FedEx Pilot Arrested In China; Accused Of Illegally Transporting Ammunition
A FedEx pilot was arrested in the southern Chiense city of Guangzhou last week after flying deliveries throughout Asia from the Guangzhou airport, according to the Wall Street Journal.
A FedEx Express airliner at Hong Kong International Airport. Chinese authorities detained a FedEx pilot at the company’s regional hub at China’s Guangzhou airport. PHOTO: ALEXANDER SHCHERBAK/ZUMA PRESS
Todd A. Hohn, a former US Air Force pilot, was waiting to catch a commercial flight on Cathay Dragon airlines to his home in Hong Kong on September 12 when he was detained by authorities and accused of carrying “nonmetallic pellets used in low-power replica air guns” in a checked bag. Chinese authorities say he was illegally transporting ammunition – and have launched a criminal investigation, according to the report.
The detention comes as FedEx faces other investigations in China amid tense U.S.-China trade talks. Mr. Hohn was detained Sept. 12 by Chinese security officials who escorted him from a preboarding executive lounge, interviewed him at one of their facilities and retained his passport, cellphone and other communication devices, the people said.
Mr. Hohn was later moved to a hotel, and has been told he isn’t allowed to leave mainland China until the investigation concludes, the people familiar with the matter said. –Wall Street Journal
China has strict laws governing firearms, and the Journal notes that “it is potentially a criminal offense to possess airsoft guns, similar to BB pellet guns, which are sometimes sold by online retailers as toys,” but that it is “unclear that carrying airsoft pellets alone would be considered a violation.”
Reached briefly for comment at his hotel room on Thursday, Hohn referred all further questions to a family lawyer.
According to a FedEx union website, Hohn was part of a group of 21 relatively new pilots who joined the company – having been welcomed by a union membership committee on June 20, 2017. Hohn stepped down as commander of the 97th Air Mobility Wing at Altus Air Force Base in Oklahoma that same month.
In June, FedEx issued an apology after it misrouted packages from Huawei – including two which were sent to the company’s Memphis hub instead of to China after the shipper changed its internal systems to comply with new restrictions from the US Commerce Department.
Chinese officials launched an investigation after Huawei publicly complained.
Chinese police have since opened two investigations into FedEx. Last month, the Chinese police said they were investigating FedEx over the discovery of a gun in a package sent from the U.S. to China. FedEx said the incident dated back to June, and that it had notified the authorities about the shipment at the time. –Wall Street Journal
The company issued a second apology in June after a Huawei smartphone being shipped to the United States from the UK was returned to its sender, a British journalist.
And in early September, China’s state-run Xinhua News Agency reported that it had launched yet another probe after FedEX was suspected of illegally shipping knives to Hong Kong. FedEx claims that the shipment never left its city of origin and was promptly handed over to authorities.
All In: Masayoshi Son Has Pledged 38% Of His SoftBank Stake For Loans From 19 Different Banks
Japan’s richest man, Masayoshi Son, may be setting himself up for one of the most epic ponzi unwinds in history, and his juggling act between his personal fortune, SoftBank and SoftBank’s Vision Fund is starting to paint a picture of him as Elon Musk on steroids.
Just like Musk, the SoftBank founder has pledged a whopping 38% of his stake in the bank as collateral for personal loans from 19 different banks, including Credit Suisse and Julius Baer, according to Bloomberg. This brings Son’s pledged stake up 36% from the levels it was at to start the year and triples his pledged stake since June 2013. It also leaves him in extreme risk of an unprecedented margin call should Softbank stock tumble (which it won’t do for now, as the company is engaged in a furious buyback campaign as it piles ponzi upon ponzi).
Incidentally, Son’s pledged shares currently have a valuation of $9 billion.
Michael Puleo, assistant professor of finance at Fairfield University’s Dolan School of Business in Connecticut warned about the massive risk of a margin call: “It lets him monetize a large share of his wealth without foregoing influence over the firm.But there’s an elevation of crash risk. If the share price falls low enough, he could get a margin call and that could be pretty costly.”
By costly, he means Son would be wiped out, although considering Son should have been wiped out when the bursting of the first dot com bubble nearly ruined him, he certainly got some good mileage out of central bank generosity.
Needless to say, Son has huge exposure to SoftBank and to its $100 billion Vision Fund. Shares of SoftBank have been under pressure lately after WeWork’s planned $47 billion IPO was postponed and the company was rumored to be assigned new valuations between $10 billion and $20 billion.
SoftBank shares fell by 5% at one point this week, which knocked a cool $770 million off of Son’s net worth. The stock is still up 27% this year, which is entirely the result of the company buying back 112 million shares of stock, valued at $5.5 billion, which it has been doing since February.
Son has also leveraged his stake in the Vision Fund, which will amplify his losses or gains depending on how the fund’s portfolio of unicorns and unicorn-wannabes, like Uber, fare. WeWork’s recent IPO blowup will undoubtedly impact the fund’s 62% return that the Vision Fund reported through March.
Robert Pozen, a senior lecturer with the MIT Sloan School of Management in Boston said: “There is a danger in companies where the founder calls all the shots regardless of whether there are loans. And when founders borrow a lot against their shares, they might be more tempted to make riskier decisions.”
As Josh Wolfe conveniently noted on Twitter this morning, the Vision Fund’s track record and investor makeup has been anything but diversified. He wrote that of the $95 billion for the Vision Fund:
$25 billion came from SoftBank
$60 billion came from the Saudis and Abu Dhabi
$10 billion came from others (including $3 billion reportedly from Son himself)
He also noted that of the 80 investments the fund has made:
5 had IPOs
4 are below IPO price
Only 1 (Guardant Health) is up
And as if levering himself, levering SoftBank and levering the VisionFund wasn’t enough, SoftBank’s compensation also involves debt: Son loaned himself $3 billion to invest in the first Vision Fund, which further increases his risk if the entire clusterfuck begins to unwind.
The loan was reportedly swapped for equity in the fund and will generate profits for Son only when deals make money. Conversely, they will generate losses for Son when deals don’t work out. Vision Fund employees receive base salaries and bonuses, but also only get payouts when profits are booked. Meanwhile, SoftBank is also planning on lending as much as $20 billion to its employees to buy stakes in a second venture capital fund. Son is expected to account for half of the employee pool.
Son, who saw a massive $70 billion wiped from his fortune during the dot-com crash, told shareholders at the company’s June meeting that SoftBank’s investment portfolio could grow 33-fold to $1.8 trillion over the next 20 years.
We’ll take the under.
As for how this epic ponzi scheme ends, while we were only joking two weeks ago, this assessment is looking increasingly feasible:
A Chinese national pleaded guilty yesterday to federal criminal charges for running an Orange County-based “birth tourism” business that catered to wealthy pregnant clients and Chinese government officials, charging them tens of thousands of dollars to help them give birth in the United States so their children would get U.S. citizenship.
Dongyuan Li (李冬媛), 41, of Irvine, pleaded guilty to one count of conspiracy to commit immigration fraud and one count of visa fraud. Li was one of 19 defendants named in a series of indictments unsealed earlier this year. She is the first of the charged operators of birth tourism businesses to plead guilty. The remaining defendants either are pending trial or are fugitives.
Li admitted in her plea agreement that, from 2013 until March 2015, she operated a birth tourism company in Irvine and in China called ‘You Win USA Vacation Services’ Corp. You Win would assist pregnant foreign nationals – typically from China – to travel to and remain in the United States to give birth so their children would receive birthright U.S. citizenship, according to the plea agreement.
According to a January 2019 federal grand jury indictment against Li, You Win advertised that it had served more than 500 Chinese birth tourism customers seeking U.S. birthright citizenship for their children. The indictment details that Li used 20 apartments in Irvine, charged each customer between $40,000 and $80,000, and she received $3 million in international wire transfers from China in two years.
Some You Win customers coached by the company made false statements on their visa applications and to U.S. immigration officials, Li’s plea agreement states. Li also admitted that the customers were advised on how to pass the U.S. Consulate interview in China, including by falsely stating that they were going to stay in the United States for only two weeks, when in reality, they planned to stay for up to three months to give birth.
Li further admitted that her customers bypassed U.S. immigration controls by booking two flights – the first from China to Hawaii and the second from Hawaii to Los Angeles International Airport – because they thought it would be easier to clear U.S. Customs through Hawaii. Li’s customers also were coached how to trick U.S. Customs at ports of entry by concealing their pregnancies, according to the plea agreement.
In October 2013, Li made a $30,965 rent payment for Irvine apartments used in her birth tourism operation, and in November 2013, she made a $30,321 rent payment for those apartments, the plea agreement states.
As part of her plea agreement, Li agreed to forfeit more than $850,000, a Murrieta residence worth more than $500,000, as well as several Mercedes-Benz vehicles.
United States District Judge James V. Selna scheduled a Dec. 16 sentencing hearing, at which time Li will face a statutory maximum sentence of 15 years in federal prison.
This case was investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and IRS Criminal Investigation. The Irvine Police Department provided substantial assistance.
This case is being prosecuted by Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office.
Trump Sues Manhattan D.A. In Response To Subpoenas
And now a plot twist: with Trump under relentless attack for the past three years to disclose his tax returns, on Thursday morning the president struck back, suing Manhattan District Attorney Cyrus Vance to block an attempt by New York state prosecutors to obtain eight years of the president’s tax returns in a probe of whether the Trump Organization falsified business records.
“In response to the subpoenas issued by the New York County District Attorney, we have filed a lawsuit this morning in federal court on behalf of the President in order to address the significant constitutional issues at stake in this case,” Trump attorney Jay Sekulow said in a statement, according to Bloomberg.
The subpoena was issued by the Manhattan DA’s office last month following the launch of a criminal investigation into hush-money payments made to porn star Stormy Daniels (real name Stephanie Clifford) by former Trump attorney Michael Cohen – who pleaded guilty last year to eight charges; seven of which were unrelated to the Trump campaign, and one for breaking federal campaign finance laws. He is currently serving a three-year prison sentence.
Vance’s office wants to determine whether Trump’s accounting firm falsely accounted for Cohen’s reimbursements as a legal expense.
In New York, filing a false business record can be a crime.
But it becomes a felony only if prosecutors can prove that the false filing was made to commit or conceal another crime, such as tax violations or bank fraud. The tax returns and other documents sought from Mazars could shed light on whether any state laws were broken. Such subpoenas also routinely request related documents in connection with the returns. –New York Times
In July, Trump sued House Democrats, along with New York AG Letitia James and NY tax commissioner Michael Schmidt in an effort to block them from releasing his tax returns.
In June, New York Gov. Andrew Cuomo signed the TRUST Act – which permits tax officials to turn over Trump’s state tax returns to any or all of t hree congressional committees. In his July lawsuit, Trump alleged that the House Ways and Means Committee’s invocation of the Trust act would “lack a legitimate legislative purpose,” adding that the law violates the First Amendment since the state of New York “enacted it to discriminate and retaliate against President Trump for his speech and politics.”
That said, while Trump and the Treasury Department have proven thus far successful in thwarting Democratic lawmakers’ inquiries, it may not be as easy to fend off a subpoena in Manhattan.
According to Trump’s accounting firm Mazars, they will “will respect the legal process and fully comply with its legal obligations,” adding that the company was legally prohibited from commenting on its work.
If the Manhattan DA is able to obtain Trump’s tax returns, the Times notes that “the documents would be covered by secrecy rules governing grand juries, meaning they would not become public unless they were used as evidence in a criminal case.”
In the aftermath of the tightest election that Israel has seen in a long time, headlines all over the world are boldly declaring that “the Netanyahu era is over”. But that is not necessarily true. At this point it is going to be exceedingly difficult for anyone to put together a governing coalition, and as I will explain in this article, there are still a couple of ways that Benjamin Netanyahu could hold on to power. This is a drama that is probably going to take an extended period of time to unfold, and Avigdor Lieberman is in the catbird seat. The decisions that he makes in the coming days are going to be absolutely critical.
Let’s start by talking about the election results. With over 90 percent of the vote counted, the Blue and White party (Kahol Lavan) and Likud have almost the same number of seats…
With 91 percent of the votes counted, Kahol Lavan has won 32 out of 120 Knesset seats, with Likud behind with 31 seats. Netanyahu’s bloc, comprised of right-wing and ultra-Orthodox parties, currently stands at 55 seats. The center-left bloc has 56 seats.
Avigdor Lieberman, whose Yisrael Beiteinu party is projected to have nine seats, is expected to be the election’s kingmaker. On Wednesday morning, he reiterated his support for a “broad liberal unity government,” which would include Yisrael Beiteinu, Likud and Kahol Lavan.
It may look like the Blue and White Party is just a few seats away from establishing a governing coalition, but that is not true at all.
The “56 seats” projected above includes the 13 seats won by the Joint List of Arab parties, and Benny Gantz has already ruled out any coalition that includes them.
Plus, if Gantz tried to include them in any coalition, he would immediately lose any hope of attracting Lieberman.
So at this point, it appears exceedingly unlikely that Gantz can get to the 61 seats that he needs to become the prime minister.
Prime Minister Benjamin Netanyahu on Wednesday canceled a visit to the United Nations General Assembly in New York next week amid political uncertainty in Israel, where he appeared to fall short of a government majority in national elections.
With just 55 seats, Netanyahu’s coalition is 6 seats short of a governing majority, and so the answer would seem to be to pull in Avigdor Lieberman’s Yisrael Beiteinu party.
But Lieberman and Netanyahu had a major falling out last November when Netanyahu refused to go to war with Hamas. Lieberman promptly resigned as defense minister, and he now says that he will not join any coalition if Netanyahu is the prime minister.
Things certainly look bleak for now, but could it be possible that Netanyahu could find a way to repair that relationship?
Maybe, but he would almost certainly have to give Lieberman just about everything that he wants, and that would include a military invasion of Gaza. Lieberman is literally holding Netanyahu’s political future in his hands, and he knows it. He may never have this sort of leverage ever again, and Lieberman is the sort of politician that will squeeze as much juice out of this moment as he possibly can.
If Netanyahu can persuade Lieberman to join his coalition, and that is a very big “if”, then Netanyahu will get another term as prime minister.
The other way that Netanyahu could remain prime minister is if nobody is able to form a coalition and another election is held a few months from now.
A lot can change in a few months, and Netanyahu could try to rectify the mistakes that he made this time around. In an article that he posted before the election, Jerry Golden explained why so many conservative Israelis are upset with Netanyahu…
A lot of Israelis are very upset with Netanyahu for not taking out Hamas after the last 700 missiles fired into our civilian population from Gaza. He knows he is in trouble and many of us here are very concerned that because of the dissatisfaction with him the liberals will win the election tomorrow.
He is now saying if he wins he will annex all the land of Judea and Samaria and even Hebron, along with the Jordan Valley. The problem is he has had around ten years to do all these and didn’t. Now many believe it is just out of desperation that he is saying these things “again”.
If no governing coalition is formed, Netanyahu could theoretically use the time period before the next election to conduct a military invasion of Gaza. This would win him back a large number of conservative votes, and that might be enough to propel him to another term as prime minister.
In any event, it appears that a military invasion of Gaza is probably coming sooner rather than later, and that means that our relationship with Israel is likely to be a very hot political issue during the 2020 U.S. election cycle.
Unfortunately, anti-Semitism is on the rise all over the nation. In fact, one recent study found that anti-Israel attitudes are rising dramatically on our college campuses…
Direct targeting of Israel’s supporters for harm, especially Jewish students, reached alarming rates: acts accusing Jewish and pro-Israel students of supporting racism, genocide and other evils more than doubled; 47% increase linking Jewish and pro-Israel students to “white supremacy”; attempts to exclude Jewish and pro-Israel students from campus activities more than doubled, with expression calling for the total boycott or exclusion of pro-Israel students from campus life nearly tripling.
Israel is roughly the size of New Jersey, it has a population of less than 10 million people, and yet it is constantly at the center of the world’s attention. Millions upon millions of people greatly love Israel, millions upon millions of people greatly hate Israel, and it is going to play a critical role in the global drama that is currently unfolding all around us.
And as this drama continues to play out in the years ahead, it is entirely possible that Benjamin Netanyahu will still be the prime minister.
We shall see what happens during the coming days, but the truth is that this game is far from over.
Third Image Surfaces Of Trudeau Wearing ‘Blackface’
Following last night’ revelation that Canadian Prime Minister Justin Trudeau wore ‘brownface’ during a yearbook photo from a school he taught at until 2001, several other photos and video purporting to show the PM in ‘black/brownface’ have been unearthed by the press. The most recent to hit is a video showing what appears to be a high school-aged Trudeau wearing what looks like head to toe ‘blackface’ makeup.
During an apology released last night, Trudeau confessed that he had worn the ‘makeup’ on several other occasions, and that there might be other images, including snaps from a high school talent show where Trudeau sang Harry Belafonte’s “the Banana Boat Song (Day Oh)” in blackface.
After the corruption scandal involving SNC-Lavalin broke, Trudeau’s poll ratings slid, but they haven’t moved much from lows they reached earlier this year.
Trudeau and his Liberal Party are still tied with the Conservatives, with 34% of the vote each, according to the latest poll (which, of course, took place before the scandal was made public).
As one twitter wit pointed out, Trudeau probably should have worked up a better strategy for getting this news in front of the public.
My big takeaway from the Justin Trudeau controversy: if you’re the leader of a Western democracy who has starred in 50 or 60 minstrel shows, it’s probably best to get that out before the media twists it all out of proportion
The video, obtained exclusively by Global News shows Trudeau covered in what appears to be ‘blackface’ makeup raising his hands in the air while laughing, sticking his tongue out and making faces. He’s wearing a white T-shirt, and his jeans are ripped at the knees. The extremely childish display was made worse by the fact that Trudeau’s limbs, including his arms and legs, are also covered in makeup.
The video doesn’t appear to be have been shot at the same location as where the other photos were taken.
This is the third image of him to be verified by the Liberal Party’s comms department.
The Liberal party referred Global News to his Wednesday night apology when asked about the new video.
Trudeau apologized Wednesday, saying that at the time, he didn’t think his actions were racist. Now, he said, he recognizes wearing brownface is racist and regrets his actions.
“I shouldn’t have done that,” he said. “I should have known better but I didn’t and I’m really sorry.”
Another photo has been produced of Trudeau in the ‘Arabian Nights’ getup that was reportedly found in an old school newspaper.
In the second photo, Trudeau has his arms around what appears to be two Sikh colleagues.
Then, of course, there’s the original, where three lovely ladies are flanking Trudeau, who is apparently reveling in his status as the PM’s son.
NDP Leader Jagmeet Singh made an emotional statement after the first photo was made public, bashing Trudeau for his offensive comments.
Singh said it’s up to Canadians, not him, to decide whether Trudeau deserves forgiveness.
“I have to really point out what we’re seeing now is an ongoing pattern of behavior that’s really going to hurt Canadians,” he said. “They’re going to see the prime minister mocking the realities that so many Canadians live with. And it is not a joke.”
Democrats Smell Blood After Whistleblower Says Trump Made Troubling ‘Promise’ To Foreign Leader
Congressional Democrats led by Rep. Adam Schiff are salivating over an August 12 whistleblower complaint by an intelligence officer over a ‘troubling promise’ President Trump allegedly made to a foreign leader during a phone call.
It is not clear which foreign leader Trump was speaking with, or what was promised, according to the Washington Post – however the complaint itself has given the president’s opponents a brand new ‘gotcha’ to chase in their quest to bring Trump down.
What’s more, acting director of national intelligence Joseph Maguire has been refusing to share details about the phone call with lawmakers.
Intelligence Community Inspector General Michael Atkinson determined that the complaint was credible and troubling enough to be considered a matter of “urgent concern,” a legal threshold that requires notification of congressional oversight committees.
And as NBC News reports, over the last several days “the secret whistleblower complaint has been the subject of an increasingly acrimonious standoff between the acting intelligence chief and Schiff, who has demanded Maguire’s testimony and a copy of the complaint.”
Maguire has agreed to testify publicly next week, Schiff announced Wednesday, saying in a statement that the Inspector General “determined that this complaint is both credible and urgent,” adding “The committee places the highest importance on the protection of whistleblowers and their complaints to Congress.”
The matter burst into public view Friday, when Schiff disclosed that an unspecified whistleblower complaint had been filed with the inspector general of the intelligence community, but was being withheld from his committee. That independent watchdog deemed the matter an “urgent concern” that he was required by law to turn over to the congressional intelligence committees.
But Maguire, after consulting with the Justice Department, overruled him, according to a series of letters between a DNI lawyer and Schiff that have been made public. –NBC News
According to Schiff, withholding the information from the House Intelligence Committee he chairs is illegal – and has raised questions over a potential coverup.
Piecing it together:
The Washington Post noted in their report that President Trump had conversations or interactions with “at least five foreign leaders in the preceding five weeks,” including a call with Russian President Vladimir Putin on July 31.
In fact, here’s Trump’s schedule since June 11, per the Post(which is absolutely creaming in their pencil-fit jeans over this story right now).
***
June 11: Trump says he has received another “beautiful” letter from Kim. Trump also responds to news that Kim’s assassinated half brother was a CIA asset by saying he would tell Kim, “I wouldn’t let that happen under my auspices.”
June 18: Trump holds a call with Chinese President Xi Jinping about the ongoing U.S.-China trade war.
June 27-29: Trump attends the Group of 20 summit in Osaka, Japan. There, he holds bilateral meetings with foreign officials including Xi, Russian President Vladimir Putin, Saudi Crown Prince Mohammed bin Salman, Turkish President Tayyip Erdogan, German Chancellor Angela Merkel, Indian Prime Minister Narendra Modi, Australian Prime Minister Scott Morrison, Brazilian President Jair Bolsonaro and Japanese Prime Minister Shinzo Abe.
June 30: Trump meets with Kim in the demilitarized zone and briefly becomes the first sitting U.S. president to set foot on North Korean soil.
July 1: Trump holds a phone call with French President Emmanuel Macron, which covers topics including Iran, the G-20 and Trump’s meeting with Kim, according to a readout from the White House.
July 9: Trump meets with the emir of Qatar, Tamim Bin Hamad Al Thani
July 18: Trump meets with Netherlands Prime Minister Mark Rutte.
July 22: Trump meets with Pakistan Prime Minister Imran Khan.
July 31: Trump holds a phone call with Putin. The call is first reported by the Russians. The White House doesn’t confirm it till late that evening, saying Trump “expressed concern over the vast wildfires afflicting Siberia” and, “The leaders also discussed trade between the two countries.” The Russians, in a much more substantial readout, claim Trump and Putin also spoke about restoring full relations one day.
July 31: Trump meets with President Khaltmaagiin Battulga of Mongolia.
Aug. 2: The United States officially withdraws from the Intermediate-range Nuclear Forces (INF) Treaty with Russia, as had been previously announced.
Aug. 2: Trump announces a trade deal alongside European Union leaders Stavros Lambrinidis (the E.U. ambassador to the United States) and Jani Raappana (deputy head of mission for the Finnish presidency of the Council of the E.U.).
Aug. 8: After Trump’s pick of Rep. John Ratcliffe (R-Tex.) to replace Coats falls through, Trump announces Joseph Maguire would take on the role in an acting capacity. In doing so, he bypassed Sue Gordon, who had been Coats’s No. 2 at DNI and was a career intelligence official with bipartisan support. Gordon would also resign.
Sept. 13: House Intelligence Committee Chairman Adam B. Schiff (D-Calif.) subpoenas Maguire to compel him to disclose the whistleblower complaint. Schiff says the complaint was determined to be “credible” by Intelligence Community Inspector General Michael Atkinson, but doesn’t say much more.
Existing Home Sales Rise At Fastest Rate In Over 2 Years
On the heels of tumbling mortgage rates, existing home sales jumped 1.3% MoM in August (notably better than the expected 0.7% drop) pushing the annual rise to +2.6% – the biggest rise in sales since May 2017.
Source: Bloomberg
This is the highest level of existing home sales SAAR since March 2018.
Source: Bloomberg
And all this as the median home price rose 4.7% from last year to $278,200 as multi-family units led the rise in sales (+1.7% MoM) vs +1.2% MoM for single-family homes.
The question is – how sustainable is this improvement given the carnage in bond markets in September?
Former Overstock CEO Byrne Dumps $90 Million Stock Gains Into Gold, Crypto “Out Of Reach Of Deep State”
After falling out of favor with shareholders over his company’s poor stock performance, comments about the “deep state” and his alleged relationship with Russian honeypot Marina Butina, Overstock CEO Patrick Byrne announced his resignation weeks ago.
And now, it looks like Byrne has finally checked out completely: on Wednesday after hours, he filed a Form 4 showing that he had sold his entire ~$90 million stake in the company into the stock’s recent squeeze as lending desks struggled to figure out how to handle the company’s recently proposed “digital dividend”.
His Form 4 showed that he sold about 4.8 million shares over the course of the past three trading sessions. His remaining 87,000 shares were given as a gift to an undisclosed recipient.
Then, in a blog post on his site Deep Capture, Byrne blamed the SEC, who he called “the Deep State’s pets”, according to MarketWatch.
The “digital dividend” that Byrne left in his wake to his shareholders could only be accessed through Overstock’s blockchain based exchange and required the holder to retain the asset for 6 months. Many thought it was an attempt to squeeze shorts and, if it was, it worked. Overstock stock shot from about $15 on September 4 to a high of almost $30 on September 13 as shorts covered in an attempt to avoid having to deal with the dividend.
But on Wednesday, Overstock had to walk back some of their plans, announcing that the dividend would be freely tradable upon its issue. The company suggested that the change was a reaction to “feedback we received from industry participants, investors and regulators.” The company also moved back the date of the distribution and promised to announce a new record date in 3 to 6 weeks.
On his blog, Byrne said that the pressure to change the digital dividend came from the “Deep State’s pets”:
“We heard over the weekend that starting last Friday, the Deep State’s pets at the SEC began leaking something to their clients JPMorgan, Morgan Stanley, and Goldman (and here as citizens I bet you thought we were their clients, right? lol). They leaked that they were going to Bazoomba our digital dividend. Once that started getting back to me, I realized this: Whenever I have had any question about whether the SEC would or would not do something totally outrageous in order to hurt our company to benefit their clients on Wall Street, they never let me down: they always did the evil thing.”
Byrne said the assertion that he sold his shares due to lack of confidence in the company was “wrong” and said he would be using his newfound riches to invest in gold, silver and two unnamed cryptocurrencies as a “hedge” against the economy failing. He also promised that if Overstock failed due to the broader economy failing, that he would use his gains from his hedges to recapitalize the company.
“…after paying tens of millions in taxes (after all, “We didn’t build that,” right?) by Friday the rest will be in investments that are counter-cyclical to the economy: Gold, silver, and two flavors of crypto. The gold and silver are stored outside of the United States, in Switzerland, and within two weeks, will be scattered in other locations that are even more outside of the reach of the Deep State, but are places that are safe for me.
The crypto is stored in the place where all crypto is stored: in mathematical mist, behind long keys held only in the memory of someone who is quite good at storing such things in memory (with paper backups in the hands of a priest I met 35 years ago who never sits foot in the West). “
These acts, Byrne continued, accomplish a critical obvjective:
”You will have not just access to capital, you will have access to the friendliest capital imaginable: my own. I have to wait six months for it to be legal, but anytime after March 17, 2020 I can provide a capital injection if needed by buying back into Overstock. Please remember that as you watch the global chaos.”
Meanwhile, the SEC has had an ongoing investigation into Overstock’s tZero blockchain subsidiary and its token security offering since February 2018. Overstock disclosed in May that the SEC had expanded its investigation to include certain public statements made by the company.
“Only those that risk going too far can possibly find out how far one can go.”– T.S. Eliot
Well, this certainly seems to be the path that the Federal Reserve, and global Central Banks, have decided take.
Yesterday, the Fed lowered interest rates by a quarter-point and maintained their “dovish” stance but suggested they are open to “allowing the balance sheet to grow.” While this isn’t anything more than just stopping Q.T. entirely, the markets took this as a sign that Q.E. is just around the corner.
That expectation is likely misguided as the Fed seems completely unconcerned of any recessionary impact in the near-term. However, such has always been the case, historically speaking, just before the onset of a recession. This is because the Fed, and economists in general, make predictions based on lagging data which is subject to large future revisions. Regardless, the outcome of the Fed’s monetary policies has always been, without exception, either poor, or disastrous.
“In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became ‘active,’ monetarily policy-wise, in the late 70’s. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the 2-year rate, bad ‘stuff’ has historically followed.”
The idea of pushing limits to extremes also applies to stock market investors. As we pointed out on Tuesday, the risks of a liquidity-driven event have increased markedly in recent months. Yet, despite the apparent risk, investors have virtually “no fear.”(Bullish advances are supported by extremely low levels of volatility below the long-term average of 19.)
“First, “record levels” of anything are records for a reason. It is where the point where previous limits were reached. Therefore, when a ‘record level’ is reached, it is NOT THE BEGINNING, but rather an indication of the MATURITY of a cycle. While the media has focused on employment, record stock market levels, etc. as a sign of an ongoing economic recovery, history suggests caution.”
In the “rush to be bullish” this a point often missed. When markets are hitting “record levels,” it is when investors get “the most bullish.” That is the case currently with retail investors “all in.”
Conversely, they are the most “bearish” at the lows.
It is just human nature.
“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.” – T.S. Eliot
The point here is that “all things do come to an end.” The further from the “mean” something has gotten, the greater the reversion is going to be. The two charts below illustrate this point clearly.
Bull markets, with regularity, are almost entirely wiped out by the subsequent bear market.
Despite the best of intentions, market participants never act rationally.
Neither do consumers.
The Instability Of Stability
This is the problem facing the Fed.
Currently, investors have been led to believe that no matter what happens, the Fed can bail out the markets and keep the bull market going for a while longer. Or rather, as Dr. Irving Fisher once uttered:
“Stocks have reached a permanently high plateau.”
Interestingly, the Fed is dependent on both market participants, and consumers, believing in this idea. As we have noted previously, with the entirety of the financial ecosystem now more heavily levered than ever, due to the Fed’s profligate measures of suppressing interest rates and flooding the system with excessive levels of liquidity, the “instability of stability” is now the most significant risk.
The “stability/instability paradox” assumes that all players are rational and such rationality implies an avoidance of complete destruction. In other words, all players will act rationally, and no one will push “the big red button.”
The Fed is highly dependent on this assumption as it provides the “room” needed, after more than 10-years of the most unprecedented monetary policy program in U.S. history, to try and navigate the risks that have built up in the system.
Simply, the Fed is dependent on “everyone acting rationally.”
Unfortunately, that has never been the case.
The behavioral biases of individuals is one of the most serious risks facing the Fed. Throughout history, as noted above, the Fed’s actions have repeatedly led to negative outcomes despite the best of intentions.
In the early 70’s it was the “Nifty Fifty” stocks,
Then Mexican and Argentine bonds a few years after that
“Portfolio Insurance” was the “thing” in the mid -80’s
Dot.com anything was a great investment in 1999
Real estate has been a boom/bust cycle roughly every other decade, but 2006 was a doozy
Today, it’s ETF’s and “Passive Investing,” and levered credit.
As noted Tuesday, the risk to this entire house of cards is a credit-related event.
“Anyone wonder what might happen should passive funds become large net sellers of credit risk? In that event, these indiscriminate sellers will have to find highly discriminating buyers who–you guessed it–will be asking lots of questions. Liquidity for the passive universe–and thus the credit markets generally–may become very problematic indeed.
The recent actions by Central Banks certainly suggest risk has risen. Whether this was just an anomalous event, or an early warning, it is too soon to know for sure. However, if there is a liquidity issue, the risk to ‘uniformed investors’ is substantially higher than most realize.
Risk concentration always seems rational at the beginning, and the initial successes of the trends it creates can be self-reinforcing. That is, until suddenly, and often without warning, it all goes “pear\-shaped.”
In November and December of last year, it was the uniformity of the price moves which revealed the fallacy “passive investing” as investors headed for the door all at the same time. While, that rout was quickly forgotten as markets stormed back to all-time highs, on “hopes” of Central Bank liquidity and “trade deals.”
The difference today, versus then, are the warning signs of deterioration in areas which pose a direct threat to everyone “acting rationally.”
“While yields going to zero] certainly sounds implausible at the moment, just remember that all yields globally are relative. If global sovereign rates are zero or less, it is only a function of time until the U.S. follows suit. This is particularly the case if there is a liquidity crisis at some point.
It is worth noting that whenever Eurodollar positioning has become this extended previously, the equity markets have declined along with yields. Given the exceedingly rapid rise in the Eurodollar positioning, it certainly suggests that ‘something has broken in the system.’”
Risk is clearly elevated as the Fed is cutting rates despite the “economic data” not supporting it. This is clearly meant to keep everyone acting rationally for now.
The problem comes when they don’t.
The Single Biggest Risk To Your Money
All of this underscores the single biggest risk to your investment portfolio.
In extremely long bull market cycles, investors become “willfully blind,” to the underlying inherent risks. Or rather, it is the “hubris” of investors they are now “smarter than the market.”
Yet, the list of concerns remains despite being completely ignored by investors and the mainstream media.
Growing economic ambiguities in the U.S. and abroad: peak autos, peak housing, peak GDP.
Political instability and a crucial election.
The failure of fiscal policy to ‘trickle down.’
An important pivot towards easing in global monetary policy.
Geopolitical risks from Trade Wars to Iran
Inversions of yield curves
Deteriorating earnings and corporate profit margins.
Record levels of private and public debt.
More than $3 trillion of covenant light and/or sub-prime corporate debt. (now larger and more pervasive than the size of the subprime mortgages outstanding in 2007)
For now, none of that matters as the Fed seems to have everything under control.
The more the market rises, the more reinforced the belief “this time is different” becomes.
Yes, our investment portfolios remain invested on the long-side for now. (Although we continue to carry slightly higher levels of cash and hedges.)
However, that will change, and rapidly so, at the first sign of the “instability of stability.”
Unfortunately, by the time the Fed realizes what they have done, it has always been too late.
