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From Bill Blain of Mint Partners

Blain’s Morning Porridge – How to catch rabies in the Junk Bond Market

I’m sure everyone has been following the Toy R Us meltdown in the bond market. Alongside chapter 11 bankruptcy, its bonds have crashed from 96 to 18% through the month. Have we seen this before? Of course you have. Happens all the time. But, Blain’s Market Mantra No 3 reminds us: “Markets have no Memory. Buyers have even less.”

There are a number of things that worry me.

First is the market doesn’t seem to think Toy R Us is symptomatic of wider problems across the whole hi-yield and LBO sector. According to some I’ve spoken to, Toys R Us is one of few and even the “only” company caught in a debt trap – oh no it isn’t! Profit of about $500mm per annum covering debt service costs of, say, about $500 per annum. FFS! As the FT comments: the capital structure is “extremely complicated” leading to doubts on what is and isn’t senior or subordinated to what. It’s what we call messy.

Second, high yield spreads continue to tighten against bonds. Why? The risks are very very different across the credit spectrum, yet simplistic credit analysis treats them the same. Mistake to chase yield without understanding the risks. And go read all the stuff from 2007 about LBOs and how diversified risk is not reduced risk.

Third, there was a great article in the FT on Wednesday about Stada – the German drugmaker. It’s subject to an aggressive LBO and issuing substantial amounts of debt (bonds and loans) to fund it, allowing the PE buyers to strip out the cash. However, “buried deep in the 766 page offering memo”, says the FT, is a carve out of the obscure “restricted payments” clause allowing the private equity buyers to raise even more guaranteed debt to pay them dividends – a clear case of “the erosion of European Covenant Protections”.

It feels like a wake up and smell the coffee for the junk market… but I’ve been saying that for years… So I wont say it again…

It looks to me that complacent investors have been misreading the signs – foolishly thinking low rates meant highly levered private equity targets were somehow safe from debt crisis? In fact, debt remains front and centre the problem: as newspapers have noted; “while Toy R Us should have been spending its management resources maintaining relevancy versus Amazon and EBay, it was struggling with a debt mountain.” Doh.

What’s very obvious is holders ignored the first rule of investing in Leveraged Buy Outs: Don’t. Unless the goals of equity holders and debt are very clearly aligned – don’t go near them. Alignment of interest twixt equity and debt is critical and misalignment seems the basis of many takeovers…

Its 12 years since KKR, Bain and Vornado bought out Toy R Us. Guess who is also involved in the Stada buyout? If you guesses Bain, give yourself a big pat on the back.

Anything is possible when markets are so distorted that the hunt for yield overcomes common sense and folk are willing to ignore the need for protection against unrewarded risk. Common sense is a very uncommon thing.

Back in the real world.. I suppose we can spend the weekend fretting about Norte Korea. I tried to read stuff on the German election, hoping to come out with a killer bon-mot about Merkel, but it was just too dull and boring to bother.

I’m off to Edinburgh later this evening… Have a great weekend.

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The price of shares in The Swiss National Bank is up 11 days in a row, soaring 150% in the last two months.

 

That sounds like a 'tulip' bubble-like 'fraud'…

 

 

The SNB is up over 120% in Q3 so far – more than double 'bubble' Bitcoin…

 

Let's check with the markets ultimate arbiter of what's fraud and what's real – JPMorgan CEO Jamie Dimon:

• It's a bubble (because it has exploded vertically in the last few months) – check
• It's a fraud, there's nothing behind it – check
• It's a business where people can invent a currency out of thin air – check
• People who buy it are "stupid" – check
• "Shocked that anyone can't see it for what it is" – check

In fact, The SNB farce is now hitting the mainstream media… WSJ notes The SNB is a rarity among rarities. Only a handful of central banks – including Japan and Belgium as well as the Swiss – have private shareholders.

…those looking for a good reason behind the rally, or trying to judge whether the stock is fairly valued, will likely be disappointed.

While the SNB does release monthly data on its balance sheet and quarterly profit, it doesn’t issue the reams of financial metrics that most listed companies do. The central bank also isn’t covered by analysts in the same way as commercial banks or companies.

UBS economist Alessandro Bee, who covers the SNB as a central bank and not as a stock, said he sees no particular reason why the stock rose.

There are only 100,000 shares outstanding and the stock is thinly traded, which can exaggerate price moves. On an average day, about 174 SNB shares are traded, compared with nearly 12 million for Credit Suisse AG.

*  *  *
So Jamie – is The Swiss National Bank a fraud?

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One lucky thief stole an ATM courier van containing $1.8 million in cash from the parking lot of a Georgia bank after two careless couriers left it running while making a routine stop. And two weeks later, federal authorities haven’t found their suspect.

Surveillance cameras at Citizens Trust Bank in the 25000 hundred block of South Harriston were able to capture a blurry image of the suspect – a man wearing dark pants and a baggy gray long-sleeve shirt with a black backpack -as he smashed the window of the van and drove off while the two couriers were inside. The drivers were gone for ten minutes – meaning the thief netted approximately $180,000 a minute, tax free.

The couriers had left the van running, but locked both doors. When they returned from their drop off, the van was gone. All they found was broken glass. Later that day, DeKalb County marshals found the van ditched in a neighborhood up the street. But the cash and suspect were missing, according to the Atlanta Journal-Constitution.

About 6:45 a.m., two ATM Response Inc. employees pulled into the bank parking lot and went inside with an unspecified amount of money.

 

“The driver locked the vehicle doors but left the keys in the ignition and the vehicle running,” Emmett said. The couriers were inside the bank between 10 and 15 minutes. They returned to find the van gone. All that was left was broken glass.

The ease with which the theif succeeded in pulling off the heist prompted some to question whether the thief had been tipped off by one of the couriers, according to Atlanta's WSB-TV 2.

“I can't believe he managed to do this,” one woman who did not identify herself told Jaquez. “Seems like an inside job."

Since Sept. 8, the day of the heist, the FBI and DeKalb County officials have been searching for the perpetrator, but have yet to stumble on any leads. Of course, it's possible that federal agents might be able to trace the cash back to whomever spent it if it reenters the banking system.
 

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Authored by Tom Westcott via Middle East Eye,

Official fears violence after 25 September independence vote, as disputes grow in areas controlled by Kurd forces outside original KRG borders.

Fears of fresh conflict in northern Iraq are bubbling to the surface weeks before Iraqi Kurds hold a contentious vote on independence, with warnings of war over disputed, ethnically mixed border regions and reports of Shia forces pushing Kurd officials from a town to prevent voting.

The Kurdistan Regional Government, or KRG, has refused repeated requests from Baghdad, the US and regional powers to postpone its 25 September referendum, saying it would only do so if an alternative was presented by Iraq’s central government.

Tensions have risen in areas liberated by KRG forces outside the region’s original 2003 borders, including the city of Kirkuk. On Monday the KRG’s president, Massoud Barzani, said “any attempt to change the reality using force” in Kirkuk “should expect that every single Kurd will be ready to fight.”

Dr Jutyar Mahmoud, a member of the region’s independence referendum commission, told Middle East Eye that disputed territories such as Kirkuk were the focus of fears of a new conflagration after the referendum.

“We will face border problems in the near future and I definitely think there will be another war, and soon,” he said.

He described Iraq as “militarily weak,” after three years of battling the Islamic State (IS), during which time forces have suffered extensive losses, particularly in the recent nine-month fight to liberate Mosul.

A greater threat, he said, was posed by Iraq’s other army – the Iranian-backed paramilitary Hashd al-Shaabi, or Popular Mobilisation force.

“The Hashd are another threat and maybe Iran will push them to fight us,” Mahmoud said, adding that Iraq’s prime minister, Haider al-Abadi, “doesn’t control the Hashd, but Iran can.”

Jutyar Mahmoud considered the Hashd a greater threat than Iraq’s regular army (AFP)

Hostile acts

His comments preceded bouts of recent unrest in some of the contested border regions. On Saturday, local Arabs pulled the KRG flag from a council building in Mandali, in the province of Diyala, and staged an armed, albeit peaceful, protest in the town.

The next day, the town council sacked the Kurdish mayor and overruled a previous vote that agreed to the town’s participation in the referendum, according to the Kurdish news service Rudaw. Claims that the Hashd were involved were denied by a well-placed source, who said such actions were not in line with the force’s policies.

The source told MEE that if local fighters affiliated with the Hashd were involved, they were representing themselves, not the Hashd al-Shaabi.

Also on Saturday, Kurdish Turkmen were urged to boycott the referendum by eight Turkmen parties in Kirkuk, who repeated Baghdad’s line that the vote is unconstitutional.

In Sinjar, 2,000 Yazidis have joined the Hashd, according to the force’s spokesman Ahmed al-Asadi.

Yazidi refugees living in camps said the move was prompted by dissatisfaction with the Kurdish peshmerga forces for failing to protect them from IS in 2014, and what they said was ongoing neglect and marginalisation of Yazidis under the KRG.

Adding to extant tensions are limitations of voter eligibility. Although northern Iraq has long been ethnically mixed, Arabs relocated under former Iraqi leader Saddam Hussein’s Arabisation schemes are not eligible to vote in the referendum, said the KRG referendum commission’s Mahmoud.

Voting in the disputed territories would also be limited to areas controlled by the peshmerga, Mahmoud said, adding that Hashd forces had made it clear that they would not accept ballot boxes being placed in any areas under their control.

Kirkuk’s tinderbox

Both the peshmerga and Hashd forces are maintaining a strong military presence in several disputed territories, including Kirkuk province.

Several thousand Turkmen Hashd fighters reportedly control what Hashd spokesman Asadi said was the lion’s share of the province, but he insisted any talk of war was political bluster.

“The Hashd al-Shaabi were founded to ensure the stability and security of Iraq, not to ignite sectarian or regional wars,” he told Middle East Eye.

 

“Anyone who promotes these ideas about war between Iraq and Kurdistan are outsiders intent on destabilising the security and stability of Iraq.

 

“The affairs in Kurdistan are not going to lead to a war and such talk is nothing but a passing political tempest to satisfy some political matters for some Kurdish politicians.

 

“We view Kurdistan as an Iraqi land and we will defend it as we continue to defend all of Iraq.”

Asadi said “brotherly ties” between Hashd fighters and the Kurds had been proved by how they stood united in one trench to defend Iraq in the battle against IS.

Baghdad, the US and regional powers have urged the KRG to postpone its referendum (Reuters)

Brotherly ties

Dr Kemal Kerkuki, a peshmerga commander stationed near IS-occupied Hawija, echoed this sentiment, saying the chance of war with Iraq was “very, very narrow, if not impossible” – but was keen to reiterate the strength of the peshmerga.

“The peshmerga forces are always ready to defend our lands and I think the fight against IS has shown the whole world what our forces are capable of,” he said.

 

“However, we are determined to use the referendum and all democratic tools in our negotiations with Baghdad for an amicable divorce.”

Kerkuki insisted defeating IS remained a priority for both the KRG and Baghdad, and said there was ongoing cooperation between Iraqi and peshmerga forces.

Having swiftly defeated IS in Tal Afar, Iraqi forces are now preparing to begin their operations to retake Hawija, in one of the many disputed areas along the border regions between the KRG and Iraq.

Kerkuki admitted there were recurrent problems between rival Iraqi forces but remained adamant that the referendum would help resolve rather than exacerbate problems in the border regions.

“The referendum is a peaceful and democratic tool to solve the chronic problems between the Kurdistan region and Iraq,” he said.

 

“The referendum is a tool to defuse war and intra-city conflicts in the newly liberated areas, particularly the so-called ‘disputed areas’.”

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As we warned over the weekend, when we first learned of Beijing's new sex doll rental business, China's sharing economy may have just jumped the shark.

Now, just 4 days later, after its business model elicited a flood of complaints and criticism, Chinese company Ta Qu – or “Touch” in English – has announced that it will close its week-old sex-doll rental business, inspiring budget-focused silicon slammers in the world’s second-largest economy to issue a collective groan.

Touch began offering five different sex doll types for daily or longer-term rent last Thursday in Beijing. But according to the BBC,“it quickly drew complaints and criticism.”

The company said in a statement on Weibo that it "sincerely apologized for the negative impact" of its business model.

But the company added that sex is "not vulgar" and said it would keep working towards more people enjoying it. The company said it had generated “a lot of interest and requests” during its short-lived run.

Unfortunately for entrepreneurs hoping to enter China’s thriving sex-toy industry, the company noted that succeeding in that industry “is really hard in China.”

"We prepared ten dolls for the trial operation," a company spokesperson said via email, adding that they received very positive feedback from users.

"But it's really hard in China," the firm wrote, saying there had been a lot of controversy with the police over the issue.

The company had offered the sex dolls for a daily fee of 298 yuan (about $50), according to Chinese media. It also sells an array of sex toys and dolls, according to the BBC.

Here's what that would've bought you:

 

 

 

In its Weibo statement, the firm said its original intention had been to make expensive silicone dolls more affordable but conceded that the service triggered a heated public debate. The company also said it would pay out compensation to users worth double the amount they had paid as a deposit for reserving a doll.

The statement added that Touch would in future pay more attention to its "social duty", and would actively promote a "healthier and more harmonious sex lifestyle".

The Chinese app was launched in 2015 as a platform for discussing issues about sex and sexuality before “pivoting” into sales.

As we reported earlier in the week, the company planned to offer five models to choose from: "Greek bikini model," "US Wonder Woman," "Korean housewife," "Russian teenager" and "Hong Kong car race cheerleader." Users can customize the dolls to their liking by picking out hair and eye color, as well as their outfits.

For those asking the obvious question, the company states that it also has hygiene on its mind, as explained by their official policy.

"The dolls' lower parts are changed for every customer," reads the app. "Please remove the lower parts before returning. After the lower parts are cleaned, the doll can be used repeatedly."

The company hoped to capitalize on China’s notorious gender imbalance favoring men, as well as the country’s thriving online gaming culture, which breeds hordes of lonely young men.

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Authored by Mac Slavo via SHTFplan.com,

Global strategist Marin Katusa is the New York Times best selling author of The Colder War, which details the geo-political power shift that threatens the global dominance of the United States. He’s also a well known resource hedge fund manager who legendary investor Doug Casey has called one of the best market analysts he’s ever worked with.

His prior forecasts noted that countries around the world would soon stop trading commodities like oil in the U.S. dollar, something we’re already seeing with China, Russia, Iran, and Venezuela, all of which are preparing non-dollar, gold-backed mechanisms of exchange.

This trend, according to Katusa in a must see interview with Future Money Trends, will only continue to weaken the U.S. dollar going forward and the result will be a massive capital flight to gold in coming years:

I think we’ll have a near term bounce on the U.S. dollar… then it’s going to be very weak… and then it’s going to go much, much lower… With China and Russia working together to de-dollarize the U.S. dollar starting with oil, which is the biggest market… and then all the other commodities.

 

You’re going to start seeing a massive unwind of these U.S. dollars in the emerging markets.

 

…

 

When that money comes back… which it will… and the world starts cluing in that the emerging markets need gold to convert the Yuan and the Ruble and all these different factors, you’re going to see a massive rush for gold.

Watch the full interview:

Katusa notes that he is preparing to “load up” on gold-based assets as the dollar strengthens and puts additional pressure on gold prices, but says that by next year major fund managers will start moving capital back into precious metals in response to dollar weakness, global de-dollarization and economic crisis:

Everybody wants to rush in when something’s exciting… but you take your position before the massive flow of money…

 

I think we have a near term dead cat bounce for the U.S. dollar… which will mean we’re going to have a little bit of weakness here in gold in the near term… the next six months is my time to load up.

 

…And when the funds flow come in… it’s going to be the equivalent of Niagra Falls coming through your garden hose.

The geo-political realignment taking place now stands to upend the financial and economic systems as we know them. This shift will not come without crisis and panic. The time to position yourself in gold-based assets is now.

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On Friday – a day many have called  “the most important day for Brexit since the referendum” – Theresa May will delivers her much anticipated Brexit speech in Florence. The roughly 5000-word speech is scheduled at begin around 09:15 EDT and is expected to provoke an immediate response from Brussels.

Among the flurry of last minute preparations, earlier this week, the Telegraph reported that Foreign Secretary Boris Johnson will resign if May veers toward a “Swiss-style” EU arrangement in her speech (more here). Earlier today, BBC Political Editor Laura Kuenssberg reported that May’s Friday speech will say the UK willing to pay €20BN during transition period “BUT only if we have access to single market + some form of customs union.” As RanSquawk added, the €20BN does not cover long term liabilities, so the eventual total departure bill to taxpayers will potentially be far higher.

Taking a step back, here is a bigger picture preview of what is known – and unknown – about tomorrow’s speech courtesy of RanSquawk

What will May Say?

Few specific details are available on what UK Prime Minister Theresa May will cover in her speech, to be delivered from Florence, Italy, on 22 September. However, it is expected that the material will be significant given that the UK delayed the fourth round of Brexit talks (which were set to take place in the week of 25 September). A spokesperson for May has been quoted as saying that the speech would outline the UK’s hopes for a “deep and special partnership” with the EU following Brexit. May was said to have discussed the particulars with her Cabinet on Thursday 21 September. At the time of publication, no firm details have been leaked, although a BBC reporter was told that May will seek a transitional agreement, with a time frame of two years being touted.

“In the wake of slow progress on Brexit negotiations, the United Kingdom may be preparing to adjust its approach,” analysts at Stratfor write. “Brexit negotiations have achieved limited progress so far, and the EU side has warned that talks are still far from the ‘sufficient progress’ necessary to move to their second phase, which is meant to address the future bilateral relationship” which the UK was eager to begin in October.

One theory that is gaining traction, therefore, is that the UK will offer some concessions to the EU which will help move the discussions on.

Tensions Within May’s Cabinet

The secrecy surrounding her speech was causing tension in May’s Cabinet. Reports in the Telegraph newspaper suggested that Foreign Secretary Boris Johnson would tender his resignation if May pivoted towards a ‘Swiss-style’ arrangement. The news drove sterling higher, with traders seemingly taking comfort from the idea that some of the more extreme, ‘hard’ voices around May would leave the Cabinet, allowing her to pursue a ‘softer’, more amenable deal.

However, the story was denied and it has been subsequently reported that May made moves to appease Johnson; the Telegraph reported “the Cabinet truce over Britain’s future payments to the EU involves paying substantial sums to the bloc, but no further payments after Britain’s transition period.”

The FT later wrote that PM May believes the UK can achieve a “bespoke” final deal with the EU, and May reportedly said neither a Canadian-style nor a Norway-style deal for single market was appropriate for the UK.

Divorce Bill

The Financial Times this week reported that the UK was set to make an “offer to fill a post-Brexit EU budget hole of at least €20bn” in an attempt to settle its so-called “diovrce bill.” The FT adds “UK officials have indicated Britain would ensure no member state would have to pay more into the EU budget or receive less money from it until 2020, the end of EU’s current long-term budget planning period. The expected hole in those two years after Brexit would be at least €20bn when payments the UK receives back from Brussels are excluded.

“A figure of €20bn is pretty close to estimates for what the UK’s net contribution to the EU budget would have been under the status quo ‘Remain’ scenario,” say analysts at RBC Capital, “however, it is unlikely that monies relating to the current EU budget period will be the end of the financial settlement negotiation between the UK and the EU.” Later reports, which followed Ma’s Cabinet meeting, suggested any financial settlement – which May would not directly address in her speech – would be contingent on single market access.

It is unclear how the EU might respond, given earlier demands from some suggesting a figure of as much as €60bln may be needed.

“On the EU side, any response next week which hints progress is sufficient to move towards discussing the future UK-EU trade deal before year end should be supportive of a view that the two-year Article 50 process isn’t too far off-track,” RBC says.

Transitional Period

May is also expected to acknowledge the need for a transitional period to avoid a ‘Brexit cliff’, where the UK would continue to abide by EU rules in some areas, while phasing out a withdrawal in other areas. “While the British government seemed to be aiming for a two-year transition, we have been told May prefers a longer hiatus of three years, which would give her enough time to prepare for elections, to be held on their scheduled date, in 2022,” analysts at SGH Macro argue.

* * *

Want more? Here is another preview, this time from Barclays?

Media speculation is mounting over the content of UK PM May’s Brexit Speech in Florence tomorrow. This is the first big Brexit-specific speech by the PM following the General Election. It is designed to outline the basis for negotiations at the fourth round of EU-UK negotiations in Brussels next week. Following that, the UK Conservative Party Conference will take place on 1-4 October, where PM May will need to satisfy her own party members with regards to the tone set over Brexit. Hence, the challenge for the PM in her speech will be to appear constructive to her EU partners, so as to advance the negotiation process, while at the same time not angering those within her own party, who may prefer a less accommodative course vis-a-vis the EU in the negotiations.

May is expected to outline three key issues – The transition, the EU withdrawal bill, and the future relationship.

• Transition – Highlights were provided by Chancellor Hammond last week. He insisted that the UK will leave the Single Market and the Customs Union in March 2019. The UK will seek to maintain the status quo of trade and access. A two-year transition period is seen as most likely to stop cabinet in-fighting.
• EU Withdrawal bill – PM May is likely to commit to the UK paying what is deemed reasonable during a transition period. Her traditional style has been vague and there is a chance she may continue with this approach, and stop short of stating an actual figure that could leave herself open to attack during the upcoming Tory Party conference. However, press speculation is mounting of a £20bn figure as a starting point for negotiations, conditional upon access to the single market and some form of Customs Union (source: BBC). We expect an eventual figure in the region of £40-50bn may be negotiable. The reaction to this from Brussels and the UK media will be important for PM May going into the Tory Party conference.
• Future relationship – Hammond gave some colour last week, focusing on financial services, and recognised concerns about the UK potentially deviating from high EU regulatory standards. We expect PM May to reiterate the importance of regulatory homogeneity in the short run. May is likely to try to insist on the need for the UK to negotiate trade deals, even if legally, this cannot begin until the second phase of negotiations.
• Reaction following the speech: The key to watch here would be the reaction from EU’s chief Brexit negotiator, Michel Barnier, as well as the UK press. The speech lays the foundations for the EU-UK negotiations next week, and EU officials have voiced increasing frustration over delays, bearing in mind that the principles for the first phase of negotiations, covering  guarantees, commitments on citizens rights, are due to be agreed between October to December before it is possible to move on to trade issues in Phase 2.

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Last week we jokingly wrote about a Facebook press release that was apparently an honest effort by the social media giant intended to summarize Russian efforts to undermine the 2016 election using their social media platform. That said, at least to us, it seemed as though Facebook unwittingly proved what a farce the entire ‘Russian collusion’ narrative had become as, after digging through advertising data for the better part of full year, Facebook reported that they found a ‘staggering’ $50,000 worth of ad buys that ‘MAY‘ have been purchased by Russian-linked accounts to run ‘potentially politically related’ ads.

Not surprisingly, after being attacked by the mainstream media and even Hillary for “assisting” the Russians, Zuckerberg is once again in the press today fanning the flames of the ‘Russian collusion’ narrative by saying that Facebook will release to Congress the details of the 3,000 ads that ‘MAY‘ have been purchased by Russian-linked accounts.

And while it seems obvious, please allow us to once again demonstrate why this entire process is so utterly bizarre… 

The chart below demonstrates how the $50,000 worth of ad buys that ‘MAY‘ have been purchased by Russian-linked accounts to run ‘potentially politically related’ ads compares to the $26.8 billion in ad revenue that Facebook generated in the U.S. over the same time period between 3Q 2015 and 2Q 2017….If $50,000 can swing an entire presidential election can you imagine what $26.8 billion can do?

 

Of course, not all of that $26.8 billion was spent on political advertising so we took a shot at breaking it down further.  While Facebook doesn’t disclose political spending as a percent of their overall advertising revenue, we did a little digging and found that political advertising represented ~5% of the overall ad market in the U.S. in 2016.  We further assumed that political share of the overall ad market is roughly half of that amount in non-election years, or 2.5%. 

Using that data, we figure that Facebook may get ~3.5% of their annual revenue from political advertising in an average year, or nearly $1 billion per year…give or take a few million.  Unfortunately, as the chart below once again demonstrates, this still does little to support Zuckerberg’s thesis that the $50,000 he keeps talking about is in any way relevant to the 2016 election.

 

Of course, the pursuit of this ridiculous narrative proves that Zuckerberg has no interest in spreading the truth about how his company impacted (and by “impacted,” we mean “had no impact at all”) the 2016 election, but rather is only interested in shoving his political agenda down the throats of an American public that he presumes is too stupid to question his propaganda. 

That said, if Zuckerberg is really just on a mission for truth, as he says he is, perhaps he can stop patronizing the American public and disclose the full facts surrounding political advertising on Facebook.  We suspect a simple financial disclosure detailing how much political advertising was sold on Facebook from 3Q 2015 – 2Q 2017, broken down by political affiliation, would go a long way toward proving just how meaningless $50,000 is in the grand scheme of things. 

That said, somehow we suspect ‘truth’ is not really Zuckerberg’s end goal, now is it?

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By Chris at http://ift.tt/12YmHT5

Before the good stuff… the fun stuff.

Here’s a fan mail I received in response to this.

I guess he/she never made it as far as this part:

“Don’t get me wrong. I’m not against EVs, and I’m all for technological innovation.”

Though, in all fairness, it may be the collagen talking. Either way, definitely not an Insider member, otherwise he/she/it would be well aware of where we’re actually invested. Ha!

Dregs from the bottom of the barrel occasionally drift into my corner of cyberspace. That they respond like this must be due to this fascinating misconception that I give a damn.

Still, if we poke them hard enough in the chest, they’ll bugger off leaving us with the fine specimens that make up the overwhelming majority of our distinguished readership. Which brings me neatly to:

“Hi Chris,

 

I’m not sure if this gets to you or is stuck in the admin box.

 

Love your work, really enjoy it.

 

Your current one on the knock off effects of banning gasoline and diesel cars made me want to bring up another point that is seldom discussed when people talk about the future of EVs… the profitability of refineries when they don’t have a market for gasoline.

 

When a barrel of crude is refined, about half of its volume ends up as gasoline.  The other half ends up as diesel, jet fuel, bunker oil, chemical feedstocks, etc… Gasoline is great for running automobiles, but pretty lousy for any other industrial process.  Industrial processes such as mining, refining, transporting, and processing cobalt, lithium, and molybdenum into EV parts.  These processes depend on the other half of the barrel.

 

Driving away (pun intended) the demand for gasoline by mandating EVs means that refineries have half of their product become much less valuable.  I don’t have the research or know of who has done the research, but I wonder what such a move would mean for the price of diesel, jet fuel, bunker oil, chemical feedstocks, etc…?

Hope all is well, cheers!”

Fair points and worth thinking about.

For example. Do those industries taking up the “other half of a barrel” benefit? To what degree? For how long? And is the market pricing this?

All fun stuff which we spend all most of our time doing here.

Anyway, today I’ve got something special for you and it’s got nothing to do with EVs or gasoline.

Bitcoin and India Stack

It was Raoul Pal who first brought to my attention the incredible galactic sized project that is India Stack.

I’ve since spoken with quite a variety of people both in India and out in order to better understand the dynamics of what’s taking place in India. I think it provides a fascinating and illuminating view into how certain problems can be dealt with.

In particular (and I’ve not seen anyone mention this), the ability to recapitalise a banking system on the brink and to do so while transitioning over a billion citizens onto a digital system.

Pre-cash elimination, India’s banks were in a shocking state. What better way to “fix” them than to get the poor to bail them out.

Ever since man began forming communities, we’ve had a setup where those at the top manufacture ways and means to have those at the bottom pay for the things they want.

Kings told stories about their “divine rights”, people believed it, priests told stories about the church’s relationship with God, people believed it. And today politicians tell stories about “the greater good”… and people believe it. Some things never change.

Aside from the banking system being recapitalised…

It’s been fascinating to watch what was up until recently one of the world’s largest cash economies and where millions never even had a bank account suddenly goes digital.

So there were two steps here.

The first being the elimination of cash in the economy, and the second bringing online the digital platform otherwise known as IndiaStack, an open source platform where information is a utility.

The set of open API for developers includes:

• The Aadhaar for authentication
• The e-KYC documents that have been generated
• Digital lockers
• e-signatures (software based as against the present dongle based e-signs)
• The Unified Payments Interface which rides on top of the National Payment Corporation of India’s Immediate Payment System.

You can check out a presentation which provides a decent overview of it here.

I’ve spoken with a lot of guys who see this as being a major boon for India’s economy, eliminating fraud, destroying swathes of bureaucracy, and bringing millions of people into the economy who previously never had access.

I don’t disagree with any of this, but what I wanted to do was to find someone who wasn’t very bullish, someone who would challenge some of these thoughts. And with that in mind, I found and spoke to Deepankar Kapoor.

Deepankar Kapoor – as you can probably infer from his name – is not only Indian but he’s also the founder of Bitcoinwiser, a well known face in the digital advertising industry in India with his most recent stint being as the Vice President & National Strategy Head at Ogilvy India.

He has 9+ years of full time recognised experience in digital business transformation of Fortune 500 brands and won many accolades throughout his career. Academically, he holds an MBA from University of Calcutta wherein he majored in Marketing [Forecasting & Econometrics], BMS from Symbiosis International University and a Diploma in Cyber Laws from the Government Law College, Mumbai. Additionally, he is a Google and Twitter Certified Professional.

You can listen to our conversation below. I apologise for the dodgy line at times – Kenyan Wi-Fi isn’t the best in the world.

And a Question for This Week

Cast your vote here and also see what others think

– Chris

“Change is opportunity.” — Suresh Prabhu, Union Minister for Commerce

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