iftttwall

Update (1900ET): As TikTok lashes out at the Trump Administration, Tencent has been conspicuously quiet.

But CNBC reported a few moments ago, citing a domestic poll, that Chinese consumers would retaliate against Apple if WeChat is banned form its app store.

Some in China Could Ditch $AAPL if WeChat Banned from App Store – CNBC, Citing Poll

— *Walter Bloomberg (@DeItaOne) August 7, 2020

No surprises there.

Meanwhile, Tencent shares are getting absolutely hammered.

* * *

Maybe its is oft-professed fondness for “deals”, but for whatever reason, it seems President Trump is determined not only to see Microsoft buy TikTok, but to claim some sort of role (or reward) for the US government in bringing about the buyout. Last night, Trump issued yet another executive order targeting both TikTok owner ByteDance and Tencent-owned WeChat, another popular Chinese social media company.

In the order, Trump essentially formalized threats made a week ago by setting a time limit for barring both companies from the US. While the recourse for WeChat is less clear, the order was worded in a way that would allow TikTok to continue operating under the auspices of Microsoft. Perhaps this had something to do with the reports about Microsoft looking into buying TikTok’s entire global business (instead of just the US, Canada, Australia and New Zealand-facing business that MSFT claimed to be interested in on Sunday night.

Stocks slumped in Asia and Europe Friday morning, and US futures are pointing to a lower open, as Beijing’s insistence that the US would not be allowed to simply “steal” TikTok in a “smash & grab” deal probably led analysts to conclude that – whatever Trump’s intentions with the EO – it would likely complicate deal talks in the near term, as Trump just made Microsoft’s job of courting the national party that much more difficult.

In its own statement published Friday morning, TikTok said it was “shocked” by Trump’s EO, which was issued “without due process” (note: it tickles us to hear Chinese companies wax poetic about the importance of “due process”.)

TikTok added that it has sought to engage in “good faith” with the US government for more than a year, and has even expressed its willingness to sell the business to a US company. The company added that it would “pursue all remedies available in order to ensure that the rule of law is not discarded and that TikTok and its users are treated fairly”.

Read the full statement:

TikTok is a community full of creativity and passion, a home that brings joy to families and meaningful careers to creators. And we are building this platform for the long term. TikTok will be here for many years to come.

We are shocked by the recent Executive Order, which was issued without any due process. For nearly a year, we have sought to engage with the US government in good faith to provide a constructive solution to the concerns that have been expressed. What we encountered instead was that the Administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.

We made clear our intentions to work with the appropriate officials to devise a solution to benefit our users, creators, partners, employees, and the broader community in the United States. There has been, and continues to be, no due process or adherence to the law. The text of the decision makes it plain that there has been a reliance on unnamed “reports” with no citations, fears that the app “may be” used for misinformation campaigns with no substantiation of such fears, and concerns about the collection of data that is industry standard for thousands of mobile apps around the world. We have made clear that TikTok has never shared user data with the Chinese government, nor censored content at its request. In fact, we make our moderation guidelines and algorithm source code available in our Transparency Center, which is a level of accountability no peer company has committed to. We even expressed our willingness to pursue a full sale of the US business to an American company.

This Executive Order risks undermining global businesses’ trust in the United States’ commitment to the rule of law, which has served as a magnet for investment and spurred decades of American economic growth. And it sets a dangerous precedent for the concept of free expression and open markets. We will pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly – if not by the Administration, then by the US courts.

We want the 100 million Americans who love our platform because it is your home for expression, entertainment, and connection to know: TikTok has never, and will never, waver in our commitment to you. We prioritize your safety, security, and the trust of our community – always. As TikTok users, creators, partners, and family, you have the right to express your opinions to your elected representatives, including the White House. You have the right to be heard.

As Trump ratchets up pressure for a deal (and further inserts himself into the deal talks, much to both companies chagrin), CNBC reminds us that Microsoft isn’t the only company reportedly “talking” to TikTok. There are at least three groups of potential investors, according to one CNBC source (we assume CNBC is referring to the VC group, Microsoft and (possibly) Facebook (though the company has vehemently denied interest in TikTok).

By adding another layer of pressure beyond what CFIUS was already applying, Trump is making these deal talks really interesting. Meanwhile, expect more whining from the teens about mean ol’ Trump trying to shut down their favorite “safe space”.

Thus far an official ongoing investigation by Lebanese authorities into the cause of Tuesday’s Beirut port blast, now considered the largest non-military munitions explosion in history, has dubbed it severe “negligence”. 

It’s now well known that over 2,500 tons of ammonium nitrate, an ultra-combustible chemical compound utilized in fertilizers and production of explosives, was allowed to sit at the port in a warehouse going back seven years. 

Specifically, President Michel Aoun identified that it was no less than 2,750 metric tons of ammonium nitrate that detonated as it was “stored unsafely” — though port officials reportedly attempted to warn the government for years that it must be moved. A number of port officials have been placed under house arrest pending the investigation.

Customs chief Badri Daher has told international media that his agency pleaded with Lebanese courts and high officials to order the chemical removed. Daher says the request for urgent removal was made six times to the judiciary over the years, all denied.

“This did not happen,” he said. The end result after the dangerous chemical — which is the same use in the deadly 1995 Oklahoma City bombing — was stored there since 2013 (also in undiluted form), was the most destructive blast in Lebanese history, killing over 135 people and injuring more than 5,000 – not to mention an estimated three billion dollars in damage.

“Legal documents, court correspondence and statements by public officials now trying to pass the buck shed light on the operations of the port, which has been dogged by allegations of widespread bribery and controlled in large measure by the militant Hezbollah group,” The Washington Post reports.

And the almost unbelievable story of how the explosive substance got there has emerged. It’s centered on a derelict and leaking vessel leased by a Russian businessman living in Cyprus. In 2013 the man identified as Igor Grechushkin, was paid $1 million to transport the high-density ammonium nitrate to the port of Beira in Mozambique. That’s when the ship, named the Rhosus, left the Black Sea port of Batumi, in Georgia.

But amid mutiny by an unpaid crew, a hole in the ship’s hull, and constant legal troubles, the ship never made it. Instead, it entered the port of Beirut where it was impounded by Lebanese authorities over severe safety issues, during which time the ammonium nitrate was transferred off, and the largely Ukrainian crew was prevented from disembarking, leading to a brief international crisis among countries as Kiev sought the safe return of its nationals.

Meanwhile, Igor Grechushkin – believed to still be living in Cyprus – reportedly simply abandoned the dangerously subpar vessel he leased, as well as its crew, never to be heard from again.

According to a damning legal briefing at the time:

“…the vessel was abandoned by her owners after charterers and cargo concern lost interest in the cargo. The vessel quickly ran out of stores, bunker and provisions.”

The ammonium nitrate was supposed to be auctioned off, but this never happened. Apparently exasperated customs and dock officials even suggested Lebanese farmers could simply spread it across their fields for a good crop yield. But not even this simple solution was heeded, nor proposals to give it to the Lebanese Army.

Via The Siberian Times: “The crew – eight Ukrainian and two Russian men – was forced to stay on board of the vessel while the owner Grechushkin declared himself bankrupt and ‘abandoned the ship’. Lebanese authorities agreed to let six out of ten sailors to leave the country, others were left stranded on the ship for almost a year. 

Instead the deadly substance languished at port, and the Rhosus sank in the harbor years later. The last crew members weren’t allowed to leave the ship and return home until August 2014. Grechushkin may have paid for their return tickets at that time.

WaPo relates: 

“Owing to the risks associated with retaining the Ammonium Nitrate on board the vessel, the port authorities discharged the cargo onto the port’s warehouses,” lawyers acting on behalf of creditors wrote in 2015. “The vessel and cargo remain to date in port awaiting auctioning and/or proper disposal,” it added.

And then later, more warnings, which apparently are in writing in legal documents:

“In view of the serious danger posed by keeping this shipment in the warehouses in an inappropriate climate,” Shafik Marei, the director of Lebanese customs, wrote in May 2016, “we repeat our request to demand the maritime agency to re-export the materials immediately.”

Astoundingly, even lawyers which had represented the effectively abandoned crew of the ship (which Ukrainian media at the time said were “hostages” of the Lebanese government) while it had been detained at port warned Lebanese government officials that the sensitive cargo was in danger “of sinking or blowing up at any moment”. 

Close view of the #BeirutExplosion pic.twitter.com/iLZR1ssOqN

— FAHAD🇱🇧 (@fabythoughts) August 5, 2020

Yet these series of warnings went unheeded for years amid a notoriously corrupt and inept Lebanese system.

Meanwhile, the fate of the man originally at the center of the saga, whose decision to simply abandon the leaky ammonium nitrate laden ship in the first place, remains somewhat of a mystery and is now largely being overlooked in international media reports. Strangely, it doesn’t even appear that Lebanese law enforcement is eager to talk to him just yet.

Cypriot media is saying Igor Grechushkin is not a Cypriot passport holder but is indeed residing in the EU country. Local authorities have indicated they are ready to bring him in for questioning, but they haven’t received a request from either Lebanese authorities or Interpol. Cypriot police spokesman Christos Andreou announced Thursday: “We have already contacted Interpol Beirut and expressed our readiness to provide them with any assistance they need, if and when our assistance is requested.”

Why hasn’t this happened? So far a few scant details have emerged via a Russia-based English language publication called The Siberian Times. It’s also included what it says is the first photograph to have emerged of Grechushkin.

First pictures emerge of a Russian man whose ammonium nitrate cargo detonated in the port of Beirut. The 2,750 tonnes cargo of Khabarovsk-born businessman Igor Grechushkin was detained in Lebanon in 2013 https://t.co/hbu1VJgres pic.twitter.com/yQZqzcBIya

— The Siberian Times (@siberian_times) August 5, 2020

The publication reports the following details:

‘The owner of the ship Igor Grechushkin effectively abandoned the ship and the remaining crew.’

‘He is not providing us with money, he completely deprived us of all means of communication.

‘He told us that he went bankrupt and while I don’t believe him, the most important thing is that he gave up on both the people and the cargo’, wrote captain Boris Prokoshev back in June 2014 in a desperate plea to international organisations, diplomats, authorities of Ukraine and the authorities of the port of Beirut to release them. 

Igor Grechushkin is reported to be still residing in Cyprus with his wife.

The Daily Mail has since republished the photographs of Grechushkin and his wife, writing that the Russian businessman “currently lives in Cyprus with wife Irina – has been accused of abandoning his ship in Beirut loaded with the lethal load.”

Given that Lebanese officials are now decrying a “crime against humanity” in having stored the deadly cargo at the port in the first place, one would think Grechushkin would at least be subject of investigation along with whatever top Lebanese officials willfully ignored the ticking time bomb in their midst.

Putting a face to some of the very real economic impact from the coronavirus are European funds that suffered a combined 706.4 billion euros in trading losses ($835 billion USD) over the first half of 2020, according to Refinitiv Lipper data released Wednesday and reported on by Reuters.

Like many other industries, the pandemic had its way with European funds – specifically in March, when global markets plunged, prompting massive interventions from Central Banks. 

Assets managed by the European fund industry saw both losses and first quarter outflows, falling to 11.2 trillion euros on June 30 from 12.3 trillion euros on December 31. 

Detlef Glow, Lipper Head of EMEA Research at Refinitiv, said: “The coronavirus pandemic hit the European fund industry with declining markets and estimated net outflows of 125.9 billion euros in the first quarter of 2020.”

He continued: “This trend reversed over the course of the second quarter as central banks and governments around the globe started quantitative easing programs and economic relief packages to cushion the economic drawdowns caused by the spread of the coronavirus and the lockdowns of economies around the globe.”

The industry recovered with inflows of 123 billion euros for the first half of the year after respective Central Banks stepped in to steady the market. The European fund market still saw a net addition of funds over the same period of time, as well. 942 funds were launched, 390 merged and 531 liquidated during the period. 

Mutual funds added 105.6 billion euros in assets with bond funds emerging as the best-selling asset type. ETFs added 17.4 billion euros. Money market funds were the best selling, bringing in 152.5 billion euros.

Equity funds saw the highest amount of liquidations. So much for buying and holding…

Authored by Egon von Greyerz via GoldSwitzerland.com,

“Gold has no role in portfolio of wealthy clients” said the chief investment officer of Goldman Sachs’ private wealth management in the week that gold in US dollars went up by over $100 and made a new high of $1,984.

Many found this statement puzzling as another Goldman department previously has told clients not to sell anything gold.

The CIO went on to say: “Our view is that gold is only appropriate if you have a very strong view that the US dollar is going to be rebased. We don’t have that view.”

THE IMPLODING DOLLAR

So here we have a dollar that has lost 85% against gold in this century and 40% since 2018. How can the CIO of the mighty GS say that the dollar is not being rebased. History certainly tells us that she is not telling the truth. Or does she believe that the dollar won’t go down in coming years. As CIO she can clearly see what everyone is seeing namely that the prospects for the dollar are doomed with what is happening in the US economy causing surging deficits and unlimited money printing.

The truth clearly lies elsewhere. No asset manager is interested in protecting their clients’ assets by investing in the ultimate form of wealth preservation which of course is physical gold. The reason is very simple. Goldman’s private wealth management like all other asset managers are not interested in holding physical gold for their clients for the simple reason that the bank can’t earn sufficient revenue on just holding client gold. Instead they want to put expensive proprietary products and their own managed funds into client portfolios and also buy and sell shares regularly to churn commissions.

No bank, managing client portfolios, tells their clients that in the last 20 years gold has outperformed all major asset classes including stocks. The Dow for example has lost 70% against gold since 1999 (excluding dividends).

Instead asset managers stick to their conventional portfolios of stocks, bonds and some alternative assets. The Dow – Gold ratio is now 13 on its way to at least 1 to 1 as in 1980 and probably 0.5 to 1 as I discussed in last week’s article.

100 TRILLION GOLD IN WEIMAR REPUBLIC

What 0.5 to 1 Dow-Gold ratio means in price is impossible to say today. It could be $20,000 gold and 10,000 Dow. It could also be $50,000 gold and 25,000 Dow. And if hyperinflation takes hold, which I think is very likely, we could see $100 billion gold. At that point I would expect the ratio to collapse in line with most stocks and be substantially below 0.5 to 1. Gold at $100 billion might sound sensational but remember that the world has seen a lot higher gold in fiat money.

In the Weimar Republic in 1923 gold reached Marks 100 trillion.

But measuring the gold price in worthless paper money obviously serves no purpose. 100 trillion marks might sound like a lot of money. Well, it is if you have to pay it in actual paper money. But the problem is that paper money at that point has lost its useful function. Today paper money is gradually being abolished. In Sweden for example, no one carries or pays with paper money. Even for small amounts like a loaf of bread, a credit card is used.

AS PAPER MONEY DIES

Abolishing paper money has been a planned process by governments and central banks. Firstly it makes bank runs impossible. The banks will simply just turn off the ATMs. They can obviously also stop electronic transfers. The most important aspect of electronic money is the Big Brother is Watching Syndrome. Now the state has total electronic control of the citizens money not just from a tax point of view but the state can decide to block individual accounts or to charge fines or taxes without the permission of the account holder.

As regards hyperinflation, it is only a matter of time before inflation picks up as the frantic printing accelerates further in line with the collapsing economy. The current explosion of the Fed balance sheet combined with surging government debt will increase money supply exponentially. This will also lead to the dollar decline accelerating.

DOLLAR FALL AND MONEY SUPPLY

The dollar index peaked at 103 in March this year and has since then fallen 10% to 93 today. As the dollar continues to decline, US inflation will pick up. So far the official US inflation rate is just above zero. Anyone buying food or paying insurance for example knows that this is not a true figure. But the real reason why inflation is low in spite of the major increase in money supply is the low velocity of money.

All the money printed is not reaching the consumer but instead staying with banks and other major institutions to shore up their balance sheets. Very little reaches the real economy.

The graph below shows the rise in the US Money Zero Maturity stock – MZM. This is the broadest measure of liquid money. It was $4.3 trillion in 2000 and is now $21 trillion. Only since March 2020 it has increased by a massive $4 trillion.

If we then look at the velocity of MZM we see how it reached 3.5 in 1981 when inflation was high and interest rates reached 20%. Today the velocity has collapsed to an all time low of 0.9. So what we are seeing is that the money printed is not spent but used to prevent the financial system from collapsing.

AS THE DOLLAR FALLS VELOCITY OF MONEY WILL PICK UP

As the dollar falls and velocity of money increases, we will see inflation increasing rapidly. Higher inflation will lead to higher interest rates. I experienced this in the UK in the 1970s when inflation was in the mid to high teens for many years. My first mortgage was at 21% in 1974.

Central banks are today managing to artificially suppress interest rates and in the short term defy the laws of supply and demand. High demand for credit should in a free market lead to high interest rates and thus taper demand for credit. But in a world controlled and manipulated by central banks, the laws of nature are temporarily set aside. This leads to false markets and false prices.

The likely course of events in the next few years are as follows:

THE NIGHTMARE SCENARIO

• Accelerating deficits and debts

• Falling dollar and other currencies

• Unlimited money printing to save banks, and failing financial system

• More printing to save failing companies

• Ever higher subsidies for furloughed and unemployed

• Universal Basic Income (UBI) introduced in most Western nations

• UBI means that everyone is paid a basic wage whether they work or not

• This will lead to ever fewer people working

• Higher unemployment means more printing

• More printing leads to more currency debasement

• This leads to higher velocity of money higher inflation

• Central banks lose control of rates as long end of bond market sells off

• High long rates push short rates up

• Rates reach 5% then quickly 10% and on to 15-20% at least

• At 10% rates interest cost on global debt of $275 trillion would be $27t

• $27t is 34% of global GDP – totally unsustainable

• So much more money printing required

• Bad debts surge leading to defaults, sovereign, corporate and private

• Unemployment escalates leading to more UBI and more money printing

• Banks start falling including the $1.5 to $2 quadrillion derivatives market

• Money printing reaches $ quadrillions leading to hyperinflation

• The financial system collapses together with major parts of industry and society

• Social unrest, civil wars, cyber wars and major conflict will be rampant

• Political systems fail as governments lose control leading to anarchy

THE WORLD WAKES UP TO THE FACT THAT IT IS BANKRUPT

Obviously governments and central banks will desperately try to introduce resets, new digital currencies, do a bit of hocus pocus with debt to pretend it has disappeared. The US might even revalue its alleged stock of 8,000 tonnes of gold. But their bluff will be called. The effects of any measure governments take will only be temporary as the world realises that it really is bankrupt.

I sincerely hope that all the above is really a nightmare in the form of a dream and will never take place. Because if it does, the world is back to the Dark Ages or the Dark Years are here as I wrote about in 2009 and revisited in 2018.

THE WORLD GOES BACKWARD 100 YEARS

If the world retraces a century of evolution or more, it is clearly in for at least 50 years of very hard times. But except for the initial shock and readjustment, life will go on for most people but at a different level. Obviously living standards will decline substantially. So will security.

MANY OF LIFE’S TREASURES ARE FREE

The positive aspect is that moral and ethical values will return with family and friends becoming the kernel of society again. And many of the best and free things in life will still be there such as nature, books, music, good conversation, close friendships etc. With the lack of many of the superficial material values, we will appreciate the real value of the new simple life even though it will seem a lot harder initially.

What I have outlined above is not a forecast but a potential scenario which I sincerely hope won’t come to pass but the risk is certainly there.

GOLD WILL ASSUME ITS CRISIS ROLE

Gold and silver are now in the acceleration phase of a secular bull market. As always, there will be corrections on the way to much higher levels.

In a period of such severe crisis which I outline above, gold will obviously assume the role it always has, namely as money and the only money which will maintain its purchasing power and act as insurance and wealth preservation. But remember, it must be physical and stored outside the banking system in a very safe place and jurisdiction.

At that point it will be meaningless to measure gold in worthless dollars or euros. Instead, think of gold in ounces or grammes and purchasing power terms.

A second coronavirus wave is quickly emerging in Europe. Spanish officials are set to reimpose lockdowns in part of the country as virus cases surge. 

A town of 32,000 people in northwestern Spain will begin lockdown Friday amid a local surge in coronavirus cases.

The senior health official in the Basque country reported 338 news cases in the region on Thursday. Authorities in the northwestern Castile and León region are quarantining Aranda de Duero after 103 new COVID-19 cases emerged there. Contact tracers have reported five active clusters.

New cases have risen steadily in Spain since a more than three-month lockdown ended on June 21, reaching 1,772 new infections reported on Wednesday. A total of more than 28,000 people in Spain have died since the pandemic began, the eighth highest total in the world. –AP News

The one-week moving average of new COVID-19 cases in Europe shows Spain is becoming the epicenter once again. 

Investors are derisking Spanish stocks as cases surge. We noted this, earlier in the week, in a piece titled: “Spanish Stocks Break Support As Virus Concerns Reemerge.” 

And there goes the V-shaped economic recovery in Spain, and probably the rest of Europe.