Bloomberg - Fantastic Fakes: Busting a $70 Million Counterfeiting Ring < 5min

The bills were from a family of counterfeits that had bedeviled agents more than any other, with at least $50 million worth recovered around the world since 1999. Agents called them the Russian-Israeli notes. This particular variation, with “77” stamped in the lower right corner and a set of subtle errors—smudged chevrons, an extra line under one “THE”—was catalogued as Secret Service Circular 23332. It was so common and so good, agents referred to it as the No. 1 note. ... The heyday of American counterfeiting came in the decades before and after the Civil War, when each bank issued its own currency. Amid the confusion, an estimated 1 in 3 bills in circulation was fake. To stop the epidemic, Abraham Lincoln established the Secret Service on April 14, 1865, the day he was assassinated. (The agency wouldn’t officially be tasked with guarding the president until after William McKinley’s killing in 1901.) Then in 1877, the federal government began printing all currency. The counterfeiting trade never recovered, and today the Secret Service estimates just one bill in 10,000 is phony. But with $1.4 trillion in U.S. currency in circulation, that’s still a lot of money. During the last fiscal year, the agency seized about $146 million in fake bills. ... The Russian-Israelis weren’t “supernotes,” the nearly flawless counterfeits the North Korean government has made. They struck a balance between craftsmanship and cost. Any better, and they might not have been profitable.

Wired - One Swede Will Kill Cash Forever – Unless His Foe Saves It From Extinction 5-15min

Nothing is more ordinary than a Monday morning at a Swedish bank. ... People go about their business quietly, with Scandinavian efficiency. The weather outside is, more likely than not, cold and gray. But on April 22, 2013, the scene at Stockholm’s Östermalmstorg branch of Skandinaviska Enskilda Banken got a jolt of color. At 10:30 am, a man in a black cap burst into the building. “This is a robbery!” he announced, using one arm to point a gun at the bankers and the other to hold out a cloth bag. “I want cash!” ... If the staff was alarmed, no one much showed it. Instead, the employees calmly informed the stranger that his demands could not be met. The bank, they explained, had no cash on the premises. None in the vaults, none at the tellers’ windows, none at all. When the robber looked confused, he was directed to a poster on the wall that proclaimed this a “cash-free” location. “It’s true,” the manager told him. “Sorry.” Crestfallen, the would-be thief lowered his gun and prepared to leave. Just before he stepped out, he turned to one of the tellers. “Where else can I go?” he asked. ... His options, in fact, were fairly limited. What this man had somehow failed to notice was that his country is at the forefront of a global economic shift.

Forbes - Skype For Cash: How TransferWise Is Upending The Way Consumers Move $3 Trillion Around The Globe 5-15min

Since banks charge transaction fees and bake in markups to exchange rates, the duo’s frequent currency transfers were costing them a small fortune. One year Käärmann thought HSBC had lost some of his Christmas bonus because 500 euros less than expected arrived in his account. ... The Estonian software engineers devised a simple solution: Hinrikus would transfer euros from his Estonian bank account into Käärmann’s Estonian account, while Käärmann would transfer pounds from his British HSBC account to Hinrikus’ at Lloyds. This would save them on international transfer fees, as well as on currency drag since they used the real exchange rate, known as the midmarket rate. Soon they had a Skype chat going with other Estonians who wanted to exchange money this way. Eventually this Skype-linked money exchange forum morphed into TransferWise. ... TransferWise uses a system not unlike the ones big financial institutions use to “cross-trade” securities, without incurring costs or commissions, by internally matching buyers and sellers. In this case the official midmarket price offers clarity–neither side is speculating–so it’s simply a balancing process, as TransferWise’s computers simultaneously verify that both sides have the money ready to swap. Indeed, its matching system means funds rarely cross international borders. ... The company is now producing roughly $5 million in revenue a month versus about $1 million per month a year ago. ... Of the $150 trillion in currency-transfer volume annually, the consumer portion amounts to an estimated $3 trillion. ... Still, that’s a decent-size market, with the revenue generated from it exceeding $45 billion.

Blackstone - The Ten Surprises of 2017 6min

1.   Still brooding about his loss of the popular vote, Donald Trump vows to win over those who oppose him by 2020.  ...
2.   The combination of tax cuts on corporations and individuals, more constructive trade agreements, dismantling regulation of financial and energy companies, and infrastructure tax incentives pushes the 2017 real growth rate above 3% for the U.S. economy.  Productivity improves for the first time since 2014.
3.   The Standard & Poor’s 500 operating earnings are $130 in 2017 and the index rises to 2500 as investors become convinced the U.S. economy is back on a long-term growth path.  ...
4.   Macro investors make a killing on currency fluctuations.  ...
5.   Increased economic growth, inflation moving toward 3%, and renewed demand for capital push interest rates higher across the board.  The 10-year U.S. Treasury yield approaches 4%.
6.   Populism spreads over Europe affecting the elections in France and Germany.  ...
7.   Reducing regulations in the energy industry leads to a surge in production in the United States. Iran and Iraq also step up their output.  ...
8.   Donald Trump realizes he has been all wrong about China.  Its currency is overvalued, not undervalued, and depreciates to eight to the dollar.  Its economy flourishes on consumer spending on goods produced at home and greater exports.  Trump avoids punitive tariffs to prevent a trade war and develops a more cooperative relationship with the world’s second largest economy.
9.   Benefiting from stronger growth in China and the United States, real growth in Japan exceeds 2% for the first time in decades and its stock market leads other developed countries in appreciation for the year.
10. The Middle East cools down.  ...

KKR - Outlook for 2017: Paradigm Shift 75min

We view Donald Trump’s ascendancy to the Presidency of the U.S. as confirmation of a political and economic paradigm shift that started with Brexit but is likely to continue for the foreseeable future, including elections across Europe in 2017. Consistent with this view, we believe that there are four major potentially secular changes that all investment professionals must consider: fiscal stimulus over monetary, domestic agendas over global ones, deregulation over reregulation, and a broadening of outsized volatility from the currency markets to include global interest rate markets. The good news is that many of our highest conviction investment themes for 2016, including the ongoing slowdown in global trade, had already begun to capture this sea change in macro and geopolitical trends. At the same time, however, in certain areas our macro preferences have evolved of late in response to the “new” reality that we now live in. As such, we have used this outlook piece to challenge conventional investment wisdom, and in some instances, “adjust our sails.” In terms of asset allocation preferences for 2017, we are still probably most excited by what we see in Private Credit on a risk-adjusted basis. We also believe that Real Assets, particularly those with yield and growth, can prosper in the macro backdrop that we envision. Meanwhile, we are now balanced in our outlook on Equities versus Credit, but in both asset classes, we continue to suggest selling Simplicity and buying Complexity. Overall, though, we do not lose sight of the fact that we are undergoing a paradigm shift, and often these types of regime changes do not always transition smoothly. As a result, we maintain our long-held approach of seeking to monetize aggressively the periodic dislocations that inevitably occur in a world of increasing geopolitical uncertainty and macro instability.

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Aeon - In praise of cash 9min

This first mode of money is public. We might call it ‘state money’. Indeed, we experience cash like a public utility that is ‘just there’. Like other public utilities, it might feel grungy and unsexy – with inefficiencies and avenues for corruption – but it is in principle open-access. It can be passed directly by the richest of society to the poorest of society, or vice versa. ... Alongside this, we have a separate system of digital fiat money, in which our money tokens take the form of ‘data objects’ recorded on a database by an authority – a bank – granted power to ‘keep score’ of them for us. ... This second mode of money is essentially private, running off an infrastructure collectively controlled by profit-seeking commercial banks and a host of private payment intermediaries – like Visa and Mastercard – that work with them. The data inscriptions in your bank account are not state money. Rather, your bank account records private promises issued to you by your bank, promising you access to state money should you wish. ... The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge.

GMO - Emerging Value and Margin of Superiority 14min

Long-time GMO clients have become accustomed to a certain kind of behavior from our asset allocation portfolios. If they are reading stories about how well an asset class has been doing, chances are pretty good that their next account statement will show that we are a seller of that asset (assuming we owned some in the first place). If, on the other hand, headlines are about how horribly things are going for an asset class, our clients have come to expect to see us buying in the coming quarters. But recently we made a move across a number of our asset allocation portfolios that goes counter to that general pattern. After a strong first half of 2017 for emerging equities that saw them rise over 18%, we actually bought more emerging in early July. It seems like a non-intuitive move for us to make, but we believe it is the correct one despite the fact that the prospective returns to emerging equities have dropped a bit since the beginning of the year. Even though the absolute expected return for emerging market value stocks has decreased, we believe the margin of superiority of emerging value over other assets has actually increased. As its superiority is higher and emerging-specific risk is relatively benign, our willingness to bear its risk has increased at the margin, which created the opportunity for us to increase our allocation.