Sep 26

Today’s News 26th September 2019

  • Danske Bank Executive At Center Of Massive Money-Laundering Scandal Found Dead
    Danske Bank Executive At Center Of Massive Money-Laundering Scandal Found Dead

    A former Danske Bank executive at the center of a €200 billion ($220 billion) money-laundering scandal in Estonia was found dead in his backyard in an apparent suicide, according to Eesti Rahvusringhääling (ERR).

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    ERR reported on Wednesday that after several days of local police searching for Aivar Rehe, who was in charge of Danske Bank in Estonia from 2006 to 2015, was found dead in the forest near his home at approximately 9:30 p.m. on Tuesday, near the capital of Tallinn.

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    Estonian Police started searching for Rehe on Monday after he disappeared, reports indicated he was mentally unstable and at risk for suicide.  

    On Tuesday, local police told ERR that he was “a threat to his own life and well-being.” 

    By Wednesday, ERR confirmed that all signs pointed to suicide, well, that is at least what the local media is reporting. 

    Danske Bank’s Estonian branch is at the heart of one of the largest money-laundering scandals, with €200 billion ($220 billion) of suspicious funds flowing from Russia, Moldova, and Azerbaijan, for at least a decade. The amount of money that was transferred was equivalent to 10 times Estonia’s GDP, mostly originating from Russia. 

    The scandal has led to a criminal probe into Danske Bank’s Estonian branch, along with top bank executives in Europe and the US. Prosecutors told ERR that Rehe wasn’t a suspect. 

    Ten former employees, most low/mid-tier ones, are suspects in the investigation. Prosecutors have already charged the bank’s former chief executive and chief financial officer, Thomas Borgen and Henrik Ramlau-Hansen.

    Danske Bank holds about 50% of Danish people’s savings, has seen at least 67% of its market capitalization wiped out in the last 19 months since the scandal emerged in 2017/2018. 

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    Earlier this year, Rehe said in an interview that all the necessary compliance tools were in place to deter money-laundering in the bank. He told the public to await the outcome of the investigation into the bank before drawing any conclusions. He also said anti-money-laundering laws back then were “were significantly different” from ones in 2019. 

     


    Tyler Durden

    Thu, 09/26/2019 – 02:45

    Tags
    Business Finance

  • The Brexit Battle Shows Democracy Is Only Allowed When The Regime Likes The Outcome
    The Brexit Battle Shows Democracy Is Only Allowed When The Regime Likes The Outcome

    Authored by Ryan McMaken via The Mises Institute,

    The United Kingdom’s Supreme Court ruled “illegal” a parliamentary tactic used by PM Boris Johnson to ensure Brexit would be carried out on October 31, more than six months after Brexit was supposed to take effect.

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    While the court wasn’t ruling on Brexit, per se, the context of the situation makes it clear the ruling is really just the latest move from the UK’s political class designed to postpone Brexit yet again.

    Given the history of EU-related referenda in Europe, we can already guess how the situation will play out. British voters will either be asked to vote again on Brexit – so that this time, they can get it “right” – or the Brexit agreement will be constructed in such a way that Brexit will be a British exit in name only.

    At the same time, bizarrely, Johnson’s moves in parliament have been credited as being “undemocratic” or even a “coup.” This charge comes even though Johnson had attempted to call an early election, but was denied.

    In the meantime, any sort of democracy that might actually strengthen the pro-Brexit position will not be allowed, as noted by Raphael Vassallo :

    To recap, then: Britain first turned to the electorate to decide on its future in the European Union by means of a nationwide referendum…and ignored the result. Then its Parliament made it technically impossible to actually deliver on that mandate, by reducing the present government to the status of a lame duck. And to cap it all, it has now even shut the door to an election: which is about the only thing left that can possibly resolve the entire Brexit impasse to begin with.

    But at least, the Commons’ reluctance to hold an election can easily be explained in purely party-political terms. Clearly, the Remainers have understood that Boris Johnson would most likely enlarge his parliamentary majority in an election. … Britain’s Parliament seems hellbent on preventing the British people from even expressing their will at all.

    By now, this is a tried and true tactic in European politics. Only votes that help the pro-EU position are allowed. Everything else is declared “undemocratic” or is simply ignored.

    In 2001, Irish voters rejected the Nice Treaty in a referendum (or, to be more accurate, rejected proposed amendments to the Irish Constitution, that would have made ratification of the Nice Treaty possible).

    Ireland’s political class quickly went to work declaring that the Irish voters had made a mistake and didn’t really understand the importance of ratifying the treaty. Vassallo notes

    … the response was to doggedly “pursue” the same rejected reforms anyway, with even greater determination than before.

    So much so, that just a year later, the Irish were presented with a second national referendum… to approve a second raft of changes to Ireland’s Constitution, so as to once again permit the ratification of pretty much the same old Nice Treaty they had earlier rejected.

    The second time, the majority voted “correctly” and demands for additional referenda, of course, ended.

    Another tactic was used on the continent when the French and the Dutch were allowed to vote on the ratification of a new EU constitution. The voters rejected it.

    But it naturally didn’t end there. French and Dutch politicians simply ignored the results of the referenda and devised an alternative strategy. They slightly revised the text of the constitution, called it the “Lisbon Treaty” and then ratified that without asking the voters.

    Brendan O’Neill summed it up in The Guardian:

    When French and Dutch voters rejected the European constitution in 2005 (and according to Valery Giscard d’Estaing , the current Lisbon treaty is the “same as the constitution”), they were sneeringly insulted by their betters in Brussels. Neil Kinnock said it was a “triumph of ignorance”. Andrew Duff, Liberal Democrat MEP, labelled the “rejectionists” as an “odd bunch of racists, xenophobes, nationalists, communists, the disappointed centre left and the generally pissed off”. He asked whether it is wise to “submit the EU Constitution to a lottery of uncoordinated national plebiscites”.

    But by 2008, the Irish still hadn’t learned their lesson, and the majority voted incorrectly in a 2008 referendum on the Lisbon Treaty.

    Sure enough, Irish politicians demanded a second vote, and the second time, the voters got it “right.”

    But not before they were roundly denounced by their betters in Parliament and in Brussels who knew better. O’Neill writes:

    As soon as the Irish people’s ballots were counted in June [2008], their rejection of Lisbon was treated as the “wrong” answer, as if they had been taking part in a multiple-choice maths exam and had failed to work out that 2+2=4. Now, they will be given a chance to sit the exam again, “until [they] come up with the right answer,” says George Galloway , attacking EU elitism. The notion that the Irish “got it wrong” exposes gobsmacking ignorance about democracy in the upper echelons of the EU. The very fact that a majority of Irish people said no to Lisbon made it the “right answer”, true and sovereign and final. “No” really does mean no.

    Here, O’Neill gets it slightly wrong. The “upper echelons of the EU” know exactly how democracy works. It is only to be tolerated if it leads to the outcomes preferred by the ruling classes. If not, then something must be done to correct the situation.

    Just keep voting until the voters do things properly.

    Calling Upon the Courts to Void the Vote

    In the US, of course, we don’t bother having additional elections out of the usual schedule. We just have judges overrule the voters whenever the voters get uppity.

    One such case occurred in California in 1994, when nearly 60 percent of the voters approved a measure to deny government services to foreign nationals living illegally in the US. It didn’t call for any deportations, or for any prosecution of any residents.

    The measure was passed with “yes” votes from of 56% of African Americans, 57% of Asians, and  a third of Hispanics. It won in every region of California except the Bay Area. In heavily Hispanic Los Angeles County, it passed by a 12-point margin.

    After the votes were counted, the result was simply ignored and thrown out. All that was required was to have a federal judge declare the will of the democratic majority to be null and void.

    In more recent years, the courts have wised up and no longer allow the voters to even have a say. In 2018, a measure to split California into three smaller states was successfully placed on the ballot after gaining the required number of signatures from voters and jumping through the usual hoops required of such measures.

    But before a vote could occur, the California Supreme Court deleted the measure from the ballot, ruling:

    “We conclude that the potential harm in permitting the measure to remain on the ballot outweighs the potential harm in delaying the proposition to a future election,” the justices wrote.

    In other words, allowing the voters to have a say on the matter is too risky. Thus, a tiny number of wealthy California judges instead decided for the voters that the only acceptable vote is “no.”

    And who needs voting when you have government judges, anyway? Once upon a time, it was widely accepted that significant changes to the federal constitution required a vote, in the manner prescribed by the Constitution itself.

    During the early twentieth century, for example, constitutional amendments were seen as the proper way to do this. It’s why Prohibition required a constitutional amendment and not just a federal law declaring a “war on booze.” It was recognized that new federal powers — like those needed to outlaw alcohol consumption — could not be invented by either the courts or the President, or Congress.

    By the 1960s, however, voting on constitutional amendments was passé. It became far more convenient to go to federal judges instead, and have them simply invent a new version of the constitution.

    Should abortion be regulated by the federal government even though everyone agreed for 180 years that no such federal power existed? No problem, just have the Supreme Court declare it to be so.

    Should the federal government have the power to force people to buy health insurance? Don’t bother with an Amendment. Just have nine federal judges decide the matter for 320 million Americans.

    Want to declare a war on drugs? An amednment is no longer required, as it was in the days of Prohibition. Now, federal judges can grant us feds any power we want!

    Meanwhile, politicians never tire of lecturing us about the sanctity of democracy. But it’s clearly only sacred when the Important People agree with the outcome.


    Tyler Durden

    Thu, 09/26/2019 – 02:00

    Tags
    Politics

  • China Launches New Attack Ship With Capabilities Of Invading Taiwan
    China Launches New Attack Ship With Capabilities Of Invading Taiwan

    We have outlined that China represents one of the greatest long-term strategic threats to the Indo-Pacific region and the US military that operates with-in. President Trump made it extremely clear last week that the People’s Liberation Army Navy (PLAN) is a “threat to the world.”

    New reports surfaced on Twitter indicating the PLAN has started the launch process of a new amphibious assault ship that could soon be capable of launching an attack on Taiwan.

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    A statement from the PLAN Wednesday said the Type 075, a helicopter carrier displacing more than 30,000 tons, is undergoing launch preparations at China State Shipbuilding Corporation’s Hudong-Zhonghua shipyard, reported Naval News.

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    The statement said water is being pumped into the dry dock in which the ship’s hull was built.

    PLAN officials said Type 075 is a new class of warship, entirely produced in China, will be able to carry out amphibious combat missions.

    Development work on Type 075 started in 2011, and it will be a “vertical” amphibious assault vessel capable of launching attacks on the mountainous East Coast of Taiwan.

    For comparison, the Type 075 is slightly smaller than the US Navy’s landing helicopter assault vessel and more comparable to ones that are currently deployed in the Australian Navy.

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    The expected launch of Type 075 could be during a massive military parade in Beijing next week (Oct. 01). The PLAN will show the world its advanced vessels, fifth-generation fighters, advanced combat drones, robots, main battle tanks, and a show of force that could result in a few angry tweets from President Trump.

    China has declared Taiwan as its territory although it has never controlled it, and threatens to invade by military force if Taipei resists unification.

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    Chinese and foreign analysts don’t see China launching an amphibious attack on Taiwan in the near term, rather a conflict with the US could spiral out of control in the South/East China Sea.

    “Looking at various flashpoints in Asia including the Korean peninsula and the South China Sea, I have come to the conclusion that Taiwan is the most dangerous one,” Brendan Taylor, a strategic studies professor at Australian National University, told the Financial Times.

    China has a long term plan, and it’s by the year 2049, Taiwan will be under Beijing control, which means sometime in the coming decades, a war could break out between both countries.

    The world is positioning for conflict, and the reports we bring you — detail how countries are actively preparing for that inevitable day.


    Tyler Durden

    Thu, 09/26/2019 – 01:00

    Tags
    Politics

  • Welfare Checks Turn Deadly: You Might Want To Think Twice Before Calling The Cops
    Welfare Checks Turn Deadly: You Might Want To Think Twice Before Calling The Cops

    Authored by John Whitehead via The Rutherford Institute,

    “Anyone who cares for someone with a developmental disability, as well as for disabled people themselves [lives] every day in fear that their behavior will be misconstrued as suspicious, intoxicated or hostile by law enforcement.”

    – Steve Silberman, The New York Times

    Think twice before you call the cops to carry out a welfare check on a loved one.

    Especially if that person is autistic, hearing impaired, mentally ill, elderly, suffering from dementia, disabled or might have a condition that hinders their ability to understand, communicate or immediately comply with an order.

    Particularly if you value that person’s life.

    At a time when growing numbers of unarmed people are being shot and killed for just standing a certain way, or moving a certain way, or holding something—anything—that police could misinterpret to be a gun, or igniting some trigger-centric fear in a police officer’s mind that has nothing to do with an actual threat to their safety, even the most benign encounters with police can have fatal consequences.

    Unfortunately, police—trained in the worst case scenario and thus ready to shoot first and ask questions later—increasingly pose a risk to anyone undergoing a mental health crisis or with special needs whose disabilities may not be immediately apparent or require more finesse than the typical freeze-or-I’ll-shoot tactics employed by America’s police forces.

    Just recently, in fact, Gay Plack, a 57-year-old Virginia woman with bipolar disorder, was killed after two police officers—sent to do a welfare check on her—entered her home uninvited, wandered through the house shouting her name, kicked open her locked bedroom door, discovered the terrified woman hiding in a dark bathroom and wielding a small axe, and four seconds later, shot her in the stomach.

    Four seconds.

    That’s all the time it took for the two police officers assigned to check on Plack to decide to use lethal force against her (both cops opened fire on the woman), rather than using non-lethal options (one cop had a Taser, which he made no attempt to use) or attempting to de-escalate the situation.

    The police chief defended his officers’ actions, claiming they had “no other option” but to shoot the 5 foot 4 inch “woman with carpal tunnel syndrome who had to quit her job at a framing shop because her hand was too weak to use the machine that cut the mats.”

    This is what happens when you empower the police to act as judge, jury and executioner.

    This is what happens when you indoctrinate the police into believing that their lives and their safety are paramount to anyone else’s.

    Suddenly, everyone and everything else is a threat that must be neutralized or eliminated.

    In light of the government’s latest efforts to predict who might pose a threat to public safety based on mental health sensor data (tracked by wearable data such as FitBits and Apple Watches and monitored by government agencies such as HARPA, the “Health Advanced Research Projects Agency”), encounters with the police could get even more deadly, especially if those involved have a mental illness or disability.

    Indeed, disabled individuals make up a third to half of all people killed by law enforcement officers.

    That’s according to a study by the Ruderman Family Foundation,  which reports that “disabled individuals make up the majority of those killed in use-of-force cases that attract widespread attention. This is true both for cases deemed illegal or against policy and for those in which officers are ultimately fully exonerated… Many more disabled civilians experience non-lethal violence and abuse at the hands of law enforcement officers.”

    For instance, Nancy Schrock called 911 for help after her husband, Tom, who suffered with mental health issues, started stalking around the backyard, upending chairs and screaming about demons. Several times before, police had transported Tom to the hospital, where he was medicated and sent home after 72 hours. This time, Tom was tasered twice. He collapsed, lost consciousness and died.

    In South Carolina, police tasered an 86-year-old grandfather reportedly in the early stages of dementia, while he was jogging backwards away from them. Now this happened after Albert Chatfield led police on a car chase, running red lights and turning randomly. However, at the point that police chose to shock the old man with electric charges, he was out of the car, on his feet, and outnumbered by police officers much younger than him.

    In Georgia, campus police shot and killed a 21-year-old student who was suffering a mental health crisis. Scout Schultz was shot through the heart by campus police when he approached four of them late one night while holding a pocketknife, shouting “Shoot me!” Although police may have feared for their lives, the blade was still in its closed position.

    In Oklahoma, police shot and killed a 35-year-old deaf man seen holding a two-foot metal pipe on his front porch (he used the pipe to fend off stray dogs while walking). Despite the fact that witnesses warned police that Magdiel Sanchez couldn’t hear—and thus comply—with their shouted orders to drop the pipe and get on the ground, police shot the man when he was about 15 feet away from them.

    In Maryland, police (moonlighting as security guards) used extreme force to eject a 26-year-old man with Downs Syndrome and a low IQ from a movie theater after the man insisted on sitting through a second screening of a film. Autopsy results indicate that Ethan Saylor died of complications arising from asphyxiation, likely caused by a chokehold.

    In Florida, police armed with assault rifles fired three shots at a 27-year-old nonverbal, autistic man who was sitting on the ground, playing with a toy truck. Police missed the autistic man and instead shot his behavioral therapist, Charles Kinsey, who had been trying to get him back to his group home. The therapist, bleeding from a gunshot wound, was then handcuffed and left lying face down on the ground for 20 minutes.

    In Texas, police handcuffed, tasered and then used a baton to subdue a 7-year-old student who has severe ADHD and a mood disorder. With school counselors otherwise occupied, school officials called police and the child’s mother to assist after Yosio Lopez started banging his head on a wall. The police arrived first.

    In New Mexico, police tasered, then opened fire on a 38-year-old homeless man who suffered from schizophrenia, all in an attempt to get James Boyd to leave a makeshift campsite. Boyd’s death provoked a wave of protests over heavy-handed law enforcement tactics.

    In Ohio, police forcefully subdued a 37-year-old bipolar woman wearing only a nightgown in near-freezing temperatures who was neither armed, violent, intoxicated, nor suspected of criminal activity. After being slammed onto the sidewalk, handcuffed and left unconscious on the street, Tanisha Anderson died as a result of being restrained in a prone position.

    And in North Carolina, a state trooper shot and killed a 29-year-old deaf motorist after he failed to pull over during a traffic stop. Daniel K. Harris was shot after exiting his car, allegedly because the trooper feared he might be reaching for a weapon.

    These cases, and the hundreds—if not thousands—more that go undocumented every year speak to a crisis in policing when it comes to law enforcement’s failure to adequately assess, de-escalate and manage encounters with special needs or disabled individuals.

    While the research is relatively scant, what has been happening is telling.

    Over the course of six months, police shot and killed someone who was in mental crisis every 36 hours.

    Among 124 police killings analyzed by The Washington Post in which mental illness appeared to be a factor, “They were overwhelmingly men, more than half of them white. Nine in 10 were armed with some kind of weapon, and most died close to home.”

    But there were also important distinctions, reports the Post.

    “This group was more likely to wield a weapon less lethal than a firearm. Six had toy guns; 3 in 10 carried a blade, such as a knife or a machete — weapons that rarely prove deadly to police officers. According to data maintained by the FBI and other organizations, only three officers have been killed with an edged weapon in the past decade. Nearly a dozen of the mentally distraught people killed were military veterans, many of them suffering from post-traumatic stress disorder as a result of their service, according to police or family members. Another was a former California Highway Patrol officer who had been forced into retirement after enduring a severe beating during a traffic stop that left him suffering from depression and PTSD. And in 45 cases, police were called to help someone get medical treatment, or after the person had tried and failed to get treatment on his own.”

    The U.S. Supreme Court, as might be expected, has thus far continued to immunize police against charges of wrongdoing when it comes to use of force against those with a mental illness.

    In a 2015 ruling, the Court declared that police could not be sued for forcing their way into a mentally ill woman’s room at a group home and shooting her five times when she advanced on them with a knife. The justices did not address whether police must take special precautions when arresting mentally ill individuals. (The Americans with Disabilities Act requires “reasonable accommodations” for people with mental illnesses, which in this case might have been less confrontational tactics.)

    Where does this leave us?

    For starters, we need better police training across the board, but especially when it comes to de-escalation tactics and crisis intervention.

    A study by the National Institute of Mental Health found that CIT (Crisis Intervention Team)-trained officers made fewer arrests, used less force, and connected more people with mental-health services than their non-trained peers.

    As The Washington Post points out:

    “Although new recruits typically spend nearly 60 hours learning to handle a gun, according to a recent survey by the Police Executive Research Forum, they receive only eight hours of training to de-escalate tense situations and eight hours learning strategies for handling the mentally ill. Otherwise, police are taught to employ tactics that tend to be counterproductive in such encounters, experts said. For example, most officers are trained to seize control when dealing with an armed suspect, often through stern, shouted commands. But yelling and pointing guns is ‘like pouring gasoline on a fire when you do that with the mentally ill,’ said Ron Honberg, policy director with the National Alliance on Mental Illness.”

    Second, police need to learn how to slow confrontations down, instead of ramping up the tension (and the noise).

    In Maryland, police recruits are now required to take a four-hour course in which they learn “de-escalation tactics” for dealing with disabled individuals: speak calmly, give space, be patient.

    One officer in charge of the Los Angeles Police Department’s “mental response teams” suggests that instead of rushing to take someone into custody, police should try to slow things down and persuade the person to come with them.

    Third, with all the questionable funds flowing to police departments these days, why not use some of those funds to establish what one disability-rights activist describes as “a 911-type number dedicated to handling mental-health emergencies, with community crisis-response teams at the ready rather than police officers.”

    In the end, while we need to make encounters with police officers safer for people with suffering from mental illness or with disabilities, what we really need – as I point out in my book Battlefield America: The War on the American People – is to make encounters with police safer for all individuals all across the board.


    Tyler Durden

    Wed, 09/25/2019 – 23:50

    Tags
    Social Issues

  • Beijing Opens Its Massive New 'Starfish' Airport – Set To Be The World's Largest & Busiest
    Beijing Opens Its Massive New ‘Starfish’ Airport – Set To Be The World’s Largest & Busiest

    On Wednesday Chinese President Xi Jinping announced the earlier than scheduled opening of Beijing Daxing International Airport in a public ceremony. Abbreviated PKX, it’s the Chinese capital’s latest boost to support tourism and business related to Xi’s flagship infrastructure project, the Belt and Road Initiative, and is vying to eventually be the world’s busiest international hub.

    The city’s current main aviation hub, Beijing Capital International Airport (BCIA) —currently the second busiest in the world behind Atlanta’s Hartsfield-Jackson airport, is considered at capacity and increasingly wracked with delays. 

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    Beijing Daxing International Airport, via Global Look Press

    The ambitious expectations for the massive ‘starfish’ designed airport is that it will handle 300 take-offs and landings an hour, seeing 45 million passengers go through its gates by 2021.

    The long-term projection is that by 2025 it will handle 72 million travelers and by 2040 the hub hopes to see 100 million passengers per year, making it the busiest and largest in the world. 

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    Wednesday’s launch ceremony in the main terminal, which was originally scheduled for Sept. 30, via AFP.

    To reach these numbers will require a planned for increase in runways from its current four to seven runways in total, eventually serving up to 620,000 flights annually. 

    Beijing Daxing International Airport, pictured below last December while under construction, was designed by architect Zaha Hadid as a ‘giant six-armed alien starfish’.

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    Via CNN

    Its opening also comes days before the 70th anniversary of the People’s Republic, which will include a huge military parade through central Beijing on Oct. 1.

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    Inside the world’s largest central airport terminal. Getty Image

    Located south of Beijing the entire expanse of the airport takes up a whopping 47 square km (18 square miles – over half the size of Hong Kong Island).

    The main terminal itself is the largest in the world at nearly 700,000 square meters.

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    A prior model displaying the airport, via Imaginechina, SCMP

    Construction on Beijing Daxing International Airport, funded primarily by the Chinese government, came in at around $17.47 billion.

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    Projected final appearance, via Business Traveler. 

    The new airport boasts of its own Huawei 5G base station as well as ‘facial ID’ check-in and security clearance upon boarding. 


    Tyler Durden

    Wed, 09/25/2019 – 23:30

  • Miami Real Estate Is About To Collapse
    Miami Real Estate Is About To Collapse

    Submitted by Harris Kupperman of Adventures in Capitalism

    Miami has a highly cyclical property market where the magnitudes of the booms and busts dwarf anywhere else in the country.  In my experience, trends in Miami real estate also tend to lead national trends by a few quarters. Therefore, smart guys always watch Miami.

    Roughly a year ago, I noticed that Miami property prices started to decline after a two or three-year period of leveling off. The pace of decline has clearly accelerated recently. Most properties on South Beach (where I live) are off by 20 to 35% from peak prices, but that is nothing compared to the carnage across the bridge in areas like Brickell and Edgewater.

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    Why are prices dropping? It’s more than simple supply and demand—though the glut of new supply is clearly part of it. Rather, your typical condo has a carrying cost of 4-7% of fair value before financing costs (property tax/condo fees/insurance/maintenance/special assessments/etc). This adds up fast when a property is worth hundreds of thousands or even millions. It is pretty much mathematically impossible to have a positive yield from buying and renting out a Miami condo (trust me, I’ve done the math many times). The only way owning is viable, is if prices go up and allow you to extract capital to fund the carrying costs—though debt service then makes the monthly cash flow even worse. The basic law of Miami condo pricing is that if prices stop going up, they collapse due to the carrying cost. Suddenly, it seems as though a lot of owners are becoming financially distressed—forcing them to hit bids at a time when demand is somewhat lacking.

    With all of that in mind, I got drinks last weekend with a buddy in the hard-money lending market to discuss the state of the market. For those of you who are unfamiliar with hard-money lending, these are loans made on the basis of the asset value, not the ability of the borrower to pay. In fact, in some cases it is assumed that the borrower will not repay the loan and through penalty interest, you rapidly chew through their equity and get to own a high-quality property at a great initial entry price. This works well in an up market. How does it work when things go no-bid?

    Friend: Holy sh*t Kuppy, it’s about to blow!!

    Me: You said that 3 months ago…

    Friend: It’s different now, the whole system is jammed up.

    Me: What do you mean?

    Friend: Before, when a borrower would default, we’d put him into penalty default interest (which is 25% on loans over $500k in Florida).  My business is to underwrite safe loans and to clip a coupon, not to own real estate.  The lenders that ARE looking for big returns (and risks and headaches) on real estate watch the public records for notices of defaults and then barrage the distressed borrower with offers of 12-16%, interest only private loans… not any borrower’s idea of a good time but still better than 25% default rate plus legal fees.  These offers often come with periods of prepaid interest that temporarily take some pressure off the borrower… but also help sharpen the axe for when it finally falls (larger, artificially inflated final loan amount).  We could play these same games with the defaulted borrowers, but my investors want the defaulted paper off the books—we don’t want to re-possess the property and have to sell it. Our specialty is underwriting—not foreclosure. We’re happy when someone takes our problems away.

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    Me: So?

    Friend: The story usually ends with a “fire sale” of the property by the defaulted borrower or by the lender (after foreclosure).  End users are seeing that the “fire sale” price may very well be next quarter’s market price, and the units aren’t moving.  Even the County foreclosure sales, which have been loaded with fix-and flip reality TV fans bidding 110% of value for the past 5 years, are seeing below market priced deals with no bids.

    Suddenly, no one wants our defaulted borrowers. The shark lenders are all jammed up with loans they poached last year. They used to be able to recycle their capital by selling the assets, but now they can’t. This means that no one is buying the distressed loans off our books without demanding a discount on principal. The whole conveyer belt is frozen. Even a few months ago, there were still idiots from out of town, or kids with daddy’s offshore money who’d come down here with a new hard money-fund and make stupid decisions. Now those guys are jammed up too or at least they’re not coming down here anymore. This means that we need to now take possession of our defaults.

    Me: How’s that going?

    Friend: Lemme explain it this way. We underwrote this one deal two years ago for a $4.5 million purchase of a new construction condo, we leant $2 million against it. The guy defaulted and we’re up to $2.5 million in principal and default interest and we took possession—figuring we were plenty protected by over a million in equity left on the asset. Remember, our basis is $2 million. Well, it’s been for sale for 9 months now. It may not even trade with a 2-handle. Meanwhile, I’m stuck carrying the thing—which isn’t cheap. I have no idea how to even sell it. We’re on our 3rd broker now. No one has a clue what to do with it, yet these assholes keep building more product.

    Me: Welcome to the Miami property cycle. If your build cost is $300 a foot and you think you can sell it for $700, you’ll flood the market. Once you’ve made a “go decision” you’re gonna finish the thing—even if you only sell it for $200 in the end.

    Him: It’s even worse. Every month they break ground on hundreds of additional units when the existing ones won’t sell. Some of the most high-profile buildings have had less than 50% sell-through and the majority of what’s “sold” is immediately dumped onto the market unfinished and unfurnished, below the developer sale price for fear that the developer will drop his price and leave these guys even further underwater. Pretty soon they’ll all be forced into another round of price cuts. It makes no sense to build more, but they keep doing it!!

    Me: Won’t the 50-bps the fed cut help clear the log-jam?

    Him: Are you f*cking kidding me? I’m charging these guys 10% because they cannot get traditional loans. They can cut a few points off rates and it wouldn’t matter. Besides, the guys who qualify for real loans are all selling because they cannot hold onto their own properties. That’s why every third unit is suddenly for sale. Prices stopped going up and the whole thing blew apart and now there’s no buyers. Remember, the price for a whole building is set on the last trade. Banks look at the data and won’t underwrite new loans.

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    Me: So, what are you doing to clear these bad assets?

    Him: I have no idea. I’ll probably smack the bid wherever it is and take the hit—before someone else does. At least I won’t have to keep making condo payments and 2% property tax payments. My fund has basically stopped lending on condos and is well below 50% LTV on everything else. We’re building cash. I don’t want any more of this crap on my balance sheet!! A surprising number of my existing loans are starting to go bad. I know what my competitors underwrote, trust me, they’re in MUCH worse shape. They underwrote all sorts of nonsense that I wouldn’t ever touch. I’ll be fine, but they’re toast.

    Me: …and Bank of Ozarks? Haha

    Him: They underwrote the stuff the scumbag local lenders wouldn’t touch at 15%, but those jokers got paid fed funds plus 3 to take the risk. We should build a fund to pick at their carcass in 2 years. Good thing they just popped down a new branch in Sunset Harbor. We can use it as the REO office. Haha

    Me: Why isn’t any of this showing up in the data yet?

    Him: Most traditional borrowers have money and are trying to hold on. Besides, property is a slow burn process. Guys are in extreme pain, transaction volumes have collapsed, properties on offer have exploded. Eventually someone blinks, people realize where the real marks are on their assets, then they ask themselves why they are paying 10% a year to hold onto something that they’re underwater on and dropping in price. It’s going to be just like 2009. Wait 6 or 9 more months. They can take rates to zero, it won’t matter. That’s not the key cost of holding these things anyway.

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    Me: Will it really be as bad as last cycle?

    Him: Last time, a lot of the stuff that defaulted was upper middle-class product. It just needed lower prices and it eventually cleared. This time, the glut is fake “super-luxury.” 3,500 ft units with private exterior jacuzzies don’t ever clear. The property tax is $50,000 alone. Who the hell can afford this stuff? You can give it away for free. A middle-class guy cannot afford to hold it. Last cycle, it was a few hundred units of high-end that went bad. Now you have whole city blocks that are nothing but high end. 200 units per building. There’s thousands and thousands of these things. The property prices can halve and that means the property tax halves, but you’re still paying condo fees and remember, when your neighbors stop paying, you’re on the hook for their payments.

    There aren’t enough rich Venezuelans and Russians to buy all these units. Besides, those guys aren’t buying here anymore. They’re scared of Trump and they’re broke anyway. This time it really is gonna blow…

    Me: Sweet!! Lemme know when I can get a great deal on something nice.


    Tyler Durden

    Wed, 09/25/2019 – 23:10

    Tags
    Business Finance

  • "Concerned For His Safety:" Oil Trader In Hiding After Losing $320 Million On Wrong-Way Derivatives Bets
    “Concerned For His Safety:” Oil Trader In Hiding After Losing $320 Million On Wrong-Way Derivatives Bets

    In a wrong-way derivates bet, we reported last week that a ‘rogue trader’ from Mitsubishi Corp. was fired after losing a whopping $320 million. Now Bloomberg is providing some clarity on what exactly happened after conversations with the trader’s lawyer.  

    The trader, who worked for Petro-Diamond Singapore Pte Ltd, a wholly-owned subsidiary of Mitsubishi Corporation, incurred significant losses when a “premature” settlement of a derivatives positions had to be closed out, said Joseph Chen, the Singapore-based lawyer for the trader, Wang Xingchen.

    “Our client takes the position that he had not engaged in unauthorized trades in crude oil derivatives,” Chen said in a statement.

    Mitsubishi Corp. and Petro-Diamond said the trader had been taking unauthorized derivatives positions since January, and suffered massive losses over the summer as oil prices plunged.

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    Xingchen reportedly occupied a relatively senior position, and was in charge of all transactions involving China for the subsidiary.

    Mitsubishi Corp. said Petro-Diamond launched an investigation into Xingchen’s trading logs while he was on vacation and sick leave in August. They found unauthorized positions, and decided to unwind them in August. The losses are expected to be about 6% of Mitsubishi’s projected profit for the fiscal year.

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    Both companies allege Xingchen had manipulated its risk-management system, and was able to make it look like the derivative trades were associated with customer orders.

    Chen told Bloomberg his client followed internal reporting procedures and policy at all times. “Internal controls were in place” throughout the period in question, he said. 

    Chen said his client is in hiding because of concerns for his safety, adding that Wang has given “appropriate responses” to Petro-Diamond.

    Singapore Police Force officials confirmed to Bloomberg that they’re investigating the matter, declined to give further details. 

    Mitsubishi and Petro-Diamond said after an internal review – all-sufficient controls were in place at the time. It added that new controls could be put in place to detect trading mishaps “at a much earlier stage.”

    The incident is a reminder of the destruction that a rogue trader can cause to a large financial institution.

    * * *

    Read Mitsubishi’s announcement below:

    Losses from Overseas Subsidiary’s Crude Oil Trading

    This is to inform you that Mitsubishi Corporation (hereinafter “MC”) can confirm that one of its subsidiaries based in Singapore has realized a previously unidentified loss from derivatives trading. Investigations are currently ongoing to determine all of the details, but what is known so far is outlined below.

    MC recognizes the seriousness of this matter and shall be redoubling efforts throughout the entire MC Group to ensure that it does not happen again.

    1. Situation at Present

    Petro-Diamond Singapore (Pte) Ltd. (hereinafter “PDS”), a subsidiary of MC that engages in the trade of crude oil and petroleum products, has confirmed that it expects to book a loss of approximately 320 million USD from its trade of crude oil derivatives.

    Although PDS has already closed the position in question and determined how much was lost on the underlying derivatives, we are now examining the total amount of losses.

    2. Facts Determined Thus Far

    An employee who was hired locally by PDS to handle its crude oil trade with China (hereinafter “the employee”) was discovered to have been repeatedly engaging in unauthorized derivatives transactions and disguising them to look like hedge transactions since January of this year. Because the employee was manipulating data in PDS’s risk-management system, the derivatives transactions appeared to be associated with actual transactions with PDS’s customers. Since July, the price of crude oil has been dropping, resulting in large losses from derivatives trading. PDS began investigating the employee’s transactions during his absence from work in the middle of August, and that is when the unauthorized transactions were discovered.

    3. MC’s and PDS’s Response

    After recognizing that the transactions being investigated could result in a loss for PDS, MC and PDS immediately consulted with an outside lawyer and established an investigation team, including local outside experts, to gain an overall picture of the situation and identify the causes.

    • PDS quickly closed the derivatives position in question and determined the losses caused by the transactions which were not associated with any crude oil transactions with PDS’s customers. PDS also has since prevented the commencement of any similar transactions.
    • MC conducted internal investigation at PDS, which included inspections of PDS’s contracts, rules, risk-management system and internal controls. Based on its findings, MC has reconfirmed that PDS has sufficient internal controls in place, including a middle office responsible for risk management. MC also confirmed PDS already tightened its governance to ensure that any similar improprieties can be detected at a much earlier stage.
    • MC also performed investigations at its other MC group companies and MC’s in-house business departments engaged in derivatives trading to determine whether or not any similar improprieties have been taking place. These investigations confirmed that there are no such problems or risks at present.
    • PDS terminated the employment of the employee on September 18. In order to take a strong action in response to the violation of internal rules and laws committed by the employee, which has caused PDS this significant loss, PDS lodged a police complaint against the employee on September 19.

    4. Impact on MC’s FY2019 Forecast

    How the losses will impact MC’s forecast for FY2019 is under investigation and shall be announced if and when a performance review is necessary.


    Tyler Durden

    Wed, 09/25/2019 – 22:50

    Tags
    Business Finance

  • Here's How We Are Silenced By Big Tech
    Here’s How We Are Silenced By Big Tech

    Authored by Charles Hugh Smith via OfTwoMinds blog,

    This is how they silence us: your content has been secretly flagged as being “unsafe,” i.e. “guilty of anti-Soviet thoughts;” poof, you’re gone.

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    Big Tech claims it isn’t silencing skeptics, dissenters and critics of the status quo, but it is silencing us. Here’s how it’s done. Let’s start with Twitter. Twitter claims it doesn’t shadow ban (Setting the record straight on shadow banning), which it defines as deliberately making someone’s content undiscoverable to everyone except the person who posted it, unbeknownst to the original poster.

    Nice, but what do we call labeling legitimate websites “unsafe” and banning Twitter users from retweeting links to posts on those sites? This is what’s happening to oftwominds.com– Twitter has labeled this site “unsafe” due to unspecified violations of the Twitter User Agreement, which I have reviewed and can categorically state the oftwominds.com site and posts have never violated the terms of the Agreement or the Twitter Rules, except if posting several tweets that contain the URL of my current post somehow violates the Rules. (If bloggers can’t list the URL of their original content more than once a day, then the Twitter Rules are prejudicial and should be amended.)

    Note that Twitter doesn’t identify or provide the user with evidence of the violation of its User Agreement that justifies the “unsafe/can’t retweet” shadow-banning. The process of contesting such arbitrary and opaque censorship is absurdly unsatisfactory. There is no form for content owners/Twitter users to contest being tossed in the “unsafe/can’t retweet” gulag; users must click through a bunch of “contact us” screens, none of which have an option for contesting being tossed in the “unsafe/can’t retweet” gulag.

    When you give up and just send Twitter Support a “report on spam,” i.e. that your own site is wrongly being labeled spam, you get (of course) an automated response in which Twitter promises to do nothing and tell you nothing.

    If original content that is obviously not violating the Terms of Service/User Agreement can be arbitrarily banned from being retweeted without any evidence or due process, how is this not censorship? This is straight out of Kafka: an unaccountable, all-powerful, completely opaque bureaucracy arbitrarily bans your Twitter followers from retweeting a link to your original, copyrighted content.How is that not flat-out censorship (by a privately owned and operated entity with extra-legal powers)?

    This is exactly like the Soviet Union, where citizens were routinely tossed in the gulag for having “anti-Soviet thoughts.” Twitter, Facebook and Google routinely hold the equivalent of extra-legal administrative “trials” in which those accused of violating open-to-interpretation (“anti-Soviet thoughts”) Terms of Service are not presented with evidence of their “crimes” nor are they given a chance in a transparent, fairly administered process to contest their “guilty” verdict.

    As for Facebook: direct links from Facebook users to oftwominds.com dropped by 90% last year over the course of a few days. What could have caused this sudden collapse? The only possible cause is Facebook limiting the number of people who could see my posts on their feeds. If this isn’t shadow-banning, then what do we call it, other than censorship?

    As for Google–who knows how your rankings in search are jiggered? We do know that having “anti-Soviet thoughts” will get you de-platformed from YouTube, which not only silences you but also demonetizes your content, so not only are you thrown into the censorship gulag, you’re stripped of your livelihood as well.

    I have long suspected that the root of oftwominds.com being censored by the Big Tech platforms is my “false arrest for sedition” via the scurrilously fabricated PropOrNot list that was gleefully promoted by the odious propaganda organ Washington Post— promoted, we should note, without any journalistic investigation or even rudimentary fact-checking.

    Having been put on a list of sites deemed “guilty of anti-Soviet thoughts” by propagandists purporting to reveal propaganda, I’ve been shadow-banned and censored without any recourse or opportunity to contest my sentence in the Big Tech gulag. This is how Big Tech silences us, quietly, without any evidence, without any hearing, without any recourse, in secret extra-legal proceedings where we are refused the opportunity to question our accuser and contest the “evidence,” if any.

    Big Tech is a privately owned and operated gulag straight out of Kafka. As I have argued before, the only way to dismantle this privately owned and operated gulag, whose sole purpose is to maximize profits from adverts and selling user data, is to turn their services into public utilities that cannot collect any data and cannot target adverts.

    This is how they silence us: your content has been secretly flagged as being “unsafe,” i.e. “guilty of anti-Soviet thoughts;” poof, you’re gone.

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    *  *  *

    Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.


    Tyler Durden

    Wed, 09/25/2019 – 22:30

    Tags
    Technology Internet

  • Listen: Fremont Cop Radios For Help After His Tesla Battery Dies During High Speed Chase
    Listen: Fremont Cop Radios For Help After His Tesla Battery Dies During High Speed Chase

    A Fremont police Tesla engaged in a high speed chase last Friday ran out of battery power while in pursuit of “felony vehicle”, according to the Mercury News. 

    The department’s Model S was in pursuit of a vehicle and was traveling at speeds of up to 120 miles per hour on the highway when the officer driving it radioed in that he might not be able to continue the chase he was leading. 

    Officer Jesse Hartman said to fellow officers nearby: 

    “I am down to six miles of battery on the Tesla so I may lose it here in a sec. If someone else is able, can they maneuver into the number one spot?”

    But the officer lucked out: shortly after radioing the battery warning in, the person he was chasing began driving on the shoulder and police had to call off the chase for safety reasons. 

    While the rest of the officers made their way back to headquarters, Hartman had to make a pit stop.

    “I’ve got to try to find a charging station for the Tesla so I can make it back to the city,” Hartman said. 

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    He eventually found a charger in San Jose and was able to return back to headquarters. The Tesla had reportedly not been recharged after its previous shift before Hartman took it out on Friday, so the battery level was “lower than it normally would have been”, a Fremont police spokeswoman said. 

    “Hartman was monitoring the charge and responsibly notifying everyone of its status,” the spokeswoman said.

    Recall, Fremont’s police department made headlines for being the first police agency in the nation to roll out Teslas as part of its fleet. The used 2014 Model S is considered as part of a “pilot program” to determine whether or not Teslas are suitable for police use on a larger scale. 

    The four year old Model S cost the department $61,000 when they bought it in 2018 – $20,000 more than a new Ford Explorer police vehicle that the department uses for its other patrol vehicles. 

    You can listen to the audio of the chase here: 


    Tyler Durden

    Wed, 09/25/2019 – 22:10

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