I attended the posh but somewhat chaotic Lamb's Club debate sponsored by Marketwatch, a part of Dow-Jones, last night. Its title: Bitcoin Boom and Bust.

One of the debaters, Prof. Mark T. Williams at Boston U Business Management School, was the most negative panelist about Bitcoin. His prior career was at at commodities trading house and as a Federal Reserve Bank examiner, My report below is based on his views.

Prof Williams summarized the origins of the new money proxy in the wake of the global financial crisis and the rise in risks which resulted. Bitcoins were supposed to reduce the risks of inflation from "fiat currencies" created by politicized central banks. They were also supposed to be protected against fraud by "banksters", the source of losses of some $3 trillion-plus during the GFC.

Bitcoins were to be "mined" by computer geniuses using complex algorithms. There would never be more than a limited number of coins and their mining would be halted in 2040.

Trading was to be decentralized, without banks or intermediaries, and verified every 10 minutes. All trades would then become irrevocable. There was to be no insurance or FDIC.

The initial market reaction, as Prof. Williams pointed out, was a bubble which then popped. He noted that the lack of a centralized payments system or track put Bitcoin trading in the position of a locomotive running wild. To quote from an article he wrote in Jan. for Dealbook:

The speculative mania generated around Bitcoin has created a hyper asset bubble that is ready to pop. Since 2013, Bitcoin has risen from $13 to as high as $1,200, price appreciation of more than 9000%. There are 12.3 mn coins outstanding. Over 90% are hoarded, which helps to artificially inflate values.

Ownership is also extremely concentrated, increasing market manipulation risk. As prices have grown to the clouds, many Bitcoin millionaires have been minted along the way. But what supports these lofty prices? Bitcoin is neither a legal entity, nor a start-up, and no stock is available for investors to purchase. It has no management team, board, balance sheet, business plan, or even a coherent vision on how to commercialize technology that has been given away in the market for free.

While backed by libertarians, Bitcoins turned out to be used most by "Silk Road" drug dealers. Then last month the largest exchange, Mt. Gox in Japan and then other trading platforms in Britain and Poland reported that billions of untraceable Bitcoins were hacked, lost, or stolen from their vaults.

As a result the performance of Bitcoins has been rocky. Prof. Williams noted that Bitcoins are 7x more risky than gold; and 15 times more risky than US dollars. (As is customary, he used price variance as a risk measure. In this case it maybe a valid marker given the short period involved and the frequent triple-digit price moves.)

This morning I got an invitation from Quaffafew, a local quantitative analyst's club, for a Bitcoin do in Princeton NJ next week. It is NEWS if nothing else.

My husband wants to buy a Bitcoin for the future for our 5 grandchildren, 3 of them near BU. I think he's nuts. The kids' father, a money manager and a CFA thinks it an odd strategy too. Prof Williams says if you really want to buy them, the best source would be Coinbase in the US.

It is perhaps trustworthy-ish. Our son wrote:

The only natural buyers for Bitcoins are either other crooks or Chinese oligarchs trying to export their ill-got millions. So whatever safety they thought they were getting by hiding their wealth in Bitcoins has been rocked.

What my British-born husband is reacting to is the UK ruling that Bitcoins are not subject to Value Added Tax because they are currency and not commodities.The SEC says they are not securities. Of course you could argue the other side of both rulings.

All the states Prof Williams cited as busily figuring out what Bitcoins are really are looking out for their own interests. The same for the UK government or the SEC. Whatever Bitcoin was set out to be originally will be undermined (pun intended) by the arrival of regulation, capital requirements, licensing, consumer protection rules, and ultimately, taxation.

Prof Williams' remark about the Triffin paradox was apt: that if a Bitcoin fills a needed function in global systems, there has to be volume. But if too many Bitcoins are created the market will lose confidence in the instrument.

In Nov. 1960, economist Robert Triffin testified before Congress on his insight into the problem of the Bretton Woods System and proposed the creation of new global monetary instruments, Special Drawing Rights, to get away from the problematic dollar-gold link:

Continuous U.S. balance of payments deficits during the 1950s provided the world with liquidity, but had also caused dollar reserves to build up in the central banks of Europe and Japan. As the central banks redeemed these dollars for gold, the U.S. gold reserves dipped dangerously low.

Anyway if my husband decides to buy one of them things let's hope he picks a moment when the price
is low. As for the notion a supporter of Bitcoins proposed, a twice-daily price fixing like what is done for gold, this is beyond reason.

Today a fellow-NYer Kevin Maher filed suit  against the 5 banks which set the London gold fix daily, accusing them of price manipulation. 

More for paid subscribers follows from Ireland, Australia, Canada, Britain, China, Colombia, Canada, Russia,  India, Spain, Chile, The Netherlands, Turkey, Ukraine, and Belarus.

*The five banks Mr. Maher accused (after US and UK government investigations signalled that the prices the banks reported were detached from the market are Deutsche Bank; Barclays;Scotiabank; HSBC; and Société Générale.We own BNS of Canada.

*Despite what stock tables seem to show, Liberty Global has not lost half its value. The fault is with Reuters which failed to spot a weird LBTYA stock split. Shareholders in the A, B, and C shares all got a C share as a dividend. It was misreported by my broker, E-trade, by the Financial Times, and by SmarTrend.

*Our Barrick bonds should gain from the latest news from CEO Jamie Sokalsky after ABX divested its Australian Kanowna Belle and Kundana mines to Northern Star for A$75 mn cash. He told a gold analyst group that in ABX's "whole portfolio there are assets better in someone else's hands". Since the start of H2 2013, ABX has sold $1 bn of assets. Mr. Sokalsky also contradicted ABX's chairman, saying that ABX would do "no gold hedging short term." We don't own the stock but a bond in US$, the Barrick North American Trust LLC 4.4% of 5.30.2021, cusip 06849RAF9. It is listed wrong on our stock tables, in 100s rather than 1000s. This will be corrected next weekend.

*Duluk Kohomange who doesn't look or sound Russian or Dutch tipped Yandex at seekingalpha.com yesterday. He called it a cheap search play. As noted, YNDX in Q4 failed to control costs to expand its advertising and Turkish presence, which nipped its profits. YNDX runs search in Russia (where it has 62% of the market), Belarus (44%), Ukraine (30%) and Turkey (less).

Mr. Kohomange argues that YNDX at a p/e ratio of 30.5x is cheaper than Google (at 33.9x) or Baidu (at 34.9x). He says too that YNDX revenues and EPS are growing 43.2% and 26% respectively, while GOOG's are growing 37% and 13%; and BIDU's 19.2% and 18%.

I failed to buy more YNDX cheaply during Monday's panic (having set too low a limit). I'll try again the next time Vladimir Vladimirovich Putin creates another crisis, probably investing alongside the Russian President who may have been the big buyer in Monday's Amsterdam trading. I want to invest alongside Putin more than I want to invest alongside Warren Buffett or John Malone (of LBTYA and LBTYK which we now own again despite selling the last batch).

*One reason our Norwegian fish-farm play Marine Harvest (MHG) is faltering may be the deal its smaller rival, Pescanova of Spain, worked out with creditors. They are settling for 10 to 40 eurocents on the euros they are owed, and putting up more funding, under pressure from the local government of Galicia, home of Spanish PM Mariano Rajoy. Apart from the awful effects of German refusal to adjust to allow faster growth and lower unemployment in Spain, there are also the awful effects of Spanish politics as usual to consider. I wrote about what a US-based Spanish professor thinks Germany should do in its own interest yesterday. Note that there are 2000 Galician fishermen who can vote for Rajoy's Partido Popular but most Pescanova employees are outside Spain, at its Thai shrimp farms.

*Colombia plans to auction Pacific and Caribbean offshore deep water blocks for oil and gas drilling, which should help boost profits at Ecopetrol, its government-controlled but NYSE listed oil company. Under its new rules, the state's 30% royalty will only kick in after the drillers have extracted 200 mn barrels of oil (or oil equivalent gas) in deep water and after 300 mn barrels in ultra-deep water. There are 13 blocks to bid for and EC is bidding against the majors. Unlike other Latin state-owned oil companies, EC is run like a business. It is up 2.5% today on the news.

*Another riser is Dr Reddy's after it said it would launch a generic of anti-bacterial Avelox (moxifloxacin HCl) in the US. The patented drug has annual sales of c$200 mn.

*Goodbody stockbrokers acquired 0.13% of the shares of Paddy Power plc, it reported to the Dublin exchange, presumably for distribution after the strong showing of the bookie firm in its last FY.

*The corporate bond default by chaotic Chaori Solar of Shanghai is no surprise. Earlier another PV producer, Suntech Power, the first Chinese solar stock to list on the NYSE, went bankrupt. This is an argument not against solar power, which is desperately needed to clean China's air, but against complex offshore structures. Our Canadian Solar is offshore but it is offshore in a safe country, Canada. We sold STP when our local Beijing reporter, Fei Chen, lost confidence in its CEO whom she interviewed at the IPO.

*Frida Ghitis made it clear that Orocobre (OROCF) the Oz lithium miner backed by Toyota which is going on stream in Argentina is speculative, but I failed to spell this out in my trading note. Read the blog. There is no advisory gap between me and our writers. I decide what they write and what we run. I assigned OROCF to Frida because as a play on electric cars running on lithium-ion batteries, as she covers Latin America. I was fed up with the boost lithium was giving to the corrupt Chilean management of SoQuiMich. SQM today reported lousy earnings, but I am unsure of the reason was the self-dealing CEO or not. EPS was 25% short of estimates.