- Here Is What The Horowitz Report Should Conclude
Here Is What The Horowitz Report Should Conclude
Authored by Larry Johnson via Sic Semper Tyrannis blog,
You do not have to wait for the Horowitz report. I can give you a preview of what he should have found if he conducted an honest audit.
The following is not my opinion. It is based on the flood of information that has come out over the past two and a half-years surrounding the plot to destroy the Presidency of Donald Trump. When you read these facts it is easy to understand how dishonest and corrupt the FBI were in presenting a FISA application to spy on Carter Page. Helen Keller could see this is wrong.
Let me take you through this piece-by-piece (except where noted I am quoting from the first FISA application).
Let’s start with the FBI claim that Carter Page was an “agent of a foreign government.”
The target of this application is Carter Page, a U.S. person, and an agent of a foreign power, described in detail below. The status of the target was determined in or about October 2016 from information provided by the U.S. Department of State.
What information did State supply? Information provided by the notorious Christopher Steele. The Washington Examiner’s Daniel Chaitin reported on this in May 2019:
Steele met Deputy Assistant Secretary of State Kathleen Kavalec on Oct. 11, 2016, 10 days before the first warrant application was submitted, and admitted he was encouraged by a client, the Clinton campaign and the Democratic National Committee, to get his research out before the 2016 election on Nov. 8, signaling a possible political motivation. The meeting was described in notes taken by Kavalec that were obtained by conservative group Citizens United through open-records litigation. The notes show that Kavalec believed at least some of Steele’s allegations to be false.
Government officials told the Hill that Kavalec informed FBI Special Agent Stephen Laycock about the meeting in an email eight days before the FISA warrant application was filed. Laycock, then the FBI’s section chief for Eurasian counterintelligence, quickly forwarded what he learned to Peter Strzok, the special agent who was leading the Trump-Russia investigation.
There it is. Not an assumption. A fact. State passed a false report from Christopher Steele to the FBI and the FBI ran with it. A competent FBI Agent would have asked about the identity of the source of the information. Either the FBI failed to do this or it lied in the FISA application. The FBI had a responsibility to note that Steele was the sole source for the claim that Page was an “agent of a foreign power.”
The application reiterates its basis for this assertion:
This application targets Carter Page. The FBI believes Page has been the subject of targeted recruitment by the Russian Government to undermine and influence the outcome of the 2016 U.S. Presidential election in violation of U.S. criminal law.
This is based on the false report from Christopher Steele as well as “cooked” intelligence provided by CIA Director Brennan. Brennan was passing off a low level Russian bureaucrat as a high level source with direct access to Putin. That was a lie.
The application then tries to bolster the lie by attributing the FBI’s credulity by citing the U.S. intelligence community (an ironic oxymoron).
In addition, according to an October 7, 2016 Joint Statement from the Department of Homeland Security and the Office of the Director of National Intelligence on Election Security (Election Security Joint Statement), the USIC is confident that the Russian Government directed the recent compromises of e-mails from U.S. persons and institutions, including from U.S. political organizations. The Election Security Joint Statement states that the recent disclosures of e-mails on; among others, sites like WikiLeaks are consistent with the methods and motivations of Russian-directed efforts. According to the Election Security Joint Statement, these thefts and disclosures are intended to interfere with the U.S. election process; activity that is not new to Moscow – the Russians have used similar tactics and techniques across Europe and Eurasia, for example, to influence public opinion there. The Election Security Joint Statement states that, based on the scope and sensitivity of these efforts, only Russia’s senior-most officials could have authorized these activities.
This was a lie. The US Intelligence Community aka USIC had made no such formal determination. If they had there would have been a written document. There was no written document and no evidence that “all 17 intelligence agencies” had coordinated and approved such a document. The Intelligence Community Assessment would not be published until January 2017 and only the FBI, the CIA and the NSA signed off on that piece of fantasy.
After stating that Carter was a Trump foreign policy advisor the FBI insists in the application:
The FBI believes that the Russian Government’s efforts are being coordinated with Page and perhaps other individuals associated with Candidate #l’s campaign (i.e. Trump).
That belief was based on the bogus information passed to State Department by Christopher Steele. It was a lie. They had no evidence and, more importantly, obtained no validation as a result of spying authorized by this outrageous application.
The FBI continues with this charade by outlining Page’s previous cooperation in helping gather evidence that led to the indictment of two Russian intel officers in January 2015. Worth noting that Bill Priestrap, who was now running FBI’s Counter Intelligence operations from FBI Headquarters, was the supervising agent in that operation and knew all about the role Page played in helping get the Russians. But the FBI put this into the application merely to foster the perception that Carter had an in with the Russians.
The FBI then disingenuously introduces Christopher Steele (i.e., Confidential Human Source #1) as the source for evidence about Page’s supposedly nefarious activities:
According to open source information, in July 2016, Page traveled to Russia and delivered the commencement address at the New Economic School.7 In addition to giving this address, the FBI has learned that Page met with at least two Russian officials during this trip. First, according to information provided by an FBI confidential-human source (Source #1), reported that Page had a secret meeting with Igor Sechin, who is the President of Rosneft [a Russian energy company] and a close associate to Russian President Putin. [Steele] reported that, during the meeting, Page and Sechin discussed future bilateral energy cooperation and the prospects for an associated move to lift Ukraine-related Western sanctions against Russia.
This was a lie designed to bamboozle the FISA court Judge. When you look at the footnote for Christopher Steele, we catch the FBI in another monster lie:
and the FBI is unaware of any derogatory information pertaining to Source #1.
The FBI fired Steele as a compensated human source within days of this FISA application. Getting fired for leaking information to the press without the approval of the FBI is “DEROGATORY INFORMATION. Why did the FBI lie on this critical detail? Let us hope Horowitz addresses this.
The footnote related to Steele also contains this disingenuous whopper:
Source #1, who now owns a foreign business/financial intelligence firm, was approached by an identified U.S. person, who indicated to Source #1 that a U.S.-based law firm had hired the identified U.S. person to conduct research regarding Candidate #l’s ties to Russia (the identified U.S. person and Source #1 have a long-standing business relationship). The identified U.S. person hired Source #1 to conduct this research. The identified U.S. person never advised Source #1 as to the motivation behind the research into Candidate #l’s ties to Russia. The FBI speculates that the identified U.S. person was likely looking for information that could be used to discredit Candidate #1’s campaign.
The FBI knew that Glenn Simpson was working for Hillary Clinton. They failed to mention this. Instead, the FBI opted for the white lie of pretending that Steele, under Simpson’s guidance, was just doing opposition research. The FBI can pretend they were just incompetent, but we now know that they were fully aware of Simpson’s ties to the Clinton effort using the law firm as a cut-out.
The FBI continued feed out the lies of the Steele Dossier pretending they were verified facts:
Divyekin [who is assessed to be Igor Nikolayevich Divyekin] had met secretly with Page and that their agenda for the meeting included Divyekin raising a dossier or “kompromat” that the Kremlin possessed on Candidate #2 [i.e., Clinton] and the possibility of it being released to Candidate #l’s campaign.
This is an unverified claim. Regular Americans know it simple as another damn lie.
Then the FBI turns its attention to creating the propaganda meme that Donald Trump had cut a deal with Putin to lift all sanctions and hurt Ukraine. This is breathtaking in light of what we now know about real Ukrainian efforts to hurt Trump:
July 2016 article in an identified news organization reported that Candidate #1’s campaign worked behind the scenes to make sure Political Party #1’s platform would not call for giving weapons to Ukraine to fight Russian and rebel forces, contradicting the view of almost all Political Party #l’s foreign policy leaders in Washington. The article stated that Candidate #l’s campaign sought “to make sure that [Political Party #1] would ot pledge to give Ukraine the weapons it has been asking for from the United States.” Further, an August 2016 article published by an identified news organization characterized Candidate #1 as sounding like a supporter of Ukraine’s territorial integrity in September (2015], adopted a “milder” tone regarding Russia’s annexation of Crimea. The August 2016 article further reported that Candidate #1 said Candidate #1 might recognize Crimea as Russian territory and lift punitive U.S. sanctions against Russia. The article opined that while the reason for Candidate #l’s shift was not clear, Candidate #l’s more conciliatory words, which contradict Political Party #1’s official platform, follow Candidate #l’s recent association with several people sympathetic to Russian influence in Ukraine, including foreign policy advisor Carter Page.
This was false information (i.e., A LIE) being fed to a pliant media by Clinton campaign officials and supporters. And the FBI buys it hook line and sinker.
The FBI then brings Michael Isikoff into the act, who also is passing along information obtained from Christopher Steele. This is nothing but chutzpah by the Bureau. Shameful:
About September 23, 2016, an identified news organization published an article (September 23rd News Article), which was written by the news organization’s Chief Investigative Correspondent, alleging that U.S. intelligence officials are investigating Page with respect to suspected efforts by the Russian Government to influence the U.S. Presidential election.· According to the September 23rd News Article, U.S. officials received intelligence reports that when Page was in Moscow in July 2016 to deliver the above-noted commencement address at the New Economic School, he met with two senior Russian officials. The September 23rd News Article stated that a “well-placed Western intelligence source” told the news organization that Page met with Igor Sechin, a longtime Putin associate and former Russian deputy minister who is now the executive chairman of Rosneft. At their alleged meeting, Sechin raised the issue of the lifting of sanctions with Page.
According to the September 23rd News Article, the Western intellig nce source also reported that U.S. intelligence agencies received reports that Page met with another top Putin aide – Igor Divyekm,, a former Russian security official who now serves as deputy chief for internal policy and is believed by U.S. officials to have responsibility for intelligence collected by Russian agencies about the U.S. election.
The FBI is pretending that this is another source to corroborate Steele. It is not. It is Christopher Steele talking to Isikoff.
The FBI at least made the pretense of giving Carter Page a chance to deny the allegations and he did in the strongest terms possible:
On or about September 25, 2016, Page sent a letter to the FBI Director. In this letter, Page made reference to the accusations in the September 23rd News Article and denied them. Page stated thatthe source of the accusations is nothing more than completely false media reports and that he did not meet this year with any sanctioned official in Russia. Page also stated that he would be willing to discuss any “final” questions the FBI may have.
The rest of the application is blacked out and presumably contains the FBI’s explanation of why they believed Carter Page was lying. But it was the FBI who was lying. If those blacked out portions are declassified then we will almost certainly see that the FBI was claiming it had multiple sources contradicting Page when in fact, it only had one–Christopher Steele, a retired British intelligence officer.
I draw this conclusion based on the FBI’s stated conclusion in the application:
(U) As discussed above, the FBI believes that Page has been collaborating and conspiring with the Russian Government . . .Based on the foregoing facts and circumstances the FBI submits that there is probable cause to believe that Page [and others whose names are blacked out, probably Michael Flynn] knowingly engage in clandestine intelligence activities (other than intelligence gathering activities) for or on behalf of such foreign power, or knowingly conspires with other persons to engage in such activities and, therefore, is an agent of a foreign power as defined by 50 U.S.C. § 1801(b)(2)(E).
The American people must wake up and understand how dishonest and stupid the FBI was in writing and submitting this baseless application to the FISA court. And we are not talking about low level flunkies who changed an email. Jim Comey signed off on these lies. Andrew McCabe signed off on this lies.
I will reiterate, if Inspector General Horowitz fails to highlight these clear and pervasive lies then it will be up to Attorney General Barr and Prosecutor John Durham to set things right.
Tyler Durden
Sun, 11/24/2019 – 23:30 - China's 'Official' Virtual Currency Could Be Arriving "Quite Soon" To "Challenge The U.S."
China's 'Official' Virtual Currency Could Be Arriving "Quite Soon" To "Challenge The U.S."
As if the trade war – and soon to be currency war – between China and the U.S. needed another wrench thrown in its gears…
China sent cryptocurrencies tumbling on Friday after re-cracking-down on exchanges that are operating illegally against authorities’ ban.
Source: Bloomberg
On Nov. 22, authorities in Shenzhen have identified a total of 39 exchanges falling foul of China’s cryptocurrency trading ban, according to local news outlet Sanyan Finance.
It remains unknown what consequences the exchanges will face, with Sanyan highlighting a desire to crack down on liquidity.
It appears that China’s blockade on non-government-sanctioned crypto trading, could be on its way to launching its own digital currency within the next 6 to 12 months, according to fund manager Edith Yeung, who recently appeared on CNBC.
The Chinese government has been researching the idea over the last few years and has reportedly identified entities to use for a potential rollout, Yeung says.
“It’s really been something (that’s) been in the works for the last few years,” she said on Wednesday during an interview. Yeung is a partner at blockchain-focused venture capital fund Proof of Capital.
When she was asked how long it might be before the launch becomes reality, she responded “Quite soon. So I definitely think within the next 6 to 12 months.”
And China has recently embraced blockchain, with state media reporting that President Xi Jinping said the country should look to “take a lead” in the technology.
Wendy Liu, head of China strategy for UBS, also said that there was greater willingness to work with blockchain and 5G in China because they will help facilitate and manage the world’s biggest country by population.
Liu commented: “Due to its own needs, (China) is going to push in that direction and you see this willingness to back these technologies more so than anywhere else.”
Meanwhile, tensions between China and the U.S. continue to hit new fever pitches, as the trade war standoff between the two countries continues. Yeung says that even thought the dollar remains the world’s reserve currency, the wider use of the Yuan could “challenge the U.S.”
She commented: “I think the Chinese government is being really smart about driving the adoption of RMB. Can you imagine, especially for the One Belt One Road initiative, they (start) to lend all in virtual RMB? Many of these countries will want to work with China to start adopting virtual RMB.”
She cited Facebook’s foray into its own virtual currency as the catalyst for China’s quick move to adopt the idea. “I think what (has) been done on the Libra side of things, instead of driving adoption for Libra, it is actually driving the whole world, central banks to really need to get into the game for digital currency,” she said.
“I really think that the United States needs to hurry up to have a strong thinking and policy, at least a direction for virtual USD,” she concluded.
You can watch Yeung’s interview here:
Tyler Durden
Sun, 11/24/2019 – 23:00 - Chinese Media Stunner: China Will Be The Next Country To Cut Rates To Zero
Chinese Media Stunner: China Will Be The Next Country To Cut Rates To Zero
One week ago, we showed in one chart why the global economic recovery that so many expect is just a few months away, won’t happen: as the chart below shows, China’s credit intensity since 1994 has exploded. This means that before the Global Financial Crisis, China needed on average one unit of credit to create one unit of GDP. Since 2008, 2½ units of credit are required to create one unit of GDP. In other words, that China needs much more credit than 10 years ago to have the exact same amount of GDP. Injecting more credit in the economy is not the miracle solution it used to be, and the disadvantages of credit push tend to surpass the advantages.
This explosion in China’s credit intensity in the past decade has directly fueled China’s debt engine, the same debt engine that single-handedly pulled the world out of a global depression in 2008/2009. Alas, this will not happen again: China’s public and household debts are at their highest historical levels, respectively at 51% of GDP and 53% of GDP, and the private sector debt service ratio is becoming a burden for many companies, reaching on average 19.7% This records an increase from 13% before the crisis. Overall, China’s debt to GDP is fast approaching an unprecedented 320%!
Which brings us to Saxo’s dour conclusion for all those who believe that the global economy is about to enjoy another period of sustainable growth (and has confused the Fed’s QE for economic resilience and fundamentals):
Contrary to previous periods of slowdown, notably in 2008-2010, 2012-2014 and in 2016, China is unlikely to save the global economy once again.
So what does it all mean? Well, even as domestic demands for liquidity are growing, foreign capital keeps flowing in and the real economy continues to slow down, which all make the country seemingly approaching a zero rates monetary condition.
While those words succinctly summarize what we said last week, they originate in an English language op-ed published today in China’s nationalist tabloid, Global Times, which for once, is surprisingly accurate, and while mostly avoiding the propaganda that Chinese media is so well known for, explains well why China may indeed be the next country to see zero rates (as a reminder, Chinese real rates are already negative due to soaring pork prices).
And while we doubt that the PBOC will be able to cut enough to bring about ZIRP, or NIRP, any time soon especially due to the ongoing hyperinflation in pork prices, if and when those do stabilize the Chinese central bank may well follow in the footsteps of every other developed central bank. In doing so, it will only infuriate Trump who has been kicking and screaming at Jerome Powell, demanding that the Fed do just that.
What we find most remarkable about the op-ed is how simply, matter-of-factly and correctly, the author explains away why zero rates are coming:
Mounting debts and the financing problems in the real economy will promote China to a zero rate condition
…
Structurally, China’s non-financial corporate debt ratio is too high, and interest rates are too high. Considering that the repayment burden of existing debt has squeezed out the effective demand for new credit, and China is likely to become the next zero interest rate country
Amusingly, the anonymous op-ed writer has managed to state in two sentences what takes financial pundits hours, days and weeks to explain on CNBC:
Another phenomenon comes with low rates monetary condition is that prices go up with risk asset. The US stock prices have climbed to a new high.
That said, what we found most surprising about the Global Times oped is its conclusion: instead of some jingoist bullshit about how China’s negative rates would be the greatest, and most negative in the entire world, the publication takes a very measured tone, and warns that such a monetary stance may very well spell doom for China, to wit:
Zero or negative rates monetary conditions don’t mean that debt issues and the asset bubble problem will be resolved automatically, but the opposite. Growing bubbles in the global financial market in the long run will be a reminder of financial risks.
In a slowing global economy, zero or even negative interest monetary conditions are a new trend that gives new risks and challenges to China and the international financial market. Awareness and responsiveness need to be revamped.
Of course, by the time China is approaching ZIRP, the trade war between the US and China will be at such a heated, if not outright “kinetic” level, that few will notice or care what Beijing’s monetary policy is.
We strongly urge all US policymakers to read the following Global Times article, which is nothing short of a trial balloon warning what China is contemplating next in a desperate move to stimulate its economy, no matter the cost.
China needs to prepare for zero interest rates
The US Federal Reserve’s (Fed) continuous interest rates cuts have triggered a race of interest rates cuts among central banks around the world, increasing excessive global liquidity even further. In this case, more countries are faced with monetary conditions of zero or negative rates. Recently, former US Fed chairman Alan Greenspan noted that “negative rates” are spreading around the world. Some financial institutions even believe the world will enter a low rates condition that hasn’t occurred in 1,000 years.
Under the condition of low or zero rates, the world’s debts level keeps rising, and the bond yields continue dropping. Another phenomenon comes with low rates monetary condition is that prices go up with risk asset. The US stock prices have climbed to a new high.
For China, the demands for liquidity are growing, foreign capital keeps flowing in and the real economy continues to slow down, which all make the country seemingly approaching a zero rates monetary condition. It asks policymakers and market players to be prepared. Mounting debts and the financing problems in the real economy will promote China to a zero rate condition. In the first half of 2019, China’s overall debts accounted for 306 percent of the GDP, up 2 percentage points from the 304 percent in the first quarter, according to a report from the Institute of International Finance (IIF). The number was just around 200 percent in 2009 and 130 percent in 1999.
According to data from the National Institution for Finance and Development, China’s enterprise sector’s debts account for 155.7 percent of the nominal GDP, up 2.2 percentage points from the end of last year. It’s far beyond the government sector’s leverage ratio of 38.5 percent and the resident sector’s leverage ratio of 55.3 percent. In the enterprise sector, private companies embattled with financing problems account for 30 percent.
Structurally, China’s non-financial corporate debt ratio is too high, and interest rates are too high. Considering that the repayment burden of existing debt has squeezed out the effective demand for new credit, and China is likely to become the next zero interest rate country, according to Zhu Haibin, Chief China Economist at J.P. Morgan.
The low rates or zero rates condition will in turn reduce the effect of current monetary policy tools. In the overall picture of global interest cuts, the low inflation level causes monetary policy to face challenges. In China, the problem is severe. Currently, China is facing the superposition structural consumption of inflation and production deflation, which is squeezing the space for monetary policy adjustments. Both targeted and “flood-like” stimulus can’t overturn the economic slowdown. New monetary tools and new aims are urgently needed in the zero rates monetary condition.
In the real economy, the zero rates monetary condition will highlight structural problems. The drop of interest rates doesn’t necessarily lead to investment increases. The stratification in liquidity and credit will remain under overproduction conditions and bring new problems to small and medium-sized enterprises. The enterprise sector needs to more urgently prepare for upgrades and maintain competitiveness. The zero rates monetary condition also asks for promotion in supply side reforms, and to resolve problems in the monetary transmission mechanism.
In the finance sector and capital market, the zero rates monetary condition is also challenging for the banking industry and shadow banking. On one hand, dropping interests will narrow the profit space for banks, pressing their performance. On the other hand, enterprises which take loans as main financing means still face structural credit risks that banks can’t identify. It asks banks to build up management and capital capacity to deal with tougher competition. Zero rates will make more investors turn to direct financing, which causes new challenges in evaluation, pricing, investment modeling and investment portfolio balance. It also requires strengthening investment market building, and providing a level playing field.
Zero or negative rates monetary conditions don’t mean that debt issues and the asset bubble problem will be resolved automatically, but the opposite. Growing bubbles in the global financial market in the long run will be a reminder of financial risks.
In a slowing global economy, zero or even negative interest monetary conditions are a new trend that gives new risks and challenges to China and the international financial market. Awareness and responsiveness need to be revamped.
The article was compiled based on a report by Beijing-based private strategic think tank Anbound. bizopinion@globaltimes.com.cn
Tyler Durden
Sun, 11/24/2019 – 22:41 - Russia Is Readying For Robot Wars
Russia Is Readying For Robot Wars
Submitted by South Front,
The Russian Armed Forces continue preparations for future conflicts involving large quantities of unmanned aerial and ground vehicles, as well as with other robotized platforms.
On November 10, the Russian Defense Ministry’s Zvezda TV channel revealed the military autonomous robotic complex “Kungas”, which is currently undergoing tests in the 12th Central Research Institute of the Russian Defense Ministry. The institute was created in the early 1950s for testing military equipment resistance to various damaging factors, including those arising from a nuclear explosion. The experimental base allows for the simulation of a super powerful shock wave and strong electromagnetic fields.
The “Kungas” includes 5 unmanned ground vehicles: a “man-portable” robot, a “light” robot, a “transportable” robot, a Nerekhta combat robot, and a robotic version of the BTR-MDM Shell armoured personnel carrier.
The Russian military did not provide extensive details on the project. However, data from open sources and released videos allows us to get a general look at the “Kungas” complex of robots. Included robots are as follows:
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A “man-portable” reconnaissance UGV with a manipulator. Its weight is 12 kg.
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A “light” UGV. It can carry an engineering manipulator or a combat module. The combat module may include one of the following: an anti-tank missile package of up to 4 missiles, a PKTM 7.62 mm machine gun, a grenade launcher, or a flamethrower system (i.e. Rocket-propelled Infantry Flamethrower). It’s weight is 200 kg.
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A “transportable” fire support and reconnaissance combat UGV. The combat module includes a 300-round Kord 12.7 mm heavy machine gun and a 90-round AG-30 automatic grenade launcher. Its weight is 2t. There are various configurations of this AGV.
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The combat robot Nerekhta. The combat module, in various options, is equipped with a 300-round Kord 12.7 mm machine-gun or a Kalashnikov 7.62 mm tank machine-gun. Additionally the module can be equipped with the 90-round automatic grenade launcher AG-30M. In addition to these weapons, the combat robot can carry 500 kg of ammunition and equipment. Nerekhta comes in various configurations, including reconnaissance, medical, transport, electronic warfare and other variants.
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A robotic version of the BTR-MDM Shell armoured personnel carrier. There are various configurations. The robot is armed with a Kord 12.7 mm machine gun or a PKTM 7.62 mm machine gun, and a 300-round automatic grenade launcher AG-30. Its main purpose is that of a transport module and fire support vehicle. The weight of the robot is 17t.
According to the report by Zvezda TV, all of these combat robots can be controlled remotely from a single command post. This means that they are controlled by a unified control system within a single intelligent network. In this case, the concept is that any combat robot, or a group of combat robots, can be controlled remotely from a single control center. The composition and number of controlled robots can differ depending on the situation and the task. Experts suggest that robots of the “Kungas” complex have the potential, after further development and improvement, to perform tasks autonomously, without direct control by an operator. In this case, the operator’s main task will be to oversee the autonomous task performance by Kungas robots and intervene in critical situations only.
The Kungas robotic system is a breakthrough development for the Russian Armed Forces. From the data revealed, it becomes clear that a platoon of combat robots has already been created within the Ground Forces. The unit is shaped in a manner which allows it to perform tasks on its own or interactively with other units of the armed forces or form flexible situational groups of different composition with the inclusion of other robotic systems.
Robots of the Kungas system can provide fire, reconnaissance and other types of support to more expensive systems, such as the Uran-9 tracked unmanned combat ground vehicle, which was tested in Syria in 2018 and entered service in January 2019. The Uran-9 is designed to deliver combined combat, reconnaissance and counter-terrorism units with remote reconnaissance and fire support. It weighs 10t and is armed with a 30 mm Shipunov 2A72 automatic cannon, 4 ready-to-launch 9M120-1 Ataka anti-tank guided missiles, 6 ready-to-launch Shmel-M reactive flamethrowers and a 7.62 mm Kalashnikov PKT/PKTM coaxial machine gun. Additionally, it can carry 4 Igla surface-to-air missiles. The combat robot is operated by a single service member and can be remotely controlled up to a maximum distance of 3,000 m. The road speed of the Uran-9 is 35km/h and the cross-country speed is 25km/h. The Uran-9 is equipped with a laser warning and target detection system, as well as identification and tracking equipment. The fitted day and night vision allows for detection of targets at a maximum distance of 6 km during the day and 3 km at night.
Therefore, the Russian military is aiming to gain capabilities allowing it to form offensive or defensive orders consisting of various robotic systems. For example, one can imagine an upcoming tactical unit consisting of several Uran 9 combat robots and various Kungas robots providing them with the needed support. The additional support will be provided by unmanned aerial vehicles and conventional units. The Russian Su-57 fighter jet and the Okhotnik stealth heavy unmanned combat aerial vehicle were developed in a manner to maximize their level of interaction by allowing them to operate as a team in the event of conflict.
It’s expected that the Russian military will continue to improve its robotic systems in this direction in order to increase the level of robotization and decrease the involvement of operators in tactical decision making during performance of tasks. The goal of this effort is to create a flexible and effective mix of robotized and non-robotized platforms -capable of performing various tasks on the battlefield.
Tyler Durden
Sun, 11/24/2019 – 22:30 -
- Amazon To Open Chinese Store As US Consumer Fades Into Darkness
Amazon To Open Chinese Store As US Consumer Fades Into Darkness
Amazon knows the US consumer is quickly deteriorating, and western markets will likely stagnate in the early 2020s. A recent investor call revealed the e-commerce giant’s forecast revenue and profit for this holiday season would be below expectations, setting up a pathway for depressed consumer activity in the quarters ahead.
To get ahead of waning consumer demand in the US, Amazon is rushing to re-establish itself back in China after it closed its Chinese marketplace in July, sources told Reuters.
Amazon is expected to open a store on the Chinese e-commerce platform Pinduoduo on Monday. The company is expected to increase its efforts to sell goods to Chinese consumers via its global platform.
Reuters notes that Alibaba and JD.com have dominated the e-commerce marketplaces in China. It was only four years ago that Pinduoduo was able to get a slice of the action in lower-tier cities.
The source told Reuters that Amazon’s Pinduoduo store would carry goods from abroad.
Amazon is making a push back into China as the government modifies its economy from an export-driven model to a consumption-driven economy. The move will likely transform China into one of the largest consumer markets in the world, in the next several years.
China recently outpaced the US as having the world’s largest middle-class population. Every US consumer goods company knows that the US dominated the 20th century, but now it’s China that is dominating the 21st century.
China will be the greatest consumption story of the 2020s and will likely outpace the US as a global superpower by 2030. Amazon can read the tea leaves, and they want action in China.
Tyler Durden
Sun, 11/24/2019 – 22:00 - Which Countries Spend The Most On Obesity?
Which Countries Spend The Most On Obesity?
Authored by Johnny Wood, senior writer at WEF
The planet’s population is growing rapidly – both in number and, in many places, size. Rising obesity levels place a heavy burden on healthcare provisions, leaving some countries facing an increasingly hefty bill, according to a new report from the Organization for Economic Cooperation and Development.
Obese people use healthcare services more frequently than most and require more specialty care visits, in-patient treatment admissions and surgery procedures. Providing medical services to tackle this problem can be a drain on healthcare budgets.
Almost one-in-four people in OECD countries are obese, the study shows, rising to almost 60% of the population when overweight people are included. Despite initiatives to combat this phenomenon, the number of people leading unhealthy lifestyles is on the rise and obesity rates are growing.
On average, treating obesity-related issues accounts for 8.4% of total healthcare spending in OECD countries.
The US is set to spend more per person treating obesity than any other OECD country. Over the next 30 years, this is expected to reach an annual outlay of almost $655 per person – 14% of the country’s total annual healthcare expenditure.
Across the border, neighbouring Canada is expected to spend less than half that per capita figure.
Germany sits between the two North American countries, with projected spending of more than $400 per person. Five of the top 10 list are European countries, with Italy and Spain coming in fourth and fifth.
Obesity accounts for more than two-thirds of all treatment costs for diabetes, almost a quarter of treatment for cardiovascular conditions and 9% of cancer cases, according to the report. As well as lowering life expectancy, it hinders school performance, decreases worker productivity and lowers gross domestic product (GDP).
Profound impact
Poor diet, lack of exercise and an inactive lifestyle all contribute to putting on excessive weight, which has far-reaching consequences beyond the cost of healthcare.
The OECD report estimates that reducing the calorie intake of energy-dense foods by a fifth could have a profound impact. Each year, this could prevent more than a million cases of noncommunicable diseases like heart conditions, save more than $13 billion in healthcare spending and increase worker numbers by almost 1.5 million.
Tyler Durden
Sun, 11/24/2019 – 21:35 - Economic Recovery Narrative Doomed: Fathom's China Momentum Indicator Signals More Downside Ahead
Economic Recovery Narrative Doomed: Fathom's China Momentum Indicator Signals More Downside Ahead
In the last 30 days, we’ve noted that China’s credit growth rapidly decelerated to the weakest pace since at least 2017 as a continued collapse in shadow banking, weak corporate demand for credit and seasonal effects all signaled that a massive rebound in China’s economy, nevertheless the global economy, in early 2020 is questionable.
Though investors around the world have bought stocks in preparation for a massive 2016-style rebound in the global economy. We’ve discussed that because of China’s credit impulse has rolled over, the probabilities of a massive rebound in China’s economy or even the rest of the world remains low — though it’s possible the global economy could stabilize, it’s just the idea that a huge rebound is unlikely.
Fathom Consulting’s China Momentum Indicator 2.0 (CMI 2.0) provides a more in-depth view of China’s economic activity than official Chinese GDP statistics.
CMI 2.0 is based on ten alternative indicators for economic activity; some of those indicators include railway freight, electricity consumption, and the issuance of bank loans.
Fathom has stated that in CMI 2.0, the calculation of the index avoids measuring construction activity, and instead focuses on shadow measures of economic activity. The consulting group says this allows the index to be “less prone to manipulation than the headline GDP figures.”
“In 2014, when China’s traditional growth model was running out of steam and vulnerabilities were rising, authorities toyed with credit tightening and an enforced rebalancing. But at the end of 2015, when growth slowed too sharply, they quickly threw in the towel, resorting to the old growth model of credit-fuelled growth. With growth once again slowing, and past precedent suggesting credit has neared its limit, China finds itself at a crossroad,” Fathom recently said.
China is undoubtedly at “crossroads,” as Fathom suggests, because of its inability to stoke economic growth via credit, this means China isn’t going to bail out the world again like it did in 2008 and 2015/16.
Global stocks are expecting China CMI 2.0 to soar in the coming months, but if that doesn’t happen, global stocks are likely to see a significant correction in the months ahead.
And with China’s economic activity decelerating, China’s CSI 300 Index could retest around the 3,000 level.
Commodities remain depressed because China’s economic activity continues to decelerate.
Without China – which has created 60% of all new global debt over the past decade – there can be no global recovery.
In other words, enjoy the current growth delusion while it lasts… some time into Q2 2020 when the Fed’s NOT QE will fade to nothing.
Tyler Durden
Sun, 11/24/2019 – 21:10 - Sprite Transgender Ad Proves There Is A War On For Children's Hearts, Minds, & Bodies
Sprite Transgender Ad Proves There Is A War On For Children's Hearts, Minds, & Bodies
Authored by Robert Bridge via The Strategic Culture Foundation,
How many people remember the days when the purpose of television commercials was to sell audiences some new-fangled product they didn’t even realize they needed as opposed to some dangerous agenda? It seems we’re losing those memories fast.
The world of corporate advertising has finally crossed the cultural Rubicon. In a newly released advertisement, yet another major corporation has idolized a lifestyle choice, which, naturally, has absolutely no connection to the traditional nuclear family that has guided Western civilization through thick and thin over two millennia. The controversial ad in question focuses all of its fervid attention not on the product, but rather on promoting transgender attitudes among the impressionable pubescent teen population.
This latest creation borne out of the Cultural Marxist laboratory, which just happens to be a commercial for Sprite, a beverage produced by the Coca-Cola Company, features several adolescents preparing for their attendance at some rainbow-festooned event on the streets of a soulless urban jungle. If the ad feels more like a documentary than a promotional for carbonated sugar water that’s because no actor is ever seen quenching their thirst with the drink. Instead, the product has become a vehicle – a veritable Trojan horse – for driving home a hugely controversial issue into the living rooms of millions of Americans.
Note: Anyone confused by what is meant by the term ‘Cultural Marxism’ may want to watch a brief segment of an interview (below) with the late journalist Andrew Breitbart, who provides a compelling argument as to how and why the Western world is now plagued with stultifying political correctness and the social justice mindset.
In the Sprite TV ad, an apparent mother [the word ‘apparent’ is necessary since the term ‘gender’ has become an entirely fluid concept defined solely by a person’s feelings, which may change at a whim] opens the action to the sound of melodramatic melodies as she applies eyeliner on her apparent biological son. Cut away to scene two. Yet another apparent mother helps her apparent daughter wrap herself into a corset to conceal the fact that ‘she’ has breasts. Heaven forbid! Whether a mastectomy is on the horizon for the ‘girl’, together with a lifetime commitment to testosterone injections, the audience is none the wiser.
Next, an apparent grandmother dotes over her apparent cross-dressing grandson as he dons a mauve wig before wiggling in uncontained excitement, together with Baba, at their reflection in the mirror. I’m struggling to imagine a grandmother that would ungrudgingly accept such a scenario, but in the fizzy pop reality world of the Coca-Cola Company anything is possible.
What’s missing in this corporate-sponsored trip to the far side of insanity? Well, for starters, common sense. After all, is it really wise to award hero status upon pubescent teens over their sexual orientation, which is oftentimes confused at best? Teenagers are already greatly influenced by the myriad messages they are bombarded with daily over social media. Do they really need a Fortune 500 company promoting a lifestyle, namely transgender, which carries with it an entire rainbow of untold risks? The liberal media rarely reports it, but there are thousands of youth right now attempting to reverse the bodily harm they have done to themselves by trying to physically become the opposite sex, which is – it needs to be clarified once and for all – absolutely impossible.
Oddly, Western society has long condemned the practice of genital mutilation in other ‘less civilized’ cultures, yet now somehow believes it is acceptable for children to sacrifice body parts and ingest powerful hormones in some dangerous quest to eradicate the sex they were born with. In other words, biology and the doctors, who assigned them the ‘wrong sex’ at birth, got it all wrong. What really matters today, at least for the Cultural Marxist warrior class, is how each individual ‘identifies’ with their ‘true’ gender.
— Hacsi Horvath (@givethemseeds) November 15, 2019
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Not only is the Coca-Cola Company permitted to promote an unhealthy product without a warning from the Surgeon General that swilling soda drinks on a daily basis greatly increases the risk of Diabetes; it is allowed to endorse a transgender lifestyle that may result in the unwanted loss of both life and limb. Literally. Once a person undergoes the removal of the breasts or penis, for example, it is exceedingly difficult to turn back. The video below will dispel any illusions about ‘gender affirmation’ operations being an easily irreversible process, as some people – many from the medical community – have suggested.
Second, the agenda-ad contains no apparent sign of fathers, who we may assume are still trying to escape from the hell-scape of a recent Gillette ad [1.5 million thumbs down on YouTube and counting] that lectured men for their so-called ‘toxic masculinity.’ Funny how one corporation outright trashes males – predominantly white men, incidentally, who are coaxed into doing the right thing by their minority brothers – while this latest corporate message fails to feature a single father figure. So we can see that the assault against Caucasian males is not only happening regularly on Netflix [watch the movie ‘Bird Box’ if you need any proof], but the warped message is now going mainstream in TV commercials as well.
Finally, it must be asked why these corporations, anxious to cash in on the ‘woke’ mania, continue to push an agenda as opposed to selling a product. After all, one of the first efforts by a corporation, which just happened to be Coca-Cola’s competitor, Pepsi Cola, to ride the wave of the social justice movement was met with abysmal failure. The video is no longer even featured on Pepsi Cola’s main website.
Does it sound reasonable that these companies are using a highly controversial subject to promote a product in order to appeal to a tiny fraction of the population? That seems like a foolish strategy to win over some social justice warriors to Sprite when just as many consumers will now be tempted to boycott the product on principle. Thus, an argument could be made that the real motivation for companies like Coca-Cola and Gillette to air such advertisements, which are invariably aimed at the youth, is to set in motion a total and complete change of mindset with the youth. In other words, these corporations are complicit in the game of social engineering and the cost to their bottom line is irrelevant. One possible motive is to create a weaker, ‘less masculine’ society of ever-more dependent consumers. Or is there something much deeper at work here? Personally, I suspect something far more sinister is guiding the decision-making process that gives the green light to such projects.
This creepy Sprite ad promotes, among other things, breast binding. Someone please explain the ethical difference between an ad that promotes breast binding and an ad that promotes anorexia. I bet you can’t.
— Matt Walsh (@MattWalshBlog) November 16, 2019
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In these controversial commercials, it usually starts with a mirror. An individual staring back at the reflection of someone they think they know, but in all likelihood do not. The ancient command ‘Know thyself’ was believed by the wise Greeks to be so crucial to the full development of the person that the motto was engraved on the famed Temple of Apollo. Much of Western society, however, the inheritors of Greco-Roman political and cultural traditions, has abandoned that sound counsel, becoming more alienated from their true selves than ever before.
I suspect this is what the globalists want: The rainbow flag of a hyper-sexualized culture displacing the national flag; the intensely individualist lifestyle supplanting any connection to the nuclear family tradition, and Western society becoming a bubbling cauldron of dreams and desires so multitudinous that nothing short of martial law will be able to control it.
Now enjoy that Sprite.
Tyler Durden
Sun, 11/24/2019 – 20:45 - No "Phase Two" Trade Deal On Horizon Say US, Chinese Officials
No "Phase Two" Trade Deal On Horizon Say US, Chinese Officials
While global stock markets surge and swoon with every headline indicating fresh optimism (or pessimism) for a US China trade deal, the same trade deal that has been around the corner ever since the summer of 2018, things aren’t looking too healthy for whatever lies beyond the allegedly easy “Phase 1” deal, that was announced as clinched with much fanfare by Trump on October 11.
The ambitious “phase two” trade deal between the US and China is looking less and less likely as the two countries find it near impossible to reach an agreement on even the preliminary “phase one” agreement, according to U.S. and Beijing officials, lawmakers and trade experts told Reuters.
Recall back in October, when stock markets roared higher after President Trump said during a press conference with Chinese vice premier Liu He that he expected to quickly dive into a second phase of talks once “phase one” had been completed. The second phase would focus on a key U.S. complaint that China effectively steals U.S. intellectual property by forcing U.S. companies to transfer their technology to Chinese rivals, the US president said then.
And yet, despite what appeared to be a modest concession by Beijing which Bloomberg earlier reported had issued various guidelines for IP theft, arguably in preparation for “Phase 2”, Reuters notes that the November 2020 U.S. presidential election, “the difficulties in getting the first-stage done, combined with the White House’s reluctance to work with other countries to pressure Beijing are dimming hopes for anything more ambitious in the near future.”
In fact, with the December venue for the Phase 1 deal announcement scrapped and still not replaced with a new one, it remains unclear if – or when – any deal will be formalized.
The news follows a previous Reuters report last Wednesday, according to which the signing of the Phase 1 deal could slide into 2020 as the two countries have hit an impasse over Beijing’s demand for more extensive tariff rollbacks. Officials in Beijing say they don’t anticipate sitting down to discuss a phase two deal before the U.S. election, in part because they want to wait to see if Trump wins a second term.
“It’s Trump who wants to sign these deals, not us. We can wait,” one Chinese official told Reuters, refuting a daily refrain from Trump who in turn has claimed that it is China that is looking to sign a deal quickly.
At the end of the day, with neither side willing to compromise and show weakness, a deal may never actually happen.
To be sure, as we drag closer to the Nov 2020 elections, China’s leverage seems to grow, if for no other reason than a collapse in trade talks could spark a major market selloff and torpedo both the economy and Trump’s approval rating.
As such, Trump’s main priority at the moment is to secure a big phase one announcement, locking in big-ticket Chinese purchases of U.S. agricultural goods that he can tout as an important win during his re-election campaign, according to a Trump administration official. After that, and as the news cycle entered the home stretch of the elections, China would recede on Trump’s policy agenda as he turns to domestic issues, the Reuters soruce said, speaking on condition of anonymity.
He will probably leave other major contentious issues to senior aides, who are likely to continue pushing Beijing over the theft of U.S. intellectual property, its militarization of the South China Sea and its human rights record, the official said.
“As soon as we finish phase one we’re going to start negotiating phase two,” a second administration official said. “As far as timing around when a phase two deal could be completed, that’s not something I can speculate on.”
The Trump White House initially laid out ambitious plans to restructure the United States’ relationship with China, including addressing what a 2018 United States Trade Representative investigation concluded were Beijing’s “unfair, unreasonable, and market-distorting practices.” Alas, in the past year, this ambitious goal shriveled to what amounted to China buying the same amount of agricultural products from the US… as it did in 2017.
Ironically, in a massively divided Congress, there is broad bipartisan support for Trump’s drive to hold China accountable for years of economic espionage, cyber attacks, forced technology transfer and dumping of low-priced goods made with hefty government subsidies. However, most of these critical concerns will not be addressed in the phase one agreement, which focuses on China agricultural product buys, tariff roll backs, and includes some intellectual property pledges.
“That’s the easy stuff,” said Costa. The harder issues are “industrial espionage, copyrights, complying with those issues, privacy and security issues.”
It’s those issues that will certainly not be resolved before the 2020 election… if ever.
Further complicating the issue, Trump’s economic advisers are split: some – such as Larry Kudlow – are pushing Trump to agree to a quick phase one deal to appease markets and business executives, others – such as Peter Navarro – want him to push for a more comprehensive agreement.
At the same time, Beijing officials are balking at pursuing larger structural changes to managing China’s economy, anxious not to appear to be kowtowing to U.S. interests.
That said, both China and the United States have a clear interest in getting a phase one deal completed relatively soon to soothe markets and assuage domestic policy concerns, said Matthew Goodman, a former U.S. government official and trade expert at the Center for Strategic and International Studies. Which is why there is a very good chance that the two sides will hammer out some phase one deal, even if just a placeholder for a photo opportunity, but a broader deal will not be reached before the election, or perhaps after. One key problem, he said, was the continued lack of a coherent U.S. strategy for dealing with China.
“I think phase one probably will happen because both presidents want it,” Goodman said at a Congressional briefing last week. But he said China was less willing now to make structural changes that might have been possible in the spring. “They’re not going to do those things,” he said.
Josh Kallmer, a former official with the U.S. Trade Representative’s office and now executive vice president of the Information Technology Industry Council, told Reuters that it was “technically possible, but hard to imagine” that the United States and Beijing could negotiate a phase two deal in the next year.
One reason for the logistical complexity is that the United States needs better coordination with its allies to pressure China to make urgently needed structural changes, including ending the forced transfer of technology and better intellectual property protections, trade experts and former officials say.
And as Trump’s trade feud with Beijing escalated, Europe and other U.S. allies have been reluctant to join Washington’s pressure campaign on Beijing, partly due to frustration with the administration’s focus on unilateral action but mostly due to their reliance on Chinese investment.
“We need an international coalition to successfully attack phase two,” said Kellie Meiman Hock, managing partner at McLarty Associates, a trade consulting group in Washington.
Such a coalition is not coming, which is also why anyone hoping for more than a token “deal” will be disappointed. On the other hand, with markets pricing in a successful deal every single day since the summer of 2018, dangling the carrot that a Phase 1 deal is “just around the corner” may be precisely what the doctor ordered to have the S&P trade around 3,400 or higher just before the presidential election. And that, far more than getting an actual trade deal with China, is what Trump has been after all along.
Tyler Durden
Sun, 11/24/2019 – 20:33 - Fed's Kashkari Says It's Time For The Federal Reserve To Start Redistributing Wealth
Fed's Kashkari Says It's Time For The Federal Reserve To Start Redistributing Wealth
It may come as a surprise to some younger Americans, but the US did not always have income tax. In fact, one of the main catalysts behind the American Revolution and resulting War of Independence was the colonial protest against British taxation policy in the 1760s. Then, in the beginning, the independent nation collected taxes on imports, whiskey, and (for a while) on glass windows, even as states and localities collected poll taxes on voters and property taxes on land and commercial buildings. In addition, there were state and federal excise taxes. But all throughout, there was no official income tax for nearly a century and a half.
Yet while the United States imposed income taxes briefly during the Civil War and the 1890s, it was not until the 16th Amendment was ratified that the US permanently legalized a federal income tax in 1913. Incidentally, that was the same momentous year – just before the start of World War I – that another milestone event in US history took place: the birth of the Federal Reserve. Shortly thereafter, states also began collecting sales taxes in the 1930s.
Ever since then, the history of US taxation has been on of “optimal” outcomes, of progressive policies, and ultimately, of wealth redistribution according to whatever party or ideological bent was in control.
Yet no matter what one though of US tax policy, one thing was immutable: it was always and only in the hands of the Federal and State government to impose whatever taxation was deemed appropriate. For better or worse, tax was synonymous with politics.
That may be changing.
Fast forward to 2019, when after a decade of unprecedented inequality spurred by the Federal Reserve’s policies, which made the rich richer, and the poor and middle classes poorer to the point that just 1% of the US population now owns as much wealth as the middle and lower classes combined…
… the same “apolitical”, private Federal Reserve, which is owned by a handful of commercial banks and whose members have never been subject to election by the general population…
… now wishes to formalize its wealth redistribution agenda, and effectively become a political force which determines who gets richer and who gets poorer.
As Bloomberg News reports today (now that it can no longer report on the travails of either its boss, Michael Bloomberg or his challengers for the Democratic primary even if it still has free reign to bash Donald Trump each and every day), Neel Kashkari, the former Goldman employee who was instrumental in the drafting of TARP and the bailout of the US financial system, and outspoken dove at the Minneapolis Fed, said “monetary policy can play the kind of redistributing role once thought to be the preserve of elected officials.” And as Bloomberg notes, “while that likely remains a minority view among U.S. central bankers, Kashkari has helped lay the groundwork for a shift in Fed communication this year.”
Needless to say, while Kashkari is all for deciding who gets what – arguably the most political of positions – he is very much against being subject to a periodic popular vote. Because, you know, the Fed knows best, and once you permit a democratic choice, the whole myth of an omnipotent Fed falls apart. As such, what Kashkari is proposing is despotism, pure and simple, one where a group of unelected career economists and various other bureaucrats has the final say on not only the price of money (determined by the Fed Funds rate), but also who ends up getting that money!
While the Fed sternly refuses to acknoleldge that the rotting cancer at the heart of its chronic inability to correctly diagnose the US economy (just over a year ago, we were a “long way away from neutral”… then just a few months later, the Fed flipped a U-turn and not only started slashing rates but launched QE4) is its inability to correctly measure inflation, and specifically admit that asset price inflation matters just as much as “economic” inflation…
… even as it chronically underestimates just how disproportionately more rising prices impact poorer Americans compared to richer ones (as we discussed previously here), it appears to be more than happy to propose expanding its role, and besides determining monetary policy, it is now generously willing to also opine on proper wealth distribution, read keeping rates low forever, and dooming all those who save to financial extinction.
Enter former Goldmanite and PIMCOite, Neel Kashkari, who believes he is the man best suited for the monumental task of singlehandedly deciding an outcome best left for the entire economy.
When Kashkari, a year into his job, launched an in-house effort in 2017 to examine widening disparities in the economy, yet clearly failing to realize the Fed’s own massive contribution to the record wealth inequality between the rich and poor, as it was the Fed’s policies that made those handful of Americans who owned financial assets richer than ever, while “redistributing” wealth away from savers and the rest of the American population, he was expecting to generate research that might inform lawmakers’ decisions, rather than the Fed’s.
“We had historically said: distributional outcomes, monetary policy has no role to play,” Kashkari told Bloomberg in an October interview. “That was kind of the standard view at the Fed, and I came in assuming that. I now think that’s wrong.”
For those confused by this word salad, what Kashkari now thinks is that it is right for the Fed to have a role in deciding distribution outcome!
The Bloomberg article then launches into an extended report of just how Kashkari hopes to legitimize his effort of elevating the Fed to the rank of supreme US despot, an emperor’s circle of unelected, career economists who take central planning in the US to a level the USSR never even conceived of, and we are confident readers can go through it on their own, especially since it includes such phrases as “paradigm shift” which is what the Bloomberg writer decided to throw in to indicate just how above the average reader he himself is, what we will say is this: trickle-down economics has failed every single time.
And now, instead of finally admitting that this core premise behind its 106 years of failed monetary policies which have made the bubble-bust mentality the norm and which guarantee that the next crash may well wipe out not only the Fed itself but western civilization as we know it, the Fed’s proposal is a “modest” one – give it even more power to determine who is rich, and who is poor, and asks just one thing: trust it that this time it will get it right.
Of course, the real motive behind Kashkari’s modest proposal is even more nefarious: the eventual fusion of monetary and fiscal policy, which in turn will greenlight the direct monetization of US debt by some super-governmental authority, call it the Treasury or whatever – one which we are confident will also be headed by a group of people who will never be subject to a popular vote – in hopes of allowing the US to effectively issue unlimited amounts of debt, i.e., launch MMT, in the process sparking enough inflation to finally inflate away America’s staggering debt load.
This will go on as long as the US Dollar maintains its reserve status, a process that will be vastly accelerated should Kashkari’s proposal – which one can comfortably argue is far more aligned with what Putin could desire in terms of destroying America’s superpower status than anything Trump has done to date – get solid footing among the “intellectual elite” of the United States.
Of course, long before the collapse of the dollar, it will also result in civil war, because if there is one thing the Fed knows how to do – and we say this without jest of sarcasm – is to make the rich even richer and the poor poorer. However, it is safe to say that US society is already nearing its breaking point, and should the Fed officially (rather than just unofficially) enter the wealth redistribution process, that would without doubt be the straw that finally breaks the American camel’s back.
Tyler Durden
Sun, 11/24/2019 – 20:20 - What Happens When The Economic Momentum Ends?
What Happens When The Economic Momentum Ends?
Authored by Bruce Wilds via Advancing Time blog,
The economic landscape before us continues to look like something out of “Alice And The Looking Glass”. A bizarre and unrecognizable land, a land that is distorted and papered over by ream after ream of paper. For over a decade this paper has been rolling off the printing presses of central banks all across the world in an attempt to mask reality. Peter Schiff says, printing money is to the economy what taking drugs is to a drug addict. In the short term, it makes the economy feel good, but in the long run, it is much worse off. Unfortunately, what was once the “long-run” or “distant future” is now getting much closer.
At some point we have simply overbuilt!
Many people are now set to blame any slowdown in global growth on what has been declared a very dangerous and protracted trade war. Going into it many economists warned it could be truly disastrous for the entire global economy. In my opinion, the fear of slowing trade and how it will affect America is being overplayed and is not the chief catalyst for a slowdown here in America. While it is easy to target trade as the culprit and Trump as the instigator this conclusion is not supported by facts. We should remember the economy moves in cycles and this one is long in the tooth by historical standards.
Since the Bernanke experiment began, time and time again, the green shoots of economic growth have withered and required more stimulus in order to move to the next level. Each prediction of achieving escape velocity has proven to be short-lived or overly optimistic. These bursts of good news have continually been followed by disappointing economic data forcing some kind of stimulus to get the economy over the next hurdle. When all is said and done I expect economists will argue for decades over whether Bernanke indeed took us down the wrong path because “easy money” allows us to ignore important problems.
When it comes to the economy we are not talking about a well-oiled and designed machine and in the end, we may find that events are not completely under the control of those who have been placed in the driver’s seat. We have just been through an expansion in credit and the monetary base of a magnitude never before witnessed in modern times. The influx of monetary stimulus from QE and massive government deficit spending has created the illusion of more pent up demand then exists or can be substantiated.
This has resulted in an elevated baseline for comparing year on year growth, in short, we have to move forward faster next year just to keep growing. For example, if we manufacture and sell twelve million automobiles this year up from ten million because of low interest rates and easy money, we now must sell the same number for the economy not to contract. This means the bar is constantly being lifted and we must sell even more next year in order to move forward. The whole concept of economic growth is based on an ever-growing trend of year over year increased production.
Click Here To Enlarge
The bad news is that even after the latest wave of fresh stimulus, global growth is again starting to drop according to the OECD’s latest report on the Economic Outlook. The report from the Paris based policy forum titled; Weak trade and investment threaten long-term growth, paints a bleak picture of what’s to come. The world economy is quickly decelerating after peaking at 3.5% in 2018. Going forward the global GDP is expected to grow at a decade low of only 2.9% this year and remain in the range of 2.9% to 3% through 2021.
Throughout history, new trends and inventions have emerged shaking things up and propelling growth. Also, we have become accustomed to what is known as “sector rotation.” Such as computer sales increase when clothing falls, but overall we seek numbers that reflect an upward and onward slope. History shows that such trends falter when they become overdone and become a headwind for growth, Central bank action coupled with massive government spending in recent years has acted as an “artificial tailwind” but this is not a normal state which can be sustained.
So the question is, what happens after the momentum ends? After QE can no longer increase demand. After most or all of this easy money has flowed into the investment “of the day,” what happens when it begins to flow out? The problem is this so-called recovery has been constructed on the unstable base of false demand and debt. It is not uncommon to see debt sour when the economy slows, and this can rapidly occur. Time has a way of revealing certain realities but does so at its own choosing. While we tend to think that we will see “it coming,” and have ample time to react if it becomes apparent the markets are about to crash the speed at which events can occur is often a surprise.
Many people have come to accept the fact the world might soon witness a major shift in the value of one investment over another as investors seek firmer ground. Derivatives, currencies, plunging stock prices, air rushing out of a bond market bubble, how debts are structured, and the timing or direction from which problems arise are all factors that must be considered. Investors are constantly reminded that investing involves risk, investing in foreign markets is subject to additional risk including currency fluctuations. This means we face the loss of principal or capital. Year after year of climbing markets tends to make people complacent and that is where we are.
Tyler Durden
Sun, 11/24/2019 – 19:55 - As Africa Drowns In Debt To China, IMF Sounds The Alarm
As Africa Drowns In Debt To China, IMF Sounds The Alarm
With China’s total debt most recently clocking in at a record 300% according to the IIF…
… the country that a decade ago managed to pull the world out of a financial depression thanks to its massive debt issuance, finds itself severely constrained in how much new debt it can dish out, and the result is a now paltry credit impulse…
… which has so far been unable to push China out of its PPI slump, which in turn means that Beijing will continue dumping its exports abroad in a deflationary wave.
And yet, with Beijing now severely limited by how much debt it can raise domestically, China has come up with creative ways to circumvent such problems at the international level where it has taken a page out of America’s debt colonization playbook and done virtually the same with the continent of Africa.
But first, a quick reminder of an article we published in the long ago 2012, when we showed a map depicting the “Beijing Conference“, a spin on the Berlin Conference of 1885 which divided Africa among Europe’s then superpowers, and which showed how China had quietly taken over Africa, and specifically its commodity riches.
As we warned then, China’s “noble” crusade to modernize Africa, would not come cheaply, because less than a decade later Africa – that final debt frontier – is suddenly finding itself with an all too developed problem: too much debt… and almost all of it is owed to China.
And none other than the International Monetary Fund is now raising the alarm about Africa’s soaring debt level, with about 40% of countries on the continent at “distressed levels”, Managing Director Kristalina Georgieva said, noting that “in some cases we are concerned, in others we see that investing is going to pay off over time,” Georgieva said in an interview with Bloomberg TV from Berlin.
Needless to say, that’s an understatement – debt levels in the region have been surging as governments funded massive infrastructure projects – usually involving a Chinese “co-investor” – and are now struggling to collect and grow revenue while increasing their budgets.
In Zambia, government debt, including publicly-guaranteed obligations, is set to increase to 92% of GDP this year, and 96% in 2020, according to the IMF. South Africa’s ratio is projected to reach 81% of GDP by 2028 and Kenya recently doubled its debt ceiling to match the size of the entire economy.
“We do advise Kenya to be somewhat more cautious in building debt, but we have seen good macroeconomic policies in Kenya,” she said. “Our program with the country, our engagement with the country, by and large, are just as positive.”
Overall, sub-Saharan African debt is set to double in the past decade, largely as a result of China’s tactical approach to offshore new debt creation away from the mainland and to its offshore colonies, an “outsourcing” which we are confident “Confessions of an Economic Hitman, Part 2” will be delighted to cover.
“Debt on its own is not bad, it is bad when it goes for the wrong things, and when it goes with a speed that the economy cannot handle,” Georgieva said. “In cases where debt is dangerous – take Zambia – we do say, you need to really get a handle on your debt. In other cases, like Ethiopia, we say you do need to renegotiate some of your debt.”
Somehow we doubt China will be losing much sleep over Africa’s debt woes: after all, with most of this debt owed to China, once the debt is restructured, it is China that ends up the owner of the underlying assets, effectively colonizing an entire continent’s most valuable assets without firing a single shot.
Meanwhile, as we noted back in January, just seven countries – the strategically important Angola, Cameroon, Ethiopia, Kenya, Republic of the Congo, Sudan and Zambia – accounted for two thirds of total cumulative borrowing in 2017 from China, with oil-rich Angola alone representing a 30% share, or $43 billion (35% of Angolan 2017 GDP). Ultimately, Angola reached a loans-for-oil settlement, with Beijing tying the country’s future oil production to shipments to China in order to service the country’s burgeoning infrastructure debt. According to an April 2018 IMF study, as of the end of 2017, about 40% of low-income Sub-Saharan African countries are now in debt distress or assessed as being at high risk of debt distress including Ethiopia, the Republic of the Congo and Zambia.
Amusingly, in a September 2018 speech to the triennial Forum on China-Africa Cooperation in Beijing, President Xi Jinping said Chinese investment came “with no strings attached” and pledged a further $ 60 billion of loans for African infrastructure development over the next three years. As it turns out, Xi was only joking because as we reported previously, China was set to take over Kenya’s lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China. The China-built, China-funded standard gauge railway, also known as the Madaraka Express, was plagued by cost overruns, and outside observers questioned its economic viability, but China was not worried: after all, if the 80%-China funded project failed, Beijing would have full recourse. Call it a “debt-for-sovereignty” exchange.
It’s not just Kenya and Angola: other notable examples of China’s debt-funded colonization endgame include Sri Lanka, where difficulties servicing $8 billion of infrastructure-related borrowing from China led to the handing over of a controlling equity stake and a 99-year operating lease for the country’s second-largest port at Hambantota to a subsidiary of a Chinese state-owned enterprise in December 2017. For Pakistan, more than 90% of revenues generated at the critical Gwadar Port at the mouth of the strategically significant Gulf of Oman are collected by the Chinese operator.
In fact, while the US and Europe have been scrambling to monetize their own debt over the past decade to avoid a social catastrophe, China was busy becoming the top creditor to not just most of Africa, but countless developing nations, in the process also effectively colonizing them, as after the inevitable debt restructurings, China will end up owning a majority of the developing world’s assets.
And so, as more developing, peripheral countries default on Chinese loans and are forced to hand over the keys to key sovereign projects to Beijing, China will slowly but surely “colonize” not just Africa but many of the Asian nations in the “Belt and Road Initiative” following a popular playbook developed by none other than the original “economic hitmen“…
Tyler Durden
Sun, 11/24/2019 – 19:30 - China Today Is Like Japan In 1989
China Today Is Like Japan In 1989
Authored by Mike Shedlock via MishTalk,
China is slowly and surely going down the path of Japan. It is aging rapidly as bad bank debts pile up.
‘Japanification’ Stalks the US, Europe, and China
The Financial Times comments ‘Japanification’ stalks the US and Europe
The FT did not include China in its discussion.
Let’s take a look down that path.
Japanification of China Well Underway
A Fascinating Conversation With Renowned Short Seller Jim Chanos on Hedgeye TV got me thinking more about China.
I made 15 notes. Consider notes 4 and 6.
4: China is still the biggest real estate bubble in history.
6: Similarities between Japan in 1980’s and China Today.
China’s Looming Crisis
Please consider China’s Looming Crisis: A Shrinking Population.
A decline in the birth rate and an increase in life expectancy means there will soon be too few workers able to support an enormous and aging population, the academy warned. The academy estimated the contraction would begin in 2027, though others believe it would come sooner or has already begun.
The government has recognized the worrisome demographic trend and in 2013 began easing enforcement of the “one child” policy in certain circumstances. It then raised the limit to two children for all families in 2016, in hopes of encouraging a baby boom. It did not work.
Dateline 2050 Projection
Replacement Level Fertility
One cannot lay all the blame for this on one child policy.
The US is also below replacement level fertility.
Please don’t suggest the answer is immigration.
Europe is aging far faster than the US, and we saw what happened to Merkel’s open arms invitation of refugees who could not speak German and had no skills at all.
China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks
Please consider China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks
Population Demographics
China resembles Japan in what is arguably the most important long-term factor affecting debt and prices: population demographics.
Japan’s paradigm shifted when it’s workforce began to shrink, which was ~15 years before its overall population began shrinking, and China is in a very similar position today.
$250 Trillion in Global Debt: How Can That Be Paid back?
In light of population demographics, increasing needs of healthcare of retirees, and massively underfunded pensions I again ask, $250 Trillion in Global Debt: How Can That Be Paid back?
Population demographics alone show the futility of central bank efforts to cram more debt into a global financial system choking on debt.
A currency crisis awaits, please click on the above link for further discussion.
Meanwhile, please ask, what the hell China is going to do with the massive number of vacant and unaffordable apartments it is building.
Addendum – Michael Pettis Chimes In
In my opinion China can only avoid following Japan’s path if it rebalances 2-3 times as aggressively as Japan did and if it begins aggressively to write down debt against local government assets. Otherwise I don’t see how it avoids 2-3 decades of much lower growth.
— Michael Pettis (@michaelxpettis) November 23, 2019
Tyler Durden
Sun, 11/24/2019 – 19:05 - Queen Cancels Prince Andrew's 60th Birthday For Being Besties With Dead Pedophile
Queen Cancels Prince Andrew's 60th Birthday For Being Besties With Dead Pedophile
After being ordered out of Buckingham Palace and formally relinquishing his official duties following a catastrophic interview with the BBC, Prince Andrew’s 60th birthday party has been canceled by his mother, the Queen.
According to the Sunday Times, Andrew will instead be treated to a small family gathering for his February 19 birthday.
During the ill-advised interview, the 59-year-old prince who stands accused of pedophilia by Virginia Roberts Giuffre, gave non-credible excuses for his relationship with Jeffrey Epstein, who died in a prison cell awaiting trial on charges of running an underage sex-trafficking ring.
Giuffre’s claims that she was forced to have sex with Prince Andrew at least three times, and remembers him “sweating all over me.”
Andrew, in response, claims that he cannot sweat as the result of a war injury.
“I have a peculiar medical condition,” Andrew told the BBC’s Emily Maitlis. “Which is that I don’t sweat, or I didn’t sweat at the time … because I had suffered what I would describe as an overdose of adrenaline in the Falklands War when I was shot at.”
“And I simply — it was, it was almost impossible for me to sweat.”
Twitter users promptly flooded their feeds with pictures of Andrew sweating at various events.
“I don’t sweat”, said the profusely sweating man#PrinceAndrew pic.twitter.com/DmQOLsxreM
— Mors 🔇 (@MorsStupebit) November 17, 2019
Prince Andrew is Sweating alright in this photo and he is even loosening his collar. #Nonce pic.twitter.com/b4w0KZoYXx
— JmRoyle #GTTO #EngineOfHope (@MyArrse) November 20, 2019
According to the Sunday Times, the Queen did not give her approval for the BBC interview.
“Andrew had a son-to-mother conversation, letting her know that he was planning to address the controversy, but without going into any details… What should have happened was the full palace process,” a source told the Times.
The queen is Canceling Andy’s birthday party, that will surely show him, I bet he’ll never be involved in a global sex trafficking ring again. https://t.co/Sx1q2oPyQi
— Molly Jong-Fast (@MollyJongFast) November 24, 2019
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Tyler Durden
Sun, 11/24/2019 – 18:40 - Hedge Fund CIO: "We Are Playing The Game Called Institutional Investor"
Hedge Fund CIO: "We Are Playing The Game Called Institutional Investor"
Submitted by Eric Peters, CIO of One River Asset Management
We were playing the game called Institutional Investor.
Winners develop an equation to produce +7.5% returns in perpetuity. All other players declare insolvency.
Beginners play backwards through time, everyone wins, participation trophies abound. They simply average long-term historical equity and bond returns, combine them in any ratio, and can’t help but hit +7.5%.
The advanced game is played in real time, requiring you to look forward. Your bonds pay exactly +1.77% each year for the coming 10yrs.
What of stocks? The S&P 500 Shiller Price-to-Earnings Ratio is 30.2 which implies a -2% compound annual return over the coming 8yrs to return the ratio to its 17.0 mean. But not all things return to mean.
If the Shiller P/E is 50% above mean in 8yrs, it implies a nearly +3% annualized S&P 500 return. And if it falls 50% below mean, stocks annualize at roughly -10% for the coming 8yrs.
There is no mathematical equation using even the most optimistic of those returns which produces +7.5%, even playing the leveraged private equity game.
Of course, it’s possible a new bull market has begun. But in 150yrs, only secular bear markets have started with the Shiller P/E above 30 (secular bulls all began with the Shiller P/E between 5-10).
The thoughtful guys at GMO estimate the following 7yr forward annualized real returns: US large cap equity -3.9%, US small caps -1.0%, Int’l large caps -0.1%, Int’l small caps +1.7%, EM equity +4.7%, EM value equity +9.3%, US bonds -2.2%, Int’l bonds (hedged) -3.9%, EM debt -0.1%, US TIPS -1.7%, US cash +0.1%.
The only equation using GMO estimates that gets you to +7.5% includes a 75% allocation to EM value equity – and that move is strictly prohibited in the game of Institutional Investor.
In fact, playing the game forward, the only equations that work include heavy allocations to aggressive asset allocators, activist investors, absolute-return relative value strategies, volatility trading, and trend following.
Or else they contain an ill-defined ‘hope’ function.
Tyler Durden
Sun, 11/24/2019 – 18:20 - Chris Matthews Asks Gabbard: Why Are So Many Democrats War Hawks?
Chris Matthews Asks Gabbard: Why Are So Many Democrats War Hawks?
In a rare moment with MSNBC’s Chris Matthews, Democratic presidential candidate Tulsi Gabbard explained why the leading figures in her party are war hawks. Far from days of the Democrats feigning to have any semblance of an ‘anti-war’ platform (only convenient for Liberal activism during the Bush years, but fizzling out under Obama), today’s party attempts to out-hawk Republicans at every turn.
“I’m looking at the Democratic establishment figures,” Matthews introduced, “people I normally like. John Kerry, Joe Biden, Hillary Clinton. You go down the list. They all supported the war in Iraq. Why were they hawks?“ (Though we might ask, what do you mean, “were?”). “Why so many Democrats with a party that’s not hawkish, why are so many of their leaders hawks?” Matthews reiterated.
In the segment, Matthews heaps rare praise on Tulsi for being “out there all alone tonight fighting against the neocons.”
Chris Matthews: “Why are so many Democrat leaders war hawks?” Intelligent but all too rare question from MSM. So important to our country/world. Only had a minute to reply. Listen for yourself. #TULSI2020 pic.twitter.com/CXEW4Qdm3H
— Tulsi Gabbard (@TulsiGabbard) November 23, 2019
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“Yeah,” Tulsi answers. “I point to two things. One is you have the foreign policy establishment and the military-industrial complex in Washington that carries such a huge amount of influence over both parties.”
She continues, “There are campaign contributions, the influence that these contractors have in this pay-to-play culture, this corrupt culture in Washington, but you also just have people who don’t understand foreign policy and who lack the experience to make these critical decisions that impact our lives and the safety and security of the American people. This is so serious about what’s at stake here.”
Democratic presidential primary debate, Wednesday, Nov. 20, 2019, in Atlanta, via the AP. The interview happened immediately after this week’s fifth Democratic debate Wednesday night in Atlanta, and after pundits have continued to complain that Gabbard is a ‘single issue candidate’.
However, is there any candidate in her party or in the GOP saying these things?
We find ourselves in a rare moment of agreement with MSNBC’s Matthews: she is “out there all alone tonight fighting against the neocons.”
Tyler Durden
Sun, 11/24/2019 – 17:50 - Navy Secretary Fired Over SEAL Controversy
Navy Secretary Fired Over SEAL Controversy
Update: President Trump has weighed in over Twitter, writing that he was “not pleased” with how Gallagher’s trial was handled and that Spencer had been terminated. He also cited “large cost overruns from past administration‘s contracting procedures,” adding “Eddie will retire peacefully with all of the honors that he has earned, including his Trident pin.” :
….contracting procedures were not addressed to my satisfaction. Therefore, Secretary of the Navy Richard Spencer’s services have been terminated by Secretary of Defense Mark Esper. I thank Richard for his service & commitment. Eddie will retire peacefully with all of the…..
— Donald J. Trump (@realDonaldTrump) November 24, 2019
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….contracting procedures were not addressed to my satisfaction. Therefore, Secretary of the Navy Richard Spencer’s services have been terminated by Secretary of Defense Mark Esper. I thank Richard for his service & commitment. Eddie will retire peacefully with all of the…..
— Donald J. Trump (@realDonaldTrump) November 24, 2019
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***
Secretary of Defense Mark Esper asked Navy Secretary Richard Spencer to resign on Sunday after the Pentagon chief lost confidence in how Spencer handled the case of a Navy SEAL accused of war crimes in Iraq, according to the Pentagon.
President Trump sits next to former Navy Secretary Richard V. Spencer in July Spencer’s resignation stems from the controversial case of Chief Petty Officer Edward Gallagher, a Navy SEAL who was accused of war crimes during a 2017 deployment and later acquitted of murder. He was convicted in July of posing with the corpse of a captive, according to the Washington Post.
Esper asked for Spencer’s resignation after learning that he had privately proposed to White House officials that if they did not interfere with proceedings against Gallagher, then Spencer would ensure that Gallagher was able to retire as a Navy SEAL, with his Trident insignia.
Spencer’s private proposal to the White House — which he did not share with Esper over the course of several conversations about the matter — contradicted his public position on the Gallagher case, chief Pentagon spokesman Jonathan Hoffman said in a statement. –Washington Post
Esper said that he was “deeply troubled by this conduct.”
“Unfortunately, as a result I have determined that Secretary Spencer no longer has my confidence to continue in his position,” Esper added in a statement. “I wish Richard well.”
Spencer made his ‘indecent’ proposal to the White House after Trump intervened in the cases of Gallagher and two other soldiers on November 15 against Pentagon advice. He also issued pardons to Army Maj. Mathew Golsteyn, who faced a murder trial next year, and former 1st Lt. Clint Lorance, who was convicted in 2013 in the murder of two unarmed men in Afghanistan.
Notably Gallagher’s legal team included Trump’s personal attorney, Marc Mukasey as well as former New York City police commissioner Bernard Kerik, who served a brief stint with Iraq’s Coalition Provisional Authority following the 2003 invasion.
Trump reinstated Gallagher’s rank after he was demoted for posing with the corpse, which Esper agreed with.
“The Navy will NOT be taking away Warfighter and Navy Seal Eddie Gallagher’s Trident Pin,” Trump tweeted last week. “This case was handled very badly from the beginning. Get back to business!”
The Navy will NOT be taking away Warfighter and Navy Seal Eddie Gallagher’s Trident Pin. This case was handled very badly from the beginning. Get back to business!
— Donald J. Trump (@realDonaldTrump) November 21, 2019
Following Trump’s tweet, the Navy was given White House guidance on November 22 that it would be allowed to proceed as planned according to an anonymous Navy official. According to the Epoch Times, however, “This would seem to have defused a conflict between the president and Navy leaders. Navy Secretary Richard Spencer said Nov. 23 at an international security forum in Halifax, Nova Scotia, that he didn’t consider a tweet by Trump an order. He said he would need a formal order to stop the Navy review board, scheduled to begin Dec. 2, that would determine whether Gallagher is allowed to remain in the SEALs.”
“I need a formal order to act,” Spencer said.
And now, he’s been formally fired.
Tyler Durden
Sun, 11/24/2019 – 17:26 - Fracking Blows Up Investors Again: Phase 2 Of The Great American Shale Oil & Gas Bust
Fracking Blows Up Investors Again: Phase 2 Of The Great American Shale Oil & Gas Bust
Submitted by Wolf Richter of WolfStreet
In 2019 through third quarter, 32 oil and gas drillers have filed for bankruptcy, according to Haynes and Boone.
Since the end of September, a gaggle of other oil and gas drillers have filed for bankruptcy, including last Monday, natural gas producer Approach Resources. This pushed the total number of bankruptcy filings of oil and gas drillers since the beginning of 2015 to over 200. Other drillers, such as Chesapeake Energy, are jostling for position at the filing counter.
Chesapeake has been burning cash ever since it started fracking. To feed its cash-burn machine, it has borrowed large amounts and has been buckling under its debt for years, selling assets to raise cash and keep drilling for another day. But its debt is still nearly $10 billion. Its shares closed on Friday at 59 cents.
On November 5, in an SEC filing, it warned of its own demise unless oil and gas prices surge into the sky asap: “If continued depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant, our ability to comply with the leverage ratio covenant during the next 12 months will be adversely affected which raises substantial doubt about our ability to continue as a going concern.”
In early 2016, during Phase 1 of the oil bust — which had started in mid-2014 — Chesapeake had already used the threat of bankruptcy to push its creditors into accepting a debt restructuring. At the time, it was the second largest natural gas producer in the US.
The debt restructuring reduced its debt burden somewhat and pushed maturities out, which then allowed it to borrow new money from new investors with a series of bond sales. This coincided with the Wall Street floodgates reopening to the oil and gas sector, when PE firms, hedge funds, and distressed-debt funds piled billions of dollars into the sector, and many of the oil and gas drillers were able to raise more cash to burn.
Chesapeake’s series of bond sales that it then undertook included, in January 2018, $1.25 billion of senior unsecured convertible notes with a coupon of 5.5%, due in September 2026. It issued those bonds at a discount, but by July 2018, a few months before Phase 2 of the oil bust set in, the bonds were trading at 103 cents on the dollar. On Friday, the last trade was at 45 cents on the dollar, giving these bonds a yield of over 21% (via TRACE, FINRA’s Trade Reporting and Compliance Engine):
Other exploration and production (E&P) companies have seen their shares get crushed as reality began to re-set in.
Whiting Petroleum shares [WLL] had spiked to $370 in August 2014, when the oil bust was setting in. By the trough of Phase 1 of the oil bust, in February 2016, its shares had plunged to $14. Then new money started flowing into the sector, and its shares rallied to $55 by August last year. Then Phase 2 of the oil bust set in, and after some disastrous earnings reports, its shares closed on Friday at $5.34.
In June 2018, Whiting sold $1 billion of callable senior unsecured bonds, with a coupon of 6.625%. The next call date is in October 2025. Through September 2018, the notes were trading at 103-104 cents on the dollar. Then Phase 2 of the oil bust took its toll. On Friday, the bonds closed at 57.8 cents on the dollar, at a yield of 18.375% (via FINRA’s TRACE):
The S&P U.S. High Yield Corporate Distressed Bond Index tracks bonds that trade at a yield that is at least 10 percentage points higher than the equivalent Treasury yield (“Option Adjusted Spread” of 1,000 basis points). Chesapeake’s bond illustrated above, trading at 21%, and Whiting’s bond trading at 18.375% qualify for this index with flying colors. Of the 182 constituents in the index, many are energy bonds. Since November 2018, the index has plunged by 28%:
Now there are stories circulating of how billionaires, who in 2016 believed the hype that the fracking bust was over, have gotten tangled up and lost tons of money on their bets. Bloomberg recounts one such story, of the brothers Farris and Dan Wilks in Texas.
In 2002, they’d turned their stone-mason expertise into Frac Tech Holdings. Chesapeake, the fracking pioneer with the collapsed shares and bonds above, acquired a 25.8% state in 2006. They became billionaires in 2011 when they sold the remainder of the company to an investor group led by Temasek Holdings, which is owned by the Government of Singapore, for $3.5 billion. They then bought large swaths of land in five states, becoming the top property owners in Montana and Idaho.
However, not all of their wealth went into real estate. In 2016, the brothers started investing heavily in the fracking industry through their investment company, Wilks Brothers LLC, including oil and gas drillers in the Permian Basin and suppliers, such as frac sand supplier Carbo Ceramics, of which the brothers are the second largest investors.
Back in 2015, Carob Ceramics [CRR] still traded at over $40 a share. By October 2016, shares had dropped into the $6-range. Then the Permian boom started, and in early 2018, shares were trading at $12. But then the long hard decline continued, as demand for frac sand vanished as drillers were running out of cash and cut back on their drilling activity, and on Friday, shares closed at 41 cents.
The brothers also invested $110 million in the above-mentioned natural-gas driller Approach Resources, which filed for bankruptcy last Monday. They invested in Alta Mesa Resources, which filed for bankruptcy in September, and they invested in Halcon Resources, which filed for bankruptcy in August (its second filing, after having already filed in 2016).
Bloomberg notes:
“Eight of the 10 biggest holdings in a portfolio spanning more than 50 investments have dropped since June 2018, when they were worth almost $1 billion. In a filing last week, they reported stakes in just seven entities worth a total of only $35.7 million. The combined value of those remaining holdings plunged by $171.2 million, or 88%, since they were initially disclosed.”
The shale oil and gas business has turned the US first into the largest gas producer in the world, and then this year also into the largest crude oil producer in the world. It’s a huge business, with lots of high-paying jobs, not only in the oil field but in technology sectors, including software and hardware, manufacturing of heavy equipment, transportation, materials, and of course construction – ranging from pipelines and housing in the oil field to now partially empty office towers in Houston where, according to JLL, the office vacancy rate in Q3 climbed to an astounding 24%.
The shale oil and gas business, when it’s hopping, is great for the US economy. Its activities feed a significant part of US industrial production, including manufacturing. It pays well, and manufacturing for the industry pays well, and construction for the industry pays well, and the tech components of the industry pay well, and these workers are spending their income on new vehicles and houses and other things, and boost the economy.
Shale oil and gas drilling is awful for the land, water, and the broader environment. But so are all other methods of supplying power and fuel to an economy, including mountain-top coal mining, burning coal, hydro (which destroys entire canyons and rivers), nuclear power (nuclear waste, Fukushima, Chernobyl), even wind and solar power (the “fuel” is free and clean but producing and placing the equipment creates its own problems). When it comes to power and fuel, there are only compromises, some worse than others, and fracking is one of them.
And it’s brutal on investors at prevailing prices. The industry has been cash-flow negative from get-go. The high prices of oil and gas the industry needs to be cash-flow positive are being prevented by prolific shale oil and gas production. Executive compensation packages have been self-designed to reward richly any increases in production, hence no-matter-what increases in production.
And investors who believed the industry’s ceaseless hype are now grappling with reality – that their money was drilled into the ground and is gone.
Tyler Durden
Sun, 11/24/2019 – 17:25 - Elon Musk Claims There's Already 187,000 "Orders" For Tesla's Cybertruck
Elon Musk Claims There's Already 187,000 "Orders" For Tesla's Cybertruck
With such an impressive unveiling that included audible laughter from the audience and two broken windows, it should come as no surprise that Elon Musk fanboys are falling all over one another to throw their money at their “visionary” savior.
And this seems to be exactly what’s happening. That is, of course, if you believe Elon Musk.
Musk claimed yesterday that there were already 146,000 “orders” for Tesla’s new Cybertruck. Of course, what Musk meant to say was “pre-orders” or “reservations”, and not actual orders. We wonder if Musk’s court ordered Twitter-sitter had a chance to approve that Tweet before Musk put it out.
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Today, he claims there are 187,000, meaning the reservations would amount to about $18.7 million in refundable $100 deposits.
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187k
— Elon Musk (@elonmusk) November 24, 2019
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And customers obviously have to take additional steps after pre-ordering the Truck. According to Tesla:
“After you submit your completed pre-order and the options you selected become available in production, we will invite you to complete the configuration of your Vehicle. We will then issue you the Vehicle Configuration and Final Price Sheet based on the base price of the model and any options included or that you select.”
Lest we forget Tesla, which also has a couple of additional steps of its own that it needs to take – you know, like actually manufacturing and producing the truck.
But the fact that almost any millennial living in his or her mothers’ basement can scrounge up $100 for a refundable deposit didn’t seem to bother the pro-Tesla scholars over at electrek, who figured it was fair game to extrapolate that all 146,000 of the pre-orders announced yesterday would translate to $8 billion in orders.
Recall, we covered the sh*tshow that was the Cybertruck reveal in detail late last week. As we said then, “a picture is worth a thousand words”.
And here’s that picture: a truck with two shattered windows that looks like it rolled out of a dumpster heap at a metal scrapyard, being offered for the low low price of just $39,900.
We also noted on Saturday that Inside EVs had speculated that 200,000 Cybertrucks had already been reserved.
Reminding its readers that the Model 3 received over 400,000 reservations and that “trucks are considerably more popular than sedans in the U.S.,” the blog speculated that “Tesla could already have over 200,000 deposits” for the Cybertruck. The blog based its prediction on “several people who are tracking Cybertruck interest” and reservations that have been posted on Twitter.
Tyler Durden
Sun, 11/24/2019 – 17:00
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