Month: August 2020

Via InternationalMan.com,

International Man: I’d like to introduce Chris MacIntosh.

After working for many top-tier investment banks, Chris left the corporate world. He has since built and sold multiple million-dollar businesses, built a VC firm allocating $35m into early-stage ventures, and become a full-time trader.

He now manages money for clients of Glenorchy Capital; a macro focused hedge fund. Chris is the founder of Capitalist Exploits, with its flagship investment subscription letter called Insider.

Alright, let’s get into our discussion.

As countries destroy their national currencies, middle- and lower-class individuals will be disproportionately affected.

Are we seeing global destruction of private savings? What are the implications?

Chris MacIntosh: There’s a lot to unpack there.

What we’re seeing is the wholesale destruction of the middle class, certainly in Western democracies.

I think it’s by design.

We’re also seeing a wave of neo-Marxism taking place across the Western world, and they see it as an opportunity.

For anybody who wants an in-depth look at it, I suggest going to the World Economic Forum and looking at what they call The Great Reset.

They see this as an opportunity to rebuild the world in a Communist form.

The destruction of the middle class allows governments to enact all sorts of dangerous policies because the middle class is really what rises up.

When you have a middle class, people fight for that—if they have capital and resources to present some resistance.

If you take that capital away from them, they have less resistance. Certainly, if you take it away from them and then replace it with something like a Universal Basic Income (UBI), people essentially just become serfs of the government. And that’s what they’re doing.

Now, when you look around the world, that’s not what is currently happening in many emerging markets. I wouldn’t call much of Asia an emerging market anymore.

You have non-socialist structures or countries, and the way they deal with this crisis will tell what happens there over the next 10–20 years.

Western countries are dealing with this crisis by increasing debts, increasing social spending—and hence, ensuring the destruction of their currencies and their bond markets—and impoverishing the citizenry along the way.

However, in other countries, and I could pinpoint many—mainly in Asia, Eastern Europe, and even Russia—they’re not handling this in the same fashion.

Many of these countries don’t have social spending programs to the extent that the West does. Hence, there isn’t a belief by the citizenry that the government can or should look after them.

They’re not destroying their balance sheets or creating serfs.

What I think will happen, as the crisis fades with respect to the coronavirus, is many countries will be in poor shape in emerging markets. However, they are laying the groundwork to build and rise up from it because they’re not crushing themselves with social spending plans.

They’re also not crushing people by dis-incentivizing to get up and work. That’s exactly what the UBI does.

On a relative basis, these places are freer—they’re freer in terms of market economics—they’re freer in terms of human capital.

We’re going to see a shift of human capital, as well as capital, from the West to the East.

That’s how I see the national currencies and how middle- and lower-class individuals are affected in this process. I think, quite frankly, that everybody suffers.

The question is, who comes out of it in a stronger fashion?

And what is more conducive to capital formation on a go-forward basis? It’s absolutely clear to me that it’s not the West. It is largely in the East. That’s the longer-term trend.

For the chaos in-between, I think it’s pretty simple—you want to own tangible stuff.

International Man: Aside from the economic trends unfolding—and accelerating—as a response to Covid-19, a cultural, political, and social shift is also underway.

How are these trends connected, and what does it mean in the months and years ahead?

Chris MacIntosh: It’s all accelerating now.

Five years ago, I couldn’t have written a book to explain what’s happening today. And had any logical person read it, they would have said, “Oh, sure. That’s going to happen.”

They would have said, “Well, that’s a bloody great piece of fiction, Chris. Good job.”

And yet, here we are. Again, these trends are in an exponential blow-off top phase.

What does it mean for the months and years ahead?

I think it’s the most dangerous period of time that we’ve ever seen, not just for your capital but also for individual freedom.

That is troubling.

In terms of what it means for capital, we’re going to have extraordinary shortages.

Right now, people are very focused on a deflationary impact because they’re saying, “Well, nobody’s working. Businesses are going bust. There’s this credit contraction.”

That’s being met with a lot of fiscal and monetary stimulus. I don’t discount the fact that people losing their jobs has a disinflationary impact. What is being missed is the extraordinary shutting down of supply.

If you look at Maslow’s hierarchy of needs—it’s food, shelter, energy.

If you look at those components over the last two decades—on a relative basis—against all other sectors, they are the cheapest that they’ve ever been.

Take agriculture, for example.

Agriculture is the cheapest it’s been in about 70 years. Yet we have absolute destruction in supply.

We have governments literally deciding who is essential and who is not essential within the food supply chain. This is not any different from what the Bolsheviks tried. We all know what that resulted in. People can look up the genocide in Ukraine, which was a massive famine caused by the government.

We’re at the cusp of seeing the same sort of thing. Already, the US just had the highest rise in food prices in 50 years. And people are still not paying attention to it. This is going to become a massive problem.

*  *  *

Tens of millions of people have lost their jobs in the US alone, and small to medium-sized businesses have been destroyed. It’s clear that we’re seeing the destruction of the middle class. We’re also seeing a wave of neo-Marxism, which is sure to transform the Western world’s political and cultural nature. The risks that lie ahead are too big and dangerous to ignore. That’s why Chris just released the most critical report on these trends, What Happens Next. This free special report explains precisely what’s coming down the pike and what it means for your wealth and well-being. Click here to access it now.

Palantir, the mysterious data analytics companies that has become one of the most valuable Silicon Valley unicorns despite being for all intents and purposes, a black box, has just given investors the first look inside the kimono.

Pardon our mixing of metaphors – but it really is difficult to understate how eager some investors have been to see these financials. As it turns out, the company, which is also known for receiving some of its early funding from a CIA-backed VC firm, lost $580 million last year.

Looks like they’re going to need to spy on more people.

Palantir was expected to go public this year, one of a handful of Silicon Valley stalwarts, including Airbnb, that missed out on last year’s string of hot IPOs (some of which – Zoom, Peloton – have done quite well in recent months).

The financials leaked over the weekend, but this is the first confirmed look from the company to investors.

For those of our readers who aren’t irredeemable fantasy nerds, Palantir was named after a magical orb from one of “The Lord of the Rings” books. It was co-founded by Peter Thiel in 2004, after he had already succeeded with PayPal and just after he made his career-cementing investment in Facebook.

Here’s what we know so far about the financials so far:

• The company lost $588 million ($580 million on a pro-forma basis) in 2019, according to its S-1 filing. Revenue grew almost 25% from the year earlier while its losses stayed roughly even – no  doubt a good sign that the business is “scalable” (however horrifying that might sound to some). In the first half of 2020, Palantir lost $165 million, or $175 million on a pro-forma basis.
• Palantir has two classes of stock, Class A and Class B, and while each share of Class A stock receives the rights to one vote, each Class A share gets 10 votes. In this way, the structure is similar to Facebook’s, and is really a classic Silicon Valley strategy for retaining founder control. Palantir says it plans to introduce Class F shares as well, which will carry a variable number of votes.

 

 

Miami is seeing a massive surge in supply in its condo market as Covid continues to have profound economic effects in South Florida, according to a new report from The Real Deal. 

The market now has a glut of 30 months worth of unsold condos and 100 months worth of luxury units (units over $1 million), according to an analysis of Multiple Listing Service data by Condo Vultures Realty. The data is ex-pre-construction sales and consists of “the area between Edgewater and Brickell, east of I-95”.

The condo data is based on 711 sales that closed in the first 6 months of this year, which averages out to about 119 sales per month. As of this week, there are still 3,579 condo listings awaiting suitors in Miami. The average asking price is about $758,000 – which contrasts sharply with the average closing price of $511,000 this year. 

The luxury market is in even worse shape than the condo market: only 36 units sold in the first 6 months of the year. There are about 600 luxury condos on the market asking an average of $2.05 million. 26 sales are pending. 

Peter Zalewski, principal at Condo Vultures Realty, told The Real Deal: “This is giving me flashbacks to 12 years ago in 2007, when the Miami condo market started to go bad. Early indications are that this pandemic combined with the oversupply that already existed is going to turn this into a serious buyer’s market.”

Shadow inventory, consisting of units that individual landlords put on the market, which are typically condos, and those that institutional owners will lease out, oftentimes without using the MLS, is also on the rise, according to Zalewski. He says that individual condo landlords and institutional owners are “dropping their prices and offering deals on units”. 

There is about 6 months of supply of shadow rental units listed on the MLS, the report says. An average of 541 leases per month were signed in the first six months of the year. 3,167 remain on the market for rent. 

Zalewski says that more price cuts and deep discounts are on their way: “The day of the all cash buyer is coming, and coming quickly. Those all cash buyers are not looking to pay market value. They’re not even looking for a discount. They’re looking for a haircut.”

“There’s too much product, and people do not want to live in a 500-unit building with 700 people,” Zalewski concluded.

Authored by Andrea Widburg via AmericanThinker.com,

One of the lockdown stories that’s earned a lot of coverage concerns Ian Smith and Frank Trumbetti, who own Atilis Gym in Bellmawr, New Jersey.  

Because the Wuhan virus is now the status quo, rather than an emerging threat, they have pushed back against Governor Phil Murphy’s insistence that his continuing “emergency” executive powers can force them into bankruptcy.  They re-opened, and, despite observing social distancing, masks, and disinfection rules (and no cases of Wuhan viruses can be traced to their gym), Murphy has engaged in a full-on vendetta against the gym, including yanking their business license.

Help may be on the way, though.  

The gym’s owners have allied with Rik Mehta, a pharmacist who is running for the U.S. Senate. 

 If Mehta wins, he’ll bump Cory “I am Spartawuss” Booker, one of the smarmiest leftists in the Senate.  The gym’s owners and Mehta had a great idea — they’ve turned the gym into Mehta’s campaign headquarters:

The gym will serve as a campaign headquarters and rally spot for Republican US Senate candidate Rik Mehta, a pharmacist who is challenging Sen. Cory Booker (D-NJ), the owners said.

Gym co-owner Frank Trumbetti, asked whether the pair thought the state might try to mess with them this time around, responded, “We believe they can’t. It doesn’t mean that they’re not going to.”

“We hope it gives us a reprieve until Nov. 3,” he said of potential government interference at the gym. “Everyone who comes in here will be a volunteer for the Mehta campaign, and we’ll be here to exercise our rights.”

“And we’re not requiring masks, either,” Trumbetti added defiantly.

Bravo, guys, for standing up to the petty tyranny of yet another Democrat governor who turned his elder care facilities into slaughterhouses.  (At a certain point, you have to wonder if the Democrat governors who did this were merely stupid or if they were deliberately trying to ease the financial burden that the needs of elderly people can impose on state budgets.)

“We took a stand for our constitutional rights and for the rights of all small business owners throughout the country,” Smith told “Fox & Friends Weekend” Sunday.

“And it wasn’t intended to become political. We were trying to offer a solution to a problem where the government was failing, and it turned political. And that was because of Gov. Murphy’s actions. So now we made it political just as much as he has.”

Without knowing any of the inevitable details about in-kind donations, insurance, etc., it sounds like an excellent idea for GOP candidates to join together with those locally owned businesses that Democrat governors seem determined to destroy.  While the governors are making sure that the big stores (Walmart, Lowes, etc.) see sales soar, they’re systematically destroying restaurants, gyms, hair care establishments, mom-and-pop stores, and all sorts of other places that can’t afford big donations to Democrat politicians.

Oil prices were higher today, driven in large part by significant shut-ins across the Gulf of Mexico. WTI traded back above $43.

As Bloomberg’s Kriti Gupta details, the Gulf of Mexico is responsible for 17% of U.S. offshore oil production, 82% of which has been shut in preparation for the storm (up from 58% yesterday). So the simple explanation for rising crude is less production means less supply and higher prices.

It gets even thornier when you consider that 45% of total U.S. petroleum refining capacity also is located along the Gulf Coast.

This is unlikely to be reflected in any inventory/production data released this week.

API

• Crude -4.524mm (-4.3mm exp)

• Cushing -646k

• Gasoline -6.392mm (-2.7mm exp) – biggest draw since April 2019

• Distillates +2.259mm (-700k exp)

Analysts expected a fifth weekly crude draw in a row and a continuing trend of draws in Gasoline stocks also… API reported bigger than expected draws for Crude and Gasoline (with the latter’s biggest drop in stocks since April 2019)…

Source: Bloomberg

WTI closed at its highest for the front-month contract since early March…

Source: Bloomberg

Oil was trading around $43.35 ahead of the print, and was little changed after the data.

“Markets know that the hurricane shut-ins are usually transient, and it’s a bit too early to know whether the current ones will have a prolonged bearish effect on prices or not,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a daily note. “Refineries might need to shut-in more runs due to flooding than upstream operators shut in crude supply,” so weaker demand for crude at the refineries may help to offset price-bullish supply constraints.

House Democrats are launching an investigation into Secretary of State Mike Pompeo’s upcoming speech at tonight’s Republican National Convention – not over the content of the speech, but whether it’s in violation of the Hatch Act and a breach of State Department regulations, according to The Hill.

Rep. Joaquin Castro (D-Texas), chairman of the House Foreign Affairs panel’s subcommittee of oversights and investigations, raised his concerns in a letter to Deputy Secretary of State Stephen Biegun and requested information on the secretary’s planned remarks.

Pompeo is coming under scrutiny for taking time during official diplomatic travel in the Middle East to record remarks to be played at the GOP convention on Tuesday night. –The Hill

Pompeo is believed to have recorded several remarks from Jerusalem, possibly violating his own instructions that appointed State Department officials are barred from engaging in partisan political activities related to US elections. The State Department, however, says Pompeo is acting in his personal capacity and that taxpayer resources were not used for preparing or delivering the remarks.

The State Department prohibition was laid out in two memos, one of which was issued in December, 2019 from the Office of the Legal Adviser, which states in bold and italics that “Senate confirmed Presidential appointees may not even attend a political party convention or convention-related event.”

The second memo, signed by Pompeo in July, reiterates the points.

“It’s absolutely unacceptable that a sitting U.S. Secretary of State, America’s top diplomat, would use official taxpayer-funded business to participate in a political party convention, particularly after the State Department published guidance that explicitly prohibits such activity,” Castro wrote to Deputy Secretary of State Stephen Biegun.

“This action is part of a pattern of politicization of U.S foreign policy, for which President Trump was impeached by the House of Representatives, that undermines America’s standing in the world. The American people deserve a full investigation,” the letter continues.