- German Prosecutors Charge 3 Former Wirecard Executives With Fraud
German Prosecutors Charge 3 Former Wirecard Executives With Fraud
Two years have passed since Wirecard abruptly filed for bankruptcy protection, confirming the allegations of bears and skeptics. And after two years of investigations, German prosecutors have finally formally charged former Wirecard CEO Markus Braun and two other executives with fraud – while former CIO Jan Marsalek remains a fugitive from justice.
Markus Braun Prosecutors in Munich said Monday that ex-CEO Markus Braun signed off on financial reports despite knowing they had been faked. They said the firm booked nonexistent revenue it attributed to multiple partnerships, mostly in Asia and the Philippines in particular, and used fake documents to purportedly show the firm had money that it ultimately did not, the Associated Press reports.
Braun’s attorney said the charges were “seriously flawed” and “assumed a false picture of the facts.” The defense claims that Braun was unaware of machinations by other executives. Despite this, he remains in custody.
In addition to Braun, the firm’s former head of accounting and the managing director of the Dubai-based subsidiary also were charged.
Wirecard’s fraud cost banks 3.1 billion euros ($3.4 billion) in loans and writedowns, according to the prosecutors’ statement.
During its heyday, Wirecard grew rapidly, and eventually found itself being listed among Germany’s top blue-chip stocks before the firm filed insolvency proceedings in 2020, based on the revelation that €1.9 billion ($2 billion) that had been included on the country’s balance sheet could not be found.
Of course, a German court must agree to the charges before a trial can be held.
Tyler Durden
Wed, 03/16/2022 – 02:45 - Has Russia Been Financing Western Environmentalism?
Has Russia Been Financing Western Environmentalism?
By Drieu Godefridi of The Gatestone Institute
Have Western environmental non-governmental organizations (NGOs), movements and parties been possible, even unwitting, collaborators with the Russian government for the last ten years?
This question arises from a recent report by the Foundation for Political Innovation (Fondapol) in Paris. Fondapol’s director, Dominique Reynié, said in a recent interview:
“We have found Gazprom funding in particular environmental NGOs, which furnished certain European countries with ministers — Belgium for example — who then evidently embarked on a sort of return of favor by defending an exit from nuclear power.”
These allegations are not new.
The Guardian, already in 2014, quoted NATO’s then Secretary General Anders Fogh Rasmussen, making the following accusation:
“I have met allies who can report that Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organisations – environmental organisations working against shale gas – to maintain European dependence on imported Russian gas.”
Below Europe’s soil lie large reserves of shale gas, also known as bedrock gas. The exploitation of these natural gas reserves would have substantially reduced Europe’s purchases of, and dependence on, Russia’s gas — in particular on its gas giant, Gazprom. The same is true of nuclear power, which offers Westerners an abundant, non-CO2-emitting energy source as an alternative to Russian gas.
Hence the interest, for the Russian government, in mounting a vast disinformation campaign against shale gas and nuclear power in the West, by massively financing the groups most likely “naturally” to oppose it: environmentalist organizations.
On June 29, 2017, two of America’s leading federal lawmakers on energy issues, US Representatives Randy Weber and Lamar Smith , sent a letter to then-Secretary of the Treasury Steven Mnuchin, demanding an investigation into the funding of US environmental organizations by the government of the Russian Federation. According to The Hill:
“The letter notes that former Secretary of State Hillary Clinton complained in a speech to a private audience in 2016, ‘We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians …'”
Without providing direct proof of the origin of the funds — that is not their role — these two Congressmen demonstrated the mechanism, which can be summarized as follows: “Funds from the Russian government -> Shell company ‘incorporated’ in Bermuda -> American foundation -> American environmental organizations.”
The advantage of Bermuda is that it does not require any disclosure that funds come from a foreign government, contrary to American law.
The Sea Change Foundation is a US-based 501(c)(3) private not-for-profit organization. As every American 501(c)(3), Sea Change must disclose that it has received funds from abroad — in this instance a Bermuda company. Nothing more.
On March 11, 2022, US Representatives Jim Banks and Bill Johnson sent a letter to Treasury Secretary Janet Yellen, asking for an investigation into the reported Russian manipulation of American “green groups” that are seemingly funded with “dark money” (anonymous donations). “Russia spent millions promoting anti-energy policies and politicians in the U.S.,” Banks said to Fox News Digital.
“Now, thanks to Biden’s war on domestic energy, U.S. oil production has dropped 10%, pushing up prices and enriching and emboldening Putin before he invaded Ukraine…. Unlike the Russia hoax, Putin’s malign influence on our energy sector is real and deserves further investigation.”
Their letter noted:
“According to Sea Change’s tax filing, in 2010 the group received $23 million, half of its total annual contributions, from a Bahamian shell corporation tied to the Russian government. Sea Change then passed that money to groups like the Sierra Club and the Center for American Progress who lobbied strongly against fracking and pro-energy policies, to reduce competition with Russian oil and gas. In 2020, the Center for American Progress donated over $800,000 exclusively to Democrat politicians and groups’ and Sierra Club Independent Action spent $3.7 million supporting Democrat candidates.
“Russia also used its state media and social medial disinformation campaigns to attack America’s energy industry. Russia Today is especially focused on energy policy. According to the Office of the Director of National Intelligence, Russia Today’s coverage ‘is likely reflective of the Russian Government’s concern about the impact of fracking and US natural gas production on the global energy market and the potential challenges to Gazprom’s profitability.’ In 2021, after Biden’s first year in office, Gazprom, a Russian state-owned energy company, earned record profits.”
The American environmental organizations specified by the letters are among the main ones, including the Sierra Club and the League of Conservation Voters Education Fund, all of which are massively involved in the opposition to shale gas exploitation in the United States and which have received a total of $10 million a year from the American Sea Change Foundation, which is richly endowed by the Bermuda-based umbrella company.
In Germany, the leading environmental organizations WWF, BUND and NABU have set up an “environmental” foundation — Naturschutzstiftung Deutsche Ostsee — with the company Nord Stream AG. Based in Zug, Switzerland, Nord Stream AG is an international consortium of five major companies established in 2005 for the planning, construction and subsequent operation of two 1,224-kilometre natural gas pipelines through the Baltic Sea. The five shareholders of the consortium are Gazprom International Projects LLC, Wintershall Dea AG, PEG Infrastruktur AG, N.V. Nederlandse Gasunie and ENGIE. Gazprom International Projects LLC holds a 51% stake in the pipeline project.
The “environmental” foundation Naturschutzstiftung Deutsche Ostsee was endowed with 10 million euros by Gazprom, as claimed by Nord Stream. These German environmental organizations WWF, BUND, NABU were, moreover, at the same time, fierce opponents of German civil nuclear power and of shale gas exploitation in Europe.
Notably, the example Dominique Reynié gave of the mechanism he described appears to be that of that of Belgium. Indeed, the current Belgian Federal Minister of Energy, Tinne Van der Straeten, of the environmentalist Groen Party, was, before she took office, the co-owner — a 50% partner — of a law firm one of whose “big” clients was none other than Gazprom, the Russian gas giant. When she became Minister of Energy in 2020, Van der Straeten worked on completely dismantling the Belgian civil nuclear park, in conformity with the fierce will of the environmentalists for almost twenty years, to replace it with gas-fired power plants, which will have to be supplied, among others, by — Gazprom.
It is of course the nuclear industry that often best demonstrates the duplicity of certain environmentalist organizations. While these organizations constantly swear by the reduction of CO2 emissions in all things, when it comes to nuclear power, we see them demanding to replace an energy source that emits almost no CO2, with fossil fuels that emit forty times more. In Belgium, the green parties Ecolo and Groen explicitly advocate replacing nuclear reactors with gas-fired power plants.
Accusations of being financed by the Russian government, even if they are signed by the Secretary General of NATO, the Director of the Foundation for Political Innovation and the Secretary of State of the United States, do not make one guilty of corruption, conflict of interests, non-disclosure of being financed by and/or being an agent of a foreign government. The presumption of innocence applies to everyone.
The aggression on Ukraine by Russia, whose military is literally financed by European purchases of Russian gas — which is 40% of the gas consumed in Europe — obliges us to throw the full media and judicial spotlight on these accusations. In this respect, the recent call by the Republican Study Committee — the largest group of conservatives in the US House of Representatives — for Treasury Secretary Yellen to investigate whether Russian money financed USA green groups is a step in the right direction.
Tyler Durden
Wed, 03/16/2022 – 02:00 - "Here Be Monsters"
“Here Be Monsters”
Authored by Kyle Shideler via The American Mind (emphasis ours),
Since the beginning of the Russian invasion of Ukraine, the phrase “national interest” has become something of a blasphemy. Certain thinkers in the “realist” school of foreign policy analysis have drawn social media ire for articulating the interests which might motivate Russia’s invasion of the Ukraine or questioning whether the United States has a significant interest in intervening there.
Increasingly in our censorious modern world, any attempt to understand the behavior of an actor (in this case Russia) is treated as a de facto endorsement of that actor’s behavior. This is not a new development. During the Global War on Terror those of us who tried to articulate the ideological framework within which jihadists operated were accused of believing the same things as the terrorists themselves.
But to recognize that Russia has long opposed the expansion of Western power into its near abroad is not the same as defending its security claims. And recognizing the Russian demand in no way denies Ukraine’s own interest in preventing itself from being dominated by its larger neighbor. To recognize the interests of one nation is not to deny the interests of another, nor does it make a moral claim as to which set of interests are “right” or “wrong.”
But the idea of “national interest” itself is in profound opposition to the Progressive vision of the global order. If countries act according to national interests, and those interests’ conflict, then disputes between nations may prove inevitable. Eliminating the idea that nations have interests does not eliminate those interests, but it does make predicting and mitigating the conflicts that result harder.
Understanding the interests of other nations may be easier if we first understand our own. How do we as Americans figure out where our own interests lie? And among our interests, how do we determine which are most important?
Begin at the beginning
To have a national interest at all one must first have a nation, defined as a people within a territory, under a single government.
The first and most paramount national interest is preserving the security and safety of the people who make up the nation. This means both protecting them from threats from without by means of invasion, as well as protecting them from within from civil conflict and upheaval. It also means preserving the way of life, beliefs, and distinctiveness of a people. For Americans, that distinctiveness is based, in part, upon shared principles, articulated in our Declaration of Independence and forged in the fire of the revolution fought to secure them. But it is also grounded in the shared co-habitation and history together in this land, liberated by that revolution.
Failing to maintain this distinctiveness can break down what it means to be a people at all. The result can be factiousness, strife, and even civil war, a threat that the country’s founders well understood.
George Washington’s Farewell Address is best-known for its admonishment against entangling foreign alliances but in it he warns against the spread of factionalism, and the excessive love or hatred towards other nations which often breeds it. Washington wrote:
Excessive partiality for one foreign nation and excessive dislike of another cause those whom they actuate to see danger only on one side and serve to veil and even second the arts of influence on the other. Real patriots, who may resist the intrigues of the favorite, are liable to become suspected and odious, while its tools and dupes usurp the applause and confidence of the people to surrender their interests.
We now live in a period where some Americans, who would not be caught dead flying Old Glory, are displaying the flags of countries they cannot even find on a map, while accusing fellow citizens who hesitate to take a side in a distant conflict of being agents in the service of a foreign power.
George Washington’s gentle reprove ought to ring urgently in our ears. There is no interest abroad so vital that it is worth destroying what remains of the bonds of civil friendship at home.
What is nearest is dearest
Safety and security for the people requires a nation to be able to hold its territory sovereign. Therefore, upholding national boundaries and ensuring that borders are defensible and intact is a primary interest. Because all nations have people and territory, they hold these interests in common. But not all countries are the same. Some are large, and others are small; some have the misfortune to be located next to larger and more powerful neighbors. It is these geopolitical realities which shape a nation’s secondary interests, which are peculiar to that nation, but are still based upon their primary interests for a secure people and territory.
In the case of the United States, we are a continental nation with only two land borders which, once finalized, have been historically peaceful. This in turn means that ensuring that our neighbors remain stable and peaceable and preventing disruptions or chaos among our neighbors is within our interests.
That order has largely broken down in Mexico, where narco- and human-trafficking cartels corrupt the national Mexican government, control swathes of territory, and openly engage our own border patrol with military weapons. Our sovereignty is routinely violated, and our borders unsecured to the point that border states have declared the ongoing crisis “an invasion.”
To our North, a border safe and settled since 1846, the Canadians are embroiled in a political dispute over COVID-19 lockdowns that saw the invocation of their version of martial law and led to protests and blockages along our own border. While unlikely to go the way of our southern border, as a neighbor Canada is more restive than any time in modern memory.
Besides the borders, the United States possesses two very long coastlines and is separated from other significant historical powers by large oceans. We thus have an interest in maintaining the distance and separation those oceans provide, by preventing outside powers from developing a foothold in the Western hemisphere. As President James Monroe articulated in the doctrine that bears his name:
We owe it, therefore, to candor and to the amicable relations existing between the United States and those powers to declare that we should consider any attempt on their part to extend their system to any portion of this hemisphere as dangerous to our peace and safety. With the existing colonies or dependencies of any European power we have not interfered and shall not interfere, but with the Governments who have declared their independence and maintained it, and whose independence we have, on great consideration and on just principles, acknowledged, we could not view any interposition for the purpose of oppressing them, or controlling in any other manner their destiny, by any European power in any other light than as the manifestation of an unfriendly disposition toward the United States.
The U.S. has woefully neglected its own hemisphere—one of its oldest articulated national interests—for decades. Chinese strategic interests in Central America have risen sharply, with nearly 20 Latin American countries participating in the Chinese “Belt and Road initiative.” Russia has deployed air defense systems, and has even conducted training exercises with nuclear weapons-capable bombers, in Venezuela. Following the outbreak of the Ukraine crisis, Russia threatened to deploy troops and weapons to Latin America, bringing back the specter of the Cuban Missile Crisis.
This does not mean (as Monroe notes) that America has an interest in overthrowing every Latin American country whose regime is not favorable to our own, but it does mean deterring great powers abroad from meddling in the Western hemisphere and attempting to assert their power over our southern neighbors.
Note also that while we may bear some affection for the independence and republican form of government possessed by (most of) our Latin neighbors, our commitment to prevent interference in the hemisphere is grounded not in their rights, but in our interests.
Here be monsters
It is these primary national interests, and secondary interests shaped by geographic realities, from which we derive the rest of our national interests. Our desire to ensure freedom of navigation, a long stated American interest, is grounded in our long coastlines and distance from the other continents. We rely upon shipping to engage in commerce with the rest of the world to make our people and country prosperous (and prosperity is to be valued for maintaining the security of the people).
To preserve the safety that the oceans provide, we have an interest in preventing the rise of a naval power equal to or superior to our own, either in the Atlantic or in the Pacific. We also have an interest in preventing the rise of a power consolidating all Northwestern Europe, the Pacific Rim, or the Middle East, as such a power could hamper or deny our ability to engage in commerce, and likewise harm us.
In large part these interests were acquired following the collapse of the British Empire, which also had an interest in securing these global conditions As a result, the early Republic was not forced to exercise as much effort to enjoy the benefits, provided it maintained a policy of not meddling in internal European struggles.
New technologies also impact our interests, particularly the rise of nuclear weapons and ICBMs, which reduce the value of oceanic distance and gives us an interest in preventing the spread of nuclear weapons and ensuring that those nations which already possess them are stable and deterred from threatening us.
At this tertiary level, it becomes easy to extrapolate additional interests and even to have interests which may conflict. For example, when does our interest in preventing the rise of a continental European power outweigh our interest in avoiding European entanglements?
This is where prudence—the ability to weigh the benefits and costs of pursuing a given course, which in turn requires a solid understanding of both adversaries and ourselves—is required. Is our nation strong or weak at this moment? Are we as a people united or divided? Are we successfully managing other more vital interests? We may well decide that securing an interest requires fighting and winning a war. But it is never in our interest to lose one.
We would do well to remember John Quincy Adam’s axiom about America’s interests:
Wherever the standard of freedom and independence has been or shall be unfurled, there will her heart, her benedictions and her prayers be. But she goes not abroad in search of monsters to destroy.
The further we get away from the nation’s primary interests, the harder it becomes to distinguish between what is in our country’s interest and what is not. The further away from your own borders you go, the easier it is to find yourself at the place on the map where it says, “here be monsters.”
* * *
Kyle Shideler is the director and senior analyst for homeland security and counterterrorism at the Center for Security Policy.
Tyler Durden
Tue, 03/15/2022 – 23:40 - World Economy Braces For Supply Chain Chaos As COVID Closes China
World Economy Braces For Supply Chain Chaos As COVID Closes China
The global economy is in disarray as the war in Ukraine unleashed a commodity shock with increasing risks of stagflation. Adding to the turmoil is an outbreak of COVID-19 in China that may unleash another supply chain crisis.
News from China over the last day shows a new outbreak of the highly contagious omicron variant has infected more than 5,000 people, the most since the early days of the pandemic in early 2020. China’s zero-tolerance approach has shuttered factories and placed some 51 million people into some form of lockdown.
As of Tuesday, omicron variant infections have been reported in 21 provinces and municipalities nationwide, including the capital of Beijing. According to CNN, five cities are in lockdown, including Changchun, Jilin, Shenzhen, Dongguan, and Langfang.
Lockdowns have forced factories to idle production and risk snarling production from Apple iPhones to Amazon Echo & Alexa devices to Toyota SUVs to smart television to all sorts of other electronic devices. Disruptions to exports may induce shortages and drive up inflation, just as the Federal Reserve embarks on hiking interest rates to control inflation at four-decade highs.
A Bank of America Corp. survey of fund managers published on Tuesday showed confidence in global growth this year is the lowest since July 2008, and stagflation expectations have jumped to a whopping 62% of respondents.
“You take all these little paper cuts and you start to add them up and you could be looking at a potential significant slowing of the global economy,” said Jay Bryson, chief economist at Wells Fargo & Co.
China’s zero-tolerance policy has reminded us that supply chains are still subjected to massive disruptions. The lockdowns couldn’t come at a worse time, as spring tends to be one of the busiest shipping seasons of the year.
Shenzhen’s 17.5 million residents were placed under lockdown on Sunday. The city resides in Guangdong, a coastal province of southeast China known for its manufacturing hub and ports, which account for about 11% of China’s economy. The province accounted for 23% of China’s shipments in 2021.
Bloomberg Economics warns that a prolonged lockdown in Shenzhen could unleash supply chain disruptions worldwide.
“The forceful action to contain the worst COVID-19 outbreak since early March will deal a direct hit to the production and consumption sides of a province that accounts for 11% of GDP. Previous steps to contain virus flareups left manufacturing unscathed for the most part. This lockdown will hit output in key industries such as tech and machinery that feed into global supply chains,” Chang Shu, chief economist for Asia, said.
“Given that China is a major global manufacturing hub and one of the most important links in global supply chains, the country’s Covid policy can have notable spillovers to its trading partners’ activity and the global economy,” said Tuuli McCully, head of Asia-Pacific economics at Scotiabank.
According to Stephanie Loomis, vice president of International Procurement, the global impact of lockdowns could roil supply chains once more.
“If they don’t let any of these guys go to factories and produce goods, then nothing will move,” Loomis said. “It’ll just stop.”
We expect factory shutdowns will spread if the virus isn’t contained and could have massive implications on the global supply chain if lockdowns persist for the next several weeks. It’s still debatable whether the factory shutdowns will impact the US. If so, it usually has a 6-8 week lag.
We question if container ships will limit delivering Chinese goods to the US because of factory shutdowns as the demand to ship sinks. This may lead to depressed shipping rates on an intermediate basis because of the lack of demand. However, long term, shipping rates should rebound due to a backlog of products that would need to be shipped once factories reopen.
“The outbreaks impose downside risk to China’s economy at least in the next few months,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said.
“A China slowdown would exacerbate the risk of stagflation and global supply chain problems,” said Zhang.
And when you thought things couldn’t get any crazier for the global economy, they certainly did and risked further economic turmoil that may roil global supply chains, just like what happened in the early days of the pandemic.
Tyler Durden
Tue, 03/15/2022 – 23:20 - So Many Russians Are Buying Gold That Central Bank Halts Bank Purchases
So Many Russians Are Buying Gold That Central Bank Halts Bank Purchases
Russia’s central bank announced that it will suspend purchases of gold from banks due to overwhelming demand from households, Reuters reports. The purchasing pause will take effect Tuesday with no end date set.
“Currently, households’ demand for buying physical gold in bars has increased, driven, in particular, by the abolition of value-added tax on these operations,” reads a statement from the central bank.
On Feb. 28, the central bank raised the key rate from 9.5% to 20% as the ruble crashed to record lows amid the Kremlin’s so-called “special operation” in Ukraine. The announcement is a flip-flop from a February announcement that the financial authority would resume gold purchases after commercial banks were hit with Western sanctions in response to the invasion.
“With the goal of diversifying the central bank’s reserves, at the moment there is no sense in building up reserves in gold,” according to VTB analysts, who added that the banking sector’s structural liquidity deficit had contracted to under 4 trillion rubles (US$36 billion), down from a record 7 trillion rubles.
Before the rush into gold, many wealthy Russians had been purchasing luxury items such as watches and other jewelry in order to defend against the ruble’s tumble. While cryptos were also purchased aggressively, there is little insight into who much bitcoin Russians currently own.
Analysts from BCS suggested that the gold purchases will help reduce the amount of cash in circulation, and will help banks’ liquidity.
In lieu of funding via gold purchases, Russia’s central bank has been providing liquidity to banks through more conventional operations such as holding daily repo auctions at lending institutions. So far, these have proven sufficient.
Tyler Durden
Tue, 03/15/2022 – 23:00 - Tesla Increases Vehicle Prices For Second Time in Weeks Amid Commodity Shock
Tesla Increases Vehicle Prices For Second Time in Weeks Amid Commodity Shock
For the second time in weeks, Tesla Inc. raised prices on its vehicles following a historic commodity surge.
Bloomberg reports the cheapest Model 3 in the US is $46,990. In a note to clients, Credit Suisse analyst Dan Levy said Tesla raised prices on all its vehicles between 3% to 5% this week. This is the second time in weeks that Tesla has raised prices (see: here).
The increase comes after a historic surge in commodity prices following Russia’s invasion of Ukraine. Western sanctions isolate the commodity-rich Russia from the rest of the world, threatening metal supplies. Bloomberg’s industrial metals index surged to record highs.
Also, the most significant weekly change in industrial metals just occurred and kicked off the first round of Tesla price hikes last week.
There’s no word on which metal(s) is impacting Tesla the most, but if we had to guess it’s probably metals for its batteries that have skyrocketed in price, such as nickel.
“Those new price increases today come just as the price of nickel is surging due to the crisis in Ukraine leading to embargoes and sanctions on Russia, the world’s third-biggest producer of nickel – a material critical to high-energy-density battery cells found in some electric vehicles,” Electrek said last week.
On Sunday, Tesla’s Elon Musk, clearly frustrated with the commodity shock, tweeted, “Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistic.”
Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics
— Elon Musk (@elonmusk) March 14, 2022
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To mitigate costs, Tesla has opted to equip some base Model 3s with iron-phosphate battery cells that don’t require nickel to keep costs low. However, such a move appears not to be working, and electric cars can certainly not escape today’s out-of-control inflationary environment.
Mush has promised an affordable version of the Model 3, but the likelihood of that happening during a commodity shock is zero.
Tyler Durden
Tue, 03/15/2022 – 22:40 - Senate Passes Resolution To Undo Transit Mask Rule; Romney Only Republican To Vote With Dems
Senate Passes Resolution To Undo Transit Mask Rule; Romney Only Republican To Vote With Dems
The Senate passed a resolution Tuesday that would eliminate extended federal regulation requiring mask on public transportation, including planes, trains and subways.
Passing by a margin of 57-40, Sen. Mitt Romney (R-UT) was the only Republican Senator to oppose the measure, while eight Democrats crossed the aisle to join Republicans in passing it.
The resolution only needed to pass by a simple majority in the Senate, and was not subject to the 60-vote filibuster.
“This is a free country. If someone wants to wear a mask on a five-hour flight from one American city to another, there is no reason they can’t do that,” said Sen. Roger Wicker (R-MI) at a press conference leading up to the vote.
“But the testimony we’ve had in the Commerce Committee, from the airline industry and from scientists is that airline air is the safest air that Americans can breathe indoors, anywhere.”
The bill will not head to the House, however it’s unclear if Speaker Nancy Pelosi (D-CA) will even allow a vote according to NBC News.
The Biden administration last week extended the requirement for masks on public transportation through April 18. When they extended it, they said that the CDC will “work with government agencies to help inform a revised policy framework for when, and under what circumstances, masks should be required in the public transportation corridor.”
In other pandemic news, Hillsborough County, Florida will end its State of Emergency over Covid-19 after the positivity rate fell from 9.7% last June to 2.9%.
The decision was based in part on research which found that “masks had little to no impact on the spread of the virus,” according to News9.
That kind of talk would get one banned from social media just months ago…
Tyler Durden
Tue, 03/15/2022 – 22:20 - US-Mexico Border Town Transformed Into Warzone After Drug Cartel Leader's Arrest
US-Mexico Border Town Transformed Into Warzone After Drug Cartel Leader’s Arrest
The Mexican border city of Nuevo Laredo has been transformed into a warzone after the arrest of a top cartel boss. Burning vehicles littered the streets, and heavy gunfighting was reported causing the U.S. consulate to go on lockdown and the U.S. border crossing to be temporarily shut down on Monday.
The chaos erupted late Sunday when Juan Gerardo Trevino, or “El Huevo,” the leader of one faction of the Northeast Cartel, the successor group to the Zetas Cartel, was arrested. He is also a U.S. citizen, a Mexican government official told Reuters. Trevino is on the U.S. Customs and Border Protection’s (CBP) list of most wanted cartel members.
Trevino faces a U.S. extradition order for drug trafficking and money laundering.
In response to the arrest, cartel members hijacked and burned vehicles and attacked law enforcement and military personnel.
“During the night of Sunday, there were shootings, burning of trucks, and a grenade attack on the U.S. consulate,” Mexican newspaper El Occidental said.
On Monday, Nuevo Laredo Mayor Carmen Lilia Canturosas warned citizens in the border town to take cover.
Bloomberg reported the U.S. consulate in Nuevo Laredo was closed to the public due to an “emergency situation,” U.S. citizens “should avoid the area or seek shelter.”
U.S. Ambassador Ken Salazar said, “I have raised our grave concerns about these incidents and the safety and security of our employees directly with the government of Mexico.”
“We are aware of an emergency situation near the U.S. Consulate General Nuevo Laredo. U.S. citizens should avoid the area or seek secure shelter.” pic.twitter.com/nfQe4rLGoh
— USCG Nvo Laredo (@USAConNVL) March 14, 2022
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Shocking videos uploaded to Twitter show the warzone.
Un poco más de Nuevo Laredo esta madrugada (otra parte del mismo video) pic.twitter.com/l8RaYiduhW
— Pascal BeltrandelRio (@beltrandelrio) March 14, 2022
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Puente internacional ,1 Nuevo Laredo pic.twitter.com/5UP6f6VuAx
— elChihuas (@Hiram87041270) March 14, 2022
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🔴 Nuevo Laredo, Tamaulipas, amaneció este lunes entre el caos de vialidades cortadas e incendios aquí y allá, debido a la detención por parte del Ejército del jefe del cartel del Noroeste, Juan Gerardo Treviño, alias El Huevo
Por @carmenmoranb
🔗 https://t.co/8bgzobmEzy pic.twitter.com/QzDICzDnqw
— EL PAÍS México (@elpaismexico) March 15, 2022
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All of this happened just across the border from Laredo, Texas. Last month, CBP agents were advised to wear full kevlar (commonly known as body armor) and be equipped with long-arm guns, such as lightweight semi-automatic rifles, due to the increased cartel activity on the border.
As the border crisis rages on, the Biden administration still doesn’t have a viable plan to subdue the violence. Widespread violence is also occurring across the country’s most popular beach resort areas.
Tyler Durden
Tue, 03/15/2022 – 22:00 - FOMC Preview: The First Rate Hike Since 2018
FOMC Preview: The First Rate Hike Since 2018
Central banks face a challenging trade-off: do they react to the labor market close to full employment and near record jump in inflation visible even before the latest energy price moves to prevent a further unanchoring of inflation expectations to the upside, or do they react to the considerable downside risks to the economic outlook from a massive geopolitical and energy price shock, preferring not to add volatility to the current market environment. The ECB opted for the former, and the Fed is expected to follow suit.
Tomorrow the Fed will hike 25bps – its first rate hike since Dec 2018 and the first liftoff (from zero) since Dec. 2015. In his recent testimony to Congress, Chair Powell summed up the compromise that the FOMC appears to have reached by noting in his recent testimony to Congress that he will support a 25bp hike at the March meeting, but is open to hiking by more than 25bp at a future meeting if inflation surprises to the upside or remains persistently high.
To be sure, many will ask why just 25bps – after all, the last time inflation was 7.9%, the Fed Funds rate was 15%. The answer is that never before has the US financial system been so hyperfinancialized, and any “rushed” attempt to lift rates will lead to a complete collapse in risk assets.
The Fed will also update the Summary of Economic Projections (SEP) to show that inflation will remain higher for longer and result in hikes of 100-125bps in each of ’22 & ’23, even though markets are far more hawkish, and have priced in 7 rate hikes for all of 2022, and a 15% chance of a 50bps rate hike on Wednesday.
The Fed may also trim growth forecasts because of geopolitical risks. According to BofA’s Ralf Preusser, Powell will offer limited guidance on the outlook for hikes: he will stress elevated uncertainty, data dependency, & retain option for 50bp hikes if needed.
The 25bp vs. 50bp debate in the months ahead will also depend on the war in Ukraine. The war has raised energy prices, tightened financial conditions, and lowered growth prospects abroad, implying higher inflation and lower growth in the US. Goldman suspects that the FOMC will be reluctant to consider a 50bp hike until downside risks to the global economy from the war diminish.
While a rate hike is fully priced in, the market focus will be on the outlook for hikes and QT. In its FOMC preview, Goldman writes that it does not expect the war to knock the Fed off of a 25bp-per-meeting tightening path. With inflation likely to remain uncomfortably high all year, the FOMC will probably only pause if it thinks further tightening risks pushing the economy into recession. Goldman expects seven 25bp hikes this year – in line with the market – one at every meeting this year, followed by four quarterly hikes in 2023, for a total of 11 rate hikes by the end of 2023, and for a terminal rate of 2.75-3%.
Going down the SEP, the dots are likely to jump again in March, though the FOMC’s forecast will be less hawkish than the market’s. Even more hawkish than BofA, Goldman expects the median dot to show six hikes in 2022, but the risks are tilted to the downside, especially if FOMC participants view balance sheet reduction as equivalent to multiple rate hikes. In 2023, GS expects the median dot to show four more hikes in 2023 and a terminal rate of 2.5-2.75%, just above the FOMC’s 2.5% neutral rate estimate.
Goldman also believes that the FOMC will avoid appearing to commit to a specific pace of tightening in its statement. The Committee could adapt Powell’s recent comment, “We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market.”
An interesting question, according to Bank of America, is whether the latest evidence of liquidity pressure in the Treasury market is causing a rethink on timing and design of QT. On QT, the bank expects the Fed to finalize their redemption caps for UST coupons, MBS, & bills (BofA cap base case: UST coupons = $60b/m, MBS = $40b/m, bills = no cap); these will likely be updated in the Fed’s “principles for reducing balance sheet” document.
BofA believes that QT details will be finalized at this meeting and allow the Fed to start QT as early as May, however, QT risks being delayed due to deteriorating UST liquidity and a Fed that does not want to add market uncertainty. According to the bank, there are risks that QT could get pushed to June or July; and may also start with only MBS QT if UST liquidity remains strained. “A later QT start could add to curve flattening pressures”, BofA warns.
Goldman does not believe that the Fed will rush QT and reminds clients that Powell said in his testimony to Congress that the FOMC will not finalize its plan to shrink the Fed’s balance sheet at the March meeting. Instead, the FOMC will likely finalize and publish its plan at the May meeting and then announce the start of balance sheet reduction at the June meeting.
That said, where Goldman does agree with BofA is in the expectation of how much QT will be once it does begin: the bank expects the FOMC to permit passive runoff capped at $60bn per month for US Treasury securities (UST) and $40bn per month for mortgage-backed securities (MBS), with at most a brief ramp-up period to reach those peak rates. Some Fed officials have also raised the possibility of permitting uncapped runoff of MBS. This would have almost no incremental impact on runoff relative to the $40bn per month cap but it might seem like an agreeable compromise to participants who had advocated sales of MBS. Comments from Fed officials suggest that the FOMC has also discussed the possibility of treating bills separately from other Treasury securities and letting them run off more quickly.
In sum, Goldman’s assumptions imply that the balance sheet will ultimately shrink from just under $9tn today to just over $6tn in 2025, although since a recession will hit long before then, this estimate appears at best naive.
A more detailed FOMC preview is below, courtesy of Newsquawk
The Fed Funds target range is expected to be lifted by 25bps in the first hike since COVID-19 with inflation running hot and the labor market widely considered close to full employment. The accompanying SEPs are expected to signal a string of hikes to follow this year in wake of ramped inflation forecasts, countered with lower growth forecasts. The guidance will be gauged to see whether FOMC is moving towards the market pricing of front-loaded hikes (seven this year), or a more measured three/four hikes. The uncertainty around the Ukraine invasion has pushed back on the chances of 50bps hikes, but the door is still open. Powell could provide more details around balance sheet reduction, but plans/launch are not to be finalised until mid-2022.
HIKE INCREMENT: The majority of Fed officials have come out in support of a 25bps liftoff for the Federal Funds target range, particularly in wake of the Ukraine uncertainty. Fed Chair Powell said in his testimony in the Capitol that he thinks it is appropriate to hike by 25bps in March. Although he warned if inflation doesn’t begin to come down, “we’re prepared to raise by more than that amount in a meeting or meetings”, keeping the door open on 50bps in future meetings. A Reuters poll of economists saw all respondents forecast a 25bps hike, while 20/37 economists saw the risk of a 50bps hike later this year as high or very high. Rates markets are implying a 5% chance of a 50bps liftoff. On administered rates, the majority expect the IOR (currently 0.15%) and RRP (currently 0.05%) to both be hiked by the same 25bps increment with money markets having been stable and the effective Federal Funds rate comfortably within the target range.
RATE PATH: Bloomberg’s survey has 28% of economists seeing the March statement indicating a hike in May, 45% expect signalling for a string of increases, and 28% see no forward guidance in the statement. Meanwhile, the Dot Plot is expected to signal more hikes are to follow this year in the Fed’s efforts to get the Fed Funds closer to neutral (largely seen at 2.5%). Powell has said that every meeting is live for 2022, but the broader discourse has seen a binomial outlook develop, with one camp leaning towards three/four hikes while the other leans towards the mid-to-high single digits, corroborating with market pricing. On which, after a Ukraine-induced unwind in market hike pricing in early March, rates markets are now back to pricing seven 25bps hikes by year-end, supported recently by the hawkish ECB and given the Fed has been undeterred in its policy outlook in wake of the invasion. The cooling of market volatility has helped.
BALANCE SHEET: Powell has said balance sheet normalisation/reduction plans will not be finalised at the March FOMC but will occur some time after the initial rate lift off. Little new details have been touted by officials in wake of the announcement made at the January confab either, where the Fed released its Principles for Reducing the Size of the Federal Reserve’s Balance Sheet. Powell may use the upcoming FOMC to give a calendar guide to when the process will begin, where expectations range largely for the rolloff to begin between July and September. And potentially on pace and composition, with Bloomberg’s median survey of economist estimates seeing the balance sheet at USD 8.5tln by 2022-end compared to the current USD 9tln area, and another USD 1tln reduction is expected in 2023. Meanwhile, amid some calls for faster MBS roll-off, most economists don’t expect a faster relative pace of MBS vs Treasuries reduction to begin with, although the Fed has kept the door open to that possibility going ahead, with some officials touting potential outright sales, instead of the current rolloff plans.
FINANCIAL CONDITIONS: A big part of the argument for 25bps liftoff instead of 50bps is the already realised deterioration in financial conditions, tightening the flow of credit to the economy. Goldman Sachs’ Global Financial Conditions index hit its tightest since May 2009, tightening 130bps since the Ukraine invasion, and adding to the increased certainty of central bank tightening paths that were already beginning to affect conditions beforehand. That tightening has been accentuated by a spell of funding pressures amid the market volatility, seen in lower stocks and record-breaking commodity strength, playing into credit spread widening. Note the recent cooling of those pressures, however. Albeit, the market is already tightening and the Fed now needs to ratify those expectations with its liftoff, but there’s less urgency to surprise too hawkishly.
INFLATION: Headline Feb CPI rose 7.9% Y/Y, with the core not far behind at +6.4% as price pressures become more broad based. Figures were in line with the Wall St consensus and presumably a slight sigh of relief for policymakers that there wasn’t another right tail print, albeit still at alarming levels. Further, given the approaching commodity shock, the Fed will now be viewing the figures as a base to grow off/sustain, rather than a peak that was expected before the Ukraine invasion. Even after the Feb NFP saw signs of cooling wage growth and easing price spiral fears, it’s noteworthy Fed’s Evans (non-voter; last speaker ahead of FOMC blackout) on CNBC said the report didn’t change much for the Fed and took the time to warn about further approaching inflation, with particular concern around food prices. Indeed, the Feb CPI report saw food prices rise 1% M/M, the largest since the early COVID period, with risks skewed to the upside ahead given the rally in ags. And that’s not to mention the already lofty 3.5% spike in energy M/M, and over 25% rise Y/Y. The Fed has largely kept a cool head to look through the inflation, with the party line being the anchoring of longer term inflation expectations keeping credence to the idea that the pressures will recede. However, the recent breakout of market-based, longer-term inflation expectations post-Ukraine will be raising eyebrows and emboldening tightening plans, with 5yr5yr CPI swaps rising further towards their 2013/14 peaks of 3% and away from their 2% target.
DOTS: Bloomberg’s economist survey sees the FOMC raising its PCE forecasts for 2022 to a 3.9% median from 2.6% in December, cutting its 2022 GDP median to 3.3% from 4.0%, while maintaining the unemployment median at 3.5% for the next several years, according to the survey. Median dot expectations via Bloomberg’s survey:
- FEDERAL FUNDS RATE: exp. at 1.1% in 2022 (prev. 0.9% in Dec), 1.9% in 2023 (prev. 1.6%), 2.38% in 2024 (prev. 2.1%), 2.5% in longer run (prev. 2.5%)
- CHANGE IN REAL GDP: exp. at 3.3% in 2022 (prev. 4.0% in Dec), 2.2% in 2023 (prev. 2.2%), 2.0% in 2024 (prev. 2.0%), 1.8% in longer run (prev. 1.8%)
- UNEMPLOYMENT RATE: exp. at 3.5% in 2022 (prev. 3.5% in Dec), 3.5% in 2023 (prev. 3.5%), 3.5% in 2024 (prev. 3.5%), 3.5% in longer run (prev. 4.0%)
- PCE INFLATION: exp. at 3.9% in 2022 (prev. 2.6% in Dec), 2.5% in 2023 (prev. 2.3%), 2.1% in 2024 (prev. 2.1%), 2.0% in longer run (prev. 2.0%)
- CORE PCE INFLATION: exp. at 3.3% in 2022 (prev. 2.7% in Dec), 2.4% in 2023 (prev. 2.3%), 2.1% in 2024 (prev. 2.1%)
Tyler Durden
Tue, 03/15/2022 – 21:40 - JP Morgan Lifts Ban On Hiring Unvaccinated Workers
JP Morgan Lifts Ban On Hiring Unvaccinated Workers
Just days after saying it would hire ex-cons, JP Morgan has decided that it will also hire unvaccinated individuals as it scrambles to fill jobs amid a stubbornly persistent labor shortage in the US.
According to Bloomberg, which cited a memo to the bank’s staff, JPM has decided to abandon the ban starting next month, the latest sign that the bank is “putting the pandemic behind it”.
For existing employees, JPM will end mandatory testing for the unvaccinated starting April 4. On top of that, it will also stop requiring staff to report COVID infections.
And for both unvaccinated and vaccinated staff, masking while inside JPM’s corporate offices will become voluntary, effective immediately.
Local rules will continue to apply, and JPM’s workers in NYC must continue to abide by vaccination requirements imposed by the city, employees must continue to meet vaccination requirements, unless the city lifts its order. The city presently requires all public-facing workers to be vaccinated.
In its memo, the bank said the changes are part of its efforts to treat COVID as part of “our new normal”.
“Across the US, as we continue to see cases decline, restrictions lifted and more flexibility with daily activities, we are learning to live with Covid as part of our new normal,” the bank said in its memo.
The decision comes as America’s megabanks recall workers to the office. Wells Fargo is planning to bring employees back starting Monday, and starting next week, Citigroup is recalling vaccinated workers to its US offices for at least two days a week.
As we concluded in a tweet, JPM’s decision is the latest indication that, in the US at least, COVID has become “ancient history”.
Covid is ancient history
*JPMORGAN TO END MANDATORY TESTING FOR UNVACCINATED STAFF
*JPMORGAN: MASKING IN CORPORATE OFFICES TO BE VOLUNTARY FOR ALL
*JPMORGAN TO RESUME HIRING UNVACCINATED INDIVIDUALS FROM APRIL 4
— zerohedge (@zerohedge) March 14, 2022
Tyler Durden
Tue, 03/15/2022 – 21:20 - Evaporating 'Buy-The-Dip' Shows Minksy Moment May Have Come
Evaporating ‘Buy-The-Dip’ Shows Minksy Moment May Have Come
Authored by Ven Ram via Bloomberg,
In the euphoric stock rally since the end of 2018, pretty much every dip was met with a volley of even stronger buying. It was as though people were waiting for others to get off the bus so they could get in.
Investors who wanted to ask questions first and buy later were left with only questions and no answers. Those who had the heart to take the ride did pretty well by all means. Why, the Nasdaq 100 Index surged nearly three-fold and the S&P 500 Index almost doubled in just three years. When your money grows at a compounded annual growth rate of 26% and 38%, even Shylock wouldn’t complain.
If the rally in Nasdaq from the end of the global financial crisis until the first wave of the pandemic was the gentle ascent of a plane, the takeoff after the first wave was that of a helicopter. Yet, that steep climb was but a preparation for an eventual bungee-jumping. The fairy tale couldn’t continue forever, and there were enough alarm bells that were set ringing for those who were in the mood to pay heed.
Fast forward to 2022. And suddenly the appetite for dip-buying has evaporated, seemingly into thin air.
That has meant that Nasdaq 100 has declined more than 20% from its peak. Valuations have gotten cheaper (not cheap, though, mind you), and investors who were quick to pounce in after the first wave of the pandemic have been scratching their heads and saying, “No, thank you,” to Mr. Market.
And so there don’t seem to be as many exits as those looking to get out would like.
Just as the screenplay turned sour in the movie you were watching, it seems the plot line is not any more alluring elsewhere either. Stocks and bonds have been playing to a similar horror script. Charming Commodities has been playing to packed houses, but how many have the conviction to get in this late in the hope that the show will go on? And unless you are a dedicated fund, chances are that your commodities overlay isn’t all that big in any case.
Meanwhile, the Fed Opera begins tomorrow. If Chair Jerome Powell and his committee indeed play the mood music they have been outlining for a while now, the rush for the exits may have just begun.
Tyler Durden
Tue, 03/15/2022 – 21:00 - Eli Lilly Halts Sales Of All Non-Essential Drugs In Russia
Eli Lilly Halts Sales Of All Non-Essential Drugs In Russia
Here’s one deprivation the Russian people probably weren’t expecting.
American drugmaker Eli Lilly has decided to halt export of all non-essential drugs to Russia, including its blockbuster erectile dysfunction drug, Cialis.
The drugmaker told the FT that while it would continue to supply drugs for life-threatening illnesses, it will suspend all marketing, drug trials and investment in Russia, along with all non-essential meds, which they will no longer export.
This marks the first time a US drugmaker has decided to pull its business from Russia since the start of the invasion of Ukraine.
“For nearly 150 years, Lilly has worked to ensure patients have access to the medicines they need, no matter where they may live,” it said in a statement. “Our Russian operations are now only focused on ensuring people suffering from diseases like cancer and diabetes continue to get the Lilly medicines they need.”
Meanwhile, Pfizer said this week that pausing the flow of its medicines to Russia would violate the company’s foundational principle of “putting patients first” (which…is that what they have been doing with all those price hikes?).
The export of medicine and the materials necessary for making drugs and medical equipment were excluded from the sanctions imposed on Russia by the US and Europe.
Tyler Durden
Tue, 03/15/2022 – 20:40 - "Guilty Until Proven Innocent" – Biden Signs New Backdoor Gun Control Into Law
“Guilty Until Proven Innocent” – Biden Signs New Backdoor Gun Control Into Law
Submitted by The Machine Gun Nest (TMGN).,
President Biden has signed a $1.5 Trillion spending bill that sends $13.6 Billion to Ukraine and funds the Government until September. The bill itself passed the Senate with a bipartisan 68-31 vote.
As we’ve reported before, the Biden administration’s only way to pass gun control at all is by backdoor means. So, of course, they’ve hidden gun control in a massive spending bill designed to fund the Government. Hidden within this 3000-page bill were two significant pieces of gun control.
But that’s only half of this shady gun control strategy. The second half is to wrap gun control into a bill that is difficult to vote against for fear of social stigma.
So, inside the omnibus bill is a previously failed act called VAWA, or the Violence Against Women’s Act. This act contains significant backdoor gun control that stands to harm gun owners. But you wouldn’t know that just by reading the title. The swamp creatures in the Senate took the opportunity to revive VAWA (which initially failed explicitly because of the gun control provisions), placing the gun control section 2207 pages into the overall bill itself.
VAWA contains two major changes to current law.
The first is titled the NICS Denial Notification Act of 2022. This act will require the criminal investigation of all denials on the National Instant Criminal-Background-Check System. For those unaware, the NICS system is used any time a sale occurs, and a firearm is transferred from a Federal Firearms Licensee (also known as an FFL) and an individual. This process happens thousands of times per day all over the country. It happens almost every time a legal gun sale takes place.
Here’s the thing, though, the NICS system isn’t perfect. It’s actually not even close to perfect. Many people experience never-ending delays or even flat-out denials because they have a common name, or the system confuses them for someone else entirely.
In fact, according to Gun Owners of America, the FBI itself admits that it’s often wrong on gun-related background check denials. GOA filed an FIOA request, and the FBI revealed that around “27.7 percent of NICS appeals received during the requested time period were overturned, and the firearm purchase/transfer were proceeded.” (proceeded is when the NICS check completes, the FFL is given a green “proceed” status)
Additionally, GOA mentions that according to claims from John Lott, a Second Amendment researcher and economist, 99 percent of NICS denials are false positives, which means that most denied people are not actually prohibited from owning a firearm.
So, the fact that the Government is compelling law enforcement to act upon a system that produces so many false positives is insane. This change to the law treats people who simply want to purchase a firearm and are falsely denied as guilty until proven innocent.
To make matters worse, the act allows the Federal Government to deputize local police and attorneys to act on behalf of the ATF.
This deputization of local police is a massive overreach for the ATF. It’s also likely a direct response to the popular Second Amendment Sanctuary County movement, which composes about 62% of counties in the entire United States as of September 2021 and has continued to grow since. These counties have pledged not to enforce federal gun control laws
This act is another example of anti-gun politicians using dirty tricks to pass unpopular legislation. Anti-Gun Politicians had brought VAWA itself before Congress in 2019, but many in Congress opposed it because they did not support the gun control portions of the bill itself. Who knew that it would eventually be resurrected and hidden into a 3000-page government spending bill.
Steph from TMGN breaks down how this may affect you:
This situation, of course, reflects another large problem in Government where a bloated, trillion-dollar spending bill is jammed through Congress at the last minute to avoid a government shutdown. Who knows what else is hidden in there.
As the situation in Ukraine continues to capture the headlines here in the United States, this massive spending bill will likely be overlooked by the corporate legacy media. It is ironic while the Ukrainians are being praised, funded, and even given weapons in some cases. Meanwhile, regular Americans in the United States are slowly having those same rights eroded bit by bit.
Tyler Durden
Tue, 03/15/2022 – 20:20 - SoftBank's Masa Son Sees $25 Billion Evaporate Amid Crushing Tech Selloff
SoftBank’s Masa Son Sees $25 Billion Evaporate Amid Crushing Tech Selloff
The recent selloff in markets has been hard for a lot of investors, but SoftBank’s Masayoshi Son has probably seen more of his net worth evaporate than any other billionaire besides Facebook’s Mark Zuckerberg.
According to Bloomberg, the SoftBank billionaire has seen his net worth fall by $25 billion over the past year, to just $13.5 billion today. While it doesn’t come close to the $70 billion he lost during the dotcom implosion, it’s still a massive sum.
It looks like we were on to something back in 2019 when we posited that SoftBank might be the tech bubble era’s “short of the century”.
Of course, what’s even more problematic than Softbank’s paper losses is the firm’s loan-to-value ratio. During the good times, SoftBank leveraged up and used the money to invest in more tech stocks.
Source: Bloomberg
Now, the stocks that it has borrowed against – most notably the firm’s massive holdings in Alibaba, which has been one of the hardest-hit stocks during the selloff in Chinese stocks.
The chart is SoftBank’s loan-to-value ratio, which Son says he checks four times a day. It’s key to how he staged his comeback over the past two decades after losing $70 billion during the dot-com crash.
Just last year, SoftBank was flying high, borrowing against its wildly lucrative stakes in tech investments such as Alibaba Group Holding Ltd. and plowing the money into the promising upstarts of tomorrow. Even when there were epic failures – Wirecard AG or Greensill Capital – profits elsewhere buried the problem.
And if the pain keeps coming, SoftBank just might be in store for an epic margin call on its debt.
The stock has tumbled almost 60% in the past year and the loan-to-value chart that Son obsesses over daily just keeps ticking higher, indicating SoftBank’s net debt is getting unwieldy relative to the equity value of its holdings. Some market watchers are flagging the risk of margin calls.
“There’s no good news in sight,” said Tomoaki Kawasaki, a senior analyst at Iwai Cosmo Securities Co. “If they’re asked to increase collateral, it’ll mean investors have to be more cautious of the finance risks the company’s facing.”
Already, SoftBank has been forced to sell some of its equity holdings at a brutal discount.
The market for new share sales, critical to SoftBank’s success, has dried up. Didi Global Inc. sank a record 44% on Friday after the ride-hailing company suspended preparations for a Hong Kong listing. In the latest sign that SoftBank is strapped for cash, its Vision Fund sold $1 billion of shares in South Korean e-commerce giant Coupang Inc. at a discount last week.
SoftBank bears are ready to pounce, as SoftBank’s asset-backed debt strategy is looking less like a smart way to redeploy capital into early stage startups, and more like a pyramid scheme.
SoftBank has long relied on asset-backed financing, which is cheaper than other forms of funding. This includes pledging assets in exchange for cash to invest in early-stage startups and using prepaid forward contracts – where SoftBank receives money upfront for a future sale of its holdings.
As of December, it had pledged more than half of its stakes in Alibaba, T-Mobile US Inc., Deutsche Telekom AG and its telecom unit SoftBank Corp. Asset-backed financing makes up $54 billion of the conglomerate’s $128 billion in total debt, according to a BI analysis.
“They have to keep raising financing, and the complexity of the ways they do it is probably what makes people less comfortable,” BI’s Chen said.
Bloomberg keeps a running tally of SoftBank’s losses.
Source: Bloomberg
Still, there’s one group of investors who haven’t entirely given up hope on SoftBank (or at least that’s what they tell their clients). The investment banks and brokerage firms still largely rate SoftBank’s shares as a “buy”, according to 18 out of 20 analysts tracked by Bloomberg.
So much for being the “conductor of the AI revoluton”.
Tyler Durden
Tue, 03/15/2022 – 20:00 - 49 Republican Senators Will Oppose Iran Nuclear Deal
49 Republican Senators Will Oppose Iran Nuclear Deal
Authored by Jason Ditz via AntiWar.com,
In a sign that getting the P5+1 nuclear deal with Iran through Congress might be difficult, if not impossible, 49 out of 50 Republican Senators have announced they will not back any deal that doesn’t limit Iran’s missile program and “confront Iran’s support for terrorism.”
The deal isn’t intended to cover those issues, merely Iran’s civilian nuclear program. The terms are not public, but its not expected to touch on either issue. Sen. Rand Paul (R-KY) was the only senator to not come out opposed.
Sen. James Risch (R-ID) speaks during a March 9 Senate Republican news conference, Getty Images. Sen. Paul said it didn’t make sense to condemn an unfinished deal, saying it is “not a very thoughtful position.” It is unclear where Senate Democrats will fall on the deal.
Either way, reports noted that the nuclear deal survived Congress in 2015 despite overwhelming Republican objection and their control of the Senate. Now, they don’t control the body at all, so any attempt to block it outright is going to depend on support from Democrats.
How this will ultimately break down likely depends on if and when the deal is finalized, and what efforts the Biden Administration makes to sell the plan.
The Iran side of the deal promises to get more Iranian oil onto the global market, and potentially the US market too. With prices up on the Russia-Ukraine war, that could be a strong incentive.
At the same time, there are questions about how the deal will reconcile Iran sanctions relief and Russian responsibilities with new Russia sanctions. The US has said they won’t interfere, but has also demanded Russia stop asking for consultations on how the two deals won’t interfere. The US has threatened to leave the talks, and work out a bilateral deal without Russia.
Republican U.S. senators warn on #Iran JCPOA: “We strongly urge the administration, our Democrat colleagues, & the international community to learn the lessons of the very recent past. A major agreement that does not have strong bipartisan support in Congress will not survive.” pic.twitter.com/QgEyjjrFUg
— Jason Brodsky (@JasonMBrodsky) March 14, 2022
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Though it’s not clear this is related to that, an alternative track for the deal could give Biden more time to get support, and a new selling point in that they are spiting Russia.
Tyler Durden
Tue, 03/15/2022 – 19:40 - Zelensky Says "Ukraine Must Recognize It Will Not Join NATO" As Ceasefire Talks Resume
Zelensky Says “Ukraine Must Recognize It Will Not Join NATO” As Ceasefire Talks Resume
Ukrainian negotiator Mykhailo Podoliak confirmed in a message posted to Twitter on Tuesday that “negotiations are ongoing” after the meeting was “paused” the day prior.
“Consultations on the main negotiation platform renewed. General regulation matters, ceasefire, withdrawal of troops from the territory of the country,” he stated. This as the AFP is reporting of the Ukrainian President’s latest surprise comments, coming on the 20th day of Russia’s invasion: “Zelensky says Ukraine must recognize it will not join NATO.”
Negotiations are ongoing. Consultations on the main negotiation platform renewed. General regulation matters, ceasefire, withdrawal of troops from the territory of the country…
— Михайло Подоляк (@Podolyak_M) March 15, 2022
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A week ago Zelensky said he had “cooled” on the question of NATO membership – statements which have apparently led to greater positive interactions with Russia at the ceasefire negotiation table.
In the fresh Tuesday remarks, he also said that NATO Article 5 is “weaker” than ever before. Article 5 spells out the collective defense basis of the Western military alliance, or essentially than an “attack against one ally is considered as an attack against all allies.”
“We realized that Ukraine will not become a member of NATO. We understand this, we are reasonable people,” he was reported as saying according to a translation. “Kyiv needs new formats to interact with the West and separate security guarantees.”
He are further comments he made:
“Some states of alliance have intimidated themselves, saying that they can’t answer. That they cannot collide with Russian missiles and planes in the Ukrainian sky. Because this, they say, will lead to escalation, will lead to the Third World War. … And what will they say if Russia goes further to Europe, attacking other countries? I am sure the same thing they say to Ukraine. Article 5 of the NATO treaty has never been as weak as it is now. This is just our opinion,” he said.
Zelensky:
“We realized that Ukraine will not become a member of NATO. We understand this, we are reasonable people.”
“Kyiv needs new formats to interact with the West and separate security guarantees”
— Ben Judah (@b_judah) March 15, 2022
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One online commenter pointed out the obvious in terms of what many might be thinking, but are perhaps hesitant to say openly… “He needed to say that before the whole country was destroyed.”
Tyler Durden
Tue, 03/15/2022 – 19:20 - Progressive Governance Needs A Social Credit State
Progressive Governance Needs A Social Credit State
Authored by William L Anderson via The Mises Institute,
Critics of the Chinese Communist regime often point toward the government’s social credit system, in which the government traces individuals’ electronic paths, from their comments on social media to items they purchase, and issues rewards and punishments based on the information collected.
For example, a Chinese citizen who receives a “bad” social credit score might not be permitted to ride one of the famous high-speed trains, being relegated to the slower trains for travel, and might be denied air travel.
Not surprisingly, people in the West have denounced the system as being heavy-handed, including CBS News, hardly a voice of antiprogressivism:
The fear is that the government will use the social credit scoring system to punish people who are not sufficiently loyal to the communist party, and trying to clear your name or fight your score is nearly impossible since there is no real due process.
Human Rights Watch, hardly a right-wing entity, is even more scathing in its criticism of China’s system:
Apple CEO Tim Cook looks forward to a “common future in cyberspace” with China, he told the Chinese government’s World Internet Conference earlier this month. This was an embarrassing gesture toward a state that aggressively censors the internet and envisions a dystopian future online.
Other progressive entities, including the New York Times, also have been critical of China’s social credit system but apparently have no problem with the establishment of a similar de facto system here. The Washington Post went even further, openly taking part in a social credit scheme by publicly identifying people who recently contributed to the Canadian truck protesters and demanding to know why they gave money.
Understand that the Washington Post accessed an illegally hacked document and then used it as a weapon against people who dared contribute to something with which the newspaper’s staff disagreed, and the purpose was not to be informative but rather to endanger contributors and make them vulnerable to job loss, public shaming, and other kinds of attacks. This is not a rendition of “Democracy Dies in Darkness” but rather an attempt to impose a greater darkness on all of us.
Not that long ago, political liberals universally would have agreed that using massive electronic surveillance to monitor speech and political contributions was unthinkable. Today, not one mainstream journalistic entity has raised a question about the actions taken by Canada’s government against dissenters or even questioned the Post’s doxing of those contributors. One surmises that the editors of the Post agree with Prime Minister Justin Trudeau, since many protesters do not share the political views of the Post’s staff.
The Washington Post is hardly the only entity that has taken the view that supporting the truckers is tantamount to supporting the Nazi Party. The New York Times has denounced the truckers as violent terrorists, in contrast to the demonstrators in 2020 that “peacefully” destroyed huge portions of American cities, killing and looting as they went. Writes Paul Krugman:
[T]his isn’t a grass-roots trucker uprising. It’s more like a slow-motion Jan. 6, a disruption caused by a relatively small number of activists, many of them right-wing extremists. At their peak, the demonstrations in Ottawa reportedly involved only around 8,000 people, while numbers at other locations have been much smaller.
Despite their lack of numbers, however, the protesters have been inflicting a remarkable amount of economic damage. The U.S. and Canadian economies are very closely integrated. In particular, North American manufacturing, especially but not only in the auto industry, relies on a constant flow of parts between factories on both sides of the border. As a result, the disruption of that flow has hobbled industry, forcing production cuts and even factory shutdowns.
It is not that Krugman believes that governments always should curtail violent protests. While his attacks on the truckers present them as violent thugs, Krugman changes directions regarding the riots in American cities in 2020, claiming that they were “remarkably nonviolent”:
This comparison will no doubt surprise those who get their news from right-wing media, which portrayed B.L.M. as an orgy of arson and looting. I still receive mail from people who believe that much of New York City was reduced to smoking rubble. In fact, the demonstrations were remarkably nonviolent; vandalism happened in a few cases, but it was relatively rare, and the damage was small considering the huge size of the protests.
By contrast, causing economic damage was and is what the Canadian protests are all about—because blocking essential flows of goods, threatening people’s livelihoods, is every bit as destructive as smashing a store window. And unlike, say, a strike aimed at a particular company, this damage fell indiscriminately on anyone who had the misfortune to rely on unobstructed trade.
And to what end? The B.L.M. demonstrations were a reaction to police killings of innocent people; what’s going on in Canada is, on its face, about rejecting public health measures intended to save lives. Of course, even that is mainly an excuse: What it’s really about is an attempt to exploit pandemic weariness to boost the usual culture-war agenda.
Krugman hardly is alone at the New York Times. Fellow columnist Michelle Goldberg described the demonstrations as “terrifying” and roundly condemned the truckers as nothing more than “right-wing” protesters, which is NYT speak for people who should have no rights. As for the 2020 demonstrations being peaceful, former NYT writer Nellie Bowles wrote about how the NYT withheld her account of the aftermath of the Kenosha riots until after the 2020 election. She had this to say about the mentality behind the NYT’s decision to withhold the truth:
Eventually the election passed. Biden was in the White House. And my Kenosha story ran. Whatever the reason for holding the piece, covering the suffering after the riots was not a priority. The reality that brought Kyle Rittenhouse into the streets was one we reporters were meant to ignore. The old man who tried to put out a blaze at a Kenosha store had his jaw broken. The top editor of the Philadelphia Inquirer had to resign in June 2020 amid staff outcry for publishing a piece with the headline, “Buildings Matter, Too.”
If you lived in those neighborhoods on fire, you were not supposed to get an extinguisher. The proper response—the only acceptable response—was to see the brick and mortar torn down, to watch the fires burn and to say: thank you.
But what does this have to do with the American and Canadian views of social credit?
First, as noted earlier, there has been no condemnation of the Canadian government’s heavy-handed crackdown on the truckers, just as no one in the mainstream press even has questioned the Washington Post’s attempt to shame and dox the truckers’ donors. When given the opportunity to condemn what clearly are social credit measures, elite American and Canadian politicians, academics, and journalists have been silent.
Second, by invoking emergency powers, Trudeau has assumed near-dictatorial powers, which would be antidemocratic in anyone’s book, yet again, the “Democracy Dies in Darkness” crowd has remained silent. I link no articles because there are none to link.
Beyond the issue of its classifying people who simply are demonstrating nonviolently as “terrorists,” there is no way that such an order can be limited to one instance. Now that Canada’s progressive government has criminalized even peaceful dissent—with approval by the progressive elites in both Canada and the US—it will be easier for governments to cross those lines when people express dissent against progressive measures in the future.
All of this goes well beyond the usual accusations of political hypocrisy. One accuses people of being hypocrites in order to shame them, but the “Democracy Dies in Darkness” crowd is well beyond any capability of being shamed. To them, whatever Trudeau and other progressive regimes do to those that dare dissent against progressive governance is legitimate because there can be no other permissible way of thinking, even while those same people give lip service to constitutional protections such as the First Amendment.
Such protections do not and will not apply to people in groups that do not support progressive ideals and, as we have seen in Canada, officials will increasingly resort to a social credit system undergirded by the “woke capitalists” of the technology sectors, who apparently have no problems being primary agents of state-sponsored surveillance. For example, Twitter gladly permitted the doxing of people who contributed money to the truckers via a supposedly secure platform. We can expect more of this. Writes Michael Rectenwald:
[W]oke capitalism cannot be sufficiently explained in terms of placating coastal leftists, ingratiating left-liberal legislators, or avoiding the wrath of activists. Rather, as wokeness has escalated and taken hold of corporations and states, it has become a demarcation device, a shibboleth for cartel members to identify and distinguish themselves from their nonwoke competitors, who are to be starved of capital investments. Woke capitalism has become a monopoly game.
Just as nonwoke individuals are cancelled from civic life, so too are nonwoke companies cancelled from the economy, leaving the spoils to the woke. Corporate cancellations are not merely the result of political fallout. They are being institutionalized and carried out through the stock market. The Environmental, Social, and Governance (ESG) Index is a Chinese-style social credit score for rating corporations. Woke planners wield the ESG Index to reward the in-group and to squeeze nonwoke players out of the market. Woke investment drives ownership and control of production away from the noncompliant. The ESG Index serves as an admission ticket for entry into the woke cartels.
Likewise, we can expect the same pressures to be placed upon nonbusiness entities like nonprofit advocacy groups and especially conservative churches. As progressives continue breaking down the historical barriers between the state and private life, a social credit system will fill the void. Individuals, business firms, and organizations that promote progressive viewpoints will see minimal disruption in their lives.
However, those individuals and entities that hold viewpoints that are “unacceptable” can expect to see daily disruptions, from their finances to simple communications by email. Given the support that American political and economic elites have shown for Trudeau and his crackdowns on “terrorist” truckers, there is little protection left for those that are not in the good graces of progressives.
Because progressive governance ultimately clashes with reality, progressives must develop ways to enforce their measures, especially when the inevitable pushback occurs. As we have learned from China, a social credit system is one way to curb dissent and to force some people to the margins. American and Canadian progressives are finding social credit also can figuratively beat people into submission.
Tyler Durden
Tue, 03/15/2022 – 19:00 - A Historic Day On Deck: Powell Hikes, Putin Defaults
A Historic Day On Deck: Powell Hikes, Putin Defaults
Tomorrow we get the highlight of what has already been an event-packed week, when at 2pm the Fed will hike rates for the first time since December 2018, raising the Fed Funds rate from 0% where it has been since the covid crisis to 0.25%. The widely telegraphed rate hike will be the first of many as the Fed scrambles to contain inflation which has led to a record high, double digit PPI and the highest CPI since the early 1980s, when the Volcker Fed hiked rates as high as 20% to contain galloping inflation. And, in doing so, the Fed will also set the US economy on course for a crash landing, with forward OIS market already pricing in almost 2 rate cuts over the next three years, a number that will only grow as the US slides into a crippling recession over the next few quarters (we will have a full FOMC preview later today).
Also tomorrow, another even more momentous event may take place when Russia is due to make two interest payments on its dollar bonds on Wednesday, but it is unclear whether western investors will actually receive their cash in dollars, in devalued rubles, or at all, potentially lining up a uniquely messy government debt default, the first since 1998 which eventually led to the collapse of LTCM and the start of the too big to fail bailout culture which defines the US financial system to this day.
On Wednesday, March 16, Russia is scheduled to hand investors a total of $117 million in interest payments on two of its bonds: namely $73 million on RUSSIA USD 2023 and $44 million on RUSSIA USD 2043. There is a 30-day grace period on these bonds, meaning that there may be time until April 15 to pay it; if it does not, that would constitute a default. There is no alternative payment clause on these bonds.
The next principal payment is on March 31, $359 million on RUSSIA USD 2030, which has a 15-day grace period, which again brings it to April 15. This is then followed by a $2 billion principal payment from RUSSIA USD 2022 maturing on April 4. Many more scheduled payments follow until the end of the year.
Altogether Russia has some $38.5BN of foreign-currency bonds (a tiny amount: the US issues roughly this much in every single monthly 10Y auction), of which roughly $20BN are owned by overseas investors. But foreigners also hold roughly 20% of Moscow’s local currency debt, which totaled roughly $200bn before the war sparked a collapse in the value of the ruble and made the bonds virtually untradeable.
The Russian government has already said that a recent coupon payment on these local bonds would not reach foreign holders, citing a central bank ban on sending foreign currency abroad. This has already been painful for western asset management groups. More than two dozen have had to freeze funds with significant Russia exposure, while others have sharply written down the value of their Russian holdings.
Will Moscow pay? As the FT notes, the finance ministry said on Monday that it had ordered the payments to be made as usual, but added that its ability to do so could be curbed by western sanctions against the Russian central bank. Finance minister Anton Siluanov said those sanctions – brought in earlier this month – were bouncing the country into an “artificial default”.
Digging deeper, there are both external and internal constraints that may limit payment.
In terms of the former, it may be that the US will prohibit payments being made on Russia’s eurobonds. This issue appeared with Directive 4 under Executive Order 14024 that prohibits US persons from conducting certain transactions with Russia’s Ministry of Finance. While it is unclear whether this extends to US banks receiving coupon payments, General License 9A appears to clarify that it would. In particular, it notes that prohibitions from Directive 4 related to the receipt of interest and maturity payments relating to debt or equity of specified entities issued before February 24, 2022 would be authorized only through May 25,2022.FAQ 981 then also notes that, beyond this date,a specific license would be required to keep receiving these payments. This all suggests that beyond May 25, it would not be possible for NYC banks to receive the interest payments, and that banks would need to ‘reject’ such transactions. This would therefore impact the interest payments due on May 27 for RUSSIA USD 2026 and EUR 2036.
Alternatively, a key domestic constraint to payment is that there may simply no longer be a willingness by Russia to make payments given the tough sanctions applied at this stage, especially given that making these payments would require using up FX that may increasingly be in short supply. Announcing that Russia is not allowing domestic bond OFZ repayments to be taken outside Russia already makes this point. Separately, a decree has now also been published by the Kremlin (see here) that allows for the repayment of foreign debt to select non-residents to be made to onshore accounts in RUB as opposed to being made to foreign accounts in FX. The decree states that this is applicable to both the government and other entities. For now, it’s not clear whether it is mandatory, or whether the CBR/Ministry of Finance would be willing to use their apparent override to enable eurobond payments to still go through. However, given that similar restrictions have been made for local government bonds, it is certainly possible that it applies to eurobonds too.
According to Morgan Stanley, it is unlikely that Russia will make the foreign debt payments: “we think it is very likely that there will be a missed payment in the coming months, perhaps as soon as the next payment on March 16. There are ways to avoid it. GL9A could be extended once May 25 hits. Also, Russia could decide to make the sovereign debt payments in USD as required. Yet for now this would be far from our base case. Note that as usual a default would not see bonds excluded from the EMBI indices. Index exclusions, barring new rules being put in place given the exceptional circumstances, would only take place due to no secondary trading.”
To be sure, markets have already largely priced in a default. Russia’s foreign bonds are trading at about 20 per cent of their face value – a level that suggests very little confidence of being repaid. Credit rating agencies, which up until late February awarded Russia investment-grade status, have slashed it to the very lowest “junk” ratings, with Fitch Ratings saying a default is “imminent.”
If Russia pays in rubles, is it still a default? Siluanov has said it is “absolutely fair” for Russia to make payments on its government debt in rubles until sanctions that he claimed have frozen nearly half of the country’s $643bn in foreign exchange reserves are lifted. But as the FT notes, payment in the Russian currency would still constitute a default in the eyes of most western investors, and not only because of its recent drop in value. Six of Russia’s 15 dollar- or euro-denominated bonds do contain a “fallback” clause allowing repayment in roubles, but the two bonds with coupons due on Wednesday are not among them. Furthermore, late on Tuesday Fitch said that were Russia to make its coupon payments due March 16 in rubles, rather than U.S. dollars, that would constitute a default following the 30-day grace period.
In any case, investors in Europe and the US say sanctions – both their own governments’ and Moscow’s – would in practice make it impossible to set up the Russian bank accounts necessary to receive rouble payments. Lawyers agree with Morgan Stanley (above) and say that even with the loophole of the alternative payment clause, a Russian default is likely and litigation almost inevitable.
What happens next? Typically, a default is followed by a period of negotiation between a government and its bondholders to reach an agreement on restructuring the debt. This is usually done by eventually exchanging the old defaulted bonds with new, less onerous ones, either simply worth less, with lower interest payments or with longer repayment schedules, or a combination of all three. Alternatively, the ECB may just end up buying them to pretend that an event of default never happened although Russia would need to invade Greece for that scenario to work.
While investors are usually reluctant to sue and get a formal default declared by a court because that could make the entire bond come due and potentially trigger defaults in other bonds where payments have not been missed, a “normal” restructuring seems unlikely in Russia’s case. The sanctions are designed to lock the country out of global bond markets and the participation of western investors in any new debt sales is forbidden.
Instead, investors will probably have to sit tight, writing off their Russian bonds and awaiting a de-escalation in the Ukraine conflict that might lead to an easing of sanctions. Some may actually want to quickly vote to demand immediate repayment and get court judgments from US and UK judges that allow them to try to seize overseas Russian assets, to ratchet up pressure on Moscow.
A subset of investors will also be hoping that the failure to make interest payments triggers a payout on credit-default swaps. The decision will be made by a finance industry “determinations committee”, made up of representatives of big banks and asset managers active in the CDS market. Unfortunately, the CDS may not end up helping bondholders, as the financial sanctions could snarl up the intricate system used to settle the contracts and it is unclear just how a CDS auction would take place.
Will a default spark a financial crisis? For a generation of trade, Russia’s last default in 1998 is still a vivid memory. Moscow’s shock decision to devalue the rouble and renege on its local debt followed on the heels of the Asian financial crisis and sent shockwaves through financial markets, leading to the collapse of US hedge fund Long-Term Capital Management, which was bailed out at the behest of the Fed by a consortium of banks, launching America’s too big to fail Wall Street culture.
Even then, Russia kept up payments on its dollar bonds, but defaulted on some Soviet-era international bonds. The last complete external default came in 1918, when the Bolshevik regime repudiated Tsarist-era debts following the Russian Revolution.
Analysts are relatively confident a rerun of 1998 can be avoided. Nikolaos Panigirtzoglou of JPMorgan points out that foreign investors and banks have already been cutting their exposure to Russia since the country’s 2014 annexation of Crimea, unlike the mid-1990s when highly leveraged funds were loading up on Russian assets. So far, the invasion of Ukraine has sparked only modest contagion in other emerging markets, with the far more significant fallout from the crisis being felt in a surge in commodity prices.
Still, anyone predicting that the Russian default won’t have adverse and unexpected consequences, is lying to themselves: as the FT notes, history of finance is littered with examples of how unexpected second-order effects from widely anticipated events still ended up causing broader calamities.
The 30-day grace period means this “probably isn’t yet the moment where we see where the full stresses in the financial system might reside . . . However, this is clearly an important story to watch,” said Jim Reid, a senior strategist at Deutsche Bank.
Tyler Durden
Tue, 03/15/2022 – 18:41 - US Navy Warship Was At Sea When Officials Said It Was Undeployable: Commander
US Navy Warship Was At Sea When Officials Said It Was Undeployable: Commander
Authored by Zachary Stieber via The Epoch Times,
The warship that U.S. Navy officials described as undeployable if they were not able to remove the unvaccinated commander was actually deployed when the assertions were made, the commander told a judge during a recent hearing.
“No sir, I do not,” the commander, who has not been publicly named, said when asked whether he thought the officials’ statements were accurate.
U.S. District Judge Steven Merryday, a George H. W. Bush appointee who is overseeing the case, ordered military officials in February not to take punitive action against the commander because they appear to have wrongfully denied the commander’s request for a religious exemption from the military’s COVID-19 vaccine mandate.
In an emergency motion to the judge on Feb. 28, officials alleged the ruling was affecting military readiness because unvaccinated sailors “pose a risk to other personnel” since the COVID-19 vaccines have proven effective at halting the spread of the virus that causes the disease.
The order “effectively places a multi-billion dollar guided missile destroyer out of commission,” the motion stated. “For example, if it becomes necessary to deploy an East Coast-based surface ship in response to global events in Ukraine (or elsewhere), the Navy will not deploy the Commander’s vessel. In this way, the Court’s order will have a wide-ranging impact on Navy operations and national security.”
Besides federal health officials saying the vaccines don’t affect the transmission of the virus, and the vaccines proving virtually ineffective against preventing infection, the claim about the ship itself was undermined by the commander’s testimony in federal court, according to a transcript released March 14.
“I was out at sea” on Feb. 28, when the motion was entered, the commander said.
The officer said he was in charge of his ship and there did not appear to be any problems stemming from his vaccination status, as both unvaccinated and vaccinated people can test positive for COVID-19, particularly since the emergence of the Omicron variant of the CCP (Chinese Communist Party) virus.
The training exercises the ship was completing lasted through about March 4, according to the commander.
The Navy and Department of Justice, whose lawyers are representing the military in the case, declined to comment.
“I’m here today because the military is not executing this policy while respecting the constitutional freedoms laid out in the First Amendment or RFRA,” the commander said, referring to the Religious Freedom Restoration Act.
“I should not be the one standing here to say that today; generals and admirals, the executives in our service, should be here to say that to the politics, to the bureaucracy, to their decision-making.”
One day after the hearing, the judge rejected the government’s motion.
The Navy has asked an appeals court to step in; that court has yet to rule on the request.
Tyler Durden
Tue, 03/15/2022 – 18:20
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