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We described previously how organizers of the 50th World Economic Forum in Davos have beefed up security, including extra vehicle checks and ‘webcam shutdowns,’ while the Swiss national authorities have restricted the airspace above the event — and further up to 5,000 troops and even fighter jets and radar have been utilized as part of a $9 million budget just for the extra security. This as Zurich regional police have designated 130 attendees of the attendees “protected under international law” which are among 3,000 other VIPs — most of which are richest people on the planet. Despite hundreds of climate protesters descending on the picturesque town in the Swiss Alps, was the “real threat” Russian agents all along? 

Timed for the World Economic Forum’s opening day, Swiss police have revealed an alleged Russian spy and infiltration plot, per a breaking report: 

Five months before world leaders began their pilgrimage to the annual World Economic Forum this week — among them US president Donald Trump — Swiss police interrupted what reports on Tuesday claimed were the beginnings of a Russian spying operation in the secluded Alpine town. 

Alerted to their unusually long stay in the high-end resort, police picked up two Russian men in Davos in August, the Graubünden cantonal police department confirmed to the Financial Times. 

Adding to the strangeness of the story, the two Russians who apparently overstayed their welcome in the town were posing as plumbers. Authorities believe that’s how they planned to access facilities and rooms where world leaders and global elites would discuss sensitive policies and planning. President Trump is in attendance, and on the opening day gave a public speech to attendees emphasizing his “America First” approach to global crises. 

Zürich’s Tages-Anzeiger newspaper first broke the story, after Swiss police concluded the men were part of a Kremlin covert effort to wiretap conversations at the high security and notoriously secretive elite event. Russia slammed the accusations as “one more attempt to undermine Swiss-Russian relations,” according to a statement issued by the Russian Embassy in Switzerland.

Though the initial newspaper report underscored that no specific criminal acts were uncovered, their lengthy stay and Russian passports evoked suspicion by police.

Crucially, when questioned the pair claimed diplomatic protections, despite not being registered in the country as official diplomats — a normative requirement and procedure, according to local police statements. 

Russian embassy officials acknowledged that two Russian nationals were briefly held and questioned by police, but that no criminal wrongdoing was found. 

Recently, two alleged Russian spies were expelled from The Hague in The Netherlands after they were suspected of hacking into a Swiss laboratory. The Hague and other European cities like Brussels which host major international and Western institutions and alliances like NATO and the World Court, have lately been described in international reports as becoming a hub for international spies gathering information for their governments. 

In Davos this week, apart from the millions in overall event security being spent by the Swiss, the elite attendees are expected to spend tens of millions on their own personal security.

For example encrypting the US president’s personal communications alone is expected to run $266,000 for a mere two days, according to figures cited in FT.

Boeing shares are down around 4% after reports from CNBC  indicate that the 737 MAX sign off won’t happen until July.

CNBC cites people familiar with the matter said on Tuesday and notes that this new date is months later than the manufacturer previously expected.

This does not bode well for the company’s imminent bond issuance ( as it tries to shore up its financing to see it through the delayed approval process and rising costs stemming from the crisis).

Shares broke below the key $320 level…

Tumbling to their lowest point since Jan. 3, 2019. 

Boeing shares could be headed down to a long term trend line if the 300 level is breached. 

As a reminder, BofA recently opined:

“we are increasingly fielding concerns from investors regarding the likelihood that the Boeing 737 MAX never returns to service.”

That question may be more critical than ever

Authored by Charles Hugh Smith via OfTwoMinds blog,

One does not need money to convey one’s thoughts, but what money does allow is the drowning out of speech of those without money by those with a lot of money.

In last week’s explanation of why the Federal Reserve is evil, I invoked the principle of calling things by their real names, a concept that drew an insightful commentary from longtime correspondent Chad D.:

Thank you, Charles, for calling out the Fed for their evil ways. We have to properly name things before we can properly address them. I would add that the Fed’s endless creation of “money” to hand out to connected bankers (not all bankers) is just one facet of the evil. The evil also manifests itself as extraordinary political-economical power in a system that allows legalized bribery disguised as free speech.

One does not need money to speak/write to convey one’s thoughts, but what money does allow is the drowning out of speech of those without money by those with a lot of money. In essence, the ultra-rich (i.e. the top .01%) get a huge megaphone to blare their thoughts, many of which are deliberately used to disorient and confuse the common man through the major media and so-called higher institutions of learning. Hence, we get common folk actively fighting for policies and laws that are against their own personal interests, such as promoting “free trade” agreements that are really managed trade agreements, whereby domestic workers are forced to complete with workers in other countries who make a pittance and are not protected by labor or environmental laws.

These agreements are part of a legal, yet unjust, framework that gives unfair, competitive advantages to large, multinational businesses at the expense of their smaller domestic and international competitors, which includes the abridgment of basic rights to settle disputes in a real court of law, not some kangaroo arbitration process with biased “judges”.

And we must not forget the bailouts, lack of prosecution for economic crimes, such as fraud and monopolistic and deceptive trade practices, and tax loopholes, all of which are bought in one way or another from the compromised “representatives” and “public servants” within the system.

The evil manifests itself as an enabler and promoter of an endless warfare state that is used to maintain an empire based upon the dollar that uses force, bribery, and blackmail to keep various peoples within the empire in line, which includes those within the host country(ies) (i.e. the USA (and the UK)) at the center of the empire. It causes the host country to befriend countries (i.e. frenemies) that hold values that are diametrically opposed to the values of the host country. The empire’s tactics also breeds resentment towards citizens of the host country, many of whom want nothing to do with the empire, by those who live in the empire outside the host country.

While massive resources are used to support the empire of the dollar, the host country rots from a lack of resources due to taxes, debt, and the misappropriation of resources. Numerous people enlist in the military to supposedly protect the country, but end up really protecting the empire and yet others enlist out of economic desperation, which ironically and perversely, is largely caused by the existence of the very thing they end up serving and protecting.

Lastly, and perhaps most importantly, the evil manifests itself in the severe abuse of our natural resources that leads to (as you’ve put) a landfill economy and the resultant, potential collapse of the biosphere that currently supports human life.

All these things represent the three heads of Cerberus and the body of Cerberus is usury, one of the most destructive forces known to humanity. Its exponential growth function will always lead to the depletion of natural resources because all the resources that would be of use to humans do not grow in that same manner and many of them are finite in the sense of people being able to obtain them in an economical way (e.g. metal ores and energy). Other natural resources like fisheries and forests can only be harvested at certain levels at certain times or they will collapse to a nonviable state.

Usury also always leads to massive wealth disparities that destabilize societies. Over time, the interest on the outstanding debt, especially if the money is debt-based, will find its way to those with assets, who end up buying more assets that get them more interest that enables them to buy yet more assets, etc.

If the Federal Reserve System was simply a decentralized clearing house for financial transactions and it was not allowed to buy government debt and we had a currency that was not based upon usury, would it be evil? It’s fair to say that the Fed has become more and more evil, because it had fundamental flaws (features?) from its inception or it has been changed by evil actors over the years. Either way, we must end its current incarnation, before it leads our country down the road to perdition.

P.S. We were warned of some of this evil by our forefathers; see the Democratic Platform from 1900. Please note how they referred to our country as a republic.

Thank you, Chad, for succinctly summarizing all that we must call by their real names: predatory, parasitic, false, evil.

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My recent books:

Audiobook edition now available:
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).\

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Update (1335ET): The CDC has confirmed that a traveler from China has been diagnosed in Seattle with the Wuhan Coronavirus.

The patient, who was hospitalized with pneumonia last week, recently had traveled to Wuhan, China, where the outbreak appears to have originated, federal officials have found.

Officials declined to identify the patient, who was said to be quite ill.

The outbreak began at a market in China and now has spread to at least four other countries, and  has killed at least six people and sickened hundreds more in Asia.

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CNN’s AnneClaire Stapleton (@AnneClaireCNN) tweeted an ominous warning:

“The US Centers for Disease Control and Prevention is expected to announce this afternoon that the first case of Wuhan coronavirus has been reported in the United States, in Washington state, a federal source outside the CDC tells CNN.”

And the market reacted rapidly…

Transports are the worst hit on the day, already suffering from coronavirus fears overnight…

Can The Fed just print up some anti-virus?

As we detailed earlier, the global risk-off wave had started in the overnight hours of Monday as the full extent of the Chinese coronavirus scare became apparent to traders, has rolled into the cash session Tuesday with airline, casino and gaming, hotel, and travel stocks, taking a leg lower.

Delta Air -3.50%, United Airlines Holdings -3.20%, Southwest Airlines -1.5%, and American Airlines Group -2.50%, were all sold as the outbreak may crimp global air travel during the upcoming Lunar New Year holiday period.

Investors dumped Wynn Resorts -4.45%, Las Vegas Sands Corp -4%, and MGM Resorts International -3%, as the virus threatens to decrease foot traffic. 

Hotels were also sold, Wyndham Hotels and Resorts -1%, Choice Hotels International -1%, and Extended Stay America -1%.

Travel stocks were dumped, Expedia Group -1%, Booking Holdings -2.20%, TripAdvisor Inc -1%, and Trip.com -10%.

Investors are unloading sensitive travel stocks because confirmed cases of coronavirus have tripled since Monday and spread to other countries around China with the risk of spreading across the world. 

Fears of a 2002-03 outbreak of SARs has been on everyone’s mind to start the week – and with a Lunar New Year holiday fast approaching – the spread of the virus could broaden in the days ahead.

Travel sensitive stocks have taken a beating in Asia, Europe, and the US – basically across the world on Tuesday, as investors brace for new cases of the virus that is quickly spreading.

Could this mean world stocks are due for a pullback? 

There is one silver lining however, prices for flu-shot manufacturers are soaring: Nanovaricides +75%, Novavax +44%, Inovio Pharma +11%, and Vaxart +11%.

2019 was a very strange year for the market, one in which stocks were up almost 30% despite no earnings growth and only multiple expansion, and yet not a single popular strategy worked. As a result, it was also an extremely painful year for hedge funds who were up for the year, but once again failed to catch up to the risk-free benchmark, the S&P500, and in fact, this was the 10th consecutive year in which active management underperformed the cheapest possible market investment, the S&P500 itself (and explains why there was a record-matching 8 consecutive months of hedge fund outflows in 2019). Most notably, it was a year in which despite the near record market performance, “bullish” strategies actually closed in the red.

Furthermore, as we reported in December, the max pain for hedge funds was Q4 when not only a variety of popular factors short-circuited following the quant crash of Sept 2019, but is also when the market got dislocated from any fundamental anchor on the back of the Fed’s repo liquidity injection and QE4.

Today, none other than David Einhorn’s Greenlight Capital confirmed just how painful both 2019 in general, and Q4 in particular, were for hedge funds – courtesy of the Fed’s latest market interventions masking as repair for the repo market – when it published its latest investor letter in which it revealed that “for the year, our long portfolio contributed 37.4%, our short portfolio lost 20.1% and macro added 1.5% to the returns before fees”.

What happened?

As Einhorn explains in the very next line, “all told, our longs went up slightly more than the market while our shorts went up slightly less than the market”, and then qualifies by adding that “in the fourth quarter, our longs went up less than the market and our shorts went up more than the market”, i.e., the infamous quarter in which the Fed launched QE4, crushing virtually everyone who was positioned to trade on fundamentals, and which is also why hedge funds remain an anachronism in a time when central banks actively managed risk, volatility and the overall equity markets, as even a single downside hedge assures a huge hit to P&L once the Fed steps into the market and sends every short ripping higher, as happened in Q4. 

Even though last year’s performance wasn’t a disaster for Greenlight, unlike 2018 and 2019, the letter notes that “the result feels a bit disappointing because at September 30 we seemed on track to have an excellent year, rather than just a decent year.”

What changed after? Why the Fed retarted QE and the rest is history.

Below are some of the key excerpts from the core of the letter (we will have more on Greenlight’s latest portfolio comments in a subsequent post):

The Greenlight Capital funds (the “Partnerships”) returned 13.8% in 2019 compared to 31.5% for the S&P 500 index. Since its inception in May 1996, Greenlight Capital, L.P. has returned 1,592% cumulatively or 12.7% annualized, both net of fees and expenses. Greenlight’s investors have earned $4.5 billion, net of fees and expenses, since inception.

For the year, our long portfolio contributed 37.4%, our short portfolio lost 20.1% and macro added 1.5% to the returns before fees. All told, our longs went up slightly more than the market while our shorts went up slightly less than the market. Even so, the result feels a bit disappointing because at September 30 we seemed on track to have an excellent year, rather than just a decent year.

There was a brief period in September when the environment was favorable for us. WeWork failed in its IPO attempt and subsequently some high-profile money-losing companies saw their share prices cut. Growth stocks in general underperformed. There were musings that value investing was ready to rebound. But that dynamic reversed in the fourth quarter and by year-end, growth stocks had outperformed value stocks for the year by 15% (40% vs 25%).

In the fourth quarter, our longs went up less than the market and our shorts went up more than the market; we underperformed on both sides by similar amounts. Tighter corporate credit spreads drove a small loss in macro during the quarter.

We tend to take comfort in low multiples and we are generally skeptical of high multiples – a framework that is a hallmark of a disciplined value orientation. Until recent years, value investing has tended to outperform growth investing. But over the last three years, growth has knocked the stuffing out of value (106% vs. 17%) – enough so that the long-term outperformance of value stocks has now reversed.

Against this backdrop, many of our longs – including some that contributed positively to 2019’s result – are just as cheap today as they were at the beginning of 2019. Likewise, many of our shorts are more expensive today than they were a year ago. The gap between how we perceive the operating business fundamentals of our investments and their market valuations has never been wider.

Thus, we begin 2020 with a portfolio that continues to be concentrated in our best ideas. We currently have 96% of capital in our top 10 longs and 47% of capital in our top 10 shorts.

So how is Einhorn positioned now with the Fed back in the market? More on that shortly in a subsequent post.

Following yesterday’s unveiling of a compressed impeachment timeline that will give Democrats just two days to make their impeachment case, the media circus that will be President Trump’s impeachment trial is about to begin.

According to Senate rules, the trial session will begin at 1 pm in Washington, when Senate Sergeant-at-Arms Michael Stenger is expected to reprise his role from last week and bring the Senate to order.

According to a report on what to expect from the first day of proceedings from Fox News, the first order of business will be swearing in Senator Jim Inhofe, who wasn’t present for Chief Justice John Roberts’ mass swearing-in of the Senate “jurors”.

Roberts will be present to preside over the proceedings. He will be accompanied on the dias by two women, Senate Parliamentarian Elizabeth MacDonough and Assistant Parliamentarian Leigh Hildebrand, who will likely be seen whispering in Roberts’ ear and passing him messages as they help him oversee the trial.

After the opening formalities are finished, Senate Majority Leader Mitch McConnell will bring forward his resolution setting the rules for the trial.

McConnell’s proposal is formally known as a “motion” in Senate parlance. According to the chamber’s rules, Pelosi’s seven appointed impeachment managers and Trump’s defense team will each have two hours to debate McConnell’s rules, which, as we noted above, include the compressed timeline and a ‘kill switch’ to end proceedings if Dems get out of line, as well as any amendments proposed by Democrats.

“Leader McConnell’s process is deliberately designed to hide the truth from the Senate and from the American people, because he knows that the President’s wrongdoing is indefensible and demands removal,” Pelosi wrote.

Of course, if the Dems succeed in calling witnesses to testify at the trial, Republicans can always threaten to subpoena Hunter Biden, whose employment at a shady Ukrainian gas company is at the center of the scandal that led to these proceedings.

Source: The Federalist Papers

Unless all 100 senators vote unanimously to end debate, each side will need to eat up all of the allotted time debating the rules.

Barring any unexpected developments, this should bring us to about 3:30

At this point, Minority leader Chuck Schumer will have a chance to propose some amendments.

McConnell’s approach creates a trial that is “rushed” and “rigged,” Schumer said in an interview.

“We can have votes before this awful resolution — this resolution that I have called a national disgrace — is enacted.”

If he does, the Dems will then get two hours to discuss and debate, as Fox explains.

The Senate has something known as “the amendment tree.” One could think of the McConnell proposal as the “trunk” of the tree. Schumer’s proposal is a “branch” of the tree. Schumer’s proposal, or proposals – so, sprigs growing off of the Schumer branch of the tree – all would represent possible amendments on which the Senate likely will have to debate and conduct a roll call vote on Tuesday evening.

What will Schumer propose? Different time allocations for the trial? Different times when they start or stop the arguments? Proposals on witnesses and documents?

By rule, Schumer’s proposal gets two hours of debate as well, with no senators participating in the debate – just the impeachment managers and the president’s counsel.

By the time all of the debates are finished, it should be roughly 5:30 or 6 pm. At this time, many suspect that the Senate will throw the public a curveball and motion to move into a closed session, kicking out all of the press and observers in the chamber. Whatever happens, Trump won’t be present: He’s in Switzerland for the World Economic Forum at Davos.

At some point later in the evening, the Senate will need to leave the closed session and take a vote on the rules. Though McConnell says he has the votes to pass his plan, it’s still possible that one or two Schumer amendments might be attached to the rules.

In summary: It’s going to be a long night in the Senate.

Anybody interested in following along with the proceedings can watch the live feed below:

Prosecutors in Brazil charged American journalist Glenn Greenwald with cybercrimes on Tuesday for his role in spreading embarrassing text messages that exposed corruption within the Brazilian judicial system, according to the New York Times.

In a 91-page criminal complaint made public on Tuesday, Greenwald is accused of participating in a “criminal organization” that spread text messages which called into question the “integrity, professionalism and motives of key members of Brazil’s justice system — particularly of figures directly involved in the investigation of a vast corruption scheme that resulted in the imprisonment of powerful business and political figures.”

Greenwald – who moved to Brazil in 2005 with his husband David Miranda – now a congressman, went beyond simply receiving the texts and publishing newsworthy information according to prosecutors.

Citing intercepted messages between Mr. Greenwald and the hackers, prosecutors say the journalist played a “clear role in facilitating the commission of a crime.”

For instance, prosecutors contend that Mr. Greenwald encouraged the hackers to delete archives that had already been shared with The Intercept Brasil, in order to cover their tracks.

Prosecutors also say that Mr. Greenwald was communicating with the hackers while they were actively monitoring private chats on Telegram, a messaging app. –New York Times

Greenwald – an attorney, rose to international prominence in 2013 for his role in the release of classified documents revealing America’s extensive NSA surveillance apparatus, after National Security Agency whistleblower Edward Snowden leaked documents to Greenwald, who worked for The Guardian at the time.

In 2016, Greenwald launched The Intercept Brasil, which began publishing articles based on the leaked text exchanges last June.

The articles raised questions about the integrity, professionalism and motives of key members of Brazil’s justice system — particularly of figures directly involved in the investigation of a vast corruption scheme that resulted in the imprisonment of powerful business and political figures.

Among the revelations in the articles, for instance, were chats in which Sérgio Moro, a former federal judge who handled the prosecution of former President Luiz Inácio Lula da Silva in 2017, provided strategic guidance to prosecutors, in violation of legal and ethical norms. Mr. Moro is now Brazil’s justice minister. –New York Times

Greenwald could not immediately be reached for comment.

Solidarity with @ggreenwald against the fascist Brazil regime. Lot of liberal hacks have been drooling to see Greenwald to get stomped, maybe now some of them will come to their senses.https://t.co/vGFTlsI6AF

— Mark Ames (@MarkAmesExiled) January 21, 2020