Money manager Peter Schiff says the Federal Reserve has already started a new money printing program that continues to expand the debt bubble and keep global markets propped up. This started abruptly last month in what is called the “repo market,” where the Fed provides liquidity for traders of short-term money or overnight funding.
Schiff says, “When the Fed was doing QE3, they were buying $85 billion worth of debt per month. They (Fed) just did $176 billion in three weeks, and they say they are not doing QE…”
“So, the Fed is monetizing more debt not doing QE than when they were doing QE, which means they are doing it and they are going to have to do more of it. The reason they are doing it is because the markets are finally trying to move interest rates higher because the Fed has been suppressing them. They are artificially low, and these artificially low interest rates have done tremendous damage to the economy over the years. Now, rates are rising, and the Fed is trying to stop this from happening. They shouldn’t do this, but this is what they have to do to keep the bubble from imploding. This is why they have to go back to QE. If they didn’t, rates would be much higher, the stock market would be much lower, real estate prices would be coming down and we would be heading for another financial crisis.”
What is the end goal in all of this? Schiff contends, “The only goal our leaders have is to postpone the pain so they can get re-elected…”
“That’s the whole idea. Look, this is a gigantic time bomb; we just have to make sure that the fuse is longer. We have an election coming up, and the Fed Chair just wants to make sure they can keep everything going long enough to resign and have somebody else be the fall guy. Nobody cares about the long term health of the economy, and the plan is to delay the inevitable and pretend everything is good. . . . As far as the debt is concerned, the debt is never going to be repaid. We can’t repay it, and, in fact, nobody even believes we are going to repay it.”
So, what is the next move by central bankers? Schiff says, “It’s more politically expedient to take the printing route, especially because nobody believes they are going to destroy the currency…”
“They think they are going to print enough money to reduce the value of the debt enough to make everything go away. It’s like trying to get a little bit pregnant, which is impossible to do. So, once they start monetizing debt in that way, then that’s it. The dollar is going to get killed. That’s where we are headed. That’s the only thing that hasn’t happened yet. Gold has broken out. Gold is over $1,500 per ounce, and it is hitting record highs in most currencies. Not in the dollar, yet. The dollar is still relatively strong against other fiat currencies, but the fact it is this weak against gold shows you there is a lot of underlying weakness in the dollar that has yet to manifest . . . but that is going to happen. When the dollar starts to fall, that’s going to take the bond market down with it. Long term interest rates are ultimately going to rise when the dollar tanks.”
Source: Bloomberg
Schiff also says, “I think gold is undervalued relative to where it should be because so many people have too much confidence in central banks and fiat money…”
“They don’t realize they need to own gold. I think they are going to come to that epiphany soon, and when they do, the price of gold is going to explode...
Gold is going to be money again. There is no question in my mind that is going to happen.”
Schiff predicts President Trump will not get re-elected but not because of impeachment, but the failing economy. Schiff says, “The trade deficits are bigger than they have ever been. They are bigger than they were under Obama…”
“Manufacturing is already in recession, and it will be deeper in recession by the time the election comes. The numbers are the worst they have been since 2009.
Most blue collar voters who voted for Trump in 2016 will be worse off in 2020. They will have more debt, and they will have lower real wages if they even have jobs.
Now, who are they going to take a chance on, some socialist Democrat who is promising to punish the rich and take their money and give it to them?”
Debt Market Suffering “Quiet Meltdown” As Billions In Loans Are Suddenly Crashing
The exponential growth in the leveraged loan market, in the last several years, created an enormous excess accumulation of sub-investment grade loans that are a ticking time bomb when the next recession strikes.
Late last year, leveraged loan markets froze, for at least a month, as Treasury yields dropped, due to the increasing threat of a global recession. An abundance of fake trade news and central bank easing throughout 2019 saved Wall Street and reopened the leveraged loan market earlier in the year, but it seems that cracks are starting to develop again with recession threats building for 2020.
Bloomberg reports that 50 companies that have at least $40 billion of loans have lost about ten percentage points of face value in the last three months.
An exodus of investors has been seen in the leveraged loan market late-summer into early fall as liquidity dries up. It’s mostly due to Treasury yields sinking, and end of cycle fears increasing, as a recession could emerge next year.
Some of the hardest-hit companies in the loan space in the last three months have been Amneal Pharmaceuticals, whose $2.7 billion loan due 2025 plunged about 80 cents on the dollar, and Seadrill Operating whose $2.6 billion loan maturing in 2021 only commands 53 cents on the dollar, said Bloomberg.
In terms of losses, Bloomberg data shows Deluxe Entertainment Services Group has seen more than $600 million wiped out in its first lien loan that dropped 77 cents in the last three months to 12.5 cents.
Although $40 billion is a blip versus the $1.2 trillion leveraged loan market, it indeed points to a quiet meltdown developing.
“People want the well-performing loans, and are more wary of taking chances on the situations that have turned negative,” said Andrew Sveen, co-director of loans at Eaton Vance Management.
One of the hardest-hit sectors in the loan market is energy, with $12 billion of loans falling more than ten cents on the dollar. Consumer and health care sectors are next, with collectively $13 billion in loans outstanding that are starting to become distressed.
The deterioration of underwriting standards in the loan market has allowed companies who are susceptible to credit downgrades when the economy slows to obtain loans.
But that ‘ease of underwriting’ is a two-edged sword as the current weakness, prompting downgrades, will force managers to sell loans into already illiquid markets, since their portfolios (or CLOs in many cases) can’t hold these investments because of certain rating thresholds.
The leveraged loan market is therefore comparable to the subprime mortgage market a decade ago. It’s a significant imbalance that will be corrected in the next recession and will amplify the next downturn.
With cracks developing in the loan space, the current meltdown is going unrecognized by most of Wall Street (which didn’t end well in 2008 or 2015 for stocks).
The accumulation of excessive leverage and high exposure to loans of non-financial companies adds to the uncertainties that corporate America, as highly leveraged as it is, could see an epic implosion as the next recession could arrive as early as 2020.
Lawyer Lawrence Ma claims the US has been supporting the protests via groups such as the NED…
More than a million Hong Kongers joined marches in June to oppose a China extradition law. But some say the US is quickly backing the protests. Photo: Don Ng/ EyePress
Lawrence YK Ma is the executive council chairman of the Hong Kong Legal Exchange Foundation and director of the China Law Society, the Chinese Judicial Studies Association and the Hong Kong Legal Exchange Foundation. He also finds time to teach law at Nankai University in Tianjin.
Ma is the go-to expert in what is arguably the most sensitive subject in Hong Kong: He meticulously tracks perceived foreign interference in the Special Administrative Region (SAR).
In the West, in similar circumstances, he would be a media star. With a smirk, he told me that local journalists, whether working in English or Chinese, rarely visit him – not to mention foreigners.
Ma received me at his office in Wanchai this past Saturday morning after a “dark day” of rampage, as described by the SAR government. He wasted no time before calling my attention to a petition requesting a “United Nations investigation into the United States’ involvement in Hong Kong riots.”
He let me see a copy of the document, which lists the People’s Republic of China as petitioner, the United States of America as respondent nation and the Hong Kong Legal Exchange Foundation as ex parte petitioner. This was submitted on Aug. 16 to the UN Security Council in Geneva, directed to UN Secretary-General Antonio Guterres.
In the document, Issue II deals with “funded, sponsored and provided supplies to any organizations, groups, companies, political parties or individuals” and “trained and frontline protesters, students and dissidents.”
Predictably, the US National Endowment for Democracy is listed in the documentation: its largest 2018 grants were directed to China, slightly ahead of Russia.
The NED was founded in 1983 after serial covert CIA ops across the Global South had been exposed.
In 1986, NED President Carl Gershman told the New York Times: “It would be terrible for democratic groups around the world to be seen as subsidized by the CIA. We saw that in the ‘60s, and that’s why it has been discontinued.” As the Times article explained about the NED:
In some respects, the program resembles the aid given by the Central Intelligence Agency in the 1950s, ’60s and ’70s to bolster pro-American political groups. But that aid was clandestine and, subsequent Congressional investigations found, often used planted newspaper articles and other forms of intentionally misleading information. The current financing is largely public – despite some recipients’ wish to keep some activities secret – and appears to be given with the objective of shoring up political pluralism, broader than the CIA’s goals of fostering pro-Americanism.
Soft power at work
So it’s no secret, all across the Global South, that under the cover of a benign umbrella promoting democracy and human rights, the NED works as a soft-power mechanism actively interfering in politics and society. Recent examples include Ukraine, Venezuela and Nicaragua. In many cases, that is conducive to regime change.
The NED’s board of directors includes Elliott Abrams, who was instrumental in financing and weaponizing the Contras in Nicaragua, and Victoria Nuland, who supervised the financing and weaponizing of militias in Ukraine that some but not all experts have described as neo-fascist.
The NED offers grants via various branches. One of them is the National Democratic Institute, which has been active in Hong Kong since the 1997 handover.These are some of the grants offered by the NED in Hong Kong in 2018.
At least one Hong Kong-based publication took the trouble of studying the NED’s local connections, even publishing a chart of the anti-extradition protest organizational structure. But none of the evidence is conclusive. The most the publication could say was, “If we analyze the historical involvement of NED in Occupy Central and the sequence of events that took place from March in 2019, it is highly possible that the Americans may be potentially involved in the current civil unrest via NED – albeit not conclusive.”
Issue III of the petition sent to the UN deals with “coordinated, directed and covertly commanded on-ground operations; connived with favorable and compatible local and American media so as to present biased new coverage.”
On “coordination,” the main political operative is identified as Julie Eadeh, based at the US Consulate after a previous Middle East stint. Eadeh became a viral sensation in China when she was caught on camera, on the same day, meeting with Anson Chan and Martin Lee, close allies of Jimmy Lai, founder of pro-protest Apple Daily, and protest leaders Joshua Wong and Nathan Law in the lobby of the Marriott.
The US State Department responded by calling the Chinese government “thuggish” for releasing photographs and personal information about Eadeh.
The NED and Eadeh are also the subjects of further accusations in the petition’s Issue IV (“Investigation of various institutions”).
All in the Basic Law
Ma is the author of an exhaustive, extensively annotated book, Hong Kong Basic Law: Principles and Controversies,published by the Hong Kong Legal Exchange Foundation.
Maria Tam, a member both of the Hong Kong SAR Basic Law Committee and of China’s National People’s Congress, praises the book’s analysis of the ultra-sensitive interpretation of the Basic Law, saying “the common law system has remained unaffected, its judicial independence remaining the best in Asia”, with Hong Kong firmly placed – so far at least – as “the third most preferred avenue for international arbitration.”
In the book, Ma extensively analyzes the finer points of the China containment policy. But he also adds culture to the mix, for instance examining the work of Liang Shuming (1893-1988) on the philosophical compatibility of traditional Chinese Confucianism with the technology of the West. Liang argued that China’s choice, in stark terms, was between wholesale Westernization or complete rejection of the West.
But Ma really hits a nerve when he examines Hong Kong’s unique role – and positioning – as a vector of the China containment policy, facilitated by a prevailing anti-communist sentiment and the absence of a national security law.
This is something that cannot be understood without examining the successive waves of emigration to Hong Kong. The first took place during the Communist-Nationalist civil war (1927-1950) and the Sino-Japanese war (1937-1945); the second, during the Cultural Revolution (1966-1977).
Ma significantly quotes a 1982 poll claiming that 95% of respondents were in favor of maintaining British rule. Everyone who followed the 1997 Hong Kong handover remembers the widespread fear of Chinese tanks rolling into Kowloon at midnight.
In sum, Ma argues that, for Washington, what matters is to “make China’s island of Hong Kong as difficult to govern for Beijing as possible.”
Integrate or perish
Anyone who takes time to carefully study the complexities of the Basic Law can see how Hong Kong is an indivisible part of China. Hundreds of millions of Mainland Chinese now have seen what the black bloc brand of “democracy” – vandalizing public and private property – has done to ruin Hong Kong.
Arguably, in the long run, and after an inevitable cleanup operation, the whole drama may only strengthen Hong Kong’s integration with China. Add to it that China, Macau, Singapore, Malaysia and Japan have separately asked Hong Kong authorities for a detailed list of black bloc rioters.
In my conversations these past few days with informed Hong Kongers – mature businessmen and businesswomen who understand the Basic Law and relations with China – two themes have been recurrent.
One is the weakness of Carrie Lam’s government, with suggestions that the outside non-well-wishers knew her understaffed and overstretched police force would not be up to the task of maintaining security across town. At the same time, many remarked how the response from Washington and London to the Emergency Regulations approval of the anti-mask law was – surprisingly – restrained.
The other theme is decolonization. My interlocutors argued that China did not “control” Hong Kong; if it did, riots would never have happened. Add to it that Lam may have been instructed to do nothing, lest she would mess up an incandescent situation even more.
Now it’s a completely new ball game. Beijing, even discreetly, will insist on a purge of anyone in the civil service who would be identified as anti-China. If Lam just continues to insist on her beloved “dialogue,” she may be replaced by a hands-on CEO such as CY Leung or Regina Ip.
Amid so much gloom, there may be a silver lining. And that concerns the Greater Bay Area project. My interlocutors tend to believe that after the storm ends and after carefully studying the situation for some months, Beijing will soon come up with a new plan to tighten Hong Kong’s integration to the mainland’s economy even more.
The first step was to tell Hong Kong’s tycoons to get their act together and be more socially responsible. The second will be to convince Hong Kong’s businesses to reinvent themselves for good and profit as part of the Greater Bay Area and the New Silk Roads, or Belt and Road Initiative.
Hong Kong will thrive only if plugged, not unplugged. That may be the ultimate – profitable – argument against any form of foreign sabotage.
Gold ETF Holdings Hit All Time High After Longest Stretch Of Inflows Since The Financial Crisis
While some investors still naively hold on to the belief that the consistently manipulated (by both institutions and central banks) VIX index is a measure of overall turmoil sentiment in the market, others are rushing to the safest of assets and as global tensions escalate and signs of a global recession mount, more investors are turning to gold. According to Bloomberg, investor holdings in bullion-backed exchange-traded funds have expanded for 17 days in a row, the longest run of inflows since the global financial crisis.
Having panned gold for years, Wall Street sentiment has turned decidedly positive in recent months:
“Gold inflows are likely to persist,” said Citigroup which expects the price of gold to rally to $1,700 an ounce over the next year. “Markedly weak manufacturing and services ISM data show that the slowdown in global trade is starting to bite the U.S. economy.”
“Gold obviously stands to benefit” if China and the U.S. can’t reach a mini deal this week, said Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America Merrill Lynch.
With opinions turned decisively in gold’s favor, it is no surprise that in September, global gold-backed ETFs and similar products had US$3.9bn of net inflows across all regions, increasing their collective gold holdings by 75.2t to 2,808 tonnes(t), the highest levels of all time. According to the World Gold Council, ETF holdings surpassed late 2012 levels, at which time the gold price was near US$1,700/oz, 18% higher than current levels. Notably, the gold-backed ETF landscape is vastly different than in 2012 when two-thirds of global holdings were concentrated in North America. Today, North American- and European-listed funds make up 52% and 44% of global holdings respectively, with the remainder coming from funds listed in Asia and other regions.
Global gold-backed ETFs added 368t (US$17.9bn, 13.4%) YTD, driven by strong inflows in the past four months
European funds have grown consistently this year, seeing positive flows in all months except April and UK-based fund holdings are at all-time highs, reaching 582 or 21% of global gold-backed ETF assets in September
Strong inflows in North American-listed funds over the past five months have increased the region’s contribution to 2019 growth – as of end September, North America had added 214t compared to 146t in Europe, or 58% of net inflows in 2019
Low-cost gold-backed ETFs‡ in the US have seen positive flows for 15 of the past 16 months and have increased their collective holdings by 51% so far this year
Asian-listed funds have reversed strong early-year outflows of over 12% and now have grown 8% on the year.
Some more details: North American funds led September’s global flows, adding 62.1t ($3.1bn, 4.5% of AUM), or 83% of net inflows. Low-cost gold-backed ETFs continued to grow, accumulating 2.9t during the month and bringing their collective holdings to 61t, worth $2.9bn. European-listed funds brought in 7.7t ($586mn, 1.0%), mainly in the UK, as investors positioned for an impeding 31 October Brexit decision. Funds in Asia had another month of strong inflows at 3.9t ($187mn, 4.6%), driven by Chinese funds.
The gold-price rally paused as global rates increased and the US dollar strengthened, falling by 3% (in US dollars) in September after having increased by 20% during the previous four months. Yet global demand for gold-backed ETFs remained strong, especially since gold remained near all-time highs in every major G10 currency, except the US dollar and Swiss franc.
Positive sentiment towards gold was also reflected in COMEX net longs, which reached all-time highs equivalent to 1,134t during the month. The volatility skew in the options market was at an all-time high, measured against available data from 2007 onwards. The skew, computed as the difference in premia paid between puts and calls at equivalent strikes, implies that market participants were willing to pay a significant premium for exposure to a higher gold price versus protection against a lower price, suggesting bullish sentiment.
Confirming the bullish tone, global trading volumes remained high across markets, finishing the month at US$183bn a day, but fell 10% from August levels. Meanwhile, volumes on the Shanghai Futures Exchange (SFE) remained elevated, at US$20bn a day, well above the 2019 y-t-d average of US$9bn and the full year 2018 average of US$3bn.
At the end of the day, however, it is all about what central banks do: global monetary policy continued to influence gold price performance as many central banks around the world cut rates or expanded quantitative easing measures. The Fed cut rates by 25bps in September – a move that was widely expected – with odds of more cuts surging after some decidedly weak economic data at the start of October.
Finally, for investors on the fence, the WGC lists several potential positive catalysts for gold in October: First, global uncertainty continues. The US House of Representatives initiated a preliminary inquiry as to whether to proceed with a formal impeachment investigation of President Trump; a move that could negatively impact risky assets and drive China to potentially delay trade solutions until the 2020 Presidential election. In addition, the deadline for a Brexit decision falls at the end of October, and there is still uncertainty as to whether there will be a ‘No Deal Brexit’ or a deadline extension. Second, despite the increases during September, interest rates worldwide remain low; we estimate that over 80% of sovereign debt is trading with negative real rates, lowering the opportunity cost of investing in gold. Finally, the US stock market is trading near all-time highs and, historically, October is a month when some of the sharpest historical down-moves in stock performance are seen; the most recent of which was last year when the S&P 500 fell 7% during the month. On the flip side, continued dollar strength and a deceleration in gold consumer demand in India and China could create headwinds.
The biggest force behind the startup bubble in the United States has been SoftBank Group, the Japanese publicly traded conglomerate. It has been the biggest force in driving up valuations of money-losing cash-burn machines to absurd levels. It has been the biggest force in flooding Silicon Valley, San Francisco, and many other startup hot spots with a tsunami of money from around the world — money that it borrowed, and money that other large investors committed to SoftBank’s investment funds to ride on its coattails. But the scheme has run into trouble, and a lot is at stake.
The thing is, SoftBank Group has nearly $100 billion in debt on a consolidated basis as a result of its aggressive acquisition binge in Japan, the US, and elsewhere. This includes permanently broke Sprint Nextel which is now trying to merge with T Mobile. It includes British chip designer ARM that it acquired in 2016 for over $32 billion, its largest acquisition ever. It includes Fortress Investment Group that it acquired in 2017 for $3.3 billion. In August 2017, it acquired a 21% stake in India’s largest e-commerce company Flipkart for $2.5 billion that it sold to Walmart less than a year later for what was said to be a 60% profit. And on and on.
In May 2017, Softbank partnered with Saudi Arabia’s Public Investment Fund to create the Vision Fund, which has obtained $97 billion in funding – well, not actual funding, some actual funding and a lot of promised funding, which made it the largest private venture capital fund ever.
Saudi Public Investment Fund promised to contribute $45 billion over the next few years. SoftBank promised to contribute $28 billion. Abu Dhabi’s Mubadala Investment promised to contribute $15 billion. Apple, Qualcomm, Foxconn, Sharp, and others also promised to contribute smaller amounts.
Over the past two years, the Vision Fund has invested in over 80 companies, including WeWork, Uber, and Slack.
But the Vision Fund needs cash on a constant basis because some of its investors receive interest payments of 7% annually on their investments in the fund. Yeah, that’s unusual, but hey, there is a lot of unusual stuff going on with SoftBank.
Some of this cash to make the interest payments was obtained from selling the stakes in Flipkart and Nvidia, but SoftBank, according to Reuters, had to borrow the rest of the money to fund these interest payments.
So we’ll call this monster the Vision Fund 1 because there is now the Vision Fund 2.
S&P and Moody’s both rate SoftBank Group one step into junk, and have said they’re more likely to downgrade SoftBank, than to upgrade it, because of its debt.
This debt and the credit ratings are important factors because they put a limit on how much the company can borrow to meet its cash needs, such as those for funding the interest payments of the Vision Fund 1, and to fund the initial investment into the Vision Fund 2.
SoftBank Group has promised to put $38 billion into the Vision Fund 2, but where is this money supposed to come from?
Other investors have not been gung-ho about the Vision Fund 2, and no big investor has stepped forward with commitments, only some smaller investors have, according to two sources that talked to Reuters.
The Saudi Public Investment Fund doesn’t have that kind of moolah at the moment, sources told Reuters, not until after it sells some big assets or until after Aramco’s long-delayed IPO, which is still not on the horizon.
The Abu Dhabi’s Mubadala Investment still intends to plow money into the Vision Fund 2 but is trying to obtain more say in the investments, a source told Reuters.
So, for now, the fund has just the threadbare pledge from SoftBank to put $38 billion into Vision Fund 2 though SoftBank doesn’t have that money, and may not be able to obtain that money, and everyone knows that.
Softbank is also facing the WeWork fiasco where it has the choice of throwing several more billions at it to keep WeWork alive long enough for an eventual IPO at a much lower valuation, or let it go to heck, and its $10 billion along with it. The money SoftBank plowed into Uber may also not be returning anytime soon.
So SoftBank Group could try to borrow more money. But last quarter, its operating cash flow was negative, and that doesn’t help a company with $100 billion in debt, according to a Reuters analysis of its balance sheet. While SoftBank had $27 billion in cash at the end of June, it would be needed to pay for its even larger liabilities that are due within a year.
Despite the misgivings of S&P and Moody’s, the company doesn’t see its debt as an issue – or as factor that would limit its borrowing ability. It tells investors that its leverage is actually low based on its low “loan-to-value ratio,” which measures the company’s net debt against the “value” of its investments.
The “value” of its investments that are not publicly traded are in the eye of the beholder, and SoftBank is the beholder.
SoftBank uses a leverage ratio that is based on the inflated “valuations” of its many investments that are not publicly traded, such as WeWork, into which SoftBank and the Vision Fund have plowed $10 billion. WeWork’s “valuation” is still $47 billion, though in reality, the company is now fighting for sheer survival, and no one has any idea what the company might be worth. Its entire business model has turned out to be just a magnificent cash-burn machine.
But SoftBank and the Vision Fund have already booked the gains from WeWork’s ascent to that $47 billion valuation.
How did they get to these gains?
In 2016, investors poured more money into WeWork by buying shares at a price that gave WeWork a valuation of $17 billion. These deals are negotiated behind closed doors and purposefully leaked to the financial press for effect.
In March 2017, SoftBank invested $300 million. In July 2017, WeWork raised another $760 million, now at a valuation of $20 billion. In July 2018, WeWork obtained $3 billion in funding from SoftBank. In January 2019, SoftBank invested another $2 billion in WeWork, now at a valuation that had been pumped up to $47 billion.
With this $2 billion investment at a valuation of $47 billion, SoftBank pushed all its prior investments up to the same share price, and thus booked a huge gain, more than doubling the value of its prior investments.
Now, I wasn’t in the room when this deal was hashed out. But I can imagine what it sounded like, with SoftBank saying:
We want to more than double the value of our prior investments, and we want to pay the maximum possible per share now, in order to book this huge gain on our prior investments, which will make us look like geniuses, and will allow us to start Vision Fund 2, and it will get the Saudis, which also picked up a huge gain, to increase their confidence in us and invest tens of billions of dollars in our Vision Fund 2.
In these investment rounds, the intent is not to buy low in order to sell high. The intent is to buy high and higher at each successive round. This makes everyone look good on paper. And they can all book gains. And these higher valuations beget hype, and hype begets the money via an IPO to bail out those investors.
By this method, SoftBank has driven up the “value” of its investments, which drives down its loan-to-value ratio. But S&P and Moody’s caught on to it, and now the market too – as demonstrated by the scuttled WeWork IPO – is catching up with SoftBank.
Due to these valuation gains, negotiated behind closed doors, the profits from SoftBank’s Vision Fund and the company’s Delta Fund more than tripled to $1.6 billion in the quarter ended December 31. Those were still the good times, before Uber’s disastrous post-IPO performance, and before WeWork’s downward spiral.
In July, SoftBank reported a 62% return on its investment, including management and performance fees. This too was before having to grapple with a write-down of its investment in WeWork and Uber.
SoftBank made two phenomenally good investments. Its biggest success was the $20 million it invested in Alibaba in 2000. The stake would be worth over $100 billion these days. SoftBank started selling down its stake in 2016 but still owns a large chunk of Alibaba’s ADRs that are traded in the US. And it owns nearly half of Yahoo Japan which it helped build.
Those two enormously successful investments have created an aura of infallibility and guaranteed success that helped the company gather up large piles of money from other investors, such as Saudi Arabia’s Public Investment Fund.
But the debacle of WeWork, Uber, and Slack will force the Vision Fund to write down that investment value. And SoftBank’s aura of infallibility has been pricked.
In addition, the exit doors for investors in cash-burn machines with gigantic valuations and no hopes for profits are closing as a result of the WeWork fiasco and as a result of the plunge in share prices of the biggest IPOs in recent months.
SoftBank has been a huge factor in Silicon Valley, San Francisco, and other startup hotspots. Startups spent this funding – much of it locally, through office leases, payroll, equipment purchases, and the like. Uber has an outsized footprint in San Francisco’s economy. And there are many other investors that have plowed funds into these startups that are now relatively big companies with huge losses.
So if SoftBank and its Vision Fund halt investments or slow them to a trickle, it will put a further chill on other investors. SoftBank was the force that drove up the valuations. What happens to these boom-and-bust economies such as Silicon Valley and San Francisco that have become uniquely dependent on this startup moolah from around the world? Well, that was a rhetorical question. A good example of what happened before was the dotcom bust. And it wasn’t pretty.
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Investigation Of Biden-Enriching Burisma Opened Months Before Zelensky Even Elected: Report
A new report from recent Fox News hire John Solomon tosses gasoline on the dumpster-fire narrative at the heart of an impeachment inquiry launched after a CIA officer filed a whistleblower complaint, alleging President Trump abused his office by ‘pressuring’ the president of Ukraine to investigate Joe Biden and his son Hunter for corruption.
According to Solomon, a new document “shows that Ukrainian officials had opened a new probe into the firm linked to Hunter Biden months before President Trump’s phone call with that country’s leader.”
Solomon said Tuesday on “Hannity” that the U.S. government knew Ukraine was planning to look again into activities at Burisma Holdings, an energy company that employed then-Vice President Joe Biden’s son as a member of its board of directors, early this year. The report is noteworthy because President Trump has been accused by Democrats of threatening in July to withhold foreign aid to Ukraine unless its new president pursued an investigation into the company and the younger Biden’s role there.
“The U.S. government had open-source intelligence and was aware as early as February of 2019 that the Ukrainian government was planning to reopen the Burisma investigation,” he claimed. “This is long before the president ever imagined having a call with President Zelensky,” he added, noting Petro Poroshenko was still Ukraine’s president at that time. –Fox News
Watch:
According to Solomon, Ukraine’s NABU anti-corruption agency requested reopening a probe into Burisma and its owner Mykola Zlochevsky.
According to the report, “The investigation then went forward, Solomon said. The new probe later resulted in a “Notice of Suspicion” being filed, alleging the existence of “illicit funds” running through the firm, Solomon also claimed.”
Solomon said his reporting revealed the requested reopening of the probe into Burisma involved, in part, “unusual transactions” in the natural gas giant’s accounts.
Solomon said the timeline of the alleged “illicit funds” coincided in part with the time Hunter Biden held a place on the firm’s board. The younger Biden was reportedly paid as much as $1 million per year for his time on the board, but Solomon said investigators in Ukraine filed a 15-page “notice of suspicion” indicating they were “looking at the possibility that the $3.4 million paid to Hunter Biden’s firm may have been part of the illicit funds that were moving through the company.“
“A month later, in April, the prosecutor’s office — open-source intelligence, again — the U.S. government officials confirming they were aware of this — made a request of another investigative agency in Ukraine for assistance in going through these bank records,” Solomon claimed. –Fox News
“That is a significant change in the timeline,” said Solomon, adding “it was omitted from the whistleblower’s complaint, and the question is did he not know it or did he exclude it because it didn’t fit the narrative he was trying to write.”
Futures Crash After US-China Make “No Progress” On Trade Talks; China Delegation To Depart One Day Early: SCMP
And to think how blissfully stocks surged today on optimism that China was willing to pursue a partial deal…
Moments after US equity futures reopened for trading, they plunged after the SCMP reported that deputy-level trade talks between the US and China aimed at laying the groundwork for high-level negotiations later this week “failed to yield any progress on critical issues, according to two sources with knowledge of the meetings.”
According to the report, the deputy-level negotiators, led on the Chinese side by vice-minister for finance Liao Min, spent the time focusing on only two areas: agricultural purchases and intellectual property protection. This apparently was not enough.
As other newswire reported earlier, during the discussions on Monday and Tuesday in Washington, the Chinese refused to talk about forced technology transfers, one source said, which is a core US grievance regarding China’s economic policies.
Speaking on condition of anonymity, the person said that talks had also skirted the issue of state subsidies, which the Trump administration says give Chinese companies an unfair advantage over international competitors.
“They have made no progress,” said another source familiar with the talks, adding that the Chinese side had not made headway in persuading US negotiators to consider a freeze on tariff increases, a main priority for Beijing.
And confirming that the week’s entire negotiation was a fiasco from the start, the SCMP reports that the Chinese delegation is planning to leave Washington on Thursday – one day early – and after just one day of principal-level talks, the SCMP source noted. Beijing’s negotiating team, headed by Vice-Premier Liu He, had previously planned to leave Washington late on Friday, allowing for up to two full days of talks.
Liu arrived in the US capital on Tuesday afternoon amid one of the tensest weeks for bilateral relations since the trade war began in July 2018.
It appears that this week’s NBA fiasco may have been the straw that broke the camel’s back:
Fallout from an NBA team general manager’s message of support for Hong Kong protesters has roiled public opinion on both sides. And earlier this week Washington announced sanctions against Chinese government entities, officials and companies it considers implicated in Beijing’s policies targeting largely Muslim ethnic minority groups in the Xinjiang Uygur autonomous region.
The Chinese government shot back, calling for an immediate reversal in the administration’s actions.
To be sure, Wednesday’s announcement that the US would block visa of various Chinese officials did not help.
In any case, with any hopes of even a modest, or mini, trade deal now seemingly collapsed, so have futures, which are puking after hours… (Dow futures -320 points)
… as is the Yuan.
Source: Bloomberg
And gold is spiking…
If confirmed, expect much more pain for a market which some have said has priced in the US-China trade deal no less than three times already.
“This Is The Third World”: Up To 3 Million Californians To Lose Power As PG&E Begins “Unprecedented” Blackouts
As previewed last night, PG&E Corp., California’s largest (bankrupt) utility, began shutting off power Wednesday to an unprecedented 3 million people in Northern California in the face of hot, windy weather that raises the risk of wildfires. While the high winds are forecast to subside by late Thursday, the company will undertake extensive inspections of its equipment before turning electricity back on, meaning outages could persist into next week. More than 3 million people may be eventually affected, based on city estimates and the average household size. The economic impact may reach $2.6 billion.
Half a million homes and businesses in Northern California have already lost power as PG&E orchestrates the biggest-ever intentional power shutoff to keep its lines from sparking blazes. The company was scheduled to shut service to another 234,000 customers in cities including Berkeley and Oakland at noon local time, but told city and county officials that those cutoffs will instead start Wednesday evening. Strong, dry winds that heighten the risk of wildfires are picking up later than forecast, the company said.
PG&E’s Wildfire Safety Operations Center in San Francisco
According to Bloomberg, never before have California utilities intentionally cut power to so many people for their own safety – and never has a shutoff affected such major metropolitan areas, even as the city of San Francisco and Silicon Valley appear spared. The undertaking is key to fairly new strategy by PG&E for preventing power lines from sparking another deadly – and costly – conflagration.
“This is unprecedented in terms of what all of us are facing as a community,” PG&E Vice President Sumeet Singh said at a media briefing Tuesday night. “We are doing everything we can to minimize the impact on our customers’ lives.”
The shutoff was scheduled to occur in three phases, eventually affecting almost 800,000 homes and businesses, including in the San Francisco Bay Area and Napa County. The next phase will include parts of Alameda, Contra Costa, Santa Clara and Santa Cruz counties, among others. The utility will also turn off 21,800 customers in Mendocino and Calaveras counties who didn’t lose power during the first stage.
After that, PG&E will weigh a third one for the southernmost portions of its service area, affecting 42,000. In all, about 15% of the utility’s customers may go dark.
The bankrupt Pacific Gas & Electric, which announced the deliberate outage, is working to prevent a repeat of a catastrophe last November in which faulty power lines it owned were determined to have sparked California’s deadliest wildfire in modern history. California Gov. Gavin Newsom said the “frustration that Californians feel as they deal with the impacts of these power outages is warranted,” but that safety was the main concern.
“The biggest threat looks to be today and continuing into the day tomorrow,” Marc Chenard, a senior branch forecaster with the U.S. Weather Prediction Center in College Park, Maryland, said of the fire risk.
Power lines are seen against a smoky landscape last November near Pulga, California, east of Paradise
“Our first priority is to protect people and to ensure that communities are safe,” the governor said in a statement.
In last year’s inferno, 86 people died and a town called Paradise was virtually destroyed. PG&E has been found responsible for dozens of other wildfires in recent years, too. This is peak wildfire season in California.
With large portions of the San Francisco Bay area set to be affected – including cities such as Oakland, Berkeley and San Jose – the shutdowns are a test for a densely populated region that’s the hub of the U.S. technology industry.
“Extremely critical” fire conditions were expected in parts of Northern California Wednesday, and in Southern California around Los Angeles county Thursday, the National Weather Service said. PG&E said the severe weather incident prompting its precautionary shutoffs — hot, dry conditions and winds gusting at up to 70 mph (110 kph) — was expected to last through mid-day Thursday in northern and central California.
Near Los Angeles, Edison International’s Southern California Edison utility said it was also considering cutting power to almost 174,000 homes and businesses. Sempra Energy’s San Diego Gas & Electric warned that it could shut power to about 30,000 customers within the next two days.
Artist’s impression of a Los Angeles blackout
The outages already affecting regions such as the Napa Valley wine country could last up to a week in some places. There was some last minute good news: PG&E briefly put off the next round of unprecedented blackouts across Northern California for a few hours on Wednesday after weather forecasts took a turn for the better. However, they were still expected to kick in later in the day.
The turn in weather forecasts hasn’t yet changed how many customers are set to lose power according to Bloomberg. Utilities in the Los Angeles and San Diego areas were also warning of service cuts.
While the city of San Francisco is not affected by the intentional shutoff – after all the locals have to be able to see when they are about to walk into human shit – much of the surrounding Bay Area could go dark, including parts of Silicon Valley. A prolonged outage threatens to roil the region’s economy by disrupting workers and everyday life.
“If you lose power for five hours, you may have to throw out some milk,” said Michael Wara, director of the Climate and Energy Policy Program at Stanford University. “If you lose power for five days, you need to throw anything that’s perishable away, and you are likely eating out of a can.”
Officials in Malibu — the glitzy home to Hollywood stars, which was also struck by last year’s inferno — said power company Southern California Edison had warned of another possible shutoff in areas from late Thursday through Friday.
More than 100,000 customers could lose power across eight Southern California counties, SCE said. Schools and universities closed Wednesday and people stocked up on gasoline, water, batteries and other basics.
“Early indicators are that the campus outage will last up to 48 hours,” said University of California, Berkeley, announcing all classes were canceled. The irony that this is taking place at the West Coast mecca of socialist thought was not lost on anyone.
With frustration rising, California state Sen. Jerry Hill described the mass blackouts as “excessive” in their scale.
“This cannot be something that can be acceptable nor long-term,” Hill told the Los Angeles Times. “This is third world, and we are not,” he added.
Daniel Swain, a climate scientist at UCLA in Los Angeles, tweeted that the power shutoffs were “a necessary bad idea in the short term” that shifts the financial costs from the power companies to the public.
As we reported last night, the first part of PG&E power cuts began midnight Tuesday into Wednesday in northern California. It affected more than 500,000 customers there, the utility company said.
An employee walks through a darkened pharmacy as downtown Sonoma, California remains without power on Oct. 9.
The rest of the San Francisco Bay area was to start losing power in waves around noon local time. A possible third phase could take place later in the day farther south.
PG&E said it expected to start turning the power back on Thursday but can only do so after inspecting its equipment for damage, which could take days in some areas.
Unfortunately for customers, PG&E won’t be able to switch the power back on once the winds stop. Crews must inspect every inch of lines to ensure they’re safe to carry electricity again. Cities have warned residents to brace for six days without power. “It’s not just a matter of, ’red flag’s over, I can turn the lights back on,”’ said Gregg Edeson, a utility consultant. “The utility really does have to go out there and look.”
The utility that supplies water to much of the East Bay has rented backup generators for its pumping stations and plants, at a cost of $400,000 for the season. But the fuel to run those generators could cost $75,000 per outage, said Andrea Pook, spokeswoman for the East Bay Municipal Utility District. And the district is still asking customers to conserve water, limiting the need for the generators.
“As an insurance policy, we’re asking customers to be mindful,” she said.
PG&E’s warnings gave residents and businesses time to prepare, said Joe Eto, a Lawrence Berkeley National Laboratory staff scientist. Many companies, he said, can now have employees work remotely, conducting business through the cloud if needed. And if their own homes go dark, there are other places they can take their laptops to charge up and work.
“Never underestimate the resourcefulness of people under stress,” he said. Then again, this is California…
AOC Vs PRC: US Lawmakers Demand NBA Sever Ties With “Concentration-Camp”-Running Communist China
Who could have seen this coming?
Never one to miss an opportunity to signal more virtue than the next cisgender being, Alexandria Ocasio-Cortez and a handful of other uber-alles bipartisan lawmakers have written a sternly-worded letter to NBA Commissioner Adam Silver “expressing our deep concern” about China’s “outrageous” use of its economic might to suppress speech of Americans.
Piling on, they add that the NBA “should have anticipated the challenges of doing business in a country run by a repressive single party government – including by being prepared to stand in strong defense of the freedom of expression of its employees, players, and affiliates across the globe.”
And so the politicians demand that the private company do the following…
1. Build upon your statement of October 8 in which you said “the NBA will not put itself in a position of regulating what players, employees, and team owners say or will not say on these issues” by clarifying that (a) NBA players, staff, partners, and fans in the United States are American persons—as such, you support their right to express their opinions no matter the economic consequences, and (b) while the NBA will follow Chinese law in China, the Chinese Communist Party must respect that the association will abide by American laws and principles in its global operations, including by not conditioning employment on any guidelines of expression on international political issues.
2. Suspend NBA activities in China until government-controlled broadcasters and government-controlled commercial sponsors end their boycott of NBA activities and the selective treatment of the Houston Rockets, and emphasize that the association will stand unified in the face of future efforts by Chinese government-controlled entities to single out individual teams, players, or associates for boycotts or selective treatment.
3. Reevaluate the NBA’s training camp in Xinjiang, where up to a million Chinese citizens are held in concentration camps as part of a massive, government-run campaign of ethno-religious repression.
4. Clarify in internal association documents that public commentary on international human rights repression including in Tibet, Hong Kong, and Xinjiang falls within expected standards of public behavior and expression.
My question for you is: If you were around at the time, how many government restrictions and taxes would you have urged to avoid the predicted calamity?
As reported in The New York Times(Aug. 1969) Stanford University biologist Dr. Paul Erhlich warned: “The trouble with almost all environmental problems is that by the time we have enough evidence to convince people, you’re dead. We must realize that unless we’re extremely lucky, everybody will disappear in a cloud of blue steam in 20 years.”
In 2000, Dr. David Viner, a senior research scientist at University of East Anglia’s climate research unit, predicted that in a few years winter snowfall would become “a very rare and exciting event. Children just aren’t going to know what snow is.”
In 2004, the U.S. Pentagon warned President George W. Bush that major European cities would be beneath rising seas. Britain will be plunged into a Siberian climate by 2020.
In 2008, Al Gore predicted that the polar ice cap would be gone in a mere 10 years. A U.S. Department of Energy study led by the U.S. Navy predicted the Arctic Ocean would experience an ice-free summer by 2016.
In May 2014, French Foreign Minister Laurent Fabius declared during a joint appearance with Secretary of State John Kerry that “we have 500 days to avoid climate chaos.”
Peter Gunter, professor at North Texas State University, predicted in the spring 1970 issue of The Living Wilderness: “Demographers agree almost unanimously on the following grim timetable: by 1975 widespread famines will begin in India; these will spread by 1990 to include all of India, Pakistan, China and the Near East, Africa. By the year 2000, or conceivably sooner, South and Central America will exist under famine conditions…. By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine.”
Ecologist Kenneth Watt’s 1970 prediction was, “If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder in the year 2000.” He added, “This is about twice what it would take to put us into an ice age.”
Mark J. Perry, scholar at the American Enterprise Institute and professor of economics and finance at the University of Michigan’s Flint campus, cites 18 spectacularly wrong predictions made around the time of first Earth Day in 1970. This time it’s not about weather.
Harrison Brown, a scientist at the National Academy of Sciences, published a chart in Scientific American that looked at metal reserves and estimated that humanity would run out of copper shortly after 2000. Lead, zinc, tin, gold and silver would be gone before 1990. Kenneth Watt said, “By the year 2000, if present trends continue, we will be using up crude oil at such a rate … that there won’t be any more crude oil.”
There were grossly wild predictions well before the first Earth Day, too.
In 1939, the U.S. Department of the Interior predicted that American oil supplies would last for only another 13 years. In 1949, the secretary of the interior said the end of U.S. oil supplies was in sight. Having learned nothing from its earlier erroneous energy claims, in 1974, the U.S. Geological Survey said that the U.S. had only a 10-year supply of natural gas. However, the U.S. Energy Information Administration estimated that as of Jan. 1, 2017, there were about 2,459 trillion cubic feet of dry natural gas in the United States. That’s enough to last us for nearly a century. The United States is the largest producer of natural gas worldwide.
Today’s wild predictions about climate doom are likely to be just as true as yesteryear’s. The major difference is today’s Americans are far more gullible and more likely to spend trillions fighting global warming. And the only result is that we’ll be much poorer and less free.
