Month: November 2022

In a massive downside surprise, the Chicago PMI survey just printed 37.2 (vs 47.0 expectations), plunging to its lowest level since the peak of the COVID lockdowns in 2020. This was below the lowest estimate of 25 economists surveyed.

Source: Bloomberg

Under the hoods was not pretty:

• Business barometer fell at a faster pace; signaling contraction

• Prices paid rose at a slower pace; signaling expansion

• New orders fell at a faster pace; signaling contraction

• Employment fell at a slower pace; signaling contraction

• Inventories rose at a faster pace; signaling expansion

• Supplier deliveries fell and the direction reversed; signaling contraction

• Production fell at a faster pace; signaling contraction

• Order backlogs fell at a faster pace; signaling contraction

In 55 years, this level of Chicago PMI has never not failed to coincide with a recession.

Protesters in the Chinese manufacturing city of Guangzhou clashed with hazmat suit-clad riot police Tuesday night, as anti-lockdown demonstrations escalated in the wake of protests in Shanghai, Beijing and other areas of the country.

In footage posted to social media, protesters in Haizhu district could be seen scuffling with security personnel, who were previously standing shoulder-to-shoulder under the cover of riot shields as the demonstrators threw objects at them.

广州海珠区后滘 补充视频

民众向警方投掷玻璃瓶 pic.twitter.com/lRvmHBwUq5

— 李老师不是你老师 (@whyyoutouzhele) November 29, 2022

The protests mark the largest wave of civil disobedience since the 1989 Tianamen protests.

Police were later seen on video escorting a row of people in handcuffs to an unknown location, Reuters reports, adding that they had authenticated the footage.

Another video clip showed people throwing objects at the police, while a third showed a tear gas canister landing in the middle of a small crowd on a narrow street, with people then running to escape the fumes.

Reuters verified that the videos were filmed in Guangzhou’s Haizhu district, the scene of COVID-related unrest two weeks ago, but could not determine when the clips were taken or the exact sequence of events and what sparked the clashes. -Reuters

According to the US-funded China Dissent Monitor operated by Freedom House, at least 27 demonstrations took place across China between Saturday and Monday, while Australia’s ASPI think tank estimated there were 43 protests in 22 cities.

In response to the protests, Guangzhou officials broke with the country’s zero-covid protocols and announced they will allow COVID-19 cases to quarantine at home instead of being forced to go to quarantine camps, such as the one below.

Huge crowds arriving by bus to an isolation camp in the city of Guangzhou… it is all for your health.

What is the point with isolation rooms after they all mingle like this? Why not just keep them all in the same room together? Or maybe it is not really about a virus? pic.twitter.com/mZ4Z1kOczE

— Wall Street Silver (@WallStreetSilv) November 29, 2022

Meanwhile in Zhengzhou, home to a large iPhone factory that has seen mass protests, officials announced the “orderly” resumption of daily life, including opening up supermarkets, gyms and restaurants. That said, they also published a list of buildings which would remain under lockdown, according to the report.

Hours before those announcements, national health officials said on Tuesday that China would respond to “urgent concerns” raised by the public and that COVID rules should be implemented more flexibly, according to each region’s conditions.

But while the easing of some measures appears to be an attempt to appease the public, authorities have also begun to seek out those who have been at recent protests. -Reuters

“Police came to my front door to ask me about it all and get me to complete a written record,” said one Beijing resident in a statement to the outlet. Another resident said that friends who had posted videos of the protests to social media were taken to a police station and made to sign a promise that they “would not do that again.”

Infiltration and sabotage?

In a late Tuesday statement that did not refer to the protests, the CCP’s top body in charge of law enforcement agencies said they would crack down on “the infiltration and sabotage activities of hostile forces,” suggesting that the protests were not organic (were they?).

According to the Central Political and Legal Affairs Commission, “illegal and criminal acts that disrupt social order” will not be tolerated, while the foreign ministry has said that rights and freedoms must be exercised within the law.

Authored by Michael Snyder via The Economic Collapse blog,

Are some of the cryptocurrency industry’s most important pioneers being targeted by someone?  We just learned that a 53-year-old cryptocurrency billionaire named Vyacheslav Taran has died, and he is the third big name to suddenly meet his maker in recent weeks.  So is this just one giant coincidence, or is there some common denominator that links all three of them?  There is so much that we don’t know right now, but it is interesting to note that all three of these deaths have happened at a time when the cryptocurrency community is going through an unprecedented amount of turmoil.  The collapse of FTX is threatening the legitimacy of the entire industry, and many that were once crypto millionaires on paper have had their fortunes completely wiped out.

Vyacheslav Taran died when the helicopter that he was riding in suddenly slammed into a hillside.  He was the co-founder of a trading platform known as Libertex, and his involvement in the cryptocurrency industry had made him a very wealthy man.

Unfortunately for Taran, he won’t be able to spend any more of that wealth because his life is now over…

A Russian billionaire has become the third top cryptocurrency trader to die suddenly in recent weeks.

Vyacheslav Taran, 53, the co-founder of trading and investing platform Libertex, died after his helicopter mysteriously crashed in a resort town near Monaco.

The vehicle plummeted on November 25 afternoon, killing Mr Taran, who had lived in Monaco for a decade, as well as a veteran pilot.

As we have seen so many times over the years, riding in helicopters can be extremely dangerous.

And it is interesting to note that “another passenger allegedly cancelled last minute”…

The finance titan was flying with an experienced pilot, 35, from the city on the shores of Lake Geneva after another passenger allegedly cancelled last minute.

The single-engine light helicopter Eurocopter EC130 operated by Monacair collided with a hillside near Eze village at around 2pm, Monaco Life reported

Hopefully we will find out the identity of the “other passenger” that decided not to go at the last minute .

That may give us a clue about what really happened.

In the end, this may have just been a tragic accident, or Taran may have been targeted for a reason that does not involve cryptocurrency.

A lot of prominent Russians have been dying lately, and so this could just be another instance where wealthy Russians are being targeted.

We just don’t know.

But what we do know is that another co-founder of a prominent cryptocurrency company was suddenly found dead last week.

It is being reported that 30-year-old Tiantian Kullander died unexpectedly while he was sleeping…

Tiantian Kullander, co-founder of Hong Kong-based digital asset company Amber Group, died unexpectedly last week in his sleep. He was 30 years old.

The company confirmed the news in a statement, saying that Tiantian, also known as “TT,” had “passed away unexpectedly in his sleep on November 23, 2022.”

Once again, it is certainly possible that this death could have absolutely nothing to do with the cryptocurrency industry.

Throughout 2022, lots of seemingly healthy young people have been dropping dead, and Kullander may just be another to add to the list.

But just like Taran, Kullander was one of the cryptocurrency industry’s most important pioneers…

“Besides co-founding Amber and building it into a multi-billion fintech unicorn, TT sat on the Board of Fnatic (one of the world’s most successful e-sports organizations) and founded KeeperDAO (the first on-chain liquidity underwriter) before giving it back to its community,” the company’s statement continued. “TT was a devoted husband, a loving father and a fierce friend. His passing is a tragedy and our thoughts and prayers are with his family. He is survived by his wife and their beloved son. We kindly request that you respect their privacy during this difficult time.”

It is often said that two is a coincidence, but three is a trend.

Well, there is one more mysterious cryptocurrency industry death that I would like to discuss in this article.

On October 28th, 29-year-old Nikolai Mushegian was found dead on a Puerto Rico beach.

In this particular case, Mushegian actually predicted ahead of time that he would soon be killed…

A brilliant young cryptocurrency pioneer named Nikolai Mushegian tweeted on Oct. 28 that intelligence agencies were going to murder him — and was found dead on a Puerto Rico beach hours later.

“CIA and Mossad and pedo elite are running some kind of sex trafficking entrapment blackmail ring out of Puerto Rico and Caribbean islands,” Mushegian, a developer of blockchain-based decentralized finance platforms who wanted to end global banking corruption, tweeted at 4:57 a.m. “They are going to frame me with a laptop planted by my ex [girlfriend] who was a spy. They will torture me to death.”

Of course we can’t actually prove that shadowy forces killed him.

All we know is that just hours after his ominous tweet his body was found in the waves on Ashford Beach.  Interestingly, he still “had his wallet on him”…

The 29-year-old then left his $6 million beach house in the luxe Condado area of San Juan, Puerto Rico, for a walk. A little after 9 a.m., a surfer off Ashford Beach, a spot considered so rife with riptides that local hotels warn against ocean swimming, discovered Mushegian’s body in the waves. He was wearing his clothes and had his wallet on him, sources told The Post.

If some criminals jumped him on the beach, they would have certainly taken his wallet.

But that doesn’t necessarily mean that he was murdered.

He could have simply drowned after going for a swim, and there is also the possibility that he could have killed himself.

According to those that knew him, he had very serious mental health issues that he was dealing with, and it appears that he was also a heavy drug user…

A person who knew Mushegian very well for years until they had a falling-out two years ago said that the developer was “very very smart” but also suffered from extreme bouts of paranoia.

“He had mental problems,” said the source, who spoke on condition of anonymity. “He saw a psychiatrist at times. He smoked a lot of pot. A tremendous amount.”

Ultimately, we may never know if all three of these deaths are connected somehow.

But I find it very interesting that all three of these men were key pioneers in the industry.

And now they are all gone.

Life is so short, and for some it ends far sooner than they were anticipating.

*  *  *

It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.

While it’s among the least relevant points of this week’s data deluge as it looks at a quarter that ended nearly 2 months ago (and much has changed since then), moments ago the BEA reported that according to its 2nd estimate of Q3 GDP, the US rebound from the “non-recession recession” of H1 when GDP was negative for 2 quarters, was even stronger than expected, with Q3 GDP revised up from 2.6% to 2.9%, above the 2.8% consensus estimate, with the BEA reporting that the increase “primarily reflected a smaller decrease in private inventory investment, an upturn in government spending, and an acceleration in nonresidential fixed investment that were partly offset by a larger decrease in residential fixed investment and a deceleration in consumer spending. Imports turned down.”

Digging deeper we find that the third-quarter increase in real GDP reflected increases in exports, consumer spending, business investment, and government spending that were partly offset by decreases in housing investment and inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

In terms of the revisions from the first to the second estimate, the update primarily reflects upward revisions to consumer spending and business investment that were partly offset by a downward revision to inventory investment.  Quantifying the Q3 GDP revision changes we get the following :

• Personal consumption rose 1.18%, up from 0.97% in the first estimate. The increase in consumer spending reflected an increase in services (led by health care and “other” services) that was partly offset by a decrease in goods (led by motor vehicles and parts as well as food and beverages). 
• Fixed Investment was less of a detractor, dropping -0.74%, vs -.89% in the first estimate. The increase in business investment reflected increases in equipment and intellectual property products that were partly offset by a decrease in structures. Specifically, nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 5.1% in 3Q after rising 0.1% prior quarter. The decrease in housing investment was led by new single-family housing construction and brokers’ commissions.  
• The change in private inventories however offset this, dropping by -0.97%, more than the -0.70% in the first estimate. The decrease in private inventory investment was led by retail trade (mainly clothing and accessory stores and “other” retailers). 
• Exports saw a modest gain, adding 1.72% to Q3 GDP, up from 1.63%
• Less imports resulted in a bigger contribution to GDP, boosting it to 1.21% up from 1.14%. The decrease in imports reflected a decrease in goods (led by consumer goods).
• Finally, government consumption boosted GDP by 0.53%, up from 0.42% previously. The increase in government spending reflected increases in state and local as well as federal (led by defense spending).  

In other word, the entire GDP boost (2.93%) was attributable to net trade (2.93%) which in turn was driven by energy exports to Europe and weapons exports to the Ukraine, while a slowdown in the US economy meant fewer imports.

Finally, looking at the all-important PCE components, the GDP Price index came in at 4.3%, above the 4.1% expected, while core PCE Q/Q rose from 4.5% in the first estimate to 4.6%, also above the 4.5% est; this may explain why the market reaction has been rather negative to the GDP report, as the continue heat in PCE may, in the eyes of algos, offset the disastrous ADP print.

Gross domestic purchases prices, the prices of goods and services purchased by U.S. residents, increased 4.7 percent in the third quarter, an upward revision of 0.1 percentage point. Excluding food and energy, prices increased 5.0 percent, an upward revision of 0.2 percentage point. Personal consumption expenditure (PCE) prices increased 4.3 percent in the third quarter, an upward revision of 0.1 percentage point. Excluding food and energy, the PCE “core” price index increased 4.6 percent, also revised up 0.1 percentage point.

Finally, we should remind readers that this data is largely meaningless as it looks at the state of the economy during the summer, while what matters for the Fed is the here and now, and how fast the US slides into recession; which means what Powell says at 1:30pm today will be even more important.

Former Chinese President Jiang Zemin, who came to power after the Tiananmen Square massacre, died on Wednesday at 96 of leukemia and multiple organ failure, state media reported. 

Jiang Zemin passed away due to leukemia and multiple organ failure in Shanghai at 12:13 p.m. on Nov. 30, 2022, at the age of 96, it was announced on Wednesday

— China Xinhua News (@XHNews) November 30, 2022

Xinhua News Agency published an open letter by the ruling Communist Party, parliament, Cabinet, and the military, about the loss of the former president. 

“Comrade Jiang Zemin’s death is an incalculable loss to our Party and our military and our people of all ethnic groups,” the letter read, expressing the announcement was with “profound grief.” 

Zemin ascended to power after the 1989 Tiananmen Square protests and massacre that left at least 10,000 people dead, according to UK documents released by BBC News in 2017. Under his leadership (from 1993 to 2003), China peacefully regained Hong Kong in 1997 and entered the World Trade Organization in 2001. 

His death comes as President Xi Jinping’s zero Covid policy has backfired, and worsening Covid outbreaks have sparked some of the worst social unrest since Tiananmen. 

David Shambaugh’s 2021 book “China’s Leaders: From Mao to Now” said Zemin was first viewed as an ornamental “flowerpot” with a limited practical purpose. 

“The initial foreign impressions of Jiang were that he was a dull, classic bureaucrat-apparatchik, lacking in intelligence and persona … As time passed and Jiang emerged on the world stage, it became quickly apparent that he was the very opposite of those descriptors.

“When compared with Xi Jinping’s hardline repression today, or Hu Jintao’s relatively limited impact, we look back wistfully on Jiang Zemin’s rule as relatively liberal and tolerant politically, socially and economically,” Shambaugh wrote.

Zemin continued to influence Chinese politics even after he stepped down in the early 2000s. In 2015, People’s Daily, the party’s flagship newspaper, warned retired leaders to sit on the sidelines and out of politics as Jinping was furious Zemin was wielding power behind the scenes. 

“Jiang Zemin continued to wield influence even after he stepped down, but that hurt his reputation.

“He did that because he was comfortable with power, but also because around him there was a circle of people who relied on him and puffed him up to make him think he was indispensable,” Yang Jisheng, a Beijing historian, told NYTimes. 

After Mao Zedong’s chaotic rule, Zemin was instrumental in formalizing a two-term limit for China’s leaders. However, last month, Jinping shattered the term limit as he positioned himself for lifetime dominance over the world’s second-largest economy. 

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

In Part one of this series, Our Currency The World’s Problem, we discuss the vital role the U.S. dollar plays in the global economy. With an understanding of the dollar’s role as the world’s reserve currency, it’s time to discuss how the Federal Reserve’s monetary policy machinations influence the dollar and, therefore, the global economy and financial markets.

Given the Fed’s recent extreme monetary policy actions, which haven’t been seen in over 40 years, it is more important now than ever to appreciate the potential global consequences of the Fed’s stern fight against inflation.

Triffin’s Paradox

In Part 1, we highlight the following two lines, which help describe Triffin’s paradox.

“To supply the world with dollars, the United States must consistently run a trade deficit. Running persistent deficits, the United States would become a debtor nation.”

“Simply the growing divergence between debt and the ability to pay for it, GDP, is unsustainable.”

Increasingly borrowing without the means to pay it off is unsustainable. The terms zombie company or Ponzi Scheme come to mind when considering such a system. That said, because the printer of the currency and taxer of its citizens is in charge, we can only ask how long the status quo can continue.

The answer is partially up to the Fed. The Fed can use QE and low-interest rates to delay the inevitable. As we now see, the problem is that those tools are detrimental when there is high inflation. Fighting inflation requires higher interest rates and QT, both of which are problematic for high debt levels.

Financial Tremors

The Bank of England is bailing out U.K. pension funds. The Bank of Japan uses excessive monetary policy to protect its currency and cap interest rates. China encourages its banks to buy stocks. The dollar, the world’s currency, is on a tear, interest rates are surging, and the financial world is fracturing.

As we noted in Part 1, financial tremors are providing early warnings that hawkish Fed actions are starting to lead to serious problems.

Most foreign nations’ economic and financial well-being is closely dependent on the value of the dollar and the supply of dollars. As such, the Fed’s actions in expanding or contracting dollar liquidity can ripple through the global financial markets. The Fed’s monetary policy is the monetary policy for the world, whether anyone agrees with it.  

ECB’S PRESIDENT LAGARDE: WE HAVE TO BE ATTENTIVE TO SPILL-OVERS FROM THE FED POLICY.

The strong dollar is a problem for some countries- Jerome Powell

2020-2022

Over the past few years, the Pandemic drastically changed the course of monetary and fiscal policy. Since 2020 the U.S. government has accumulated over $10 trillion in debt. To help markets absorb the enormous supply of bonds, the Fed bought nearly $5 trillion in debt. As a result of fiscal spending, the money supply surged higher, and inflation soon followed.

Prices spiraled higher due to weakened supply lines and massive fiscal handouts. Despite economic normalization and signs of brewing inflation in 2021, the Fed continued buying bonds and kept interest rates pinned at zero.

The ultimate time to fight inflation was before it was a problem. Being late to the game makes the inflation fight harder. In 2022, after inflation became entrenched, the Fed finally started acting.

To their credit, they have been highly forceful, raising rates by 3.75% in just ten months and commencing an aggressive QT program in June. The Fed was the first major central bank to combat inflation vigorously. While other countries sat idly by, the Fed became extremely hawkish.

Money gravitated toward dollars in large part due to Fed aggression. Confidence was growing among currency traders that the Fed was taking inflation seriously. Adding considerable strength to the dollar was that most other central banks were doing nothing about inflation. 

Big Macs and Why Exchange Rates Change

Purchasing power parity (PPP) explains why currencies move against each other. In 1986, the Economist magazine popularized PPP with its Big Mac Index.

The theory underpinning the Big Mac index and PPP states that the exchange rate between two currencies should equalize the prices charged for a Big Mac or an identical basket of goods.

Simply, as prices rise by more in one country versus another currency, the exchange rates between the two must change to offset the difference. Not surprisingly, with the Fed leading the charge against inflation, currency traders flocked to the dollar. Based on PPP and two other currency measures, the dollar is now the most overvalued currency.

Why Does Dollar Strength Matter to Foreign Nations?

There are two primary reasons. For starters, many foreign borrowers borrow dollar-denominated debt. Second, changing currency exchange rates impacts the costs of goods bought and sold with other nations.

Foreign Borrowing

The BIS estimates over $13 trillion of foreign dollar-denominated debt outstanding. This debt poses a unique problem for its borrowers.

In Dollar Appreciation Threatens The Global Economy, we provide an example via the hypothetical Loonie Tire Company to help readers appreciate the impact of dollar strength. The table below from the article shows that a five-cent appreciation of the U.S. dollar versus the Canadian dollar has a significant effect on the firm’s debt terms.

Because the debt’s repayment occurs in dollars, the loan amount and the interest payments increase with the USD/CAD exchange rate. In our example, it boosted the company’s funding costs by roughly seven percent.

The current dollar strength is significantly raising borrowing costs for unhedged foreign borrowers. Dollar strength resulting from aggressive Fed policy is forcing the Fed’s hawkish policy upon the world.

Importing Inflation

Most commodities and other goods are traded in U.S. dollars. As such, price changes for said goods in foreign nations are due to the combination of supply/demand dynamics and changes in the currency exchange rate.

We present the graph below to help appreciate how dollar strength impacts foreign prices. It shows the price of crude oil rose 11% more when priced in euros versus U.S. dollars since January. 

Again, dollar strength resulting from the Fed’s more aggressive policy is generating more inflation in foreign nations.

Summary

“We are addicted to our reserve currency privilege, which is in fact not a privilege but a curse.” –James Grant, Grant’s Interest Rate Observer.

The key takeaway we hope to impart is that Fed policy is the de facto monetary policy for the world. Whether foreign nations want or need tightening or easing, they are stuck with the monetary policy that the Fed decides America needs.

Today, aggressive Fed policy is creating havoc abroad. Like Japan, nations with slower economic growth and more debt can ill afford a monetary-tightening Fed policy. They are trying to counteract the Fed with zero interest rates and QE, but the result is a plunging yen and increasing inflation. Europe, China, and almost all other countries face variations of the same theme.

The world is finally facing Triffin’s Paradox.

The Midterms are over and so any pretense of a ‘strong as hell’ economy are out of the window, providing some ammo for folks to believe this morning’s ADP report (ahead of Friday’s payrolls print) may come in very ugly.

After a notable rise in October (despite an aggressively tightening Fed), expectations were for a smaller +200k print in November but instead ADP reports only 127k jobs were added in November – the lowest since Jan 2021

Source: Bloomberg

Service-providing jobs rose 213k while goods-producing jobs fell 86k with manufacturing job losses soaring… but fear not, we added 224k bartenders and waiters

*AMC NETWORKS TO LAY OFF ABOUT 20% OF ITS U.S. EMPLOYEES: DJ

As long as the US hires 5 million waiters and bartenders in November, all is well

— zerohedge (@zerohedge) November 29, 2022

Nela Richardson, ADP Chief Economist said:

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”

Pay growth remained elevated even as it continued a modest but broad-based deceleration.

Job changers notched their fifth straight slowdown and the smallest increase in pay since January.

Pay growth for job stayers edged down, too, led by leisure and hospitality, which had a rapid run-up in 2021 but has been falling since March.

US futures rose on the last trading day of November as anxious investors awaited a potentially monkey-hammering speech from Federal Reserve Chair Jerome Powell (although as JPM said, most of the downside is already priced in) and assessed a softer stance from China on Covid curbs. S&P 500 futures rose 0.2% by 745a.m. ET while Nasdaq 100 futures rose 0.3%. The underlying indexes have closed lower for three consecutive days amid Covid restrictions and unrest in China. In Europe, shares climbed the most in more than a week as data showed eurozone inflation slowed for the first time in 1-1/2 years. Benchmark Treasury 10-year yields slipped and are down more than 25 basis points in November.

In premarket trading, NetApp plunged 14% after the data-management company cut its guidance for earnings and revenue growth, while cybersecurity stocks fell after CrowdStrike’s forecast for fourth-quarter revenue fell short of estimates with analysts noting that macro headwinds have started catching up to the business as clients pull back on tech spending, while deals are taking longer to close amid an economic slowdown. HP Enterprise shares rose after sales beat forecasts on strong demand. Here are some other premarket movers:

• Cryptocurrency- exposed stocks climb as Bitcoin rose to a two-week high, before a keenly awaited speech by Fed Chair Jerome Powell that is expected to signal a slower pace of interest rate hikes in the US. Marathon Digital +4.8%, Riot Blockchain +5%, Coinbase +2.9% and Silvergate +2.4%
• Horizon Therapeutics stock rises 33% after the company confirmed it’s in “highly preliminary discussions” with Amgen, Johnson & Johnson and Sanofi about a possible sale. Such a deal would be accretive, analysts said, estimating a takeout price range between ~$110 and $135 a share.
• X4 Pharmaceuticals shares fall 18%, weakness that Stifel (buy) said is likely “balance-sheet driven” after the company disclosed in a presentation that it has sufficient cash to fund operations into 3Q next year.
• AST SpaceMobile shares decline 5.8% after offering of $65m of its Class A common stock via B. Riley, with net proceeds to be used for general corporate purposes.
• Keep an eye on LPL Financial stock as Morgan Stanley downgrades it to equal-weight and removes the broker-dealer from its ‘Financials’ Finest’ list, with private-equity group Blackstone (BX US) added.
• Watch Fisker stock as it was initiated with an outperform rating at Evercore ISI, with the broker positive on the firm’s “unique” business model. Lucid and Rivian which both gain in US premarket trading, are started at inline.
• Workday shares jumped 8.5% in US postmarket trading on Tuesday as the finance and human resources cloud software provider narrowed its subscription revenue guidance for the full year, with analysts saying that demand is holding up even against a tough macroeconomic backdrop.

US equities have been consolidating over the past 20 days, with the S&P 500 hovering around the 4,000 point-level, as volumes have collapsed heading into the year-end.

“The reality is that as we approach year-end, people’s appetite to add new risk will severely diminish,” said James Athey, investment director at Abrdn. “Indeed, with a recession the base case for 2023, investors who have made a quick profit on this recent rally are increasingly liable to want to book profit before liquidity dries up. That probably means we will continue to drift without much force in either direction.”

As previewed yesterday, Fed chair Jerome Powell is expected to speak about the state of the economy and the labor market at 1:30pm ET. Investors will pay attention to any clues about future policy, with the Fed Chair widely expected to signal lower rate hikes, but also warn that monetary tightening has further to run. He is widely expected to signal that the next Fed rate hike will step down to 50 basis points, though he will also likely warn that policy tightening has further to run. Those hopes of slower interest rate rises, alongside mounting optimism over China’s reopening, pushed the dollar lower and put the greenback on track for its worst month since 2009.

A degree of caution remains among traders before the Fed chair’s remarks, given still-high global inflation and a robust jobs market.  “The market is hesitating a bit,” Societe Generale strategist Kenneth Broux said. “I would be very surprised if it is a dovish speech.” Some may hold the view that “the dollar has peaked and that the Fed Funds rate will peak at 5%, but I fear Powell will tell them it’s too soon,” he said.

“Where we think markets need to be cautious and where we would like to see a bit of tempering in optimism is over the pivot,” said Geoffrey Yu, senior strategist at Bank of New York Mellon. “What we are looking for is higher for longer.”

In Europe, the Stoxx 600 rose, led by consumer, auto, technology and energy shares. The benchmark is on course for a back-to-back monthly gain for the first time since August 2021. Here are the biggest European movers:

• Swedish biopharma company BioArctic jumps as much as 13% after its partner Eisai said the treatment for Alzheimer’s disease that they’re developing, lecanemab, isn’t to blame for two deaths involving brain bleeding of patients in a clinical trial.
• VGP gains as much as 6.6% after KBC Securities reinstated its buy recommendation, highlighting the Belgian real estate developer’s “strong management,” robust demand and good positioning in taking advantage of macro trends.
• Argenx rises as much as 7.4% after the biotech company agreed to purchase another FDA Priority Review Voucher, a move that KBC (buy) says can “significantly” accelerate regulatory review in the US, reducing times from about 12 months to six.
• Adyen climbs as much as 3.1% after New Street Research initiated with a buy rating, saying expectations over the payment firm’s margins have now been reset and it’s well positioned to create long-term value versus competitors that slowed investments amid macro uncertainties.
• Catena falls as much as 7.5% after the Swedish logistics property firm offered 4.5 million shares at SEK362, a 7.4% discount versus Tuesday’s closing price.
• Rexel falls as much as 6.9% in early Paris trading, the worst performance in the SBF 120 index, after the company was downgraded to underperform by Exane.
• Telenet slides as much as 5.3% after Oddo BHF downgraded to underperform just over a month after it cut the telecom operator to neutral, saying the company will face significant earnings pressure in 2023, while its fiber joint venture with Fluvius will take years to unlock the value.
• Pennon falls as much as 8.4% after the UK water company’s 1H results, which Jefferies said imply downside risk to earnings estimates.
• Sanofi declines as much as 3% after Horizon Therapeutics disclosed that the French company is among potential suitors it’s holding “highly preliminary discussions” with about a possible sale. Amgen and Johnson & Johnson are others.

Earlier in the session, Asian equities rose, supported by a rally in Chinese shares amid speculation that unrest in China would pressure authorities to speed up the loosening of Covid restrictions, while traders awaited a speech from Fed Chair Jerome Powell. Meanwhile, China’s economic activity contracted further in November amid a record Covid outbreak, with growth likely to remain weak and the central bank expected to add more stimulus to bolster the recovery. The MSCI Asia Pacific Index erased a drop of as much as 0.5% to rise 0.9% on Wednesday, led by consumer discretionary and technology shares. Benchmarks in South Korea and Taiwan gained while Japanese key gauges capped a fourth day of losses. Chinese equities rose for a second day, buoyed by optimism from the removal of lockdown curbs in some districts of Guangzhou which added to hopes that the nation is laying the ground for an eventual Covid-Zero exit. Economic data released earlier Wednesday showed China’s factory and services activity contracted further in November due to Covid curbs.

“I think the direction of reopening is quite clear,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Government is taking baby steps which is to be expected. It is also doing the right things, such as encouraging vaccination for the elderly.”   Powell’s comments will provide traders with more clues on the Fed’s tightening path going forward. Market watchers recently have been expecting slower interest rate hikes, though hawkish remarks from some officials continue to temper optimism. Asian equities have seen stellar performances in November with multiple benchmarks capping their best months in years. The key MSCI Asian measure has jumped nearly 15%, set for its best month since 1998.

Japanese equities dropped, capping a fourth day of losses, as investors monitored the Covid situation in China and awaited Fed Chair Jerome Powell’s speech.  The Topix fell 0.4% to close at 1,985.57, while the Nikkei declined 0.2% to 27,968.99. Keyence Corp. contributed the most to the Topix decline, decreasing 2.2%. Out of 2,165 stocks in the index, 573 rose and 1,496 fell, while 96 were unchanged. “Caution remains as the risk of inflation has not gone away, and with US stock prices having difficulty rising significantly, Japan’s stock prices have recently been moving sideways,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management

Australian stocks rose: the S&P/ASX 200 index reversed an earlier loss to close 0.4% higher at 7,284.20 after data showed inflation unexpectedly decelerated in October. The print sent government bond yields lower and suggest the Reserve Bank may be approaching the peak of its policy tightening cycle. Mining and energy shares contributed the most to the benchmark’s rise, with a gauge of materials stocks notching its biggest monthly gain ever as iron ore eyed its own record surge. In New Zealand, the S&P/NZX 50 index rose 1.4% to 11,552.04

In FX, a gauge of the dollar fell for a second day. The Bloomberg Dollar Spot Index is poised to end this month around 4.5% lower, which would be its worst performance since May 2009. Investors continue to bet that China will reopen its economy after authorities on Tuesday adjusted virus restrictions in Zhengzhou, a city that’s home to Apple Inc.’s largest manufacturing site in China. Norway’s krone led gains as oil rose. The onshore yuan advanced 1% versus the dollar as hopes over a relaxation of China’s Covid curbs stoke optimism about the country’s economy. Onshore yuan rallies to 7.0830 vs dollar; offshore currency up 0.8% to 7.0840.

In rates, treasuries were slightly richer across the curve with gains led by belly out to long-end, flattening 2s10s and 2s5s spreads with 2-year yields little changed on the day. Treasuries are on pace for their third monthly gain of 2022 and the biggest since March 2020, as inflation moderated and Fed policymakers remained committed to additional rate increases to reinforce the trend. US 10-year yields around 3.72%, richer by 2bp on the day and outperforming bunds and gilts by 3bp and 4.5bp in the sector; after the data and Powell’s speech and Q&A at the Brookings Institution at 1:30pm in Washington, long-end could draw support into the month-end Treasury index rebalancing at 4pm New York time. Expected month-end duration extension is larger than average at 0.13yr for Dec. 1. Dollar issuance slate empty so far; 11 borrowers priced just over $17b Tuesday, led by Amazon multi-tranche offering. Focal points of  month-end session include 3Q GDP revision, JOLTS job openings data and Fed’s Powell speaking on the economic outlook and labor market.

In commodities, OPEC and its allies are increasingly expected to hold production levels steady after the group opted to meet online amid an uncertain market outlook. Earlier this week, OPEC+ delegates signaled that Saudi Arabia and its partners would consider new output curbs at its gathering on Sunday, which was scheduled to take place at the cartel’s Vienna headquarters. But with the group’s decision to hold a virtual session, views are changing, and oil analysts and OPEC+ officials widely predict that the alliance will keep output unchanged. In futures, West Texas Intermediate rose for a third day, climbing above $80 a barrel after industry data pointed to a large decline in US crude stockpiles, while traders weighed the outlook for Chinese demand and the forthcoming OPEC+ meeting.  For spot oil prices from around the world, see BOIL.   IN THE NEWS The dilemma facing OPEC+ members is that the potential demand slowdown going into next year — especially in China –coincides with an “exceptionally tight” crude market, according to Bank of America’s Karen Kostanian. Here’s what other analysts are saying we should expect from this weekend’s meeting. European diplomats trying to reach a deal to curb Russian oil prices are wrestling with an awkward truth: Moscow’s main benchmark crude is already trading below the levels proposed for the cap. Saudi Aramco may reduce the official selling price of its flagship Arab Light crude by $2.10 a barrel on-month to Asia for January, according to the median estimate in a Bloomberg survey. The Caspian Pipeline Consortium, which has already suffered two major stoppages this year, is warning of the potential for more because of a lack of spare parts. China’s ongoing battle with Covid-19, which sparked street protests and conciliatory moves from the government after citizens balked at the latest lockdowns, continues to crimp oil demand in the world’s biggest importer. Chevron Corp. found almost half of employees and contractors in Australia have been bullied in the past five years and a third experienced sexual harassment, according to a survey led by an external consultancy

 

Binance has acquired Sakura Exchange, entering the Japanese market as a JFSA regulated entity.

Looking to the day ahead now, one of the key highlights will be Fed Chair Powell’s speech at the Brookings Institution. Other central bank speakers include the Fed’s Bowman and Cook, the ECB’s Makhlouf and BoE chief economist Pill. The Fed will also be releasing their Beige Book. When it comes to data releases, today will  we will get the November ADP employment change (8:15am), second estimate of 3Q GDP and October wholesale inventories (8:30am), November MNI Chicago PMI (9:45am), October pending home sales and JOLTS job openings (10am).

Market Snapshot

• S&P 500 futures up 0.2% to 3,969.25
• STOXX Europe 600 up 0.6% to 439.99
• MXAP up 0.9% to 156.52
• MXAPJ up 1.5% to 508.23
• Nikkei down 0.2% to 27,968.99
• Topix down 0.4% to 1,985.57
• Hang Seng Index up 2.2% to 18,597.23
• Shanghai Composite little changed at 3,151.34
• Sensex up 0.3% to 62,898.19
• Australia S&P/ASX 200 up 0.4% to 7,284.17
• Kospi up 1.6% to 2,472.53
• Brent Futures up 2.2% to $84.89/bbl
• Gold spot up 0.7% to $1,761.34
• U.S. Dollar Index down 0.36% to 106.44
• German 10Y yield up 0.4% to 1.92%
• Euro up 0.4% to $1.0371

Top Overnight News from Bloomberg

• Zhengzhou shuttered hundreds of buildings and apartment blocks hours after lifting broader lockdown measures, as officials strive to make their Covid controls more targeted in line with Beijing’s directives
• Strong demand for goods and services may be starting to overtake supply constraints — from the pandemic and the war in Ukraine — as the driver of US prices, according to new gauges built by Federal Reserve economists
• Currency traders hoping to enjoy a quiet run up to Christmas may be in for a shock. One-month implied volatility for major currency pairs — a gauge of expectations for FX moves over that period — are sitting well above their 10-year average for this time of year
• Jiang Zemin, the Chinese leader who presided over more than a decade of dramatic economic growth following the bloody 1989 crackdown on pro-democracy protesters in Tiananmen Square, has died. He was 96

A more detailed look at global markets courtesy of Newsquawk

APAC stocks eventually traded mostly higher at month-end although gains were capped following the subdued handover from Wall St and after disappointing Chinese PMI data. ASX 200 was positive with the index led by strength in the mining-related sectors and with initial losses pared alongside a slew of data releases including better-than-expected Construction Work and softer monthly Australian CPI. Nikkei 225 slipped beneath the 28,000 level after Industrial Production further deteriorated which prompted the government to cut its relevant assessment. Hang Seng and Shanghai Comp were indecisive as recent optimism from hopes of an easing of COVID controls was clouded by disappointing Chinese PMI data which slipped into a deeper contraction.

Top Asian News

• Fullerton Health Said to Mull Stake Sale at $1.1 Billion Value
• Hong Kong Dollar Strengthens Past Strong Half of Trading Band
• Asian Stocks Gain for Second Day on China Reopening Hopes
• NDTV Founders Resign From Holding Firm Board Amid Adani Takeover
• Chinese Stocks in Hong Kong Jump, Capping Best Month Since 2003
• Binance Re-Enters Japan With Sakura Exchange Purchase
• GoTo Shares Fall to Record Low as Major Holders’ Lock-Up Expires

European equities trade on a firmer footing following mixed leads from Wall St, with eyes set on Fed Chair Powell on month-end, Euro Stoxx 50 +0.5%. Sectors in Europe are mostly positive but to a lesser extent than at the cash open; Autos, Consumer Products and Energy outpace while Real Estate and Telecoms lag. US futures are trading a touch above unchanged following yesterday’s session which was characterised by notable tech selling amid a pick-up in US yields, ES +0.2%.

Top European News

• BoE Chief Economist Pill says inflation expected to decline rapidly in H2 2023, demand is easing as household incomes are squeezed, the labour market remains very tight.
• Hungary gets initial green light from the European Commission for its EUR 5.8bln recovery plan, according to Bloomberg; recommends withholding separate EUR 7.5bln in fund.
• Hungary’s Russia-Designed Nuclear Reactors Survive Legal Attack
• Viceroy Target Home REIT Hits Back at Latest Short Report
• Houseboats Get Fresh Look in London’s Brutal Real Estate Market
• Turkish Economy Stumbles, Risks Bigger Downswing Before Election
• Germany Nov. SA Unemployment Change +17K M/m; Est. +13.5K M/m
• BOE Chief Economist Assumes UK Inflation Will Fall Next Year

FX

• DXY is under pressure in early European hours after failing to top 107.00 overnight, having printed an APAC peak of 106.90, matching the Tuesday high.
• Antipodeans lead the charge amid the positive risk move and despite the softer-than-expected Aussie CPI overnight and weak PMIs from China.
• EUR gains were somewhat stalled after EZ headline CPI printed softer than expectations but the core metrics topped forecasts while Cable has managed to attain a foothold on 1.20.
• CNH is the EM outperformer on hopes of looser Chinese COVID restrictions.
• PBoC set USD/CNY mid-point at 7.1769 vs exp. 7.1790 (prev. 7.1989)
• Japanese FX intervention amounted to 0 between October 28th-November 28th, according to MoF.

Fixed Income

• Core bonds dented as core EZ inflation fails to decline, USTs directionally in-fitting but little changed overall pre-Powell.
• Bund Dec’22 slipped from 141.24 to 140.70 (vs 140.50 low) on the EZ inflation release, with market pricing between 50bp & 75bp remains on a knife-edge.
• Gilts are lower by circa 40 ticks on the session in sympathy and were unphased by largely familiar remarks from Chief Economist Pill.

Commodities

• WTI and Brent futures are firmer intraday as the risk tone remains constructive and the Dollar declines.
• Spot gold grinds higher as DXY softens and the risk tone turns less constructive, with the yellow metal rising north of USD 1,750/oz and towards Monday’s USD 1,763/oz peak.
• Base metals are firmer across the board on hopes China will ease its Zero-COVID parameters, with 3M LME copper extending on overnight gains to levels north of USD 8,100/t during the European morning.
• US Private Energy Inventory Data (bbls): Crude -7.9mln (exp. -2.8mln), Gasoline +2.9mln (exp. +1.7mln), Distillate +4.0mln (exp. +1.5mln), Cushing -0.2mln.
• OPEC+ decision to meet virtually on December 4th signals that there is little likelihood of a change in policy and the virtual meeting puts focus on the pending Russian oil price cap decision on December 5th, according to a source with direct knowledge cited by Reuters.
• OPEC+ cancelled the 2nd Dec JTC meeting, according to Argus sources.

China covid updates

• Beijing City reports 2,378 new local COVID cases (prev. 2,126) during 15 hours to 3pm on Wednesday.
• China’s Guangzhou will gradually resume normal operations of subway stations and Haizhu trams as of November 30th, according to the Municipal government.
• Beijing is set to allow some residents to skip mass COVID testing, according to Bloomberg.
• China is reportedly mulling rolling out a 4th round of COVID vaccines, according to Bloomberg.

Geopolitics

• China and Russian warplanes temporarily entered South Korea’s air defence zone, according to Yonhap.
• Russian Foreign Ministry says Moscow does not intend to discuss the New START treaty with Washington as long as it supplies Ukraine with weapons, via Al Jazeera.

US Event Calendar

• 07:00: Nov. MBA Mortgage Applications -0.8%, prior 2.2%
• 08:15: Nov. ADP Employment Change, est. 200,000, prior 239,000
• 08:30: 3Q GDP Annualized QoQ, est. 2.8%, prior 2.6%
  • Personal Consumption, est. 1.6%, prior 1.4%
  • PCE Core QoQ, est. 4.5%, prior 4.5%
  • GDP Price Index, est. 4.1%, prior 4.1%
• 08:30: Oct. Advance Goods Trade Balance, est. -$90.5b, prior -$92.2b
• 08:30: Oct. Retail Inventories MoM, est. 0.5%, prior 0.4%
  • Wholesale Inventories MoM, est. 0.5%, prior 0.6%
• 09:45: Nov. MNI Chicago PMI, est. 47.0, prior 45.2
• 10:00: Oct. JOLTs Job Openings, est. 10.3m, prior 10.7m
• 10:00: Oct. Pending Home Sales YoY, est. -35.2%, prior -30.4%
  • Pending Home Sales (MoM), est. -5.7%, prior -10.2%
• 14:00: U.S. Federal Reserve Releases Beige Book

Central Bank speakers

• 08:50: Fed’s Bowman Discusses the Future of Small Banks
• 12:35: Fed’s Cook Discusses the Economic and Policy Outlook
• 13:30: Powell Discusses the Economic Outlook and the Labor Market

DB’s Jim Reid concludes the overnight wrap

Markets bent a little yesterday but didn’t break as US stocks rallied around half a percent off their European closing lows into the NY final bell. The S&P 500 (-0.16%) still ultimately lost ground for a third day running though. Interestingly, that came in spite of several positive developments yesterday, with the latest European inflation data surprising on the downside, just as there were fresh signs pointing towards a potential reopening in China. However, the focus is now turning back to the Fed once again, with investors eagerly awaiting Chair Powell’s speech at the Brookings Institution later on today. That’s an important one since the Fed’s blackout period ahead of the next meeting begins this weekend, so this is the last chance Powell will have to give a steer on policy beforehand. In addition, today will bring the latest data on job openings and the quits rate for October, which have recently been cited by the Fed and others as a key gauge of inflationary pressures from the labour market.

With that in mind, it’ll be a big day for Fed watchers, but we shouldn’t forget the ECB as we’ll also get the flash CPI release for the Euro Area at 10am London time. Markets will be paying close attention, but European government bonds were already rallying ahead of that yesterday after the country-specific releases surprised on the downside. For instance, Spanish inflation came in at +6.6% in November using the EU-harmonised measure, which was down from +7.3% in October and also beneath the +7.1% reading expected. Later in the day, we got further signs that inflation might be moving lower, with German inflation down from +11.6% in October to +11.3% in November, whilst Belgian inflation was down from +12.3% in October to +10.6% in November. That trend has continued overnight as well, with Australia’s CPI for October unexpectedly falling to +6.9% (vs. +7.6% expected).

Those signs of decelerating inflation led investors to price in a growing chance that the ECB would slow down the pace of their hikes to 50bps in December. Indeed, the hike that overnight index swaps are pricing in for the next meeting came down by -5.2bps on the day to 56.5bps, suggesting that investors were pricing out the chances of another 75bps hike. In turn, European government bonds rallied across the continent, with yields on 10yr bunds (-6.6bps), OATs (-6.9bps) and BTPs (-8.3bps) all falling on the day.

When it comes to Fed Chair Powell’s speech today, he’s set to be giving remarks on the “economic outlook, inflation and the labor market”, so it should be relevant for policy. It’s widely expected the Fed will downshift their rate hikes to a 50bp pace in December, but our US economists expect Powell to shift the focus away from a downshift towards the Fed’s broader tightening campaign, and to reiterate the key messages from the November press conference. Ahead of that, we had some fresh signs that the Fed’s tightening cycle was impacting the economy, with the Case-Shiller index of 20-cities’ home prices down by a further -1.24% in September, building on its -1.30% decline in August. Bear in mind as well that all 20 cities in the index posted a monthly decline, so this is a very broad-based move lower. Elsewhere, the Conference Board’s consumer confidence numbers also fell back in November, falling to their lowest level since July at 100.2 (vs. 100.0 expected).

Ahead of Powell’s remarks, US Treasuries followed a very different path to their counterparts in Europe, with yields rising at all maturities. The 10yr yield was up +6.3bps on the day to 3.74%, with the move entirely driven by a +6.7bps rise in the real yield. And those moves have only slightly retraced overnight, with the 10yr yield down -2.1bps at 3.72%. With the pickup in real yields, equities were always going to struggle, even if the S&P did recover into the close. The rate-sensitive Nasdaq underperformed, falling -0.59%. Sentiment was similar in Europe, with the STOXX 600 (-0.13%) experiencing its third consecutive decline for the first time since early October.

Over in China, there were some important developments on the Covid situation shortly after we went to press yesterday. First, officials said that they would seek to raise vaccination rates among the elderly, which was good news for markets since stronger levels of immunity are seen as increasing the chances of the economy reopening. Second, there was also a comment that local officials should avoid excessive Covid restrictions, which again was seen as taking the direction of travel further in favour of reopening following the weekend protests. Chinese assets performed strongly on the back of these developments, and in US hours the NASDAQ Golden Dragon China index surged by +5.04%, building on its +2.83% gain over the previous session. The prospect of a future reopening in China offered further support to oil prices as well, with Brent crude up +0.61% to $83.70/bbl.

That boost has continued into Asian markets this morning, with the CSI 300 (+0.10%), the Shanghai Composite (+0.05%) and the Hang Seng (+0.69%) all seeing further gains. That’s in spite of some downbeat data on the economic situation in China, with the manufacturing PMI falling to its lowest level since April at 48.0 (vs. 49.0 expected). The non-manufacturing PMI also deteriorated to 46.7 (vs. 48.0 expected), and the composite PMI fell to a post-April low as well at 47.1. Markets elsewhere in the region are a bit more mixed however, with the Nikkei shedding -0.35%, whereas the KOSPI (+1.18%) has seen solid gains. Looking ahead, US and European equity futures are pointing to gains at the open, with those on the S&P 500 up +0.18%.

Elsewhere yesterday, UK gilts underperformed their European counterparts after comments from the BoE’s Catherine Mann, who’s been one of the more hawkish members on the MPC. Mann said that inflation expectations were becoming “increasingly embedded”, and 10yr gilt yields only fell -2.6bps on the day, a smaller fall than seen for the other big European economies. In the meantime, the latest data on mortgage approvals for October came through, which is the first release entirely after the UK’s mini-budget in late-September. That showed a dip in approvals to 59.0k (vs. 60.0k expected), which is their lowest level since the initial wave of the pandemic.

To the day ahead now, and one of the key highlights will be Fed Chair Powell’s speech at the Brookings Institution. Other central bank speakers include the Fed’s Bowman and Cook, the ECB’s Makhlouf and BoE chief economist Pill. The Fed will also be releasing their Beige Book. When it comes to data releases, today will bring the Euro Area flash CPI release and German unemployment for November, whilst in the US there’s the ADP’s report of private payrolls for November, the second estimate of Q3 GDP, the JOLTS job openings for October, pending home sales for October, and the MNI Chicago PMI for November.

By Derek Andersen of CoinTelegraph

The disgraced former head of the world’s second-largest cryptocurrency exchange tells his side of the story in candid but occasionally inarticulate interviews.

Former FTX head Sam Bankman-Fried (SBF) selected cryptocurrency vlogger Tiffany Fong for a series of lengthy and candid telephone interviews. In the two interviews that had been released on YouTube at press time, SBF speaks about many of the major questions connected with the collapse of FTX.

The first interview was conducted Nov. 6 and released Nov. 29 on YouTube. “I’ve started to trust my gut on things like this,” SBF said, explaining why he selected the relatively unknown figure to speak to. Fong has less than 10,000 subscribers to her channel. “Here’s someone who will, like, approach this from at least a somewhat neutral and interested vantage point,” he said of her. He continued:

“We as a society, in my opinion, my humble opinion, have spent quite enough time this week trying to figure out whether anyone living in [the FTX residential facility in] Albany [Bahamas] was polyamorous […] and the answer is too boring for people to believe.”

The recording began with SBF saying, “You don’t get into the situation we got in if you, like, make all the right decisions.” Taking her cue from that, Fong started her interview by asking about the “backdoor” that allowed SBF “to execute commands that could alter the [FTX] company’s financial records without alerting others.”

SBF expressed surprise at the very idea. “And this is something I would be doing?” he asked. “That I can tell you is definitely not true. I don’t even know how to code. […] I literally never even opened the code for any of FTX.”

This set the tone for the rest of the conversation, in which Fong politely asked hardball questions and SBF answered with seeming openness.

SBF went on to comment on FTX’s FTT coin. “I think it had real value. That being said, there are a few problems. […] This was f*****g embarrassing given my background. […] I think it was basically more legit than a lot of tokens in some ways. Its was more economically underpinned than the average token was,” he said.

“Illiquidity didn’t cause the crash,” SBF continued. Rather, it was “the massive correlation of things during market moves, especially when they are triggered by fear over the position itself.”

SBF agreed with Fong that “the recovery looks pretty slim” for international customers, while “U.S. is a hundred percent. If its Amazon account had not been turned off, “they could already be withdrawing.”

Speaking about his political activities, SBF said, “I donated about the same to both parties. […] All of my Republican donations were dark.” He addressed rumors about money laundering of Ukrainian donations:

“The Ukraine one? I wish I could have pulled that off. I wish. I didn’t fully understand the goal of it. I was helping Ukraine launder funds for the Democratic Party? I don’t know why Ukraine is laundering funds for the Democratic Party. I don’t know how they would or why they would.”

In the second, undated, phone interview, SBF addressed the use of FTX customer funds by Alameda Research. Struggling for words, SBF said that he should have thought more about “what a hyper-correlated cross-scenario looks like. It’s the oldest game in the book in finance. […] There was no one person in charge of monitoring risk positions at FTX.” Fong pressed for specifics from the situation, with little success.

SBF took a moderate position on the role of Binance CEO Changpeng Zhao (CZ) in the FTX downfall. “Things would certainly be a lot more stable and there would be a lot more ability to generate liquidity […] and I don’t know for sure.”

Asked about the impact of the collapse of FTX and surrounding scandal on him, SBF said, “I wake up each day and think about what happened, and I have hours per day to ruminate on it. […] It’s different than what it seems to other people.”

So today was day one of @SBF_FTX “i am too dumb to be a criminal mastermind” world tour.

Join us tomorrow for day two when he channels Simple Jack next to Janet Yellen and Zelenskyy at the NYT summit of totally non-criminal folks.

— zerohedge (@zerohedge) November 30, 2022