Market Update 14 Sep 2012 – EUR, Cotton, TLT and London Bitcoin Conference

This week saw massive coordinated central bank "easing", aka money printing, with the ECB promising unlimited new bond purchases to bail out the Eurozone and the German high court giving it's go-ahead, with the result that the EUR dropped to new all-time lows before experiencing a little "shadenfruede recovery" on the Fed's announcement and closing the week down 0.3%.

Not to be outdone by the ECB, the Federal Reserve announced QE3, an open-ended one-two punch of zero interest rates and $40 billion in new money every month with no end date.  As the saying goes, "the beatings will continue until morale improves". Morale certainly took a nose dive on the news, with the long bonds as represented by TLT dropping a whopping 7.2% for the week, punching dramatically down through the lower edge of the trading channel, and erasing most of TLT's gains for the last year. And this drop occurred on massive volume – look out below! The USD itself dropped by 2.7% to close at 17.5mg,  down 11.3% for the year to date.

Cotton also took the news badly, falling to a new all-time low of 13.0 mg/lb before ending the week at 13.2 mg, down 3.1%.

While currencies and bonds were markedly lower, stocks were mixed.  The big US indices are slightly lower (S&P 500 down 0.8%), but the Nikkei 225 rose 1.7%, and the HUI gold stocks rose 4.2%.

The week's strongest performer was coffee, rising 8.2%, to close at 31.7 mg/lb.  Silver was in second place with a 4.8% gain. The charts for silver, platinum, coffee and the HUI are all starting to look like they may have found their bottoms, but they have yet to break out above their overhead resistance levels.  Keep an eye on these going forward.

I've spent the last few days in London for the 2012 Bitcoin Conference. It has been extremely interesting and educational. There is an incredible spectrum of political opinion, ranging from radical crypto-anarchists to utopians (the abolition of the need for money as costs of living approach zero) to minarchists to outright communists.  The debates and Q&A sessions are colorful and informative, but well-mannered and respectful of other's positions.

There were some great presentations on legal and legislative issues and how these are likely to evolve over time. Also a very important presentation on the potential for non-monetary applications of the bitcoin protocols: smart contracts, smart property, and other interesting concepts that are in there, but not used at all so far (stuff that could come into play a few years down the road when the currency aspect is soundly in place.)

I had a chance to talk with some of the people maintaining and developing the bitcoin software, as well as people developing applications and businesses around the new currency. I was very impressed with the systematic approach being taken to keeping the currency system robust and scalable, so that it can continue to grow as more and more users discover what it can do for them.

Many of the sessions were recorded, and if they are made available, I'll post a link here. Meanwhile, if you'd like to see the slides for my presentation, drop me an email, and I'll be happy to send you a copy.