- HSBC’s London Gold Vault: Is This Gold’s Secret Hiding Place?
Submitted by Ronan Manly of Bullionstar
HSBC’s London Gold Vault: Is This Gold’s Secret Hiding Place?
HSBC’s main gold vault in London regularly comes under the media spotlight for a number of reasons. These reasons include:
a) the HSBC London vault stores a very large amount of gold on behalf of gold-backed Exchange Traded Funds, primarily the well-known SPDR Gold Trust (GLD)
b) along with the Bank of England vaults and JP Morgan vault, the HSBC vault is one of the 3 largest gold vaults in London
c) the location of the HSBC vault in London is not publicised and so the secrecy creates intrigue
d) HSBC every so often throws out some visual or audio-visual media bait about the vault, most famously in the case of CNBC’s Bob Pisani and his camerman and producer visiting and filming inside the actual vault
Despite all of the above, no one seems to have ever tried to figure out where this gold vault is actually located. Until now.
In some ways HSBC has done a very good job keeping the location of its London gold vault under wraps. The main challenge is where does one begin to look for a vault in London from scratch. At first it would appear that there is nothing in the public domain pointing to the HSBC vault location. This is not entirely true however. The gold bullion activities of HSBC in London stem from two companies that over time became part of the HSBC group. My approach was to start by thinking about which London locations HSBC used to be based at. I took this approach because it became obvious that the HSBC London gold vault being used was still a battered looking old vault space in 2004 and 2005, which was after the entire HSBC company had moved to its spanking new London headquarters in Canary Wharf by 2003.
In New York, the location of the HSBC Bank USA precious metals vault in Manhattan is well-known and is even listed in CFTC documents such as here. The vault is at 1 West 39th Street, SC 2 Level , New York, New York 10018 , which is the same building as 450 Fifth Avenue, which is the former Republic National Bank building that HSBC took over in 1999-2000. This Republic building at 450 Fifth Avenue, when it was being built, “had special vault requirements that reportedly added significantly to the project’s cost“. So its hard to see why HSBC makes such a big deal of not revealing its London vault location.
History of HSBC gold operations in London
In 1993, HSBC Holdings plc relocated its headquarters to London after having acquired Britain’s Midland Bank the previous year. Midland in turn had fully acquired Samuel Montagu in 1974 to form Midland Montagu. Samuel Montagu & Co was a City of London bullion broker, and one of the 5 original gold fixing members of the London Gold Fixing, and in turn, Midland Montagu was also a Gold Fixer. In 1999, HSBC began using the name ‘HSBC’ for the Gold Fixing seat of Midland Montagu.
Between 1999 and 2000, HSBC completed the acquisition of Republic National Bank of New York. Republic National Bank of New York had been a big player in the world gold markets, and in 1993, Republic National had bought one of the London Gold Fixing seats from Mase Westpac, meaning that from 1993 both Republic National and Midland Montagu held Gold Fixing seats, and that HSBC ended up with 2 of the 5 Gold Fixing seats. Therefore, in 2000, following the Republic National takeover, HSBC in London sold one of its newly acquired seats to Credit Suisse.
I also have always thought that the HSBC vault is in central London, and not in some far-flung outer London location. The LPMCL website (www.lpmcl.com) still displays text that says that the bullion clearer’s vaults are in ‘central London locations’:
“The five London bullion clearing members each maintain confidential secure vaulting facilities within central London locations, using either their own premises, or those of a secure storage agent…”
Anyone who knows London will understand that ‘central London’ refers to a small number of central districts, and not some broader inside the M25 (ring road) definition. Before moving to Canary Wharf in circa 2003, HSBC occupied a number of buildings clustered around the north bank of the River Thames, including 10 Lower Thames Street (the Banks’ Headquarters), 3 Lower Thames Street (St Magnus House), 10 Queen Street Place at the corner of Upper Thames Street (Thames Exchange – containing a trading floor), and Vintners Place (adjoined to Vintners Hall on the other side of Queen Street Place and Upper Thames Street).
HSBC Bank USA NA (London branch)
Until late 2014, the HSBC entity that was the custodian of the SPDR Gold Trust was “HSBC Bank USA NA (London branch)”. NA means National Association. On 21 November 2014, effective 22 December 2014, the custodian for the SPDR Gold Trust switched from HSBC Bank USA, National Association to HSBC Bank plc.
HSBC Bank USA NA (London branch), until 2015, was also the HSBC entity that was listed as a member of London Precious Metals Clearing Limited (LPMCL) on the LPMCL website. See, for example, September 2009 imprint of LPMCL website. The next step is therefore to see where HSBC Bank USA NA (London branch) was formerly located.
The Financial Services Register (FSA Register) lists HSBC Bank USA, Reference number: 141298, effective from 24 January 2000, with a registered address of Thames Exchange, 10 Queen Street Place, London EC4R 1BE. Recalling the Republic National connection, the previous registered name for this entity was “Republic National Bank of New York”, with the same address, effective from 18 December 1995 to 24 January 2000. The FSA Register entry also lists various well-known names of the HSBC gold world alongside this HSBC Bank USA entity, including Jeremy Charles, Peter Fava and David Rose.
Recalling the Samual Montagu / Midland Montagu connection to HSBC, an entity called Montagu Precious Metals is also listed with an old address at “2nd Floor, Thames Exchange, 10 Queen Street Place, London EC4R 1BQ.
An old gold information website called GoldAvenue from the year 2000, written by Timothy Green, also lists HSBC Bank USA (London branch) address as:
HSBC Bank USA
London branch
Thames Exchange
10 Queen Street Place
London EC4R 1BQThat same Gold Avenue web page also correctly listed the HSBC New York vault address as:
HSBC Bank USA
452 Fifth Avenue
New York, NY 10018which is the same building as West 39th Street, New York, in Manhattan.
The precursor to the SPDR Gold Trust was called Gold Bullion Ltd, a vehicle set up by Graham Tuckwell, promoted by the World Gold Council, and listed on the Australian Stock Exchange. Gold Bullion Ltd’s first day of trading was 28th March 2003. Following Gold Bullion Ltd’s launch, the SPDR Gold Trust (GLD) was then launched in 2004, but originally it was called STREETracks Gold Shares, and it even had another former working title of ‘Equity Gold Trust’ in early 2004.
A May 2003 Marketwatch article about Gold Bullion Ltd and the early incarnation of the SPDR Gold Trust (Equity Gold Trust) can be seen here, and a speech by Graham Tuckwell about Gold Bullion Ltd to the LBMA annual conference in Lisbon in 2003 can be seen here. Most importantly, an early draft Prospectus of Gold Bullion Ltd (in MS Word), dated 10 February 2003, lists the Custodian of Gold Bullion Ltd as:
CUSTODIAN BANK
HSBC Bank USA
Thames Exchange
10 Queen Street Place
London EC4R 1BQTherefore, Thames Exchange goes to the top of the list for further consideration, as does it’s neighbour Vintner’s Place. Thames Exchange and Vintners Place were both HSBC buildings and both buildings are situated right across the road from each other, with Queen Street Place literally bisecting the 2 buildings. Queen Street Place is also the road that acts as the approach road to Southwark Bridge, with the 10 Queen Street Place building and the Vintners Place building literally creating a canyon either side of the road.
You will see below why Queen Street Place is interesting. Queen Street Place is very near the Bank of England and is in the City of London, so it’s under City of London Police protection. It’s also very near the River Thames, as is the JP Morgan London vault. To get to the Bank of England from Queen Street Place, you literally walk a mintute north up Queens Street, and then a few minutes north-east along Queen Victoria Street and you’re at the Bank of England.
An official HSBC letter-headed note documenting the Thames Exchange address and proving HSBC occupied this building can be seen here. Similarly, an official letter-headed note documenting the Vintner’s Place address, and proving that HSBC occupied that building can be seen here.
HSBC moves out of the City of London – 2002/2003
A Property Week article from 20 April 2000, titled “JLL to mastermind HSBC’s City exodus“, covered the huge HSBC move out of the City to Canary Wharf in the early 2000s:
“Army of firms called in to help co-ordinate bank’s relocation to Docklands by 2002““HSBC has stepped up its retreat from the City of London by instructing agents to open negotiations on the disposal of its outstanding City liabilities.
In one of the most hotly contested pitches of last year, Jones Lang Lasalle has beaten rivals to secure the lead role as strategic adviser for the bank’s relocation to Docklands [Canary Wharf] in 2002.
In addition to JLL, the bank has instructed another seven firms to mastermind the disposal of its 121,000 sq m (1,302,445 sq ft) City portfolio.”
“HSBC has ruled out acquiring freehold or long-leasehold interests and has instructed agents to negotiate the best surrender or assignment of the occupational leases on its 12 City buildings.”
“Morgan Pepper is advising on HSBC’s 17-year lease at Thames Exchange, 10 Queen Street Place, EC4. The Scottish Amicable building is currently under offer to Blackstone Real Estate Advisors for £73m.
Insignia Richard Ellis, Chapman Swabey, Strutt & Parker and Wright Oliphant have positions on the bank’s remaining interests in Vintners Place EC3; Bishop’s Court at Artillery Street, and HSBC’s 37,160 sq m (400,000 sq ft) office complex at St Magnus House and Montagu House.
By the time STREETracks Gold Trust (the original name for the SPDR Gold Trust) was launched in 2004, HSBC Bank USA’s address had moved to HSBC’s new headquarters in Canary Wharf, in the Docklands, east of the City of London. By early 2003, Equity Gold Trust also listed the HSBC custodian with the Canary Wharf address.
An article by engineering company Arup HSBC Headquarters – Canary Wharf – Arup), describing the new HSBC Canary Wharf building, dated 21 April 2004 stated:
“The phased occupation of the [Canary Wharf] building was completed in February 2003 when the last of over 8000 staff moved in, with HSBC Group Chairman Sir John Bond officially opening the building as the Group’s new head office on 2 April 2003.”
However, the old HSBC gold vault did not ‘move’ at the time the rest of HSBC moved lock, stock, and barrel to Canary Wharf between 2002-2003. In fact, the HSBC vault remained where it was in a slightly rundown shabby space with cream-colored walls. See multiple photos of the vault space below. The HSBC vault did however transform from an ‘old’ vault into a ‘new’ vault sometime between 2006 to early 2007. My belief, which I’ll explain below, is that this vault didn’t move, it just received an extensive renovation.
A diagram of the HSBC headquarters in Canary Wharf where the whole London HSBC workforce moved to by early 2003 can be seen below. Notice the car parks in basements B2, B3 and B4. You can also read about the basement construction in the Arup document above. This is not the location for a beat-up old vault that can be seen in the below old gold vault shots. Besides, the vertical pillars/piles in the old and new HSBC vault are nothing like the huge structural pillars/piles found in the HSBC headquarters in Canary Wharf.
The pillars in the old HSBC vault photos are pillars that would be found in an old arched vault, while the support pillars in the new HSBC vault photos are those that would be found in relatively shallow spaces under a road, such as pillars/supports used in the cut and cover New York subway system.
Arup diagram of HSBC Headquarters, Canary Wharf. lower section and basementHSBC Gold Vault Photos
December 2004:
Here you can see an early gold vault photo of Graham Tuckwell, joint managing director of Gold Bullion Securities, and Stuart Thomas, managing director of World Gold Trust Services, in the ‘old’ HSBC vault in December 2004 checking a HSBC bar list:
Source: https://web.archive.org/web/20051125081854/http://streettracksgoldshares.com/images/DSC_0130_800.jpg
And another photo, taken at the same time, of Stuart Thomas in the vault in December 2004:
Notice the very old piping around the top of the walls.
Source:https://web.archive.org/web/20051125082702/http://streettracksgoldshares.com/images/dsc_0178_800.jpg
In fact, there are lots more photos of the inside of the ‘old’ vault on the StreetTRACKS website here https://web.archive.org/web/20060518124841/http://streettracksgoldshares.com/us/media/gb_media.php
June 2005:
See five photos below of vault in June 2005:
‘Old’ vault looks quite beaten with concrete pillars, old floor, old air conditioning unit, and awful decor, and some type of desk an chair and wiring on the very right hand side of the photo.
October 2005:
Managing Director Stuart Thomas, Director of Corporate Communications, George Milling-Stanley of World Gold Trust Services, and CFO and Treasurer James Lowe (wearing a gold tie) of World Gold Trust Services
6 more vault shots of gold bars stacked on pallets:
http://web.archive.org/web/20070109203025/http://streettracksgoldshares.com/images/DSC_0055_800.jpg
http://web.archive.org/web/20070110123058/http://streettracksgoldshares.com/images/DSC_0042_800.jpg
http://web.archive.org/web/20070110204026/http://streettracksgoldshares.com/images/DSC_0149_800.jpg
When the gold is stacked 6 pallets high, as in the above photo, it nearly reaches up to where the pillars start to broaden out. Recall for a moment the definition of a vault. A vault is any space covered by arches, or an arched ceiling over a void. This is why the Bank of England ‘vaults’ are called vaults, because in the old vaults of the Bank of England (before the Bank of England was rebuilt in the 1920s/1930s), the gold was stored in the arched vaulted basements. The pillars in the shots of this ‘old’ HSBC vault look like pillars/piles that are the lower parts of arches, since they taper outwards as they go higher and they are positioned in a grid like formation.
http://web.archive.org/web/20070111113411/http://streettracksgoldshares.com/images/DSC_0065_800.jpg
You can see how all the pallets of gold were located in a space with quite a lot of walls and chunky support pillars that broaden at the top (i.e. support pillars). Very similar pillars can be seen in old parts of the London Underground pedestrian tunnels, and also in the Vintner’s Hall wine vaults, which is next door to the vaults under Queen Street Place.
The NEW HSBC Vault 2007
During the second half of 2007, a series of 4 photos appeared on the STREETTracks website of a ‘New’ HSBC gold vault in London. The headline title of this series of images was“The gold in trust at HSBC’s gold vault in London. The gold is being held in Trust for the shareholders of GLD. These images as at June 2007?
This STREETTracks web page can be accessed via the following link, however, the photos don’t render properly.
However, I did source the photos in other dated instances from a similar link, and uploaded them. See below.2007 George Milling-Stanley and possibly a bearded Stuart Thomas – June 2007
George Millin-Stanley’s watch puts the time at 11:45am.
https://www.bullionstar.com/blogs/ronan-manly/wp-content/uploads/2016/04/dsc_0127_800.jpg
Milling-Stanley and 3 others – probably from State Street and BONY – June2007
https://www.bullionstar.com/blogs/ronan-manly/wp-content/uploads/2016/04/dsc_0102_800.jpg
New vault – wide angle shot 2007
https://www.bullionstar.com/blogs/ronan-manly/wp-content/uploads/2016/04/dsc_0018_800.jpg
2nd wide angle new vault shot 2007
https://www.bullionstar.com/blogs/ronan-manly/wp-content/uploads/2016/04/dsc_0005_800.jpg
The MarketWatch website and a GLD SEC submission mentioned the ‘new’ vault move in an article on 11th January 2008:“…StreetTracks Gold Shares, a wildly popular exchange-traded fund so awash in investor cash that its backers recently scrambled to find a bigger vault to accommodate their ever-growing horde of the precious metal, now valued at $18 billion.”“Because the StreetTracks reserve expanded faster than expected, its managers had to move the stores to a bigger vault about six months ago to make more room, says George Milling-Stanley, a spokesman for the gold council.”Graham Tuckwell, Chairman of ETF Securities, also referred to the ‘old’ and ‘new’ vaults at the LBMA Conference in Hong Kong in November 2012. On page 3, section C “Is the Gold Really There?”, Tuckwell shows 2 photos to the audience, one from “10 years ago” and one a recent photo. In the old photo, which is probably this photohe says “the fellow on the left is a 10-year younger version of me“. He also says: “That was the old vault when we started doing it, and you can see that we are doing a bit of a check“.Then Tuckwell goes on to say: “This photograph was taken just over a year ago on a recent vault visit“… “Our gold, from the London product, the GBS, is on the left and the gold from the US product, the GLD, is on the right in this picture“. GBS was the Australian product and GLD being the State Street product, listed in November 2004.As it turns out, there are vaults beneath the road under Queen Street Place, between 10 Queen Street Place (Thames Exchange) and Vintners Place, and these vaults were renovated during the period that would coincide with the HSBC London gold vault transforming from an ‘old’ vault to a ‘new vault’.
Southwark Bridge and The Queen Street Place Vaults
Southwark Bridge is a bridge over the River Thames connecting the City of London (financial district) on the north bank of the river, to the area of Southwark on the south bank. The first Southwark Bridge (Queen Street Bridge) opened in 1819 and was an arched bridge with “vaults under the north abutment of the bridge“. There is also a reference to the vaults under Queen Street Place in a 1908 Corporation of London Record Office record.
A second bridge, the current Southwark Bridge, replaced the earlier bridge, and it opened in 1921.
A book titled ‘Design Applications of Raft Foundations‘, when discussing the development that became Vintners Place, mentions the vaults under Queen Street Place and shows that the vault space begins maybe 2.0 metres under the roadway, and with the vault space height being about 5 metres high which looks a very similar height to both the ‘old’ and ‘new’ HSBC vault spaces.
In fact, there were up to 17 vaults under Queen Street Place judging by a planning application from 1992 which listed a Vault Q (assuming Vaults A – Q), and the application said that the vaults had been used for storage.
Alterations to Vaults under Queen Street Place
Keeping in mind that the ‘old’ HSBC gold vault became a ‘new’ HSBC gold vault sometime in 2006, or early 2007, then the following, in my view, becomes highly relevant. In September 2004, a building control planning application was submitted to City of London planning department for Alterations to Vaults in the Thames Exchange building at 10 Queen Street Place. See link for the application. See screenshots also.
Fit Out of Vaults under Queen Street Place
Following this in November 2005, another building control planning application was received by the City of London planning department for “Fit out of Vaults between 10 Queen Street Place and Vintners Place“. See link below and also screenshots.
Thames Exchange – 10 Queen Street Place
Blackstone bought Thames Exchange from Scottish Amicable in 2000 while it was still being leased to HSBC. HSBC then surrendered the lease of the building when it moved to Canary Wharf in 2003. Blackstone then renamed Thames Exchange to 10 Queen Street Place and began renovating it while leasing it to City law firm SJ Berwin for its new London headquarters. However, SJ Berwin only moved its London headquarters from Gray’s Inn Road to 10 Queen Street Place sometime between February and April 2006, so the renovations appear to have gone on during 2003-2005. Norwich Property Trust purchased 10 Queen Street Place from Blackstone in 2006, after it had been renovated. Notably, Norwich retained TFT Consultants to inspect 10 Queen Street Place. TFT Consultants states in a case-study on its website that:
“We inspected this prominent riverside mixed-use building including extensive vaults underneath Southwark Bridge approach road and prepared a TDD report for Norwich Property Trust.”
Property investor Jaguar bought the 10 Queen Street Place building from Norwich in 2008, and then the Malaysian haji pilgrims fund purchased 10 Queen Street Place from Jaguar in September 2012.Coincidentally, Vintners Place, which adjoins Queen Street Place on the other side of the vaults was also sold in September 2012 when Downtown Properties and a South Korean consortium bought it from Atlas Capital. The tenants at the time included Jefferies International, and Sumitomo and Thomson Reuters. Vintners Place also adjoins Thames House, Five Kings House, and The Worshipful Company of Vintners also has its headquarters in a building called Vintner’s Hall on the corner of Queen Street Place and Upper Thames Street.The Plans of the Vaults under Queen Street Place
Detailed plans of the vaults under Queen Street Place before and after the ‘Alterations’ and ‘Fit Out’ can be seen here ( Vault Plans – Before 10 Queen Street Place – Vaults – Lower Ground Floor Plan – Before alterations) and here (Vault Plans – Proposed 10 Queen Street Place – Vaults – Lower Ground Floor Plan – After alterations). Both sets of plans were drawn up by Hurley, Robertson Architects. Click on the links to bring up the actual pdf files of the full plans.
Vaults under Queen Street Place – old layout – dated 28 November 2002 And more zoomed in. Notice all of the individual vaults and doors, and all of the walls with rows of pillars marked between the walls.
Vaults under Queen Street Place – old layout zoomed inCompare the above plans to the ‘proposed’ plans. In the proposed plans, which are revision C08 dated 06 April 2006, all of the individual vaults have been removed by removing all the doors and walls, leaving just rows of pillars, and beams (given that it’s a top-down view looking down).
Vaults under Queen Street Place – proposed vaults – 2006 updatesYou can see the changes a bit more clearly in the following slightly zoomed in version. Notice the facilities added on the right, such as toilets, kitchen, changing rooms, office, telecoms room etc, and also the rows of supports/ pillars on the left hand side, which is about 7 rows of supports / pillars in the open space, 5 of which run at the same angle, then there is a V shape where the pillars then run at a different angle.
Vaults under Queen Street Place – proposed vaults – 2006 updates – zoomed inAnyone who has the inclination, given these sets of plans of the vaults under Queen Street Place, please check back over the photos of the ‘old’ HSBC vault and ‘new’ HSBC vault and decide for yourself if the photos in the ‘old’ cramped vault with the pillars and cream wall is reminiscent of the pre-alteration plans above. Likewise, decide for yourself if the ‘new’ HSBC London gold vault with the open plan design and layout of vertical steel support columns looks like the plans above of the ‘proposed’ alterations and ‘Fit Out’ of the vaults under Queen Street Place.
When G4S built its subterranean gold vault in Park Royal, London in 2013 / 2014, it fitted it out the area beside the vault with toilets and a kitchen – See second last sentence in red box below from the G4S building contractor document. Because, if you are working down in a vault all day, there will need to be toilets and a kitchen area, as well as changing rooms, phones and desktop computers etc. For background to G4S vault, see “G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out“.
The Pisani Files – “This is it folks, this is the Motherlode!”
Now we come to the Bob Pisani videos that were filmed by CNBC in the HSBC London gold vault in 2011. I say videos in plural because there are 4 video segments, and actually 5 segments in total including a trailer. The videos are quite exciting and fast-paced but frustrating because the camera is quite shaky and moves around rapidly for a lot of the vault segments, possibly on purpose. The background music is quite catchy also (at first).
1. The Motherlode
The first video is on a CBNC web page and embedded in an article titled “Gold’s secret hiding place”, however the video is titled “Gold Rush – The Mother Lode”. Its dated Wednesday, 31 Aug 2011 with a byline of “CNBC’s Bob Pisani recently got an exclusive inside look at the HSBC gold vaults in London, where the gold for the SPDR Gold Trust (GLD) is stored.” The video is 4:55 mins long, and introduced by Pisani from the New York studio. The vault shots begin at 1:18, and interestnigly, at 0:40 mins, the camera is in a vehicle travelling down Lower Thames Street.
http://www.cnbc.com/id/44343442
2. Gold’s Secret Hiding Place
Let’s call this 2nd video “Gold’s Secret Hiding Place”. This version, which is different to the Motherlode, is on YouTube. I’m not sure of the official segment name. This version is 5:06 mins long, and Bob says the vault is “in a super-secret location only known to a few people”. This is also the version where Bob hands in his cellphone and travels in a blacked-out vehicle saying “we have no idea where we’re going. We only know our final destination. The vault!”
There is a neat online app called Pause House which allows you to look at any YourTube clip frame-by-frame, and can be used on the above clip for those who want to get a good look at the vault interior. (Pause House).
3. The Third version
Lets call this the Third version. Its 2:43 mins long. Pisani starts on Waterloo Bridge on the River Thames and he points towards Westminster Bridge (the exact opposite direction to Southwark Bridge). Then he is in the blacked-out vehicle, and then in the vault from 1:04 mins. At this stage the music might be annoying, so luckily, there is no background music when Bob talks in the vault.
4. Inside the Secret Vault
This clip is 2:42 mins long and is dated Thursday, 8 Mar 2012 with a byline of “CNBC’s Bob Pisani gets unprecedented access inside the largest private gold reserve in the world.” Its slightly similar to version 3 above
http://video.cnbc.com/gallery/?video=3000077579
5. Version 5 is just a 31 second trailer about the CNBC 2011 gold series, published in March 2012, with gold vault footage only appearing for a few seconds.
https://www.youtube.com/watch?v=gUSqbqYOnRY&feature=youtu.be
2005 vs 2011
There is one sentence in both “Motherlode” and “Gold’s Secret Hiding Place” that I consider very interesting. And it relates to the ‘old’ and ‘new’ vaults. What Bob Pisani says has obviously been told to him by someone at HSBC, since he would not know anything about the vault in advance.
At 3:37 mins in Motherlode, Pisani says “In 2005, there was less than 200 tonnes of gold here, now there’s 6 times as much“.
At 4:05 mins in Gold’s secret hiding place, Pisani says “In 2005, there was less than 200 tonnes of gold in this vault backing the GLD. Now there’s 6 times as much.”
Pisani is essentially saying, probably without realising, that it is the same vault. i.e. that the vault in 2005 is the same vault as in 2011. However, given that the vault in 2005 was the ‘old’ vault, and that the vault in 2011 was the ‘new vault’, this suggests that it is the same space, and that the vault space was just renovated. It therefore supports the view that the vaults under Queen Street Place are a very strong candidate to be the HSBC London Gold Vault that stores the GLD gold and the ETF Securities gold.
Fruiterers Passage
You might have spotted above that one of the existing vaults under Southwark Bridge was turned into a riverside walkway. This was probably vault Q, which looked to be the vault nearest the river. This walkway runs under the beginning of the abutment on the north of SouthWark Bridge and is called the slightly humorous name ‘Fruiterers Passage’. The Passage was opened circa the year 2000 (and named after the Worshipful Company of Fruiterers), and is ornately tiled with ceramics, even around its pillar enclosures. Take a look at a photo of Fruiterers Passage and compare it to a photo of the new ‘HSBC’ gold vault that features the yellow-painted steel support pillars. The dimensions and spacings of the pillars in both photos look very similar, even identical.
A video walk-through (2:45 mins) of Fruiterers Passage can be seen here. The first 20-30 seconds shows Southwark Bridge, and then the walk through the Passage begins:
Although there are lots of security cameras around the City of London, the cameras in Fruiterers Passage and security warnings near the entrance to the Passage seem particularly explicit.
Size Matters
A MarketWatch article from 11 January 2008 quoted George Milling-Stanley as saying that the vault was sizable but “not quite as big as a cricket pitch.” On another occasion, Milling-Stanley used another sporting analogy and described the ‘new’ vault as “about the size of a football field“. Can a sporting analogy (or two) help determine the size of the HSBC London gold vault? Possibly, but it’s not as clear-cut as you might think.
Notwithstanding that a ‘cricket pitch’ is the (smallish) 22 yard strip between the wickets, the quotation was presumably referring to a ‘cricket field’. However, there is no standard shape of a ‘cricket field’, let alone standardised dimensions, since the ICC rules only state that the field can be circular or oval with a variable diameter of between 450 and 500 feet on the ‘long’ side (sometimes giving 16,000 sq yards). Regarding Milling-Stanley’s ‘football field’, analogy, it’s not clear whether this analogy was intended for a US audience or non-US audience. So it could mean ‘American’ football, or soccer or rugby.
In soccer, there is no standard size ‘field’. The sidelines (touch lines) have to be between 100 and 130 yards (110 to 120 yards for international matches), while the goal lines (end lines) must be between 50 and 100 yards (70 to 80 yards) in international matches. This could result in over 7000 sq meters or over 1.75 acres. The American football field is thankfully standardised, being 120 by 53.33 yards or 6400 sq yards.
Overall, Milling-Stanley’s descriptions give a flavour for permissible dimensions, but based on Bob Pisani’s video tour, I see the vault as a rectangular space but not quite as big as a soccer pitch. So lets look at the space in Google Earth. I’ve just added a yellow rectangle for illustrative purposes to show where the vaults under Queen Street Place are located.
Bird’s Eye View – Queen Street Place looking north from Southwark Bridge – 10 Queen St Place on right, Vintners Place on leftSee also some cross-sectional plans that were part of the 2004 Blackstone Thames Exchange planning applications (Cross Section width 10 Queen St Place – from river view and Cross Section length 10 Queen St Place).
Night shot – Queen Street Place without trafficThe Marketwatch January 2008 article also said that the HSBC vault was “located on the outskirts of London” but how would the journalist know this since the same article also said that “a spokeswoman for HSBC declined to provide vault details, citing security policies”. As financial journalists mostly repeat what is told to them, I think this “located on the outskirts of London” bone was thrown out as a red-herring, and means the exact opposite.
Conclusion
At its peak holdings in December 2012, the SPDR Gold Trust stored 1353 tonnes of gold. Some observations from looking at the vault space in the Pisani videos and from talking to other people, are that:
a) the HSBC vault looks quite full in 2011, but it still looks like the space would be hard pushed to store the 1200 tonnes of gold that Pisani says were there
b) based on modelling the number of realistic-sized pallets that could conceivably fit into the Queen Street Place vault space (as per the vault plans), it also seems that it would be hard pressed to store 1,200 tonnes, unless they were crammed in. And the pallets in the CNBC segments are not fully crammed in to the space.
Remember also that the 1200 tonnes of gold reference only referred to the SPDR Gold Trust holdings in mid-2011 around the time the CNBC video segment was filmed. See blue line in chart below (chart from www.sharelynx.com) for GLD holdings over its lifetime. HSBC is also the gold custodian for ETF Securities’ gold-backed ETF which held about 170 tonnes at the time of Pisani’s visit. That would be nearly 1,400 tonnes of gold just between the GLD and ETFS holdings, which would be about 228 piles of pallets stacked 6 high crammed in. Furthermore, that’s not even taking into account any gold holdings of other HSBC customers, and Pisani also says in the videos that HSBC confirmed to him that its vault also stores gold for a range of clients.
When GLD held 1353 tonnes in December 2012, this in itself would be 225 piles of pallets, each 6 high. ETFS held about 170 tonnes in December 2012 also, which would be another 28 piles of pallets stacked 6 high. If this location is the famous storage area for the SPDR Gold Trust then possibly during the boom times when GLD holdings peaked, the HSBC vault may not have been big enough to accommodate the GLD gold let any other gold. Which would mean that HSBC was storing GLD gold elsewhere such as at the Bank of England vault, or the JP Morgan vault, both very close to Queen Street Place. It would also mean that GLD sources new gold inflows from gold that is at the Bank of England, i.e. leased central bank gold.
Another point to consider is that if the vaults under Queen Street Place are the correct location for the HSBC vault, then where did the gold that was being stored there in late 2005 / early 2006 go to during the vault alterations? This would have been at least 200 tonnes of gold as of late 2005, rising to over 350 tonnes of gold by late 2006. As the Bank of England is literally up the road from Queen Street Place, moving it to the Bank of England vaults would be the most likely option during the renovation.
In summary, using publicly available information and evidence, I have described where I think the HSBC London gold vault may be located. Whether I am correct is another matter.
- China's Crashing – Stocks, Commodities Plunge After "Top Authority" Implies "Abandoning Loose Policy"
"After comprehensive judgment, our economic recovery cannot be U-shaped, cannot be V-shaped, but will be L-shaped," warns an 'authoritative' person according to a shocking report published by Government mouthpiece People's Daily. The report, explaining why investors should not expect growth to pick up soon or expect more stimulus to come soon further sets expectations for China to "face the issue of rising non-performing loans" and not continue to create zombie companies. The result – a bloodbath in stocks and commodities…
Chinese stocks are down 4.5 to 7% in the last 2 days… as turmoil returns…
The report (found here), as Bloomberg summarizes, suggests China shouldn't loosen monetary conditions to enable growth…
- China should abandon idea of loosening money conditions to accelerate economic growth, People’s Daily reports, citing interview with an “authoritative” person who wasn’t identified.
- Monetary conditions shouldn’t be loosened to cut levels of leverage
- China won’t use stock, forex and property-market policies as tools to ensure economic growth
- Economic growth won’t be too low without stimulus as potential is sufficient
- China should face the issue of rising non-performing loans of banks and not cover it up or delay handling it
- Economy’s performance will be L-shaped for quite some time, instead of just 1-2 yrs
- Economy’s performance won’t be U- or V-shaped
- China will limit bankruptcies for “zombie” cos; at the same time it will definitely close cos. that can’t be saved, instead of converting debt to equity or forced restructuring
And the impact on stocks and commoditiers (as the latter's bubble implodes) is clear – Short-term…
And Long-term…
As the churn collapses, volume disappears and Iron ore, Steel rebar, and copper all collapse back to un-credit-speculated reality – smashing The Baltic Dry lower also.
- The New Normal: Cold War 2.0
Authored by Pepe Escobar, Op-Ed via SputnikNews.com,
We are all living in Hybrid War time. From R2P (“responsibility to protect”) to color revolutions, from currency attacks to stock market manipulations.
From judicial-financial-political-media enabled “soft” coups – as in Brazil – to support for “moderate” jihadis, multiple stages of Hybrid War now cross-pollinate and generate a vortex of new mutant viruses.
Hybrid War, a Beltway concept, has even been turned upside down by the conceptualizers. NATO, affecting puzzlement at the very existence of the concept, interprets the Russian “invasion” of Ukraine as Hybrid War. That serves prime Hybrid War purveyors such as the RAND corporation to take it further, peddling war game scenarios of Russia being able to invade and conquer the Baltic states — Estonia, Latvia, and Lithuania — in less than 60 hours.
And that, in turn, foments even more Western military hysteria, encapsulated by the new NATO commander, a.k.a. Dr. Strangelove; Gen. Curtis Scaparrotti, who made sure he would come up with a stage entrance worthy of his predecessor, Philip Breedlove/ Breedhate.
Slightly amused at the whole conceptual circus, Russians respond with actions. Extra deployments in our Western borderlands? No problem; here’s your asymmetrical answer. And say hello, soon, to our new toy: the S-500s.
What Hillary wants
The notion that Moscow would have any interest at all to capture Baltic states is ludicrous in itself. But with the evidence of direct occupation of Afghanistan (the Taliban will never quit) and R2P in Libya (a failed state devastated by militias) spelling miserable failure, NATO badly needs a “success”. Enter warmongering rhetoric and conceptual manipulation – and this when it’s actually Washington that is deploying Hybrid War all across the chessboard.
Reality occurs beyond NATO’s looking glass. Russia is way ahead of the Pentagon/NATO in A2AD — anti-access/area denial; Russian missiles and submarines may easily prevent NATO fighter jets from flying in Central Europe and NATO ships from “patrolling” the Baltic Sea. For the “indispensable nation”, that hurts – so bad.
Relentless rhetorical hysteria masks the real high-stakes game in play. And that’s where US presidential candidate Hillary Clinton fits in. Throughout her campaign, Clinton has extolled “a major strategic objective of our transatlantic alliance”. The major “strategic objective” is none other than the Transatlantic Trade and Investment Partnership (TTIP) – a NATO-on-trade complementing political and military NATO.
The fact that TTIP, after the latest Dutch leaks, now runs the risk of being mired in Walking Dead territory may be a temporary setback. The imperial “project” is clear; to configure NATO, which already mutated into a global Robocop (Afghanistan, Libya, Syria), into an integrated political-economic-commercial-military alliance. Always under Washington’s command, of course. And including key peripheral vassals/contributors, such as the Gulf petromonarchies and Israel.
The imperial “enemy”, of course, would have to be the only authentic project available for the 21st century: Eurasia integration – which ranges from the Chinese-led New Silk Roads to the Russia-led Eurasia Economic Union; BRICS integration, which includes their New Development Bank (NDB), in tandem with the Chinese Asian Infrastructure Investment Bank (AIIB); a resurgent, still independent Iran – Eurasia-connected; and all other independent poles among Non-Aligned Movement (NAM) nations.
This is the ultimate, ongoing 21st confrontation that will keep generating multiple, localized hybrid warfare forms – as it takes place not only across Eurasia but across the whole Global South. It’s all interlocked – from Maidan to the secret TTIP negotiations; from provoking China in the South China Sea to an oil price war and an attack on the ruble; from the NSA spying on Petrobras feeding a slow motion, legalistic regime change process in Brazil to an EU ravaged by twin plagues; a refugee crisis ultimately provoked by NATO’s wars (and instrumentalized by Turkey) coupled with Salafi-jhadi terrorism also spawned by the same wars.
Even with France and Germany still dithering – as in paying too heavy a price for sanctions on Russia — Washington’s “project” counts on a ravaged EU being a perpetual hostage of NATO. And ultimately, a hostage of NATO on trade – because of those US geostrategic imperatives against Eurasia integration.
This implies another necessity; the conceptual war – it’s the evil Russians who are waging Hybrid War, not us! — must be won at all costs, by instilling constant fear into the average EU citizen. In parallel, it’s also essential to put on a show; thus one of the most massive US-designed military operations on European soil since the end of the Cold War – complete with Navy and Air Force displaying nuclear capability.
This is the new normal; Cold War 2.0, 24/7.
- Hillary Doubles Down As FBI Probe Enters Final Stages
After interviewing Hillary Clinton's top aides last week, the question now becomes whether or not the FBI will interview Clinton next as the investigation enters its final stages.
In an interview today with CBS' "Face The Nation", Hillary said nobody had contacted her regarding an interview.
"No one has reached out to me yet, but last summer, I think last August, I made it clear I'm more than ready to talk to anybody, anytime."
Clinton also doubled down on her claims that she did nothing wrong.
"It's a security inquiry, I always took classified material seriously. There was never any material marked classified that was sent or received by me."
Of course, there's classified and then there's "classified", but we'll save that for another day.
As far as whether or not the FBI will eventually interview Clinton, although the FBI hasn't said Hillary is the target of the probe, many experts are saying that's how they see the situation unfolding.
"This certainly sends the signal that they are nearing an end to their investigation. Typically, the way we structured investigations when I was a federal prosecutor is that we would seek to interview the target last. As you begin to interview people who are extremely close to the target of an investigation, people who are considered confidants, you typically interview those people towards the final stages of the investigation. So that way if they tell you something that is contrary to something you've already learned, you can immediately challenge them on that information." said Steven Levin, a former federal prosecutor.
"It's very high-stakes. They're only going to ask her questions that they know the answers to already." added former U.S. attorney Matthew Whitaker.
As far as one angle that may be played if Clinton is found to have mishandled classified information, that it was not intentional, national security lawyer Bradley Moss says that's irrelevant.
"The extent to which the person intended to remove classified documents is irrelevant. All that matters for strict legal purposes of culpability is whether the person, by virtue of their official position, came into possession of classified information and affirmatively removed the information to an unauthorized location."
Outside of whether or not the FBI decides to interview Clinton, there are two interesting elements to the case that we're interested in learning more about.
The first, what comes of the capture and extradition to the United States of notorious hacker Guccifer, who claimed he gained access to Clinton's "completely unsecured" server. Will the FBI interview him and gather information from the hacker (who since he's already arrested for hacking other officials, doesn't have anything to lose by disclosing evidence of the Clinton hack). And finally, what information has been provided by Bryan Pagliano, the IT specialist believed to have set up and maintained Clinton's server. Pagliano was given full immunity in exchange for his help with the investigation, and perhaps that specific event will be enough to trip up Clinton when the FBI asks one of those questions that they already know the answer to.
- "The Death Of The Gold Market" – Why One Analyst Thinks A Run On London Gold Vaults Is Imminent
When it comes to tracking the nuances at the all important margin of the gold market, few are as observant as ADMISI’s Paul Mylchreest, whose December 2014 analysis showed the stunning role gold holds in the new normal as a funding “currency” for BOJ interventions in the form of a long Nikkei/short gold (and vice versa) pair trade, indicating that central banks directly intervene in gold pricing (by selling, of course) when seeking to push paper asset prices higher.
In his latest report he follows up with an even more disturbing analysis on the state of the gold market. Specifically, he looks at what historically has been the hub of gold trading, the London bullion market, and finds that it “is running into a problem and is facing the biggest challenge since it collapsed from an insufficient supply of physical gold in March 1968.“
We suggest readers set aside at least an hour, and two coffees for this “must read” report. For those pressed for time, the executive summary is as follows: using data from the LBMA and Bank of England on gold stored in London vaults and net UK gold export data from HM Revenue & Customs, Mylchreest calculates that the “float” of physical gold in London (excluding gold owned by ETFs and central banks) has recently declined to +/- zero.
Summarizing the data in the report.
The full details of how Mylchreest gets to this number are broken out in detail in the attached report; fast-forwarding to his troubling summary we read the following conclusion, one we have observed numerous times when analyzing the troubling trends within the gold vaults of none other than the Comex itself: “if we are correct, the London Bullion Market is running into a problem and is facing the biggest challenge since it collapsed from an insufficient supply of physical gold in March 1968.”
Some more of the report’s core findings, most of which should come as no surprise to regulatr readers:
* * *
Besides the growth in physical gold demand from existing sources, there is more than US$200 Billion of trading every day in unallocated (paper) gold. If buyers lose confidence in the market’s structure and ability to deliver actual bullion, the market could become disorderly (via an old fashioned “run” on the vaults) as it seeks to find the true price of physical gold.
Intuitively, we think that central banks might have lent/leased gold to maintain the status quo and mask what is technically a default. However, rather than being used to provide temporary liquidity, it is possible that loans/leases are being rolled. This is not sustainable and implies dual ownership claims.
Going forward, the market is vulnerable to several trends in physical gold trading patterns:
- Since 2009, central banks have switched from net sellers to net buyers ;
- The extraordinary strength in Chinese gold demand as indicated by withdrawals of bul-lion on the Shanghai Gold Exchange, e.g. an astonishing 2,597 tonnes, or more than 80% of all of the gold mined worldwide, in 2015;
- The rebound in gold held by London-based gold ETFs, which has been increasing since January 2016, as western investors dip their toes back into physical gold; and
- Net gold exports by the UK – mainly to support strong Asian (especially Chinese) demand – which have been a feature of the market since 2013.
But the vulnerability is not confined to current trends in physical bullion.
If there is no gold float, there is nothing supporting more than US$200 Billion of trading every day in unallocated (paper) gold instruments which accounts for more than 95% of gold trading in London.
The convention of trading unallocated gold has been based on a fractional reserve system. It works as long as gold buyers retain confidence that the banks could deliver physical gold if demanded, but our analysis suggests that they could not.
For more than four years, selling of paper gold overwhelmed growing demand for physical gold from the likes of China and central banks (in aggregate). The “gold market” became a chimera as fundamentals were turned upside down. Banks added paper “gold supply” in almost elastic fashion on occasions when western investors increased net gold exposure via paper gold instruments.
We’ve argued for many years that a breakdown and bifurcation in the gold market between physical and paper gold substitutes would be necessary for accurate price discovery of physical gold bullion. The lead article in the January 2016 edition of the LBMA’s quarterly magazine was titled “Wholesale Physical Markets are Broken”, which might be confirmation that this process is reaching an advanced stage.
In the interim, we could move towards a two-tier gold market – where physical gold trades at a premium to paper gold instruments, such as unallocated gold in London and COMEX gold futures in the US.
It saddens us that London’s position and reputation as the hub of the world gold market is in jeopardy unless the LBMA, BoE and other stakeholders embrace rapid and far-reaching reform. The London Bullion Market is structurally flawed and overdue for reform – it is not an exchange, it is under-regulated and there is near zero transparency. More than anything, it is primarily a system of paper credits/debits which benefits the banks and undermines the investment case for gold and, consequently, interests of gold investors.
Seeing the Achilles Heel of London’s gold market, China’s Shanghai Gold Exchange (SGE) launched a Yuan-denominated physical gold benchmark gold contract on 19 April 2016. Examining the SGE’s white paper, it’s clear that China acknowledges that its introduction should lead to a more realistic price for physical gold and that its strategy is to shift price discovery in the gold market from London to Asia.
Unfortunately time is running out for London and meanwhile…
The vast pools of western capital are not underweight gold, they are almost zero–weighted. Ultimately, gold is a bet on financial system mismanagement in many guises – such as inflation, deflation, rising credit risk, declining confidence in policy makers, etc. The fact that mainstream investors and commentators have started to have doubts about central bank policies has been positive for gold.
For years, the typical pushback on investing in gold by western investors was that it had no yield. In a bizarre twist of investing, more than US$7 Trillion of bonds now have negative yields thanks to unconventional monetary policies like ZIRP/NIRP, and gold investing can be justified on a yield basis. Unlike every other financial asset, including sovereign bonds, physical gold has no counterparty risk.
We have been here before…
“Someone once said, ‘no one wants gold, that’s why the US$ price keeps falling.’ Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely be-cause ‘too many people are buying it’! Think now, if you are a person of ‘great worth’ is it not better for you to acquire gold over years, at better prices? If you are one of ‘small worth’, can you not follow in the footsteps of giants? The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is losing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing”
Anonymous quote from many years ago (the 1990s!)
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Mylchreest full must read report below (pdf):
- Obama: TTIP Necessary So As To Protect Megabanks From Prosecution
Authored by Eric Zuesse,
On May 7th, Deutsche Wirtschafts Nachrichten, or German Economic News, headlined, "USA planen mit TTIP Frontal-Angriff auf Gerichte in Europa” or “U.S. Plans Frontal Attack on Europe’s Courts via TTIP,” and reported that, “America’s urgency to sign TTIP with Europe has solid reason: Megabanks must protect themselves from claims by European investors who allege that they were cheated during the debt crisis. … The U.S. Ambassador to Italy has now let the cat out of the bag on this — probably unintentionally.”
In this particular case, the megabank that’s being sued isn’t American but German, Deutsche Bank, which the U.S. Ambassador to Italy has cited as his example to defend, perhaps so as to appeal to Germans to protect their megabanks against lawsuits from foreign investors (such as Italians) who complain. In that case it was investors in the Italian city of Trani, population 53,000. The smallness of the city was an issue the Ambassador raised against the suit’s having been brought there.
Reuters headlined on May 6th, "Italian prosecutor investigates Deutsche Bank over 2011 bond sale”, and reported that, "An Italian prosecutor is investigating Deutsche Bank (DBKGn.DE) over its sale of 7 billion euros ($8 billion) of Italian government bonds five years ago, an investigative source told Reuters. A prosecutor in Trani, a town in southern Italy, is investigating because Deutsche Bank allegedly told clients in a research note in early 2011 that Italy's public debt was no cause for concern, and then sold almost 90 percent of its own holding of the country's bonds.” The U.S. bond-rating agencies are also subjects in this suit, because Trani had relied upon their ratings of those bonds.
The Obama Administration (through its Italian Ambassador) seems thus to be saying, in effect, that unless TTIP is passed into law, Europe’s megabanks (and the U.S. bond-rating agencies, S&P, Moody’s and Fitch) will be able successfully to be sued by cheated investors, just as has been happening with such American banks as JPMorgan/Chase and Goldman Sachs in the United States, which — since TTIP hasn’t yet been in force anywhere, including in the U.S. — were forced to pay billions to cheated investors. Apparently, Obama would be happier if those suits had been impossible in the U.S. The argument here, though only implicitly, seems to be that TTIP is the way to protect megabanks and the bond-rating firms. It concerns specifically the selling of sophisticated derivative investments.
If this is the argument behind the remarks by Obama’s Italian Ambassador, John Phillips, he’s obliquely warning Europeans that unless TTIP gets signed, their megabanks might similarly be forced to pay billions to investors who were cheated. As quoted by Reuters, he said that, in the U.S., it's "highly unlikely that such a case would be brought outside the major financial centers, where prosecutors have both jurisdiction and expertise in securities fraud prosecutions,” and that megabanks need the protection that’s provided by such prosecutors, since they possess “expertise in securities fraud prosecutions.” Phillips was clearly implying that small-city prosecutors (such as are allowed to prosecute such cases in Europe) aren’t such “experts,” as are needed in order to protect the megabanks. Reuters characterizes Phillips’s argument as asserting, “Italy’s justice system was deterring investors.” However, no clarification of the meaning of that statement was provided by Reuters.
DWN alleges that under the TTIP such a court-issue would probably not even have been raised but would simply have ended before an arbitration panel, in which the aggrieved investors exert no influence and where it would be almost impossible for these investors’ rights to be protected.
Another example is cited, where the German city of Pforzheim successfully sued, at the Federal Court of Justice, the U.S. megabank JPMorgan/Chase, and where that court allowed Pforzheim to seek “accumulated damages of 57 million euros.”
Under TTIP, a megabank fined this way might in turn sue the nation’s taxpayers to restore the megabank’s ensuing loss of profits. If the cheated investors win, taxpayers might thus end up bearing the cheated investors' losses. Under TTIP, the fined company would be arguing that the law under which it had been fined is in violation of TTIP and thus constitutes a violation of that treaty, so that the violating government is obliged to be paying the fine — the law against fraud would itself be violating the fined company’s rights. If the three-arbitrator TTIP panel rules in the megabank’s favor, the government would need to pay the fine it had assessed against the bank, and no appeals court exists for any of these arbitration-panels’ rulings — these rulings are final. Obama and other proponents of that system, which is called ISDS for Investor State Dispute Settlement, say that it’s a more efficient way of handling such disputes. In international commercial affairs, it not only eliminates appeals courts, it gradually eliminates democracy, by fining the government into ultimate submission to these three-person panels of international-corporate-accountable arbitrators.
On the same basic idea, Benito Mussolini was praised for “making the trains run on time.”
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Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
- "Love The Communist Party" – China Threatens Its Entrepreneurs Not To Become "Trumpeters Of Western Capitalism"
China’s leadership is trying to manage a tenuous balancing act between letting the private sector grow the economy, and making sure that its focus remains true to the party message.
In 2002, then president Jiang Zemin welcomed entrepreneurs to the party, and according to Bloomberg, the private sector has since grown to make up more than 60% of China’s economy. As the private sector developed, however, it has done so in a way that is concerning to current president Xi Jinping. Some Chinese have “unwittingly become trumpeters of Western capitalistic ideology” which could lead to “disastrous consequences.” Xi said in a speech at Beijing’s Party School last December.
Thus, through speeches of his own, and through government media outlets, president Xi is setting out to remind the private sector of just what its role is, and what its priorities should be.
Xi’s speeches are very clear about the party message. In March, Xi told businessmen that entrepreneurs shouldn’t simply make money, they must “love the motherland, love the people, love the Communist Party, and actively practice socialist core values.” The media arm of the government is doing its part by picking up the rhetoric as well. China Daily wrote that tycoons colluding “with corrupt officials” have sparked “wide doubt over the private sector and its role.” While the party periodical Red Flag Manuscript joined in, saying “some business people in the nonstate economy, especially some entrepreneurs, are having errors in their thinking.” They “lack faith in Marxism, socialism, and communism.”
One businessman who felt the brunt of China’s expanding propaganda, is Ren Zhiqiang, a retired real estate tycoon who must serve a one-year probation for publishing “erroneous views” that “seriously violate the Party’s political discipline,” according to a May 2 statement by a Beijing party committee. A party member, he got in hot water after questioning the president’s call for tighter controls over the media.
With about 73 million private enterprises and family businesses in China, the private sector has become a very important piece to the overall economy, but not too important to be outside of the party message of course. “Private enterprises, for the government, are an indispensable part of the economy. But if they develop too well, officials may knife them. A strong state can at any time bankrupt or eliminate them.” says Hu Xingdou, an economist at the Beijing Institute of Technology.
Bankrupt or eliminate the business, or as the first step, simply disappear people until they’ve been reminded enough of the message that they’re deemed fit to return to public life, which is something we’ve seen a lot of in the past (here, here). In the first eight months of last year, senior managers from 34 companies went “missing” as they were picked up in connection with investigations. The phrase “shilian”, or lost contact, has become how people refer to the practice.
It’s clear that China will certainly have its hands full if it’s going to add enforcement of party message to its already growing list of issues such as a slowing economy and social unrest. We are, however, curious to find out if the creation of a massive debt bubble in an effort to try and jump start the economy will fall under “disastrous consequences of Western capitalist ideology” when it implodes, or if that will be something the central planners take credit for.
Finally, with all this taking place as China is clearly cracking down on any dissent, most notably in its recent gag order on “bearish” economists, analysts, pundits and media voices as reported in “A Panicked China Orders Media To Stick To “Positive Reporting” Or Risk “The Stability Of The Country” and of course “China Threatens Its Economists And Analysts To Only Write Bullish Reports, Or Else” one wonders if there is any “data” out of China that is even remotely credible, let alone accurate, any more?
To be sure, headlines like these only reinforce the fear that China’s economy is doing far, far worse thatn the official data suggest:
- CHINA’S ECONOMY WITHIN, OR EVEN BETTER THAN EXPECTATION: CHINA DAILY
Because if you repeat it enough times, it becomes the truth?
- If Everything Is So Great, Where Are The Unicorn IPOs?
Over the course of the last week it seemed no matter where I turned in the business media one meme was being pushed above all others: It’s still a great time to be a private tech unicorn. Implying, that funding rounds were still “robust.”
What wasn’t said, so I will, is this: It’s a great time to be a private “unicorn” rather, than take the chance and become the poster-child for the IPO apocalypse. For it’s better to be assumed a $BILLION dollar success story rather, than IPO and officially open the books to the market and remove all doubt – that you’re not.
It would seem “additional funding rounds” is the story (the only story I’ll contend) that keeps the whole “unicorn” meme alive. For if these were great companies, at great valuations, with great prospects to earn or reward investors, founders, employees and so forth untold riches (which of course is told as to lure and keep talent and others) during the same period the “markets” were within a trading days movement of reaching never before seen in human history highs. How many tech unicorns of the over 150 now residing in the “unicorn stable” even hinted at a date, never-mind actually announced? __________ (Insert crickets here.)
At this stage a few questions must now be addressed. One would be: If it not now, when? And not a vague “when.” But rather: precisely when?
If a company today that has been raising funds to even be within this so-called “exclusive club” can’t articulate a date, or time period, with specificity. In other words: Definitive announcements that have meaning with dates such as those declaring “within the next 30, 90…,” whatever days. Or, something reminiscent of stating “November of this year barring a market panic or sell off etc., etc.” Not some lame “Market conditions warranted us deciding to postpone setting a date blah, blah, blah…” PR trash. Than are they to be believed of any metrics?
Why is this so important one might be asking? Easy, let’s put this into some context:
For all intents and purposes, 2016 is close to being over for just an announcement and the time needed to follow up with the subsequent roadshow to price and launch. Remember, we are currently 5 weeks away from the half-year point of 2016 without either an announcement or actual IPO. (Oh wait, there was one – Dell™. Need I say more?)
Again, it must be reiterated: 2016 is now well into its 5th month and within spitting distance of “the first-half is history” mark. And during this period the “markets” have been within a percentage point of breaking the all time highs and still remain at elevated levels.
The rise from the lows of February were not only meteoric, they were actually historic in both their percentage gains, as well as, time frame.
Add to this the Fed. has all but conceded “extraordinary monetary measures and policy” are the norm, rather than temporary. While reiterating: will remain for the foreseeable future. And there’s not a one?
Think about that. Does all that square with what you’ve been told (or sold) when it comes to everything “The Valley?” And speaking of “square….”
It would seem the price for one of the “The Valley’s” most recent (recent as in Nov. of 2015) IPO’d unicorn’s: Square™ isn’t doing all that well. As a matter of fact, it seems to be doing as well as its other CEO’s responsibility: Twitter™.
Remember when all the chatter and twit-storms were about how great it would be to have one CEO run two “disruptive” companies simultaneously? Especially when the “Jobs” reference was invoked? How’s that all working out? If you really want to know – just look to their stock chart. If you own them in your 401K? I’ll wager you already know even without looking at your last statement.
As I’ve stated many times, I take no issue with Mr. Dorsey, or the companies he’s founded. Both he and his companies show great value, as well as, potential for the future. However, with that said, the idea that the valuations and metrics used were both “reasonable” as well as “sustainable” along with the idea that Mr. Dorsey should be applauded to take the reins as CEO of two publicly traded, highly competitive, as well as, ever evolving companies simultaneously? All while one is flailing in its stock valuation while the other debuts with an IPO? It was ludicrous at best – moronic at worst and I stated so.
To this I was (as always) scorned and vilified by many a Valley aficionado. Yet, today? Well, let’s just say I’ve watched, read, or heard more revisionist statements about that “great idea” than I’ve heard a politician “clarify” their previous position.
I’ve argued ad nauseam about the whole Valley’s “It’s different this time” knee-jerk response to criticism. Especially when it has come to the once coveted title of “IPO’d.”
However, there’s also been another attribute which seems to be just as ensconced, as well as, obvious to those who are paying attention. e.g., Once rarefied air seems to be turning into exhaust fumes. And nowhere is this more apparent than with Apple™.
Nearly two years ago to the day I penned the following article, “Did Apple Just Become Microsoft?” At the time this was a complete and utterly opposing viewpoint to anyone comparing Apple to _______(fill in the blank.) There was the acquisition of Beats™ along with what I depicted as a complete and utter cave in to Wall Street. As quoted in MarketWatch™ To wit:
“But St. Cyr takes it a step forward by comparing Apple to the lumbering software giant. In a “complete and utter cave-in to Wall Street,” Apple’s latest report wasn’t consumer-products based; rather, it was designed to play Wall Street’s game, he says.
“Dividends, debt, splits, and more,” he said. “I don’t think the iPhone has added as many new features at once as the new features released in Apple the stock.” That’s how Microsoft MSFT does it, said St. Cyr as he waxed on about the Apple you knew is no longer. “ I hope I’m wrong, but the actions are beginning to not only speak for themselves – they’re screaming.“
At this time Apple was the; and I do mean the darling of both Wall Street, as well as, most 401K holders. During that time it was basically insinuated; to question anything Apple whether in terms of strategy, products, acquisitions, and more. It was implied: “You – just don’t get it!” Fair point. The only problem? As of today, near two years to the day – the value of your shares are worth about the same as they were then. And, for some – the same as two years prior in 2012. To even think of such a possibility during 2014 never-mind articulate or postulate the idea was met with dismissal as well as scorn. And guess what the current meme surrounding Apple is today? Hint: Has Apple become Microsoft?
Which brings me around to another postulate which I’ve articulated that today is being met with just as much revile as well as repulsion to even consider the possibilities: Social media.
Today much like Apple during the wake of the release of the iPhone 6S®, Facebook™ latest earnings release is being heralded as “the earnings report that should put all the nay-sayers to rest.”
After all, it’s touted “just look at what they’re doing with mobile!” And it’s a fair point. However, what I thought was interesting that went either unnoticed, or, blatantly under-reported was the fact that Mark wants to add some new class shares so that when he sells his current shares he can remain “in charge.” OK, fair enough. It’s not like this type of thing hasn’t been done before. (If memory serves me, I believe Google™ for one did something similar) Yet, when you put it into context with another announcement made similar by Amazon™? It’s just one of those things that make you go hmmm…. What was the announcement?
It seems (to borrow from my previous article) “In a complete and utter cave-in to Wall Street” (in fairness also with some impending pressure from regulators) Facebook along with Amazon it has been reported will declare more GAAP refined metrics as opposed to Non-GAAP when it comes to “equity-based pay costs.” i.e., reporting them as real expenses on the earnings reports. As it should be in my opinion.
However, what does such a move hold for others? Others such as – new competitors? Older ones? Ones not even IPO’s as of yet? Or, better yet: how about when competing for those precious “to be allocated” sovereign wealth/central bank funds? After all, such a move would make most, if not all “unicorns” scrambling for funding rounds not only look worse than unprofitable. But probably looking closer to – insolvent.
Imagine closing the door on future rivals with the possibility of making your own earnings statement appear worse. Now that takes not only some chutzpah, but if it were to work? It borders on genius!
If you think Twitter, Square, or others have an issue reporting investor friendly incentive now? Just wait if their demanded (whether by regulators or peer pressure) to report using only GAAP. And for those remaining in the “Unicorn stables” awaiting cashing out in the IPO horse-race to riches? You’d be better off investing in any company that uses unicorn tears in its glue formulation. For you would all but drive a stake into the heart of most in the current batch of tech IPO’s in waiting.
Imagine for a second you’re a rival to Facebook like, Oh I don’t know, let’s say Snapchat™. If you have yet to IPO: what are the chances you’re going to get anywhere near those implied valuations (I believe it’s somewhere around $16 BILLION) if now you’ll need to report using GAAP? Are you beginning to see my point?
A move like this (if it actually was an intentionally executed tactic, to which I would commend from a business perspective as: brilliant) would all but surely close a door behind you stifling anyone rivaling your acquisitions or future customers. That and surely just as important – cutting off nearly all their future investment dollars.
Any upstart or potential rival that is “cash burn” sensitive would be all but scorched out of business in no time. Then, all one would need to do is wait for the bankruptcy trial and pick up any patents and more on the cheap. As in very cheap.
And it is precisely this which increases the potential as to keep more IPO’s off the market, rather, than on. And for one very often, overlooked reason: VC’s net worth can remain (or at least appear) more robust the longer it’s off the IPO scene – rather than on it.
I know this sounds counter-intuitive at first but remember: For a few million dollars you could “invest” in a startup at the right funding level and have your “assets” stated to be worth multiples more. Much more, as in BILLIONS more.
And don’t forget these “valuation metrics” for most of today’s tech unicorns are worth $BILLIONS and billions because? Hint: Because they say they are. That’s it.
If you think Non-GAAP accounting was “inflationary” when it comes to a company’s worth. The stated metrics for valuing whether or not a “unicorn” is a “unicorn” makes Non-GAAP look conservative!
So when it comes to all this nascent talk about “unicorns” and their subsequent funding rounds just remember: Is it really a great time to be a private unicorn? Or – has that window not only closed, but maybe, just nailed shut by two of the biggest to ever profit from the meme?
- Venezuelan Opposition Leader Assassinated Days After 1.8 Million Sign Petition To Oust Maduro
The situation in hyperinflating socialist paradise Venezuela just moved one step closer to chaotic totalitarianism. With President Maduro clinging to power (thanks to his military 'assistance') amid growing social unrest (1.8 million signatures gathered seeking a referendum to remove him), FoxNews Latino reports German Mavare, leader of the opposition UNT party, died Friday after being shot in the head, asassinated in the western state of Lara, according to his organisation. Maduro has appeared on State TV tying Mavare to "armed groups" and suggested that more right-wing politicians are potential targets.
The Venezuelan people are growing increasingly angry at the nightmare of economic squallor Nicolas Maduro appears to have laid at their door (thanks in large part to an overly-generous socialist agenda runnining out of other people's petrodollars)…
In less than a week, more than 1.8 million people in Venezuela signed petitions seeking a referendum to remove President Nicolas Maduro from office. That's nine times the required 200,000 signatures.
The opposition said in a statement they delivered the petitions in 80 sealed boxes early Monday morning without notifying the media to avoid potential clashes with Maduro’s supporters.
Ousting Maduro will not be an easy task despite his approval rating plummeting amid triple-digit inflation, widespread food shortages and near-daily power blackouts. Recent polls suggest two-thirds of Venezuelans want him out.
If the National Electoral Council verifies the signatures in the coming days, it would trigger a second petition drive during which 20 percent of the electorate, almost 4 million people, would have to sign before a referendum could be scheduled on removing Maduro before his term ends in 2019.
If a vote were held, the president would be removed only if the number of anti-Maduro votes exceeded the 7.6 million votes he received in the 2013 election. In December's parliamentary elections, opposition candidates mustered only 7.7 million even though they won control of the legislature by a landslide.
President Maduro has recently dug in against what he calls opposition attempts to destabilize Venezuela…
"If the oligarchy were to do something against me and take this palace by one means or another, I order you, men and women of the working class, to declare yourselves in rebellion and undertake an indefinite strike."
And now, it appears 'someone' has "rebelled"…Venezuelan politician German Mavare, leader of the opposition UNT party, died on Friday after being shot in the head, an assassination that occurred in the western state of Lara, his organization said.
"The board of the UNT expresses its deepest sorrow for the slaying of colleague German Mavare. We demand justice and an end to violence," was the message posted on the Twitter account of the UNT party, headed by jailed ex-presidential candidate and former governor of Zulia state, Manuel Rosales.
The mayor of Iribarren in Lara state, Alfredo Ramos, said on his Twitter account minutes after the incident occurred before dawn Friday: "German Mavare, of the popular urbanization of Carucieña, a tireless fighter for social causes, has just been hit by a bullet in the head."
For his part, Luis Florido, an opposition lawmaker of the Voluntad Popular party, said on Twitter: "German Mavare died. A red bullet ended his life. Politics today is high risk. We demand an investigation of the case #NoMoreViolence #Lara".
The authorities have not yet issued a statement about the matter. Bloomberg reports that Maduro, speaking on on state television, said:
“The people we captured are talking and more than one far right-wing politician is mentioned."
"Authorities this week killed leaders of armed groups with ties to paramilitaries."
"Government is pursuing armed groups."
In conclusion, things just went to 11 on the spinal tap amplifier of failed-state-ness, and we leave it to R. Evan Ellis to discuss what happens next,
The question for businessmen and governments with a stake in the deteriorating situation in Venezuela is no longer if the regime of Nicholas Maduro will come to a premature end, but under what circumstances.
This reality has little to do with the determination or sophistication of the Venezuelan opposition, nor of the resiliency of its almost completely compromised institutions. Rather, the Maduro regime has locked the country on a course of national self-destruction, responding to the deepening economic crisis with counterproductive, and simply bizarre measures, such as criminalizing the attempt of the market to respond to shortages, or reducing the federal work week, destroying the little productive capacity that remains in the country.
Similarly, in the face of the population’s demand for a change in course, evinced by the massive opposition victory in the December 2015 mid-term elections, Maduro’s intransigence increases the probability that the suffering and frustration of the Venezuelan people will eventually give rise to violence.
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