Month: December 2022

By Felice Maranz, Bloomberg Markets Live reporter and analyst.,

Investors already concerned about the state of commercial real estate — as interest rates climb and the economy seems poised to slow — got another worrying signal with a massive Blackstone real estate fund hitting its redemption limit.

MLIV recently flagged the frozen commercial-property market. Transactions have fallen off a cliff, making it hard for investors to determine how deep any looming price crash, if there is one coming, may be. Development is down too. Bloomberg’s REIT index is underperforming the broader S&P 500 significantly this year.

A recent Fed survey on bank lending had added to signals of slowing economic growth. The senior loan officer survey (aka “Sloos”), revealed both weaker demand and tighter standards for commercial real estate loans.

Bloomberg’s office REIT index is doing particularly poorly, sinking ~35% this year. Today’s jobs data beat expectations, but the labor force participation rate dropped again, and small businesses are shedding workers, while work forces haven’t fully returned to pre-pandemic office life.

Blackstone officials may be halting redemptions if they can’t — or don’t want to — sell assets because they aren’t confident they can get a price that matches their current valuations, Bloomberg Intelligence’s Jeffrey Langbaum tells me. He warns that a repricing for private market values is coming, as it has to, based on interest rates. Blackstone shares have tumbled around 10% in two days.

*    *    * 

Blackstone has prepared investment advisors with “help guide conversations” to keep clients calm due to increasing uncertainty about the fund. 

We wonder if it’s parts of a bigger systematic issue…  

The Democrats’ early-primary schedule is poised for a major shakeup that will break with tradition and further decouple the party’s nomination process from that of the Republicans. 

At a private dinner on Thursday, Democratic Party officials announced that President Biden has urged them to jettison Iowa from the 2024 slate of early nominating contests, while vaulting South Carolina to “first-in-the-nation” status and moving the battleground states of Georgia and Michigan into coveted early slots as well.  

Race is clearly a factor, as Democrats have increasingly bristled at giving so much influence to the predominantly white populations of Iowa and New Hampshire.

“Black voters in particular have been the backbone of the Democratic Party but have been pushed to the back of the early primary process,” said de facto party leader Biden in a letter delivered to the Democratic National Committee on Thursday. “We must ensure that voters of color have a voice in choosing our nominee much earlier in the process and throughout the entire early window,”

South Carolina was the salvation of candidate Biden’s faltering 2020 primary campaign, after Rep. James Clyburn — “the godfather of South Carolina Democratic politics” — endorsed him.  

Since 2008, nominating sequence has proceeded from the Iowa caucuses and then on to New Hampshire, Nevada and South Carolina. Biden’s proposed 2024 Democratic calendar looks like this: 

• Tuesday Feb. 6: South Carolina
• Tuesday Feb. 13: New Hampshire and Nevada
• Tuesday Feb. 20: Georgia
• Tuesday Feb. 27: Michigan

While it’s still in the early window, New Hampshire would not only take a backseat to South Carolina, but would also be forced to share its primary day spotlight with Nevada.

Reactions from New Hampshire politicians came swiftly. “I strongly oppose the president’s deeply misguided proposal, but make no mistake, New Hampshire’s law is clear, and our primary will continue to be First in the Nation,” said Sen. Maggie Hassan in a statement. New Hampshire Democratic party chair Ray Buckley was also flatly defiant: “This news is obviously disappointing, but we will be holding our primary first.” 

New Hampshire’s first-in-the-nation status is indeed embedded in a state law that stipulates that the Granite State’s primary must be held one week before any similar contest. That sets us up an entertaining fight over the coming months. The party has its own weapon, in that it could punish New Hampshire by reducing the state’s delegates to the national nominating convention — or banning the entire delegation.  

Nevada’s Democratic senators voiced their own displeasure — in a way that could seemingly be interpreted as deeming South Carolina unfit to go first not only for being too conservative but perhaps even too black:

The first contest “should be held in a competitive, pro-labor state that supports voting access and reflects all of America’s diversity,” said Senators Catherine Cortez Masto and Jacky Rosen in a joint statement. 

Per demographic data from the US Census, here’s what Masto and Rosen seem to be alluding to: 

• Black: USA 14%, South Carolina 27%, Nevada 11%
• Asian: USA 6%, South Carolina 2%, Nevada 9%
• Latino: USA 19%, South Carolina 6%, Nevada 30%

As with New Hampshire, Nevada legislators brushed aside party leaders’ announced intentions, declaring Nevada Democrats will vote on February 6, 2024 — the day that’s supposed to be for South Carolina alone — “and will continue to be held on the first Tuesday in February in future election cycles.” 

As New Hampshire and Nevada Democrats ready to battle the party, it’s important to note that the new schedule must first be approved by the party’s Rules and Bylaws Committee — which meets Friday and Saturday — and then by the full party in early 2023. 

Though the rest of the world recognized that Iowa’s fate was already sealed, Iowa Democrat Scott Brennan, who is on the Rules and Bylaws Committee, said Biden’s letter came as a shock.

“A complete kick in the teeth. Very surprised. No courtesy of a call from the White House to frankly any member of the committee. The Washington Post had it before the committee did. So, you know, it says something to me about the process,” he told KCCI. 

In addition to having a strike against it for its 90% white population, the Hawkeye State has also fallen out of favor with the DNC as the state increasingly leans Republican.  

In his letter to the DNC, Biden also recommended that Iowa and a handful of other states and territories scrap their caucus systems altogether, on the premise that the time-intensive caucus process creates a barrier to participation by working-class people. Iowa’s 2020 caucus was an embarrassing logistical disaster. 

Earlier this year, the Republican Party decided that, in 2024, contests will once again start in Iowa before moving on to New Hampshire, South Carolina and then Nevada. 

Meanwhile, Democratic presidential hopefuls will surely be happy to sidestep those humiliatingly-phallic corn-dog photo-sessions at the Iowa State Fair. Well, at least, some of them will. 

Authored by Jeffrey Tucker via The Brownstone Institute,

We are being gifted with a series of extremely impressive displays of accountability avoidance. They have been virtuosic acts, ones for the history books. I speak of the strange rhetorical symmetry between Anthony Fauci and Sam Bankman-Fried and their responses under questioning for bad actions that no one denies except themselves. 

I’ve watched what feels like a hundred hours of interviews and read transcripts of many more. They are enormously frustrating. They both specialize in justifying the small things while systematically overlooking the big picture for which they are wholly responsible. They speak in a passive voice about mistakes made but bounce off that quickly to fob the blame the results on everyone but themselves. 

What appears below is a kind of composite of them both. It’s written as farce but an oddly realistic one. 

Let’s say that a person named Sam Fauci-Fried has been accused of two crimes: theft of socks from WalMart and forcibly preventing children from attending school. 

Here is Sam under questioning. 

*  *  * 

“Did you or did you not steal socks from WalMart?”

“It’s an excellent question, and thank you for asking it. So, as I think back on the events under consideration here, we need first to understand the circumstances in which there are many pairs of socks, far more than were being sold, and also a genuine opportunity for a broader and frankly more socially aware distribution of foot covering through the community. This is where we and many others in our enterprise got involved.”

“So you did steal the socks?”

“I do understand the point of your question and it’s a good one. I think most fundamentally, we are dealing with a misalignment of perceptions over collateralized loan obligations, which, under normal conditions, would be satisfied by rehypothecation through various counterparties over which I have no control. That said, it is true that I should have been keeping a closer watch. As CEO, that was my responsibility.”

“Rephrasing, do you have socks that belong to someone else?”

“This really does raise the question of provenance, which, as you well know, can be very complex in mechanized markets where traders are presented with a range of options from futures to securitized derivatives. On the one hand, one can take custody of a basket of commodities but if you look carefully at the terms of services, that is contingent on an estimation of the risk profile over a range of time. In a volatile market, these conditions may or may not apply.”

“Can you give the socks back?”

“Let me be perfectly clear. It is my understanding, and this may not be entirely precise because I do lack access to all relevant data, that there is no question of full liquidity for customers in the US, and I would also like to draw attention to the excellent supervisory role of Japan in this respect. As for my own custodial relationship, given the present situation due to legal proceedings, I’m in no position to effectuate a reallocation of disposition due to my admitted misestimation of liquidity conditions.”

“Let’s please move on to the second charge, namely that you forcibly prevented children from going to school. How do you answer?”

“If you look at the record, you will see that I never locked anyone down. In my position, it was merely my role to make known the existence of common-sense health measures during a time of community spread as recommended by relevant authorities.”

“But, sir, we have multiple examples of interviews and speeches, and even a trove of emails, in which you said children should be stopped from going to school, in some places for as long as two years. Are you not the nation’s most powerful person to dictate to others on grounds of health?”

“Again, I oversee operations amounting to billions. The very idea that I have time to concern myself with such trivialities is absurd.”

“But we have the emails.”

“I do not recall. Again, I’m a very busy man, trying to save lives.”

“Did you get the idea that you can save lives by closing schools from a foreign totalitarian regime?”

“If you are speaking of China’s social distancing measures, those are just common sense and it was my obligation to draw attention to their effectiveness in slowing the spread with a distinct purpose in mind. For my part, I never went to China and I deeply resent the implication that I did.”

“But you sent your deputy assistant, correct? And he reported to you that China was doing a great job? And you accepted his word.”

“My role is to receive and pass on competent advice but my role is limited to a purely advisory position. You are barking up the wrong tree here! As for all other questions, suffice it to say that I do not remember.”

*  *  *

When Richard Nixon was caught red-handed in a coverup, he resigned. When the markets turned down during Bernie Madoff’s reign, he confessed and turned himself in. But that was before the onset of poststructuralism in which everyone gets to dream up a subjective reality and call it true. Fancy words replace facts and philosophical complexity masks moral clarity. 

The madness of lockdowns only intensified the problem. They pretended as if wrong is right and ill- health is heath, both physically and mentally. We are so used to lies that many people have grown weary of protesting them. We are so beaten down that we can barely demand that people take responsibility for what they have done. And the perpetuators have become skilled at saving their own skin.

Will we ever get to the bottom of these cases? Not if those who benefitted from their capers also sit in judgment. Instead, they might instead make a mint from speaking fees and book royalties. Cynical times we live in, much like scenes in the Hunger Games when the regime was stable and carnage for sport was the norm.

Year after year many wonder why does Bridgewater – reportedly the world’s largest hedge fund but far smaller than such true hedge fund titans like the Swiss National Bank and the Bank of Japan (which overnight was out buying Japanese ETFs for the first time since June) – manage more than $100 billion, and year after year they are left wondering since the fund keeps posting at best meddling, middle-of-the-road (if not much worse) returns. Then, in 2022, the fund came this close to finally redeeming its skeptics… but in the end no such luck.

According to Bloomberg, Bridgewater erased most of the returns it had generated through this year’s first three quarters, “ruining what was shaping up to be the hedge fund giant’s best annual performance in more than a decade.”

After surging an impressive 22% as of the end of September, putting it on track for its best year since 2010, when it rose about 27%, Bridgewater’s Pure Alpha fund tumbled about 13% in the fourth quarter through November, cutting its year-to-date gain to a paltry 6%,  Meanwhile, Bridgewater’s bigger and more-leveraged Pure Alpha II fund tumbled about 20% in the two months through Nov. 30, paring its 2022 advance to 7.8%.

It wasn’t immediately clear how Bridgewater’s risk-parity All Weather fund did in 2022, but judging by the collapse in rates, we doubt it was in the green.

It also wasn’t clear what sparked the sharp reversal but as Bloomberg notes, Bridgewater’s macro-trading peers have made money for most of this year by betting on rising interest rates, a strong dollar and falling stocks. Those trends reversed in recent weeks as the Federal Reserve signaled that it would slow the pace of monetary tightening.

Yields on 10-year Treasuries dropped to about 3.5% now from roughly 4.2% in early November. The dollar has tumbled against all major currencies since the end of September, and equity markets rebounded sharply.

Authored by Zachary Stieber via The Epoch Times,

House Democrats might release former President Donald Trump’s tax returns, Speaker of the House Nancy Pelosi (D-Calif.) said on Dec. 1.

The decision would be up to Ways and Means Committee Chairman Richard Neal (D-Mass.) and members of the panel, Pelosi said.

“That’s a judgment they’re going to have to make,” she told reporters during a briefing in Washington.

The judgment would be in keeping with the purpose of acquiring the returns, which Neal has said is examining the way the IRS audits presidents and considering legislative reform to the program, Pelosi added.

“I would hope that the public would have the opportunity to see but again, it’s complicated. It’s technical, it’s legal,” she said. “And Richie Neal has handled this with great dignity. There have been those in the public who were saying he should be doing this and you should be doing that. No, you should be handling it with the dignity that it deserves.”

Pelosi’s comments came hours after the Biden administration said it transmitted six years of Trump’s federal returns to the committee, which had been locked in litigation for years over the matter. The U.S. Supreme Court declined to intervene in a recent order, clearing the way for the Department of Treasury to transmit the documents.

Neal didn’t respond to a request for comment by press time and a Ways and Means Committee spokesperson declined to comment after the returns were transmitted.

Trump’s opposition was predicated in part on how top Democrats, including Neal and Pelosi, have said or suggested they’d release the returns if they were ever able to obtain them.

“Committee Democrats remain steadfast in our pursuit to have his individual tax returns disclosed to the public,” Neal said on the House floor in 2017.

“When we win this election, and we have a new president of the United States in January, and we have a new secretary of the Treasury, and Richie Neal asks for the president’s returns, then the world will see what the president has been hiding all of this time,” Pelosi said in 2020.

Former U.S. President Donald Trump, joined by former First Lady Melania Trump, arrives to speak at the Mar-a-Lago Club in Palm Beach, Fla., on Nov. 15, 2022. (Alon Skuy/AFP via Getty Images)

Rulings

Courts ruled that because Neal had expressed a legislative intent—using the returns as part of a process of considering whether legislation was needed to overhaul the way IRS audits presidents—his effort was legal, even though judges acknowledged that Democrats might release the documents.

“The Chairman has identified a legitimate legislative purpose that it requires information to accomplish. At this stage, it is not our place to delve deeper than this. The mere fact that individual members of Congress may have political motivations as well as legislative ones is of no moment. Indeed, it is likely rare that an individual member of Congress would work for a legislative purpose without considering the political implications,” U.S. Circuit Judge David Sentelle, a Reagan appointee, said in one of the rulings.

“The statements of individual Committee members and members who are not part of the Committee provided by the Trump Parties do not change this. The courts do not probe the motives of individual legislators. These motives are explicitly protected by the Speech or Debate Clause.”

The Supreme Court declined to hear arguments against that ruling, which ordered the IRS to transmit the documents to the House, and on Nov. 22 lifted a temporary stay of the order.

Trump criticized the ruling, saying that “it is unprecedented to be handing over Tax Returns, & it creates terrible precedent for future Presidents.”

Rep. Kevin Brady (R-Texas), the top Republican on the Ways and Means Committee, also reacted negatively.

“The Supreme Court has no idea what their inaction unleashes,” Brady said.

“By effectively granting the majority party in either chamber of Congress nearly unlimited power to target and make public the tax returns of political enemies—political figures, private citizens, or even justices of the Supreme Court themselves—they are opening a dangerous new political battleground where no citizen is safe.”

Rep. Richard Neal (D-Mass.) in Washington on Feb. 4, 2022. (Drew Angerer/Getty Images)

Fresh Call for Legislation

Pelosi said the situation calls for legislation that would mandate that certain presidential candidates make their returns public.

“We need to possibly have legislation requiring candidates for president to reach a certain threshold, that the public has a right to see their tax returns,” she said.

“I think the public has a right to know. That’s why we should pass legislation requiring candidates to do that. That’s why every other candidate has, except you know who, and who shall remain nameless here.”

Democrats control the House, the Senate, and the White House, although Republicans are poised to take control of the House in January 2023 when the new Congress convenes.

H.R. 273, introduced by Reps. William Pascrell (D-N.J.) and Anna Eshoo (D-Calif.), would require presidents and candidates to disclose their 10 most recent tax returns. The bill was included in H.R. 1, which the House passed but which died in the Senate.

Earlier this week CNN reported that the Biden administration is considering “dramatically” increasing its training of Ukrainian forces. The proposal would involve US advisers training “much larger groups of Ukrainian soldiers in more sophisticated battlefield tactics” at American installations in Germany, and possibly other locations in Europe. This could involve as many as 2,500 Ukrainian soldiers trained by US advisers a month, which over a half-year period would total 15,000 going through the proposed ramped-up US program.

This report and others, which have also detailed expanding military training programs for Ukrainians in Europe overseen by UK and other NATO-member militaries, has prompted a Friday response from the Kremlin. Foreign Minister Sergey Lavrov alleged Thursday that the US and NATO are now directly participating in the Ukraine war.

“You shouldn’t say that the US and NATO aren’t taking part in this war. You are directly participating in it,” Lavrov told a press briefing. 

“And not just by providing weapons but also by training personnel. You are training their military on your territory, on the territories of Britain, Germany, Italy, and other countries,” he pointed out.

He reiterated prior Kremlin statements underscoring that war between nuclear powers is “unacceptable” but while highlighting that growing US-NATO involvement greatly heightens this risk.

“Even if someone plans to start it by conventional means, the risk of escalation into a nuclear war will be enormous,” Lavrov added.

Lavrov’s comments are hugely significant given up to this point Moscow slammed what it called “indirect” American involvement. Russian officials spoke of the growing proxy war nature of the conflict. But now it appears the Kremlin sees that there’s been an escalation to direct NATO involvement.

Meanwhile the ongoing British program at multiple UK bases continues to be large in size. The UK’s own infantry program for Ukraine forces has a stated goal of training at least 10,000 Ukrainian troops. 

It remains that the Kremlin has warned repeatedly against such deepening Western involvement, which clearly is now going far beyond just weapons shipments. Russia this week walked away from New START nuclear arms reduction treaty negotiations with the US while citing its growing involvement in backing Kiev as a major reason for halting resumption of talks. 

Authored by Tsvetana Paraskova via OilPrice.com,

Switzerland could limit the use of electric vehicles (EVs) in cases of electricity supply shortages this winter under a new four-step plan to prevent power cuts and blackouts.

To ensure energy security this winter, Switzerland could become the first country to limit the driving and use of EVs, German daily Der Spiegel reports, citing multiple media reports on the Swiss four-stage action plan to avoid blackouts.  

Driving EVs could be banned in Switzerland unless in cases of “absolutely necessary journeys” in stage three of the power conservation plans. The country also plans a stricter speed limit on highways in the recently proposed action plan, which has yet to be adopted.

Switzerland typically imports electricity from France and Germany to meet all its power demand, but this year supply from its neighbors is constrained.

In France, the nuclear fleet availability is much lower than usual, which has led to the country becoming a net importer of electricity after decades of being a net exporter. The French electricity grid is at higher risk of strained power supplies in January 2023 than previously estimated due to lower nuclear power generation. The country could face the risk of power cuts this winter when electricity supply may not be enough to meet demand, Xavier Piechaczyk, the head of grid operator RTE, said earlier this week.

In Germany, the situation is similar, as utilities are having to make do with no Russian pipeline gas supply. 

Switzerland’s power supply remains uncertain for the winter and troubles with enough electricity capacity cannot be ruled out, the Swiss Federal Electricity Commission, Elcom, said as early as in June. Due to the expected lower availability of French nuclear power generation and of France’s power exports to Switzerland, the Swiss imports of power generated in France is likely to be much lower this winter compared to previous winter seasons, Elcom said.

Therefore, Switzerland may need to cover its electricity import needs of around 4 gigawatt hours (GWh) from imports from its other neighbors Germany, Austria, and Italy. However, the power export availability of those countries would heavily depend on the available fossil fuels, mostly natural gas, according to Elcom.

Ukraine is bracing for further stepped-up Russian airstrikes targeting its energy infrastructure, with President Vladimir Putin on Friday confirming the next wave is imminent, telling his German counterpart Olaf Scholz that new attacks are “inevitable” due to the West’s “destructive” policies.

“It was noted that the Russian Armed Forces had long refrained from precision missile strikes against certain targets on the territory of Ukraine,” a Kremlin readout of the telephone call begins. “But now such measures have become a forced and inevitable response to Kyiv’s provocative attacks on Russia’s civilian infrastructure.”

The statement emphasizes NATO’s weapons pipeline into Kiev: “Attention was drawn to the destructive line of Western states, including Germany, that are pumping the Kyiv regime with weapons, and are training the Ukrainian military.”

Putin reminded Scholz of the West’s deep “political and financial support” which has made the potential for any meaningful ceasefire negotiations impossible, from Moscow’s perspective. He said constant and largescale military support from allies “leads to the fact that Kyiv completely rejects the idea of any negotiations.”

Meanwhile, there appears to be external verification that the next significant aerial attack on Ukraine is coming soon, with Sky News Australia citing military analysts who say new satellite images show Russia is planning an ‘imminent’ large scale missile strike on Ukraine.

According to details in the report:

Satellite images released by US-based Maxar Technologies show a build-up of two dozen Tu-95 and Tu-160 long-range bombers at Engels-2 air base in Saratov Oblast, 700km from the Russia-Ukrainian border. 

Pictured beside the aircraft are ammunition boxes, which experts say are likely to contain Kh-55 and Kh-101 cruise missiles, with the significant increase in activity suggesting a looming attack. 

Additionally, Der Spiegel quotes military analyst Arda Mevlutoğlu as follows: “The unusually high number of bombers on the tarmac is an indication of an increase in operations, if not an imminent large-scale attack.”

📍Russia is preparing for a new massive strike: the Engels-2 airfield is on high alert

Two dozen Tu-95 and Tu-160 long-range bombers were spotted. Fuel tanks, ammo crates, vehicles and repair materials can also be spotted. pic.twitter.com/nbTWazLsM9

— Ukraine-Russia war (@UkraineRussia2) December 1, 2022

Despite Ukrainian utility and emergency crews continuing to scramble, it remains that an estimated 40% of the entire national energy infrastructure remains degraded or destroyed. The New York Times reported this week, “Ukrainian officials said that Russian attacks had disabled the power grid in the southern city of Kherson and six million people across the country were still without power after previous assaults.”

Temperatures have also remained below freezing, and are expected to dip further into the frigid winter months. Russia has defended its attacks on the energy grid as “legitimate”, while US Secretary of State Antony Blinken during a meeting of NATO ministers in Bucharest, Romania condemned the “barbaric” Russian actions.