Wednesday, December 18, 2013

Oops, I was wrong - Fed begins taper

Sigh. I was so sure of myself – and the Fed, that they would not decide to begin the tapering of quantitative easing at their FOMC meeting today, but they went ahead and tapered by $10 billion per month starting in January, cutting their monthly purchases of treasury and agency debt from $85 billion to $75 billion.
In truth, that $10 billion per month is relatively modest and not very likely to impact the economy terribly much.
The good news is that they have gotten that initial tapering decision out of the way, so that eliminates a whole level of second-guessing of the Fed by private sector businesses. The Fed is essentially planting a stake in the sand, asserting that they fully expect unemployment to improve significantly in 2014. Now, we'll see if businesses take the bait and up their game on the investment and hiring fronts.

-- Jack Krupansky

Sunday, December 15, 2013

Mined my first (fractional) bitcoin

With all the chatter about Bitcoin ($1,200!!!), I just had to check it out. Actually, I've been reading the news reports and various stories off and on for months. My original introduction to Bitcoin was the episode of The Good Wife, where her teenage son explains Bitcoin mining to her.
Buying Bitcoins is inconvenient and real mining is expensive, but it turns out that you can dip your toe in the waters with a simple browser-based miner called BitcoinPlus. It's running on my 3-1/2-year old Toshiba notebook PC as I write this and has already mined five fractional Bitcoins in about two hours.
Each fractional Bitcoin in BitcoinPlus is worth 0.00000002 BTC (Bitcoin). The current "value" of a Bitcoin is $862.79 (as per Bitstamp), so my current Bitcoin minings of five of those fractional Bitcoins is worth 5 x 0.00000002 x $862.79 = $0.000086279 or just under 1/100th of a penny. Hey, that's not much, but at least I'm in the game.
Note: I actually tried this a week ago and it ran for three hours and mined a grand total of... zero Bitcoins. The key is that you are solving a fraction of the total calculation which depends on having enough other people mining at the same time in the same "pool", so it depends on the time of day and how many other people are mining using the BitcoinPlus browser app.
Note: I suspect that it costs more for the electrical power to mine these fractional Bitcoins than they are actually worth.
More info:
Personally, I see Bitcoin as an experimental novelty. Not quite a scam, not really a commodity, and less of a store of value than even gold – and not yet a true currency. I mean, the market value of a Bitcoin is quite volatile, even this early in the game. Until the market for Bitcoins is broad enough and deep enough to dwarf the volatility, Bitcoin is a high-risk proposition, although mining is clearly found money. AFAICT, the only way that Bitcoin can become a broad and deep currency would be if the supply increases dramatically and matches a much larger long-term demand, but the implicit limitation on Bitcoin supply growth seems to argue against that.
In terms of speculative investment, there are probably plenty of stocks that have just as good a chance of rising (or falling) in price as much as Bitcoin.
-- Jack Krupansky

Saturday, December 14, 2013

Will the Fed begin to taper QE this coming week?

That's the big question on everybody's minds: Will the Federal Reserve decide at the upcoming December FOMC meeting this coming week to begin the tapering of quantitative easing? My answer, in one word: No. As in no way, no how.
Oh, sure, they will "taper" their vigor for maintaining QE and a couple of voting members may vote against continuing QE as-is and maybe include some language suggesting that tapering could be coming soon, but the whole point of QE is to drive unemployment down to the Fed target of 6.5% and we still have a ways to go. The recent decline to 7.0% unemployment was a bit of a stretch and rather lame, so any suggestion that the economy can just coast to 6.5% unemployment without full-blown QE is simply nonsense.
Although the budget deal takes away some of the anxiety over the future of the economy, the unresolved issue of the federal debt limit will continue to weigh on the economic outlook.
It is easy to say that the economy will be even stronger in three to six months, but in truth it is no slam dunk to assert that 6.5% unemployment will be achieved by even June 2014. I mean, government budgets are still under pressure and companies are still intensely managing expenses, investment, and earnings (to maintain stock prices), so only incremental improvement on the unemployment front is a sure thing for the next six months. My prediction: Unemployment will be in the 6.6% to 6.8% range in six months and 6.5% won't be hit until the summer or fall of 2014.
Another key uncertainty in unemployment is the extent to which people who had dropped out of the job market because they could not find jobs earlier in the recession and recovery see the improvements on the employment front as a reason to once again start looking for a job. Ironically, that improvement actually raises the number of people who are unemployed if only temporarily. This is because technically people who abandon looking for a job are no longer counted as unemployed – they are counted as "not in the job market."

-- Jack Krupansky

Thursday, December 05, 2013

Twitter finally closes above it's IPO opening price

How about that, on an otherwise dour, down day for the stock market, Twitter (TWTR) pops up 4.42% and closes at $45.62, $0.52 or 1.15% above it's IPO opening price of $45.10. It only took about a month.
There were a couple of relatively minor news items. I guess the shorts just got tired of the intense struggle with the "social media bulls" and threw in the towel.
What's next? I think mostly the stock is likely to stay in a range holding pattern waiting for news about revenue and earnings for the next few quarters which will be a "do or die" period for the company.
I still have only my modest position from the open on the opening day. I still intend to add to my position over time, but only on 15% dips. Based on today's close of $45.62, the stock would have to fall to $38.78 for me to buy more. My buying price would rise as/if the stock continues to move up incrementally.

-- Jack Krupansky