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Investors in forex, or the foreign exchange market, who used a trading site called SecureInvestment.com received a nasty surprise as Secure Investment disappeared earlier this year, along with more than $1 billion of investors’ money.

According to Bloomberg Businessweek, Secure Investment presented itself as a site that made trading decisions for investors and guaranteed their principal, meaning that even if they didn’t make money, they’d never lose any. Secure claimed to be a legitimate and profitable choice, with video testimonials by satisfied investors and trading results posted every day. To further lure customers, Secure stated that on average, investors had gained 1 percent each trading day over the last five years. Bloomberg writes that this would, in theory, work out to a yearly gain of about 250 percent — an appealing possibility for those looking to invest their money and get a large return.

Investors Have Doubts

However, several investors soon realized that Secure Investment might not be as secure as it claimed. U.K.-based doctor Rajibuddin Mandal and his wife invested a total of $60,000 in Secure Investment, which rapidly climbed to $2,450,000 in 10 months, according to Bloomberg. When Mandal attempted to make a withdrawal in March, though, he got an email putting him off; this was followed by an April 30 email in which Secure’s technical department claimed to be working on updates. The next day, the website disappeared.

The Mandals will most likely never see their money again.

Here’s a cached screenshot of what the website looked like in August 2013:

Image via DomainTools.com

Massive Losses

Customers in 11 countries have been affected, says Bloomberg, which also reports that Secure Investment asked investors to wire money to banks in Australia, Latvia, Cyprus and Poland. The data posted on Secure’s website indicated that investors may have lost over $1 billion.

All A Front

The company was supposedly incorporated in Panama in 2008, yet it never revealed its real location, instead boasting a fake staff and fake offices. In July 2013, the website of Panama’s securities regulator “warned that the company wasn’t licensed or authorized to trade currencies,” says Bloomberg.

The video testimonials were also fakes; the supposedly satisfied customers were actually actors who had never heard of either forex or Secure Investment.

So is there a real face that can be attached to this scandal? Maybe; Secure’s CEO is identified as a man named Michael Sterling, who appears in an infomercial for the company. However, according to Bloomberg, there has been no response for “repeated requests” for interviews with Sterling.

All in all, it seems that Secure Investment has disappeared without a trace, leaving disappointed investors a lot poorer — and a lot more angry.

The post Forex Website Disappears, Taking $1 Billion Of Investors’ Money With It appeared first on Wall Street Insanity.

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Investors in digital currencies beware: Mt. Gox, previously the world’s largest bitcoin exchange, has filed for bankruptcy. This comes in the wake of the organization losing an estimated 850,000 of the virtual coins, worth nearly half a billion dollars.

Mt. Gox CEO Mark Karpeles told the Japanese Asahi News Network in a press conference, “We have lost bitcoins due to weaknesses in the system.” Despite his company’s failures, Karpeles still sees a promising future for the growth of the virtual currency.

In the meantime, investors and bitcoin holders are still trying to uncover the truth behind the collapse of the exchange and find out what happened to their money. The Tokyo-based exchange was used primarily by foreign investors, who lost a combined 750,000 bitcoins, while Mt. Gox lost 100,000 of its own.

With an average price of $565 for a single bitcoin, the loss of 850,000 represents about $480 million, according to current prices on the CoinDesk Bitcoin Price Index.

This past Tuesday, Mt. Gox stopped all transactions and took down its website, marking the most critical blow to the bitcoin industry to date. In filing bankruptcy, few Mt. Gox investors have hopes of recovering their investments. Still, part of the process involves the development of a restructuring plan and the payment of any claims recovered to Mt. Gox creditors, a process that could take several years.

Bitcoin, a virtual currency free of any centralized banking control, still has potential as an industry. Many are quick to point the finger at CEO Karpeles himself, who is alleged to have maintained a lax attitude about the company and did little to control the effects of hackers.

As Mt. Gox continues with its filing of bankruptcy, similar to that of Chapter 11 in the United States, investigators in both Japan and the U.S. are exploring the possibility of criminal activity related to the Mt. Gox collapse.

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If you ask any trader or investor what is the most important currency to follow, they would probably say the U.S. Dollar. After all, the U.S. Dollar is the world’s reserve currency. If someone in Asia, or Africa wanted to buy a barrel of oil they would need to convert their money into U.S. Dollars in order to pay for that barrel of oil. Almost every major commodity is traded in U.S. Dollars, so it is understandable why the U.S. Dollar should be followed. If a trader or investor trades the U.S. Dollar Index, they are trading the U.S. Dollar verse a basket of six other major currencies, including the British Pound, Euro, and the Japanese Yen.

Do you know which currency is most important that trades against the U.S. Dollar at this time?

At this time, the most important currency pair in the market is the U.S. Dollar verse the Japanese Yen (USD/JPY). That is right, the Japanese Yen is the key to the stock market at this time. When the USD/JPY chart moves higher it means that the Japanese Yen is moving lower. So why would a weaker Japanese Yen help the major stock indexes in the United States move higher? This is a good question, the answer is that the large financial institutions have a highly leveraged bet that Japan will continue to print more and more money to try and create inflation. Since the late 1980’s Japan has suffered from deflation. In 2012, the Japanese government and the Japanese central bank have vowed to implement easy money policies like the Federal Reserve to try and create inflation. The big hedge funds are aware of this, and now they are all in on this bet of selling short the Japanese yen, or basically buying USD/JPY.

Recently, the Japanese Yen has strengthened against the U.S. Dollar. So is it any surprise why the U.S. stock markets have been tumbling lower lately? This currency pair (USD/JPY) is literally moving the stock market in the United States and Europe. Just look at any chart of the USD/JPY and the S&P 500 Index and you will see how the two charts basically trade in lock step with each other. You see, if the USD/JPY chart falls or declines (yen strengthens against the dollar) the leveraged institutional money can no longer buy the S&P 500 Index, Dow Jones Industrial Average, or any other major stock index. It is all based on market liquidity and a leveraged trade. All eyes should be glued to the USD/JPY chart as it tells us everything we need to know at this time.

Disclosure: This article is written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does own physical gold and silver at the time the article was submitted.

The post Your Eyes Should Be Glued to The Currency Market appeared first on Wall Street Insanity.

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Europe is still one of the most interesting places to invest. The risks in the countries using the continent’s single currency are avidly followed, and little understood. Europe is a complicated problem, and there is nowhere that is more evident than the European Central Bank. The regulatory body kept interest rates across the Eurozone at record lows this morning as the union struggles with economic risks from a plethora of directions.

The European Central Bank kept its benchmark interest rate at 0.25 percent, a record low first implemented in November. That change may have surprised investors, but this morning’s decision was widely expected. Europe, like the United States, is unable to keep its inflation rate near its target. That means the currency is at risk of deflating relative to the world’s other currency’s.

Eurozone Deflation

Eurozone inflation stood at around 0.8 percent in December. The ECB has a stated target of 2 percent, but the struggling continent is unable to devalue the single currency at anything close to that rate. Low interest rates, and monetary easing, are supposed to spur inflation. That hasn’t worked in the Eurozone, and it is a growing problem in the United States.

Deflation can lead to huge economic problems as consumers prefer to save their money rather than spend it, and economic growth remains sluggish as a result. the catalyst for deflation is very different than that which drove Japan into its period of stagflation, but analysts are worried about the fate of the single currency in a similar situation. In Europe business and households are not being given access to the credit that they crave, and the economy is not benefiting from the credit market.

Deflation could cause Europe’s long term problems to turn into a decade, or more, of officials struggling to bring the economy under their control. Europe faces risks other than deflation, however, and one of those problems could bring an end to the single currency experiment before falling prices have the opportunity to.

Risks Mount In Europe

Analysts have been taking solace from better than expected reports that emerged from the Eurozone in recent weeks. The reports show that retail sales are up, and industrial activity is also increasing. The issue, as always in Europe, is regional. Europe’s core nations are performing well. Germany’s factories are humming and its unemployment is at incredible lows.

The countries at the periphery are not performing quite as well. Spain’s unemployment is still above 25%, and the country’s future is far from predictable. At the same time France, long considered a core nation, is fast becoming a peripheral part of the continent’s decision making and economic activity.

Europe is surrounded by economic problems, and the tools available to the central bank are simply not up to the challenge. The continent may need to implement more than a single interest rate, or it might require more creative approaches to policy. Whatever the solution, Europe is difficult to predict, and investors willing to open themselves to the continent’s risks are brave indeed.

The post ECB Keeps Interest Rates At Record Lows Amid Risks appeared first on Wall Street Insanity.

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Good news for Bitcoin fans and investors: the virtual currency just came one step closer to entering the mainstream. Bank of America, one of the biggest firms on Wall Street, announced in a comprehensive 14-page memo this morning that it would begin covering the currency.

“We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers,” bank strategists David Woo, Ian Gordon and Vadim Iaralov wrote in the memo. “As a medium of exchange, Bitcoin has clear potential for growth, in our view.”

The strategists list several advantages to using Bitcoin, such as low transaction costs and a finite supply of coins, mimicking the availability of gold or silver. They state, “Bitcoin offers an attractive alternative to cash in terms of security, transparancy of transactions, and counterfeiting.”

The memo also goes through disadvantages and potential issues. The strategists note price volatility, possible interference by regulators, and that fact that it’s simply not recognized as legal tender.

After weighing the pros and cons, Bank of America arrived at its analysis of Bitcoin’s fair market value. Woo and associates state that the maximum fair value of a single bitcoin will be $1,300, making the entire Bitcoin institution worth a maximum $15 billion.

Sam Ro of Business Insider thinks it won’t be long before others on Wall Street start covering Bitcoin and offering their own analyses. “Wall Street’s coverage of Bitcoin seemed inevitable considering the amount of money moving in and out of it,” he wrote.

Chinese Government Creates A Setback As It Denounces Bitcoin

There are still some kinks to work out; as Bitcoin becomes increasingly popular, it remains extremely volatile in the world market. The People’s Bank of China announced new nationwide handling restrictions for the coins, causing the value of a single bitcoin to fall from $1,240 to a low of $870 this morning.

The notice of the new restrictions described bitcoins as “not a currency in the real meaning of the word,” according to the New York Times. Rather, bitcoins are a “virtual commodity that does not share the same legal status of a currency. Nor can, or should, it be circulated or used in the marketplace as a currency.” Based on these views, the People’s Bank of China said the new measures were necessary in order to “protect the status of the renminbi as the statutory currency, prevent risks of money laundering and protect financial stability.”

The notice did specify that individuals can participate in Bitcoin investments at their will. “Ordinary members of the public have the freedom to participate in Bitcoin transactions as a kind of commodity trading activity on the Internet, provided they assume the risks themselves,” it said.

The Chinese market was able to make such a huge difference in the price of a bitcoin because, despite government reluctance to accept it, the currency is widely popular in China. Xiong Bin, a 33-year-old Bitcoin holder, explained to the Wall Street Journal, “Our generation doesn’t have enough money to invest in property and I don’t understand economics well enough to invest in the stock market.”

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Bitcoin is all over the news once again. The cryptocurrency is the wave of the future according to its horde of fans, and investors are losing out if they’re staying away from the currency. Some investors will be worried that this talk is justified and they’re missing out on an investment in the next big thing. There’s reasons to distrust the argument, however.

The Bitcoin talk may sound like the froth around a bubble to more experience investors. The valuation of the cryptocurrency is based on little apart from future expected value. This reasoning is justified. Bitcoin’s valuation is so volatile at the moment that buying goods and services with it is difficult. There are other problems for those who want to invest in Bitcoin, but here’s a look at the four major issues.

Bitcoin Design Flaws

There are a couple of major flaws in the design of the currency, and for those looking to invest in the cryprocurency these may be a problems. The first major problem is that Bitcoin is deflationary. The currency will naturally become more valuable over time. That means there is less impetus to spend coins. They will be worth more next week. The currency is designed to have a maximum of 24 million units in circulation at any time, inevitably leading to deflation.

Bitcoin Is Anonymous

A second major problem is that Bitcoin is anonymous. The fact that the currency protects the identity of users is not the major problem, though that causes certain issues, the fact that nobody knows who built the currency does. Currencies are backed by the strength of a state. Bitcoin is supposed to be backed by the security of its computer code. The fact that nobody knows who designed the code makes it difficult to trust in the currency, and conspiracy theories about the origins will be easier to foment than those about the Federal Reserve.

Bitcoin Might Be Useless

Bitcoin was designed to be anonymous, it was designed to keep its value, and it was designed to keep the identity of those using it a secret. The problem is that nobody accepts Bitcoin. The currency is still taking off, and there’s nothing to guarantee it won’t be used en masse in ten years, but today the currency is close to useless. Its volatility means that most merchants accepting the currency only accept the US dollar price of goods in Bitcoin.

Lack of Bitcoin Payment Infrastructure

Along with the dearth of merchants really offering their wares in Bitcoin is the lack of Bitcoin payment infrastructure. There are a huge amount of companies that make the international currency system work properly. Bitcoin does not have these tools just yet. Until people begin to accept Bitcoin at face value and the currency has infrastructure in place, it is essentially useless.

Bitcoin may not be a bad investment, but there is little doubt that it is a risky one. Investors should think long and hard before attempting to get into the virtual currency market, the risks are almost impossible to quantify. Though the bet might pay off, it is speculation. Investors would be better off putting their money into something they understand a little better.

The post Investing In Bitcoin: 4 Major Problems appeared first on Wall Street Insanity.

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More than 400 retailers are offering exclusive deals today to people paying in Bitcoins, according to Techcrunch. And because of the simple nature of Bitcoin and its typical user, many of these deals are on the geeky side.

The deals offered on bitcoinblackfriday.com include discounted Reddit Gold, sriracha bacon lollipops and more bitcoins. And if you really have a lot of bitcoins to spend, you can always buy that special someone a trip to space.

The Practicality Of The Sale

Bitcoin Black Friday offers good deals, but only if you find something you actually want. Some online retailers, for example, are giving across-the-board discounts of 10 or 20 percent when you pay with bitcoins.

But the retailers and their deals are very niche. Techcrunch points out that you won’t find big retailers like eBay or Google on the list, for example. And there’s a reason for that. These companies have their own forms of payment to push, eBay preferring PayPal and Google using Google Wallet.

There is one thing the sale is definitely good for: giving to charity. Users can currently choose from 34 charities and charitable companies to support on the Bitcoin Black Friday site. And many donations earn something in return. Gocoin is offering to match every donation made to The Boys and Girls Club of Santa Monica, for example. And if you buy a belt on Completely Royal, the company gives you a 15 percent discount and donates 10 percent of the price to the charity Raising Bitcoin for Phillipines.

Whatever you’re in the market for, Bitcoin Black Friday deals are worth browsing for any Bitcoin user. Browse all of today’s Bitcoin Black Friday deals here.

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Bitcoin is the popular online currency that is taking the world by storm. The coins first became popular when it was used on the infamous Silk Road website, where users could purchase drugs. It is used by a brothel in the U.K. for clients to be able to anonymously pay for their philandering.

However, Bitcoin is popular somewhere else these days, and believe it or not, it’s on an exchange. The company is traded on the Mt. Gox exchange, and its stock has recorded a stellar rise on the street so far this year. The company has recorded an increase in share price of more than 7,600 percent this year, and it broke another record today.

For the first time, bitcoin broke the $1,000 per share price barrier, and reached as high as $1,030. This is a massive increase from its December 31st close of just $13.27 per share.

Bitcoin is part of a growing trend of digital, online currencies that are finally gaining acceptance as payment forms. The U.S. government held a Senate hearing on November 18th at which Bitcoin was explained, along with other forms of virtual currency. The hearing was set to determine whether the U.S. government would attempt to stop mainstream acceptance of the currency, or allow it to be used. According to the outcome of the meeting, Bitcoin was embraced, once it was fully explained to the committee set to hold the hearing.

Ben Bernanke, the Federal Reserve Chairman, has already voiced his support of Bitcoin. His letter to the Senators said:

Vice Chairman Alan Blinder’s testimony at that time made the key point that while these types of innovations may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

This support of the digital currency by the U.S. markets has marked a milestone for Bitcoin, contributing to its rise to new highs. Since its open, the day after the hearing, the currency has risen by close to 30 percent.

Disclosure: Author represents that he holds no position in any of the stocks mentioned in this article at the time of submission.

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With the LIBOR scandal barely far enough in the past to be a bad memory, Barclays PLC, London’s international banking house has confirmed that regulators are asking for information regarding the possible manipulation of foreign exchange rates. The U.K. based bank joins UBS of Switzerland and Deutsche Bank of Germany in confirming that the U.S. Department of Justice (DOJ) has initiated a probe into these matters.

Barclays Is Cooperating

Barclays made the announcement of the probe during its third quarter earnings call, and said the bank is cooperating with authorities to get to the bottom of the matter. The exchange rates help set the rates for trillions of dollars of investments, and if they are manipulated entire markets may be compromised.

The bank said that the investigators from the DOJ have noted that the investigations are focusing on foreign currency traders, and that this investigation centers around allegations of “possible attempts to manipulate certain benchmark currency exchange rates, or engage in other activities that would benefit their trading positions.

UBS & Deutsche Bank

The announcement from Barclays comes only two days after a similar announcement by Switzerland based UBS. Deutsche Bank of Germany also confirmed that the DOJ had launched a probe into its actions as well.

Other Investigations

Aside from the DOJ, there are several other investigations ongoing into the actions of the banks and they include internal investigations by the banks themselves. Great Britain has launched its own investigation through their Financial Conduct Authority, as well as the Swiss Financial Market Supervisory Authority and Competition Commission having launched a probe of its own. Barclays has also made it clear that an internal investigation is underway to attempt to clear up the matter.

Global Probes

These attempts to learn of corruption in the banking and trading world are simply the latest installments of many such investigations in recent years. The LIBOR scandal involved international exchange rates and also involved major banking institutions. Now, it seems the pain of the LIBOR scandal may be re-lived by Barclays and other banking giants. With the recurring nature of these issues, it begs the question of whether the global banking and trading models should be re-examined and re-designed.

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After a string of precipitous declines in mid-May, the Japanese stock market has bounced back. The Nikkei 225 hit a multi-year high of 16020 on May 20th, and then proceeded to quickly head downwards, hitting around 12400 on June 6th before stabilizing. This represented an almost 22% correction. The equity index has since recovered a portion of its lost ground, and is currently trading around 14400. Japan is undertaking massive governmental intervention in order to jump start its economy after poor growth over the past decade. In order to fully understand Japan’s attempted economic recovery, it is not enough to look at only the Nikkei. Rather, the U.S. Dollar/Yen exchange rate is also of vital importance, as is the yield on Japanese bonds. The question becomes whether the Japanese economy is now on solid footing, or whether it may face further headwinds moving forward.

Japan is taking dramatic steps with stimulus funding in an attempt to reverse its long time deflationary economy. This effort has been spearheaded by recently elected Prime Minister Shinzo Abe, and has been nicknamed “Abenomics” by the financial media. Abe previously served as Prime Minister from 2006 to 2007, and was re-elected in October of 2012. Abenomics is taking a multi-pronged approach to dealing with Japanese macro-economic issues, including massive quantitative easing, a devaluation of the Japanese yen, and setting low interest rates. The Bank of Japan has stated that it intends to buy about 7 trillion yen monthly in bonds over the next two years. Abe has further pegged a 2% inflation rate to spur the economic growth.

Up until May, Abenomics looked like a stroke of genius. The yen had devalued to around 102 yen per dollar, the yield on Japanese bonds was low, and the Nikkei was skyrocketing. Then, it started falling apart in the middle of May. The yield on the 10 year Japanese bond rose from .315 percent in April to around 1 percent in May. The yen quickly strengthened versus the dollar, reaching 94.24 on June 17th. As mentioned previously, the Nikkei took a dive during the same period. However, the volatility has since declined. The Nikkei is rising again, the bond yields are low, and the yen has weakened to around 101 per USD. Some experts are declaring the increased volatility was only a slight correction on the path to a recovery for Japan.

While some observers are still bullish on Japan, others believe the recent bond volatility is a sign of things to come. Kyle Bass, the hedge fund manager of Hyman Capital Management, L.P., has been predicting an implosion of Japan’s economy for the past few years. Bass was one of the few managers to call the sub-prime mortgage crisis correctly, and profited by purchasing default credit swaps during that crisis. Bass has identified a number of macro-economic problems with Japan’s economy which he believes will not only hinder any attempted recovery, but eventually cause a meltdown. He says that Japan faces tremendous issues with its aging workforce. In addition, Bass believes that the Bank of Japan will not be able to keep bond yields down over the mid to long term. Rather, he has identified what he has termed the Rational Investor Paradox, where bond holders will have impetus to sell their bonds if they are facing negative real rates of return with an inflation target of 2%. Bass posits that while yields may stay low in the short term, this selling will ultimately overwhelm the Bank of Japan and long term interest rates will rise as a result.

For now, the situation in Japan is stable. However, it remains to be seen whether Abenomics can be successful in reversing deflation, and bring about a Japanese economic recovery. Abe is betting on an economic miracle his second time around as Prime Minister. American investors may gain exposure to Japan’s economy through the I-Shares MSCI Japan ETF (NYSE: EWJ) or the WisdomTree Japan Hedged Equity ETF (NYSE: DXJ).

Disclosure: The author is short EWJ.

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