Month: October 2021

By Tony Pasqsuariello, Goldman Sachs’ head of Hedge Fund Sales in US Equity Derivatives,

The key story over recent weeks has been a nascent return of the reflation theme. To be sure, price action across the macro complex hasn’t been subtle — be it higher rates, another charge higher in commodities or the searing outperformance of cyclicals over growth stocks — yet, this is a different scene from the high velocity days of November through March.

Whereas the franchise dialogue then was characterized by hopes for unbounded fiscal spending, a sincere Fed commitment to the AIT framework and blockbuster payrolls prints … the recent story line has centered more on the FOMC taking their first clear step towards normalizing policy, energy markets contending with some very serious supply-and-demand issues and positioning/mis-positioning.

That said, where you can find common ground between the two episodes is around the biggest fundamental variable in the markets: the interplay between COVID and global economic activity.

Amidst all the noise and cross-currents and debate around first derivatives vs second derivatives, the fact is this: the global economy is firing on more cylinders today than at any point in the COVID era.

For example, witness the GS Effective Lockdown Index, which trends in the right direction and clearly identifies a recent inflection from the Delta impingement — taking the index to its easiest level since the early days of the pandemic.

Here’s another framing from long-time colleague Dominic Wilson: “for me the big difference is that last year it was about large, new positives — now it’s about removal of some downside stuff against a slowing trend so it’s all a bit more tactical. and, the upside tails aren’t really being restored.”

Looking ahead, here’s where I come out, taker of feedback:

1. Point-to-point, there’s been no better horse in the reflation race than commodities — and, if the first point in the section below is correct, for medium-term investors, that could well remain the case.
2. It’s not totally obvious to this stock operator where the bond market goes from here. given the inflation debate, I do think the asymmetry is skewed towards higher rates than lower rates. the house view continues to be 1.60% on 10-year notes at year end, with an ultimate path to 2.50% (link).
3. Given that point on rates, it’s also not clear to me that you’re supposed to be sliding all of your chips from secular winners to cyclicals; I’d prefer to keep an ongoing balance there, while overtly avoiding the bond proxies. said another way: cyclicals-over-defensives is a clearer axis to me than value-over-growth.
4. On S&P more broadly, as we approach a very strong seasonal period, I continue to believe the path of least resistance is higher. at the same time, I also suspect we’ll be living with a higher base level of volatility for a while — with that comes a choppier trading environment where the bulls get paid by adding exposure on dips.
5. If global central banks are getting out of the bond buying business, one can expect it will happen at different speeds and with different exit strategies. as a crafty client suggested, from a very boring starting point, this should open the door to a better opportunity set in FX trading. note, quietly, DXY has made YTD highs.

Several other quick points, charts:

1. Commodities: another week, another higher high in BCOM, with an eye-popping sequence in the European power markets. In the GIR upgrade to our oil forecast, I found it a little interesting they touched up YE’21 Brent from 80 to 90 … I found it more interesting that the 2023 bogey moved from 65 to 85 (link).

2. The Fed: from an arguably absurd starting point, last week marked the first step towards a glide path — if a very long path — to something resembling policy normalization. I looked back at the ’04-’06 analog: the Fed hiked rates 17 times, they were most perfectly predictable in doing so, and market volatility collapsed along the way. while I imagine they’d be happy with a similar outcome, again my instinct is that analog may not apply all over again.

3. Japan: it’s a big week for the ever pivotal Japanese election cycle, with an outcome that skews as generically market friendly. coupled with a much better outlook for COVID and the reset in global interest rate curves, the bullish house call for Japanese equities still aligns with my instincts: link.

4. China: GIR published an eye opening note on their property market (link). at 20% of GDP and 62% of household wealth, thus totaling $60tr, one can argue it’s the largest asset class in the world (btw, am I the only person who didn’t realize that).

5. From the 2017 market journal, when S&P never traded negative at any point in the year en route to a 22% total return and a 3 Sharpe:

• i. “maybe someday we’ll look back and be astounded that central banks bought $14tr bonds. or, maybe, they will still be buying.” note that since last March, the big four central banks have bought another ~ $5.5tr.
• ii. with updates: “in the 20th century, the Dow went from 66 to 11,497 (a gain of 17,320%). in the 21st century, the index is up a further 402%.”
• iii. with updates: “total returns since the ’04 IPO: Alphabet/Google + 6,312% … Domino’s Pizza + 7,148%.”
• iv. “remember, 10% of cumulative alpha per year breaks down to … 4 bps per trading day.”
• v. while not for deployment in this email, “data shows there’s a positive correlation between swearing and perceptions of honesty.”

6. When the market is trading at multiples not seen outside of the tech bubble, it’s fair to wonder if one of the big challenges is priced-to-perfection risk? I asked Ben Snider in GIR to zoom in a bit on valuation in the context of the COVID era. the sequence has been interesting: since the market bottomed last March, only 32% of the rally has been driven by earnings … the balance of 68% was re-rating of the multiple. that said, since the vaccine announcements last November, the entirety of the rally has been driven by earnings:

7. This is one of those big picture charts that doesn’t inform your risk taking in the short-term, but perhaps says a lot about the world in a broader sense. With credit to Peter Oppenheimer and team in GIR, this contextualizes just how big US mega cap tech companies are relative to the GDP of various large countries and indices:

8. Following on from there … again with credit to Ben Snider … this a very simple snapshot of annual total returns in the FAAMG complex post-GFC … for all of the local turbulence of recent weeks, I still think there’s a lot to like here long-term:

9. To level set positioning in the hedge fund community, this lays out the recent history in both gross exposure (left side) and net exposure (right side). While I am very aware that US households have gone whole-hog into stock market, the professional trading community is, by contrast, relatively sober in current risk taking. As someone put it to me: there’s lots of optimism, but lots of cash … That’s not how bull markets usually end.

CDC Director Rochelle Walensky said last week that Covid vaccines ‘can’t prevent transmission‘ anymore despite working “exceptionally well.”

“Our vaccines are working exceptionally well. They continue to work well for Delta with regard to severe illness and death – they prevent it, but what they can’t do anymore is prevent transmission,” she told CNN‘s Wolf Blitzer. “So if you’re going home to someone who is not vaccinated…I would suggest you wear a mask in public indoor settings,” she continued.

CDC director Rochelle Walensky says that the vaccine *cannot* prevent transmission. So why are all these Pro-Vaxxers saying that it can? pic.twitter.com/8aaDTh8N3T

— Anthony Brian Logan (ABL) 🇺🇸 (@ANTHONYBLOGAN) October 2, 2021

That said, Walensky may have actually undersold the vaccines. According to a preprint study by British scientists at the University of Oxford, people who have taken AstraAeneca’s Covid-19 vaccine and contract the virus are just as likely to spread it as the unvaccinated after 90 days, while the Pfizer vaccine’s ability to reduce transmission is “substantially” reduced over the same period, according to the records of nearly 150,000 contacts that were traced from approximately 100,000 initial cases.

As NBC News reports, “The samples included people who were fully or partially vaccinated with either the Pfizer-BioNTech (BNT162b2) or the AstraZeneca (ChAd0x1) vaccines, as well as people who were unvaccinated. The researchers then looked at how the vaccines affected the spread of the virus if a person had a breakthrough infection with either the alpha variant or the highly contagious delta variant.” Of note, both vaccines were more effective against the Alpha variant.

Initially, both vaccines reduced transmission from a fully vaccinated person to a given contact. Specifically, if a vaccinated individual is infected with the Delta variant, a given contact was 65% less likely to test positive if the infected had two doses of the Pfizer vaccine, and 36% less likely with AstraZeneca.

Yet, buried in the 14th paragraph of the report, NBC News notes:

The new study showed that protection against transmission seemed to wane over time, however. After three months, people who had breakthrough infections after being vaccinated with AstraZeneca were just as likely to spread the delta variant as the unvaccinated. While protection against transmission decreased in people who had received the Pfizer vaccine, there was still a benefit when compared with people who were unvaccinated.

In the words of the researchers, the Pfizer vaccine’s ability to reduce transmission was ‘substantially’ lower by week 12.

They also found that while the Pfizer vaccine was superior in reducing transmission to contacts, protection against Covid-19 in the first place waned faster vs. AstraZeneca.

As for where people are coming into contact with the infected – the study found that 70% occurred within households, 10% from household visitors, 10% at ‘events and activities,’ and 10% at work or school.

What does this mean for the holidays? According to Dr. Anthony Fauci, it’s ‘too soon to tell’ whether people can safely gather together for Christmas this year.

HOLIDAY LOOKAHEAD: “It’s just too soon to tell,” Dr. Anthony Fauci tells @margbrennan when pressed whether or not people can safely gather together for Christmas this year.

He says the country should instead concentrate on getting COVID cases down. pic.twitter.com/ey0ft9aCOh

— Face The Nation (@FaceTheNation) October 3, 2021

But you can “safely gather” 1000s for the Met gala or 900 at Obama’s birthday party? Fuck this guy. https://t.co/cRdLGaupap

— Stalingrad & Poorski (@Stalingrad_Poor) October 3, 2021

And why aren’t US officials acknowledging naturally acquired immunity?

The big issue with natural immunity is that nobody gets rich.

— Robert J. O’Neill (@mchooyah) October 2, 2021

With all the mixed messaging, is anyone really shocked at the widespread ‘vaccine hesitancy’ among healthcare professionals?

As the Babylon Bee jokes:

By Michael Every, CIO of One River Asset Management

“Is it your intention to ban or limit the use of cryptocurrencies, like we’re seeing in China?” asked Ted Budd, Republican congressman from North Carolina. “No,” replied Fed Chairman Jay Powell. “No intention to ban them?” asked Budd again. “No intention to ban them, but stablecoins are like money market funds, they’re like bank deposits; they’re to some extent outside the regulatory perimeter, and it’s appropriate that they be regulated,” answered Powell. And as it sunk in that the world’s largest economy would not chase China to stifle private sector innovation in the field of blockchain technology, digital assets prices surged

Getting Real

The US dollar is the world’s reserve currency. 59.2% of all official foreign exchange reserves are held as US dollars. 20.5% are euros. 5.8% are Japanese yen. 4.8% are British pounds sterling. 2.6% are Chinese renminbi — slightly more than the 2.2% of reserves held in Canadian dollars. 1.8% are Australian dollars. The remaining few percent are various other small currencies that don’t matter in the grand scheme of things. Swiss francs would be an example. Some reserves are held in gold. Someday, there will be digital asset reserves too.

For a foreign nation to hold dollars in reserve, it must first acquire them. It can either purchase those dollars in foreign exchange markets, or it can acquire the dollars by selling its goods, services, hard assets, or financial assets. There are consequences to such transactions. One of them is that the dollar’s value relative to other currencies is higher than it would be if these nations were not buying and holding dollars in reserve. Another is that by acquiring so many dollars and holding them in reserve, the US is forced to run a current account deficit.

When the US runs large deficits, it consumes more than it produces, buying goods/services/assets from foreign nations. This supports economic growth in those nations, job creation, etc. In a world of ever-expanding globalization, such a dynamic was seen as a benefit by almost everyone. Even Americans who lost their manufacturing jobs to foreigners tolerated this for a while. It fed easy credit and cheap consumer goods. Those on the losing-end of globalization remained subdued. That changed in recent years. And it is manifesting politically.

Were the US dollar to lose its reserve currency status, it would decline relative to other currencies. The US current account deficit would have to shrink. In the extreme, US deficits would turn to surpluses – foreign investors, or the lack thereof in this case, would be imposing austerity on US policy. This would be an unmitigated disaster for nations that have built economies to export products and services – almost every nation in the world. So, would any of these countries want to see that? It’s hard to imagine why they would. And it is easy to imagine these nations would try desperately to avoid such an outcome.  

So, if the cost of having the world’s dominant reserve currency includes running large current account deficits, having an overvalued currency, and losing manufacturing jobs, why would any nation want this? It appears no nation really does. The Germans buried their deutschmark by adopting the euro. The Europeans wouldn’t tolerate the cost of having the dominant reserve currency. The Japanese sell the yen whenever it gets too strong. There is only one other nation that has an economy that is big enough to potentially bear the costs required to shoulder the burden of issuing the world’s reserve currency – China.

China has several large problems. It is now ageing. Its working age population is shrinking. And unlike Japan, which became a rich nation before starting its demographic collapse, China is still quite poor. Being poor is rough, growing old is tough, experiencing both simultaneously is brutal. After spending decades building the means of production to supply the world with manufactured goods, it may be difficult for China to convince the world they have the fluidity to accommodate being the world’s reserve currency. The benefits to China are clear – the promise of more consumption with more access to global credit at comparatively low interest rates. But the costs are extraordinary and include a loss of control at a time when China is fixated on exerting its dominion.    

* * *

Anecdote

“All streams flow to the sea because it is lower than they,” appeared unexpectedly in Xi’s empty mind, the Lao Tzu quote disturbing his morning meditation. Agitated, he inhaled deeply, pausing momentarily, his lungs full, in search of stillness. “Humility gives it its power,” further penetrated Xi’s thoughts, interrupting the moment. As a child, Xi studied the philosophical teachings of Lao Tzu, committing his ancient wisdom to memory. “If you want to govern the people, you must place yourself below them. And if you want to lead the people, you must learn how to follow them.”

This of course, is the source of Xi’s greatest anxiety. China’s swift rise from utter destitution required the state to dominate the activities of its citizens. “Water is fluid, soft, and yielding. But water will wear away rock, which is rigid and cannot yield,” now leaked into Xi’s mind, his meditation a mess, haunted by Lao Tzu. “As a rule, whatever is fluid, soft, and yielding will overcome whatever is rigid and hard.” As China rises and its centrally controlled bureaucracy flourishes, it grows increasingly brittle. All such structures ultimately do.

“If you are untrusting, people will not trust you.” Lao Tzu’s words gnawing at Xi, his security state tightening its grip on individuals in ways that would’ve made an East German Stasi blush. Beijing’s latest technological vice is its central bank digital currency, which in a nation where the government remains above the rule of law, gives leaders vast new power over its 1.46bln subjects.

Xi had naturally hoped Washington would follow Beijing’s lead, undermining the source of America’s strength – which is to defend the value of the individual over the collective. But now it appeared Washington would do no such thing. The WSJ reported Washington would instead seek to regulate private-sector US dollar stablecoin using existing law. Limiting government dominion in sensible ways. Paving the way for innovation. Xi sighed. “The world belongs to those who let go.”

“Appear weak when you are strong, and strong when you are weak,” whispered Xi to himself, refocusing on Sun Tzu wisdom, pushing Lao Tzu to the far recesses of his rattled mind. Xi recognized the near impossibility of his renminbi overtaking the US dollar, and yet there is value in having so many people believe this is his plan. The world’s nations hold $7.1trln in official US dollar reserves (22.7x the world’s $312bln renminbi held in official reserves). “Know yourself and you will win all battles,” thought Xi, recounting his favorite Sun Tzu quote, as true today as when the general wrote it in 530 BC, penning the Art of War. Xi’s decision to outlaw cryptocurrency trading was a risk he had preferred to avoid. It revealed a great weakness.

When given the opportunity, Chinese citizens sell their renminbi to escape an economic system where his government remains above the rule of law. So, naturally, Xi restricted his subject’s ability to exchange renminbi for dollars. In the digital world, absent political coercion, the free market overwhelmingly chose the US dollar as the ecosystem’s stablecoin with 98% of that market’s $126bln now linked to dollars (representing over $100trln/yr in turnover). A large percentage of trading in US dollar stablecoin originated in China. Xi outlawed this activity too. “The supreme art of war is to subdue the enemy without fighting,” thought Xi, ordering yet more fighter planes to violate Taiwan’s airspace, distracting those who might otherwise see his nation as nearing the apex of its power, the world shifting away from globalization, as China’s working age population enters its inexorable decline.

And now the US will allow digital assets to trade alongside its dollar. For all of America’s obvious weaknesses, it remained sufficiently confident to allow its citizens to choose. “Build your opponent a golden bridge to retreat across,” whispered Xi, beginning to wonder whether his adversaries would someday grant him such a path.

Nobody knows more about the future bullish and bearish developments of a business than its top executives. Insiders are senior executives, board members, or shareholders who hold 10% or more of a company, usually, come out on top when buying and selling stock. There are now tracking services offered to institutional and retail investors that rank top US corporate insiders on their trading track records, according to Bloomberg. 

It comes as no surprise that insider activity may sometimes be a good indication of the future price movement of a particular stock mainly because those in the know are likely basing decisions off nonpublic information, which outlines what our readers have known all along: the stock market is not a level playing field. 

Mississippi College School of Law professor John Anderson said, “it’s really easy to say that our markets should be a level playing field, but the reality is that they never have been.” He said people “come to the market because they think they have better information, better understanding than their counterparties.” 

“Most Americans today believe the stock market is rigged, and they’re right,” said Daniel Taylor, a professor at the Wharton School and the head of the Wharton Forensic Analytics Lab. Corporate insiders are sometimes taking advantage of nonpublic information by trading well before the news hits the tape. 

Monitoring Form 4 filings of insider buy and sells has been a popular technique by some on Wall Street. Now there are tracking companies using algorithms to sort through SEC filings to follow the top insiders. This has spurred a completely new service, offered by TipRanks, where customers can automatically track insider buys and sells and win rates. 

The highest-ranked TipRanks’ corporate insider is an unknown 80-year-old investor in Birmingham, Alabama, who advises and sits on multiple boards. His track record has made him a legend on the platform: Out of the 496 trades he’s made since 2014 in Alabama’s ServisFirst Bancshares Inc., where he sits on the board, and Century Bancorp Inc. of Massachusetts, where he owns more than 10% of the stock, 372 of them or about three quarters have been winning trades three months later. When Filler makes a trade, his Form 4 is released two days after and automatically updated on TipRanks. He’s got about 2,700 subscribers on the platform that are alerted after he makes a trade. 

Besides Filler, other TipRanks favorites include Steve Mihaylo, the CEO of telephone services company Crexendo Inc., who has a win rate of 83% over the last five years; Snehal Patel, CEO of pharmaceutical company Greenwich LifeSciences Inc., who has earned 488% on four trades that were made ahead of results from a cancer drug trial. 

Many insiders’ high success win rates seem as if it’s just luck, but it’s been an open secret on Wall Street that insiders trade on what they know. Wharton’s Taylor said, “there is a lack of appreciation for the amount of opportunistic abuse that exists under the current system, the amount of egregiousness.” 

Last year, readers may recall pharmaceutical execs adopted so-called 10b5-1 plans – trading schedules that are preplanned buying and selling programs over time. However, many of the preplanned trades were based on COVID vaccine announcements. In particular, Pfizer CEO Albert Bourla, who, under the 10b5-1, dumped shares on a vaccine announcement. 

Bourla’s trading plan seems to have lined up around future headlines based on nonpublic information. These plans were first introduced in the early 2000s to allow execs to trade stock in a preplanned fashion that would shield them from wrongdoing. Taylor said these plans are susceptible to abuse. 

In June, Gary Gensler, the SEC’s new chair, said his staff would enforce companies to implement a “cooling off” period between when execs set up 10b5-1 plans. His assessment significantly understates the insider trading problem and how the plan shields execs from any wrongdoing even if they developed a preplanned buying or selling program around future company news. 

Ankush Khardori, who recently worked as a prosecutor in the Fraud Section of the Justice Department, said, “insiders have some legitimate advantage over everyone else – they have experience and expertise that allows them to put public information into context in a way others cannot. That allows a defense lawyer to say, ‘This wasn’t inside information. They were just better at reading what was already out there.'”

Under the Securities Exchange Act of 1934, executives who have material nonpublic information and trade on it seem like a slam dunk case for the government. Still, regulators and lawyers said identifying and prosecuting the offense is complicated. 

Most Americans are correct. The stock market is a rigged game for the wealthy as corporate execs can hide behind trading plans as they buy or sell stock, sometimes based on nonpublic information. 

Authored by Brian McGlinchey via Stark Realities,

With Thursday’s passage of a continuing resolution that funds government operations until December 3rd, Congress dodged one fiscal cliff, but a bigger one looms ahead. The federal government has maxed out its credit, and if Congress doesn’t raise the statutory debt ceiling by October 18, the Treasury won’t be able to cover all of Uncle Sam’s obligations.

With Democrats controlling the House, Senate and White House, Republicans have declared they’re leaving it entirely up to the Democrats to raise the ceiling through the budget reconciliation process. Democratic leaders and their media allies claim that would be too complex, time-consuming and risky.

However, if past experience is a reliable guide, we can expect a couple weeks of harsh rhetoric, media hype and hand-wringing that culminate in the debt ceiling being modified for the 99th time in its 104-year history.

That said, amid all the attention paid to the Capitol Hill debt-limit poker game that not only pits Democrats against Republicans but also progressives against moderate liberals, it’s easy to lose sight of a hard truth about America’s $28 trillion debt: As a burden that will fall on future generations, government debt is a form of taxation without representation and is therefore profoundly unethical.

Today’s Debt is Tomorrow’s Taxation

“No taxation without representation” was a rallying cry of the American Revolution. Even in today’s divided country, the notion is still embraced as a bedrock principle of fair government by people of all political stripes.

Too few, however, appreciate that government debt is taxation without representation.

The federal government has racked up more than $28 trillion of debt—that’s more than $86,000 for every citizen alive today. With huge annual deficits now considered normal, there’s no hope it will be repaid any time soon. That means every deficit dollar is a burden that will be forced on future Americans who didn’t elect the spendthrifts who are shackling them to it.

Though debt has been a steady fixture in American government, it’s at an alarmingly high level today and projected to skyrocket even higher over the next 30 years—which is as long as the Congressional Budget Office makes projections.

Note the official $28 trillion of debt greatly understates the true peril—by omitting something that’s required on any private firm’s balance sheet: unfunded liabilities. Add promised Social Security, Medicare and other government benefits, and the real US debt is somewhere between $113 trillion and $239 trillion.

Now that they’ve lost control of the legislative and executive branches, Republicans who fell off the debt-hawk wagon during the Trump administration are urging fiscal restraint.

The reverse phenomenon can be seen across the aisle. During the Trump administration, former Federal Reserve chair Janet Yellen said “the US debt path is completely unsustainable.” Now that she’s Secretary of the Treasury in a Democratic administration, she’s recommending the debt ceiling be repealed altogether.

Of course, Yellen isn’t alone in whistling past the federal fiscal graveyard. Check out this emphatic denial of reality from MSNBC host Chris Hayes:

THERE IS NO BRUTAL FISCAL REALITY THE NATION FACES; IT IS ENTIRELY MADE UP!

— Chris Hayes (@chrislhayes) September 29, 2021

West Virginia Democratic senator Joe Manchin begs to differ.

“What I have made clear to the President and Democratic leaders is that spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity,” he said in a statement issued Wednesday.

Five Ways Today’s Debt Will Haunt Future Americans

The millstone that today’s government is tying around the necks of our children, grandchildren and great-grandchildren is multifaceted:

• Higher taxes. When the income tax was launched in 1913, the maximum rate was 7%. Today, it’s 37%, and we’ve already seen rates well north of that over the last century. Expect marginal rates to rise and deductions to fall.

• New taxes. Those who foolishly wish for a “wealth tax” on the richest Americans are oblivious to the reality that—just as we saw with the income tax—it would inevitably expand to hit the middle class too. That Trojan horse isn’t the only possible menace: politicians may pursue a value-added tax or national sales tax too.

• Higher interest rates. The less confident borrowers are in Uncle Sam’s ability to repay, the higher interest rates they’ll demand on Treasury debt. Since interest is an ever-larger component of government spending, that creates a vicious circle. And since Treasury rates serve as a market benchmark, higher Treasury rates mean higher rates on consumer and business loans too.

• Inflation. The Federal Reserve aids and abets deficit spending by buying Treasury debt with money created out of thin air. That, in turn, feeds price inflation of the sort now emerging in the wake of the Feds’ unhinged pandemic spending spree. Diminished buying power thus acts as a stealthy form of taxation.

• A drag on the economy. “Assuming we never face a full-on debt crisis like the one we have seen play out in Greece, we’ll then face the unfortunate yet increasingly likely scenario of becoming not-much-growth Japan,” writes senior George Mason University research fellow Veronique De Rugy at Reason. “At least 40 academic studies published since 2010 observe the debt-growth relationship.”

Government-Media Misdirection

While it will create plenty of grist for next year’s election advertisements, Washington’s debt-ceiling theatrics will likely do little to change the government’s long-term debt trajectory. That would require something neither party has shown a meaningful appetite for: real spending cuts.

Meanwhile, mainstream media messaging will continue conditioning Americans to view huge deficits as perfectly acceptable, with the Overton window of discourse centered on just how huge they should be.

In turn, that distorted framing will further inhibit citizens’ realization that today’s government debt is a growing tax unfairly imposed on Americans who haven’t even been born yet.

Stark Realities undermines official narratives, demolishes conventional wisdom and exposes fundamental myths across the political spectrum. Read more and subscribe at starkrealities.substack.com

It’s been a while since we have seen a massive leak exposing international tax shelters that offer a window into the hidden wealth of the global elite. Buzzfeed brought us the Fincen files a year ago, and before that, the Panama Papers, in early 2016 – leaked documents from the Panama-based law firm Mossack Fonseca – which offered a wealth of information that implicated foreign leaders (it even cost the leader of Iceland his job) including – of course – Russian Vladimir Putin.

Amusingly, though, these major leaks never seem to expose wealth held by American political leaders. And, so today, we have yet another leak, following the same pattern as the Panama Papers – dropping out of nowhere on an otherwise quiet Sunday afternoon – to expose foreign leaders from the Middle East and Eastern Europe, meaning there’s – you guessed it – another Putin connection.

Strange how these massive document leaks never expose US leaders… https://t.co/TRe9RU0hJo

— zerohedge (@zerohedge) October 3, 2021

The biggest revelation from what the Washington Post is calling “the Pandora Papers” is that South Dakota “now rivals notoriously opaque jurisdictions in Europe and the Caribbean” as a haven for those in need of financial secrecy.

“Tens of millions of dollars from outside the US are now sheltered by trust companies in Sioux Falls, some of it tied to people and companies accused of human rights abuses and other wrongdoing.”

Who are these people the Washington Post is suddenly so concerned with, now that they’ve been handed the same files that the ICIJ handed to every other American media organization reporting on this (creating the illusion that this information has been “vetted” by multiple independent outlets)? 11.9MM financial records were supposedly obtained by ICIJ as part of the leak. The records shed light on some 29K separate accounts. You think CNN, WaPo, NYT and every other media outlet in the US has reviewed them?

Of those named in the leaks, some 130 have already been identified as “billionaires” by Forbes or other media. Another 330 public officials were named from around the world. More of these names will be revealed in the coming days, but for starters, WaPo has published articles focusing on two foreign leaders, they are:

• Jordan’s King Abdullah II: – who purchased lavish homes on both US coasts, including a luxury home in Malibu, and spent more than $100MM earned from an unclear provenance. Most of the purchases were made during a 10-year stretch, which coincided with “mounting hardship” in Jordan, according to WaPo.

and…

• Vladimir Putin: – via a Russian woman, Svetlana Krivonogikh, with whom he is said to have had an affair. Per the “documents”, Krivonogikh was allegedly gifted a swanky apartment in Monaco (worth $4.1MM back  in 2003), along with a globe-spanning “portfolio of properties”. It’s also alleged that Krivonogikh may be the mother of another Putin daughter, a teenage Instagram model who has capitalized on the questions surrounding her paternity to build her Instagram following.
• At another point in WaPo’s report on Putin, the paper also suggests a Russian energy trader worth billions sold a swanky St. Petersburg apartment to the grandmother of a rhythmic gymnast said to have had an affair with Putin. We have included a photo of the gymnast below. The same businessman was also said to have transferred assets to a Putin son-in-law, among other efforts to allegedly hide assets belonging to the dear leader.

WaPo’s reporting also includes a lengthy explainer of how “trusts” work in the American financial system, and how they can be “manipulated” for purposes of hiding assets from creditors, or the tax man.

At this point, reporting on Putin’s hidden assets has been so extensive, it’s a joke to suggest they are “hidden”. Let’s not forget, Alexei Navalny dedicated much of his recent work to reporting on a $1 billion Black Sea palace he claims is a secret residence for the Russian leader.

But the real question is: how come these leaks never seem to focus on any American politicians? It’s not like they don’t engage in hiding assets in the same fashion (perhaps not as blatantly)?

And another question: if these American media organizations were able to efficiently comb through millions of documents in this investigation, then how come it took so long to “verify” the texts, photos and other items gleaned from Hunter’s former laptop, which – wouldn’t you know it – actually did once belong to him (even though the press went as far as to suggest it might have been an opposition plant)?

How is it that Pandora Papers can be authenticated by multiple corporate media organizations but these same organization could not authenticate Hunter BIden’s emails?

— Lizzy (@lizzie363) October 3, 2021

Perhaps the answer has something to do with the fact that, once again, the American press is simply reporting what they’re being told.

After Friday’s surge in cryptos lifted the entire space green for the week (following an ugly start to the week), Saturday saw markets flatline, but early after trading today (Sunday) has seen a renewed bid across all assets.

Bitcoin just topped $49,000…

Source:Bloomberg

This moves comes just over a week after China ‘banned’ crypto (for the 25th time) and erases losses due to SEC’s Gensler’s comments on DeFi regulation…

Source:Bloomberg

Ethereum is nearing $3500…

Source:Bloomberg

Bloomberg reports that The quick jump may have been fueled by a short squeeze in parts of the market, according to JST Capital co-founder Todd Morakis and Jonathan Cheesman, head of over-the-counter and institutional sales at crypto-derivatives exchange FTX. Market watchers pinned it on everything from the end of the historically tough month of September to lack of interference from the Federal Reserve. As is usually the case when Bitcoin takes a step higher, bulls cheered the move.

The breakout “looks important technically,” strategists at Fundstrat, the firm co-founded by Tom Lee, wrote in a report.

“Prices have eclipsed weekly highs as well as one-month downtrends,” they said.

While trends had turned negative a month ago, “Friday’s move is a big positive in helping to resolve this consolidation.”

“The rally has also preserved positive intermediate-term momentum” via a technical measure known as the moving average convergence/divergence indicator, Fairlead Strategies LLC’s Katie Stocktonsaid in a note — but she sees a counter-trend signal coming from another technical framework, DeMark indicators, that could prevent follow-through on the move. 

“We would feel more comfortable moving to a bullish short-term bias once this signal is invalidated – which in our work would require two closes above $48,800,” she said.

“The first upside target lies at September highs at $52,956, then $64,895,” the strategists said, the latter being right around Bitcoin’s record high from mid-April.

Bitcoin also took out its 50- and 200-DMA after finding support at the 100DMA for over a week…

Source:Bloomberg

Ethereum has surged above its 50DMA after finding support at its 100DMA for over a week…

Source:Bloomberg

The overall crypto market went from a market value of about $1.9 trillion on Wednesday to $2.2 trillion on Sunday, according to CoinGecko.

Finally, some traders are looking to the stock-to-flow model – and the similar relationship seen in Q4 2018 to Q1 2019 – as a framework for positioning here.

Source

This model suggests bitcoin will be trading around $80,000 by year-end.

By Blue Apples

Months ago, Bagram Air Base became center stage of the calamitous withdrawal of U.S. forces from Afghanistan. Since then, foreign policy experts have opined that it will unveil the next act of that tragedy in welcoming growing Chinese interest in Afghanistan. Now, the page has been seemingly turned onto that chapter. This morning, it appears the next stage of that plan may be unfolding following multiple confirmed reports of planes landing at the airfield across social media and mainstream outlets.

Reports claim that the floodlights have turned on at Bagram Air Base for the first time since U.S. troops departed the nation, marking the resumption of its operations.

The capitulation which placed Bagram Air Base into the hands of the Taliban was enabled by the Biden Administration departing from a component of the Trump-era withdrawal plans that included keeping a contingent of 800 or so special military operatives to work with Afghan Special Forces aimed at curbing the resurgence of the Taliban and other terrorist cells in the country. In the absence of that coordinated effort, Bagram fell from U.S. control before forces could be withdrawn, resulting in a catastrophic departure from the country that has marked the low point of the Biden Administration thus far.

Though none of those reports have been able to confirm that the planes landing at Bagram belong to the Chinese army, their arrival follows the resumption of power at the airfield for the first time since U.S. forces departed in August. The resumption of operations at Bagram follows Taliban forces blocking off public access to the Chinese Embassy in Kabul. The fortification of that embassy is reported to have been in advance of meetings between Taliban Interior Minister Sirajuddin Haqqani and Chen Wenqing, the Minister of State Security for the Chinese since 2016. Wenqing’s reported presence in Kabul comes weeks after another head of intelligence was spotted in Kabul when Pakistani ISI Chief Faiz Hameed had arrived in the capitol to meet with his country’s own ambassador to Afghanistan. The Taliban’s Acting Foreign Minister also met with China’s Ambassador to Afghanistan preceding Wenqing’s reported visit. Despite the apparent resumption of operations at Bagram, Taliban officials have shot down the notion that any Chinese security forces or planes have landed at the air base since then.

Since long before the Taliban solidified its takeover of Kabul, Chinese officials had been crafting a foreign policy plan which embraced the rule of the extremist sect. That approach is a component of diplomatic engagement with Afghanistan that has been an obvious multi-faceted and long-term strategy of the Chinese as they anticipated the inevitable U.S. withdrawal from the longest theater of war in its history. Wenqing’s diplomatic engagements with Afghan officials predate the installation of the Taliban-led government, as the Chinese security chief previously met with the National Security Advisor to the previous Afghan government, Hamdullah Mohib, in Tehran back in 2019. In addition to expanding its military presence in the region, China is especially motivated to capitalize on the availability of the vast mineral resources Afghanistan holds. Fostering a positive relationship with the Taliban is imperative to that. Chinese mineral rights in Afghanistan go back to 2008, when the country hashed out a thirty-year lease on the Mes Aynak Copper Mine through its state-owned enterprises China Metallurgical Group Corporations (“MCC”) and Jiangxi Copper, the country’s largest copper producer. MCC merged with China’s largest iron and steel trader China Minmetals Corporation in 2015. The transition of power to the Taliban this summer makes efforts for Chinese officials to forge a diplomatic relations essential to preserving those pre-existing mineral rights agreements in addition to expanding their access to other vital resources.

Diplomacy between the Chinese and the former  government of the Islamic Republic of Afghanistan had soured earlier this year following the December 2020 arrest of Chinese spies who were reportedly working with a covert intelligence network led by the aforementioned Sirajuddin Haqqani, who has gone from a clandestine terrorist operating in Afghanistan to leading the country’s Interior Ministry, highlighting the long-standing relation between him and the Chinese intelligence apparatus. This scandal resulted in the previous Afghan government severing several oil and gas contracts with the Chinese. Previously the China National Petroleum Corp. had signed a billion dollar contract with the Afghan government for drilling and refining oil in the country’s Amu Daya basin but that deal had been voided by the previous Afghan regime. Given Haqqani and the Taliban’s ascent into power, it’s possible that these deals will be rehashed.

The clear incentive for the Taliban to advance its diplomacy with the Chinese lies in its need to strengthen its security apparatus in Afghanistan to keep its government viable. This is evident from reports of Chinese state officials contemplating an outright takeover of Bagram. With the Taliban seizing over $84 billion in U.S. combat equipment, that presents the risk of the Chinese government to reverse engineer everything from Humvees to Black Hawk Helicopters. With the World Bank predicting a 20% decline in foreign aid to Afghanistan following the Taliban takeover, economic investment from China would greatly help with filling that void. Similar regional report from Iran, Pakistan, and Tajikistan marks the nascent efforts to create a new geopolitical axis where the middle east meets the far east in support of future Taliban hegemony in Afghanistan. While the U.S. has removed itself from Afghanistan for the first time in nearly 20 years, this burgeoning new alliance makes from the next chapter of an occupation that will haunt the country for much longer.