INTO THE BITCOIN MINES  | On the flat lava plain of Reykjanesbaer, Iceland, near the Arctic Circle, you can find the Bitcoin mines, Nathaniel Popper reports in DealBook. There, more than 100 whirring silver computers, each in a locked cabinet and each cooled by blasts of Arctic air, are the laborers of the virtual mines where Bitcoins are unearthed. The custom-built machines, running an open-source Bitcoin program, perform complex algorithms 24 hours a day, seeking to win a block of 25 new Bitcoins from the virtual currency’s decentralized network.
Emmanuel Abiodun, 31, founder of the company that built the Iceland installation, called the computers “money-printing machines.†He is one of a number of entrepreneurs who have rushed, gold-fever style, into large-scale Bitcoin mining operations in just the last few months, as a speculative mania has helped push the price of Bitcoins higher. These entrepreneurs are making enormous bets that Bitcoin will not collapse, as it has threatened to do several times. If the system did crash, the fancy computers would be essentially useless because they are custom-built for Bitcoin mining.
Mr. Popper writes: “The computers that do the work eat up so much energy that electricity costs can be the deciding factor in profitability. There are Bitcoin mining installations in Hong Kong and Washington State, among other places, but Mr. Abiodun chose Iceland, where geothermal and hydroelectric energy are plentiful and cheap. And the arctic air is free and piped in to cool the machines, which often overheat when they are pushed to the outer limits of their computing capacity.â€
The virtual currency’s true believers “are taking the long view â€" the one in which Bitcoin, despite the ups and down, keeps appreciating in value and eventually becomes a serious currency,†Nick Bilton writes in the Disruptions column on the Bits blog.
Paul Krugman, in his column in The New York Times, writes that the appeal of Bitcoin is similar to that of gold. “Bitcoin seems to derive its appeal from more or less the same sources, plus the added sense that it’s high-tech and algorithmic, so it must be the wave of the future,†Mr. Krugman writes. “But don’t let the fancy trappings fool you: What’s really happening is a determined march to the days when money meant stuff you could jingle in your purse. In tropics and tundra alike, we are for some reason digging our way back to the 17th century.â€
FED TO CRACK DOWN ON RISK-SHIFTING DEALS  | The Federal Reserve moved on Friday to curb a type of financial maneuver that banks can exploit to make themselves look stronger than they actually are, notifying big banks that it was taking aim at so-called risk transfer transactions, DealBook’s Peter Eavis reports. The Fed said in its guidance that it would “strongly scrutinize†risk-transfer deals that have a substantial impact on a bank’s balance sheet. Banks that have recently used such transactions include Citigroup, Credit Suisse and UBS.
“Supporters of these complex deals say that they allow banks to protect themselves from future losses on loans or other assets. But regulators are concerned that banks may at times use them to evade the stiffer regulations that have been introduced since the 2008 financial crisis,†Mr. Eavis writes. “While risk-transfer deals have been around for years, the temptation to use them has risen as regulators have required banks to increase their capital.â€
INVESTMENT STRATEGY RISES FROM OBSCURITY  | The successful maneuvering by the billionaire Carl C. Icahn with CVR Energy illustrates the enormous growth of an obscure but increasingly popular securities structure â€" the master limited partnership, or M.L.P. â€" and its ability to create huge personal wealth, DealBook’s David Gelles reports. Since the financial crisis, the popularity of M.L.P.’s has soared.
Mr. Icahn’s deal helps show why. The investor paid at least $2 billion last year for 82 percent of CVR, an oil refinery business, something he knew little about. He then tried to sell the company quickly and failed. Yet this year Mr. Icahn took advantage of an M.L.P. structure and used the company to inflate his already enormous wealth.
Mr. Gelles writes: “In January, CVR, under Mr. Icahn’s direction, placed its refineries into a new company, CVR Refining. The new company is structured as an M.L.P., a publicly traded partnership that pays no corporate tax and distributes most profit to investors. Thanks to those generous distributions, stock market investors are valuing M.L.P.’s at a significant premium to traditional corporations, so there was a good chance CVR Refining would do well as a public company.â€
ON THE AGENDA Â |Â The Federal Reserve turns 100 years old today. Data on personal income and outlays in November is out at 8:30 a.m. Please note that the newsletter will go dark for the holidays, to resume on Jan. 2. The DealBook site, however, will be updated regularly with news and analysis during this time. See you in the new year!
HOW JPMORGAN EXPANDED IN ELECTRICITY  | “The good news arrived in a confidential letter from the Federal Reserve Board in Washington. The nation’s biggest bank, JPMorgan Chase, had won the right to expand its reach in a lucrative business that has nothing to do with banking: electricity,†Gretchen Morgenson reports in The New York Times. “Areas like electricity are generally off limits to banks because of the risks involved. But with its June 2010 letter, the Fed let JPMorgan take an even bigger role selling electricity in California and the Midwest, saying the push would ‘reasonably be expected to produce benefits to the public that outweigh any potential adverse effects.’â€
“Three months later, JPMorgan traders began a scheme to manipulate electricity prices, ultimately forcing consumers in those regions to pay more every time they flicked on a light switch or an air-conditioner, the Federal Energy Regulatory Commission subsequently contended. The story of how the Fed cleared the way for JPMorgan â€" a decision that brought many millions in profits to the bank â€" illuminates how the Fed has allowed the bank into a variety of markets for basic goods.â€
Plan for Tribune Spinoff Raises Concern for Newspaper Operations  | “A plan by the Tribune Company to separate eight newspapers, including The Los Angeles Times and The Chicago Tribune, from its more profitable digital and television businesses could threaten their survival, staff members, industry analysts and a congressman said last week,†Ravi Somaiya reports in The New York Times.
NEW YORK TIMES
Jazz Deal for Gentium Shows Benefits of Inversions  | A big reason that American companies relocate to places like Ireland is so that they can acquire companies on a tax-efficient basis. In agreeing to to buy Gentium, a drug maker, for about $1 billion, Jazz Pharmaceuticals took full advantage of that benefit.
DealBook »
Oracle to Buy Responsys for $1.5 Billion  | The acquisition will extend Oracle’s reach into online marketing. The software maker allows brands to coordinate advertising across the web.
DealBook »
Talent Agency James Grant Being Prepared For Sale  | James Grant, the British talent agency owned by private equity firm Gresham, is being prepared for a sale worth up to $100 million, The Sunday Times in London reports.
Sunday Times
New Owners for Spanish Meats Company  | Shuanghui International Holdings of China and the Mexican frozen food company Sigma agreed on Monday to share ownership of the Spanish meat processor Campofrio, valuing it at $957 million, Reuters reports.
REUTERS
South Africa’s Telkom to Sell Internet Business  | Telkom, the South African telecommunications company, said that it has agreed to sell its Mauritius Internet business for an undisclosed amount as part of its turnaround, Reuters reports.
Reuters
Edgar M. Bronfman, Former Seagram Chairman, Dies at 84 Â |Â Edgar M. Bronfman, who built Seagram into an empire well beyond the liquor industry and was a champion for the rights of Jews, has died at the age of 84, writes Jonathan Kandell of The New York Times.
An Architecture Critic on the Towers of Billionaire’s Row  | Michael Kimmelman writes in The New York Times that the shiny new buildings along 57th Street in Manhattan “are stirring some populist fury and prompting an argument: Do we need more public oversight when it comes to the city’s stratospheric architecture? Are we selling off our skyline to the plutocrats? Or are those who occupy these spaces serving up much needed tax revenue to the city?â€
“There are no simple answers. But I believe there may be ways to thread the needle â€" to encourage ambitious buildings and also to curb bad design. First, however we must be clear-eyed about the options.â€
NEW YORK TIMES
Reality Is Returning to the Market  | “Let’s reflect on how remarkable the American stock market has been lately, and on how well it has been weathering the first few days of a late-December shift in Federal Reserve policy,†Jeff Sommer writes in the Strategies column in The New York Times. “And then let’s get used to worrying again, because stormier times are coming, probably fairly soon.â€
NEW YORK TIMES
R.B.S. Denies Plan to Increase Salaries to Evade Bonus Rules  | Royal Bank of Scotland denied that it is looking at broadly increasing base salaries for its bankers, in an effort to evade European rules intended to crack down on outsized pay packages, The Financial Times reports.
Financial Times
Goldman to Put Own Money in New Real-Estate Fund Despite Volcker  | Despite passage of the Volcker Rule, Goldman Sachs has raised $1 billion for a new real-estate investment fund, in which it has agreed to contribute up to 20 percent of its own money, The Wall Street Journal reports. It can do so because real-estate loans were excluded from trading restrictions.
Wall Street Journal
Wells Fargo Poised for Wall Street Run  | The California bank will start knocking more loudly on the door of the bulge-bracket Wall Street firms, asserts Antony Currie of Reuters Breakingviews.
REUTERS BREAKINGVIEWS
Beating Back Pain  | When his back pain returned after more than 25 years, Tony Schwartz writes, he decided it was time to address his fears directly.
DealBook »
Aareal Bank to Buy Rival From Lone Star for $468 Million  | Aareal Bank, the German lender, plans to buy Corealcredit Bank from the private equity firm Lone Star Funds for 342 million euros, or about $468 million, Reuters reports.
Reuters
Hedge Fund Has No Plans to Participate in Tender Offer for Celesio  | Elliott Management, the New York-based hedge fund founded by Paul Singer, reiterated Monday that it has no plans to participate in a tender offer by McKesson Corporation for the German pharmaceutical wholesaler Celesio, unless the deal is sweetened.
DealBook »
Hollywood Studios Unfazed by Flops  | Despite a number of prominent wrecks at the box office this summer, when studios collectively released 17 blockbusters between May and the beginning of August, Hollywood has scheduled five films for wide release on Christmas Day, James B. Stewart writes in the Common Sense column in The New York Times. But one major studio, Sony Pictures Entertainment, which has been under pressure from the hedge fund manager Daniel S. Loeb, did cut its slate for next year.
NEW YORK TIMES
For a Hedge Fund Pioneer, a Tiger Fund Burning Bright  | A so-called seeding fund overseen by Julian Robertson, the billionaire investor, is beating the industry average return this year by a wide margin, according to a person briefed on the matter.
DealBook »
Paulson Sold Washington Mutual Bonds After Suit  | Paulson & Company, the hedge fund run by John A. Paulson, sold its bonds in Washington Mutual after JPMorgan Chase filed a $1 billion lawsuit against the Federal Deposit Insurance Corporation, The Wall Street Journal reports.
Wall Street Journal
Hedge Fund Returns Again Tracking Below Stocks  | Hedge fund returns continue to track below stocks this year, with the average hedge fund up 8.2 percent this year, compared with a 21 percent rise in equities, Reuters reports.
Reuters
Premier Foods of Britain Preparing Rights Offering  | The British food maker Premier Foods is preparing a 300 million pound rights offering to its shareholders as it attempts to stave off Apollo Global Management, a major creditor, The Sunday Times in London reports.
In BlackBerry’s Backyard, a Snowier Silicon Valley  | “Unlike some cities that suffered when a big local business faltered, as Rochester did with Kodak and Xerox, BlackBerry’s backyard of Waterloo still bubbles with economic energy,†Ian Austen reports in The New York Times.
NEW YORK TIMES
Apple Looks to Take Bite From World’s Largest Wireless Carrier  | Apple has reached a deal to bring the iPhone to China Mobile, the world’s largest wireless carrier, in January, Eric Pfanner and Brian X. Chen of The New York Times write.
Start-Ups Seeking to Cash In on Regional Food at Holidays  | Specialty start-up companies are putting regional food, such as sourdough bread from San Francisco and pastrami from Katz Deli in New York, on the table during the holiday season, The Financial Times reports.
Financial Times
Tiffany Ordered to Pay $448.7 Million to Swatch  | Tiffany & Company was ordered by a Dutch arbitration panel to pay $448.7 million to Swatch over a failed joint venture, Reuters reports.
Reuters
Swiss Banks Race to Meet U.S. Tax Deadline  | Bloomberg News writes, “Switzerland’s 300 banks have enlisted an army of auditors, lawyers and in-house workers as they race to meet a Dec. 31 deadline on whether to seek U.S. amnesty for helping American clients evade taxes.â€
Bloomberg
Banks Struggling to Design Volcker Compliance  | Banks are having difficulty creating compliance programs that comply with the Volcker Rule, which bans banks from proprietary trading, The Financial Times reports.
Financial Times
Ally in $98 Million Settlement on Bias in Auto Loans  | The Consumer Financial Protection Bureau found that 235,000 minority borrowers were paying up to $300 on average more in interest than white borrowers on loans arranged by auto dealers.
DealBook »
Year-End Means Lawyers Seeking Clients to Pay Up  | As the year winds down, law firms in the United States are involved in a delicate dance with their clients: trying to get them to pay their bills, The Wall Street Journal reports.
Wall Street Journal
More Whistle-Blower Cases in 2013  | Britain’s Financial Conduct Authority opened 72 percent more cases in the first 10 months of 2013 based on whistle-blower complaints than its predecessor regulator did in the prior year, The Financial Times reports, citing research by Kroll.
Financial Times
