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Saturday, July 6, 2013
The Fed Is Studying The Risks Of Bitcoin
The United States is studying the potential risk from online payment mechanisms like PayPal and Bitcoin, a top US Federal Reserve official told an international conference on Monday.
Some bankers have expressed worries that newer players in the online marketplace could have negative implications for the financial system.
"We have been talking... with banking organisations over the last year or two, trying more carefully to understand what the concerns are with these new payment mechanisms," Federal Reserve Vice Chair Janet Yellen said.
But she denied the widespread view that such players operate completely unregulated, saying the United States has a stronger regulatory environment than many are aware of, especially in the area of consumer protection.
"In point of fact, at least in the United States, there are regulations that apply to PayPal and other payment providers," she told the annual International Monetary Conference in China's financial hub of Shanghai.
PayPal is the online payments arm of US Internet retail giant eBay.
"But that said, this is very much on our radar screen and we are carefully trying to identify where the risks are," Yellen added.
Last month, US authorities seized the accounts of one Bitcoin digital currency exchange operator, Mutum Sigillum LCC, claiming it was functioning as an "unlicensed money service business".
Bitcoins were launched in 2009 in the wake of the global financial crisis by an anonymous programmer who wanted to create a currency independent of any central bank or financial institution.
Some officials fear the virtual currency can be used by criminals or terrorists, or could be vulnerable to hackers.
The United States last month launched a money laundering probe against a digital currency operator, Costa Rica-based Liberty Reserve, which allegedly handled huge amounts of money outside the control of national governments.
The Viral Post Predicting Massive Obamacare Rate Shock Doesn't Tell The Whole Story
Late last week, a post by Avik Roy on possible increases to health insurance premiums in California went viral. So viral, in fact, that it was apparently Forbes' fastest ever to reach a million page views:
This is @forbes' fastest post to hit 1M pageviews. Cheers, @avik!forbes.com/sites/theapoth…
— Kate Pierce (@Kate_Pierce) June 1, 2013
It's pretty easy to see why. The headline asserts that the Affordable Care Act could drive individual insurance premiums in California up by as much as 146%, and contrasts with a report from California that showed that premiums would rise by less than what was expected.
While people don't understand the law particularly well, they do understand what they pay for health insurance.
One problem: That number, which was picked up by Drudge Report, The Daily Caller, and others, is misleading.
Ezra Klein and Jonathan Cohn have more detailed explanations of why that is, but here it is in brief.
In order to get that figure, Roy went to a website called eHealthInsurance.com, a marketplace for individual health insurance, and compared the cheapest plans there to the projected plans that will be offered in California's insurance exchange, a competitive marketplace for individuals to buy coverage.
However, the plans he uses to compare offer what's called a "teaser rate" — one based on age without any knowledge of medical history. If you have pre-existing conditions, that premium goes up or you're ineligible. So the $92 median plan he comes up with isn't one that very many people would ever actually pay.
A number of reviews found by Rick Ungar at Forbes of that particular provider said that quoted rates were nowhere near what people actually pay.
So if you're a 25-year-old in perfect health with a perfect medical history who doesn't get health insurance from your employer, but has an income in excess of $45,000 if single, or $96,000 with a family of four (there are subsidies available for people up to four times the federal poverty rate), you might be able to get that premium for a year, after which the provider is perfectly free to boost rates.
And while this theoretical person and other young, healthy, and wealthy people might see higher premiums, older, poorer, and sicker people will likely pay lower premiums than they do now.
There's a tradeoff there that's worth debating, whether those transfers are worthwhile or efficient.
Premiums for some people are going to rise due to Obamacare. Some might rise a lot, provoking "rate-shock."
California's figures, predicting anywhere between a 26% decrease in premiums to a 2% increase might be too low. But rates won't swing 100 plus percent in the other direction. And higher rates for some is exactly what the law is designed to create.
The Great US Shale Boom Story Is Entirely Cancelled Out By What's Going On In Iraq
Continue to Business Insider »You will be redirected in seconds.Enter your email address and zip code to set up customized email alerts.You have successfully emailed the post. \ABS\Auto Blog Samurai\data\How Gold Is Mined\themoneygame\PinExt.png "Pin It")
Business Insider/Matthew Boesler, data from BloombergThis has arguably had the effect of recoupling the dollar with the global growth cycle, which BofA Merrill Lynch strategist David Woo says should reduce macroeconomic volatility in the U.S. going forward. 
EIA, Barclays Research
The U.S. shale energy revolution is making its mark on global financial markets.
Since the beginning of last year, the U.S. has steadily pared its petroleum trade deficit, ramping up exports and tapering back imports of oil.
Business Insider/Matthew Boesler, data from BloombergThis has arguably had the effect of recoupling the dollar with the global growth cycle, which BofA Merrill Lynch strategist David Woo says should reduce macroeconomic volatility in the U.S. going forward. With the U.S. supplying the world with more and more oil, it may seem logical to assume that the shale revolution will keep downward pressure on oil prices going forward.
"The rapid development of US shale has led some in the market to be concerned that we are now moving into an oversupplied position on supply [in global oil markets]," says Barclays oil analyst Rahim Karim and his team in their latest report.
However, the Barclays team disputes this.
"Going forward, our expectation is that the rate of growth from US shale oil will slow and when combined with slower growth than previously anticipated from other key production areas including Iraq there will be minimal growth in OPEC spare capacity," write the Barclays analysts.
They provide the chart below and the following explanation:
Growth in US shale oil entirely offset by lower expectations from Iraq: The graph below demonstrates how expectations of supply growth have changed from 2011 to the present day. With the development of US Shale, the EIA has lifted its expectations for incremental supply growth from 2011 by a total of 0.6mb/d over the 2013-16 period. However, on a global basis this uplift has been more than offset by our lower expectations of growth from Iraq down by almost 2mb/d over the same period.
EIA, Barclays Research
If the Barclays projections play out, increased oil supply may not be as big of a downward price pressure as many think.
"As a result we anticipate the Brent oil price remaining above $100/bl in the medium and longer term," writes the Barclays team. "In turn this should support continued capital expenditure in the industry, hence our continued preference globally for Oil Services."
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APIBM CEO Ginni RomettyFor months, IBM and EMC have been duking it out with each other to buy Dallas-based SoftLayer, one of the nation's largest, private cloud computing providers. And IBM just won.
IBM bought SoftLayer for an undisclosed amount. The deal has to be significant, though, because SoftLayer had estimated revenues of about $400 million last year and a valuation of well over $2 billion.
SoftLayer has about 21,000 customers for its web hosting and cloud services and 13 data centers in the U.S., Europe and Asia, mostly small and mid-sized customers.
EMC wanted this company as a jump start for the new cloud initiatives launched by its subsidiary, VMware. In the past couple of months, VMware launched vCloud (an Amazon-like infrastructure cloud service for enterprises) and Pivotal (a Microsoft-Azure like cloud for developers). SoftLayer would have given it the big international data centers it needs.
Plus, one of SoftLayer's big customers is Citrix, VMware's biggest competitor. Stomping on Citrix would have been a bonus for EMC.
At one point, it looked like EMC might have an edge, too. Venture capitalist David Strohm sits on the boards of EMC, VMware and SoftLayer.
But, alas, not so.
IBM wanted SoftLayer for obvious reasons, too. It instantly gives IBM game with small-to-medium-sized businesses, a fast-growing segment. IBM's home-grown cloud has been geared for large enterprises, particularly multinationals.
SoftLayer will help IBM compete with the lower-end cloud market dominated by Amazon. IBM pointed out in its press release that gaming companies, a particular Amazon stronghold, have been flocking to SoftLayer of late. More than 60 new gaming companies have signed up in last two quarters, it said.
The UK May Have Just Stumbled Upon Enough Shale Gas To Power The Country For 60 Years
Rob Wile | Jun. 4, 2013, 9:52 AM | 347 | British gas producer iGas PLC has completed a study claiming there's enough natural gas in northwest England to power the UK for about 60 years.
British gas producer iGas PLC has completed a study claiming there's enough natural gas in northwest England to power the UK for about 60 years. The story was first reported by the FT's Guy Chazan.
Of course, it's just a single corporation making this estimate, so we should take it with a grain of salt.
iGas studied a 300 square mile area near Liverpool and found the shale deposits contained up to 170 trillion cubic feet of natgas. The UK currently consumes 3.3 tcf annually, according to the EIA.
The "most likely" scenario from the study is that the deposits contain 120 tcf, while the lowest estimate stood at 15.1 tcf.
iGas hopes to begin drilling in the area by Q4 this year. At the same time, there's been growing opposition in the UK to fracking, a common form of extracting gas from shale.
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