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5 "Tells" that the Stock Markets Are About to Reverse

Blockchain Promises To Be As Disruptive A Technology As The Internet

Currencies / Bitcoin Sep 05, 2014 - 06:07 PM GMT

By: GoldCore

Currencies

Every once in a while a new idea blasts onto the scene out of nowhere -- typically it is at first met with suspicion and distrust. If it has merit, it can start to become disruptive and awkward for incumbents, let's call them the “Safe Guys”. Safety and security are heralded as reasons why the new idea should be ignored.

New ideas only really take off when someone somewhere, lets call him the “New Guy”, figures out how to monetise the hell out of the idea -- then New Guy types start to get wealthy. Then and only then do Safe Guys start to take notice and that brings a whole new level of scrutiny.


You see, unlike the established players, New Guy has nothing to lose and so he can just “go for it”. Success follows and suddenly the Safe Guy incumbents react, at first not by changing what they do but they state, rather pretentiously, that while, yes it is an interesting idea, they can do just as good a job as the upstart and in a far safer way. They then pay some bloated consultant to explain exactly what the new idea actually is, so they won't look so stupid next time. (You see, in many cases success will in time hamper innovation as we give in to the human trait -- to protect what we have and not risk it with some fandangled and convoluted new-thinking!)

You can see this behaviour in so many industries: low cost airline travel, music downloading, internet browsers, electric cars, even taxis.

Well, what if I told you that there is something new in the works and it is happening right now, that it is so big and so transformative that it is promises to rewrite everything you do and every way you do it. If you thought the internet was a big deal, well, you are about to meet its big brother.

Before I explain what I mean, I need to cover some basic ground work first. We humans can be a very distrusting lot. We can be “oh so nice” and polite and civilised when it suits us, but when it comes to really trusting each other, all that niceness goes out the window.

At the end of the day we have an overwhelming urge to acquire, to earn, to build and to keep all manner of assets. We don't just want to have all the assets we can get our hands on, we also then want everyone else to know we have them too. Yes, there are saints amongst us who rise above all of this, but they are the exception, (or perhaps the acknowledgement they seek is of a more intellectual ilk). Because of our capacity to cut corners, tell outright lies, misrepresent at every opportunity, we require a very energy intensive and complex contract system. Either way, if you think about it, our desire to acquire assets, at almost whatever cost and to account and protect those assets governs so much of the net human enterprise.

It is a relatively recent phenomenon that we have realised that the sum of our activities may be having a deleterious effect on the world around us, (cough cough) on our neighbours or on our children's future. As such, we have started to develop a collective consciousness about “how” we actually go about our business and the unintended legacy effects we can have on our environment.

At the heart of the global economy is a big list of assets, houses, land, companies, intellectual property, brands, human talent etc. We spend an enormous amount of time trying to figure out who exactly owns the asset, how they own the asset, who can work the asset, how to protect the asset, how to value the asset, how to extract value from the asset, how to maintain the asset, how to make our asset more efficient than our neighbour's asset, how to exploit the asset, how to attack our neighbour's asset, how to calculate taxes on the asset. It is a small wonder that after all of this work that happens around the asset, that when the asset is actually put to work, there is any net actual value left for society.

Think of the army of “professional” analysts who are employed to manage the asset: lawyers, bankers, auditors, tax departments, payment services, developers etc. They are sometimes referred to, in part, as the "services industry" and they are accepted as being the best type of economic activity a new, technology focused economy can have. Some politicians even refer to them as the “knowledge economy”, as if that actually means something.

Now here is the big change that is coming. Imagine a world where every single asset had a universally accepted “tag” attached to it. The tag will display exactly which account owns the asset, who can control the asset, every conceivable dimensional detail about the asset, how to buy and sell the asset. Imagine if it was indisputable, as sure as 1+1=2. Imagine if you could sell your house or any other asset without having to go into a legal mine field of contract law. Imagine a world where you could buy a service or product anywhere in the world in a microsecond and not have to pay outlandish charges to some faceless, feckless banking guild.

You may have heard of Bitcoin, a cryptographic electronic currency that is grabbing headlines all over the world. It is being described by Safe Guy types, as “volatile”, the preserve of criminals, unsafe, scary etc. Indeed it may be or become all some and none of these things in time. But behind it is a technology that is as transformative as I have ever seen.

The technology is known simply as “blockchain". In origin, and partly in design, it is similar to the original methods of accountancy dreamed up by the the first international traders thousands of years ago. This modern day incarnation of those hallowed concepts is infinitely more practical, dynamic and accessible to the computer-clad and hyper-connected people of today.


A blockchain is simply a register of assets on a public ledger that clearly identifies: an asset, owner and any number of useful credentials that may be helpful in understanding the properties of the asset. This means that you can have certainty that what is there is there and can be bought and or sold. It is public and it is virtually indisputable.

What this means is that the barriers to entry so many people will be lowered, allowing much greater economic participation by more and more people at lower and lower cost. It means that complex processes such as stock trading will be near instant in terms of settlement of trades, property conveyancing could happen in moments not months, tax collecting could be instant and at point of transaction. The concept of paying professional fees to access certain markets will be gone, as the cost of participation will be greatly reduced.

I recently attended a fantastic conference in Dublin called BitFin. It was a mindblowing experience. The hall held approximately 400 people of all types. I would say, crudely, they were made up of ultra geeks seeking investment, Klondykers salivating at how they could get rich, interested parties and some regulators from officialdom trying to make sense of it all. It got me a thinking and since then I have not been able to temper my enthusiasm for what might be. So now I might be metaphorising from “Interested Party” to Klondyker, please bear with me.

Bitcoin is simply an application of blockchain technology that is being applied to currency. Currencies are a great starting point for this technology. Suddenly the complex apparatus that is deployed to secure, identify, verify, transact every transaction is being greatly reduced.

Imagine writing a book and having it distributed on Amazon, or other retailer, a day after it is signed off. If the book is purchased the next day, your account as the writer, is credited a millisecond after the purchaser account is debited. Imagine every step in the procurement process will become vastly more efficient, with little or no bureaucracy to slow down commerce.

The cost of that book will be a fraction of current costs in new Bitcoin currency. The innovative book company that can get their suppliers and writers to accept Bitcoin as payment will have vertical integration bliss, fast tracking the economic process. First movers will make competitors look expensive and outdated. blockchain is essentially and potentially straight through processing on steroids for all industries, all assets and all transactions. Fiat currencies euro, pound, dollar), with their massive industry of safety checks, will look like dinosaurs.

Another big win is the ability to tackle the mammoth abuse of governments in our currency markets. Central banks' very existence could be rightfully challenged as they would no longer own a currency that is truly international and decentrally managed.

Right now we are all eating monetary “cake”, and having our savings and pensions robbed and devalued by pensionable bureaucrats. What's more, the loot is being selectively allocated on the basis of status and access rather than merit. This is making the rich richer and is and will lead to social unrest.

Even from technological development, the advent of robotic science is being hampered by the confusion sowed by the human bureaucratic processes and obscured ownership ledger systems. Because currently we have a very convoluted way of managing assets, it is is near impossible for a logical, procedure-driven, semi-autonomous system to really assist us. If you had an efficient asset management register and complementary transaction and security systems, robotic assets could, at last, be in a position to greatly enhance our economic processes.

How will it change us? Well, it is hard to say. Clearly, it raises enormous challenges for society, demographics etc. But it will come and it will change everything we know and everything we do. Perhaps it will allow more human resources to be deployed into finding new assets, exploiting their benefits with greater accuracy and less waste, and thus in time allow us to focus on the effects of our cumulative behaviour on our environment and our children's future.

MARKET UPDATE
Today’s AM fix was USD 1,264.00, EUR 975.69 and GBP 774.80 per ounce.
Yesterday’s AM fix was USD 1,271.00, EUR 966.69 and GBP 772.36 per ounce.

Gold fell $7.10 or 0.56% to $1,262.90 per ounce and silver slipped $0.04 or 0.73% to $19.08 per ounce yesterday.

The gold price came under pressure yesterday in the New York market due to US dollar strength. After peaking near $1,275 in early New York trading, the price moved steadily down and fell below $1,260. In overnight Asian trading the gold price strengthened again and reached $1,263.50 at close of Singapore trading. Gold is currently trading at $1265 in London, down 0.47% from yesterday.

Like gold, the silver price strengthened yesterday in early New York trading to $19.35 but then moved down below $19.00, before a slight recovery in Asian market hours. In London trading, Silver is now quoted as $19.04, down 0.93% from yesterday.

The volatility in the gold and silver prices yesterday did not reach the platinum and palladium markets where prices remained in a narrow trading range. Compared to yesterday, platinum has fallen 0.5% to $1,405 while palladium has risen 0.55% to $887.

For the week, gold is down 1.63% from $1,286 on August 29, silver has fallen 2.6% from $19.55, platinum is down 1.4% from $1425, and palladium is 1.15% lower compared to last Friday’s price of $897.

The European Central Bank announced further cuts in its key interest rates yesterday while unveiling details of a quantitative easing programme. This pressured the euro while adding relative strength to the US dollar. US dollar strength conversely had a negative impact on the gold price, hence gold and silver weakened in morning US market hours after the ECB announcements had filtered through.

The ECB rate reductions chopped 0.1% off its three main interest rates, bringing its refinancing rate to 0.05%, its deposit facility rate to -0.20% (minus), and its marginal lending rate to 0.30%. The quantitative easing announcement revealed that the ECB will add liquidity to the markets via the purchase of asset backed securities (ABS).

Geopolitical crises in Ukraine and the Middle East still remain unresolved but the current NATO summit in Wales may lead to further clarity on these issues over the coming weeks. Until these crises are resolved, the safe haven benefits of gold should act as a support for its price in the near term.

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

IRL
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FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

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