any new municipal taxes.”

The foundation’s CEO, Tom McCabe, worries the tax will eventually extend beyond the $250,000+ income bracket, and perhaps be applied across the whole state of Washington.

“No matter who starts out paying it, everyone will eventually suffer,” he said in a statement.

Other cities are considering taxing the wealthy to compensate for the decrease in federal funding. San Francisco, for instance, is considering raising the income tax rate by 0.5% for residents who make over $1 million.

Polls provide varying indications of Seattle residents’ attitudes toward the new tax. 62% of 700 voters polled recently by King-5 TV disapproved of the measure, but other studies have shown widespread support for the tax.

Overestimated IPOs Valuation Drops

Snap Inc. and Blue Apron Holdings Inc. have faced difficult discrepancies in stock valuation during their transition from private to public valuations. What were the two most anticipated IPOs have now become case examples of inconsistencies between private and public funding? They now serve as a reminder that stock value is not the only important aspect of running a successful business, indicating a bleak short-term future and possibly a poor long-term future as well if the operations remain the same.

The source of the overpricing these two companies face is twofold. Investors ever urgent drive to have a part in the next big hit, essentially a bet on future innovation helps drive up the value of unprofitable companies facing fierce competition. What often occurs is that investors then begin to invest in anything with potential, diversifying their risk portfolio while maximizing future profits. This influx of wealth and promise leads to the second source of overpricing, in which the companies themselves receive feedback that what they are doing is enough, resulting in a lack of growth and foresight.

When these two scenarios occur, public market investors show reluctance to reward rich market values without proof of financial health and future growth. Just because private investors were willing to invest in a company does not mean that their intent will translate in public commercial appeal. And this is how Snap and Blue Apron find themselves trading below their initial public offering price.

Now as previously mentioned, there is more to running a successful company than market value, and despite Snap’s and Blue Apron’s market value is below the expected public offering price, this does not mean there is no hope for the company. However, market value is an estimation that communicates the status of a company to potential investors, and so having a negative valuation could produce a positive feedback loop that continues a decrease in a company’s stock price. The negative sentiment can erode customer relationships, employee morale and the ability to raise more money, which results in making a turnaround significantly more difficult. This is why it is so important that companies do not overshoot what public investors will be willing to pay based on private funding. Otherwise, it is not just your stock that will take a beating.

Regarding the specifics of stock prices for Snap as an example, Snap’s stock prices fell from $17-a-share IPO to $15.44 on Tuesday. With such a major decline, Snap’s market capitalization is valued at about $18.2 billion, which is a major contract to the anticipated high-end valuation target of $40 billion. Other companies including Snap may need to give investors an exit opportunity, which will stand as a true test of whether the valuations are fair.

Considering the current lack of discernable financial health and future growth plans, Snap and Blue Apron are expected to continue their decline in valuation at the IPO stage over the next two years. These expectations are based on the fact that these companies do not live up to the worth dictated by private investments, and are therefore likely to continue suffering for it.

Snap’s situation has been influenced more by external pressures, as the IPO has faced numerous criticisms regarding its growth due to competition from Facebook Inc.’s Instagram app. Competitors often gain an upper effect when a company fails to deliver, as the customers and investors immediately switch over to what is considered to be better performing based on reputation. Because of this, by June, Snap was the most-shorted new U.S. technology stock of the year.

EPA Intends Reversal of Controversial Alaskan Gold Mine Opposition

The Environmental Protection Agency (EPA) has proposed withdrawing its 2014 determination barring any large-scale mine in Alaska’s Bristol Bay. The Trump administration has been working hard and taken several key steps towards paving the way for this controversial mine. A successful implementation allowing the mine would be a distinct reversal from former President Barack Obama’s opposition to the project.

The initial reasoning for why there was a barring of a mine in the area was due to the potential damage that would imperil the region’s sockeye salmon fishery. Taryn Kiekow Heimer, a senior policy analyst at the National Resources Defense Council, has stated that the only thing that’s changed since the initial barring is the politics attached to the mine. Asides from politics, the relevant facts, science and opposition to the mine have remained unchanged, persisting in sounding the message that it would be “the wrong mine in the wrong place.”

The EPA’s actions result from a legal settlement with Pebble Limited Partnership, a subsidiary of Northern Dynasty Minerals Ltd. As with most settlements, the agreement did not provide direct immediate approval for the construction of a mine, but it instead paved the way for the Canadian firm to apply for federal permits that would eventually produce a mine in Alaska. This path for federal permits is something the Obama administration had previously countered, restricting access and therefore blocking the construction of the mine.

This potential settlement and pending reversal is the result of the EPA’s intentions to provide Pebble Mine a fair process that is simultaneously not too costing for the EPA. Northern Dynasty Minerals has been behind several lawsuits that sued the EPA regarding this matter, and have recently reported its agreement that they gain nothing more than “fairness and due process under the law.”

It is important to note that the EPA does not hold the final say in this matter, and even if they do withdraw its opposition, Pebble Mine will still have hoops to jump through. Pebble Mine would need to undergo a federal environmental review and other relevant state requirements before construction can begin, including an EPA consultation with the public, and local tribes.

The opposition to mine is composed mainly of Native Alaskans, environmentalists, fishing operators and local businesses who have been against the mine since the inception of the idea in 2004. Through prospecting, Southwestern Alaska is said to contain gold reservoirs estimated to be worth about $120 billion. However, accessing the gold mine would contaminate and create repercussions affecting the lakes and tributaries that connect to the potential site for the mine, which feeds into the headwaters of Bristol Bay.

This could potentially impact a fishery that generates $500 million a year, which is a major source of income and labor in the area. Furthermore, the revenue generated from the mines is prioritized only for Pebble Mines, while the fishery helps supports the local tribes and the public in both financially as well as a food source.

One argument against the EPA barring is based on the overstepping of bounds and regulations. The EPA has been criticized as an agency “trampling the authority of the state of Alaska,” while restricting the input of other federal agencies while also preventing the results of a mining company’s $700 million capital investment. On the other side, the EPA has been praised of protecting a valuable fishery and the village whose life depends on it. A ballot measure is being conducted that would allow lawmakers to ban any proposed mine should the project prove detrimental to the wild salmon stocks, which is currently polling at passing with a two-thirds majority.

The EPA has said it would accept public comments on the proposal for the next 90 days.

Financial Firms Vulnerable to Class-Action Lawsuits

The Consumer Financial Protection Bureau has planned to adopt a rule that would prohibit financial firms from forcing Americans into arbitration in disputes over their bank and credit card accounts. This rule will affect millions of Americans, as they are no longer subject to the whims of financial firms and their exploitative measures the isolate individuals in order to make a profit.

Consumers are now able to band together in class-action lawsuits that could cost banks and other financial firms billions of dollars. The new rule, which is predicted to take effect next year should no major obstacles arise, is expected to create serious tensions. Both the Trump administration and House Republicans have pushed to restrict the consumer finance agency as part of an effort to lighten regulation on the financial industry. This rule will counteract against the aforementioned efforts, granting more power and protection to consumers at the expense of the financial industry.

The director of the consumer agency, Richard Cordray, stated that the ruling is following the spirit that a no one should escape accountability if they break the law, regardless of how large or powerful the individual in question may be. The rule has already faced opposition, as Representative Jeb Hensarling, a Texan Republican who has been trying to weaken the consumer agency, has stated that the rule should be rejected. Hensarling quotes that the “American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives,” which is ironic considering that the rule is an attempt to prevent financial firms from controlling the lives of ‘ordinary’ Americans.

Regardless of the opposition, the rule will be difficult to nullify due to populist appeal. There has been nationwide criticism of arbitration clauses that enable corporations to circumvent courts and take away the tools that fight abusive practices. Instead, the rule will dismantle a series of legal maneuvers that allow major American companies to block customers from going to court to fight potentially harmful business practices.

The consumer agency itself has fallen under strict supervision and criticism by pro-business groups, arguing from a political standpoint that the rule is a quality of life improvement for class-action lawyers, who more often than not donate Democratically. Similar opposition has been the request that the president remove Cordray as director to an overreach of regulation. However, supporters of the agency agree that arbitration being independent from corporate interests is a priority that needs to be addressed.

The consequences of this rule is that corporations will no longer be able to use fine print in their contracts to force consumers into secretive arbitration that pits borrowers against powerful companies with deep pockets. Most people would abandon their claims due to a lack of resources, leaving the companies free to bully customers. Example class-action lawsuits that have been limited due to arbitration include predatory lending, wage theft, sexual discrimination and medical malpractice. What reinforces this practice is that it is practically impossible to apply for a credit card, rent a car, or shop online without agreeing to private arbitration. The rule balances the scales, by enabling people to band together and pool resources.

While the protections do not apply to existing accounts, consumers would be able to pay off old loans and open new accounts that do fall under the protection of the new rule, which has the potential for a considerable impact on consumer finance. While this rule will not explicitly outlaw arbitration, this new practice is expected to effectively kill the process.

The point of class-action lawsuits is not to give people a big payout but rather results in a small payout to individuals who are part of a larger group. The intention is that the companies pay large fines to put an end to abusive practices, and provides individuals with a voice and a community that ensures that no party is being exploited. Should this rule go through, consumer finance and the way banks and financial firms conduct businesses will face major changes?

Record $1.7 Million for Charity Speedrunning

During the seventh Summer Games Done Quick (SGDQ) Speedrunning marathon event, the charity was able to raise nearly $1.78 million from just over 30,000 people. This year’s charity donation reaches a new record high from last year, continuing an ever-growing annual trend. The money raised will be donated to ‘Doctors Without Borders’ charity.

Two speedrunning marathon events are held every year, with the event being the Awesome Games Done Quick (AGDQ) occurring in January. Both events are one week long, and see 100,000 concurrent viewers watching the event online and donating millions of dollars to charity. Games Done Quick is easily the largest speedrunning event, drawing runners from around the globe. The speedrun event lasts seven days with no breaks, meaning that it is in the player’s best interests to complete the required total of 132 games as fast as possible.

The event gathers hundreds of players together in a hotel conference room to play their favorite games at incredible speeds. The crowd these events draw is full of enthusiasts who watch the players play these games, usually matching the number of players playing or more. Often it is not enough to just finish the games with the fastest time possible, and players are challenged by those giving donations to complete the games with added difficulties. Speedrunner Halfcoordinated raised $2,740 by completing NieR: Automata while holding an Emil plushie in one hand.

The total donations for this year’s event come in part from direct donations that the players receive while playing the games, and in part due to partner donations from activities including but not limited to T-shirt sales and the Humble Bundle, which donates 100 percent of new monthly subscriptions, automatically entering new subscribers as donating towards the event charity. This year’s donations were 35 percent higher than the previous year, suggesting that speedrunning events are growing and becoming more popular, both as a charity event as well as a bi-annual gaming event.

Following the established trend, SGDQ accumulated donations were less than AGDQ, with this year’s AGDQ making $2.2 million in donations in the same amount of time. One suspected reason for why the AGDQ tends to be more popular is that it occurs during the holiday, making it more accessible by those who work during the SGDQ. Despite making less, the SGDQ was a major success and reinforces the input and support for the speedrunning gamer community.

For SGDQ, the highest single donation made during the event amounted to $20,300, and a total of 139 speed runs were held, meaning that players were able to accomplish more than the required total of 132. This goes to show how passionate the gamers are about these games, as they not only want to beat their individual games in the fastest time possible but in doing so try to complete more games. Some gaming categories included just single speedruns of players trying to beat the game, such as the already mentioned NieR: Automata and Final Fantasy VII, while in some other categories races were held as players tried to be the first to complete titles including Tetris: The Grand Master amongst other titles.

The SGDQ has progressed significantly since its inception seven years ago, where the first event raised $21,397, but there are passionate people whose ambition is for the event to generate more money to donate to the ‘Doctors Without Borders’ charity. Nevertheless, the SGDQ 2017 has been a massive undertaking and has the makings of a cultural touchstone for many in the gaming community. One tradition is for the event to begin and end with a new and old-fan favorite, which helps chapter the climate and feelings of the gaming community.

Since the events for 2017 have already concluded, fans already are waiting on the next AGDQ with baited breath in 2018. Thankfully, the dates have already been announced for next year, with the next Games Done Quick event occurring from January 7-14.