Month: February 2023

Following two major recent terrorist attacks which targeted Chinese nationals in Kabul, the Chinese government is desperately appealing to the Taliban to provide better security protection for its citizens in Afghanistan. The past week has seen multiple reports emerge saying that Beijing is even offering the Taliban advanced weaponry in order to bolster counter-terror efforts in the capital. 

The US national security website 19fortyfive writes that “Rather than subsidize education or develop the country, it now appears that the Taliban will use its limited cash to purchase or otherwise acquire Blowfish drones from China.”

The source describes the China-produced drones as follows: 

The Blowfish is a potentially devastating platform. The mini-helicopter can fire machine guns, launch mortars, and throw grenades. Artificial Intelligence imbues them with the ability to determine who lives and who dies on the battlefield with minimal human input. The Pentagon has already expressed fears that Blowfish exported to the Middle East could end up in the wrong hands. 

China is also said to be concerned about the security situation as it has its eye on expanding Belt and Road initiative projects in the AfPak region:

Chinese officials also fear for the security of projects related to the China-Pakistan Economic Corridor (CPEC), which have faced several attacks in the provinces of Khyber Pakhtunkhwa and Balochistan in Pakistan.

Both these provinces are adjacent to Afghanistan and officials in Pakistan have alleged that Baloch groups fighting for the freedom of Balochistan and the Tehreek-i-Taliban Pakistan (TTP) operate from bases across the Durand Line with the active co-operation of the Afghan Taliban.

In a fresh Tuesday report, Newsmax also writes that China is “planning to fortify its economic position in Afghanistan by providing lethal drones to the Taliban.”

Demonstration of the Blowfish copter drone dropping small bombs from the Chinese manufacturer: 

Other sources, including the Jamestown Foundation, have alleged a China-Taliban security ‘quid pro quo’ based on drone and other weapons sales; however, there’s been nothing in the way of official statements from either side, or clear confirmation.

Likely, Beijing would view publicizing such a deal as somewhat embarrassing given both the radical Islamic nature of the Taliban regime, as well as its current inability to provide adequate security protection to Chinese businessmen and diplomats in Kabul.

By SpotGamma

Summary:

Into the FOMC meeting and minutes Feb 1st, we believe the market is approaching a near term ceiling and downside opportunity exists in individual names which have recently been high performing or speculative (by buying put spreads).

Rationale for ceiling:

• We believe the market has front-run a policy shift by the Fed
• We have near term resistance at 4100 at our Call Wall with peak resistance at 4200
• With current IV levels being low, and also under equivalent measures of realized vol, there is reduced fuel for a squeeze

Full note on implied volatility compression here.

Downside opportunity:

• Specific names like ARKK and TSLA have had very strong recent runs
• The entire QQQ complex is up 10% in January, fueled by short-covering and 0DTE options

Additional Context:

Implied volatility compression (1 month IV < 30 day Realized Vol) in the SPX has been a signal that has marked equity market tops over the past year. This IV compression is in play now after huge rallies in equities, particularly in “speculative” names like ARKK (+29% in January) and in tech (QQQ +10% in January). We believe that much of the force behind this rally was driven by the combination of short covering and ultra-short dated trading activity like 0DTE.

Along with sharp moves higher in tech, we’d also highlight that “value” stocks are back to all time highs.

Last week, IV further compressed as strong treasury auctions led to the MOVE index collapsing, which likely persuaded the VIX to touch 1 year lows of 18 on Friday. Note, too,  the MOVE Index is now at 100 – the same level it was into the August highs. It was then at Jackson Hole wherein a hawkish Powell marked a major interim high.

Linked to this, its clear that put demand is reflecting a much more sanguine environment ahead.

Our conclusion here is that if markets want higher out of FOMC, there may be a fairly limited rally due to the sharp moves already made YTD. At the end of the day, interest rates are ~4% higher than 1 year ago which should reduce equity valuations year over year, making upside over 4300 uncompelling.

We also believe that traders are positioned to expect this bullish impulse out of FOMC, which can drain upside momentum.  We therefore think that the best risk/reward positioning here into FOMC is to own puts/put spreads in the speculative/tech names which have rallied the most YTD. Any neutral to negative sentiment from the FOMC would likely hit those names asymmetrically.

More from Spotgamma here

And now for some Tuesday humor, brought to you by the US Treasury Department, which sees no indication whatsoever that US funds have been misused in Ukraine, following last week’s massive political shake-up wherein some dozen top Ukrainian officials were booted from their posts amid persistent corruption allegations. 

“We have no indication that U.S. funds have been misused in Ukraine,” Treasury spokesperson Megan Apper said in Treasury’s first comments since the ‘shock’ resignations. 

In the official statement given to Reuters, the US government also hailed the supposed “safeguards” which the Ukrainians have put in place, though without actually specifying any: “We welcome the ongoing efforts by the Ukrainian authorities to work with us to ensure appropriate safeguards are in place so that U.S assistance reaches those for whom it is intended,” Apper said.

The statement fails to detail precisely how US authorities are tracking disbursement of the some tens of billions in funds that go from American Joe taxpayer, and into the pockets of the Zelensky government to dole out (other than referencing a digital system which supposedly monitors funds)…

Apper said the Treasury would continue to work closely with the World Bank on tracking U.S. disbursements “to confirm that they are used as intended, as well as with Ukraine and other partners to tackle corruption.”

Apparently totally unaware of the extreme irony, Reuters chooses to add the following facts for some further context and color to its report… and it’s perhaps all you need to know: 

“Ukraine ranks 116 out of 180 countries on the annual Corruption Perceptions Index released Tuesday by Transparency International, up one ranking from last year.

“Its score on the index was 33 on a scale of 0-100, where 0 means highly corrupt and 100 means very clean.”

(…and note that Treasury Dept’s statement was issued on very day that the new corruption rankings came out… the “rise” on the index means Ukraine is supposedly ever-so-slightly less corrupt.)

But again, don’t worry – nothing to see here – the US Treasury is assuring that when it comes to the well over $100 billion in defense and other foreign aid pledged as well as the many billions distributed so far, Ukraine is “very clean”. 

See our viral report from last week for a review of the high-ranking Ukrainian officials who were forced to resign–Ukraine Rocked By Corruption Scandal, Wave Of Top Officials Resign: Sports Cars, Mansions & Luxury Vacations As People Suffered.

As but one example, no less than the #2 defense minister was brought down. He had a direct hand in handling some of the very billions in US aid which the Treasury is now claiming was never misused. As we pointed out earlier…

According to AFP, “the defense ministry had earlier announced the resignation of deputy minister Vyacheslav Shapovalov, who was in charge of the army’s logistical support, on the heels of accusations it was signing food contracts at inflated prices.” 

“Ukrainian safeguards” pic.twitter.com/5evt1sgBuV

— Marmot XI (@MarmotXi) January 31, 2023

In the case regarding the food contracts, Shapovalov is accused of signing a deal with an unknown, shady firm. In his role as deputy defense minister, his is the most notable and visible resignation. Crucially he had no small part in overseeing the billions of dollars flowing from the pockets of US and European taxpayers as authorized defense aid.

Zelensky staff can be seen wearing Rolexes while in field uniforms. Just sayin. pic.twitter.com/vW87JdAMPw

— UncleBuck_10k (@UncleBuck_10k) January 31, 2023

Authored by David Hill & Jeffrey Kupfer via RealClear Wire,

When Republicans in Washington talk about energy policy, one word often comes up: Solyndra.  Before the recent elections, headlines blared about this defaulted government loan guarantee – “Republicans look for the next Solyndra.”  

With Republicans now controlling the U.S. House of Representatives, should they actually “look for the next Solyndra”?  What are the real lessons from it for both Congressional Republicans and the Biden Administration?  

We believe there are lessons, and here’s what they are: (1) rigorous underwriting and continual oversight are necessary for government financial support programs – and that’s particularly important now, with billions of dollars in spending newly authorized by the Inflation Reduction Act; (2) loan guarantee decisions must be made solely on technological and financial merit – not politics; (3)  defaults may happen with the DOE loan guarantee program – its whole purpose is to take risk.  But that never excuses imprudent or politically-motivated risk-taking.

We served as senior officials at the U.S. Department of Energy (DOE) in the George W. Bush Administration, including after Congress authorized the DOE loan guarantee program for innovative energy projects in 2005.  We helped write the program’s regulations and stand up the loan programs office (LPO).  We were there when DOE started considering Solyndra’s loan guarantee application – though not when DOE approved and issued the guarantee in 2009.

Solyndra, a California solar panel manufacturing company, had requested a loan guarantee for more than $500 million.  Near the end of the Bush Administration, the DOE credit committee, which we had created and which consisted entirely of career officials empowered to do a thorough, nonpartisan review of projects, concluded the Solyndra application was, in essence, not ready for prime time.  

Despite the pressure DOE was under to issue a loan guarantee, our boss, Energy Secretary Samuel Bodman never even considered overruling that committee.  As a result, the Bush Administration did not issue a loan guarantee to Solyndra – or anyone else. 

In 2009 however, the American Recovery and Reinvestment Act armed the loan guarantee program with millions in taxpayer dollars and the new Administration wanted to show it could do what the former one hadn’t.  Late that year DOE issued Solyndra a $530 million loan guarantee.  President Barack Obama even visited the company to tout the program.

It took Solyndra only 24 months to burn through the DOE money and declare bankruptcy.  The federal government took a massive financial loss.  

Critics argue Solyndra demonstrates all the worst things about government action and federal financial support.  They point out the huge financial cost to taxpayers.  They cite the political pressure from the highest levels of government.  They point to DOE’s legally questionable and ultimately unsuccessful actions to save the project from default and the Obama Administration from embarrassment.  

The program’s defenders say sometimes things just go wrong and projects default – it happens in the private sector too.  They say the loan guarantee program was created to take risks; and even so, it regularly turns a profit and has a good overall loss experience.  They argue Solyndra officials weren’t truthful and that the current LPO office is better staffed and more diligent.   

So who’s right?

The DOE loan guarantee program was created to advance innovative technologies, enable new types of energy projects, and improve environmental performance.  It was to do that for projects the private financial sector might not be willing or able to support.

With such a program, it is inevitable some projects won’t perform as well as expected.  Technology also may develop in unpredictable ways, and economic, market or political trends may unexpectedly change.  Defaults may happen, even with a perfectly run program.

That said, the purpose of the DOE program is NOT to take risks only a sucker would take.  Political motivations or insufficient diligence can lead to imprudent risk-taking.  To avoid that, rigorous and transparent underwriting and oversight are important – particularly right now. 

A loan guarantee default that costs taxpayers hundreds of millions of dollars is never a good thing and can never just be waived off.  DOE must ensure that if defaults happen, they are not because the underwriting process was short-circuited, program standards were compromised to score political points, special interests were favored, or DOE had focused on financing marquis “signature” projects to score political points.     

The country is undergoing an energy transition; accelerating new types of clean energy projects is an important part of that effort.  With unprecedented resources and a broad mandate, the DOE loan guarantee program can play a critical role.  However, that will only happen if DOE applies careful scrutiny, proceeds with transparency and without political favoritism, and ensures only high quality projects receive guarantees.  And both DOE and Congress must conduct vigorous oversight.  Failure to do all of these things jeopardizes the loan guarantee program and the clean energy transition itself.

David Hill is a former general counsel of the Department of Energy and an adjunct senior research scholar at the Columbia University’s Center on Global Energy Policy;

Jeffrey Kupfer is a former acting Deputy Secretary of the Department of Energy, an adjunct professor at Carnegie Mellon University’s Heinz School and the president of ConservAmerica.

The “blame everyone but the criminals” strategy being employed in most major U.S. cities – and contributing to the increase in crime while emboldening future criminals – doesn’t show signs of stopping anytime soon. 

Case in point? The auto thefts in Seattle have gotten so bad that city attorneys in the liberal-run utopia are hilariously suing the manufacturers of Hyundai and Kia for failing to install anti-theft technology on their vehicles.

Talk about missing the point.

As Axios pointed out, auto thefts across the country have been on a surge over the last few years. In Seattle, Hyundai and Kia thefts were 620% higher than other auto brands. Perhaps this is what has motivated Seattle City Attorney Ann Davison to sue the manufacturers. 

Most thefts have taken place in Northgate, Capitol Hill, Central District and Beacon Hill, the report says. “The city is seeking unspecified damages and asking the car manufacturers to fix the problem,” Axios wrote. 

The suit claims that “Hyundai and Kia failed to use immobilizer technology that ensured car ignitions could not be started without their keys long after other carmakers had adopted the same technology”. This made the two brands of vehicles “easier to steal”, the report says.

It also blames YouTube videos that “showed how to steal car models simply by removing a plastic piece under the steering wheel and using a USB cord and turning it like a key”. 

This, of course, takes the focus away from the rise in criminals attempting to get into property that isn’t theirs to begin with. Perhaps someone should inform that the first thing someone needs to do to steal a car, is break and enter into property that isn’t theirs. Maybe that’ll help realign expectations before this suit is hastily thrown out of court. 

Hyundai rightfully dismissed the lawsuit as “improper and unnecessary”, telling Axios that “Hyundai Motor America has made engine immobilizers standard on all vehicles produced as of November 2021.” They also said that “Owners of past models can also bring their vehicles to a local Hyundai dealer for the purchase and installation of a customized security kit…”

And, of course, this is why we expect the exodus from cities like Seattle, and those of its ilk, to continue. 

Via The Cradle,

A top Iranian official announced this week that Iran and Russia had integrated their interbank communication and transfer systems to help enhance trade and financial operations in an effort to bypass strict economic sanctions on their financial infrastructure.

With the signing of the agreement, 52 Iranian and 106 Russian banks are connected through the Russian Financial Message Transfer System, which will facilitate economic relations between the two countries, said Deputy Governor of the Central Bank of Iran Mohsen Karimi.

“This system is immune to sanctions as it is based on the infrastructures of both countries,” Karimi said, according to Iran’s Mehr news agency.

The global consortium SWIFT, the world leader in secure financial messaging services, excluded Iranian banks from its system following the reimposition of economic sanctions by the United States on Iran in 2018.

As a result of that suspension of services, the Iranian banking system is disconnected from the international one, making banking transactions with other countries difficult. Russia was partially excluded from SWIFT last year due to its invasion of Ukraine.

While economic relations between the two countries have grown to 4 billion in recent years, Tehran has sold drones to Russia, which it has used in its invasion of Ukraine.

Official trips between the two countries have also multiplied in recent months, with Iranian President Ebrahim Raisi visiting Russia in January 2022 and Iranian Foreign Minister Hosein Amir Abdolahian making two trips to the Russian capital in less than a year.

“In today’s world, a country’s status is largely related to its economic power … We need economic growth to maintain our regional and global position,” Iran’s top authority, Supreme Leader Ali Khamenei, said in a televised speech.

Additionally, deputy governor of Iran’s Central Bank, Mohsen Karimi, announced: “Iranian banks no longer need to use SWIFT… with Russian banks, which can be for the opening of Letters of Credit and transfers or warranties.”

Winter storm warnings and weather advisories stretched from the US Southwest to the Southeast on Tuesday as snow, sleet, and freezing rain canceled and or delayed at least 3,000 flights. 

According to FlightAware’s flight tracking website, 1,300 flights had been canceled, and an additional 2,000 were delayed as of Tuesday morning. 

Dallas-Fort Worth International, Austin-Bergstrom International, and Dallas Love Field were three Texas airports experiencing the most flight disruptions as an ice storm slammed the state. Cancellations and delays were also seen across the country. 

The National Weather Service in Fort Worth said a winter storm warning was in effect in north and western central Texas until Wednesday afternoon. 

On Monday, Texas Gov. Greg Abbott directed the state’s Division of Emergency Management to prepare for adverse weather conditions. 

“The State of Texas is working tirelessly to ensure Texans and their communities have the resources, assistance, and support needed to respond to winter weather impacts across the state,” Gov. Abbott said in a press release.

The ice storm will also impact Arkansas, Mississippi, and Tennessee through Wednesday. NWS Memphis said areas could expect ice accumulations of a quarter to one-half inch or more. 

After a mild January, a blast of cold air is pouring into the Midwest through this weekend. 

A cold shot is expected for the Mid-Atlantic region, but temperatures could return to average levels by Sunday or early next week. 

The Northeast will also see a brief chill. 

On Thursday, Punxsutawney Phil will come out of his burrow in the ground and let the US know if an early spring is ahead or six more weeks of winter. 

Authored by Petr Svab via The Epoch Times (emphasis ours),

Diseases of the heart and veins claimed more lives over the past several years among American aged 25 to 44 than before the COVID-19 pandemic. Even with the pandemic waning, such deaths remain elevated.

In 2020, the first year of the pandemic, deaths caused by circulatory diseases increased by about 15 percent in the 25 to 44 age group compared to the year before, according to death certificate data collected by the Centers for Disease Control and Prevention (CDC).

In 2021, such deaths increased by more than 20 percent compared to 2019.

That means nearly 6,500 more deaths.

(ZH: Related)

During the 3rd Quarter of 2021 the 25-44 age (millennials) holders of Group Life Policies experienced an 84% excess mortality ramp from Q2 2021’s 33% excess. The rate of change was an event.

Can anyone explain this event other than mandates & vaccines? Give it a shot 😏 pic.twitter.com/jTyTHBmN4B

— Ed ☯️Free Thinker & Oracle (@DowdEdward) January 17, 2023

It appears that the increase may have been caused by multiple factors.

COVID-19 sometimes causes complications in the circulatory system. It’s likely that some deaths, especially early on in the pandemic, were caused by COVID-19 but were misclassified on the death certificate.

Also, many people were likely diagnosed too late or not at all because they were afraid to go to a doctor during the pandemic.

However, diseases of the circulatory system continued to claim lives at a higher rate in this age group even in 2022, when the pandemic receded. In the first half of the year, such deaths were still more than 13 percent above the death toll for the first half of 2019, according to the CDC’s preliminary data.

In the 45 to 54 age group, such deaths increased in 2020–21 but seem to have since receded back to pre-pandemic levels.

In the 15 to 24 age group, such deaths have barely budged over the past five years.

A growing number of experts and studies have associated the COVID-19 vaccines with serious, even fatal conditions, including heart inflammation, or myocarditis. They suggest that the spike protein produced through the vaccination can cause blood clotting and inflammation.

“All cardiovascular conditions have gotten worse because of the vaccine and anything and everything that can go wrong with the heart has gone wrong with the heart as a result of these mRNA vaccines. There’s no doubt about it,” said Dr. Aseem Malhotra, a British cardiologist who has researched extensively the associations between the COVID-19 vaccines and heart issues.

Malhotra has argued that such issues should be presumed to be associated with the vaccines until proven otherwise. He initially supported the vaccines but changed his mind after his father’s cardiac arrest six months after vaccination.

Dr. Peter McCullough, a highly published American cardiologist, independently reached a similar conclusion.

“When people are in a study or it’s in a post-marketing period in a brand-new drug, when someone dies within a few days, or certainly within 30 days of any new drug or injection, it is that drug until proven otherwise,” he told Epoch TV’s Jan Jekielek last month.

“If this was in a regulatory dossier, it could even be something that’s seemingly disconnected. Believe it or not, in clinical trials, if someone’s taking a drug and they have a car accident, it’s attributed to the drug, because the drug may have made them dizzy or foggy or what have you.”

The rollout of the vaccines also correlates with significant increases in other conditions, including eye problems, immune system issues, and, in some data, cancer, according to Josh Stirling, an insurance research analyst.

Overall, the vaccination correlates with increased mortality, according to Stirling.

“The more doses on average you have in a region within the United States, the bigger increase in mortality that region has had in 2022 when compared to 2021,” he recently told Jekielek in an interview for “American Thought Leaders.”

Stirling has argued that if the vaccine’s adverse effects are properly identified, they could be mitigated.

“If we were actually just screening for these people, the vast majority of these health issues, before they become catastrophic, could very easily be managed—not necessarily solved, but certainly managed with amazing medical advances and simple things like blood thinners, or changes in lifestyle,” he said.

Mortality in prime-age adults aged 18 to 64 substantially increased in 2020 and onward, even with COVID-19 deaths excluded, according to a Dec. 15, 2022, paper that attempted to account for COVID-19 deaths misclassified on death certificates.

Read more here…