- Hong Kong's IPO Mania Goes White Hot, Drives Up Interbank Rates
IPO mania is gripping Hong Kong and if you’ve been looking for a warning sign that equity markets are close to a peak, just maybe this is it. It was a feature of the Hong Kong market in 2006-07, before the Great Financial Crisis, and in 2000, prior to the bursting of the Dot.com bubble. No surprises, the current mania is also focused on the technology sector. The focal point today is the China Literature Ltd IPO which began trading this morning. The stock price rose as high as HK$110 per share compared with the HK$55 IPO price. No wonder the company’s executives were looking smug.
China Literature is an Amazon Kindle “look-alike”, being the Chinese mainland’s largest publisher of e-books. However, it is also growing its own network of contract writers and owns the rights to well-known Chinese online novels, such as the Grave Robbers’ Chronicles and Ghost Blows Out the Light series. The HK$8.3 billion IPO was more than 600 times oversubscribed with 5% of the city’s population applying for shares. According to Bloomberg.
Hong Kong demand for new share sales has hit fever pitch, with 417,000 people applying for lots in Tencent Holdings Ltd.’s online bookstore unit — more than 5 percent of the city’s population. China Literature Ltd.’s retail offering was 625 times oversubscribed, according to the company. That locked up at least HK$520 billion ($67 billion), or a third of the city’s monetary base, the South China Morning Post reported. It’s easy to see why the clamor: China Literature’s shares surged as much as 100 percent on their Wednesday debut…"You can tell Hong Kong investors like tech stocks," said Daniel So, Hong Kong-based strategist with CMB International Securities Ltd. "If you’d managed to get the stock, you’d have made a lot of money.”
One signal of the scale of the current IPO mania is that the China Literature had a 200-basis point impact on Hong Kong’s interbank rate, as Bloomberg explains.
Interest in initial public offerings is so intense it’s affecting the city’s interbank rates. The overnight Hibor fixing jumped 2.1 percentage points on Oct. 31, the most in a decade, as investors placed orders for China Literature.
In contrast to some of the Dot.com era’s IPOs, at least China Literature is profitable and has a coherent strategy. It uses “big data” to drive revenues and aims to cross-sell content into other media. As Bloomberg reports.
China Literature had profit of 213.5 million yuan ($32 million) in the first half of this year, compared with a 2.4 million yuan loss for the same period in 2016, according to its prospectus. The company — created through the merger of Tencent’s online literature business with Carlyle Group LP-backed Cloudary Corp — had 9.6 million works and 6.4 million writers as of June 30. Customers can pay for an entire book or buy a few chapters at a time to see if they want to keep reading.
“We can study our users’ social network and understand their preference and recommend to them what their friends like to read,” Co-Chief Executive Officer Wu Wenhui said in an interview. “We already have compiled a great amount of user data, which will enable us to study what they like.” The company also wants to leverage its content into other forms of entertainment, such as movies, TV series and anime, as Tencent aspires to create a Marvel-like empire. Shenzhen-based Tencent became China’s second-biggest technology company on the strength of its WeChat messaging app, which since has morphed into a portal for shopping, banking, gaming and consuming entertainment.
China Literature will select some content, and co-invest or co-produce movies or anime series, co-CEO Liang Xiaodong said. He added that his company is closely working with Tencent’s film and video units. “User demand for content is getting very strong, especially original material,” Liang said in an interview with Bloomberg Television. “Our content can easily be converted into movies and games to maximize coverage.”
The China Literature IPO came on the heels of HK’s largest ever fintech IPO, ZhongAn Online Property & Casualty Insurance. ZhongAn raised $1.5 billion and priced at the top end of its valuation range. As Bloomberg notes, there are more tech IPO’s in the pipeline with the focus now shifting to the gaming accessories sub-sector.
China Literature’s IPO follows ZhongAn Online P&C Insurance Co., which went public in September. The first major fintech listing in Hong Kong, and backed by Ant Financial, the owner of Alipay, the retail portion was almost 400 times oversubscribed. Focus will now shift to Razer Inc., a manufacturer of high-spec gaming accessories, which will begin trading in Hong Kong on Monday after raising $529 million.
The Razer Inc. IPO will make co-founder and CEO, Tan Min-Liang, a dollar billionaire. The global gaming market is “hot”, with growth expected to increase by 52% to $160 billion by 2021. Buyers of Razer shares will include Singapore’s sovereign wealth fund, GIC.
If we were to be strictly precise, the ZhongAn IPO was 391 times over-subscribed, while China Literature was 625 times over-subscribed. Consequently, the latter beat out ZhongAn to hold the record for a Hong Kong IPO. We look forward to seeing the metrics for Razer, but Hong Kong IPOs are obviously white hot.
Shouting on deaf ears no doubt, the FT reports that one analyst urged caution.
In recent years, a doubling in the share price on the first day of trading for a Hong Kong listing has been rare. The strong appetite for China Literature stock on Wednesday was driven by retail investors trying to get a piece of what many perceived could be the next Tencent, said Kevin Tam, an analyst at Core Pacific-Yamaichi in Hong Kong.“ They expect this to be Tencent number two,” he added. “Many retail investors missed out on the first Tencent IPO and the 10-times growth.” But Mr Tam cautioned that such expectations for China Literature were misguided. Much of Tencent’s value is locked in its userbase but China Literature has “just a very small slice of that”, he said.
Wu Wenhui. co-chief executive of China Literature, stated that he wants to bring original Chinese literature to a global audience. He might eventually be successful in this but, right now, he's bringing the melt-up stage in the Chinese bubble to a global audience.
- Hate Crime Hoax: Air Force Cadet Admits To Faking Racial Crime
Authored by Mac Slavo via SHTFplan.com,
A black Air Force cadet has admitted to writing racial slurs targeting blacks attempting to generate hate crime outrage.
You may remember the epic speech given by Lt. Gen. Jay Silveria, superintendent of the U.S. Air Force Academy…
“There is absolutely no place in our Air Force for racism. It’s not who we are, nor will we tolerate it in any shape or fashion,” Silveria said.
“I’ve said it before, the area of dignity and respect is my red line. Let me be clear; it won’t be crossed without significant repercussions.”
"If you can't treat someone with dignity and respect, then get out,"
Along with garnering national coverage and condemnation from politicians, the incident sparked outrage from students at the school and their parents.
In a now-deleted Facebook post, the mother of one of the cadets who said he was a victim of the racist message shared a photo of the whiteboard, calling it "disgusting."
Her post read:
This is why I'm so hurt! Someone left this disgusting message on my sons door at the Airforce Academy in Colorado! I'm angry that people are teaching their children such hate.
These young people are supposed to bond and protect each other and the country. Who would my son have to watch out for? The enemy or the enemy?
I know this is hard to see but it's the reality my family and the country is dealing with. We cannot tolerate such hatred! Keep your head up son!
In another Facebook post, the cadet's father wrote, "My son is not playing a victim…The real victim is the person raised with that kind of hate."
The Air Force immediately began investigating the incident after it occurred in September.
And on Tuesday, The Air Force Academy announced that the black cadet who was supposedly the victim of the racial slurs was, in fact, responsible for writing them.
"We can confirm that one of the cadet candidates who was allegedly targeted by racist remarks written outside of their dorm room was actually responsible for the act," the Academy said in a statement.
Officials said the cadet admitted to being behind the racist messages that appeared outside the doors of five black cadets’ rooms, KMGH-ABC reported.
The Air Force Academy has also confirmed that the cadet responsible for the messages is no longer at the school, but they failed to clearly state whether or not he left of his own free will.
* * *
But these incidents keep happening.
Hate crimes should not be tolerated, but neither should faking them. According to the Daily Wire, a similar incident happened just last week. An African American man alleged that someone wrote racial slurs all over his car when he was the one who wrote the slurs. The man, 21-year-old Dauntarius Williams, came forward and admitted that he staged the entire event.
One should be outraged as Silveria says. Not just as an “airman” but as human beings.
Not only do we treat each other with condemnation and hostility, but we also fake horrible things, like this hate crime hoax in the name of creating more outrage.
- Are Journalists An Enemy Of The American People?
As usual, it depends who you ask…
You will find more statistics at Statista
Statista's Niall McCarthy notes that according to the Cato 2017 Free Speech and Tolerance Survey, 63 percent of Republicans agree with President Trump that journalists today "are an enemy of the American people".
During his presidency, Trump has taken to Twitter to call the national media "fake news" and in mid-February, he tweeted "The FAKE NEWS media is not my enemy, it is the enemy of the American people. SICK!"
Generally, 35 percent of Americans agree with Trump's view while nearly two-thirds disagree.
Unsurprisingly, the share of Democrats considering the media an enemy of the people is very low at just 11 percent.
Among Independents, it rises to 38 percent.
- Hillary 'Is' America
Authored by Robert Gore via Straight Line Logic blog,
Psychologically, there’s nothing out of the ordinary about Hillary in contemporary America…
Fyodor Dostoyevsky would have been the right author to illuminate the inner world of Hillary Clinton. He had the imaginative power to show the psychological deterioration – the rickety castle of lies she’s built to shut out threatening realities and the truth.
For all of Dostoyevsky’s skill, it probably would have been beyond him to dramatically render America’s degenerate descent. Hillary’s supporters believe she’s extraordinary; her detractors believe she’s a tragic anomaly. They’re both wrong. The real tragedy is that in contemporary America, there’s nothing exceptional about her other than her criminality, and how exceptional is that? Shutting out reality and the truth are national pastimes. She’s not psychologically differentiated in any way from the crowd, and her access to platforms allows her to peddle what it wants to hear.
Many people’s first impression of Hillary came from her and Bill’s famous 60 Minutes interview after the 1992 Super Bowl. She said she wasn’t Tammy Wynette, standing by her man, as she stood by her man despite allegations of a 12-year affair with Gennifer Flowers. She may have saved her man’s presidential campaign. Hillary’s 60 Minutes performance garnered a consensus 5-star rating. Only later would it be reconsidered.
In 10 minutes of television, she projected a set of complicated, even conflicting images—forthright but defensive, feisty but dutiful—triggering the mix of skeptical, antagonistic feelings that have defined her with a share of the American public ever since.
“The TV Interview That Haunts Hillary Clinton,” Politico, 9/23/16 (LINK)).
At the time, Bill’s philandering wasn’t widely documented. The Paula Jones, Monica Lewinsky, Juanita Broaddrick, and Kathleen Willey allegations and revelations would surface during his presidency. Nevertheless, Hillary had to have numerous clues, if not outright knowledge, of Bill’s relaxed attitude towards his marriage vows. Was she in denial?
That relatively charitable explanation became less plausible as accusations about Bill’s liaisons, attempted liaisons, and sexual assaults filled the alternative media and even on occasion the mainstream media, where they were usually dismissed. The accusations fueled Hillary’s fury…against the accusers. She spearheaded the effort to discredit them, contrary to her claim that women don’t lie about sexual harassment.
By the end of Bill’s presidency, it was clear that Hillary’s support was not rooted in love or denial, but crass opportunism at the cost of self-respect. She kept her wagon hitched to her husband’s star because he was her ticket. A woman of modest gifts and almost no political skill, everything she had achieved had been through Bill. She would need him to launch her political career.
How do you account for the American people’s long infatuation with government? Is it love coupled with denial? How many are like the cuckold who repeatedly finds his wife in bed with other men? They remain smitten even as the government goes from lie to lie, betrayal to betrayal. Consider a list of political prevarications, by no means exhaustive.
A “modest” income tax will only be levied on the very rich.
A central bank will smooth out economic fluctuations, stop financial crises, and maintain the value of the dollar.
President Wilson will keep us out of Europe’s War.
World War I will be the war to end all wars and make the world safe for democracy.
The New Deal will end the Great Depression.
President Roosevelt will keep us out of Europe’s war.
World War II will be the war to end all wars and make the world safe for democracy.
Dropping atomic bombs on Japan is necessary to save a million American lives.
The Communists want to rule the world.
The president was killed by a lone gunman.
There is light at the end of the tunnel in Vietnam.
“I am not a crook.”
Whip Inflation Now.
Wars against poverty, drugs, and terrorism will eradicate poverty, drugs, and terrorism.
Legally mandated racial, ethnic, and gender preferences are not discriminatory.
The Muslims want to rule the world.
Invading foreign countries, fighting undeclared wars, and regime changes will make the world safe for democracy.
Spying on you full-time will make you safer and preserve your freedom.
If you like your doctor you can keep your doctor; if you like your plan you can keep your plan.
Yet, faith in government runs deep, there’s still that substantial segment who believes whatever it tells them.
However, like Hillary’s support of Bill, most of those who now back the government do so opportunistically, a nice way of saying they’ve been bought off…at the cost of self-respect. The millions receiving redistributed and vote-buying largess are told they have more right to it than the people from whom it was taken. The string-pullers at the top of the lucrative military-industrial-intelligence complex, the medical, education, and welfare rackets, the government debt and central bank swindles, and other sundry scams abandoned morality in their formative years. Bill boinks bimbos; the government is organized crime, so what? A juxtaposition of The Godfather, Part 2 and an infamous Hillary quote offers what passes as rationalization: We’re all part of the same hypocrisy, what difference does it make?
Besides such opportunism and rationalization, Hillary is the template for another psychological dodge: escape into fantasy. Up to her eyeballs in charges of illicit and illegal Russian collusion, her oft-repeated claims that Russia stole the election sound like the bizarre ravings of a street-corner crazy.
Aren’t the unshakeable tenets of American denial just as crazy, if not more so? We can continuously spend more than we earn. In stocks, bonds, debt, and central banks we trust. Underfunded pensions and medical funds will take care of the elderly, even as their numbers steadily increase relative to the number of younger workers who will supposedly support them. The US must maintain global order. The rest of the world likes it when the indispensable nation tells it what to do. Invading foreign countries and instituting a police state at home make us safer. Terrorism and refugee migration are not blowback from our own policies. People’s race, ethnicity, gender, and sexual preferences are more important than their merits as individuals. And so on and so on and so on.
It’s tragic when a drunk hits bottom, in a gutter somewhere covered in his own vomit. If, when he regains consciousness his disgust and self-loathing prompt him to acknowledge and address his alcoholism, something good can come from something bad. America has a looming rendezvous with a brick wall. Afterwards, those who have feasted on government will find there’s little to scavenge. Those who denied the impending crash won’t emerge from the wreckage.
The few who do emerge will do so with psychological defenses breached and illusions shattered. Awakened, they’ll offer a hope of recovery and redemption. As with the chastened drunk in the gutter, however, it will be a long, slow slog and there are no guarantees.
- Kevin Spacey Popped The 'House Of Cards'-Bubble In Baltimore, Wiping Out Over 2000 Jobs
Last Tuesday, Media Right Capital and distributor Netflix announced the suspension of the American thriller, House of Cards, days after Anthony Rapp alleged Kevin Spacey, the executive producer and star had made ‘sexual advances’ towards him in the 1980’s, when he was 14-years old.
Then last Thursday, Netflix cut ties with Spacey, a day after CNN published an article circulating new allegations of sexual misconduct from several current and former members of “House of Cards”.
Since then, a long impressive list of actors, bartenders, a military advisor, and mostly men, 13 in total, are accusing Spacey of sexual misconduct from the 1980’s to present day.
Unbeknownst to many, House of Cards was predominantly filmed in Baltimore, Maryland for all five seasons making it Maryland’s largest film production. In season 4 alone, almost 2,700 cast, crew, and other support teams were hired from the Greater Baltimore region, and the production alone used local services from more than 2,000 Maryland vendors. Maryland as a whole proudly flaunts itself as the home of the production, which earned more than $128 million in 2015 from season 4’s production.
According to The Baltimore Sun, more than a half billion dollars flowed into the local economy through many businesses during the production of ‘House of Cards’…
Caterers and fast-food restaurants, carpet and furniture outlets, music and antique stores, warehouses, auto parts dealers and paint suppliers – all are included among the show’s hundreds of Maryland vendors during more than five years of filming, often in and around Baltimore, at locations including the Peabody Institute of the Johns Hopkins University, the Baltimore Museum of Art and The Baltimore Sun.
With the firing of Spacey and the entire production in limbo. There is major doubt the production will continue and could create a headache for Baltimore’s local economy.
Already, local vendors are “already feeling the loss of a deep-pocketed customer and the cachet of being associated with a hit series”, as the suspension of the production inches towards its first full-week.
Meanwhile, the crew is still getting paid says The Baltimore Sun, but many are casting doubts the production will continue.
The 4-5 year economic boom in Baltimore from a big-budget production has likely popped. The economic ripple through the community and many small businesses could be devastating, especially for the state, who has welcomed the the production with enamors tax credits over the years.
Jena Richardson,28, a crew member on House of Cards, said “if the show leaves, that means that a lot of my friends who have become my set family will have to leave to find work as well. So if we can keep the work here, then everybody can stay here and provide for themselves and their families throughout the holidays.”
Another crew member, Roger Voter,27, a tech assistant, said the loss of the show would be a “huge detriment. Having Baltimore locals being trained in these jobs under the masters of LA is great for their careers”, but as we point out Kevin Spacey has popped the filming bubble in Baltimore and it could mean newly created film techs will have to revert back to the bartending life or even return to their parent’s basements.
Bottomline: with the House of Cards bubble popped, Under Armour meltdown, and a homicide rate doubled Chicago’s. Baltimore’s outlook heading into 2018 is bleak.
- Thousands Of Americans Scream At The Sky To Mark Trump Anniversary
It was the scream which, at the conclusion of Donald Trump’s inauguration ceremony, captured the existential dread of millions of Americans.
It also appears to have sparked a mass “resistance” protest movement.
On Wednesday night, thousands of Americans across the nation gathered to “Scream helplessly at the Sky on the Anniversary of the Election” to mark one year since President Trump’s victory.
Thousands attended events planned in New York City, Philadelphia, Dallas and other major cities. The idea came from Boston, where people will gather in America’s oldest park, the Boston Common, to scream. The premise behind the event was self-explanatory as people came to public gathering places, looked to the sky and, well, screamed.
This is how one Facebook event page described tonight’s event:
Let’s have a primal scream for the current state of our democracy! Gather together after work at Philadelphia’s City Hall, or just scream in solidarity from your own backyard.
The Washington Square Park event planned in New York was more emphatic:
Join us cucks and snowflakes, safe spacers and libtards, as we enjoy a collective cathartic yell into the heavens about our current political establishment.
Explaining the motive behind today’s screamfest, New York event organizer Nathan Wahl said that “frankly, I can’t keep up with it all. Every time I think of the laundry list of social injustices on top of my own shit like my actual laundry I get overwhelmed. Every news notification on my phone is a reminder of something over which I am powerless. And I think a lot of people feel that way. So fuck me for thinking it’d be nice to yell about it.”
We really need some universal mental healthcare in this country and some anger management, while we’re at it. Which is kind of what this event is. It’s group anger management. No one’s crying. No one’s demanding anything. It’s a collective expression of frustration. It’s like… it’s like the feeling you have when you’ve been building Ikea furniture for three hours, and it’s late, and you feel like you’re getting nowhere, and you were almost done, but then you realized you put a piece on backwards and you have to take almost the entire thing apart and you just wanna fucking SCREAM. That’s what we’re doing?—?we’re screaming because living in America feels like building ikea furniture.
Secondly, I am doing something.
More than 15,000 people had expressed an interest in attending Wednesday’s scream in New York, including Joe Z. from Astoria, who told Metro it “might be helpful to bond with others who feel the same way.” Joe has found Trump’s presidency thus far “as awful as I feared — it’s a daily, sometimes hourly nightmare.” The main thing he intends to scream about is Trump’s measures against immigrants.
“Everything they do with immigration is about eliminating diversity from this country,” he said. “I live in Queens, diversity of cultures is what I most love about living here. There’s no empathy for others in the face of the most callous cruelty to other human beings.”
Tonight’s “scream” started off in a calm fashion as the following BuzzFeed clip shows…
People are gathering to scream at the sky in NYC to mark the one-year anniversary of Trump’s electionhttps://t.co/aU89B4HfzA
— BuzzFeed News (@BuzzFeedNews) November 9, 2017
https://platform.twitter.com/widgets.js
… before the occasional clashes broke out.
Crowd members are clashing while screaming at the sky in NYC on the anniversary of the 2016 electionhttps://t.co/aU89B4HfzA
— BuzzFeed News (@BuzzFeedNews) November 9, 2017
https://platform.twitter.com/widgets.js
Meanwhile, there was a parallel event for Trump supporters who wanted to shout their joy over the events of the past year. According to RallyList.com, there was a nationwide screaming counter-protest to “Praise God for President Trump” and that “HRC is not our president.”
- How Broke Is The House Of Saud?
Authored by Raul Ilargi Meijer via The Automatic Earth blog,
Trying to figure out what on earth is happening in the Middle East appears to have gotten a lot harder. Perhaps (because) it’s become more dangerous too. There are so many players, and connections between players, involved now that even making one of those schematic representations would never get it right. Too many unknown unknowns.
A short and incomplete list of the actors: Sunni, Shiite, Saudi Arabia, US, Russia, Turkey, ISIS, Syria, Iran, Iraq, Libya, Kurds, Lebanon, Hezbollah, Hamas, Qatar, Israel, United Arab Emirates (UAE), Houthis, perhaps even Chechnya, Afghanistan, Pakistan. I know I know, add your favorites.
So what have we got, or what do we know we’ve got?
We seem to have the US lining up with Israel, the UAE and Saudi Arabia against Russia, Iran, Syria, Hezbollah. Broadly. But that’s just a -pun intended- crude start.
Putin has been getting closer to the Saudis because of the OPEC production cuts, trying to jack up the price of oil. Which ironically has now been achieved on the heels of the arrests of 11 princes and scores of other wealthy and powerful in the kingdom. But Putin also recently signed a $30 billion oil -infrastructure- deal with Iran. And he’s been cuddling up to Israel as well.
In fact, Putin may well be the most powerful force in the Middle East today. Well played?! He prevented the demise of Assad in Syria, which however you look at it at least saved the country from becoming another Iraq and Libya style failed state. If there’s one thing you can say about the Middle East/North Africa it’s that the US succeeded in creating chaos there to such an extent that it has zero control left over any of it. Well played?!
One thing seems obvious: the House of Saud needs money.
The cash flowing out to the princes is simply not available anymore. The oil price is a major factor in that. Miraculously, the weekend crackdown on dozens of princes et al, managed to do what all the OPEC meetings could not for the price of oil: push it up. But the shrinkage of foreign reserves shows a long term problem, not some momentary blip:
Another sign that money has become a real problem in Riyadh is the ever-postponed IPO of Saudi Aramco, the flagship oil company supposedly worth $2 trillion. Trump this week called on the Saudi’s to list it in New York, but despite the upsurge in oil prices you still have to wonder which part of that $2 trillion is real, and which is just fantasy.
But yeah, I know, there’s a million different stocks you can ask the same question about. Then again, seeing the wealth of some of the kingdom’s richest parties confiscated overnight can’t be a buy buy buy signal, can it? Looks like the IPO delay tells us something.
And then you have the 15,000 princes and princesses who all live off of the Kingdom’s supposed riches (‘only 2,000’ profit directly). All of them live in -relative- wealth. Some more than others, but there’s no hunger in the royal family. Thing is, overall population growth outdoes even that in the royal family. Which means, since the country produces nothing except for oil, that there are 1000s upon 1000s of young people with nothing to do but spend money that’s no longer there. Cue mayhem.
And things are not getting better, Saudi Arabia loses money on every barrel it produces. There are stories about them lowering their break-even price, but let’s take that with a few spoonfuls of salt. A 25% drop in break-even prices in just one year sounds a bit too good. Moreover, main competitors like Iran would still have a much lower break-even price. So even if prices would rise further, the Saudi’s might only break even while Iran gets much richer. Running vs standing still.
Saudi Arabia Leads Gulf Nations in Cutting Break-Even Oil Price
Saudi Arabia, OPEC’s biggest oil producer, is also a leader when it comes to slashing the crude price the country needs to balance its budget. The kingdom will need oil to trade at $70 a barrel next year to break even, the IMF said Tuesday in its Regional Economic Outlook for the Middle East and Central Asia. That’s down from a break-even of $96.60 a barrel in 2016, the biggest drop of eight crude producers in the Persian Gulf. The break-even is a measure of the crude price needed to meet spending plans and balance the budget.
Gulf oil producers are cutting spending and eliminating subsidies after crude plunged from more than $100 a barrel in 2014 to average just over half that this year. The need to curb spending is more urgent with the Organization of Petroleum Exporting Countries cutting output to reduce a global glut. Oil will trade at $50 to $60 a barrel for the “medium term,” the IMF said.
So a thorough cleansing job of the royal family is perhaps inevitable, albeit very risky. King Salman and crown prince Mohammed bin Salman are up against a very large group of rich people. But there’s no way back now.
Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge
Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis…
Much more will have to follow that. Doing a half way job is far too risky once the job has started. Not even $800 billion sounds like all that much. Separate families and factions within the royal family have had decades to accumulate wealth.
Saudi Crackdown Targets Up to $800 Billion in Assets
The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”
The most visible – and perhaps richest- of all those arrested -in western eyes- is Al-Waleed. The Bloomberg estimate of his wealth that came out this week is $19 billion. But their own article seems to indicate a much higher number. He owns 5% of Apple -says Bloomberg-, and that share alone would be worth $45 billion.
Alwaleed, Caught in Saudi Purge, Has Assets Across the World
Apple – Alwaleed bought 6.23 million shares, or 5 percent, of the computer and mobile-device maker for $115.4 million in 1997. He made these purchases between mid-March and April of that year while the company was still struggling to turn itself around. He has since continued to hold the stake while Apple’s valuation has soared to as high as $900 billion.
Going through all these numbers, you can imagine why the ruling family, or rather the rulers within that family, are getting nervous. And that’s where we get to an interesting piece by Ryan Grim at the Intercept, who says it’s not even 32-year-old crown prince Mohammed bin Salman, known as MBS, or King Salman, 81, who control the kingdom these days, it’s the United Arab Emirates (UAE) -and maybe Washington-.
The coup has already been perpetrated.
Saudi Arabia’s Government Purge – And How Washington Corruption Enabled It
The move marks a moment of reckoning for Washington’s foreign policy establishment, which struck a bargain of sorts with Mohammed bin Salman, known as MBS, and Yousef Al Otaiba, the United Arab Emirates ambassador to the U.S. who has been MBS’s leading advocate in Washington. The unspoken arrangement was clear: The UAE and Saudi Arabia would pump millions into Washington’s political ecosystem while mouthing a belief in “reform,” and Washington would pretend to believe that they meant it.
MBS has won praise for some policies, like an openness to reconsidering Saudi Arabia’s ban on women drivers. Meanwhile, however, the 32-year-old MBS has been pursuing a dangerously impulsive and aggressive regional policy, which has included a heightening of tensions with Iran, a catastrophic war on Yemen, and a blockade of ostensible ally Qatar. Those regional policies have been disasters for the millions who have suffered the consequences, including the starving people of Yemen, as well as for Saudi Arabia, but MBS has dug in harder and harder. And his supporters in Washington have not blinked.
The platitudes about reform were also challenged by recent mass arrests of religious figures and repression of anything that has remotely approached less than full support of MBS. The latest purge comes just days after White House adviser Jared Kushner, a close ally of Otaiba, visited Riyadh, and just hours after a bizarre-even-for-Trump tweet. Whatever legitimate debate there was about MBS ended Saturday — his drive to consolidate power is now too obvious to ignore. And that puts denizens of Washington’s think tank world in a difficult spot, as they have come to rely heavily on the Saudi and UAE end of the bargain.
As The Intercept reported earlier, one think tank alone, the Middle East Institute, got a massive $20 million commitment from the UAE. And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries. “Our relationship with them is based on strategic depth, shared interests, and most importantly the hope that we could influence them. Not the other way around,” Otaiba has said privately.
The kingdom’s broke. Not today, or tomorrow morning, but crown prince MBS is able to look at the numbers and go: Oh Shit! And if he doesn’t see it, he has Kushner (re: Israel) and Al-Otaiba to fill him in. All three relative youngsters -MBS is 32, Kushner is 36, Otaiba is 43- are exceedingly nervous by now.
And then you get war, or the threat of war. War in Yemen, a blockade of Qatar, and now ‘mingling’ in Lebanon with the somewhat mysterious removal of billionaire PM Hariri -allegedly on an Iran/Hezbollah assassination plot-, and outright threats against Iran and Hezbollah:
Lebanon’s Hariri Visits UAE As Home Crisis Escalates
Lebanon’s outgoing prime minister, Saad al-Hariri, made a brief visit to the United Arab Emirates from Saudi Arabia on Tuesday despite a deepening crisis back home and a rise in regional tensions triggered by his surprise resignation. Hariri announced his resignation on Saturday during a visit to his ally Saudi Arabia and has not yet returned to Lebanon. He said he believed there was an assassination plot against him and accused Iran, Saudi Arabia’s arch-rival, and its Lebanese ally Hezbollah of sowing strife in the Arab world.
His resignation has thrust Lebanon back into the frontline of the regional rivalry that pits a mostly Sunni bloc led by Saudi Arabia and allied Gulf monarchies against Shi‘ite Iran and its allies. Hariri’s office said he had flown to Abu Dhabi on Tuesday and then returned to Riyadh, but it gave no reason for the trip. It also did not say when he would return home. Hariri’s Future TV channel said he would also visit Bahrain but gave no reason.
In short: billionaire PM Hariri is a puppet. Just perhaps not of Saudi Arabia, but of Abu Dhabi. Whether he’s under house arrest in Riyadh, as has been suggested, is still unclear. But it’s a safe bet that he didn’t fly to Abu Dhabi -and back- alone, or of his own accord. He went to receive instructions.
Saudi Arabia Accuses Iran Of ‘Direct Military Aggression’ Over Yemen Missile
Saudi Arabia’s crown prince has accused Iran of “direct military aggression” by supplying missiles to Houthi rebels in Yemen, raising the stakes in an already tense standoff between the two regional rivals. Mohammed bin Salman linked Tehran to the launch of a ballistic missile fired from Yemen towards the international airport in the Saudi capital of Riyadh on Saturday. The missile was intercepted and destroyed.
“The involvement of the Iranian regime in supplying its Houthi militias with missiles is considered a direct military aggression by the Iranian regime,” the prince said on Tuesday during a phone conversation with the UK foreign secretary, Boris Johnson, according to the state-run Saudi Press Agency. He added that the move “may be considered an act of war against the kingdom”. Iran has called Riyadh’s accusations as baseless and provocative.
We have no way of knowing what is true or not about this. We do know that Saudi Arabia have been executing a barbaric war in Yemen. With weapons from the US, UK, et al. So someone firing back wouldn’t be that far-fetched.
Regardless, Pepe Escobar, a journalist who knows much more than his peers, or at least doesn’t hold back as much as them, doesn’t see this end well for MBS, UAE, Israel, US, and whoever else is in their corner. Another losing war for the US in the Middle East? We’re losing count.
The Inside Story Of The Saudi Night Of Long Knives
A top Middle East business/investment source who has been doing deals for decades with the opaque House of Saud offers much-needed perspective: “This is more serious than it appears. The arrest of the two sons of previous King Abdullah, Princes Miteb and Turki, was a fatal mistake. This now endangers the King himself. It was only the regard for the King that protected MBS. There are many left in the army against MBS and they are enraged at the arrest of their commanders.” To say the Saudi Arabian Army is in uproar is an understatement. “He’d have to arrest the whole army before he could feel secure.”
[..] The story starts with secret deliberations in 2014 about a possible “removal” of then King Abdullah. But “the dissolution of the royal family would lead to the breaking apart of tribal loyalties and the country splitting into three parts. It would be more difficult to secure the oil, and the broken institutions whatever they were should be maintained to avoid chaos.” Instead, a decision was reached to get rid of Prince Bandar bin Sultan – then actively coddling Salafi-jihadis in Syria – and replace the control of the security apparatus with Mohammed bin Nayef. The succession of Abdullah proceeded smoothly.
Power was shared between three main clans: King Salman (and his beloved son Prince Mohammed); the son of Prince Nayef (the other Prince Mohammed), and finally the son of the dead king (Prince Miteb, commander of the National Guard). In practice, Salman let MBS run the show. And, in practice, blunders also followed. The House of Saud lost its lethal regime-change drive in Syria and is bogged down in an unwinnable war on Yemen, which on top of it prevents MBS from exploiting the Empty Quarter – the desert straddling both nations. The Saudi Treasury was forced to borrow on the international markets. Austerity ruled …
[..] aversion to MBS never ceased to grow; “There are three major royal family groups aligning against the present rulers: the family of former King Abdullah, the family of former King Fahd, and the family of former Crown Prince Nayef.” Nayef – who replaced Bandar – is close to Washington and extremely popular in Langley due to his counter-terrorism activities. His arrest earlier this year angered the CIA and quite a few factions of the House of Saud – as it was interpreted as MBS forcing his hand in the power struggle. According to the source, “he might have gotten away with the arrest of CIA favorite Mohammed bin Nayef if he smoothed it over but MBS has now crossed the Rubicon though he is no Caesar. The CIA regards him as totally worthless.”
[..] The source, though, is adamant; “There will be regime change in the near future, and the only reason that it has not happened already is because the old King is liked among his family. It is possible that there may be a struggle emanating from the military as during the days of King Farouk, and we may have a ruler arise that is not friendly to the United States.”
In the end, it all comes down to a familiar theme: follow the money. And we need to seriously question the economic reality of Saudi Arabia. That graph above of their foreign reserves looks downright grim.
With money comes power. Who loses money loses power. Saudi Arabia is bleeding money. The population surge is uncanny, and there are no jobs for all these young people. Perhaps the best they can do is be a US/Israel puppet in an attempt to ‘redo’ the map of the Middle East, but that has not been a very successful project off late -like the past 100 years-.
Then again, when you’re desperate you do desperate things. And when you’re a 32-year-old crown prince with more enemies than you can keep track of, you use what money is left to 1) keep up appearances, 2) steal what others have gathered, 3) buy weapons up the wazoo, and 4) go to war.
It all paints a very dark picture for the world.
Russia won’t stand for attacks on Iran. And Iran won’t let attacks on Lebanon/Hezbollah go unanswered. All that is set to push up oil prices further, and all parties involved are just fine with that. Because they can buy more weapons with the additional profits.
I’ll leave you with Nassim Taleb’s comments on the situation. After all, Nassim’s from Lebanon, and knows that part of the world like the back of his hand:
- Real Motive Behind Saudi Purge Emerges: $800 Billion In Confiscated Assets
From the very beginning, there was something off about Sunday's unprecedented
countercouppurge unleashed by Mohammad bin Salman on alleged political enemies, including some of Saudi Arabia's richest and most powerful royals and government officials: it was just too brazen to be a simple "power consolidation" move; in fact most commentators were shocked by the sheer audacity, with one question outstanding: why take such a huge gamble? After all, there was little chatter of an imminent coup threat against either the senile Saudi King or the crown prince, MbS, and a crackdown of such proportions would only boost animosity against the current ruling royals further.Things gradually started to make sense when it emerged that some $33 billion in oligarch net worth was "at risk" among just the 4 wealthiest arrested Saudis, which included the media-friendly prince Alwaleed.
One day later, a Reuters source reported that in a just as dramatic expansion of the original crackdown, bank accounts of over 1,200 individuals had been frozen, a number which was growing by the minute. Commenting on this land cashgrab, we rhetorically asked "So when could the confiscatory process end? As we jokingly suggested yesterday, the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country's foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account."
Then an article overnight from the WSJ confirmed that fundamentally, the purge may be nothing more than a forced extortion scheme, as the Saudi government – already suffering from soaring budget deficits, sliding oil revenues and plunging reserves – was "aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite."
As we reported yesterday, the WSJ writes that the country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.” But what is more notable, is that while we first suggested – jokingly – on Monday that the ulterior Saudi motive would be to simply "nationalize" the net worth of some of Saudi Arabia's wealthiest individuals, now the WSJ confirms that this is precisely the case, and what's more notably is that the amount in question is absolutely staggering: nearly 2x Saudi Arabia's total foreign reserves!
As the WSJ alleges, "the crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion."
While much of that money remains abroad – and invested in various assets from bonds to stocks to precious metals and real estate – which will complicate efforts to reclaim it, even a portion of that amount would help shore up Saudi Arabia’s finances.
A prolonged period of low oil prices forced the government to borrow money on the international bond market and to draw extensively from the country’s foreign reserves, which dropped from $730 billion at their peak in 2014 to $487.6 billion in August, the latest available government data.
Confirming our speculation was advisory firm Eurasia Group, which in a note said that the crown prince "needs cash to fund the government’s investment plans" adding that “It was becoming increasingly clear that additional revenue is needed to improve the economy’s performance. The government will also strike deals with businessmen and royals to avoid arrest, but only as part of a greater commitment to the local economy.”
Of course, there is a major danger that such a draconian cash grab would result in a violent blowback by everyone who has funds parked in the Kingdom. To assuage fears, Saudi Arabia’s minister of commerce, Majid al Qasabi, on Tuesday sought to reassure the private sector that the corruption investigation wouldn’t interfere with normal business operations. The procedures and investigations undertaken by the anticorruption agency won’t affect ongoing business or projects, he said. Furthermore, the Saudi central bank said that individual accounts had been frozen, not corporate accounts. “It is business as usual for both banks and corporates,” the central bank said.
However, this is problematic: first, not only is the list of names of detained and "frozen" accounts growing by the day…
The government earlier this week vowed that it would arrest more people as part of the corruption investigation, which began around three years ago. As a precautionary measure, authorities have banned a large number of people from traveling outside the country, among them hundreds of royals and people connected to those arrested, according to people familiar with the matter. The government hasn’t officially named the people who were detained.
… but the mere shock of a move that would be more appropriate for the 1950s USSR has prompted crushed any faith and confidence the international community may have had in Saudi governance and business practices.
The biggest irony would be if from this flagrant attmept to shore up the Kingdom's deteriorating finances, a domestic and international bank run emerged, with locals and foreign individuals and companies quietly, or not so quietly, pulling their assets and capital from confiscation ground zero, in the process precipitating the very economic collapse that the move was meant to avoid.
Judging by the market reaction, which has sent Riyal forward tumbling on rising bets of either a recession, or devaluation, or both, this unorthodox attempt to inject up to $800 billion in assets into the struggling local economy, could soon backfire spectacularly.
Meanwhile, for those still confused about the current political scene in Saudi Arabia, here is an infographic courtesy of the WSJ which explains "Who Has Been Promoted, Who Has Been Detained in Saudi Arabia"
- It Begins: Pension Bailout Bill To Be Introduced This Week
Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U.S. population: a multi-trillion pension storm, which was recently dubbed “one of the most heated battles of a lifetime” by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.
That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U.S. Treasury to remain solvent.
The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is “they could not make risky investments”, which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury’s “bailout” loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.
The bill would also fund a program at the Pension Benefit Guaranty Corp. to finance any remaining needs of pension plans borrowing from the new program.
“Any money needed for the PBGC would be a tiny fraction of what it would otherwise be on the hook for if Congress fails to act,” said an analysis by Mr. Brown’s office.
Sen. Brown’s angle was naturally populist, and aimed squarely at those whose pensions are likely to recoup pennies on the dollar under the current investing climate: union workers. Brown told a group of retired Teamsters in Ohio on Monday that the bill will be out shortly.
“It’s bad enough that Wall Street squandered workers’ money — and it’s worse that the government that’s supposed to look out for these folks is trying to break the promise made to these workers. Not on our watch. We won’t allow that to happen,” he said.
No, instead what will happen “under his watch” is that funds collected from taxpaying Americans will be spent to satisfy the ridiculous retirement promises and obligations made over the past few decades, and while the immediate recipients of the funds, i.e. those looking at near-term retirement will be made whole, everyone else, i.e., taxpayers will lose.
And now that the machinery for pension bailouts is finally in motion, we look forward to the next, and possibly final, tear in the American social fabric, that between workers who can’t wait to retire to the generous pension promises (see “Why Illinois Is In Trouble – 63,000 Public Employees With $100,000+ Salaries Cost Taxpayers $10 Billion” and “Mapping The $100,000+ California Public Employee Pensions At CalPERS Costing Taxpayers $3.0B”), and all those other unluckly taxpayers, who will have to fund these promises.
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