Category: zerohedge

Authored by Robert Wheeler via The Organic Prepper blog,

Remember all those conspiracy theorists and Luddites who told you they didn’t want Echo or Alexa devices in their home because those gadgets were spying on them? Well, they were right. That’s not even up for debate. 

If you were one of those friends who mocked them and called them crazy, you were wrong. Just admit it.

If you are bewildered by what you just read, please, read on.

Nearly ten years ago, writers like Brandon Turbeville and others were warning that “smart technology” and the “internet of things” were being developed for surveillance and manipulation purposes. (Despite the companies’ claims of greater convenience.) We’ve been in a virtual dragnet for years.

Those devices and technologies are ubiquitous and are being used to soak up data, private and personal conversations, interactions, and even movement. All of this openly discussed in mainstream outlets. Lately, this website has reported on the Nest, your phone’s location tracker, and other “smart” technology. We’ve even talked about how we all have “surveillance scores.“

Take a look at WIRED’s article by Sidney Fussell, “Meet the Star Witness: Your Smart Speaker.” In this article, Fussell details a murder case in which an Amazon Echo device was presented as evidence.

He writes, 

In July 2019, police rushed to the home of 32-year-old Silvia Galva. Galva’s friend, also in the home, called 911, claiming she overheard a violent argument between Galva and her boyfriend, 43-year-old Adam Crespo. The two lived together in Hallandale Beach, Florida, about 20 miles from Miami.

When officers arrived, Galva was dead, impaled through her chest by the 12-inch blade at the sharp end of a bedpost. Police believe Crespo tried to drag Galva from their bed. She held onto the bedpost to resist, but the sharp end snapped, somehow killing her. Police charged Crespo with second-degree murder. He pleaded not guilty and was released on $65,000 bail, awaiting trial. In the months since the arrest, Crespo’s lawyer has presented a surprising piece of evidence in his defense: recordings from a pair of Amazon Echo speakers.

“I had a lot of interviews where people said, ‘Oh, are you aware that this could be the first time Alexa recordings are going to be used to convict somebody of murder?’” says Christopher O’Toole, Crespo’s lawyer. “And I actually thought of it the opposite way, that this could be the first time an Amazon Alexa recording is used to exonerate somebody and show that they’re innocent.”

When police and prosecutors collect smart home or speaker data, it’s typically used as evidence against suspects. The Hallandale Beach Police Department filed a subpoena for Crespo’s speakers, as they may have picked up audio of the argument Galva’s friend overheard.

The incident shows the growing role of smart home devices and wearables in police investigations.

In 2016, police in Bentonville, Arkansas, requested Amazon Echo data in connection with a man’s death, believed to be the first such request. Amazon initially tried to block the request, but later handed over the data. A murder charge against the defendant was later dropped, but the speaker, smart home, and wearable data has figured into multiple cases since then.

Requests for smart and wearable data has increased rapidly.

Fussell continues,

Earlier this month, Amazon said it had received more than 3,000 requests from police for user data in the first half of this year, and complied almost 2,000 times. That was a 72 percent increase in requests from the same period in 2016, when Amazon first disclosed the data, and a 24 percent jump in the past year alone.

Amazon doesn’t provide granular data on what police are seeking, but Douglas Orr, head of the criminal justice department at the University of North Georgia, says police now look for smart home data as routinely as data from smartphones. Data on a smartphone often points officers towards other devices, which they then probe as the investigation continues.

By amending a search warrant, police can “keep going to keep collecting data,” Orr says. “That usually leads to an Echo or at least some other device.”

As Orr explains, officers are getting more savvy about smart home devices, creating templates that simplify requesting data. Police departments often share these templates, he says, tailoring requests for the specifics of the case they’re investigating.

Google’s Nest unit reported increasing police demands for data from its smart speakers through 2018. Google then stopped reporting Nest data separately, including such requests in its broader corporate transparency report, which shows increased requests for Google user data.

In their terms of service, most major apps and websites include a clause warning users that companies may hand over their data if requested by the government. Law enforcement agencies file subpoenas or search warrants for data, detailing to judges what evidence they expect to find on the devices and how it may serve the investigation. Amazon and Google both notify users of a request for data unless the order itself forbids it. Any number of entities can request user data, but the companies say they prioritize requests based on urgency.

“Things like Homeland Security, they’re going to take high priority,” explains Lee Whitfield, a forensic analyst. “Other law enforcement requests will come in under that. And then things like divorce cases or civil cases, they have a lower ranking.”

In an emailed statement, an Amazon spokesperson said the company “objects to overbroad or otherwise inappropriate demands” from law enforcement and referred WIRED to its policy on government requests. A Google spokesperson also referred WIRED to its updated policy on requests.

Forensic experts tell WIRED that information from the devices is valued because it can offer a timeline of a person’s activities, their location, if they’re alone, and can verify statements made during questioning.

. . . . .

Orr has studied the types of data police can pull from smart speakers like the Amazon Echo. “Voice clips are only the beginning,” he says. Speakers keep time-stamped logs of user activity. Police can examine these logs to get a sense of what someone was doing around the time of an alleged crime.

Fussell then provides another example of how these devices are used by law enforcement.

He writes,

Consider a potential suspect who can’t prove where they were at 11 pm on a Thursday, because they live alone. Something as simple as ordering pizza through a speaker would show the time and location of the request and, if voice recognition is enabled, who made the request. “It might be benign information that someone was ordering a pizza, but it might also be an alibi for somebody,” Orr says.

Police increasingly rely on wearables and smart devices to verify the claims people make during an investigation. Sometimes, the tools can reveal a lie.

Heather Mahalik, a forensics instructor, recalls a Florida case in which a man killed his wife, then tried to impersonate her. The husband sent texts and Facebook messages from his wife’s phone in an attempt to blur the timeline of her disappearance. While the woman’s phone activity continued, her Apple Watch showed a sudden drop in heart rate activity that the husband claimed was due to a dead battery. Activity on the man’s phone synced perfectly with when he used the wife’s phone to post to Facebook. Her phone showed no activity except for when the husband picked it up to post, with timestamps matching his activity to the use of the wife’s phone.

“We were able to tell from his device that he would pick up the phone, take 18 steps, and it corresponded with the time he posted a Facebook post,” Mahalik says.

Connecting information from multiple devices is a common practice, analysts say. Information on one device can suggest evidence on another. This ability to string together discoveries leads to what another expert calls a phased approach to digital forensics.

“They ask for something, the investigation moves along, they find something else interesting, and then they request the next thing,” says Whitfield, the forensic analyst.

O’Toole, Crespo’s lawyer, says police subpoenaed Crespo’s social media accounts right away, then requested his voice recordings about four weeks later. Officers wrote in the search warrant that the speaker data may include “audio recordings capturing the attack on victim Silvia Crespo.”

O’Toole says he intends to introduce the smart speaker recordings in his client’s favor. Via email, a spokesperson for Hallandale Beach Police confirmed the case was still active but did not provide further comment.

O’Toole says smart speaker recordings are part of several cases he’s working on, including a divorce in which a woman subpoenaed data from a smart speaker that may have picked up the sounds of her husband with another woman..

Whitfield says police are becoming more savvy about the information in the smart speakers’ activity logs. He recalls a case where police found drugs in a household with multiple residents. Officers identified a suspect after seizing data from a smart speaker. Its log not only listed recent queries related to drugs but identified who spoke them. Google and Amazon speakers let users create profiles so the devices recognize their individual voices. This information helped police identify the suspect.

“I just don’t see this going away,” Whitfield says. “I think this is going to be more and more prolific as time goes on.”

Whitfield is right.

It will never go away.

Advertisement of these technological devices as a tool for convenience was a manipulative tactic to introduce technological devices for their real purpose – the tracking, monitoring, and recording of citizens so that no action – no matter how small – goes unnoticed. We are already living in a surveillance state and it’s only going to get worse.

Once begun, this bell cannot be unrung.

President Trump plans to appoint conservative legal watchdog Tom Fitton of Judicial Watch to serve on a D.C. court oversight body which has the power to remove judges within the district, according to Politico.

Fitton’s upcoming appointment to the D.C. Commission on Judicial Disabilities and Tenure was announced by the White House in a Friday afternoon letter. The commission includes four attorneys, one federal judge and two laypeople who can vote to remove judges for misconduct, or force judges into retirement if they become mentally or physically incapacitated.

The president can appoint one of the members to a five-year term.

Fitton heads up Judicial Watch, a conservative watchdog organization founded in 1994, which has made headlines bringing Freedom of Information Act (FOIA) lawsuits to force the government to release evidence which may point to misconduct by government officials.

The groups has sued both Republican and Democratic administrations, including the Clinton IRS alleging a retaliatory audit, the Bush administration and former Vice President Dick Cheney and his former company, Haliburton, and the Obama administration over former Secretary of State Hillary Clinton’s emails, after she deliberately circumvented the Freedom of Information Act with a private server in order to conceal her communications from public records requests.

Submitted by Thomas Farnan, originally published in The National Pulse

U.S. Director of National Intelligence John Ratcliffe recently declassified information indicating the CIA obtained intelligence in 2016 that the Russians believed the Clinton campaign was trying to falsely associate Russia with the so-called hack of DNC computers. CIA Director John Brennan shared the intelligence with President Obama. They knew, in other words, that the DNC was conducting false Russian flag operation against the Trump campaign. The following is an exclusive excerpt from The Russia Lie that tells the amazing story in detail:

On March 19, 2016, Hillary Clinton’s campaign chairman, John Podesta, surrendered his emails to an unknown entity in a “spear phishing” scam. This has been called a “hack,” but it was not.  Instead, it was the sort of flim-flam hustle that happens to gullible dupes on the internet. 

The content of the emails was beyond embarrassing. They showed election fraud and coordination with the media against the candidacy of Bernie Sanders. The DNC and the Clinton campaign needed a cover story.

Blaming Russia would be a handy way to deal with the Podesta emails. There was already an existing Russia operation that could easily be retrofitted to this purpose. The problem was that it was nearly impossible to identify the perpetrator in a phishing scheme using computer forensic tools. 

The only way to associate Putin with the emails was circumstantially. 

The DNC retained a company that called itself “CrowdStrike” to provide assistance. CrowdStrike’s chief technology officer and co-founder, Dmitri Alperovitch, is an anti-Putin, Russian expat and a senior fellow at the Atlantic Council. 

With the Atlantic Council in 2016, all roads led to Ukraine. The Atlantic Council’s list of significant contributors includes Ukrainian billionaire Victor Pinchuk. 

The Ukrainian energy company that was paying millions to an entity that was funneling large amounts to Hunter Biden months after he was discharged from the US Navy for drug use, Burisma, also appears prominently on the Atlantic Council’s donor list. 

Arseniy Yatsenyuk, the Western puppet installed in Ukraine, visited the Atlantic Council’s Washington offices to make a speech weeks after the coup. 

Pinchuk was also a big donor (between $10 million and $20 million) to the Clinton Foundation. Back in ’15, the Wall Street Journal published an investigative piece, “Clinton Charity Tapped Foreign Friends.” The piece was about how Ukraine was attempting to influence Clinton by making huge donations through Pinchuk. Foreign interference, anyone?

On June 12, 2016, WikiLeaks founder Julian Assange announced: “We have upcoming leaks in relation to Hillary Clinton . . . We have emails pending publication.” 

Two days later, CrowdStrike fed the Washington Post a story, headlined, “Russian government hackers penetrated DNC, stole opposition research on Trump.” The improbable tale was that the Russians had hacked the DNC computer servers and got away with some opposition research on Trump. The article quoted Alperovitch of CrowdStrike and the Atlantic Council.

The next day, a new blog – Guccifer 2.0 – appeared on the internet and announced:

Worldwide known cyber security company CrowdStrike announced that the Democratic National Committee (DNC) servers had been hacked by “sophisticated” hacker groups.

I’m very pleased the company appreciated my skills so highly))) But in fact, it was easy, very easy.

Guccifer may have been the first one who penetrated Hillary Clinton’s and other Democrats’ mail servers. But he certainly wasn’t the last. No wonder any other hacker could easily get access to the DNC’s servers.

Shame on CrowdStrike: Do you think I’ve been in the DNC’s networks for almost a year and saved only 2 documents? Do you really believe it?

Here are just a few docs from many thousands I extracted when hacking into DNC’s network.

Guccifer 2.0 posted hundreds of pages of Trump opposition research allegedly hacked from the DNC and emailed copies to Gawker and The Smoking Gun. In raw form, the opposition research was one of the documents obtained in the Podesta emails, with a notable difference: It was widely reported the document now contained “Russian fingerprints.”

The document had been cut and pasted into a separate Russian Word template that yielded an abundance of Russian “error “messages. In the document’s metadata was the name of the Russian secret police founder, Felix Dzerzhinsky, written in the Russian language. 

The three-parenthesis formulation from the original post “)))” is the Russian version of a smiley face used commonly on social media. In addition, the blog’s author deliberately used a Russian VPN service visible in its emails even though there would have been many options to hide any national affiliation.

Under the circumstances, the FBI should have analyzed the DNC computers to confirm the Guccifer hack. Incredibly, though, the inspection was done by CrowdStrike, the same Atlantic Council-connected private contractor paid by the DNC that had already concluded in The Washington Post that there was a hack and Putin was behind it. 

CrowdStrike would declare the “hack” to be the work of sophisticated Russian spies. Alperovitch described it as, “skilled operational tradecraft.” 

There is nothing skilled, though, in ham-handedly disclosing a Russian identity when trying to hide it. The more reasonable inference is that this was a set-up. It certainly looks like Guccifer 2.0 suddenly appeared in coordination with the Washington Post’s article that appeared the previous day. 

FBI Director James Comey confirmed in testimony to the Senate Intelligence Committee in January 2017 that the FBI’s failure to inspect the computers was unusual to say the least. “We’d always prefer to have access hands-on ourselves if that’s possible,” he said. 

But the DNC rebuffed the FBI’s request to inspect the hardware. Comey added that the DNC’s hand-picked investigator, CrowdStrike, is “a highly respected private company.” 

What he did not reveal was that CrowdStrike never corroborated a hack by forensic analysis. In testimony released in 2020, it was revealed that CrowdStrike admitted to Congressional investigators as early as 2017 that it had no direct evidence of Russian hacking. 

CrowdStrike’s president Shawn Henry testified, “There’s not evidence that [documents and emails] were actually exfiltrated [from the DNC servers]. There’s circumstantial evidence but no evidence that they were actually exfiltrated.”

The circumstantial evidence was Guccifer 2.0.

This was a crucial revelation because the thousand ships of Russiagate launched upon the positive assertion that CrowdStrike had definitely proven a Russian hack. Yet this fact was kept from the American public for more than three years.  

The reasonable inference is that the DNC was trying to frame Russia and the FBI and intelligence agencies were going along with the scheme because of political pressure.

Those who assert that it is a “conspiracy theory” to say that CrowdStrike would fabricate the results of computer forensic testing to create a false Russian flag should know that it was caught doing exactly that around the time it was inspecting the DNC computers. 

On Dec. 22, 2016, CrowdStrike caused an international stir when it claimed to have uncovered evidence that Russians hacked into a Ukrainian artillery computer app to help pro-Russian separatists. Voice of America later determined the claim was false, and CrowdStrike retracted its finding. 

Ukraine’s Ministry of Defense was forced to eat crow and admit that the hacking never happened. 

If you wanted a computer testing firm to fabricate a Russian hack for political reasons in 2016, CrowdStrike was who you went out and hired.

To read the rest of the story, click The Russia Lie: How the Military Industrial Complex Targeted Trump and buy the ebook for just $5.

The White House Correspondents Association is having a full-blown fit over President Trump’s decision to leave Walter Reed and do a little drive-by visit for the “Great Patriots” gathered outside.

And as if that weren’t enough, WSJ late Sunday published a “scoop” reporting what anybody who watched Dr. Conley’s Saturday press briefing probably had already expected: That President Trump didn’t immediately inform the public of the results of a rapid COVID-19 test taken Thursday.

Trump revealed in a tweet sent early Friday morning that both he and the First Lady had tested positive for the virus. But in a press briefing on Saturday, Trump’s physician, Dr. Sean Conley, “misspoke”, saying Trump was 72 hours in already, suggesting that Trump may have known about his illness as early as Wednesday.

So far, there’s no evidence to suggest that Trump tested positive Wednesday. But according to WSJ, Trump first tested positive via a rapid test (probably the Abbott Labs rapid test) for the first time on Thursday evening, shortly before he sat for an interview with Fox News Host Sean Hannity. During the interview, Trump acknowledged that his aide, Hope Hicks, had tested positive. But he claimed that he wouldn’t get his test results back until “either tonight or tomorrow morning”.

“I’ll get my test back either tonight or tomorrow morning,” Mr. Trump said during the interview. At 1 a.m. on Friday, the president tweeted that he indeed had tested positive.

To be sure, WSJ reported that the White House protocol is to first test Trump and his staff with the Abbott Labs test, then – if that test comes back positive – they’re tested again with a more accurate test. WSJ’s sources claimed that Trump’s tests followed this protocol. After testing positive for the first time, Trump reportedly told one of his aides: “Don’t tell anyone”.

Apparently, “anyone” included other top officials in the West Wing and the Campaign. One source told WSJ that Bill Stepien, Trump’s campaign manager, wasn’t aware of Hope Hicks’ positive test until he read about it on Twitter.

Stepien has since tested positive. Now, other WSJ sources are saying that a sense of anxiety has gripped the West Wing, as nobody is willing to talk about positive tests, even among their colleagues.

The initial secrecy within Mr. Trump’s inner circle has created a sense of anxiety within the West Wing. Publicly, the White House has issued evolving and contradictory statements about the president’s health that has some officials worried about their own credibility.

“I’m glued to Twitter and TV because I have no official communication from anyone in the West Wing,” an administration official said.

The White House didn’t respond immediately to a request for comment.

Before closing out the story, WSJ offered a hint that Trump’s team was already curtailing access to the president on Wednesday. Despite this, when Trump arrived in Minneapolis, he shook hands and posed for photos, confounding his greeters’ expectations.

Minnesota state Rep. Kurt Daudt said Saturday he was awaiting a Covid-19 test after greeting Mr. Trump at the Minneapolis airport on Wednesday. Mr. Daudt and other greeters had been tested before meeting the president, and were instructed not to shake hands with him or get close to him, but when the president came down the stairs from the plane, he offered to take photos.

“You’ve been tested, right?” Mr. Trump said, according to Mr. Daudt.

Several of the greeters posed for photos with the president, with some standing less than a foot away from him, according to photos from the event. None wore a mask. Mr. Trump then attended a fundraiser at the home of Mike Davis, owners of a quartz countertop company, according to his campaign schedule.

None of this is damning evidence that Trump lied to the country, of course. Though we wouldn’t be surprised to see the NYT follow this up with a similarly anonymously sourced report claiming that Trump actually tested positive Thursday morning – or perhaps even Wednesday evening.

Submitted by Sovereign Man

Natia Sampson volunteered to become the legal guardian of her niece after the girl’s parents were incarcerated. And the social worker on the case took a liking to Natia.

At first she politely rejected his advances, fearing that reporting these instances would be met with retaliation. But soon it turned into sexual harassment, and she was forced to contact his superiors. But nothing changed. Until one day, the social worker exploded at Natia, saying, “I don’t know where you get off sending all these complaint emails and making all these calls, but you are going to find out that we at [Child Services] stick together, and cover for each other.”

Soon after, he lodged claims of child neglect against Natia. She eventually fought off the completely unsubstantiated charges.

Natia then sued the social worker and the Department of Children and Family Services for so obviously violating her rights. But the case was dismissed last month. The Judge’s decision reads:

“the right of private individuals to be free from sexual harassment at the hands of social workers was not clearly established at the time of defendants’ conduct in this case.”

What this means:

Clearly if the parents are in prison, this family has some problems. It is easy to dismiss these cases as the stuff of broken homes. But we have also highlighted a case in the past where children were kidnapped by a SWAT team after the parents disagreed with a doctor over the seriousness of a fever.

Then there was the child taken away because a father wouldn’t cooperate with a civil asset forfeiture proceeding– when the cops steal your money without a conviction, or even a criminal charge.

A town in Alabama removed countless children from innocent parents because a lab owner falsified drug test results for years.

One judge removed a child from the home in an attempt to force a confession from her parents. The courts found no evidence of abuse, but didn’t return the child to her parents for two years.

This same judge removed a child from a home because the court hearing was running too late into the evening. In another case, she arbitrarily denied placing a child with his grandparents, instead placing him in a stranger’s foster home where he was sexually abused.

While hopefully these cases are rare, you can’t deny that foster care horror stories exist. It’s terrible enough to be separated from your child. But to imagine what could be happening to your child in a stranger’s care is even more terrifying.

Earlier this year, the US Marshal Service launched a national effort to rescue trafficked children. They recently confirmed that the majority of sexually trafficked children they rescued came from foster care.

In the Ohio operation, “25 of the 31 children recovered were in DCFS [foster] care in either a group homes or foster case… in Georgia: 28 of the 39 recovered were in the care of DFACS [Department of Family and Children’s Services].”

What you can do about it:

There has recently been a massive increase in homeschooling because of COVID. In the past, you could reasonably worry that homeschooling would make you a target of the state, just for being outside the mainstream. But these days, homeschooling is more likely to shield you from any incidents in the first place.

Just this past Friday we talked about a case where a social worker was brought in because a teacher saw a BB gun in a child’s bedroom during virtual learning.

Teachers peering into your home through the child’s computer screen is already ensnaring innocent kids and parents in the social services system. So it’s reasonable to assume that states with the highest homeschool freedom are some of the safest from social services overreach as well.

The following states do not require any notice that you are homeschooling: Alaska, Connecticut, Idaho, Illinois, Indiana, Iowa, Michigan, Missouri, New Jersey, Oklahoma, and Texas. (Usually in these states you do have to formally withdraw your child from public school if they were previously enrolled.)

Also, joining the Home School Legal Defense Association (or a similar group) gives you legal protection, resources, and a network with strength in numbers if Child Protective Services does ever unjustly target you.

But when it comes to something as important as having agency over your own children, you may want to look outside the US entirely.

In a Sovereign Man Confidential Alert from August, we profiled a man who we referred to as David. As a child, he witnessed the government kidnap his five-year-old nephew. David’s parents had been raising the little boy– their grandson– because the boy’s parents were unable to do so. But the boy’s father (David’s sister’s ex) didn’t like the arrangement. He convinced his girlfriend, a Child Protective Services official, to remove the child from the home. The little boy was never returned.

“I saw first-hand that child welfare in the US is a Soviet-style system,” he says. “They got away with it. I vowed at that moment never to have a child in the US.”

David and his wife opted to have their first baby in Brazil, where they have been living for most of this year. And for their next child, they are considering Argentina or Chile. In the meantime, the family plans to live in Spain.

Of course, this is only anecdotal information. But as someone who witnessed the abuses of the US child services system first- hand, David feels better about his parental rights in these countries. And even when a country’s official child services laws look similar to laws in the US, in practice, it may be much more rare for a child to be removed without actual serious cause.

In that sense, you may want to look at a country’s culture regarding parental rights, rather than just its laws.

Since the largest threat facing the country is white supremacists, according to FBI Director Chris Wray and Homeland Security acting chief Tom Wolf, the Department of Homeland Security has agreed to provide $10 million in grants to organizations which combat ‘far-right extremism and white supremacy,‘ according to the Wall Street Journal.

The department’s Targeted Violence and Terrorism Prevention program will fund groups such as Life After Hate – founded by reformed white supremacists, which helps people trying to do the same. Another group, the School of Communication at American University, will develop a strategy to combat disinformation ‘circulated by the far right online,’ and others. Life After Hate was awarded nearly $750,000, while the School of Communication received a $500,000 grant.

One of the largest grants, nearly $750,000, went to Life After Hate, which was founded by former white supremacists and neo-Nazis and works with people trying to leave violent far-right movements. The group was first awarded funding under the Obama-era program but had its grant rescinded soon after Mr. Trump took office. –Wall Street Journal

Life After Hate says they will use the funding for its ExitUSA initiative. Executive director Sammy Rangel says their work “has never been more important,” adding “This project follows years of innovation in a space that was largely uncharted.”

Another group, the Counter Extremism Project, was awarded $277,755 to collaborate with Parallel Networks, which works with inmates at a San Diego County correctional facility who adhere to both white supremacist of jihadi ideology.

The organizations will develop a curriculum—one for white supremacists, and the other for jihadis—aimed at providing alternative narratives to extremist ideology that will be administered both in person and through email correspondence.

Jesse Morton, a former recruiter for al Qaeda in New York who now heads Parallel Networks, said the goal is to help pull these inmates away from an extremist mindset and give them the tools to reintegrate into society after leaving prison. –Wall Street Journal

According to a DHS spokesman, the funding is targeted at preventing “violent white supremacy alongside a number of recognized and emergent forms of terrorism and targeted violence.”

In September, FBI Director Christopher Wray told the House Homeland Security Committee that the majority of deadly or violent incidents against others in 2018 and 2019 were racially and ethnically motivated, and are “the most lethal of all domestic extremists since 2001.”

Last weekend, we pointed out following the recent modest correction in the Nasdaq, institutional traders had gone full bear – at least in NQ futures – pushing the net non-commercial contracts to the second shortest position ever, which prompted both us and others to caution that a short squeeze in NQ futs was imminent. This is what the otherwise bearish (on tech) Bear Traps Report said last week after observing our chart:

Nasdaq non-commercial futures positioning is now the shortest since 2008, the index has rapidly blown through the March lows. We are definitely not bullish Nasdaq, but this certainly gives us pause. It is quite possible that this is just momentum players hedging their FANG gains etc, but still quite a move. Keep in mind, that was out a week ago. We’d imagine most dealers and former dealers are bearish risk and are short futures because every piled into puts very quickly (i.e dealers had to hedge themselves on the other side of the trade). Setting up for a squeeze to short into…

A few days later, that’s precisely what happened because according to the latest CFTC Commitment of Traders report, the Nasdaq 100 mini net spec short position in the week ending Sept 29 indeed collapsed by almost 40%, as the net future position shrank from -134.3K to -79.6K.

What happened? Well, as we reported on Friday using both SpotGamma data and a report from CNBC’s David Faber, SoftBank appears to have attempted another forced short squeeze, this time not so much in gamma but in actual future shorts, although it may well have been aiming for both. As SpotGamma observed on Friday, “this chasm between call & put gamma is starting to look similar to that of early August” while CNBC’s David Faber explained what caused it: on Thursday SoftBank bought $200M worth of calls in NFLX, AMZN, FB and GOOGL.

This likely explains why the Nasdaq ripped higher on Thursday after trading water for much of past week…

… however, SoftBank probably did not expect the Friday fireworks, when Trump’s covid diagnosis actually resulted in a pro-cyclical trade sweeping market as traders assumed (perhaps erroneously) that a fiscal stimulus deal (and its associated inflation) is now more likely.

In any case what we find most notable, is that while the Nasdaq indeed rose modestly last week (vs the Sept 25 Friday close), the fact that a whopping 40% of NQ short were covered and the Nasdaq barely rose, likely means that any future attempts by Softbanks to spark a gamma or futures squeeze could have very painful consequences for Masa Son… and potentially all those who furiously keep buying tech stocks and QQQs (and even the 3x levered TQQQ) after every dip.

Back in May, when the Fed was struggling to rekindle animal spirits and force investors into every possible toxic debt instrument it could find, we explained how through the magic of modern monetary alchemy, a portfolio consisting of 96% Junk Loans had been converted into 87% investment grade bonds.

The magic catalyst in question: CLOs, which are structured credit products that take a portfolio of mostly junk loans – which are used to fund much of corporate America – and repackage them in such a way that the resulting product looks and feels much higher in credit quality, even though it consists of the exact same junky underlying securities, just presented in a different way.

Of course, this is hyperbole there is nothing “magical” about what CLOs do – in a nutshell, such structured products merely take advantage of the diversification nature of a broad pool of loans and make the assumption that absent a catastrophic economic crash, it is unlikely that more than a given percentage of loans will default at any one time. Now, we got perilously close to just such a mass default event after the covid shutdowns, which is also why the Fed had no choice but to step in and effectively bailout both corporate bonds and loans, or else it risked a complete collapse of the corporate bond and loan markets, and trillions of downstream losses in the CLO space.

In retrospect, and looking where risk assets trade now, the Fed has succeeded in kicking the can (whether it can continue doing that even as we head into the peak turbulence period of the US election and a potential second wave and new shutdowns, remains an open question).

One company which is not waiting to see what happens to the economy or to euphoria investor risk appetite, is the iconic distressed investor, Cerberus Capital, which has taken the CLO example above one step further, and instead of selling repackaging loans, has taken a bunch of freefalling, and potentially worthless, CMBS interest-only tranches and repackaged this steaming pile of dogshit into a $300 million product that the rocket scientists at DBRS rated, drumroll, AAA.

The product? A CDO, or Collateralized Debt Obligation, very much of the type that led to the collapse of the financial system in 2007/2008 when a handful of banks repackaged subprime mortgages into CDOs (and CDO squareds), giving the impression of riskless securities, which were virtually all wiped out once the housing market crashed, and one-hit wonder investors such as John Paulson made billions.

As Bloomberg details this latest “Wall Street alchemy” enabled by the Fed’s idiotic bubble-blowing policies, “in a maneuver that recalls the complex home mortgage investments in the mid-2000s, Cerberus Capital Management has used relatively low-quality commercial mortgage bonds to create triple-A debt.” In doing so, it is taking advantage of the greed and stupidity of the prevailing investor, because as we have repeatedly noted, the commercial real estate market has been clobbered especially hard by the pandemic, and a CMBX series focusing on hotels has emerged as the “Big Short 3.0” trade.

Just how bad is the CRE market? Consider that according to Trepp, around 9% of all commercial mortgages that have been bundled into bonds were delinquent in August, as Covid-19 keeps shoppers out of malls, travelers away from hotels and workers home from offices. The real number is far higher, and only the fact that $20 billion in CMBS forbearances have been granted is preventing this chart from exploding.

This is why hedge funds that find themselves holding to these securities are looking for creative ways to offload them to the army of idiot investors spawned by Jerome Powell’s monetary idiocy, while also making money from flipping them. Sure enough, Cerberus will likely strike gold in both regards: the securities sold by the hedge fund mature in 2.2 years, and the AAA portion is being marketed at a price of between 1.4 and 1.5 percentage points over benchmarks, according to Bloomberg sources. The high ratings combined with relatively high yields and short-term maturity could attract some investors.

Specifically, Cerberus – where Dan Quayle is Chairman of Global investments and may explain how Cerberus ended up with this pile of steaming horseshit in the first place – is taking derivatives of commercial mortgage bonds, known as interest-only strips, and packaging them into around $390 million of notes, about $300 million of which have top ratings from DBRS Morningstar.

As Bloomberg explains the structured product “alchemy” we first deconstructed back in May, “most of the commercial mortgage securities at the foundation of this transaction have the lowest investment-grade rating, BBB-, but through the magic of securitization they’re transmuted into AAA instruments, similar to subprime mortgage bond derivatives that were bundled into top-rated collateralized debt obligations during the U.S. housing bubble.”

Attempting to explain why investors have once again learned absolutely nothing from the financial crisis, Jason Callan, head of structured assets at Columbia Threadneedle Investments said “I’m sure the ratings are what’s driving the demand.” He is right, although it’s worth remembering that rating agencies rated hundreds of similar CDOs AAA in the summer of 2007, only to see them completely wiped out less than a year later.

“This is a CDO,” said Jen Ripper, an investment specialist at Penn Mutual Asset Management. “There could be a real risk of some principal loss at the BBB- level, which most of these interest-only tranches are ‘stripped’ off of.”

As Bloomberg adds, the transaction is being referred to as a “resecuritization”, according to deal docs, which say it’s structured so that cash flows have some protection from early repayment of principal through refinancing, and losses due to defaults. By some protection it likely means 1-2 months of capital buffer after which buyers are on their own. And in a world where a $700 million mall-backed CMBS portfolio is about to become the first mega casualty of the covid crisis, they will be on their own very soon.

Not convinced yet? Well, the deal is backed by about 9,300 mortgages, 27.6% of which are office, 25% retail and 15.5% hotel – the three hardest hit sectors in the post-covid age – while the rest is a mix of other commercial real estate sectors, initial marketing materials show.

Worse, CMBS “interest-only strips” are linked to the performance of corresponding bonds with the same ratings that pay both principal and interest. They represent securities backed by the excess interest generated from a pool of commercial mortgages. In other words, these securities default first, before any other impairments hit the capital structure. It also means that anyone who investors in such a “resecuritization” will lose money, guaranteed… unless of course the Fed buys it all.

Completing the farce, the Cerberus deal is being arranged by Deutsche Bank, JPMorgan Chase and Wells Fargo, the three banks that have the worst criminal record in the world and which collectively have paid tens of billions of legal fees, penalties and settlements. And soon, once this deal also blows up, we can add a few more billion in legal penalties.

But don’t worry, nobody will go to prison, because if anyone is guilty of anything, it is the Fed for allowing this kind of financial crisis stupidity to make a triumphal return.

Authored by T.J.Coles via Counterpunch.org,

In July, Dmitry Rogozin, Director General of Roscosmos, cited the U.S. “retreat from principles of cooperation and mutual support” to justify Russia’s refusal to join the latest U.S. space initiative: to build lunar bases. Rogozin was likely referring to the U.S. refusal to renew the Intermediate-range Forces Treaty and its intention to back out of the Open Skies Treaty.

Russia responded by declaring that Venus is a “Russian planet.” The U.S. continues to reject Sino-Russian efforts to strengthen the Outer Space Treaty 1967, to prohibit the weaponization of space. Doing so would interfere with U.S. plans for “full spectrum dominance.”

MOON LANDING 2.0

Last week on 22 September, the National Aeronautical and Space Administration (NASA) signed a memorandum with the Department of Defense (DOD). The signers were NASA’s administrator, Jim Bridenstine, and the U.S. Space Force Chief of Operations General, John Raymond.

The signing of the memo took place in the broader context of NASA’s Artemis program. In December 2017, Donald Trump signed the Presidential Memorandum on Reinvigorating America’s Human Space Exploration Program. It was an update of Obama’s space policy, adding that the U.S. will: “Lead an innovative and sustainable program of exploration with commercial and international partners to enable human expansion across the solar system and to bring back to Earth new knowledge and opportunities.”

NASA’s Artemis program oversees the U.S. mission to exploit the moon, including the construction of the Artemis Base Camp at the lunar South Pole, probably near the Shackleton Crater. This will serve as a forerunner to building a base on Mars. It “builds on a half-century of experience and preparation to establish a robust human-robotic presence on and around the Moon,” says NASA. Artemis includes a Space Launch System and the Orion spacecraft. These operations will enable “U.S. commercial companies and international partners to further contribute to the exploration and development of the Moon.”

International partners, at present, include Canada, Japan, and the EU. Though, as we shall see, weaponization and competition remain serious threats to international peace and human survival. Other elements of the program include a Power and Propulsion Element (PPE) and the Habitation and Logistics Outpost (HALO), which Artemis hopes to finalize by 2023. The international efforts include deploying “science payloads” and CubeSats, as well as refueling the Gateway: an orbiting lunar outpost.

WEAPONIZED MOON

Contracts for the Human Landing System (HLS) have gone to Blue Origin, Dynetics (Leidos), and SpaceX. The HLS team includes Draper, Lockheed Martin, and Northrop Grumman. Draper will provide avionics, guidance, navigation, and software. The Integrated Lander Vehicle will launch on United Launch Alliance’s Vulcan heavy-lift rocket. Maxar Technologies will develop the PPE. HALO is an initial crew cabin for astronauts visiting the Gateway and will likely be built by Northrop. Pressurized and unpressurized cargo, including space instruments and food, will be delivered by SpaceX.

The recent NASA-DOD memorandum of understanding references the proposed lunar base and says that NASA and the Space Force “reaffirm and continue their rich legacy of collaboration in space launch, in-space operations, and space research activities, all of which contribute to the Parties’ separate and distinct civil and defense endeavors”—the latter are classified. The Space Force will act as the NASA’s guarantor. Space Force’s responsibilities “include developing military space systems and doctrine, as well as presenting space forces to support the warfighting Combatant Commands.” The memo reiterates common NASA-DOD interests.

The memo also seeks to establish a Foundation for Broad Collaboration. General Raymond says:

 “A secure, stable, and accessible space domain underpins our nation’s security, prosperity and scientific achievement. Space Force looks forward to future collaboration, as NASA pushes farther into the universe for the benefit of all.”

The Space Force states that it “will secure the peaceful use of space, free for any who seek to expand their understanding of the universe, by organizing, training and equipping forces to protect U.S. and allied interests in space.” “Peace” means U.S. dominance unimpeded by commercial rivals, like China, India, and Russia.

NASA AS STIMULUS FOR HI-TECH

As the BBC acknowledges: 

“Many practical products developed by NASA during the Apollo years are well known: cordless drills, PV (solar) panels, freeze-dried food, thermal insulation material, heat coatings and so on.”

Having learned their craft at the Fairchild Semiconductor company, NASA scientists formed Intel, which later worked on personal computers with Microsoft. The so-called Apollo Effect, in reference to the first moon landing, indirectly and reportedly inspired Tim Berners-Lee, who is credited with creating the World Wide Web, Jeff Bezos of Amazon, and Elon Musk of SpaceX, which is now contracted to work on the latest program.

NASA says of the future that taxpayer dollars will fund research and development for corporate, hi-tech innovation: “Space Technology investments will stimulate the economy and build our Nation’s global economic competitiveness through the creation of new products and services, new business and industries, and high-quality, sustainable jobs,” like those above. It notes more broadly:

“Knowledge provided by weather and navigational spacecraft, efficiency improvements in both ground and air transportation, super computers, solar- and wind-generated energy, the cameras found in many of today’s cell phones, improved biomedical applications including advanced medical imaging and even more nutritious infant formula, as well as the protective gear that keeps our military, firefighters and police safe, have all benefitted from our nation’s investments in aerospace technology.”

Colonel Eric Felt, Director of the Air Force Research Laboratory Space Vehicles Directorate, says: “The space renaissance happening on the commercial side is fantastic, there is innovation we can use.” Felt also notes the link between civilian-commercial and military technology: “We have limited funding in our budget for science and technology … We have to leverage dual-use technologies”—which means weaponized civilian and commercial products.

CONCLUSION

As pundits analyze what was arguably the lowest point of U.S. electoral politics in the mont of September, namely the “debate” between The Donald and Creepy Joe, Sky News reports on the Space Command’s first foreign deployment to Al Udeid Air Base, Qatar:

“Their mission is to confront new threats in the region from Iran’s missile programme – as well as attempts to jam, hack and blind satellites.”

Confront threats means maintain dominance.

The Space Force has also seen the transfer of Air Force personnel to the Marine Expeditionary Unit, indicating that the Force will integrate into all levels of the U.S. military, realizing the U.S. elite dream of “full spectrum dominance.”

AMC Entertainment, the largest movie theater chain in the world, will “run out of liquidity” in six months, according to debt ratings agency S&P Global Ratings, which downgraded AMC’s credit rating from CCC+ to CCC- and slapped it with a negative outlook, according to The Hollywood Reporter.

“Given our expectations for a high rate of cash burn, we believe the company will run out of liquidity within the next six months unless it is able to raise additional capital, which we view as unlikely, or attendance levels materially improve,” said the agency.

“The negative outlook reflects our view that a default, distressed exchange, or redemption appears to be inevitable within six months, absent unanticipated significantly favorable changes in the issuer’s circumstances.”

Box office sales have cratered in the wake of the COVID-19 pandemic, despite 70% of US movie theaters estimated to have re-opened with social-distance seating as of Labor Day.

After major theater re-openings on Labor Day pulled in a collective $28.4 million for 25 film releases, according to IMDB’s Box Office Mojo.com, the next two following weekends saw declines: $12.6 million for 24 releases (September 11-13) and $11.3 million for 28 releases (September 18-20). –MediaDailyNews

In July, AMC completed a debt restructuring with bondholders which saw $200 million in fresh cash, as well as the purchase of $100 million in new senior notes by the Silver Lake Group. The chain also raised $77 million by selling nine theaters in Europe’s Baltic region.

According to S&P Global, AMC “continues to struggle operationally and financially because U.S. attendance remains weak after reopening, additional major theatrical releases are delayed and its cash burn might accelerate now that its theaters are open,” and that continued reduced capacity combined with customers who are increasingly embracing streaming platforms, is likely to persist into next year.

Most exhibition companies — or 93 percent — weathered losses of 75 percent in the second quarter of 2020 after moviegoing came to an unprecedented stop in mid-March. While more than half of theaters are now reopened, Hollywood continues to delay its major fall releases out of concern that many moviegoers aren’t yet ready to return. –The Hollywood Reporter

On Wednesday, the National Association of Theatre Owners, the Directors Guild of America and the Motion Picture Association were joined by dozens of influential filmmakers to beg Congress for money, warning that many cinemas may not survive.