Aa lot of crypto industry rags cheered the news that banks were given the regulatory go ahead to use stable coins and the blockchain as a transfer settlement layer. My suggestion is to be careful of what you wish for. The Office of the Comptroller of Currency (a regulatory arm of the US Treasury) released the following note: Federally Chartered Banks and Thrifts May Participate in Independent Node Verification Networks and Use Stablecoins for Payment Activities, as excerpted:

“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies. Some of those technologies are built and managed by bank consortia and some are based on independent node verification networks such as blockchains,” said Acting Comptroller of the Currency Brian P. Brooks. “The President’s Working Group on Financial Markets recently articulated a strong framework for ushering in an era of stablecoin-based financial infrastructure, identifying important risks while allowing those risks to be managed in a technology-agnostic way. Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability, and low cost associated with these products.”

The agency letter concludes a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities. In deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices.

Engaging in INVN within the federal banking system may enhance the efficiency, effectiveness, and stability of payments activities and achieve the benefits of real-time payments already enjoyed in other countries. For example, such activities may be more resilient than other payment networks because of the decentralized nature of INVNs, which allows a comparatively large number of nodes to verify transactions in a trusted manner. An INVN also limits tampering or adding inaccurate information to the database because information is only added to the network after consensus is reached among the nodes validating the information.

that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire. Sounds like good news, right? Well, yes, and no... Banks, by their very business models, are gatekeepers of capital. No one will every really have as much capital on hand to deploy as we bank. Combine that access to capital with implicit and explicit preferential rights given by regulators (we are not all invited to play the game on the same terms, let's face it) and the banks willingness to play hardball as opposed the the blochchain's genesis entrepreneurs coming from mainly an opensource mentality and you may find a recipe for disaster for the entrepreneurial blockhain/token startup. There's near guaranteed doom for the ICO funded startup, as the US regulatory environment is downright vociferous if not lethal!

That leaves self-funded and VC funded ventures - again, limited in scope and depth of creativity. Not everybody has the hook-up for capital! Then there's the open-sourced mindset of the typical blockchain developer or architect. The look at companies that attempt to place their stake in the ground and claim territory for themselves, and say, " But... Can't we all just get along???" Well, on Wall Street, the answer is... No! Or, at least it has been since I've been alive. You have to be part of the old boys club, and that club ain't very big, and even more to the point, it ain't offered to just any or everyone.

So, with that preamble, we have a bunch of the crypto pioneers who came up with many great ideas, yet failed to protect them. Then we came up with banks who took these ideas, and did very little to build upon them, yet stand quite likely to capitalize on them. Let's take Wells Fargo, who apparently has patented the cryptocurrency exchange, and done so right under the nose of the industry. If this is the case, all of you Stellar, Tether, USDC and other USD stable coin aficionados might need to site down and hold on tight. The rug may be snatched from under you. 

Wells Fargo patent number: US10565645B1 United States - 

Systems and methods for operating a math-based currency exchange

Just the other day I stated "Why does everyone confuse a bubble with economic progress" in a post about a very probable bubble in China (see "It Doesn't Take a Genius to Figure Out How This Will End" then get your chuckles on with "Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!"). Well, as if on cue,  Stocks, Metals Decline Around World After China Curbs Lending; Yen Weakens:

Jan. 7 (Bloomberg) -- Stocks fell around the world, driving the MSCI Emerging Markets Index down the most in three weeks, and metals declined after China moved to curb lending. The yen dropped after Japan’s new finance minister said he would welcome a weaker currency.

The MSCI emerging markets gauge slipped 0.7 percent at 9:45 a.m. in London, led by China as the Shanghai Composite Index plunged 1.9 percent, the biggest decline among benchmark indexes tracked by Bloomberg. Futures on the Standard & Poor’s 500 Index lost 0.3 percent. Copper retreated from a 16-month high and oil snapped an 11-day rally. The yen weakened against all 16 most- traded currencies.

Central bankers in China, the engine of the global economic bubble recovery, sold three-month bills at a higher interest rate for the first time in 19 weeks after saying their 2010 focus is controlling record loan growth. The Federal Reserve said in the minutes of its latest meeting that the U.S. economic recovery might require additional stimulus measures to be sustained.

“Bubble Blowing Growth will probably reverse slow this year as tight credit will damp the artificially derived and probably outright lied about demand side,” said Zhang Ling, who helps oversee $7.2 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That will dash investors’ hope of another year of fast bubble blowing growth.”

Just the other day I stated "Why does everyone confuse a bubble with economic progress" in a post about a very probable bubble in China (see "It Doesn't Take a Genius to Figure Out How This Will End" then get your chuckles on with "Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!"). Well, as if on cue,  Stocks, Metals Decline Around World After China Curbs Lending; Yen Weakens:

Jan. 7 (Bloomberg) -- Stocks fell around the world, driving the MSCI Emerging Markets Index down the most in three weeks, and metals declined after China moved to curb lending. The yen dropped after Japan’s new finance minister said he would welcome a weaker currency.

The MSCI emerging markets gauge slipped 0.7 percent at 9:45 a.m. in London, led by China as the Shanghai Composite Index plunged 1.9 percent, the biggest decline among benchmark indexes tracked by Bloomberg. Futures on the Standard & Poor’s 500 Index lost 0.3 percent. Copper retreated from a 16-month high and oil snapped an 11-day rally. The yen weakened against all 16 most- traded currencies.

Central bankers in China, the engine of the global economic bubble recovery, sold three-month bills at a higher interest rate for the first time in 19 weeks after saying their 2010 focus is controlling record loan growth. The Federal Reserve said in the minutes of its latest meeting that the U.S. economic recovery might require additional stimulus measures to be sustained.

“Bubble Blowing Growth will probably reverse slow this year as tight credit will damp the artificially derived and probably outright lied about demand side,” said Zhang Ling, who helps oversee $7.2 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That will dash investors’ hope of another year of fast bubble blowing growth.”

A closer look at the CAT - Q2 09 results demands further scrutingy. Let's walk through it with a magnifying glass and an open mind. Below are the main conclusions to be drawn from what was reported: (this is to be read after the CAT report:  Caterpillar Inc. Preliminary Analysis 2009-06-17 10:34:20 666.50 Kb,  CAT Forensic Analysis Retail 2009-06-25 15:43:20 374.87 Kb,  CAT Forensic Analysis Professional 2009-06-25 15:44:27 836.39 Kb and for non-subscribers - CAT’s 2Q09 results analysis) . Note and disclaimer: This material was put together from contributions from several readers as well as my own analysts. Please note that this is not investment advice (nor is anything that you get from my site), and everything presented is for illustrative purposes only, with no warranty (explicit or implied) as to accuracy or completeness.

• Big EPS beat, mostly due to one-timers. We saw a big EPS beat this Q (60 cents actual vs 22 cents expected), but it was entirely due to factors that are not reflective of ongoing profitability or indicative of the health of core operations - currency fluctuations, low cost inventory liquidation, low tax rate. In essence, the accountants seemed to have packed every one timer they could find into this quarter to come up with an estimate beat. Does this fool the Street? Apparently since the stock is rising. Can it be replicated? Hell no!
• Normalized Q2 09 EPS much lower. Adjusting margins and costs to where they should reasonably be given sharply lower sales offset by very respectable amounts of cost cutting, and we would have seen 18 cents normalized EPS. The logic behind the adjustment is to account for all of the factors included in this quarter that are just highly unlikely to happen again. In other words, what do we expect for next quarter???
• Since the surprise was one-time in nature, another way of thinking about the one-time nature of this "beat" is to consider that the "beat" was 38 cents, which is 85% of the 45 cent increase in their 2009 guidance. It is the increase in guidance that the media has used to justify the optimism driving the share price rally. Wait a minute! If 85% of the guidance raise was baked into this quarter and this quarter can't be repeated, what does that portend going forward?
• Conservative valuation calculations: Conservatively driving "normal" sales off the Q1/Q2 average, using the Q2 09 normalized net margin and a conservative 20 multiple implies a fair stock price well below our current $40+, and well below the conservative valuation band given in BoomBustBlog research reports -  CAT Forensic Analysis Retail 2009-06-25 15:43:20 374.87 Kb,  CAT Forensic Analysis Professional 2009-06-25 15:44:27 836.39 Kb 
• Long term view - consensus is wrong (as it usually alwasy is, for some odd reason). If the consensus is correct, this will have been an irrationally short and shallow downturn for CAT from a revenue and profitability standpoint, historically speaking).
• Leverage remains elevated. Machinery debt declined from $7.3B in Q1 09 to $6.9B in Q2 09. Off of "Debt / Capitalization" using Shareholders Equity, we saw improvement. Off of Debt / Revenues, we saw sharp deterioration.
• Mgmt calling for very weak Q3, implying they are pinning all hopes on Q4 stabilization. The Q3 appears so weak that they are doing large scale rolling shut downs. Profits no doubt will be tossed out of the window. Their hope, and what it appears they are pinning their guidance on, is Q4 improvement. Basically, they are looking to eat those "green shoots"!

Let's move forward to expand on each and every one of the points above in detail.