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Putin is increasingly aware of how poorly his military is doing in Ukraine, US intel chief says

Putin's objectives to capture Ukraine have not changed despite him becoming aware of Russia's failures, the US director of national intelligence said. Russian President Vladimir Putin at the Artificial Intelligence Journey conference in Moscow, Russia, on November 24, 2022.Contributor/Getty Images Putin had initially been kept in the dark about Russia's failures in Ukraine, earlier reports said.  But the US director of national intelligence said Saturday that he is "becoming more informed." Avril Haines said Putin is "surprised" but not deterred by Russia's military performance. Russia's President Vladimir Putin is increasingly aware of how poorly his military is doing in Ukraine, US National Intelligence Director Avril Haines said on Saturday.Speaking at the Reagan Defense Forum in Simi Valley, California, Haines said Putin was "surprised" at his military's disappointing performance in Ukraine following its invasion in February."I do think he is becoming more informed of the challenges that the military faces in Russia," Haines said, according to NBC News. "But it's still not clear to us that he has a full picture at this stage of just how challenged they are." Haines' comments come after reports that Putin's military advisors had been shielding him from what is happening on the ground in Ukraine. In March — one month after Putin launched a full-scale invasion of Ukraine — a US intelligence official told reporters that they believe that Putin "is being misinformed by his advisors about how badly the Russian military is performing and how the Russian economy is being crippled by sanctions because his senior advisors are too afraid to tell him the truth."In September, it was reported that Putin was playing a more active role in the war in Ukraine, becoming more hands-on with his commanders.Haines said on Saturday that Putin's political objectives to capture Ukraine have not changed despite him becoming more aware of Russia's military failures.She said it is unclear whether he would still accept scaled-back military ambitions, adding: "I think our analysts would say he may be willing to do that on a temporary basis with the idea that he might then come back at this issue at a later time," according to NBC News.Russia continues to experience battlefield setbacks. In the last few months, Putin's troops have been forced to retreat from the Kharkiv region, from Kherson Oblast, and from parts of the Russian-occupied Donbas region.Read the original article on Business Insider.....»»

Category: personnelSource: nytDec 5th, 2022

Macleod: The Evolution Of Credit & Debt In 2023

Macleod: The Evolution Of Credit & Debt In 2023 Authored by Alasdair Macleod via GoldMoney.com, The evidence strongly suggests that a combined interest rate, economic and currency crisis for the US and its western alliance will continue in 2023. This article focuses on credit, its constraints, and why quantitative easing has already crowded out private sector activity. Adjusting M2 money supply for accumulating QE indicates the degree to which this has driven the US tax base into deep recession. And the wider effects on credit in the economy should not be ignored.  After a brief partial recovery from the covid crisis in US government finances, they are likely to start deteriorating again due to a deepening recession of private sector activity. Funding these deficits depends on foreign inward investment flows, which are faltering. Rising interest rates and an ongoing bear market make funding from this source hard to envisage. Meanwhile, from his public statements President Putin is fully aware of these difficulties, and a consequence of the western alliance increasing their support and involvement in Ukraine makes it almost certain that Putin will take the opportunity to push the dollar over the edge. Credit is much more than bank deposits Economics is about credit, and its balance sheet twin, debt. Debt is either productive, in which case it can extinguish credit in due course, or it is not, and credit must be extended or written off. Money almost never comes into it. Money is distinguished from credit by having no counterparty risk, which credit always has. The role of money is to stabilise the purchasing power of credit. And the only legal form of money is metallic; gold, silver, or copper usually rendered into coin for enhanced fungibility. Credit is created between consenting parties. It facilitates commerce, created to circulate existing commodities, and to transform them into consumer goods. The chain of production requires credit, from miner, grower, or importer, to manufacturer, wholesaler, retailer and customer or consumer. Credit in the production chain is only extinguished when the customer or consumer pays for the end product. Until then, the entire production chain must either have money or arrange for credit to pay for their inputs.  Providers of this credit include the widest range of economic actors in an economy as well as the banks. When we talk of the misnamed money supply as the measure of credit in an economy, we are looking at the tip of an iceberg, leading us to think that debt in the form of bank notes and deposit accounts owed to individuals and businesses is the extent of it. Changes in the banking sector’s risk appetite drive a larger change in unrecorded credit conditions. We must accept that changes in the level of officially recognised debt are merely symptomatic of larger changes in payment obligations in the economy.  The role of credit is not adequately understood by economists. Keynes’s General Theory has only one indexed reference to credit in the entire book, the vade mecum for all macroeconomists. Even the title includes “money” when it is actually all about credit. Von Mises expounds on credit to a considerable degree in his Human Action, but this is an exception. And even his followers today are often unclear about the distinction between money and credit. Economists and commentators have begun to understand that credit is not limited to banks, by admitting to the existence of shadow banking, a loose definition for financial institutions which do not have a banking licence but circulate credit. The Bank for International Settlements which monitors shadow banking appears to suspect shadow banks of creating credit without the requirement of a banking licence. There appears to be a confusion here: the BIS’s starting point is that credit is the preserve of a licenced bank. The mistake is to not understand the wider role of non-bank credit in economic activity. But these institutions, ranging from insurance companies and pension funds to various forms of financial intermediaries and agents, unconsciously create credit by allowing time to elapse between a commitment giving rise to an obligation, and its settlement. Even next day settlement is a debt obligation for a buyer, or credit extended by a seller. Delivery against settlement is a credit obligation for both parties in a transaction. Futures, forwards, and options are credit obligations in favour of a buyer, which can be traded. And when a broker insists a client must have a credit in his account before investing, or to deliver securities before selling, credits and obligations are also created. Therefore, credit has the same effect as money (which is very rarely used) in every transaction, financial or non-financial. All the debts in the accounts of businesses are part of the circulating medium in an economy, including bills of exchange and other tradable obligations. And at each transfer a new credit, debt, or right of action is created, while others are extinguished. A banking system provides a base for further credit expansion because all credit transactions are ultimately settled in bank notes, which are an obligation of the note issuer (in practice today, a central bank) or through the novation of a bank deposit, being an obligation of a commercial bank. Banks are simply dealers in credit. As such, they facilitate not just their own dealings, but all credit creation and expunction.  The reason for making the point about the true extent of credit is that it is a mistake to think that the statistical expansion, or contraction of it, conventionally measured by the misnamed money supply, is the true extent of a change in outstanding credit. Central banks in particular act as if they believe that by influencing the height of the visible tip of the credit iceberg, they can simply ignore the consequences for the rest.  It is also worth making this point so that we can assess how the economies of the western alliance will fare in the year ahead — the American-led NATO and other nations adhering to its sphere of influence. With signs of bank credit no longer expanding and, in some cases, contracting, and with price inflation continuing at destructive levels and a recession threatened, it is rarely so important to understand credit and its role in an economy.  We also need to have a true understanding of credit to assess the prospects for China’s economy, which appears to be set on a different course. Emerging from lockdown and in the light of favourable geopolitical developments while the western alliance is tipping into recession, the prospects for China’s economy are rapidly improving. Interest rates in 2023 That the long-term trend of declining interest rates for the major fiat currencies over the last four decades came to an end in 2021 is now beyond question. That this trend fostered a continuing appreciation of asset values is fundamental to an understanding of the consequences. And that the expansion of bank credit supporting a widening plethora of financial credit has stopped, is now only beginning to be register. If we look at the quarterly rate of change in US M2 money supply, this is now evident. Since the Bretton Woods agreement was abandoned in 1971, there has not been as severe a contraction of US dollar bank credit as witnessed today. It follows a massive covid-related spike when the US Government’s budget deficit soared. And its rise and fall is contemporaneous with a collapse in government revenues and soaring welfare costs. In fiscal 2020 (to end-September), the Federal Government’s deficit was $3.312 trillion, compared with revenue of $3.42 trillion. It meant that spending was nearly twice tax income. Some of that excess expenditure was helicoptered directly into citizens’ bank accounts. The rest was reflected in bank balances as it was spent into public circulation by the government. Furthermore, from March 2020 the Fed commenced QE at the rate of $120bn per month, adding a total of $2.6 trillion in bank deposits by the end of fiscal 2021.  Deflating M2 by QE to get a feel for changes in the aggregate level of bank deposits strictly related to private sector origination tells us that private sector related credit was already contracting substantially in fiscal 2020—2021. This finding is consistent with an economy which suffered a suspension of much activity. This is illustrated in our next chart, taken from January 2020. In this chart, accumulating QE is subtracted from official M2 to derive the red line. In practice, one cannot make such a clear distinction, because QE credit goes directly into the financial sector, which is broadly excluded from the GDP calculation. Nevertheless, QE inflates not just commercial bank reserves at the Fed, but their deposit liabilities to the insurance companies, pension funds, and other members of the shadow banking group. A minor portion of QE might relate to the commercial banks themselves, which for practical purposes can be ignored. Through QE, state-origination of credit effectively crowds out private sector-origination of credit. A Keynesian critic might dismiss this on the basis that he believes QE stimulates the wider economy. That may be true when a monetary stimulus is first applied, since it takes time for market prices to adjust to the extra quantity of credit. Furthermore, QE stimulates financial market values and not the GDP economy, only affecting it later in a roundabout way. But when QE eventually leaks out into the wider economy, it leads to higher prices for consumer goods, confirmed by the dramatic re-emergence of consumer price inflation. Furthermore, regulated banks are limited in their ability to create credit by balance sheet constraints, so to accommodate QE they are necessarily restricted in their credit creation for private sector borrowers. Given the far larger quantities of non-bank credit which depend for its facilitation on bank credit, the negative impact on the economy of banks becoming risk averse is poorly understood. It is ignored on the assumption that state-origination of credit through budget deficits stimulates economic activity. What is less appreciated is that QE has already driven the non-government portion of the US economy into a deepening recession, yet to be reflected in government statistics. Furthermore, that the extra credit burden on the commercial banking system has exceeded their collective balance sheet capacity is confirmed by the Fed’s reverse repo facility, which offers deposit facilities additional to the commercial banking system. Currently standing at $2.2 trillion, it represents the bulk of excess credit created by QE since March 2020. Adjusted for QE, the falling level of private sector deposits in the M2 statistic is consistent with an economic slump, only concealed statistically by the expansion of state spending and the loss of the dollar’s purchasing power. The economic distortions arising from QE are not restricted to America but are repeated in the other advanced economies as well. The only offset to the problem is an increase in private sector savings at the expense of immediate consumption and the extent to which they absorb increasing government borrowing. That way, the consequences for price inflation would have been lessened. But in America, much of the EU, and the UK, savings have not increased as a proportion of GDP, so there has been little or no savings offset to soaring budget deficits. A funding crisis is in the making Returning to the US as our primary example, we can see that national monetary statistics are concealing a slump in economic activity in the “real economy”. This real economy represents the state’s revenue base. On its own, this is going to lead to higher government borrowing than expected by forecasters as tax revenues fall and welfare commitments rise. And interest expense, already estimated by the Congressional Budget Office to cost $442bn in the current fiscal year and $525bn in fiscal 2024, are bound to be significantly higher due to unbudgeted extra borrowing. Officialdom still assumes that a recession will be mild and brief. Consequently, the CBO’s calculations are unrealistic in what is clearly an unfolding economic slump given the evidence from bank credit. Even without considering additional negative factors, such as bankruptcies and bank failures which always attend a deep recession, borrowing cost estimates are almost certainly going to be far higher than currently expected. In addition to domestic spending, the western alliance appears to be stepping up its war in Ukraine against Russia. US Defence spending is already running at nearly $800bn, and that can be expected to escalate significantly as the conflict in Ukraine worsens. The CBO’s estimate for 2024 is an increase to $814bn; but in the face of a more realistic assessment of an escalation of the Ukraine conflict since the CBO forecast was made last May, the outturn could easily be over $1,000bn.  To the volume of debt issuance must also be added variations in interest cost. Bond investors currently tolerate negative yields in the apparent belief that falling consumer demand in a recession will reduce the tendency for consumer prices to rise. This is certainly the official line in all western central banks. But as we have seen, this “transient inflation” argument has had its timescale pushed further into the future as reality intervenes.  This line of thinking, which is based on interpretations of supply and demand curves, ignores the plain fact that a general fall in consumption is tied irrevocably to a general fall in production. It also ignores the most important variable, which is the purchasing power of a fiat currency. It is the loss of purchasing power, which is primarily reflected in the consumer price index following the dilution of the currency by its debasement. In the absence of a sheet anchor tying credit values to legal money there is the thorny question of its users’ confidence being maintained in it as the exchange medium. Should that deteriorate, not only have we yet to see the consequences of earlier QE work their way through to undermining the dollar’s purchasing power, but the cost of government borrowing is likely to remain higher and for longer than official forecasts assume.  Funding difficulties are ahead We can now identify sources of ongoing credit inflation, which at the least will serve to continue to undermine the dollar’s purchasing power and ensure that a rising trend for interest rates will continue. This conclusion is markedly different from expectations that the current catalogue of problems facing the US authorities amounts to a series of one-off factors that will diminish and disappear in time. We can see that in common with the Eurozone, Japan, and the UK, the US financial system will be required to come up with rising levels of credit to fund government debt, the consequence of continuing high levels of budget deficits. Furthermore, after a brief respite from the exceptional levels of deficits over covid, there is every likelihood that these deficits will increase again, particularly in the US, UK, and the PIGS grouping in the Eurozone. Not only do these nations have a problem with budget deficits, but they have trade deficits as well. This is bad news particularly for the dollar and sterling, because both currencies are overly dependent on inward capital flows to balance their governments’ books. It is becoming apparent that with respect to credit policies, the authorities in America (and the UK) are faced with mounting funding difficulties to resolve. We can briefly summarise them as follows: Though they have yet to admit it, despite all the QE to date the evidence of a gathering recession is mounting. It has only served to conceal a deteriorating economic condition. The Fed is prioritising tackling rising consumer prices for now, claiming that that is the immediate problem. Along with the US Treasury, the Fed still claims that inflation is transient. This claim must continue to have credibility if negative real yields in bond markets are to endure, a situation which cannot last for very long. Monetary stimulus is confined by a lack of commercial banking balance sheet space. Further stimulation through QE will come up against this lack of headroom.  With early evidence of a declining foreign appetite for US Treasuries, it could become increasingly difficult to fund the government’s deficits, as was the case in the UK in the 1970s. This author has vivid recollections of a similar situation faced by the UK’s monetary authorities between 1972—1975. In those days, the Bank of England was instructed in its monetary policy by the Treasury, and often its market related advice was overridden by Treasury mandarins lacking knowledge of financial markets. During the Barbour boom of 1971—1972, the Bank suppressed interest rates and encouraged the inflation of credit. Subsequently, price inflation started to rise and interest rates belatedly followed, always reluctantly conceded by the authorities. This rapidly became a funding crisis for the government. The Treasury always tried to issue gilt-edged stock at less than the market was prepared to pay. Consequently, sterling’s exchange rate would come under pressure, and with a trend of rising consumer prices continuing, interest rates would have to be raised to get the gilt issue of the day subscribed. Having reflected a deteriorating situation, bond yields then fell when it was momentarily resolved. The crunch came in Autumn 1973, when the Bank of England’s minimum lending rate was increased from 9% on 26 July in steps to 13% on 13 November. A banking crisis suddenly ensued among lenders exposed to commercial property, and a number of banks failed. This episode became known as the secondary banking crisis. As bond yields rose, stock markets crashed, with the FT30 Share Index falling from 530 in May 1972, to 140 in January 1975. The listed commercial property sector was virtually wiped out. In an air of crisis, inept Treasury policies continued to contribute to a growing fear of runaway inflation. Long maturity gilt issues bore coupons such as 15 ¼% and 15 ½%. And finally, in November 1976, the IMF bailed Britain out with a $3.9bn loan.  Today, these lessons for the Fed and holders of dollar denominated financial assets are instructive. Future increases in interest rates were always underestimated, and as the error became apparent bond yields rose and equities fell. While the Fed is notionally independent from the US Treasury, the Federal Open Market Committee’s approach to markets is one of control, which was not so much shared by the Bank of England in the 1970s but reflected the anti-market Keynesian view of the controlling UK Treasury.  In common with all other western central banks today, official policy at the Fed is to deny that price inflation is related to the quantity of credit. It is rare that money or credit in the context of a circulating medium is even mentioned in FOMC policy statements. Instead, interest rate setting is the dominant theme. And there is no acknowledgement that interest rates are primarily compensation to depositors for loss of purchasing power — a dangerous error when national finances are dependent on foreigners buying your treasury bonds.  Foreign ownership of dollars and dollar assets In the 1970s, sterling’s troubles were compounded by a combination of trade deficits and Britain’s dependence on inward (foreign) investment. In short, the nation was, and still is savings deficient. Consequently, at the first sign of rising interest rates foreign holders recognised that the UK government would drag its heels at accepting reality. They would turn sellers leading to perennial sterling crises. Today, the dollar has been protected from this fate because of its status as the world’s reserve currency. Otherwise, it shares the same characteristics as sterling in the 1970s — twin deficits, reliance upon foreign investment, and rising yields on government bonds.  According to the US Treasury’s TIC statistics, in the 12 months to September last, foreign holders purchased $846bn long-term securities. Breaking these figures down, private sector foreigners were net buyers, while foreign governments were net sellers. This reflects the difference between the trade deficit and the balance of payments: in other words, importers were retaining and investing most of their dollar payments on a net basis. Table 1 shows the most recent position. Over the last year, the total value of foreign long-term and short-term investments in dollars (including bank deposits) fell by $3.531 trillion to $30.270 trillion. $2.532 trillion of this decline was in equity valuations, and with the recent rally in equity and bond markets, there will be some recovery in these numbers. But they are an indication of market and currency risks assumed by foreign holders of these assets if US bond yields start to rise again. And here we must also consider relative currency attractions. The decline of the petrodollar and rise of the petroyuan It is in this context that we must view Saudi Arabia’s move to replace petrodollars with petroyuan. Through its climate change policies, the western alliance against the Asian hegemons has effectively told its oil and natural gas supliers in the Gulf Cooperation Council that their carbon fuel products will no longer be welcome in a decade’s time. It is therefore hardly surprising that the Middle East sees its future trade being with China, along with her associates in the Shanghai Cooperation Organisation, the Eurasian economic Union, and the BRICS. Saudi Arabia has indicated her desire to join BRICS. Along with Egypt, Qatar, Emirates, Kuwait, and Bahrain, Saudi Arabia are also on the list to become dialog partners of the SCO.  Binding the membership of the SCO together is China’s plans to accelerate a communications and industrial revolution throughout Asia, and with a savings rate of 45% she has the capital available to invest in the necessary projects without undermining her currency. While America stagnates, China’s economy will be powering ahead. There are further advantages to China’s plans with respect to the security and availability of cheap energy. While the Asians pay lip service to the western alliance’s insistence that fossil fuels must be reduced and then eliminated, in practice SCO members are still building coal-fired power stations and increasing their demand for all forms of fossil fuel. Members, associates, and dialog partners of the SCO, representing over 40% of the world’s population now include all the major oil and gas exporters in Asia. The economic consequences are certain to impart significant advantages to China and her industrialisation plans, compared with the western alliance’s determination to starve itself of energy. While it will take some time for the Saudis to fully declare the petrodollar dead, the signal that she is prepared to accept petroyuan is an important one with more immediate consequences. We can be sure that besides geopolitical imperatives, the Saudis will have analysed the relative prospects between the two petro-currencies. They appear to have concluded that the risk of loss of the yuan’s purchasing power is at least no greater than that of the dollar. And if the Saudis are arriving at this conclusion, we can assume that other Asian governments holding dollars in their reserves will as well. Russia is likely to stir the currency pot With the western alliance increasing its support and involvement in the Ukraine proxy war, the military pressure on Russia is mounting. If President Putin has learned anything, it should be that military attempts to secure Eastern Ukraine carry a high risk of failure. Furthermore, with the alliance bringing more lethal weaponry to bear on his army, his prospects of military success are declining. Compounding his military problems is the recent decline in oil and gas prices, particularly of the latter which has taken the energy squeeze off the EU. There can be little doubt that the greater these negative factors become, the greater the pressure on Putin to resort to a financial solution. Putin’s strategy is likely to be simple and has already been telegraphed in his speech to the delegates at the St Petersburg Economic Forum last June. In short, he understands the weakness for the dollar’s position and by extension those of the other alliance currencies. Ideally, a cold snap in Middle and Eastern Europe will help lift oil and gas prices, increasing the prospects for price inflation, thereby bringing renewed pressure for interest rates in the alliance currencies to rise. This will lead to renewed losses on US and EU bonds, further falls in equities, and therefore dollar liquidation by foreigners. The eventual outcome of Triffin’s dilemma, a final crisis for the reserve currency, is certainly in the wings. With the situation in Ukraine likely to escalate, Putin can ill afford to delay. On another front, he has authorised Russia’s National Wealth Fund to invest up to 60% in Chinese yuan and 40% in physical gold. This is probably a move to protect the fund from Putin’s view of future currency trends and from their declining value in gold. It is consistent with what the Saudis are doing with respect to getting out of dollars into yuan, and probably some gold bullion through the Shanghai International Gold Exchange. If this demand for gold extends beyond both Russia and Saudi Arabia, then the mechanism for dollar destruction could be accelerating demand for gold from multiple governments and entities in the Russian Chinese axis. Tyler Durden Sat, 01/14/2023 - 17:30.....»»

Category: dealsSource: nytJan 14th, 2023

A CEO"s apology is a make-or-break moment. Here"s how to do it right.

Everyone messes up, including companies and CEOs. They need to understand the repercussions of a bad apology and how it can break trust. It's hard to build trust, it's harder to maintain trust, and it's harder still to repair that trust after a betrayal, a Harvard professor said.PwC When a CEO or company messes up and trust is broken, the apology must be done right. Trust is the everyday currency of business, PwC's Wes Bricker says. CEOs must be aware that the way they apologize is just as important as the words "I'm sorry." Nobody is perfect, including CEOs. When a company or leader makes a mistake, there is more than one way to offer up a mea culpa that sounds genuine, shows ownership, and lays out a path forward. We're all familiar with how to apologize in our personal lives, but what's the best way to apologize when you're a leader of a team or a company? It's a question addressed in boardrooms, by lawyers, by crisis-communication firms, and by PwC.The US professional-services firm runs the Trust Leadership Institute — which aims to help C-suite and senior-level executives and directors think about the evolving and increasingly complex role that trust plays in business, including public policy, data and technology, cybersecurity, workforce management, governance, and sustainability.The institute is part of PwC's $300 million commitment to push leaders to embed trust-based fundamentals into their day-to-day and long-term management styles and business practices.It's hard to build trust, it's harder to maintain trust, and it's harder still to repair that trust after a betrayal, Sandra Sucher, a Harvard Business School professor and one of the session leaders at a Trust Leadership Institute gathering in December, told Insider. "Trust isn't a luxury good," Wes Bricker, PwC's vice chair and US trust-solutions coleader, told Insider. "It's your everyday currency of business, and it's a nonnegotiable for long-term success." The apology is one component of that currency.In recent years, a corporation's or CEO's apology has taken on greater significance because customers and employees are often quick to demand that leaders take ownership and show transparency around their actions. Sucher said she'd seen numerous examples of poorly worded corporate apologies. Such efforts failed because they didn't acknowledge the harm, lacked accountability, and didn't offer a way to fix the problem. She said a recent example of an apology done well was in a memo from the payments company Stripe announcing layoffs. Sucher praised the clarity that CEO Patrick Collison showed in his message to Stripe's workers."He was just very straightforward," Sucher said.It was important, Sucher said, that Collison acknowledged Stripe was too quick to hire. That level of transparency made Collison seem more credible in saying the company would be working to turn things around, Sucher said."If you can't describe how this happened, how will I believe you can fix the problem?" she added.Collison's apology had authenticity and didn't sound robotic, Sucher said. Any apology must seem like a human is talking, and it can't feel too rehearsed or like the company's main concern is guarding against lawsuits, she said.Sucher also pushes CEOs to tailor an apology message to a person — whether that's the employee or the customer — and have fellow C-suite employees role-play with them to capture the spirit of what leaders are looking for with the apology. The corporate apology must include an "offer of repair," Sucher said. This is essentially some action to make sure the betrayal or harm won't be felt again.Sucher said CEOs were receptive to a framework on how to apologize because "everyone messes up at times."Because "these companies are part of our lives" and many CEOs have achieved celebrity status, Sucher said, the chief executives must be aware that the way they apologize is just as important as the words "I'm sorry." Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 4th, 2023

2022 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead

2022 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead One year ago, when looking at the 20 most popular stories of 2021, we said that the year would be a very tough act to follow as "the sheer breadth of narratives, stories, surprises, plot twists and unexpected developments" made 2021 the most memorable year yet in our brief history, and that it would be an extremely tough act to follow. And yet despite the exceedingly high bar for 2022, not only did the year not disappoint but between the constant news barrage, the regime shifts, narrative volatility, market rollercoasters, oh and the world being on the verge of a nuclear Armageddon for much of the year, the past year was the most action, excitement, and news (including fake news)-packed yet. Where does one even start? While covid - which was the story of 2020 - finally faded away from the front page and the constant barrage of fearmongering coverage (with recent revelations courtesy of Elon Musk's "Twitter Files" showing just how extensively said newsflow was crafted, orchestrated and -y es - censored by the government, while a sudden U-turn by China in its Covid Zero policy prompting a top Chinese research to admit that the "fatality rate from the omicron variant of the virus is in line with the flu"), and the story of 2021 was the scourge of soaring inflation (which contrary to macrotourist predictions that it would prove "transitory" just kept rising, and rising, and rising, until it hit levels not seen since the Volcker galloping inflation days of the 1980s)... ... then the big market story of 2022 was the coordinated central bank crusade to put the inflation genie back into the bottle and to contain soaring prices (which were no longer transitory, especially after Putin launched his "special military operation" in Ukraine which we will discuss shortly)... ... even if it meant crushing the housing market... ... sparking a global recession, or as Goldman calls it a "broad-based but necessary slowdown in global growth"... ... and leaving millions out of work (the BLS still pretends hundreds of thousands of workers are being added to payrolls even though as we all know - as does the Philadelphia Fed - that is a lie, and the real employment number has not changed since March)... ... not to mention triggering the worst bear market in both stocks and bonds since the global financial crisis. Yes, less than a year after the S&P hit a record just above 4800 in January of this year, both global stock and bond markets have cratered, and in a profound shock to an entire generation of "traders" who have never lived through a hiking cycle and rising inflation, for the first time since 2008 no central banks are riding to the market's rescue. Meanwhile, with a drop of more than 20% in 2022 translating into a record $18 trillion wipeout, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, amid the Fed's relentless rate hiking campaign. Add bond market losses - because in 2022 everything was sold - and you get a staggering $36 trillion in value vaporized, which in absolute terms is nearly double the damage from the Lehman failure and the global financial crisis. None of this should come as a surprise: the staggering liquidity injections that started in 2020, continued throughout 2021 and extended into the first half of 2022 before gently reversing as QT finally returned; the final tally is that after $3 trillion in emergency liquidity injections in the immediate aftermath of the pandemic to "stabilize the world", the Fed injected another $2 trillion in the subsequent period, most of which in 2021, a year where economists were "puzzled" why inflation was soaring (this, of course, excludes the tens of trillions of monetary stimulus injected by other central banks as well as the boundless fiscal stimulus that was greenlighted with the launch of helicopter money). And then, when a modest $500 billion in Fed balance sheet liquidity was withdrawn... everything crashed. This reminds us of something we said two years ago: "it's almost as if the world's richest asset owners requested the covid pandemic." Well, last year we got confirmation for this rhetorical statement, when we calculated that in the 18 months after the covid pandemic hit, the richest 1% of US society saw their net worth increase by over $30 trillion, which in turn officially made the US into a banana republic where the middle 60% of US households by income - a measure economists use as a definition of the middle class - saw their combined assets drop from 26.7% to 26.6% of national wealth, the lowest in Federal Reserve data, while for the first time the super rich had a bigger share, at 27%. Yes, for the first time ever, the 1% owned more wealth than the entire US middle class, a definition traditionally reserve for kleptocracies and despotic African banana republics. But as the Fed finally ended QE and started draining its balance sheet in 2022, the party ended with a thud, and this tremendous wealth accumulation by the top 1% went into reverse: indeed, just the 500 richest billionaires saw their fortunes collapse by $1.4 trillion with names such as Mark Zuckerberg, Elon Musk, Jeff Bezos, Masa Son and Larry Page and Sergey Brin all losing more than a third (in some cases much more) of their net worth. This also reminds us of something else we said a year ago: "this continued can-kicking by the establishment - all of which was made possible by the covid pandemic and lockdowns which served as an all too convenient scapegoat for the unprecedented response that served to propel risk assets (and fiat alternatives such as gold and bitcoin) to all time highs - has come with a price... and an increasingly higher price in fact. As even Bank of America CIO Michael Hartnett admits, Fed's response to the the pandemic "worsened inequality" as the value of financial assets - Wall Street -  relative to economy - Main Street - hit all-time high of 6.3x." In other words, for all its faults, 2022 was a year in which inequality finally reversed - if only a little - and as Michael Hartnett said in one of his final Flow Shows, "Main St finally outperformed Wall St significantly in 2022" as the value of financial assets relative to the economy slumped from 6.3x to 5.4x. Sadly, we doubt that this will cheer anyone up - be it workers - who have seen their real, inflation-adjusted earnings decline for a record 20 consecutive months (or virtually all of Joe BIden's presidency)... ... or investors who have seen crushing losses across all industries, with the exception of the one sector we have been pounding-the-table-on bullish on since the summer of 2020: energy (with our favorite stock, Exxon, blowing away the competition with its nearly triple digit return YTD). There is some good news for jittery bulls looking ahead at 2023: statistics show that two consecutive down years are rare for major equity markets — the S&P 500 index has fallen for two straight years on just four occasions since 1928, and they usually marked market crashes or social cataclysms -  the Great Depression, World War II, the 1970s oil crisis and the bursting of the dot-com bubble. The scary thing though, is that when they do occur, drops in the second year tend to be deeper than in the first. And with Joe Biden at the helm, betting on a second great depression may be prudent. Even if that sounds hyperbolic, when it comes to markets the big question for 2023 is simple: have markets bottomed or is there much more room to fall, in other words, are we facing a hard or soft landing. And speaking of Joe Biden at the helm, another glaring risk factor for 2023 is - of course- nuclear war. Because while the great inflation fight and Biden bear market were the defining features of 2022 from an economic and capital markets standpoint, the biggest event in terms of geopolitical and social importance was the war between Russia and Ukraine. While one could write - pardon the pun - the modern day equivalent of "war and peace" on the causes behind the war in Ukraine, for the sake of brevity we will merely note that a conflict that had been simmering for years if not decades... ... finally got its proverbial spark in February when - encouraged by NATO to join the military alliance in an act that Russia had repeatedly warned would be casus belli against Ukraine - Putin ordered a "special military operation" against Ukraine, sending Russian troops to invade the country because, as he subsequently explained, "if Russia did not do this now, it itself would be invaded by neighboring NATO countries a few years later." And speaking of what else Putin said in the lead up to the Ukraine war, the following snapshots reveal much of the Russian leader's thinking about the biggest geopolitical conflict since World War II. And while the geopolitical implications of the war are staggering and long-reaching, the single most important consequence to the world, and especially Europe, is the threat of persistent energy shortages over the coming years as Russian energy output has been sanctioned and curtailed for the foreseeable future... ... in the process sending energy prices in Europe and elsewhere soaring, and pushing inflation sharply higher. Which is especially ironic, because the same central banks we showed above that are hiking rates like crazy in hopes of containing inflation are doing precisely nothing to address the elephant in the room, namely that inflation is not demand-driven (which the Fed can control by adjusting the price of money) but entirely on the supply-side. And since the Fed can't print oil or gas, all that central banks are doing is executing Vladimir Putin's indirect bidding and pushing the world into a global recession if not all out depression as they hope to crush enough energy demand to lower prices in a world where energy supply is also much lower. What they forget is that this will lead to tens of millions of unemployed people, and while that is not a major issue yet, something tells us that the coming mass layoffs - both in the US and around the globe - and not just in tech but across all industries, will be the story of 2023. One final thing worth mentioning in the context of the Ukraine war is what it means strategically for the future of the world, and here we would argue that some of the best analysis belong to former NY Fed repo guru, Zoltan Pozsar whose periodic dispatches throughout 2022 (all of which are available to professional subscribers), and whose year-end report on the fate of Bretton Woods III, the petrodollar, the petroyuan and petrogold, are all must-read for anyone who hopes to be ahead of the curve in today's rapidly changing world. Away from Inflation and the Ukraine war, the next most important topic in the past year, were the revelations from the Twitter Files, exposed by the social medial company's new owner, Elon Musk, who paid $44 billion so that the world can finally see first hand just how little free speech there really is in the so-called land of the free and the home of the First Amendment, and how countless three-lettered, deep-state alphabet agencies - and the military-industrial complex - will do anything and everything to control both the official discourse and the unofficial narrative to keep their preferred puppets in the White House, and keep those they disapprove of - censored and/or locked up, both literally and metaphorically... or simply designate them "conspiracy theorists." None other than Matt Taibbi wrote the best summary of what the Twitter Files revealed, namely America's stealthy conversion into a crypto-fascist state where some unelected government bureaucrat tells corporations what to do: This last week saw the FBI describe Lee Fang, Michael Shellenberger and me as “conspiracy theorists” whose “sole aim” is to discredit the agency. That statement will look ironic soon, as we spent much of this week learning about other agencies and organizations that can now also be discredited thanks to these files. A group of us spent the last weeks reading thousands of documents. For me a lot of that time was spent learning how Twitter functioned, specifically its relationships with government. How weird is modern-day America? Not long ago, CIA veterans tell me, the information above the “tearline” of a U.S. government intelligence cable would include the station of origin and any other CIA offices copied on the report. I spent much of today looking at exactly similar documents, seemingly written by the same people, except the “offices” copied at the top of their reports weren’t other agency stations, but Twitter’s Silicon Valley colleagues: Apple, Facebook, Microsoft, LinkedIn, even Wikipedia. It turns out these are the new principal intelligence outposts of the American empire. A subplot is these companies seem not to have had much choice in being made key parts of a global surveillance and information control apparatus, although evidence suggests their Quislingian executives were mostly all thrilled to be absorbed. Details on those “Other Government Agencies” soon, probably tomorrow. One happy-ish thought at month’s end: Sometime in the last decade, many people — I was one — began to feel robbed of their sense of normalcy by something we couldn’t define. Increasingly glued to our phones, we saw that the version of the world that was spat out at us from them seemed distorted. The public’s reactions to various news events seemed off-kilter, being either way too intense, not intense enough, or simply unbelievable. You’d read that seemingly everyone in the world was in agreement that a certain thing was true, except it seemed ridiculous to you, which put you in an awkward place with friends, family, others. Should you say something? Are you the crazy one? I can’t have been the only person to have struggled psychologically during this time. This is why these Twitter files have been such a balm. This is the reality they stole from us! It’s repulsive, horrifying, and dystopian, a gruesome history of a world run by anti-people, but I’ll take it any day over the vile and insulting facsimile of truth they’ve been selling. Personally, once I saw that these lurid files could be used as a road map back to something like reality — I wasn’t sure until this week — I relaxed for the first time in probably seven or eight years. Well said Matt, and we say this as one of the first media outlets that was dubbed "conspiracy theorists" by the authorities, long before everyone else joined the club. Oh yes, we've been there: we were suspended for half a year on Twitter for telling the truth about Covid, and then we lost most of our advertisers after the Atlantic Council's weaponized "fact-checkers" put us on every ad agency's black list while anonymous CIA sources at the AP slandered us for being "Kremlin puppets" - which reminds us: for those with the means, desire and willingness to support us, please do so by becoming a premium member: we are now almost entirely reader-funded so your financial assistance will be instrumental to ensure our continued survival into 2023 and beyond. The bottom line, at least for us, is that the past three years have been a stark lesson in how quickly an ad-funded business can disintegrate in this world which resembles the dystopia of 1984 more and more each day, and we have since taken measures. Two years ago, we launched a paid version of our website, which is entirely ad and moderation free, and offers readers a variety of premium content. It wasn't our intention to make this transformation but unfortunately we know which way the wind is blowing and it is only a matter of time before the gatekeepers of online ad spending block us for good. As such, if we are to have any hope in continuing it will come directly from you, our readers. We will keep the free website running for as long as possible, but we are certain that it is only a matter of time before the hammer falls as the censorship bandwagon rolls out much more aggressively in the coming year. Meanwhile, for all those lamenting the relentless coverage of politics in a financial blog, why finance appears to have taken a secondary role, and why the political "narrative" has taken a dominant role for financial analysts, the past three years showed conclusively why that is the case: in a world where markets gyrated, and "rotated" from value stocks to growth and vice versa, purely on speculation of how big the next stimulus out of Washington will be, now that any future big stimulus plans are off the table until at least 2024 thanks to a divided Congress, and the Fed is still planning on hiking until it finally crushing inflation, we would like to remind readers of one of our favorite charts: every financial crisis is the result of Fed tightening, and something always breaks. Which brings us to the simplest forecast about the coming year: 2023 will be the year when something finally breaks. As for more nuanced predictions about the future, as the past three years so vividly showed, when it comes to actual surprises and all true "black swans", it won't be what anyone had expected. And so while many themes, both in the political and financial realm, did get some accelerated closure, dramatic changes in 2022 persisted and new sources of global shocks emerged, and will continue to manifest themselves in often violent and unexpected ways - from the ongoing record polarization in the US political arena, to "populist" upheavals around the developed world, to the gradual transition to a global Universal Basic (i.e., socialized) Income regime, to China deciding that the US is finally weak enough and the time has come to invade Taiwan. As always, we thank all of our readers for making this website - which has never seen one dollar of outside funding (and despite amusing recurring allegations, has certainly never seen a ruble from either Putin or the KGB either, sorry CIA) and has never spent one dollar on marketing - a small (or not so small) part of your daily routine. Which also brings us to another critical topic: that of fake news, and something we - and others who do not comply with the established narrative - have been accused of. While we find the narrative of fake news laughable, after all every single article in this website is backed by facts and links to outside sources, it is clearly a dangerous development, and a very slippery slope that the entire developed world is pushing for what is, when stripped of fancy jargon, internet censorship under the guise of protecting the average person from "dangerous, fake information." It's also why we are preparing for the next onslaught against independent thought and why we had no choice but to roll out a premium version of this website. In addition to the other themes noted above, we expect the crackdown on free speech to only accelerate in the coming year - Elon Musk's Twitter Files revelations notwithstanding, especially as the following list of Top 20 articles for 2022 reveals, many of the most popular articles in the past year were precisely those which the conventional media would not touch with a ten foot pole, both out of fear of repercussions and because the MSM has now become a PR agency for either a political party or some unelected, deep state bureaucrat, which in turn allowed the alternative media to continue to flourish in an information vacuum (in less than a decade, Elon Musk's $44 billion purchase of Twitter will seem like one of the century's biggest bargains) and take significant market share from the established outlets by covering topics which established media outlets refuse to do, in the process earning itself the derogatory "fake news" condemnation. We are grateful that our readers - who hit a new record high in 2022 - have realized that it is incumbent upon them to decide what is, and isn't "fake news." * * * And so, before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our no longer that brief, almost 14-year existence, starting with 2009 and continuing with 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. So without further ado, here are the articles that you, our readers, found to be the most engaging, interesting and popular based on the number of hits, during the past year. In 20th spot with just over 510,000 views, was one of the seminal market strategy reports of 2022 by the man who has become the most prescient and accurate voice on Wall Street, former NY Fed repo guru Zoltan Pozsar, whose periodic pieces previewing the post-war world - one where Bretton Woods III makes a stunning comeback, where the petrodollar dies, and is replaced by the Petroyuan - have become must-read staple fare for Wall Street professionals. In "Wall Street Stunned By Zoltan Pozsar's Latest Prediction Of What Comes Next", Zoltan offered his first post-Ukraine war glimpse of the coming "Bretton Woods III" world, "a new monetary order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West." Subsequent events, including the growing proximity of Russia, China and various other non-G7 nations, coupled with stubborn inflation, have gone a long way to proving Zoltan's thesis. The only thing that's missing is the overhaul of the world reserve currency. In 19th spot, some 526,000 learned that amid the relentless crackdown against free speech by a regime which Elon Musk's Twitter Files have definitively revealed is borderline fascist (as in real fascism, not that clownish farce which antifa thugs pretend to crusade against) Zero Hedge was among the first websites to be targeted by the CIA when that deep state mouthpiece, the Associated Press, said that "intelligence officials accused a conservative financial news website [Zero Hedge] with a significant American readership of amplifying Kremlin propaganda." As we explained in "Now We've Done It: We Pissed Off The CIA" - the 19th most viewed article of 2022 - we have done no such thing but as the AP also revealed, the real motive behind the hit piece is that "Zero Hedge has been sharply critical of Biden and posted stories about allegations of wrongdoing by his son Hunter." Of course, only a few weeks later we would learn that reports of wrongdoing by "his son Hunter" as unveiled in the infamously censored laptop story fiasco, were indeed accurate (despite dozens of "former intel officials" saying it is Russian disinfo) but since only "Kremlin propaganda" sites dare to attack Joe Biden while the MSM keeps deathly silent, nobody in the so-called "free press" bothered to mention it. Incidentally, since the CIA did a full background check on us and republishing some pro-Russian blogs was the best they could find, we are confident that  On the other hand, since being designated a pro-Russian operation meant that we have been blacklisted by most advertisers, we are increasingly reliant on you, dear readers (and not Vladimir Putin) for support, and we would be extremely grateful to everyone who can sign up for our premium product to support us into 2023 and onward. In 18th spot, and suitably right below our little tete-a-tete with the CIA, was the disclosure of a huge trove of corruption Hunter Biden's "laptop from hell." In April, with over 568,000 page views, readers learned that "450GB Of 'Deleted' Hunter Biden Laptop Material To Be Released Within Weeks." The ultimate result was the long overdue confirmation by the mainstream press (NYT and WaPo) that the Biden notebook was indeed real (again, despite dozens of "former intel officials" saying it is Russian disinfo) but since the state-corporatist apparatus had already achieved its goal, and suppressed and censored the original NYPost reporting just ahead of the 2020 presidential election and Biden had been elected president, few cared (just a few months later, thanks to Elon Musk and the Twitter files would we learn just how deep the censorship hole went, and that it involved not only the US government, the Democratic Party, the FBI, but also the biggest tech and media companies, all working together to censor anything that they found politically unpalatable). Yes, 2022 was also a midterm year, and with more than 617,000 views, was our snapshot of what happened on Nov 8 when in a carbon copy of 2020 it initially seemed like Republicans would sweep Congress as we described in the 17th most popular article of 2022, "Election Night Results: FL "Catastrophic" For Dems, Vance Takes OH, Fetterman Tops Oz"... but it was not meant to be and as the mail-in votes crawled in days and weeks later, the GOP lead not only fizzled (despite a jarring loss among Florida Hispanics), but in the end Democrats kept the Senate. Ultimately the result was anticlimatic, and with Congress divided for the next two years, governance will be secondary to what the Fed will do, which in our humble view, will be the big story of 2023. For all the political, market and central bank trials and tribulations of 2022, one could make the argument that the biggest story of the past year was Elon Musk's whimsical takeover of twitter, which started off amicably enough as laid out in the 16th most popular article of 2022 (with more than 627,000 page views) "Buffett Says "Musk Is Winning...It's America" As TWTR Board Ponders Poison Pill", then turned ugly and hostile, transitioned into a case of buyer's remorse with Musk suing to back out of the deal only to find out he can't, and culminated with the release of the shocking Twitter Files, Musk's stunning expose of the dirt and secrets of how the world's most popular news outlet had effectively become a subsidiary not only of the Democratic party but also of the FBI, CIA and various other deep state alphabet agencies, validating once again countless "conspiracy theories" and confirming once and for all that any outlet that still dares to oppose the official party line is the biggest enemy of the deep state. And speaking of the deep state, we had a glaring reminder in September why one should be very careful when crossing the US secret police FBI when pro-Trump celeb pillow entrepreneur Mike Lindell was intercepted by the Feds during a hunting trip and had his cell phone seized as described in "FBI Tracks Down Mike Lindell On Hunting Trip, Surrounds His Car And Seizes Cell Phone". That this happened to one of the most vocal critics of the 2020 election just two months before the midterms, was surely a coincidence, as over 625,000 readers obviously concluded. 2022 was not a good year for markets, and certainly wasn't good for retail investors whose torrid gains from the meme stock mania of 2021 melted down almost as fast as the Fed hiked rates (very fast). But not everyone was a loser, and one story stood out: that of 20-year-old student Jake Freeman (who together with his uncle) bought up a substantial, 6.2% stake in soon-to-be-broke retailer Bed Bath and Beyond, and piggybacking on the antics of one Ryan Cohen, quietly cashed out after making a massive $110 million by piggybacking on one of the most vicious short/gamma squeezes in recent history. The "Surreal Story Of A 20-Year-Old Student Who Acquired 6% Of Bed Bath & Beyond, And Made $110 Million In 3 Weeks" was the 14th most read article of 2022. The 13th most read story of 2022 with over 668,000 reads was the bizarre interlude involving superstar-trader and outgoing House Speaker Nancy Pelosi's husband, Paul, and his bizarre attack by a "right wing" progressive as described in "Paul Pelosi Undergoing Brain Surgery Following 'Brutal' Attack; Suspect Identified." While authorities have struggled to craft a narrative that the attacker, nudist transient David Depape of Berkeley, was a pro-Trumper and the attack was politically motivated, the evidence has indicated that he suffered from serious mental illness and drug addiction and lacked any coherent political ideology; some have even claimed that there was a sexual relationship between him and Pelosi, a theory that could be easily disproven if only the police would release the bodycam footage from the moment of the arrest. Unfortunately, San Fran PD has vowed to keep it confidential. Depape's trial is set to be 2023's business, so expect more fireworks. 2022 was also a year in which Europeans realized how brutally expensive electricity can be when the biggest commodity, nat gas and oil supplier to Europe, Russia, is suddenly cut off. And judging by the 668,500 people who read "How In The Name Of God": Shocked Europeans Post Astronomical Energy Bills As 'Terrifying Winter' Approaches" and made it into the 12th most popular article of the year, the staggering number were also news to our audience: indeed, the fact that Geraldine Dolan, who owns the Poppyfields cafe in Athlone, Ireland, and was charged nearly €10,000 for just over two months of energy usage, was shocking to everyone. To be sure, there were countless other such stories out of Europe and with the Russia-Ukraine war unlikely to end any time soon, Europe's commodity hyperinflation will only continue. Adding insult to injury, Europe is on a fast track to a brutal recession, but the ECB remains stuck in tightening mode, perhaps because it somehow believes that higher rates will ease energy supplies. Alas that won't happen and instead the big question for 2023 will be whether Europe is merely hit with a recession or if instead the ECB's actions escalates the local malaise into a full-blown depression. Earlier we said that one of the most prophetic voices on Wall Street in 2022 (and prior) was that of Zoltan Pozsar, who laid out his theory of a Bretton Woods III regime in the days immediately following the Russian invasion of Ukraine. Well, just one month later we saw the first tentative steps toward just such a paradigm shift when in April the Russian central bank offered to buy gold from domestic commercial banks at a fixed price of 5000 rubles per gram; by doing so the Bank of Russia both linked the ruble to gold and, since gold trades in US dollars, set a floor price for the ruble in terms of the US dollar. We described this in "A Paradigm Shift Western Media Hasn't Grasped Yet" - Russian Ruble Relaunched, Linked To Gold & Commodities", an article red 670,000 times making it the 11th most popular of the year. This concept of "petrogold" was also the subject of extensive discussion by Pozsar who dedicated one of his most recent widely-read notes to the topic; if indeed we are witnessing the transition to a Bretton Woods 3 regime, 2023 will see a lot of fireworks in the monetary system as the dollar's reserve status is challenged by eastern commodity producers. The 10th most popular article of 2022, with 686K views was a reminder of just how much "the settled science" can change: as described in "You Murderous Hypocrites": Outrage Ensues After The Atlantic Suggests 'Amnesty' For Pandemic Authoritarians, many were shocked when after pushing for economy-crushing lockdowns, seeking to block children from going to school (and stunting their development), and even calling for the incarceration or worse of mask, vaccine and booster holdouts, the liberal left - realizing that it was completely wrong about everything to do with covid, a virus with a 99% survival rate - suddenly and politely was hoping to "declare a pandemic amnesty." Brown Professor Emily Oster - a huge lockdown proponent, who now pleads from mercy from the once-shunned - wrote "we need to forgive one another for what we did and said when we were in the dark about COVID. Let’s acknowledge that we made complicated choices in the face of deep uncertainty, and then try to work together to build back and move forward." The response from those who lost their small business, wealth, or worse, a family member (who died alone or from complications from the experimental gene therapy known as "vaccines" and "boosters") was clear and unanimous; as for those seeking preemptive pardons from the coming tribunals, their plea was clear: “We didn't know! We were just following orders."  And from one covid post we segue into another, only this time the focus is not on the disease but rather the consequences of mandatory vaccines: over 730K readers were shocked in February when a former finance professional discovered a surge in "excess mortality", or unexplained deaths among otherwise healthy young adults, yet not linked directly to covid (thus leaving vaccines as the possible cause of death), as we showed in "Long Funeral Homes, Short Life Insurers? Ex-Blackrock Fund Manager Discovers Disturbing Trends In Mortality." This wasn't the first time we had heart of a surge in excess mortality: a month earlier it was the CEO of insurance company OneAmerica to observe that the death rate for those aged 18-64 had soared by 40% over pre-pandemic levels (this was another post that received a lot of clicks). While the science is clearly not settled here - on either covid or the vaccines - the emerging trend is ominous: at this rate the excess deaths associated with covid (and its vaccines) will soon surpass the deaths directly linked to covid. And anyone who dares to bring this up will be branded a racist, a white supremacists, or a fascist, or all three. One of the defining features of 2022 was the record surge in the price of food. And while much of this inflation could be attributed to the trillions in helicopter money injected over the past three years, as well as the snarled supply chains due to the war in Ukraine, a mystery emerged when one after another US food processing plant mysteriously burned down. And with almost 800,000 page views, a majority of our readers wanted to know why "Another US Food Processing Plant Erupts In Flames", making it the 8th most read post of the year. While so far no crime has been alleged, the fact that over 100 "accidental fires" (as listed here) have taken place across America's food facilities since the start of 2021, impairing the US supply chain, remains one of the biggest mysteries of the year. While some will argue that runaway inflation was the event of 2022, we will counter that the defining moment was the war between Ukraine and Russia, which broke out in February after what the Kremlin said was a long-running NATO attempt to corner Russia (by pushing Ukraine to seek membership in the military alliance), forcing it to either launch an invasion now, or wait several years and be invaded by all the neighboring NATO countries. Still, many were shocked when Putin ultimately gave the order to launch the "special military operations", as most had Russia to merely posture. But it was not meant to be and nearly 840K readers followed the world-changing events on February 2 when "Putin Orders "Special Military Operation" In Ukraine's Breakaway Regions." The war continues to this day with no prospects of peace or even a ceasefire. And from one geopolitical hotspot we go to another, namely China and Taiwan, which many expect will be the next major military theater at some time in the near future when Beijing finally invades the "Republic of China" and officially brings it back into the fold. Thing here got extra hot in early August when Democrat Nancy Pelosi decided to make an unexpected trip to the semiconductor-heavy island, sparking an unprecedented diplomatic escalation, with many speculating that China could simply fire at Nancy's unsanctioned airplane. In the end, however, as nearly 950,000 found out, the situation fizzled as "China Summoned US Ambassador Overnight, Says Washington "Must Pay The Price"." Since then Pelosi's political career has officially ended, and while China has not yet invaded Taiwan, it is only a matter of time before it does. While Covid may have been a 2021 story, that was also the year when nobody was allowed to talk about the Chinese pandemic. Things changed in 2022 when liberal censorship finally crashed under its own weight, and long overdue discussions of Covid became mainstream. nowhere more so than on Twitter where Elon Musk fired all those responsible for silencing the debate over the past three years, and of course, the show of the always outspoken Joe Rogan, where mRNA inventor Robert Malone, gave a fascinating interview to Joe Rogan which aired on New Year's Eve 2022 and which took the world by storm in the first days of the new year. It certainly made over 908,000 readers click on "COVID, Ivermectin, And 'Mass Formation Psychosis': Dr. Robert Malone Gives Blistering Interview To Joe Rogan." The doctor, who had been suspended by both LInkedIn and Twitter, for the crime of promoting "vaccine hesitancy" argued that if the risks of vaccines are not discussed, informed consent is not possible. As Malone concluded "Informed consent is not only not happening, it's being actively blocked." Luckily, now that Elon Musk has made it possible to discuss covid - and so much more - on twitter without fears of immediate suspension, there is again hope that not only is informed consent once again possible, but that the wheels of true justice are starting to steamroll liberal censorship. A tragic and bizarre interlude took place in early July when "Former Japanese PM Abe Shot Dead During Speech, "Frustrated" Assassin Arrested", a shocking development which captured the attention of some 927,000 readers.  While some expected the assassination to be a Archduke Ferdinand moment, coming at a time of soaring inflation around the globe and potentially catalyzing grassroots anger at the ruling class, the episode remained isolated as it did not have political motives and instead the killer, Yamagami, said that he killed the former PM in relation to a grudge he held against the Unification Church, to which Abe and his family had political ties, over his mother's bankruptcy in 2002. That's the good news. The bad news is that with the fabric of society close to tearing across most developed nations, it is only a matter of time before we do get a real Archduke 2.0 moment. Just days after Rogan's interview with Malone (see above), another covid-linked "surprise" emerged when Projected Veritas leaked military documents hidden on a classified system showing how EcoHealth Alliance approached DARPA in March 2018, seeking funding to conduct illegal gain of function research of bat borne coronaviruses. But while US infatuation with creating viral bioweapons is hardly new (instead it merely outsourced it to biolabs in China), one of the discoveries revealed in "Ivermectin 'Works Throughout All Phases' Of COVID According To Leaked Military Documents" - the third most popular post of 2022 with 929K page views, is that the infamous "horse paste" Ivermectin was defined by Darpa as a "curative" which works throughout all phases of the illness because it both inhibits viral replication and modulates the immune response. Of course, had that been made public, it would have prevented Pfizer and Moderna from making tens of billions in revenue from selling mRNA-based therapies (not vaccines) whose potentially deadly side effects we are only now learning about (as the 9th most popular post of 2022 noted above confirms). The fake news apparatus was busy spinning in overtime this past year (and every other year), and not only when it comes to covid, inflation, unemployment, the recession, but also - or rather especially - the Ukraine fog of propaganda war. A striking example was the explosion of both pipelines connecting Russia to Europe, Nord Stream I and II, which quickly escalated into a fingerpointing exercise of accusations, with Europe blaming Putin for blowing up the pipelines (even though said pipelines exclusively benefit the Kremlin which spent billions building them in the recent past), while the Kremlin said it was the US' fault. This we learned in "EU Chief Calls Nord Stream Attack "Sabotage", Warns Of "Strongest Possible Response", which was also the 2nd most read article of the year with just over 1,050,000 page views. In the end, there was no "response" at all. Why? Because as it emerged just two months later in that most deep state of outlets, the Washington Post, "Evidence In Nord Stream Sabotage Doesn't Point To Russia." In other words, it points to the US, just as professor Jeffrey Sachs dared to suggest on Bloomberg, leading to shock and awe at the pro-Biden media outlet. The lesson here, inasmuch as there is one, is that the perpetrators of every false flag operation always emerge - it may take time, but the outcome is inevitable, and "shockingly", the culprit almost always is one particular nation... Finally, the most read article of 2022 with nearly 1.1 million page views, was "White House Says Russian Forces 20 Miles Outside Ukraine's Capital." It cemented that as least as far as ZH readers were concerned, the biggest event of the year was the war in Ukraine, an event which has set in motion forces which will redefine the layout of the world over the next century (and, if Zoltan Pozsar is right, will lead to the demise of the US dollar as a reserve currency and culminate with China surpassing the US as the world's biggest superpower). Incidentally, while Russian forces may have been 20 miles outside of Kiev, they were repelled and even though the war could have ended nearly a year ago and the world would have returned to some semblance of normalcy, it was not meant to be, and the war still goes on with little hope that it will end any time soon. And with all that behind us, and as we wave goodbye to another bizarre, exciting, surreal year, what lies in store for 2023, and the next decade? We don't know: as frequent and not so frequent readers are aware, we do not pretend to be able to predict the future and we don't try, despite repeat baseless allegations that we constantly predict the collapse of civilization: we leave the predicting to the "smartest people in the room" who year after year have been consistently wrong about everything, and never more so than in 2022 (when the entire world realized just how clueless the Fed had been when it called the most crushing and persistent inflation in two generations "transitory"), which destroyed the reputation of central banks, of economists, of conventional media and the professional "polling" and "strategist" class forever, not to mention all those "scientists" who made a mockery of both the scientific method and the "expert class" with their catastrophically bungled response to the covid pandemic. We merely observe, find what is unexpected, entertaining, amusing, surprising or grotesque in an increasingly bizarre, sad, and increasingly crazy world, and then just write about it. We do know, however, that with central banks now desperate to contain inflation and undo 13 years of central bank mistakes - after all it is the trillions and trillions in monetary stimulus, the helicopter money, the MMT, and the endless deficit funding by central banks that made the current runaway inflation possible, the current attempt to do something impossible and stuff 13 years of toothpaste back into the tube, will be a catastrophic failure. We are confident, however, that in the end it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who will eventually be revealed as fully naked. When that happens and what happens after is anyone's guess. But, as we have promised - and delivered - every year for the past 14, we will be there to document every aspect of it. Finally, and as always, we wish all our readers the best of luck in 2023, with much success in trading and every other avenue of life. We bid farewell to 2022 with our traditional and unwavering year-end promise: Zero Hedge will be there each and every day - usually with a cynical smile (and with the CIA clearly on our ass now) - helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that defines every aspect of our increasingly broken economic, political and financial system. Tyler Durden Sat, 12/31/2022 - 11:05.....»»

Category: dealsSource: nytDec 31st, 2022

Transcript: Charlie Ellis

   The transcript from this week’s, MiB: Charlie Ellis on Vanguard’s Rules of Investing is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters… Read More The post Transcript: Charlie Ellis appeared first on The Big Picture.    The transcript from this week’s, MiB: Charlie Ellis on Vanguard’s Rules of Investing is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, what can I say? Charlie Ellis is a legend in the world of finance, whether it was at Greenwich Associates, or as chair of the Yale endowment, or a board member at Vanguard. He has seen pretty much everything in the world of investing. His career spans the entire modern era dating back to, you know, the Paul Volcker era, and what took place during the boom periods of the ‘80s and ‘90s, and how technology has changed the world of investing. He’s just one of these people who is so thoughtful and insightful about everything. It’s just always a pleasure to chat with him. I found our discussion to be absolutely fascinating, and I think you will also. With no further ado, my conversation with Greenwich Associates’ Charlie Ellis. The last time we spoke, we really were talking about the retirement crisis, and we spent a little bit of time discussing Vanguard. But this new book is so interesting and so filled with details that only an insider can have. Let’s delve into it a little bit. Tell us what first led you to Vanguard. How did you get involved with them? CHARLIE ELLIS, FOUNDER AND FORMER MANAGING PARTNER, GREENWICH ASSOCIATES: Well, it started a long time ago, 1966, I was working with a securities firm in New York, and Wellington was a client in Philadelphia. And I would go down to Philadelphia and meet with John Neff, Jack Bogle and the others, and I got convinced that these were very bright and interesting people doing interesting things. But old Wellington was not really a great and interesting place. It was a balanced portfolio. The assets were going down year by year by year. As people said, you know, it’s just out of date, I’m going to get a performance fund. I’m going to beat the market. These guys will never get out of the slow that they’re in. But still, there was something special about Jack and John. So — RITHOLTZ: The irony of that is in 1966, hey, we were about to start, you know, a long period of equity underperformance. You would have guessed, had you known that a balanced fund, the stock and bond portfolio was going to do a lot better than just the pure stock funds over the next 16 years. ELLIS: That’s the way the world works. Just when you least expect it, something goes in a different direction. I’ve really liked the guys. When Jack said he was going to be leaving after the merger made in heaven, with the Boston group, Jack, you really are stretching it. This is a very unlikely proposition. You’ve got less than 30 people working with you. You’re in charge of the back office activities. That’s an activity you never ever personally enjoyed at all. You always assigned that to somebody else. And he would say to me, don’t worry about it. Jim Reid (ph), he’s going to take responsibility for that. RITHOLTZ: Right. ELLIS: I don’t have to do it. You’re not allowed to do anything in investment management, and then allow it to do anything in sales. The mutual fund business is all about sales and investing. What are you going to do? And the answer was, I’m going to hang in there and find a way to make this thing work. RITHOLTZ: And the fascinating story is the argument that he concocted around indexing, first, it’s not investment management because, hey, we’re not making any decisions. We’re just buying all the stocks in the index. And second, there’s no sales. People are going to come to us. So therefore, this is outside of the deal he cut with the folks at Wellington. ELLIS: Right. And it was just barely enough over a period of several months to convince his board of directors it’s okay to do that. RITHOLTZ: And he just kind of skated through. They barely approved it. ELLIS: Very close run. But Jack was a very argumentative, persuasive, always had the facts supporting whatever case like a really good litigating lawyer. He was always able to make his own case very, very, very well. RITHOLTZ: So let’s talk about that initial fund. The plan was to do an IPO to raise $200 million in new client assets for the funds. How much did they end up actually raising? ELLIS: This is the first index fund. RITHOLTZ: The first index fund? ELLIS: It’s a very interesting story. Going to raise a pretty serious amount of money, it was very hard to get Wall Street to agree to do the underwriting. And then it was really hard to get salespeople in the various cities to say, yeah, I’m going to pitch this to my clients for a very good reason. Everybody knew in those days, the purpose of investment management is to beat the market. Everybody understood that was the game. So you’re looking for a manager who’s going to beat the market. Everybody talked that way. And here’s a guy coming along, saying, hey, I got a really good idea for you. I’m not going to beat the market. Jack would have argued, well, wait a minute. 75% of the active funds are underperforming what they said they were going to do. If I meet the market, match it, I’m going to beat most of them. I’ll be in the top quartile as a consequence. Yeah, yeah, yeah. But Jack, you’re going to charge a sales load of 8% on this index fund, so people’s first day are 8% behind the market, how are they ever going to catch up with the market? Don’t let that bother you. We’ll find a way to make it work out. But that was a killer, and people would look at him and say, straight faced, I’m not going to go to my clients and say, go into this investment opportunity, you’re guaranteed to be behind the market for the rest of the time that you hold on to it. RITHOLTZ: Now, some of the data that Jack had showed that the active managers, all of whom were high fee, not even counting the fees after a period of time, the vast majority, some 95%, lag the market. And then once you work the fees and after 10 or 15 years, they’re way behind the market. Why did it take so long for that concept to be recognized by investors? ELLIS: We’re all governed by our beliefs, and beliefs are much more powerful than data. And as we’ve seen in politics, as we’ll see in all kinds of other subject areas, what people believed is what drives them to their behavior and decisions. Don’t bother me with the facts, is a reality of human beings. So if you’re fact-based, you got to be prepared for people to say, you’re crazy, that doesn’t make any sense. I know what’s right. RITHOLTZ: And when you look back to the 1970s and ‘80s, you know, we’ve taken for granted how much data is available today, how easy it is for us to access historical returns for various indices versus inflation, versus dividends, versus everything. That technology and that information wasn’t all that readily available 40, 50 years ago. ELLIS: What do you mean it wasn’t readily available? It wasn’t available, period. I mean, we go back a little bit of personal history. I was privileged to have the responsibility for representing Greenwich Associates consulting with Wall Street firms. The smartest people on Wall Street in terms of picking up an understanding, this is really good information, I can really put it to work. John Whitehead at Goldman Sachs, who was unbelievably demanding and rigorous as a client, but I loved working for him because he always took everything very, very seriously. And there’s one other person, Mike Bloomberg at Salomon Brothers, and Mike took the information and convert it into decisions on a regular basis. That put him in a very strong position competitively, but it also proved to him the value of having good hard information. And you can’t deny, anybody can have good hard information and not use it. He was really good at using it. And that’s characteristic of why he’s been so extraordinary and as successful as years and years and years later. RITHOLTZ: So all of this is really fascinating. What made you 19 books and decide to say, hey, you know, it’s time to tell the inside story of Vanguard, what led you to saying now’s the time? ELLIS: I was a director of Vanguard. I had worked with Vanguard as a strategy consultant before being a director. And I was deeply convinced that this was for almost any American investor, the right way to do your investing. And that it was low cost, yup; high value, yup; reliably delivered in a systematic way. And that looking at it as a director, it seemed to me very, very clear that Vanguard was way underestimated by almost everybody. The clients of Vanguard underestimated how good a deal they were really getting. People who weren’t clients of Vanguard were crazy not to know what the facts were. They can make their own decision, but they should know at least what the facts are. Here’s a better way of being able to get good investment, guidance and information. And as a director, I said, you know, I think we really are making a big mistake not to make it clear to our own people how good a deal they’re getting. Yeah, yeah, yeah. But, you know, everything about Vanguard as an organization is modesty, and particularly with Jack Brennan, who was very much, Mr. Modesty, and it just didn’t take off. And then after I left the board, Jack and I were both advisors to a very, very large investment fund, and so it gave me an opportunity to make the pitch to him one more time. And he said, you know, I think you’re right. I think this would be good for investors. I said, but Jack, it’s going to be good for Vanguard too. He said, yeah, but it’s really good for investors. So let’s go ahead. RITHOLTZ: So I like the concept of Vanguard’s culture as unique in the world of finance, low cost, high integrity. And tell us a little bit about the Vanguard culture. ELLIS: Well, it starts with one very simple proposition, nobody is making a profit. Every other investment organization got a problem that somebody is taking money out of the pot every day, every month, every year as a profit. That’s the American way. It’s a good incentive. Yeah, yeah, yeah. But here’s a group who’s highly motivated, they’re doing all kinds of leadership things, and nobody is taking a profit. Everybody who’s an investor in Vanguard is an owner of Vanguard. The only owners of Vanguard are the investors in Vanguard. So it’s a nice tight little situation where you eat your own cooking and you’re doing what’s really right because it’s what’s really right for everybody. RITHOLTZ: Really interesting. So given how the world has changed over the past few decades, have you noticed any changes in the culture at Vanguard over that period? ELLIS: Honestly, no. It’s astonishing. It’s still Boy Scouts and Girl Scouts gathered together every day to do — as they like to say, to do the right thing. And that’s the only metric by which they make a judgement. What’s the right thing to do for our investor clients? Because it’s their shop and we’re here to do the right thing for them. RITHOLTZ: So when we look around at the world of low cost indexes, they’re all pretty much the same. They’re cheap. They tend to hold almost identical portfolios. What makes the Vanguard version of this so different? How does Vanguard brand itself in what is essentially a commodity product? ELLIS: It’s really fascinating, essentially, a commodity product. If you have a client, they will understand and appreciate. They get good service, not fabulous service, but good service at low cost, on a very unreliable basis. And there’s a group of people who are working full time to protect them from anything dumb or getting conned. Not bad. RITHOLTZ: So let’s talk about the enigma that is Jack Bogle. He spent the first 25 years of his career on the active side of the street. It seems like it’s almost a coincidence that Vanguard was even launched. Tell us about that. ELLIS: A lot of different ways you’d commit to answer your question. First, Jack engineered what was supposed to be the great merger made in heaven, combining old fashioned Wellington with all of the integrity that it might have had in days gone by, heavy sales load, heavy on sales activities, not so good on investing, combined with a hot ticket group in Boston. And it looked like that would be a winning proposition for everybody. Only problem, culture, personality, way of thinking, way of doing business. Jack always wanted to have complete control of everything. The guy said the Thorndike, Doran, Paine & Lewis Partnership, which is now the core of modern Wellington, believed deeply in a consensus development as friends talking things out, figuring out together what’s the best thing to do, take a long term point of view. The two cultures did not mix. And Jack insisted on his culture being dominant because that was key to his personality. And that made it worse, not better. And then he insisted more on having it his way, and that made it even worse. And so, finally, they got to the point of saying you have to go. RITHOLTZ: And essentially, they deposed him. They tossed out the king, eventually winning a vote at a board level where he was removed from Wellington, the investment firm. But Jack had a clever backdoor way around it. He was still a participant and part of the board, where there were numerous independent directors. And the way the mutual fund industry is set up, the administration of the funds and the management of the investments are two different creatures. So he was able to stay with the admin side. Tell us a little bit about that. ELLIS: You’ve said such a nice job of summarizing it, there’s almost nothing to say other than you got it exactly right. RITHOLTZ: Oh, I got a couple of chapters just on that. ELLIS: Jack Bogle understood that the directors had certain kinds of power that could not be taken away. And they were because of the SEC and the whole concept of regulation of mutual fund industry, representatives of the investors in the mutual funds. That was a very strong base. And so, legally, the directors were responsible for figuring out what to do about investing, then the directors were responsible for figuring out what to do about sales. That’s legally. That’s not the way it actually worked. The way it actually worked is the directors did exactly what they were told by the management company, because otherwise they wouldn’t get the very nice fees that they were getting and they wouldn’t have the privilege of coming to the meetings, and so on and so on. RITHOLTZ: All the directors were buddies of the folks running the investment. ELLIS: Why else would you choose one? RITHOLTZ: Right. ELLIS: Obedient directors, friends of the firm, all this sort of stuff, it’s really not a nice part of the history. It’s very different today. But 25, 30 years ago, it was a different world. So Jack had worked out that the directors would have responsibility for making the final decision on things that were important enough so that they had some real gravitas and some real strength. And he had a very close relationship with several of the directors. And several of the directors had a high regard for Jack as a man of integrity, and so they were very strong in support for him. Guys like Chuck Root for an example. He was the head of TF&C, the actuarial firm, and a really distinguished talent in the Philadelphia business community. And basically thought that Jack was good guy with strong intentions, and maybe too strong a personality sometimes, but a good guy for the long run, and was clear going to support him. And Jack had similar relationships with people who give him support, just enough so that he could get the vote on his side for things that had to do with administration. Interesting phenomenon. One of the guys said he was most focused on getting to be sure that he would get the right support, management consultant named Warden who was doing some terrific work for European companies, trying to understand American business after the Second World War, and built up a very nice franchise. He died and if he hadn’t died, the vote might have — RITHOLTZ: The night before the vote. ELLIS: If it hadn’t happened that way, vote might have gone the other way, so that close. Jack won by marginal vote, the right to be able to do the administration. What a win. You think about Pyrrhic victories, what a win. Let me just be sure I understand this. I’m Jack Bogle. The one thing I don’t care about at all, have no interest in whatsoever is fund administration. RITHOLTZ: Right. ELLIS: That’s my sole business. And I’m going to have less than 30 people working with me. And the crowd of funds that I’m managing are basically going downhill because redemptions are larger than new sales. That’s not much to start with, but — RITHOLTZ: Not at all. ELLIS: — you’ve got to understand at the start, there’s a magic missing ingredient. Jack’s ability to be ferociously angry and beautifully articulate for any case he ever wanted to make was a major competitive factor. And then a couple of things were lucky breaks, money market funds came out and you could charge 1% on a money market fund, which is a lot to charge for something. This is plain vanilla on some money market fund. But a money market fund was sure to be a winner compared to the bank CDs that were limited by regulation to 5% interest. Then Paul Volcker was driving the interest rates up to 8%, 10%, 12%, even 14% on money market instruments. All you had to do as a money market fund manager is buying the standard stuff, Treasury bills, commercial paper and the like. You could put together a portfolio that’s producing a very high income, and the banks that had all the money were limited to that 5.5%. So then when they float out of the banks into the mutual funds, and Vanguard made itself obvious choice by having slightly lower fees, and then lower fees, and then lower fees as their assets built up. So they had low fees for an identical product. Then you don’t have to be that smart to figure out, hey, wait a minute, these are identical products — RITHOLTZ: Right. ELLIS: — and one is low cost, why not? RITHOLTZ: Why not? So let’s also talk about what was then thought of as a fairly radical concept, neutralizing the mutual funds business. Tell us a little bit about that idea, where instead of being profit-driven, the profits would eventually flow back to the owners, the investors in the funds, through lower fees. ELLIS: Well, you just said beautifully. RITHOLTZ: Well, you know, I’ve been — ELLIS: The proposition. RITHOLTZ: I’ve been educated with this book, so it’s deep in my thought process. ELLIS: And you know, once you get 2 and 2 is 4, it’s easy to remember and put to work. But the secret here over and over and over again is ferocious drive to not fail, which was Jack, ferocious drive to be recognized as Mr. Wonderful, which was a very important part of Jack Bogle all through his career, but — RITHOLTZ: Saint Jack. ELLIS: — to get more and more and more important as he got deeper into Vanguard. Those two phenomena show up over and over and over again. RITHOLTZ: So given how successful the mutualization was, why didn’t any other asset managers copy the structure? It seems like — ELLIS: Oh, wait, wait, wait, wait, wait, what’s the American way? I start a business to make a profit. If I do a good job, people will come to my business. I’ll get bigger, I’ll make more profits. So I do a good job, I keep getting more. And it’s a positive cycle. Okay. What would attract anybody to get into a business where you do a really good job and you break even? You do a really, really good job for years and you breakeven. You do a really, really, really good job for year after year after year for all kinds of people, and you breakeven. You mean you never ever make a profit? That’s right. You never ever make a profit. Well, what’s in it for me? RITHOLTZ: Well, you — ELLIS: And that is a stopper for almost everybody who starts a business. If you can’t make a profit, why in the world would you get going? RITHOLTZ: Well — ELLIS: It goes back to Adam Smith and all the way through since then. RITHOLTZ: You do end up achieving a certain size where there are economies of scale, and you pay yourself a very nice salary. Hey, maybe you don’t go public, maybe you don’t sell the firm. But you sleep at night and you know you’re doing the right thing for your clients. There’s got to be some appeal for that. ELLIS: Now you’re getting to why is the culture at Vanguard so steadily the same and why do people at Vanguard enjoy being where they are? First, they really like doing a good job and doing the right thing in doing a good job. It’s amazing. People really do like being honest. People really do like delivering good value. People really do like doing a great job for other people as customers. And particularly if you make clear, when you join Vanguard, you’re never going to get rich. It is not going to happen. So if that’s the main item on your agenda, go somewhere else. And there are plenty of places as Wall Street, where they’ll say you want to get rich? Come here. So if you don’t want to get rich, but you do want to do something you’re proud of every day, with a group of people who are just like you, proud of what they’re doing. Boy Scouts, Girl Scouts, pretty soon you start to say, you know, there’s something to this, maybe being a Jesuit is not all that bad an idea. Then pretty soon, you start finding, hey, wait a minute, this works. RITHOLTZ: Let’s talk a little bit about not just Jack Bogle, but the era and the team he assembled that was so crucial to Vanguard’s success. Tell us a little bit about how this, you know, 1927 Yankees came together. ELLIS: Great question. First, Jack was a man with a mission. And if you spent time with him, you could be infected with that sense of mission and purpose. And if that rang the bell for what you wanted to do with your working career, it was almost magic because there wasn’t very much competition from other people doing things in the investment world. Secondly, this was a man of tremendous conviction about what was going to be the right thing to do. Sometimes that worked very much at the advantage of Vanguard. There were some times when it worked just the other way and it was a real negative, but decisive. Whichever way, it was characteristic of Jack. As a personality, he could put on the charm in a way in which almost anybody would melt. And then, of course, there were hard-hitting times when he was absolutely determined that everybody was going to do this or that. You were already onboard and you sort of say, well, you take the good with the bad, we can work this one out, so on and so on. RITHOLTZ: Really interesting. Tell us a little bit about Jack Brennan, the man who succeeded Bogle as the second CEO of Vanguard. He’s really quite a fascinating character. ELLIS: Well, he had a terrific impact. And if you look at the impact in terms of assets under management, what Bogle did in his time, Brennan did 10 times as much in his time — RITHOLTZ: Wow. ELLIS: — 10 times as much. And he did it by putting together a team of other people, empowering them to be strong and effective of what they were doing. Then it goes back to a couple of different root factors; Boston, Irish, Catholic, training. His dad was told by his guidance counselor in high school, no kid, you’re not going to become a mechanic. You’re going to go to school because you’re too good and too smart to stop your life right at this, graduating from high school. You’re going to college. And that was a breakthrough. And Jack’s father became a consequential banker in the Boston area. But he always stayed clear to his basic roots. Jack Brennan grows up as a son of that kind of straightforward guy, and becomes a very, very straightforward guy himself. The second characteristic is he was a very good athlete, and he was very good at lacrosse in particular. And one day his kids were asking him, well, Dad, were you the highest scorer? He said, that’s not the right question. What do you mean, Dad? They gave him a copy of the Dartmouth Indian, the student newspaper, Brennan 28 assists — RITHOLTZ: Right. ELLIS: — 8 goals. He said it’s not whether you score, it’s whether your team scores. RITHOLTZ: Right. ELLIS: And that’s Jack Brennan all the way through. He’s all about bringing the team forward. As he said himself, being famous is not on my agenda. RITHOLTZ: Right. Right. ELLIS: And it’s very clear. Most people have never heard of Jack Brennan. He’s probably the most important person in the development of Vanguard as an organization. RITHOLTZ: That’s quite a statement. I don’t disagree, but I don’t think most people are aware how he professionalized Vanguard, how he brought in a huge team of people. But he also found all sorts of both cost savings and growth that as good as Bogle was, it was just outside of his expertise. ELLIS: Yeah. And what Jack Bogle always said, I’m a small company guy. And Jack Brennan understood to be the really right Vanguard in the future, you’re going to have to be a big organization. Second, you’re going to have to have a lot of computing power because technology is the secret to keeping costs low, low, low in the long run. Jack Bogle would say over and over again, computers are too damn expensive. And he was right on the day that you buy them, but if you can only think of them as that moment — RITHOLTZ: Right. ELLIS: — you’re not going to be able to get a payoff. If you think of them as going on for 5 years or 10 years and going to use them as tools to bring the cost of the operation down, it’s a completely different answer. And so Jack Brennan was absolutely key to the whole idea of using technology, particularly computers, and moving in advancement to that direction. Second thing is he’s very good at distributing responsibility and hiring in outstanding individuals to do in a quiet way, the things that needed to get done. So shift from one person to a team, and the team has got maybe a dozen key players on it. Then you get something that’s got tremendous capacity to manage a larger and larger organization which Vanguard had to become in order to get the economic power that it has today. RITHOLTZ: Right, to keep driving costs lower. So Brennan and Bogle were very close. Eventually to Brennan’s dismay, the relationship fell apart. Tell us a little bit about that episode. ELLIS: Well, easy analogy would be father and son, older guy, younger guy, Mr. Outside Jack Bogle, Mr. Inside Jack Brennan. So long as that was the working relationship, things were great. But Jack Bogle always thought of Vanguard as my company. And when you have a possessive view like that, you can talk yourself into making serious mistakes. He had agreed with Jim Rabe (ph) way back when that the longest that anybody ought to work at Vanguard would be maybe till 70. So let’s have 70 be our retirement age. They get closer and closer and closer to it, and Jack Bogle said, well, yeah, but it doesn’t apply to the chairman. It doesn’t apply to me. It can’t be really the right thing in the board of director. He said, no, it really is the right thing. In fact, the company has already gone past your skill set. RITHOLTZ: Right. ELLIS: And Jack Brennan has got the skill set, and he’s proving it over and over and over again. We want to make that change in a very clear way. I don’t want to make that change. Then Jack Bogle really, really resisted it. Finally, it turned out he was deeply upset about not having made a fortune the way Ned Johnson had made a fortune at Fidelity. So they gave him a substantial settlement to leave with good behavior and a great opportunity for him to start Bogle Research, which turned out to be a marvelous success for Jack Bogle and for people who are paying attention in that direction, but take him out of the controls position on Vanguard, so it could basically grow in its natural way as a major phenomenon. RITHOLTZ: So let’s talk a little bit about John Neff, another name that made a huge difference early on, doesn’t really get talked about all that much. Tell us what he did and why he was so pivotal to Vanguard’s success. ELLIS: People don’t talk about John Neff today. But in the ‘60s and the ‘70s and the ‘80s, people talked about John Neff because he had the best record of any mutual fund manager in the country. RITHOLTZ: Wow. ELLIS: And you could argue that one of the great managers at Capital Group had an even better record, but Capital broke up the funds into multiple different portfolio managers, so it was not public. But among the public recorded, John Neff had the best performance over the long term. Wow. Does that make a difference when you’re looking at year after year after year after year? With some exceptions sometimes for two or three years, but over any long-term investment, he had the best record of anybody in the investment business. RITHOLTZ: What about Gus Sauter? He was the first chief investment officer at Vanguard Group, highly regarded. Tell us a little bit about his contributions. ELLIS: A terrific quant with a great deal of modesty and a wonderful ability to think things through. And Gus Sauter was critical to development of the ETF business, and critical to the development of the indexing business and the capacity to manage with the quantitative group, substantial fractions of the actively managed portfolios because he could replicate what an active manager might do. And one of his quiet, soft spoken, it’s not about me, it’s about the interesting work that my team is doing; the team builder and just terrific technology understander, who was able to put things together in a way that was really wonderful. RITHOLTZ: You mentioned how important Jack Brennan was. Let’s talk a little bit about Bill McNabb. He was running Vanguard right in the heart of the financial crisis. He’s the one who basically told all the crew members, hey, nobody is getting fired, just get on the phone, speak to the clients, and don’t worry about your jobs. We’re all safe. Tell us a bit about his decision-making and how important he was not just during the financial crisis, but, you know, I think Vanguard was about $800 billion pre crisis. And now, it’s 10x. It’s $8 trillion. Tell us a little bit about what Bill McNabb brought to the table. ELLIS: The secret to Bill McNabb is modesty, competence and discipline. And if you look at how would you understand that, think of him as he was for many, many years, a rower. In crew, there are no fabulous individual performers. It’s all about how the whole group of eight people rose simultaneously to a level of perfection. And if they get it really, really right, perform in a way that you can’t match. And that’s what Bill McNabb was all about, is disciplined, steady, reliable performance. And aw-shucks personality on the outside, but Mr. Trustworthy on the inside, and everybody knew he was the kind of solid citizen that you would like to have your sister marry, or you’d like to have your mother marry, or you’d like to have your daughter marry, one of those things. He’s just Mr. Good guy. And while every other firm in the investment business was cutting costs because the market was down and looked like it was going to go down a lot, he said, no, we’re not going to cut costs at all. Nobody is losing their job. We’re all going to stay here together because the number of customers is not going down. It’s just that the profitability of the business is going down, and we are not a profit-minded organization. We’re a service-minded organization. We’re all about the customers because they are owners, that we’re going to stay right steady on through. And that made a terrific impact internally. But of course, it also meant that they had a wonderfully strong organization coming out of the financial crisis and that was a big help too. RITHOLTZ: Yeah, perfectly positioned. Tell us about Charlie Root, what was his role as an advisor and a board member. ELLIS: He was the head of the major actuarial consulting firm in Philadelphia, very disciplined thinker, and an organizationally-minded person, and one of those people that you’d love to have as a director of your corporation. Unfortunately, shortly after some of the most important decisions, he was cleaning out the gutters in his home and the ladder he had climbed up to the gutters on, started to slip a little bit to the side. RITHOLTZ: Uh-oh. ELLIS: And I’m afraid that has caused his death. And it was a real loss to Vanguard and a real loss to the Philadelphia community. RITHOLTZ: There’s one person I really have to ask about and that’s you. You were a director of Vanguard for over a decade. You were a strategy consultant. Tell us about how you felt your role was and what your contributions were during that era. ELLIS: In all fairness, I have to feel — RITHOLTZ: Look at you, you’re blushing. I can’t believe this. ELLIS: I really enjoyed being a director. We didn’t get paid very much. I have to admit the food that we were served at meals was really pretty crummy. But it was all part of the keep the cost down, keep the cost down attitude. Management was so candid and so open with us as directors. It was a privilege to be working with them. And it didn’t hurt that I was sitting side by side with Burt Malkiel, who is one of those outstanding people in the investments world. And Burt has just turned 90. RITHOLTZ: Wow. ELLIS: And his great book, A Random Walk Down Wall Street, has just come out with a new, very considerably updated version. And to sit with him and to realize, on item after item after item, Burton and I agreed, Burton and I agreed, Burton and I agreed. So it was a wonderful privilege and opportunity to be able to be candid, direct, blunt spoken, and to have a really capable guy sitting right beside you, I think you’re on the right track, keep going, keep going. And to have a management team that was so glad to hear what we had to say, even when it might be really in disagreement with them or might be slightly in disagreement with them, they’d love to having the candor coming from the outside. RITHOLTZ: Let’s talk a little bit about the current state of Vanguard. But I have to preface it with Jack Bogle’s CMH, not EMH, not the efficient market hypothesis, but the costs matter hypothesis, which really dates back to his Princeton thesis. It wasn’t so much about active versus passive, it was about expensive versus inexpensive. Tell us a little bit about how that impacted the development at Vanguard. ELLIS: First, you got to understand that Jack Bogle was a master of the personality franchise development business. When nobody else gave a damn about becoming clearly identified in a very specific way, Jack cared greatly about that. And it goes back to when he likes to tell the story on himself, at least did tell the story on himself whether he likes it or not. When he was in school, he came in second in his academic performance. And he went around to each one of his teachers, pleading with them to really examine and modify his grade so he could come in first. He wanted to be the valedictorian, not the salutatorian. Now, why would he care so much about that? It is not the be all and end all of the world. It’s because of his personality. Something deep inside him drove him to always enhance things, make things look better, make things look better, make things look better. And so all the way through the story of Vanguard, you’ll find Jack Bogle doing things or saying things to make the record look much more positive about what he contributed than the reality. And one of the awkwardness is the franchise building was done so beautifully, so consistently, so skillfully by a master of that craft, that it’s still 20 years later, 30 years later, carries on. And most people if you ask them, when you think of Vanguard, who do you think of? Bang, they’ve got it. Well, Jack Bogle was terribly important to the starting. Nobody could have started the organization without being Jack Bogle, partly angry, partly talent, partly skills of various particular characteristics, one of which was building the personal franchise. Nobody could have started Vanguard. But if Jack Bogle had stayed in control, it would never have become the organization it is today. It would be substantially smaller. It would be deeply outclassed by people who use automation to make their offering a better and more effective proposition. And we wouldn’t see the Vanguard that’s been developed since then. RITHOLTZ: So let’s talk a little bit about that Vanguard, very huge in ETFs, big overseas investing, lots of other things that Vanguard and Bogle didn’t see eye to eye about. How often did the company disagree with its founder? ELLIS: Interesting question, and I’m not sure I could do it in terms of numerical quantitative. But if you look back the concepts that Jack Bogle really believed in, computers, he thought were terribly expensive. That would have been a stopper today. RITHOLTZ: Real, for sure. ELLIS: He couldn’t do it. RITHOLTZ: Right. He really believed in he’s making the decisions. It’s too complicated of a business. There are too many things going on. There are too many different responsibilities for one person to do all of the decision-making. If you look at Vanguard today, you’re looking at a substantial organization that’s going through a substantial transformation towards becoming more of an effective organization, at serving clients’ interests, and doing a better and better job for the people who are already the investor-owners of Vanguard. So they are not making a major commitment internationally. They are not spending a lot of money to build a future business. In other countries, they’re looking for places where the resistance by the banking establishment or the financial establishment in those different countries is more open to non-local competition. But it’s hard to find, very hard to find. They’ve made some changes that we’re keeping up with the times. They’ve got a substantial institutional business. If you’re in the investment business as an institution, you really want to know something about private equity. If Vanguard doesn’t have private equity, that’s going to take them out of the running. So they’ve developed a really interesting joint venture, where they’re able to get access to a very competent private equity investment organization at a very controlled cost. They’re not aiming to be the very best, but second quartile of performance on a reliable basis, with broadly diversified capability. Okay, that will work very nicely. They’re doing the same sort of a change in going towards more and more advice. And anybody who has been in the investment management business, as you have been, looking back on things, you can tell almost everybody would be well-advised to have been more a long-term investor, make fewer choices and decisions, figure out what’s really right for you. And at the same time, you’d recognize that every individual is unique. Nobody is exactly the same. Now, if you look at personality, for example, your eyeglasses, I wear eyeglasses; your shoe size, my shoe size; your shirt sizes, color, size, sleeve length. Pretty soon you realize Barry’s clothes are different from mine because Barry is different from me. And he ought to wear the clothes that are right for him, and I want to wear the clothes that are more right for me. I might get advice from my wife or something on what to wear, but we’re two different guys. RITHOLTZ: We’re actually dressed shockingly similarly with our collared shirts and a blue sweater on top. But doesn’t that kind of raise the point of, well, everybody is different. But everybody needs to save for retirement to pay for their kids’ college, to leave something to the next generation. It shouldn’t vary radically. The broad strokes should all be fairly similar, shouldn’t they? ELLIS: In terms of the macro proposition, you’re exactly right. But everybody is different from everybody else in age, income, wealth, attitude towards life, how many years you want to keep working, things like risk tolerance. RITHOLTZ: Sure. ELLIS: Everybody differs. So it turns out that almost everybody is specifically individually themselves different from somebody else, specifically individually themselves. And as a result, advice to individuals is increasingly obviously a useful part of the total investment proposition. And Vanguard is moving in that direction, and capable probably of more power in a direction that anybody would ever understand or estimate. RITHOLTZ: I read a crazy statistic somewhere, I don’t recall if it was in the book or elsewhere, in the state of Pennsylvania, the certified financial planners, something like 96% of them in the state work for Vanguard. That’s just a crazy number as they’ve pushed into the advisory business and hiring all of these CFPs. ELLIS: They’ve made a major commitment to serving the investor with what they really need. And most people really ought to have a good investment plan, but they don’t. Most people ought to have a clear definition of their long-term purpose as investors, other than I want to do better than the market, or I want to do at least as well as the market, or I want to do well or something vague and general like that. Very hard to get people to be very specific about what do they really, really want to do and why. And if you’ve got a good advisor, you can do a lot to improve on your results by figuring out together, what makes sense to you that’s available in the marketplace, and making the right decisions of what’s available and realistic as opposed to dreams that may or may not come true. RITHOLTZ: So let’s talk about two areas that are a little controversial. One is the thought that as indexing became more and more appealing and attracted more and more assets, Jack Bogle was a little concerned about oligopoly, about potential any trust issues. At what size is passive or indexing too large? ELLIS: I think it’s a wonderful question. But if you don’t mind, I’m going to say it’s the wrong question. RITHOLTZ: Okay. ELLIS: The right question is when will active investors say to themselves, as the professionals, the people who are making their living as active investors, say to themselves, I think I’m going to get a different career? I think I’m going to leave this business and go in a different direction. At what age will they say to their children, look, it was okay for me in my time, but it’s not a good place for you. Don’t do it, don’t do it. At what point are you going to see fewer people taking courses on investment management at business schools? We’re nowhere near that. RITHOLTZ: Right. ELLIS: We’re putting more people through the learning process of how to be pretty damn good as an analyst through business school courses, and then out into the industry that are coming out of the industry through retirement. And that’s where the market is really controlled for market efficiency, or correct pricing. There’s really smart people. If you go back 50 years ago, there were a small number of people who made their living as analysts, and a small number of people made their living as portfolio managers, maybe as many as 500 people in the world. And today, it’s somewhere between one and a half and 2 million people. RITHOLTZ: Wow. ELLIS: That’s a big change, and there have been lots of other changes. The one that I think is the most powerful, here we are at Bloomberg Radio, think about how many people own a terminal, a Bloomberg terminal that will give you any answer to any question you ever want to ask for the rest of your life within seconds. RITHOLTZ: It’s all data and technology. ELLIS: It’s all over the place. Everybody has computing power in their pocket that is much as a 360, which was IBM’s magical power force 50 years ago. And everybody has access to the Internet and it’s instantaneous communication worldwide. And thank goodness, we speak the English language because that’s the language of investing worldwide. But it means that there’s a huge transformation that’s taking place, and it has made the markets more and more skillful at finding the right price. But makes it harder for active managers. And as you and I’ve talked about before, active managers underperform the chosen segment of the market they went after. And now, we’re somewhere between 85% and 90% of active managers fall short of their intention. And when they fall short, they often get desperate and fall very short by Hail Mary passes and other kinds of dramatic efforts. RITHOLTZ: The paradox of skill is the better the professionals get; it becomes increasingly harder to even beat the market. So that’s quite fascinating. One other question that’s a little controversial, we’ve seen some pushback to ESG, environmental, social, governance investing and the voting of proxies. How does an entity like Vanguard manage these issues on behalf of their huge 30 million clients and their $8 trillion in assets? ELLIS: Very simple. They do what you would like to. If you were a corporate executive, what would you like to have your shareholders do? Pay attention to the votes, be quite consistent about always voting. And as you know, most people don’t vote at all. And then many institutional investors say, it’s not our decision to make because we’re on behalf of others. So your very best client, if you’re a corporate executive, best shareholder is to be somebody who is in it for the long run. And if you’re a Vanguard and indexing, you’re in it permanently for the long, long, long run, cares about certain basic principles and they do, and they advertise what those principles are. For example, they believe that a board of directors should have an incentive in the company stock. They’re very strong to have diversification of personality and background. Okay, fine. Those are pretty much straightforward things. Nobody would have any trouble with that. Yeah. And they’re very much in favor of certain kinds of incentives, but not others. And most people look at and say, yeah, those are the right things to be in favor of. So it’s one after another after another items where Vanguard and State Street, and BlackRock are all three in agreement, basically, that good governance is an important characteristic of a board of directors, and they really want to see that going. What is it that you wouldn’t like about the way in which the voting is done? It’s a terrifically powerful answer. What wouldn’t you like? And there is nothing that you wouldn’t like. Now, is it possible that a group could quietly somehow skillfully get together and agree, let’s do something that’s really not going to be right for our investors? Yeah, you could say mechanically, it’s possible. But there’s Canada for an example, it’s a country right next to one of the most powerful military organization, nations in the world. Are the Canadians afraid the Americans are going to attack again? Of course not. In fact, we cooperate in our activities. RITHOLTZ: Right. ELLIS: Yeah. Okay. What would happen if somebody at any one of the indexing leaders were to do something that was not quite Boy Scout/Girl Scout right down the line? They get called out. I think they’d called out. Would it be the newspapers? Yes. Would it be on Bloomberg Radio? Yes. Would you have an interview with somebody who had called them out? Yes. One of those perfectly marvelous situations where you’re forced to do what you damn well want to do. RITHOLTZ: State Street, Vanguard, BlackRock, they all have pretty good businesses. Why would you want to mess with that? Really, really fascinating stuff, Charlie. Let’s jump to some of our favorite questions that we ask all of our guests. And I want to start with the last time I saw you was before the pandemic, what have you been doing during the pandemic? And tell us what what’s been keeping you entertained. ELLIS: Well, part of the entertainment value is that our children, our daughter and her husband and their two kids under 5 have moved into our house. So we’ve had the privilege of watching little kids again, and I have to tell you that is a dream come true. It’s a lot of fun. Second thing is we have an agreement in our family that we’re worried about the children and COVID. So we don’t do very much at all in the way of travel. And I used to be five days a week get on a train into Manhattan — RITHOLTZ: Right. ELLIS: — as a way of doing business. I’ve been in New York City three times in three years. RITHOLTZ: Wow. ELLIS: It’s really something else. And so I’m delighted to be here today. But in our family, I have to drive in, and then turn around and drive back. Then as you know, the traffic is not all that convenient, and so on and so on. But things like that have been distractions. I’ve enjoyed the privilege — Zoom has made a wonderful difference to my life and I’m sure to most other people, the freedom to be able to do repeat messages and communication in a serious way through Zoom. It’s really been terrific. The third thing is I’ve got a real bee in my bonnet that I want to be able to try to be helpful to people. And so doing investment advice is just as easy for me, located where I am. Once you make the communication contact, it works out fine. And I’ve really enjoyed being able to provide some useful investment advice to individuals as we’re going along. And then the third thing is I’ve been quite active in writing. I’ve written for the Financial Times several different pieces and I’ve written a couple of different books. I’ve got three books in the process of coming out. So have I been busy? Yeah, I’ve been busy. RITHOLTZ: So one of the things I always like to ask people is about their mentors who helped shape your career. ELLIS: Well, the most important person probably is Nellie Walsh, my sixth grade school teacher, who called me on the carpet one day and I was terribly surprised because I thought I was doing just the right thing. And she said, you were wrestling with Peter Neely, weren’t you? Well, I was. But that’s because of I couldn’t get him to stop throwing the snowballs with cinders in with the little kids, and he was picking on the little kids and I didn’t think that was fair. And she said, Charles, she never called me Charlie, always Charles, I think more of you, I expect more of you that you would lower yourself to the likes of Peter Neely. You may go. And ever since then, I’ve been held to a higher account, higher standard, higher expectation in every way to be responsive to Nellie Walsh. And more serious, people in the investment world, Joe Lasser, who was the director of Research at Wertheim, a traditional Wall Street firm. He believed deeply in security analysis, and was a very strong advocate of the CFA program. And so he got me in a training group to take the CFA exam as soon as we could. That was an important breakaway time. Another would be Coyler Crum who was a terrific professor of Investment Management at Harvard Business School. I enjoyed very much working with him. You could argue also, Ben Graham and David Dodd because of their wonderful book, Security Analysis, which was the first affirmation of professionalism in the financial analysis and securities pricing industry. And it really made a big difference to me. One of the great privileges of my life was to work, when I was working in Wall Street, and then working for Greenwich Associates for 30 years, working all day, every day with some of the smartest, most capable people in the world. And they were all involved in investment management. And if any one of them competed, all the others competed, and they all wanted to try to find ways to be better. And they’re all willing to tell you any insights that they had. And they’re all willing to provide a chorus of teachers and guidance in terms of what’s going on in investment management. And for me, that’s really the most important single place for learning that I had, and what a privilege all day, every day, is to be with the smartest people in the room, who are trying to figure out investment management. Then when you add it all together, you realize they’re competing with themselves. And they’re not going to be able to beat each other on a systematic and regular basis, voice that make a big difference to your way of thinking. RITHOLTZ: So you mentioned Graham and Dodd, and their books on Security Analysis. Tell us some of your other favorites and what else you’ve been reading more recently. ELLIS: Well, more recently, I have to tell you, I haven’t found a book on investment management that I thought was really compelling. You could argue, no, come on, there is a very recent book. That’s the new edition of an established book, Burton Malkiel’s A Random Walk Down Wall Street. It’s got to be one of the best books that’s ever been written about investment management, and about the markets and how to think about them. A wonderful guy and a wonderful book, and has done so much for so many people. Then if you look at other books that I would like to read, then you tend towards history, biography. and I’m always looking for suggestions of more books to read in that general field because I think you’ll learn so much about the way human beings do things, if you study about them, study about them, and study about them. And so I’m a nut for trying to learn from others. RITHOLTZ: I like the suggestions. What sort of advice would you give to a recent college graduate who is thinking about a career in investment management? ELLIS: Here I have a very strong opinion that you should think very candidly about why you’re interested. We all know for an example, that it’s a very well paid line of work. Most people don’t really appreciate how well paid it is, but it is wonderfully well paid. Secondly, you don’t have to retire at 65. In fact, many people work into their 70s. Many people even work into their 80s. At 85, I’m still working. I have just very wonderful privilege of not having to stop work at some arbitrary date like 65 or 60. Now, that’s a characteristic. When you look at the lifetime compensation of being in the markets all the time and free to pick anytime you want to, to pick a stock individually, that can be for some people, a very attractive characteristic. So if you like to make some substantial financial success, that’s one reason. If that’s your motivation, I think you’re in trouble. Because, yes, of course, you will make a substantial amount of income. But it’s not the most important part of your life. When you get to the end of life and you’re off standing in front of St. Peter at the pearly gates, and he said, well, you had your life, you were very lucky to be born at all. But there you were, and you chose the investment management world. What did you really do during that that you’re proud of? I made a lot of money. That’s not a good answer to a really great question. So be sure that if you’re going into the investment management field, that you know, is it because you want to make a lot of money, or is it because you like the idea of competing all the time with some of the smartest, most hardworking people in the world, which could be a terrific motivator and you could understand, or is it because you want to serve people and help them with what they’re trying to figure out about what they want to accomplish? If you’re the latter group, then you’re going to be in a profession and you will also get paid well, but your compensation will come primarily from being good as a profession. That lasts a lifetime. But you have to be clear about what is your motivation. RITHOLTZ: Really, really very interesting. And our final question, what do you know about the world of finance and investing in Wall Street today that you wish you knew 50 or so years ago? ELLIS: Well, you know, it’s pretty obvious in a way, I wish I’ve understood how much change was going to take place in the investment management activity and field. Computers for an example, when I first got started, there were no computers being used — RITHOLTZ: Wow. ELLIS: — or maybe in the back office, but they were clunky kinds of operations. And the idea that there would be the transformation of information worldwide is available to you instantaneously through Mike Bloomberg’s wonderful invention, the terminal, that the Bloomberg Terminal has transformed the world of information gathering. The Internet has transformed the world of information gathering. And as a consequence, the world of investing is now worldwide. And everybody in the world is competing with everybody else in the world in the investment management fields. So I wish I’ve understood how dramatic a change there would be, because it would make a big difference. If you understood that, you’d have the forces of change working for you and you could have made a completely different transformation of life. RITHOLTZ: Quite fascinating. Charlie, thank you for being so generous with your time. We have been speaking with Charlie Ellis, author of the new book Inside Vanguard: Leadership Secrets From the Company That Continues to Rewrite the Rules of the Investing Business. If you enjoy this conversation, be sure and check out any of the previous 475 podcasts we’ve done over the past eight years. You can find those at iTunes, Spotify, YouTube, wherever you get your favorite podcasts from. Be sure and sign up for my daily reading list at ritholtz.com. Follow me on Twitter @ritholtz. You can follow all of the Bloomberg podcasts at podcasts on Twitter. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Justin Milner is my audio engineer. Atika Valbrun is my project manager. Paris Wald is my producer. Sean Russo is my head of Research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~   The post Transcript: Charlie Ellis appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureDec 30th, 2022

Russia is tearing through its munitions stockpiles faster than it can refill them, top US intel chief says

The US Director of National Intelligence said Russia is expending its stockpiles "quite quickly," which she said is "pretty extraordinary." Russian servicemen from the units of the 150th Motor Rifle Division of the Southern Military District take part in exercises on the training grounds in the Rostov Region, Russia, on January 28, 2022.Russian Defence Ministry / Handout/Anadolu Agency via Getty Images Russia rapidly expending its stockpiles of munitions, the top US intelligence official said. Avril Haines said Moscow can't replace these stockpiles as quickly as it is going through them. In dealing with limited precision munitions, Russia has turned to Iran and North Korea for support.    Russian forces are expending their stockpiles of munitions at a greater speed than Moscow can replenish them, the top US intelligence official said recently.Avril Haines, the Director of National Intelligence, told the Reagan National Defense Forum on Saturday that Russia is burning through its munitions stockpiles "quite quickly," though she did not elaborate on any precise figures. "I mean it's really pretty extraordinary, and our own sense is that they are not capable of indigenously producing what they are expending at this stage," Haines said during a fireside chat with NBC News journalist Andrea Mitchell. "So that is going to be a challenge, and that is why you see them going to other countries effectively to try to get ammunition." "And of course, we've indicated that their precision munitions are running out much faster. In many respects, they have a lot of stockpiles," Haines continued, and added that "how viable those stockpiles are, how much they have, what they can use in different conflicts are obviously all questions that we look at quite carefully with our allies and partners."   For months now, Russia has been using long-range precision munitions to target civilian areas and civilian infrastructure across Ukraine while Moscow's forces continue to suffer battlefield defeats and lose territory to Kyiv's troops. War experts previously told Insider that in doing so, Russian President Vladimir Putin has been drawing from an increasingly limited stockpile of munitions for these attacks.As recently as Monday, Russia launched a fresh barrage of missiles into Ukraine, the country's air force said. Ukraine's foreign minister, Dmytro Kuleba, said Moscow targeted "critical civilian infrastructure trying to deprive people of power, water, and heating amid freezing temperatures."It is not exactly clear how many of each type of munition Russia has stockpiled, though Ukrainian Defense Minister Oleksii Reznikov shared a graphic to social media in late November claiming to show the status of Russia's high-precision missile arsenal. The post included various missiles launched from the ground, sea, and air, and how much of a specific missile's stockpile has been exhausted over the course of the war. —Oleksii Reznikov (@oleksiireznikov) November 22, 2022US officials have said that while Russia expends massive amounts of artillery and precision-guided munitions in Ukraine — and also deals with crushing international sanctions — the country has turned to pariah governments like Iran and North Korea for weapons and military hardware. "We've indicated we've seen some movement, but it's not been a lot at this stage, and it is one of the ones we're watching quite carefully because it would be significant, potentially," Haines said of the transfer of weapons from North Korea on Saturday.  Iran, meanwhile, has provided Russia with various drones — including the Shahed-136 suicide loitering munition — which Moscow has used to relentlessly target Ukraine's civil infrastructure. These kamikaze drones, as they have been called, are cheaper than precision munitions, making them a suitable though less destructive supplement as Russia's stockpiles run low."We've also seen the Russians looking for other types of precision munitions from Iran," Haines said, adding that this "will be very concerning in terms of their capacity, more generally." Read the original article on Business Insider.....»»

Category: smallbizSource: nytDec 5th, 2022

US Futures Drop As Chinese Stocks Soar On Reopening Optimism

US Futures Drop As Chinese Stocks Soar On Reopening Optimism US stock futures fell on Monday as investors weighed the outlook for economic growth against the possibility of a softening in the Federal Reserve’s policy, or in other words, whether bad news is again bad news. At the same time, and just one week after China was swept by violent anti-covid zero protests, Chinese stocks in listed in the US rose sharply after Hong Kong-listed peers rallied and the offshore yuan strengthened past the key 7.00 level after Chinese authorities eased Covid testing requirements across major cities over the weekend. The financial hub of Shanghai scrapped PCR testing requirements to enter outdoor public venues such as parks or use public transportation starting Monday. Hangzhou, home to tech giant Alibaba dropped obligations to enter most public venues including offices and supermarkets, while Shanghai also eased rules.  As a result, Hong Kong’s Hang Seng Tech Index closed at session highs, soaring some 9.2%, the biggest jump since Nov. 11, after China eased Covid testing requirements across major cities over the weekend. Meanwhile in the US, Nasdaq 100 futures were down 0.4% by 7:30 a.m. in New York, while S&P 500 futures dipped 0.5%. The indexes shrugged off a hotter-than-expected jobs report on Friday as investors and erased almost all early losses as they remained optimistic that the Fed would slow the pace of interest rate hikes at its meeting this month. The dollar remained near session lows, boosting most Group-of-10 currencies. Treasury yields climbed across the curve. Oil advanced after OPEC+ kept its 2 million production cut and amid growing signs China is reopening, while gold was little changed. Bitcoin rose more than 1%, gaining for a second day. The S&P 500 is on course for its biggest fourth-quarter gain since 1999 as signs of a cooling in US inflation have led to a pullback in bond yields, but market participants warn the outlook for next year remains uncertain amid the risk to corporate earnings from the specter of a recession. Among notable moves in premarket trading, US-listed Chinese stocks extended their torrid rally as easing Covid curbs in major Chinese cities fueled optimism that Beijing is hastening the shift away from its Covid Zero strategy; Alibaba rose 5.2%, Baidu +5.6%, Pinduoduo +5%, JD.com +5.6%, Bilibili +16%, Nio +6.3%, XPeng +11%. Cryptocurrency-exposed stocks rose as Bitcoin extended gains for a second day. Tesla slipped as much as 4.8% after a Bloomberg News report said that the electric vehicle maker planned to lower production at its Shanghai factory. Here are the other notable premarket movers: Activision Blizzard rises 2.3% after Bloomberg News reported that Microsoft is ready to fight for its $69 billion acquisition of the video gaming company if the US Federal Trade Commission files a lawsuit seeking to block the deal. Marathon Digital and Riot Blockchain lead cryptocurrency-exposed stocks higher as Bitcoin extends gains for a second day. Marathon Digital +4.9%, Riot Blockchain (RIOT US) +2.8% and Coinbase  +2.3% Keep an eye on airlines’ shares as Morgan Stanley says 2023 could be a “Goldilocks” year for air travel, boosting earnings beyond current expectations, as the broker upgrades United Airlines to overweight and cuts Allegiant Travel to equal-weight. Alaska Air is initiated with a buy recommendation at Citi, saying the carrier has attributes to offset headwinds facing domestic airlines in 2023. Additionally, the broker begins coverage on JetBlue with a neutral rating. Watch Terex as Deutsche Bank cut its rating to hold from buy on recent outperformance, saying that it’s best to stay defensively-positioned on US industrial stocks into 2023. Keep an eye on Ameris Bancorp and Atlantic Union (AUB US) as Piper Sandler resumed coverage on US mid-Atlantic and southeast banks, saying the two lenders are its preferred larger-cap names with both at attractive entry points. “Despite an increasingly optimistic end to the year, the main indexes seem unlikely to recover their lost ground and the current rally may be too little, too late,” said Richard Hunter, head of markets at Interactive Investor. Moreover, “doubts still linger” on how much more the Fed will still need to raise interest rates and the impact of higher-for-longer inflation, he said. Morgan Stanley strategist Michael Wilson said the year-end rally he had predicted had now run its course and investors are better off booking profits from here on. He sees an “absolute upside” for the S&P 500 at 4,150 points -- about 2% above current levels -- which could be achieved “over the next week or so.” Notable other US headlines: WSJ's Timiraos writes that Fed officials have signalled plans to hike by 50bp at the December gathering, though elevated wage pressures could lead them to continue increasing rates to levels higher than investors currently expect. Delta Air Lines (DAL) confirmed it reached an agreement in principle for a new pilot contract after it offered a 34% pay increase to pilots over 3 years, according to Reuters. Apple (AAPL) supplier Foxconn (2317 TT) expects full production at its COVID-hit plant in China to resume from late December to early January, while the Co. and the local government are pushing hard on the plant's recruitment drive but many uncertainties remain, according to sources cited by Reuters. Moldova’s central bank is to conduct an extraordinary meeting on Monday to assess its main policy indicators including the policy rate, according to Reuters. Iran’s Attorney General announced that Iran abolished its morality police and is considering changing hijab laws following the protests, according to WSJ. Euro Stoxx 50 falls 0.2%. FTSE 100 outperforms peers, adding 0.3%. Here are some of the biggest European movers today: Tech investors Naspers and Prosus both gain more than 5% in Johannesburg trading Monday after Chinese authorities accelerate a shift toward reopening the economy. European mining stocks in focus as metals advance after Chinese authorities eased Covid testing requirements across major cities over the weekend. Rio Tinto and Glencore shares rise as much as 3.7% and 2.4% respectively. Credit Suisse shares climb as much as 3.7% in early trading after the Wall Street Journal reported that Saudi Arabia’s Crown Prince Mohammed bin Salman is preparing to invest in the Swiss lender’s investment-bank unit. Grifols shares rise as much as 6.5% in early trading after Morgan Stanley raised to overweight from equal-weight on the expectation that 2023 will be a “strong growth year” supported by accelerating plasma collections and early signs of declining donor fees. Bayer shares slide as much as 2.8%, the most in about a month, after Bank of America cut its recommendation for the German agropharmaceutical giant to neutral on the company’s lack of catalysts after a 2022 outperformance. FlatexDEGIRO shares fall as much as 38%, the biggest intraday drop since its 2009 listing, after the online brokerage firm cut its revenue forecast and said it was working on measures to address shortcomings in some business practices and governance identified by a BaFin audit. German catering equipment company Rational sinks as much as 9%, making them the worst performer in the Stoxx 600, after Bank of America initiated coverage on the stock with an underperform recommendation, citing a “demand crunch” in 2023. Swedish Orphan Biovitrum shares drop as much as 2.2% after Morgan Stanley downgrades the stock to equal-weight from overweight. Asian stocks rebounded, inching closer to bull market territory, as Chinese equities resumed their rally on further relaxation of Covid rules in Asia’s biggest economy. The MSCI Asia Pacific Index climbed as much as 1.4%, led by communication services and consumer discretionary shares. Benchmarks in Hong Kong led gains in the region with the Hang Seng Tech Index soaring more than 9% and the Hang Seng China Enterprises Index up roughly 5%. Morgan Stanley upgraded China to overweight. Investors cheered latest signs of China pivoting from its strict virus rules as authorities eased Covid testing requirements across major cities over the weekend, including the financial hub of Shanghai. The move fueled gains in reopening stocks in China and its neighboring countries such as South Korea. Markets were closed in Thailand for a holiday. The moves coincided with growing bullish calls from Wall Street banks on Chinese equities, with more market watchers calling a bottom in the nation’s shares. Morgan Stanley upgraded China stocks to overweight from an equal-weight position held since January 2021, while abrdn’s Asia Pacific chief executive Rene Buehlmann urged investors to “go back” into Chinese markets. Elsewhere, stock benchmarks were mixed with gauges in Japan and South Korea trading lower while those in Australia, Singapore and Vietnam rose.  After falling for much of the year, Asian stocks staged a dramatic rally in the past few weeks with a surge in foreign inflows into emerging Asian shares, supported by the dollar’s weakness and expectations for a slowdown in the Fed’s hikes.  The key Asian stock benchmark still remains about 17% lower so far this year, on course for its worst annual performance in more than a decade. A closer look at Japanese stocks reveals that they ended mixed as investors gauged the impact of China’s shift toward reopening and US employment data. The Topix fell 0.3% to close at 1,947.90, while the Nikkei advanced 0.2% to 27,820.40. Toyota Motor Corp. contributed the most to the Topix decline, decreasing 1%. Out of 2,164 stocks in the index, 741 rose and 1,304 fell, while 119 were unchanged. “Japanese stocks are a bit weak at the moment as economic indicators are becoming a little more globally skewed,” said Mamoru Shimode, a chief strategist at Resona Asset Management.  Australian stocks rose: the S&P/ASX 200 index rose 0.3% to close at 7,325.60, led by gains in mining and real estate shares, as traders bet on further reopening of the Chinese economy from Covid restrictions.  Shares of iron ore miners and steel companies were among top performers advancing as commodity prices rallied on China reopening bets.  In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,677.75. Stocks in India ended flat on Monday as investors likely took profits in recent outperformers, while the focus shifts to the central bank’s monetary policy announcement later this week. The S&P BSE Sensex ended flat at 62,834.60 in Mumbai, while the NSE Nifty 50 Index was also little changed, as both indexes overcame declines of as much as 0.6% each. The key gauges rose for eight consecutive sessions before declining on Friday. The Reserve Bank of India’s rate-setting panel will commenced its three-day meet Monday for the monetary policy to be announced on Wednesday. All of the economists surveyed by Bloomberg expect the benchmark lending rate to be increased, with the median estimate for a 35 basis points hike. Polls in India’s Gujarat, also the home state to Prime Minister Narendra Modi, end today and results will be announced on Dec. 8. Investors will be watchful of the outcome as the results will indicate Modi’s popularity for national elections next in 2024.  In rates, treasuries are mixed as the curve bear flattens with 2s10s narrowing 1.6bps as US trading day begins, extending the flattening move unleashed Friday by stronger-than-estimated November employment data. All Treasuries apart from the very long end fell, with the largest decline seen in the belly of the curve, as traders added to Fed hike wagers ahead of US ISM services numbers for November. Yields remain inside Friday’s ranges, though inverted 2s10s reached -81.4bp, new low for the cycle. 2- to 7-year yields higher by 3bp-4bp on the day, 30-year lower by ~1bp; 10-year higher by ~2bp at 3.50% Most European 10-year yields are lower, led by UK as expectations for BOE rate hikes are pared. IG credit issuance slate blank so far, however dealers expect $10b-$15b this week and $20b for December. Three-month dollar Libor fell for a third straight day, longest streak since February, to 4.72343%. The Bloomberg Dollar Spot Index snapped a four-day drop as the greenback rose 0.1%. CAD and AUD are the strongest performers in G-10 FX, JPY and GBP underperform. ZAR (1.7%) leads gains in EMFX. The yen underperformed all its Group-of-10 peers while the Australian and Canadian dollar were the top gainers as commodities got a boost on hopes that China is engineering a gradual shift away from its strict Covid Zero policy. Chinese stocks and the yuan also rallied. The yuan strengthened past the key 7 per dollar level after Shanghai and Hangzou relaxed Covid testing rules. Hong Kong dollar surged to the strongest level since June 2021. Te onshore yuan extended gain to 1.5% to 6.9450 per dollar, the most since Nov. 11 as reopening optimism continues to boost the currency.  The euro steadied after rising to a fresh five-month high of $1.0585. Euro options bets suggest a run above $1.06 before FOMC meeting. Bunds, Italian bonds swung between modest gains and losses amid a slew of ECB speeches. The pound slipped after posting four consecutive weeks of gains. Money markets eased BOE rate-hike wagers after policy-maker Swati Dhingra said in a newspaper interview that interest rates should peak below 4.5%. The central bank will conduct bond sales later on Monday In commoidties, Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Brent rises 1.8% near $87.15 while WTI Jan was at 81.50/bbl, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilize markets. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. US economic data include November final S&P Global US services and composite PMIs (9:45am), October factory orders and November ISM services (10am) Market Snapshot S&P 500 futures down 0.3% to 4,062.75 STOXX Europe 600 little changed at 442.85 MXAP up 1.1% to 159.66 MXAPJ up 1.7% to 521.41 Nikkei up 0.2% to 27,820.40 Topix down 0.3% to 1,947.90 Hang Seng Index up 4.5% to 19,518.29 Shanghai Composite up 1.8% to 3,211.81 Sensex down 0.1% to 62,798.89 Australia S&P/ASX 200 up 0.3% to 7,325.60 Kospi down 0.6% to 2,419.32 German 10Y yield little changed at 1.85% Euro up 0.2% to $1.0555 Brent Futures up 1.9% to $87.16/bbl Gold spot down 0.0% to $1,797.23 US Dollar Index little changed at 104.47 Top US News From Bloomberg ECB Governing Council member Francois Villeroy de Galhau said it’s too early to discuss where interest rates will peak, saying the monetary-tightening process should be carried out at the appropriate pace The ECB should raise borrowing costs by at least a half-point this month to curb surging consumer prices, according to Governing Council member Gabriel Makhlouf ECB Governing Council Member Mario Centeno said “everything indicates” that the peak of inflation may be reached in the fourth quarter “Decisive monetary tightening must continue” as inflation persists above target, Croatian Central Bank Governor Boris Vujcic told the newspaper Jutarnji List, weeks before the Balkan nation joins the euro zone The US dollar has erased more than half of this year’s gains amid growing expectations the Federal Reserve will temper its aggressive rate hikes, and as optimism grows over China’s reopening plans Swedish central bankers are divided on the prospects for bringing inflation back to its target after a string of interest-rate increases, minutes from the bank’s latest policy meeting show Emerging-market central banks face a Catch-22 where plunging economic growth means they can’t keep monetary conditions tight, but elevated inflation doesn’t allow them to halt rate hikes either OPEC+ responded to surging volatility and growing market uncertainty by keeping its oil production unchanged The world’s worst- performing major currency looks poised for an impressive turnaround in 2023 as its two key drivers -- a hawkish Federal Reserve and dovish Bank of Japan -- swap places in the eyes of some investors The BOJ may achieve its inflation target in 2023 as the cost of living has consistently exceeded market expectations this year, according to Takatoshi Ito, a contender to replace Governor Haruhiko Kuroda in April The PBOC injected a record monthly amount into state policy banks in November to help spur infrastructure spending and boost a struggling economy Turkish inflation slowed for the first time in over a year-and-a-half, though measures to revive the economy ahead of elections in 2023 may keep it elevated for some time A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks traded mostly positive as Chinese markets led the advances on reopening optimism after several large cities further loosened COVID-19 restrictions, although the gains for the rest of the region were limited after Friday’s mixed post-NFP performance on Wall St and a further deterioration in Chinese Caixin Services and Composite PMI data. ASX 200 was higher with the index supported by strength in mining and energy as underlying commodity prices benefitted from the China reopening play. Nikkei 225 was indecisive and just about kept afloat throughout the session with price action contained by a lack of pertinent drivers to propel the index closer to the 28,000 level. Hang Seng and Shanghai Comp shrugged off the weak Chinese PMI data with risk appetite supported by reopening hopes and as the PBoC’s previously announced RRR cut took effect, while developers were boosted after reports last week that China's top four banks intend to issue loans for domestic developers’ overseas debt repayments. Top Asian News Chinese Caixin Services PMI (Nov) 46.7 vs. Exp. 48.0 (Prev. 48.4); Composite PMI (Nov) 47.0 (Prev. 48.3) Several Chinese cities accelerated the loosening of COVID-19 restrictions over the weekend including Shanghai and Shenzhen which scrapped requirements for commuters to present PCR tests for travelling on public transport, while apartment complexes in Beijing indicated that those that tested positive could quarantine at home, according to FT. China could announce 10 supplementary COVID measures as soon as Wednesday, via Reuters citing sources; could downgrade COVID to category B management as early as January. Subsequently, Shanghai scraps COVID testing requirement at more public venues from Tuesday, according to Bloomberg. PBoC is reportedly expected to reduce the amount of open market operations towards the end of the year to avoid excess liquidity, according to China Securities Journal. Morgan Stanley upgraded MSCI China to overweight from equal weight and said the ROE is likely to rise to 11.1% by end-2023, according to Reuters. European bourses are under modest pressure, Euro Stoxx 50 -0.2%, following on from fairly contained action in futures overnight. In APAC hours, Chinese stocks were the marked outpeformers given the loosening of COVID restrictions, though the region's PMIs slipped. Stateside, futures are are in-fitting with European peers and are under slight pressure, ES -0.3%, with specific developments light during the Fed blackout window. Tesla (TSLA) reduced Shanghai output by up to 20% due to sluggish demand, according to Bloomberg; output cuts set to take effect as soon as this week, sources state. Foxconn (2317 TT) November sales -11.4% YY. Q4 outlook expected in-line with consensus. November was the month most affected by COVID; due to off-peak seasonality and COVID November revenue declined MM. Top European News BoE’s Dhingra said higher interest rates could lead to a deeper and longer recession which is what she thinks they should all be worried about, while she sees few signs that demands for higher wages are raising the risk of a wage-price spiral, according to the Observer. Confederation of British Industry warned the UK will fall into a year-long recession next year as a combination of rising inflation, negative growth and declining business investment weigh on the economy, according to FT. UK Conservative Party Chairman and Minister without Portfolio in the Cabinet Office Zahawi said the government is looking at bringing in the military if strikes go ahead in various sectors including the health sector, according to Reuters and Sky News. UK RMT union rejected the Rail Delivery Group offer and demanded a meeting on Monday to resolve the dispute, while UK Transport Secretary Harper said the situation is disappointing and unfair to the public, according to Reuters. ECB’s Villeroy said that inflation should peak in H1 next year and that he favours a 50bps rate hike at the December 15th meeting, while he added that rate hikes will continue after that but cannot say when they will stop and he expects to beat inflation by 2024-2025, according to Reuters. ECB's Makhlouf sees a 50bps increase at a minimum at the December (15th) meeting, expects the eventual magntude to be 50bp; have to be open to policy rates moving into restrictive territory for a period in 2023; pre-mature to be talking about the endpoint for rates EU Commission President von der Leyen said the US Inflation Reduction Act is raising concerns in Europe and there is a risk it could lead to unfair competition, close markets and fragment supply chains that have already been tested by the pandemic, while she added that competition is good but it must be a level playing field and that they must take action to rebalance the playing field where the IRA or other measures conduct distortions, according to Reuters. FX DXY bid despite an earlier move to 104.10 lows, with the index recovering to 104.75+ parameters amid favourable technical levels US yields. Action which has been felt most keenly against the JPY, USD/JPY testing 135.50 at best from an initial 134.10 low, action which has offset the Yuan's impact on the USD. Yuan outperforms given the latest easing of COVID restrictions and source reports pointing to additional measures being forthcoming. AUD the next-best ahead of the RBA policy announcement with a 25bp hike expected. Both EUR and GBP were unreactive to the latest PMIs, with hefty OpEx in EUR/USD of note for the NY Cut; though, GBP has felt the USD's bid more keenly, sub-1.2250 at worst. PBoC set USD/CNY mid-point at 7.0384 vs exp. 7.0368 (prev. 7.0542) Fixed Income Core benchmarks are experiencing choppy trade, but retain an underlying bid with Bunds surpassing touted 142.17 resistance and Gilts briefly breaching 106.00. A move which leaves USTs lagging slightly with corresponding yields bid, though the curve is mixed and action is once again most pronounced at the short-end ahead of ISM & Factory Orders. Commodities Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Currently, WTI Jan & Brent Fed are pivoting USD 81.50/bbl and USD 87/bbl respectively, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilise markets, according to Reuters and FT. Iraqi Oil Minister said OPEC members are committed to the agreed production rates until the end of 2023 and the Algerian Energy Minister said the decision to keep output unchanged is appropriate to market fluctuations. Kuwaiti Oil Minister said OPEC+ decisions are based on market data and ensure its stability, while he added the impact of slow global economic growth on oil demand is a cause for continuous caution, according to Reuters. G7 and Australia announced on Friday that a consensus was reached on a price cap for Russian seaborne oil at USD 60/bbl which will enter into force on December 5th or very soon thereafter and they will ‘grandfather’ any revision of the price cap to allow compliant transactions concluded beforehand. Furthermore, US Treasury Secretary Yellen said that the price cap will immediately cut into Russia’s most important source of revenue and preserve stable global energy supplies, while a senior Treasury official stated that the price cap will create an anchor for Russian oil and has already driven prices lower, according to Reuters. Ukrainian President Zelensky’s chief of staff commented that the price cap on Russian oil should be capped to USD 30/bbl, according to Reuters. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. EU countries cut their gas demand by a quarter last month despite a fall in temperature which shows an effort in reducing the reliance on Russian energy, according to FT. Moldova’s Deputy PM Spinu said they will not pay a 50% advance to Gasprom by December 20th for its December gas supplies, according to Reuters. Spot gold has pulled back below USD 1800/oz and now resides in proximity to its 200-DMA at USD 1795/oz while base metals remain bid, but have eased from initial best levels. Geopolitics US Defense Secretary Austin accused Russia of deliberate cruelty in its war in Ukraine and that it was intentionally targeting civilians, according to Reuters. US Director of National Intelligence Haines said they expect a reduced tempo in Ukraine fighting to continue in the coming months, while she added that Russia is not capable of indigenously producing munitions they are expending, according to Reuters. US Indo-Pacific Commander Aquilino said it is in China’s strategy to encourage nations like North Korea to create problems for the US and he is not optimistic about China doing anything helpful to stabilise the Indo-Pacific region, according to Reuters. N.Korea has fired around 130 artillery shots off its East & West Coast, via Yonhap; Subsequently, N. Korean military says the firing of artillery shells was a warning to S. Korean military action, via KCNA. US Event Calendar 09:45: Nov. S&P Global US Composite PMI, est. 46.3, prior 46.3 09:45: Nov. S&P Global US Services PMI, est. 46.1, prior 46.1 10:00: Oct. Durable Goods Orders, est. 1.0%, prior 1.0% Durables-Less Transportation, est. 0.5%, prior 0.5% Cap Goods Ship Nondef Ex Air, prior 1.3% Cap Goods Orders Nondef Ex Air, prior 0.7% 10:00: Oct. Factory Orders, est. 0.7%, prior 0.3% Factory Orders Ex Trans, prior -0.1% 10:00: Nov. ISM Services Index, est. 53.3, prior 54.4 DB's Jim Reid concludes the overnight wrap Although there is little question that I feel fully aware that someone has cut my back open with a knife within the last few days and sawed off some bone inside, I feel remarkably mobile and spritely. However, I'm trying not to appear too mobile as I've been signed off housework for a few weeks as I'm not supposed to bend, twist or lift. Don't waste a crisis as they say. I also resisted any urge to celebrate England waltzing into the last 8 of World Cup last night. Still plenty of time for it to go spectacularly wrong. No need to stress the back needlessly at this stage! As the World Cup builds to the business end of the tournament, we welcome in a week with limited US data and one with the Fed now on their blackout period ahead of next week's FOMC. In fact, could it actually be quite a quiet week ahead? Famous last words in a year like this, but next week should be much more interesting than this week given that we also have US CPI and the ECB meeting to go alongside the Fed. The data we do see in the US starts today with the ISM services index (DB forecast 53.9 vs 54.4 in October) and ends with PPI and the UoM consumer confidence number on Friday with the latest inflation expectations numbers included. Elsewhere we’ll also get CPI and PPI from China (Friday), industrial production from Germany (Wednesday) and trade data from key economies. While central bank speak will be sparse, Lagarde speaks today and for this week some attention will shift to Canada and Australia. The former meet on Wednesday and as a reminder, their last meeting's dovish tilt spurred a pivot trade in the US on the back of expectations the Fed would mimic the message. So this meeting may be a driver of sentiment more broadly. The consensus is split on Bloomberg between 25bps and 50bps which makes it interesting. The Reserve Bank of Australia will also decide on policy tomorrow, and consensus expects a 25bp rate hike that takes the cash rate to 3.1%. Wednesday will also likely see the Reserve Bank of India downshift to 25bps after three 50bps hikes. So by midweek we’ll have a better feel for whether these central banks are trying to downshift. The full day-by-day week ahead is at the end as usual on a Monday. Staying on the topic of where central bank rates are going, payrolls from last Friday merit some closer attention. The headline (263k vs 284k last and 200k consensus) and private (221k vs. 248k last and 185k consensus) payrolls numbers beat with unemployment steady at 3.7%. However, market focus was squarely on the upside surprise to average hourly earnings (+0.6% vs. +0.5% last and +0.3% consensus) which boosted the year-over-year growth rate by a couple of tenths to 5.1% vs consensus at only 4.6%. This big upside miss got our economists digging into the data and they found that the response rate for the establishment survey, which measures nonfarm payrolls, hours and earnings, was just 49.4%, well below the normal 65-70% range and the lowest since 2002. So it feels like you could see decent sized revisions. In addition, our economists found that most of the upside surprise to AHEs was due to the transportation and warehouse sector, which showed a +2.5% monthly gain - over five standard deviations above the average and by far a record increase. Information services AHEs (+1.6% vs. Unch.) also showed an unusually large gain that was about 2.5 standard deviations outside of the average. Combined, the unusually large increases in these two sectors likely boosted overall AHEs by around one to two tenths in their view. Nevertheless, income growth from our economists’ payroll proxy was still up 7.6% compared to a year ago and inflation is not going to be coming down to trend with labour markets like this. There is more and more evidence that the supply side is normalising on the inflation front but it's seems inconceivable that inflation can normalise overall when we see the type of employment numbers we saw last week, not just from the employment report but also from the JOLTS data which still pointed towards a tight labour market. Indeed, in Powell's mid-week speech which caused a major bond/rates rally, he did cite the latest JOLTS data as still showing a large imbalance between supply and demand for labour, referencing the roughly 1.7 job openings for every unemployed worker. Powell also noted that for "the principal wage measures that we look at, I would say that you're one and half or two percent above that (which is consistent with two percent inflation over time)". So it's fascinating that at the moment the market is focusing squarely on the very strong likelihood that we'll ratchet down to 'only' a 50bps hike next week and extrapolating that level of dovishness rather than focus on any risks that the terminal rate could end up being nearer say 6% than 5%. Indeed Larry Summers was doing the rounds over the weekend suggesting that markets were likely under-pricing terminal and seemingly being more comfortable suggesting a peak nearer 6 than 5%, even if he wasn't specific over a particular number. In terms of weekend news OPEC+ decided to keep production at current levels as expected. This follows the EU decision on Friday, after months of negotiations, to cap the price of Russian crude at $60 per barrel, starting today. This morning in Asia trading hours, oil prices are trading higher with Brent crude futures (+0.82%) trading at $86.27/bbl and WTI futures (+0.83%) at $80.64/bbl following China’s further easing of its Covid Curbs. Elsewhere, Shanghai and Hangzhou have followed other Chinese cities in easing some Covid restrictions over the weekend. They announced that from tomorrow, they will remove the requirement to have a PCR test to enter outdoor public venues and to use public transport. Chinese equities surged on the news with the Hang Seng rising +3.3% in early trading to its highest since mid-September, leading gains across the region with the CSI (+1.60%) and the Shanghai Composite (+1.55%) also rallying. Outside of China, the Nikkei (+0.01%) is struggling to gain traction this morning whilst the KOSPI (-0.51%) is slipping back slightly. In overnight trading, US stock futures are indicating a negative start with contracts tied to S&P 500 (-0.14%) and the NASDAQ 100 (-0.17%) edging lower. Meanwhile, yields on 10yr USTs (+4.55 bps) have climbed higher, trading at 3.53% with the 2s10s curve at -79.15 bps as we go to press. Data out from China today showed that services activity contracted further in November as Covid restrictions continued to restrain growth, with the Caixin China services PMI falling to a six-month low of 46.7 from 48.4 in October. Elsewhere, the final estimate of Japan’s services PMI fell to 50.3 from October's 53.2, hitting the lowest since August as cost pressures remained acute. The composite PMI contracted to 48.9 in November from 51.8 a month earlier. In FX, the Chinese currency strengthened to 6.96 against the US dollar, moving below 7 for the first time since mid-September on hopes of reopening. Recapping last week now and for the second week running major sovereign bond markets and equity indices rallied, after perceived dovishness from Fed Chair Powell in his last remarks before the December FOMC communications blackout period, troubling global growth data, and further confirmation of China moving on from the strictest form zero Covid policies that have plagued global supply chains. Treasury and Bund yields fell over the week, a largely parallel shock to the already inverted US yield curve while Bund yields flattened slightly. All told, 2yr Treasuries fell -18.1bps (+4.4bps Friday) while 10yr yields were -19.1bps lower (-1.9bps Friday). 2yr Bunds fell -8.7bps, though climbed +8.0bps Friday, while 10yr yields were -11.8bps lower after climbing +4.2bps Friday following the US jobs report. But note that 10yr US yields fell c.7bps after the European close and c.15bps lower than their highs for the day just after payrolls were released. Terminal Fed Funds fell c.8bps on the week but were first c.6bps higher pre-Powell's speech and then c.22bps lower into payrolls, before climbing 8bps after and into the close for the week. A second straight week of falling discount rates led to a second straight week of decent equity performance. The S&P 500 climbed +1.13% (-0.12% Friday) with the more rate-sensitive NASDAQ outperforming, up +2.09% (-0.18% Friday). One area of weakness was bank stocks, where the S&P 500 banks sector fell -2.03% (-1.04% Friday) as slower growth and flatter curves weighed. Performance was more mixed in Europe, but the STOXX 600 still managed to post a +0.58% weekly gain (-0.15% Friday), while the regional indices took their cues from the World Cup: the DAX fell -0.08% (+0.27% Friday) with Germany failing to reach the knockout round again while the CAC and FTSE 100 increased +0.44% (-0.17% Friday) and +0.93% (-0.03% Friday), respectively. Tyler Durden Mon, 12/05/2022 - 08:03.....»»

Category: blogSource: zerohedgeDec 5th, 2022

Putin"s power doesn"t exist in a vacuum: Here are 14 of his biggest enablers, from billionaire oligarchs to world leaders

Putin relies on a vast network of elites he can co-opt or dupe into supporting his corrupt and authoritarian regime waging a brutal war in Ukraine. Nikolai Patrushev; Roman Abramovich; Vladimir Putin; Xi Jinping; Elon MuskLintao Zhang, Pool/Associated Press; Sang Tan/Associated Press; Kay Nietfeld/picture alliance/Getty Images; Alex Brandon/Associated Press; Evan Agostini/Invision/Associated Press Vladimir Putin maintains a cadre of supporters despite his growing global isolation. Russian oligarchs, world leaders, and American pundits have all enabled Putin's war in Ukraine. Here are some of the key figures that have helped empower Putin. Russian President Vladimir Putin launched an unprovoked attack on Ukraine in February, but the invasion was the culmination of two decades in power that have been enabled by world leaders, billionaire oligarchs, and other powerful figures.Putin, a Soviet KGB officer-turned-politician, has effectively stayed in power for over two decades. He served his first two terms as Russia's president from 2000-2008, and was elected president again in 2012. He also served as the Russian prime minister from 1999-2000 and 2008-2012.In his latest term as president, Putin drastically escalated conflict with Ukraine, including with the 2014 annexation of Crimea by force, a move deemed by most of the world to be illegal and illegitimate. His time in power has also been marred by reports of murdered dissidents, a steady rotting of democracy in Russia, and interference in foreign elections, including in the US.Still, influential figures have continued to support Putin, either through direct support, like partnerships or reliance on Russian energy products, or indirectly, by uncritically echoing his talking points or allowing him to proceed relatively unchecked. Here are some of the key figures who have enabled Putin's power.Dmitry MedvedevRussian President Vladimir Putin and then-Prime Minister Dmitry Medvedev attend a wreath-laying ceremony at the Tomb of the Unknown Soldier in Moscow, Russia, Thursday, Feb. 23, 2017.Ivan Sekretarev/Associated PressFormer Russian President Dmitry Medvedev has been in lockstep with Putin — his presidential predecessor and successor — over the country's war efforts since the February invasion.Medvedev, a close Putin ally who's leveled genocidal threats against Ukraine, was elected president in 2008, following the latter's first two terms. Russia's constitution at the time limited Putin to two consecutive terms, but he managed to maintain power in Medvedev's administration, serving as prime minister from 2008 to 2012.When Putin reclaimed the presidency in 2012 in an election marred by allegations of fraud, Medvedev took his place as prime minister, a position he held until 2020 when he stepped down to ease Putin's efforts to overhaul Russia's constitution.Putin also appointed him deputy chair of the Security Council of Russia, a position he still holds today.Medvedev has provided increasingly aggressive support for Putin's Ukraine invasion, issuing several bellicose statements about the conflict, as well as Russia's nuclear arsenal. In June, Medvedev threatened to strike "targets in the West" after the US agreed to provide Ukraine with advanced rocket systems and later expressed a desire to "disappear" all of Moscow's enemies.In September, he reiterated Putin's thinly veiled nuclear threats, emphasizing that Putin's warning was "definitely not a bluff, and earlier this month, framed Russia's ongoing, unprovoked war as a sacred conflict with "Satan."Sergei ShoiguRussian President Vladimir Putin (L) accompanied by Sergei Shoigu gestures as he fishes in the remote Tuva region in southern Siberia, on August 3, 2017.Alexey Nikolsky/SPutnik/AFP via Getty ImagesA loyal and longtime friend to Putin, Defense Minister Sergei Shoigu was once considered a possible successor to the Russian presidency. But as the official responsible for Russia's war in Ukraine, Shoigu has become a lightning rod for criticism amid the oft-failing war effort. Shoigu has marked a steady ascent through Russia's elite, utilizing his close relationships with powerful people, including Russia's first president, Boris Yeltsin, and then Putin himself. Shoigu and Putin's friendship appeared to go beyond politics: The two often vacationed together in the Siberian woods where they would go fishing and hikingDespite having never actually served in the military, Shoigu has executed Putin's defense aspirations for years, spearheading the invasion and annexation of Crimea in 2014 and contributing to Russia's intervention in Syria the following year. The West sanctioned Shoigu just one day after Russia's unprovoked invasion of Ukraine. But months of mounting Russian military failures have sparked rumors of a rift between Putin and Shoigu. Even so, Shoigu has remained silent, despite his apparent role as Putin's scapegoat. "Shoigu is willing to basically be Putin's bulletproof vest," Mark Galeotti, who heads the Russia-focused consultancy Mayak Intelligence, told Insider's Sophia Ankel.Nikolai PatrushevRussian Security Council Secretary Nikolai Patrushev and Russia's President Vladimir Putin during a meeting with the Secretary-General of the Japanese National Security Council.Mikhail MetzelbackslashTASS via Getty ImagesNikolai Patrushev, who serves as secretary of Russia's Security Council, is another longtime Putin ally and one of the exceedingly few people in power known to have the president's trust. Patrushev and Putin are old KGB comrades whose relationship dates back to 1998, and is regarded as one of the most powerful siloviki, as the close aides who advocate force are known. Galeotti told The Washington Post in July that Patrushev has long been the "devil on Putin's shoulder whispering poison into his ear." Since the war began, Patrushev has undertaken several foreign trips on behalf of Russia's war effort, speaking for Putin on a variety of topics as the 70-year-old president grew increasingly reclusive. "His ideas form the foundations of decisions taken by Putin," Tatiana Stanovaya, the founder of the Russian political consultancy R.Politik, told The Post of Patrushev. "He is one of the few figures Putin listens to." Since the invasion, Patrushev has emerged as a dependable frontman and frequent public promoter of Russia's war. His prominence on the global stage has prompted questions about his personal aims and whether or not he may be seeking Putin's power for himself.The Kremlin has brushed off suggestions that the security secretary has amassed new powers, but some intelligence experts see Patrushev as Putin's likely replacement should the president fall ill. The Russian OligarchsIn this Nov. 10, 2017, file photo, Russia's President Vladimir Putin, left, and Oleg Deripaska, right, attend the APEC Business Advisory Council dialogue in Danang, Vietnam.Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP, FileDozens of Russian oligarchs were among the first to be hit with Western sanctions in the immediate aftermath of the invasion over their close ties to President Putin.Many of these ultra-rich, Russian businessmen helped fuel Putin's meteoric rise to power and helped keep him there.Several of the "original" oligarchs amassed their power during the "perestroika" reforms to Russia's economy and political system in the late 1980s. After the fall of the Soviet Union, these men bought up industrial companies being sold off by the state, padding their pockets and increasing their influence.When Putin took the presidency in 2000, he vowed to crack down on corruption in the government, exiling certain oligarchs. But men who remained friendly to Putin — and who vowed to stay out of politics — were able to grow even richer, leaving Putin to his political machinations without much of a check. A new wave of Russian security elites emerged in the 1990s. These quasi-military elites would come to be known as silovarchs — a combination of the word oligarch and siloviki, a reference to the Russian military. Hugo Crosthwaite, a lead analyst at security intelligence firm Dragonfly, told Insider's Sam Tabahriti that the siloviki are much more a part of Putin's close circle and partial to his regime."Siloviki are ultimately closer to the president than oligarchs are," he said. But some of these siloviki and Oligarchs wield more "Putin power" than others. Roman AbramovichRoman Abramovich no longer owns Chelsea FC.Clive Mason/Getty ImagesRoman Abramovich has emerged as one of Russia's most recognizable oligarchs thanks to his previous ownership of Chelsea Football Club, a top-flight London soccer team which he oversaw for nearly two decades.In recent months, Abramovich has found himself in the spotlight after he was sanctioned by the European Union and the UK following Russia's invasion of Ukraine. As Western officials were seizing his many assets, including his massive yacht, Abramovich was acting as an unofficial envoy in peace talks between Russia and Ukraine in the spring. Though not an official member of the negotiations team, Abramovich's access to such conversations offer insight into what is believed to be his close relationship with Putin. European officials say Abramovich has "privileged access" to the Russian president and has maintained close ties with Putin for decades, Insider's Grace Dean and James Dean reported in April.Abramovich himself has repeatedly denied any financial links to Putin or a close relationship with the president. But Western officials say the oligarch and his businesses have received "preferential treatment and concessions" from Putin, including tax breaks and grants.The Times of London reported that Abramovich met with Putin in March and handed the president a handwritten note from Ukrainian President Volodymyr Zelenskyy seeking peace, which Putin promptly dismissed.Gennady TimchenkoRussian tycoon Gennady Timchenko, left, attends a meeting of Russian President Vladimir Putin, right, with French businessmen in the Kremlin in Moscow, Russia, Wednesday, May 25, 2016.Sergei Karpukhin/Pool Photo via APTimchenko, a billionaire trader and businessman who faced US sanctions ahead of Russia's invasion, is another notable oligarch with close ties to Putin. The sixth richest man in Russia, Timchenko was the wealthiest oligarch to face US sanctions earlier this year. The two men have been friends since the early 1990s, according to The Guardian, when Putin, a rising political star at the time, gifted Timchenko an oil export license to aid the St. Petersburg oil trader. Timchenko emerged as a co-founder of Gunvor Group, a Swiss-based trading house that exports billions of dollars of Russian oil. Both the company and Putin have rejected allegations that the Russian president was a "sleeper" beneficiary of Gunvor's activities, profiting off oil exports, The Guardian reported. But the US in 2014 sanctioned Timchenko along with other members of the "Russian leadership's inner circle," alleging that Timchenko's energy sector activities had direct links to Putin. Timchenko said he had sold his stake in Gunvor the day before he was sanctioned by the US in 2014 over the annexation of Crimea. Timchenko remains the founder and owner of the private investment firm Volga Group which is a major shareholder in Russia's massive natural gas producer Novatek.Chinese leader Xi JinpingRussian President Vladimir Putin (L) and Chinese leader Xi Jinping pose for a photograph during their meeting in Beijing, on February 4, 2022.Photo by ALEXEI DRUZHININ/Sputnik/AFP via Getty ImagesChina and Russia are not formal allies, but ties between the two countries, particularly related to trade and defense, have expanded over the past decade. The two countries consider each other strategic partners, and said in February their relationship has "no limits."In early February, as concern mounted over the possibility of Russia invading Ukraine, Chinese officials asked Russian officials to wait until after the end of the Winter Olympics in Beijing, according to Western intelligence officials.The intelligence report indicated that Chinese officials had some level of prior knowledge about the planned invasion, although it wasn't clear if Chinese leader Xi Jinping and Putin had communicated directly. But the request to delay may have emboldened Putin to actually go through with it, Simon Miles, an assistant professor at Duke University's Sanford School of Public Policy and a historian of the Soviet Union and US-Soviet relations, told Insider.Following the invasion, as Western countries issued crippling sanctions against Russia, China continued to purchase Russian oil and gas, serving as a lifeline for the Kremlin to continue with the war efforts. China, which is the largest purchaser of Russian oil, has even quietly increased its purchases since the war began.Xi has also refrained from condemning the invasion, though in September Putin acknowledged the Chinese leader had concerns about the war. But when the United Nations Security Council voted to condemn Russia's annexation of Ukrainian territories as illegal, China abstained.Indian Prime Minister Narendra ModiIndian Prime Minister Narendra Modi meeting Russian President Vladimir Putin in May, 2018.Getty ImagesLike China, India has also maintained its relationship with Russia throughout the war, continuing to buy energy products. India also drastically increased its purchases of Russian oil in the spring at highly discounted rates, essentially helping to fund the war efforts in Ukraine.India has refrained from condemning Russia's invasion, and the two countries have referred to their relationship as a "special and privileged strategic partnership."Indian Prime Minister Narendra Modi did criticize the war in September during a face-to-face meeting with Putin. "Today's era is not an era of war, and I have spoken to you on the phone about this," Modi said. Putin acknowledged Modi's concerns and said he too wanted the war to end as soon as possible.However, fear of losing the support of China and India may have actually encouraged Putin to escalate the war, in hopes of ending it sooner. And when the United Nations Security Council voted to condemn Russia's annexation of Ukrainian territories, India also abstained.Belarusian President Alexander LukashenkoRussian President Vladimir Putin (R) greets Belarusian President Alexander Lukashenko (L) during the welcoming ceremony in Saint Petersburg, Russia, December,20,2019.Photo by Mikhail Svetlov/Getty ImagesBelarus, along with its authoritarian president, Alexander Lukashenko, has been Putin's most important ally on the world stage. The country, located north of Ukraine, is Russia's only ally in Europe.Belarus has deep ties to Russia and the two remained close even after the dissolution of the Soviet Union in 1991. The countries are connected by a number of political, economic, and defense deals, including the Union State, the Eurasian Economic Union, and the Collective Security Treaty Organization, a military alliance of post-Soviet states that Putin has propped up as NATO's counterpart.Lukashenko, who has been referred to as Europe's last dictator, and Putin have a close relationship, with Belarus supporting Russia in the war effort. Belarus served as a staging ground for Russian troops prior to the invasion and has since been used by Russia to launch ballistic missiles into Ukraine. Hospitals in Belarus near the Ukrainian border have also taken in wounded Russian soldiers.Lukashenko, who's known for outlandish claims including that vodka protects against COVID-19, at one point even seemed to spill Russia's war plans for Ukraine.Gerhard SchröderGerman Chancellor Gerhard Schroeder, right, Russian President Vladimir Putin, center, and French President Jacques Chirac at a joint press conference in Svetlogorsk, Kaliningrad, July 3, 2005.JOHANNES EISELE/AFP via Getty ImagesFormer German Chancellor Gerhard Schröder has forged deep ties with Russia and Putin.While in office, Schröder, who served as chancellor from 1998 to 2005, supported building the first undersea gas pipeline that would directly deliver Russian natural gas to Germany. Three weeks after leaving office, Schröder became head of the board of shareholders for Nord Stream, the company behind the pipeline, despite concerns about a conflict of interest or wrongdoing.He has since made nearly $1 million a year from energy companies controlled by the Kremlin, The New York Times reported. Schröder has been one of Germany's most prominent proponents of importing Russian energy to fuel the country's industrial economy.As Germany was forced to confront it's reliance on Russia's oil and gas in the wake of the Ukraine invasion, some placed blame on Schröder, who critics say has promoted Russian energy at the expense of Germany's long-term interests.Schröder was also criticized in August after having a private meeting with Putin during a trip to Moscow. He told German media he had nothing to apologize for and said the West should properly acknowledge Russia's "real fears of being hemmed in" by antagonistic countries, The Guardian reported. He also recommended Ukraine remain neutral and that both sides needed to compromise. Schröder is now being investigated by Germany's Social Democrats, the party he has been a part of since 1963, over his ties to Russia and Putin.Olga SkabeyevaRussia-1 host Olga Skabeyeva has played a key role in the Kremlin's propaganda strategy amid the war in Ukraine.YouTube/UATV EnglishOlga Skabeyeva has emerged as perhaps the most passionate and prominent Russian TV propagandist among a sea of TV propagandists who have been pushing the Kremlin's talking points since the war began.Nicknamed the "propagandist-in-chief" and the "iron doll of Putin TV," Skabeyeva has been a dependable, frequent face in Putin's war effort, delivering intense, often-fabricated rants on the government-owned TV channel Russia-1 about Russia's military struggles, Western leaders, and the Ukrainian army.Skabeyeva has built her career over the last 15 years of the Putin regime serving as a mouthpiece for the administration, experts told Insider's Michelle Mark earlier this year. She hosts the political talk show "60 Minutes" on Russia-1 alongside her husband Yevgeny Popov, offering polarizing and divisive — though almost certainly Putin-approved — analysis and propaganda. In April she sparked international outcry after she said on television that Russia was in the middle of World War III, marking a notable shift in the Kremlin's acceptable rhetoric regarding Ukraine.Sarah Oates, a professor and senior scholar at the University of Maryland's Philip Merrill College of Journalism previously told Insider that Skabeyeva's inflammatory words were no accident, as Russian TV presenters often receive their talking points directly from the government.Vasily Gatov, a Russian media researcher and visiting fellow at the USC Annenberg Center on Communication Leadership and Policy, compared her to Fox News host Tucker Carlson, and called her a "monster" in an April interview.Elon MuskElon Musk.Michael Gonzalez/Getty ImagesTesla and SpaceX billionaire Elon Musk in recent months has pushed Kremlin talking points to his 118 million followers on Twitter, the site he now owns.On October 3, Musk tweeted a poll suggesting a Ukraine-Russia peace plan that included holding elections in four Ukrainian territories Russia claimed to have annexed in a move that was widely decried as illegitimate and illegal. The plan also suggested Crimea, which Russia has illegally occupied since 2014, be acknowledged as part of Russia, that Ukraine remain neutral, and a water supply to Crimea be guaranteed.Musk's peace plan was so favorable to Russia and specific to water rights in southern Ukraine that one leading Russia analyst, Fiona Hill, said it had the Kremlin's fingerprints on it, though Musk has denied speaking to Putin.Musk's tweet sparked harsh criticism from Ukrainian officials, including President Volodymyr Zelensky, who suggested the billionaire was supporting Putin. But Musk has continued to chime in about the war, including in a tweet emphasizing the importance of Crimea to Russian national security, another point pushed by the Kremlin.Donald TrumpUS President Donald Trump (L) and Russia's President Vladimir Putin shake hands before attending a joint press conference after a meeting at the Presidential Palace in Helsinki, on July 16, 2018.YURI KADOBNOV/AFP via Getty ImagesFormer President Donald Trump has often bragged about his close relationship with Putin and frequently downplayed the national security threat posted by Russia, ignoring warnings from US intelligence agencies.In 2014, after Putin invaded Crimea, Trump praised the Russian president in a speech at the Conservative Political Action Conference and said the rest of Ukraine would fall "fairly quickly." He later claimed the people of Crimea would rather be with Russia.When US intelligence agencies concluded Russia had interfered in the 2016 election through an online disinformation and propaganda campaign intended to help Trump and hurt Hillary Clinton, Trump doubted them, accepting Putin's denials. He later acknowledged the meddling, but has frequently dismissed it or contradicted US intel.In 2019, Trump's first impeachment was over an accusation that he withheld aid to Ukraine, which was still in ongoing conflict with Russia, in order to find dirt on Biden, his political opponent.And since the war began, Trump has continued to push Kremlin talking points and praise Putin. When Russia invaded in February, Trump lauded Putin's justification for invading as "genius" and "savvy." In October, Trump appeared to take blame for the invasion away from Putin and place it on US leadership — exactly where the Russian president says it belongs. "They actually taunted him, if you really look at it, our country and our so-called leadership taunted Putin," Trump told right-wing network Real America's Voice. "I would listen, I would say, you know, they're almost forcing him to go in with what they're saying. The rhetoric was so dumb."Trump also pushed a Ukraine-Russia peace deal after Putin threatened the use of nuclear weapons, playing into Putin's plans in a way that some experts described as "dangerous."Tucker CarlsonThe Fox News host Tucker Carlson on December 7, 2021.Fox NewsFox News host Tucker Carlson has frequently repeated Putin's talking points by sharing them on "Tucker Carlson Tonight," one of cable news' most-watched shows. Just before Russia invaded Ukraine, Carlson devoted a 15-minute segment to talking about how the US should not care about the looming conflict between the two countries.He claimed concern over the conflict was not about protecting Ukraine but because Democrats "want you to hate Putin" and that NATO doesn't want Russia to exist. He also said NATO's "one and only goal is to hold back the development of Russia," echoing claims made by Putin.He's also repeatedly attacked the country of Ukraine, whose citizens have mounted a society-wide response and begun to regain territory seized by the Russian invaders who have left mass graves in their wake.Following the invasion, Carlson acknowledged Putin and Russia were to blame but continued to spread their messages to his massive audience. In March a leaked memo showed the Kremlin even instructing Russian state media to play clips from Carlson's show "as much as possible," Mother Jones reported.At various points Carlson has defended Putin, downplayed the threat posed by Russia, repeated unsubstantiated and unlikely claims pushed by the Kremlin that the US was behind the Nord Stream pipelines sabotage, and falsely said the US is only providing aid to Ukraine as "payback for the 2016 election."Read the original article on Business Insider.....»»

Category: worldSource: nytNov 24th, 2022

Israeli Intelligence Warns Iran Is Mulling Terror Attack On World Cup

Israeli Intelligence Warns Iran Is Mulling Terror Attack On World Cup The head of Israeli Military Intelligence has warned this week that Iran is mulling an attack on World Cup venues in Qatar amid ongoing anti-regime protests. Maj. Gen. Aharon Haliva described that he expects Tehran officials to grow more desperate amid the now months-long "anti-hijab" protests, thus the potential for lashing out by a major terror attack grows increasingly likely. "There is a real concern within the regime that it endangers the regime. At this stage, I do not see a risk to the regime…. but as the pressure on Iran increases, including internal pressure, the Iranian response is much more aggressive, so we should expect much more aggressive responses in the region and in the world," Haliva said. Anadolu Agency/Getty Images "I am telling you that the Iranians are now considering attacking the World Cup in Qatar as well," he said. “The only thing holding them back is how the Qataris will react." He issued the words Monday before a defense conference in Tel Aviv, calling the ongoing protests which have increasingly taken over university campuses and major city streets in the Islamic Republic "extremely exceptional" and now fast becoming a "civilian rebellion". "The death toll, the attacks on national symbols — this is very troubling for the regime, especially combined with sanctions, the existing international pressure, and the difficult economic situation," the military intel chief described. Outgoing Defense Minister Benny Gantz also backed the prediction related to the World Cup, alleging the Iranians are poised to create instability outside their country.  Iranian leaders have meanwhile charged that the protests and unrest are a foreign plot, with the spiraling violence which has left scores of police and security services casualties being fueled by Israeli and US intelligence. Over 320 people have died since the demonstrations began. Authorities have denounced the "rioters".  IDF Military Intelligence chief Aharon Haliva. Image: JNS/Flash90 As for the claims that Iran could be planning an attack on the World Cup, it remains entirely unclear if this is based on any firm intelligence. Instead, it seems more the speculative accusations which are typical from Israeli officials anytime there's a major media-covered international event in the Middle East region. Tyler Durden Wed, 11/23/2022 - 11:30.....»»

Category: personnelSource: nytNov 23rd, 2022

Chris Hedges: Stop Worrying & Love the Bomb

Chris Hedges: Stop Worrying & Love the Bomb Authored by Chris Hedges via Scheerpost.com, I have covered enough wars to know that once you open that Pandora’s box, the many evils that pour out are beyond anyone’s control. War accelerates the whirlwind of industrial killing. The longer any war continues, the closer and closer each side comes to self-annihilation.  Unless it is stopped, the proxy war between Russia and the U.S. in Ukraine all but guarantees direct confrontation with Russia and, with it, the very real possibility of nuclear war.` Bombs Away – by Mr. Fish. U.S. President Joe Biden, who doesn’t always seem to be quite sure where he is or what he is supposed to be saying, is being propped up in the I-am-a-bigger-man-than-you contest with Russian President Vladimir Putin by a coterie of rabid warmongers who have orchestrated over 20 years of military fiascos. They are salivating at the prospect of taking on Russia, and then, if there is any habitation left on the globe, China. Trapped in the polarizing mindset of the Cold War — where any effort to de-escalate conflicts through diplomacy is considered appeasement, a perfidious Munich moment — they smugly push the human species closer and closer toward obliteration. Unfortunately for us, one of these true believers is Secretary of State Antony Blinken. “Putin is saying he is not bluffing. Well, he cannot afford bluffing, and it has to be clear that the people supporting Ukraine and the European Union and the Member States, and the United States and NATO are not bluffing neither,” E.U. foreign policy chief Josep Borrell warned. “Any nuclear attack against Ukraine will create an answer, not a nuclear answer but such a powerful answer from the military side that the Russian Army will be annihilated.” Annihilated. Are these people insane? Josep Borrell in 2019. (European Parliament, CC BY 2.0, Wikimedia Commons)  You know we are in trouble when former Donald Trump is the voice of reason. “We must demand the immediate negotiation of a peaceful end to the war in Ukraine, or we will end up in world war three” the former U.S. president said. “And there will be nothing left of our planet — all because stupid people didn’t have a clue … They don’t understand what they’re dealing with, the power of nuclear.” I dealt with many of these ideologues — David Petraeus, Elliot Abrams, Robert Kagan, Victoria Nuland — as a foreign correspondent for The New York Times. Once you strip away their chest full of medals or fancy degrees, you find shallow men and women, craven careerists who obsequiously serve the war industry that ensures their promotions, pays the budgets of their think tanks and showers them with money as board members of military contractors. They are the pimps of war. If you reported on them, as I did, you would not sleep well at night. They are vain enough and stupid enough to blow up the world long before we go extinct because of the climate crisis, which they have also dutifully accelerated. If, as Joe Biden says, Putin is “not joking” about using nuclear weapons and we risk nuclear “Armageddon,” why isn’t Biden on the phone to Putin? Why doesn’t he follow the example of John F. Kennedy, who repeatedly communicated with Nikita Khrushchev to negotiate an end to the Cuban missile crisis? Kennedy, who unlike Biden served in the military, knew the obtuseness of generals. He had the good sense to ignore Curtis LeMay, the Air Force chief of staff and head of the Strategic Air Command, as well as the model for General Jack D. Ripper in “Dr. Strangelove,” who urged Kennedy to bomb the Cuban missile bases, an act that would have probably ignited a nuclear war. Biden is not made of the same stuff. Retired General Curtis LeMay in 1987. (U.S. National Archives, CC BY-SA 4.0, Wikimedia Commons) Why is Washington sending $50 billion in arms and assistance to sustain the conflict in Ukraine and promising billions more for “as long as it takes”? Why did Washington and Whitehall dissuade Ukraine’s President Vladimir Zelensky, a former stand-up comic who has been magically transformed by these war lovers into the new Winston Churchill, from pursuing negotiations with Moscow, set up by Turkey? Why do they believe that militarily humiliating Putin, whom they are also determined to remove from power, won’t lead him to do the unthinkable in a final act of desperation? Moscow strongly implied it would use nuclear weapons in response to a “threat” to its “territorial integrity” and the pimps of war shouted down anyone who expressed concern that we all might go up in mushroom clouds, labeling them traitors who are weakening Ukrainian and Western resolve. Giddy at the battlefield losses suffered by Russia, they poke the Russian bear with ever greater ferocity. The Pentagon helped plan Ukraine’s latest counteroffensive, and the C.I.A. passes on battlefield intelligence. The U.S. is slipping, as we did in Vietnam, from advising, arming, funding and supporting, into fighting.  U.S. President Joe Biden during a briefing by his national security team, Aug. 18, 2021. (Public Domain, Wikimedia Commons) None of this is helped by Zelensky’s suggestion that, to deter the use of nuclear weapons by Russia, NATO should launch “preventive strikes.” “Waiting for the nuclear strikes first and then to say ‘what’s going to happen to them.’ No! There is a need to review the way the pressure is being exerted. So there is a need to review this procedure,” he said. Kremlin spokesman Dmitry Peskov said the remarks, which Zelensky tried to roll back, were “nothing else than a call to start a world war.”  The West has been baiting Moscow for decades. I reported from Eastern Europe at the end of the Cold War. I watched these militarists set out to build what they called a unipolar world — a world where they alone ruled. First, they broke promises not to expand NATO beyond the borders of a unified Germany. Then they broke promises not to “permanently station substantial combat forces” in the new NATO member countries in Eastern and Central Europe. Then they broke promises not to station missile systems along Russia’s border. Then they broke promises not to interfere in the internal affairs of border states such as Ukraine, orchestrating the 2014 coup that ousted the elected government of Victor Yanukovich, replacing it with an anti-Russian — fascist aligned — government, which, in turn, led to an eight-year-long civil war, as the Russian populated regions in the east sought independence from Kiev. They armed Ukraine with NATO weapons and trained 100,000 Ukrainian soldiers after the coup. Then they recruited neutral Finland and Sweden into NATO. Now the U.S. is being asked to send advanced long-range missile systems to Ukraine, which Russia says would make the U.S. “a direct party to the conflict.” But blinded by hubris and lacking any understanding of geopolitics, they push us, like the hapless generals in the Austro-Hungarian empire, towards catastrophe. The West calls for total victory. Russia annexes four Ukrainian provinces. The Westhelps Ukraine bomb the Kerch Bridge. Russia rains missiles down on Ukrainian cities. The West gives Ukraine sophisticated air defense systems. The West gloats over Russian losses. Russia introduces conscription. Now Russia carries out drone and cruise missile attacks on power, sewage and water treatment plants. Where does it end? “Is the United States, for example, trying to help bring an end to this conflict, through a settlement that would allow for a sovereign Ukraine and some kind of relationship between the United States and Russia?” a New York Times editorial asks. “Or is the United States now trying to weaken Russia permanently? Has the administration’s goal shifted to destabilizing Putin or having him removed? Does the United States intend to hold Putin accountable as a war criminal? Or is the goal to try to avoid a wider war — and if so, how does crowing about providing U.S. intelligence to kill Russians and sink one of their ships achieve this?” No one has any answers. The Times editorial ridicules the folly of attempting to recapture all of Ukrainian territory, especially those territories populated by ethnic Russians. “A decisive military victory for Ukraine over Russia, in which Ukraine regains all the territory Russia has seized since 2014, is not a realistic goal,” it reads. “Though Russia’s planning and fighting have been surprisingly sloppy, Russia remains too strong, and Mr. Putin has invested too much personal prestige in the invasion to back down.” But common sense, along with realistic military objectives and an equitable peace, is overpowered by the intoxication of war. On Oct. 17, NATO countries began a two-week-long exercise in Europe, called Steadfast Noon, in which 60 aircraft, including fighter jets and long-range bombers flown in from Minot Air Base in North Dakota are simulating dropping thermonuclear bombs on European targets. This exercise happens annually. But the timing is nevertheless ominous. The U.S. has some 150 “tactical” nuclear warheads stationed in Belgium, Germany, Italy, the Netherlands and Turkey.  Admiral Rob Bauer, chair of NATO Military Committee, during a meeting of NATO defence ministers on Oct. 13. (NATO) Ukraine will be a long and costly war of attrition, one that will leave much of Ukraine in ruins and hundreds of thousands of families convulsed by lifelong grief. If NATO prevails and Putin feels his hold on power is in jeopardy, what will stop him from lashing out in desperation? Russia has the world’s largest arsenal of tactical nukes, weapons that can kill tens of thousands if used on a city. It also possesses nearly 6,000 nuclear warheads. Putin does not want to end up, like his Serbian allies Slobodan Miloševic and Ratko Mladic, as a convicted war criminal in the Hague. Nor does he want to go the way of Saddam Hussein and Muammar Gaddafi. What will stop him from upping the ante if he feels cornered? Russian President Vladimir Putin puts nuclear forces on high alert, Feb. 27. (Kremlin) There is something grimly cavalier about how political, military and intelligence chiefs, including C.I.A. Director William Burns, a former U.S. ambassador to Moscow, agree about the danger of humiliating and defeating Putin and the specter of nuclear war. “Given the potential desperation of President Putin and the Russian leadership, given the setbacks that they’ve faced so far, militarily, none of us can take lightly the threat posed by a potential resort to tactical nuclear weapons or low-yield nuclear weapons,” Burns said in remarks at Georgia Tech in Atlanta. Former C.I.A. Director Leon Panetta, who also served as defense secretary under President Barack Obama, wrote this month that U.S. intelligence agencies believe the odds of the war in Ukraine spiraling into a nuclear war are as high as 1-in-4. The director of National Intelligence, Avril Haines, echoed this warning, telling the Senate Armed Services Committee in May that if Putin believed there was an existential threat to Russia, he could resort to nuclear weapons.  “We do think that [Putin’s perception of an existential threat] could be the case in the event that he perceives that he is losing the war in Ukraine, and that NATO in effect is either intervening or about to intervene in that context, which would obviously contribute to a perception that he is about to lose the war in Ukraine,” Haines said. “As this war and its consequences slowly weaken Russian conventional strength … Russia likely will increasingly rely on its nuclear deterrent to signal the West and project strength to its internal and external audiences,” Lt. Gen. Scott Berrier wrote in the Defense Intelligence Agency’s threat assessment submitted to the same Armed Services Committee at the end of April. Given these assessments, why don’t Burns, Panetta, Haines and Berrier, urgently advocate diplomacy with Russia to de-escalate the nuclear threat? This war should never have happened. The U.S. was well aware it was provoking Russia. But it was drunk on its own power, especially as it emerged as the world’s sole superpower at the end of the Cold War, and besides, there were billions in profits to be made in arms sales to new NATO members. In 2008, when Burns was serving as the ambassador to Moscow, he wrote to Secretary of State Condoleezza Rice: “Ukrainian entry into NATO is the brightest of all redlines for the Russian elite (not just Putin). In more than two and a half years of conversations with key Russian players, from knuckle-draggers in the dark recesses of the Kremlin to Putin’s sharpest liberal critics, I have yet to find anyone who views Ukraine in NATO as anything other than a direct challenge to Russian interests.”  Sixty-six U.N. members, most from the Global South, have called for diplomacy to end the war in Ukraine, as required by the U.N. Charter. But few of the big power players are listening. If you think nuclear war can’t happen, pay a visit to Hiroshima and Nagasaki. These Japanese cities had no military value. They were wiped out because most of the rest of Japan’s urban centers had already been destroyed by saturation bombing campaigns directed by LeMay. The U.S. knew Japan was crippled and ready to surrender, but it wanted to send a message to the Soviet Union that with its new atomic weapons it was going to dominate the world. We saw how that turned out. Chris Hedges is a Pulitzer Prize–winning journalist who was a foreign correspondent for 15 years for The New York Times, where he served as the Middle East bureau chief and Balkan bureau chief for the paper. He previously worked overseas for The Dallas Morning News, The Christian Science Monitor and NPR.  He is the host of show “The Chris Hedges Report.” Author’s Note to Readers: There is now no way left for me to continue to write a weekly column for ScheerPost and produce my weekly television show without your help. The walls are closing in, with startling rapidity, on independent journalism, with the elites, including the Democratic Party elites, clamoring for more and more censorship. Bob Scheer, who runs ScheerPost on a shoestring budget, and I will not waiver in our commitment to independent and honest journalism, and we will never put ScheerPost behind a paywall, charge a subscription for it, sell your data or accept advertising. Please, if you can, sign up at chrishedges.substack.com so I can continue to post my Monday column on ScheerPost and produce my weekly television show, “The Chris Hedges Report.” This column is from Scheerpost, for which Chris Hedges writes a regular column. Click here to sign up for email alerts. Tyler Durden Sun, 10/30/2022 - 22:00.....»»

Category: blogSource: zerohedgeOct 30th, 2022

As US-China Relations Worsen, Expect Supply Chain Chaos

As US-China Relations Worsen, Expect Supply Chain Chaos By John Paul Hampstead of FreightWaves The trans-Pacific trade lane connecting the world’s most important countries is a pillar of the global economy. But now it’s becoming an epicenter of supply chain, financial and geopolitical risk.  During the pandemic, ocean container spot rates rocketed upward from approximately $1,000 per 40-foot container to nearly $20,000 last fall before plunging again to $2,720 last week. Meanwhile, U.S. officials staged visits to Taiwan and took action to further separate the Chinese and American semiconductor sectors. This potent combination of economic, political and military issues will make trans-Pacific business complicated for years to come.  China’s zero-COVID policies and recent tensions over Taiwan have accelerated this confrontation, which could lead to further decoupling between the U.S. and China. But the fundamental issues will likely persist beyond present crises.  The American media coverage of President Xi Jinping’s address to the 20th Communist Party Congress in Beijing last week took note of Xi’s pessimistic tone, warning party members to prepare China for confrontation and crisis. Politico’s Phelim Kine called Xi’s view of U.S.-China relations “increasingly bleak.” Bret Stephens played into the rivalry, writing a cynical op-ed in The New York Times sarcastically thanking Xi for running his country so poorly as to make the United States seem good by contrast.  Counter-signaling Xi’s message of a Chinese “national rejuvenation,” U.S. Secretary of State Antony Blinken was at the same time giving speeches at Stanford University in a tour carefully packaged around a national-strength-through-technology theme. Blinken visited the SLAC National Accelerator Laboratory then spoke at a Hoover Institute event with former Secretary of State Condoleeza Rice, who is now the Hoover Institute director. Most strikingly, Blinken said China was “determined to pursue reunification [with Taiwan] on a much faster timeline” — a statement that made headlines. Blinken’s visit to Stanford seems to be part of a general effort from the Biden administration to nationalize technology policy and shape the technology industry into an asset that could be useful in a China conflict. Blinken announced his creation of the State Department’s Bureau of Cyberspace and Digital Policy in April. In August, President Biden signed the CHIPS and Science Act, which will spend $280 billion on U.S. semiconductor infrastructure.  China’s zero-COVID policy fighting losing battle But before we give too much thought to strategic industrial policy, we should recognize the most immediate impact to supply chains and the trans-Pacific trade that the Chinese president’s third term will have: the continuation of Xi’s signature zero-COVID policy for the foreseeable future. China’s draconian surveillance and control regime of tests, quarantines and lockdowns — enabled by a collaboration between the Chinese Communist Party (CCP) and China technology companies — seemed to work well enough for a year. Xi’s policy held down infection rates and kept the economy pointed up and to the right.  But when the Omicron variant’s greater infectiousness overwhelmed mask and vaccine protections, China kept forcefully applying lockdowns, massively disrupting both its own economy and trans-Pacific trade in general. Although the Chinese state adapted its tactics on a case-by-case basis — the 2022 lockdown of Shanghai, for instance, kept critical infrastructure like the container terminals operating in ways that the 2021 lockdown of Yantian did not, for example — the governance mechanism was the same. Centralized algorithms looked for signals in endless oceans of public health, location and social media data. As a result, recommended policy actions were increasingly ineffectual and mismatched to realities on the ground.  Tokyo-based freelance writer Dylan Levi King explored the deep roots of this data-driven, centralized electronic command and control system in a recent article for Palladium Magazine called “The Genealogy of Chinese Cybernetics.” King reconstructs the career of Qian Xuesan, author of “Engineering Cybernetics” (1954), from Pasadena, California, to Beijing and his role in building the computer systems and algorithmic models that justified China’s “Great Leap Forward” and the one-child policy.  As King wrote, the implementation of these policies fell far short of the dream of optimized, electronic, frictionless command and control: “Political attempts at cybernetic planning — both in China and elsewhere — have never overcome the problem of limited sensors and weak effectors.” Though he doesn’t refer specifically to the pandemic, the unintended consequences of a zero-COVID policy, including food shortages, real estate insolvency and bank runs seem to validate it as a further example of this governance style’s inadequacy.  The consensus of the international financial community, as Bloomberg’s John Authers wrote, is that China’s zero-COVID policy under Omicron has been a disaster casting a pall over the global economy. The Hang Sen Index, which measures the health of the Hong Kong stock market and its largest companies, is down 46% since its Feb. 19, 2021, peak. It is threatening to dip below its 30-year support level. Zero-COVID has created downstream supply chain issues with widespread, long-lasting and unpredictable effects on the earnings of U.S. and European companies, from automakers to big-box retailers. US-China relations have weakened for more than decade But whether or not Xi rolls back his zero-COVID policy or not, the future of the trans-Pacific is troubled.  All signs point to escalating confrontation between the United States and China over Taiwan, but the seemingly cheery relationship between the two giants has been shifting — sometimes quickly, sometimes slowly — for years, dating back to the Obama administration. Recall that one of the reasons given for former President Barack Obama’s withdrawal from Iraq and Afghanistan was to enable the “pivot to Asia,” the continent that Obama identified as the future center of gravity of the global economy in terms of population and gross domestic product. These weren’t just words. Obama moved 2,500 Marines into northern Australia and designed the Trans-Pacific Partnership, a trade agreement with smaller regional powers meant to isolate China.  Former President Donald Trump’s tariffs, which eventually escalated into a medium-sized trade war with China and a series of smaller skirmishes with Canada and the European Union, set off panicked behavior by U.S. importers that roiled the trans-Pacific. Companies accelerated the timelines on their purchase orders, “pulling forward” shipments that were originally scheduled to arrive after new tariffs took effect in order to avoid paying the duties. A logjam of volume increased rates, reduced schedule reliability, congested ports and filled warehouses, especially in Southern California.  In summer 2018, when the pull-forward effects were felt, the U.S. truckload market was still on fire, having been catalyzed by Hurricane Harvey the previous year and the ELD mandate’s tightening effect on capacity. The unpredictable volumes coming out of some of the country’s most important freight markets undoubtedly kept truckload rates higher for longer before the market ultimately began rolling over in October. Expect more military activity Although Trump sometimes styled his protectionist tariffs as merely the pragmatic bargaining chips of a consummate dealmaker looking out for the American people, his military moves revealed a deeper, strategic understanding of the trans-Pacific. His administration, for example, emphasized the U.S. Navy’s ability to secure vital trade routes. Navy patrols in heavily trafficked areas and freedom of navigation exercises increased, placing additional pressure on those operations to perform.  When the Navy looked sloppy, heads rolled. In summer 2017, the U.S. Seventh Fleet, a forward-deployed and based in Yokosuka, Japan, and centered on the USS Ronald Reagan’s carrier strike group, suffered two accidents. The Arleigh Burke-class guided missile destroyer USS Fitzgerald collided with a commercial vessel in July off the coast of Yokosuka. The next month, another Arleigh Burke, the USS John McCain, collided with a commercial vessel near the Strait of Malacca off Singapore. Between the two accidents, 17 American sailors were killed. Trump’s chief of naval operations, Adm. John Richardson, responded by effectively purging the Seventh Fleet and the larger U.S. Pacific Fleet. The Navy fired or retired the destroyer commanders and executive officers, as well as commander of the Seventh Fleet, Adm. Joseph Aucoin. Then Richardson told Adm. Scott Swift, commander of the Pacific Fleet (of which the Seventh is a part), that he wouldn’t be considered for promotion to the Indo-Pacific Command, so Swift announced his retirement. The point had been made: U.S. Navy leaders were personally responsible for keeping up with the heavier demands made on security operations in vital trans-Pacific trade lanes.  Beginning in the Obama administration and continuing through the Trump and Biden administrations, the United States has exhibited a growing awareness of the trans-Pacific as not only a trade conduit but also a theater for competition and perhaps conflict. Diplomatic, economic, technological and military steps have been taken that suggest the United States is exploring how it can maintain its interests in the Pacific region without China’s cooperation or consent. The most recent flare-ups are the kind of incidental accelerants that were bound to occur during this more gradual paradigm shift in U.S.-China relations. Supply chain chaos to ensue Apart from overt military encounters, I’ll be watching a few key themes going forward: increased volatility in supply chains, in terms of freight volumes; capacity availability and transportation rates; less visibility into China’s economic activity; and a more diverse, less China-centric trans-Pacific trade. I expect the U.S.-China rivalry to express itself through gamesmanship in a number of spheres, including technology, international law, diplomacy, trade practices and military posture. The uncertainty and chaos of this changing trans-Pacific paradigm — from decades of decreasing friction and lower costs to a new trend of increasing friction and higher costs — will drive unpredictable and disruptive shipper behavior similar to that seen in 2018, 2020 and 2021. Stockouts will be followed by inventory gluts and vice versa, as importers pay too much to move their goods that are stored too long and arrive too late, compressing gross margins.  At the same time, outsider observers will likely see less of China’s real economic activity. Last year, China cut off foreign access to automatic identification system (AIS) data, preventing companies from seeing the real-time location of commercial vessels in Chinese waters. Official reports on economic activity coming out of Shanghai during the last COVID lockdown were anything but transparent, and much Western analysis relied on anecdotes and alternative data sources.  Leland Miller, the CEO of China Beige Book, a firm that tabulates independent Chinese economic data, said last week that the country was undergoing a “paradigm shift” in its governance and economic models that will complicate its further development, including the end of debt-fueled growth. It will be difficult to track this shift accurately, given the unreliability of official data. Finally, if the U.S. and China decide to pursue a policy of mutual divestment, we should expect a more diverse, less China-centric trans-Pacific trade. There are other exciting economies in the region that the United States is connected to, including Vietnam, the Philippines, Taiwan, Korea, Japan and Indonesia. Eastbound freight flows may have more widely distributed origins as China’s share diminishes. Ports like South Korea’s Busan, Malaysia’s Port Klang, Taiwan’s Kaohsiung and Japan’s Yokohama could become relatively more important.  The change in network structure could threaten the stability of the container-ship alliances that control capacity in the trans-Pacific and make the 20,000-plus twenty-foot equivalent unit mega-ships built to serve the largest ports harder to fill and less competitive. Capacity could structurally loosen on what are now the densest lanes, like Shanghai to Los Angeles, while slots could be harder to find on more obscure but growing lanes. The upshot here is that even a prudent trade strategy seeking to de-risk China by sourcing goods in other Asian countries will be exposed to knock-on effects from the challenges the U.S.-China trade is fated to face. Importers and their transportation providers will need to build links between operations teams and strategic planners so that emerging trends in markets can be identified. Tariffs, embargoes and many other forms of economic warfare are potentially on the table.  For 20 years, the trans-Pacific was relatively easy, boring and cheap. Now it’s becoming exciting, difficult and expensive — and will probably stay that way for some time to come. Tyler Durden Fri, 10/28/2022 - 15:06.....»»

Category: smallbizSource: nytOct 28th, 2022

Futures Green After Bouncing From Session Lows As Overnight Swings Turn Violent

Futures Green After Bouncing From Session Lows As Overnight Swings Turn Violent US equity-index futures have swung wildly in the illiquid, overnight session, and after earlier dropping as much as 0.5% following the rapid move higher in US Treasurys and UK gilts, they have since erased all losses to trade near session highs, up 0.3% with Nasdaq futures also up 0.2%, as investors the surge in yields fizzled and as investors assessed disappointing earnings from Tesla against resilient reports from AT&T and IBM. Oil jumped, Chinese stocks spiked (but then fizzled) and both the offshore and onshore yuan rose after a Bloomberg report sparked market optimism that Chinese officials are mulling shortening the amount of time people coming into the country must spend in mandatory quarantine, an implicit tempering of the country's much maligned coved zero policies. The US dollar slumped as sterling spiked as UK Prime Minister Liz Truss began meetings with a key Conservative party official, stoking speculation that a change in leadership may be afoot. US 10-year yield holds steady at about 4.12%. In other notable overnight developments, Hong Kong's Hang Seng index tumbled to the lowest level since 2009 amid continued liquidations and outflows from China... ... while the yen finally weakened past the closely watched 150 per dollar level, marking a 32-year low and keeping investors on high alert for further intervention to support it. And sure enough, the BOJ promptly jumped in sparking a big move lower in the pair. The move followed a surge in US Treasury yields to multi-year highs that widened the gap with Japanese equivalents. In premarket trading, bank stocks were mostly higher following their worst day in more than a month. In corporate news, the world’s biggest banks have already had to use about $30 billion of their own cash this year to fund loans for acquisitions and buyouts that they weren’t able to offload to investors. US-listed Chinese stocks bounced in premarket trading, a day after Wednesday’s selloff sent the Nasdaq Golden Dragon China Index down to its lowest closing level since July 2013. The KraneShares CSI China Internet Fund ETF rises 2.1% as of 7:20 a.m. in New York. Here are the other notable premarket movers: Tesla (TSLA US) falls 5.5% in premarket trading after the world’s most valuable automaker missed third-quarter revenue estimates as it struggled to get its cars to customers. Fellow EV firms lower in premarket trading include: Nikola (NKLA US) -2%, Faraday Future (FFIE US) -2%, Rivian (RIVN US) -1.8%, Canoo (GOEV US) -0.7% Alcoa (AA US) drops 9.3% in premarket trading after the aluminum giant reported worse-than-expected results for the third quarter, putting pressure on its global peers. International Business Machines (IBM US) shares rise 3.1% in premarket trading after the IT services company reported third-quarter revenue that beat expectations. Ally Financial (ALLY US) shares drop 2.5% in premarket trading as Morgan Stanley downgraded the car-finance company to equal-weight from overweight following Wednesday’s third-quarter results. Sunrun (RUN US) shares slump 4.1% in premarket trading after Wolfe downgrades the stock in a note to peer perform, citing headwinds from a rising interest-rate environment. Las Vegas Sands (LVS US) shares rise 1% in US premarket trading after posting better- than-expected 3Q adjusted property Ebitda. That was driven by a solid performance in Singapore while uncertainty remains around Macau. US stocks slipped on Wednesday after a two-day rally saw the S&P 500 reclaim $1.2 trillion in market capitalization amid support from technical levels and optimism about earnings. Higher bond yields and Tesla’s sobering report provided reminders of the tough macroeconomic backdrop as costs for companies remain high and the Federal Reserve pushes forward with interest rate hikes. “We continue to see plenty of macroeconomic headwinds,” said Marija Veitmane, a senior strategist at State Street Global Markets. “As central banks tighten financial conditions, earnings will crack. So we are very much in the sell-the-rally camp.” Investors continue to closely monitor events in the UK where Liz Truss’s chaotic premiership looked close to imploding as backbench Conservative lawmakers openly said she should resign and even Cabinet ministers discussed her future. The pound weakened and 10-year UK bond yields climbed, but were off their highs. A generally strong start to the third-quarter earnings season has bolstered sentiment toward equities. But investors are having to balance signs of corporate resilience against fears about the impact of persistent inflation, hawkish moves by the Federal Reserve and other central banks and threats to the economy. “I think the market now is looking at 2023 and baking some kind of mild downturn into the price,” Hugh Gimber, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “The key is that inflation number coming down, because if it does, 5% for the Fed looks to me roughly as the right figure and then the market can have a clearer picture.” In Europe, the Stoxx 50 fell 0.5% with Spain's IBEX flat but outperforming peers; the DAX lags, retreating 0.8%. Telecoms, financial services and retailers are the worst-performing sectors. Oil and gas shares are the only rising sector in Stoxx Europe 600 index on Thursday as crude extended gains amid a report that China debates easing some Covid restrictions, while European gas advanced after a five-day losing run. The Stoxx Energy sub-index advanced 1.3% as of 10:45 a.m. in London, while the broader equity benchmark declined 0.5%. Here are some of the biggest European movers today: Oil and gas shares are the only rising sector in Stoxx Europe 600 index on Thursday as crude extended gains amid a report that China is debating easing some Covid restrictions, while European gas advanced after a five-day losing run. BP gained 1.5%, Shell +1.4% and TotalEnergies +1.5% Saipem soars as much as 13% in Milan, the most intraday since July 14, after winning a $4.5 billion engineering and construction contract from Qatargas. Jefferies upgraded the stock to buy after the “material” award Yara shares gain as much as 7.2% after fertilizer maker’s 3Q adjusted Ebitda beat analyst estimates and was seen as very strong in an uncertain quarter. Declining gas prices are also pointing toward restarting fertilizer capacity in Europe as demand is rising Brunello Cucinelli shares soar as much as 11.5%, the most since March, after it delivered a significant beat in its 3Q results as well as a major uptick in FY guidance Nokia shares fall as much as 6.8% after a mixed set of results, with sales beating consensus estimates while profit and margin lagged. The bottom-line was dragged down by the network equipment maker’s Technologies segment, which continued to be hobbled by a delay in patent contract renewals Ericsson shares slide as much as 16%, the most since Oct. 2016, after reporting third-quarter operating profit and margin that missed analyst estimates. While the Swedish telecom equipment maker pledges to change pricing and cut costs, analysts still see margin pressure persisting into the next year Volvo shares fall as much as 5.9% in Stockholm trading, the most intraday since May 2, as analysts highlight that focus for 3Q results is on the weaker Truck division margin, which is driving a miss at Ebit level GB Group shares plummet as much as 20%, hitting the lowest since September 2017, after identity verification company published a first-half trading update. Davy said the revenue was below consensus expectations Earlier in the session, Asian equities headed for a second day of declines, as the recent selloff in Hong Kong shares deepened amid investor concerns on China’s zero-Covid approach. The MSCI Asia Pacific Index dropped as much as 1.6%, as tech shares faced fresh losses after bond yields spiked overnight. The gauge pared some of its earlier losses after a report that Chinese authorities were considering a shorter quarantine for inbound travelers. Hong Kong led declines in the region, with its benchmark falling to the lowest since 2009 as Chief Executive John Lee’s maiden policy speech left investors disappointed. Traders remained concerned about consumer demand in China amid lockdowns and rising Covid cases, as well as the spillover into earnings for the region.  “History suggests it is hard for stocks to rally in the face of EPS cuts,” said Stephen Innes, managing partner at SPI Asset Management in a note. “While stock prices should trough before EPS estimates bottom, there is still a lot of wood to chop.” Benchmarks in Taiwan, South Korea and Australia also fell, with the latter extending declines after government data showed that Australian hiring almost stalled in September. Japan’s gauges slid even as the yen weakened past the closely-watched 150 per dollar. Indexes in Indonesia and Malaysia defied the broader gloom to gain more than 1%. The Hang Seng Tech index has now tumbled more than 70% from its Jan 2021 high. China’s possible cut in quarantine period for inbound travelers is a small step in the right direction but a lot more is needed to lift investor sentiment dented by the country’s Covid Zero policy.  US futures pared losses after the Bloomberg report on the news. The offshore yuan briefly gained as much as 0.5% to 7.2353 against the dollar. According to Amir Anvarzadeh, a strategist at Asymmetric Advisors: “A cut to quarantine rules for inbound travelers will not be enough for the Chinese market to rebound” Japanese stocks slid as investors refocused on the impact of higher US interest rates and a looming global recession after a two-day rally. The Topix fell 0.5% to close at 1,895.41, while the Nikkei declined 0.9% to 27,006.96. Hoya Corp. contributed the most to the Topix decline, decreasing 3.5%. Out of 2,166 stocks in the index, 596 rose and 1,454 fell, while 116 were unchanged. Australian stocks declined with global growth fears in focus; the S&P/ASX 200 index fell 1% to 6,730.70, in step with most markets in Asia and on Wall Street amid worries of a global slowdown. Miners contributed the most to the gauge’s retreat as investors weighed quarterly production reports. They also assessed jobs data that suggest the RBA will continue to slow the pace of interest rate increases. In New Zealand, the S&P/NZX 50 index fell 0.8% to 10,832.03. Key Indian stock gauges gained for a fifth straight day, their longest run of advances in two months, before a key festival next week and as robust corporate earnings boost investor sentiment. The S&P BSE Sensex gained 0.2% to 59,202.90 in Mumbai, while the NSE Nifty 50 Index advanced 0.3%. The indexes overcame decline of as much as 0.5% as weekly derivative contracts expired Thursday. The key benchmarks have risen more than 2% this week and were trading near their highest level since Sept. 21. Twelve of 19 sector sub-gauges compiled by BSE Ltd. advanced, led by oil & gas companies while consumer durables were the worst performers. For the week, information technology stocks are the best performers, helped by stronger-than-expected earnings. Out of 11 Nifty 50 companies, which have so far reported earnings, eight have either met or exceeded average estimates, while three have trailed. Asian Paints’ quarterly results trailed estimates, dragged by weaker revenue growth and rising costs, while Bajaj Finance’s numbers matched consensus In rates, 10-year TSY yields trade near session lows at around 4.12%, richer by 1bp on the day after earlier rising 5bps to 4.17% while German 10-year yield rises 5.5bps to 2.43%. Treasuries pared losses in the early US session, rising with gilts which stretch to fresh session highs and outperform on the day as Bank of England Deputy Governor Ben Broadbent says UK rates may not rise as much as markets foresee. Gilts outperformed by 4bp while bunds lag Treasuries by 2bp; belly outperformance tightens 2s5s30s fly by 4bp on the day. Dollar issuance slate empty so far and expected to be light; Wednesday saw three borrowers price $6.5b. Three-month dollar Libor +4.70bp at 4.32457% In FX, the Bloomberg Dollar Spot Index hovered as the greenback traded mixed against its Group-of-10 peers, though most pairs consolidated recent moves. Treasury yields rose by as much as 2bps, led by the short end. The euro erased a modest loss to near $0.98. Bunds fell for a third session as traders continued to digest Wednesday’s unexpected German Finance Agency decision to increase its own securities holdings for repo purposes, with schatz swap spreads narrowing for a sixth day, the longest streak since December UK bonds pared an earlier loss and traders cut bets on BOE tightening after Deputy Governor Ben Broadbent said it’s not clear that UK interest rates need to rise as much as the market expects. The pound fell below $1.12 as Liz Truss’s premiership looks close to imploding after she fired one minister over a security breach and two others were heard resigning amid the fallout from a chaotic parliamentary vote before agreeing to stay in their posts The yen fluctuated in a tight range, and briefly rose above 150 per dollar. Japanese Finance Minister Shunichi Suzuki said excessive and sudden moves in the foreign exchange market triggered by speculation can’t be tolerated. Japan’s benchmark yield climbed above the central bank’s policy ceiling and monetary authorities announced unscheduled bond purchases to rein it back in. Demand for long gamma in dollar-yen gains traction as spot breaches the psychologically-key 150 level Australia’s dollar slid as much as 0.7% amid a weak jobs print, before reversing following a report that Chinese officials were debating whether to shorten quarantine for inbound travelers. Bonds fell. Australia’s employment rose by just 923 people in September, below the forecast of 25,000, government data showed In commodities, WTI and Brent December contracts are firmer intraday with the former around USD 86/bbl (84.49-86.27 range) whilst the latter resides around USD 93.50/bbl (91.95-93.92 range). The crude complex is buoyed by the pullback in the Dollar after receiving a boost from source reports that China is considering easing its COVID rules for travellers. Spot gold sees some support from the DXY remaining under 113.00, although remains well off recent highs, with the yellow metal still around the USD 1,630/oz mark (vs yesterday’s 1,654.50/oz high). LME metals are mixed but 3M copper receives a boost from the Buck alongside the aforementioned China source reports, but the red metal remains under USD 7,500/t. Overall, Bitcoin is contained and essentially unchanged on the session around USD 19.1k with specific updates relatively limited and participants focused on broader market action. To the day ahead now, and data releases from the US include the weekly initial jobless claims and existing home sales for September, whilst in Germany there’s the PPI reading for September. Central bank speakers include the Fed’s Harker, Jefferson, Cook and Bowman, the ECB’s de Cos and BoE Deputy Governor Broadbent. Earnings releases include Danaher, Philip Morris International, Union Pacific, AT&T and Blackstone. Finally, EU leaders will gather for a summit in Brussels. Market Snapshot S&P 500 futures down 0.5% to 3,690.25 MXAP down 0.8% to 136.26 MXAPJ down 0.9% to 440.36 Nikkei down 0.9% to 27,006.96 Topix down 0.5% to 1,895.41 Hang Seng Index down 1.4% to 16,280.22 Shanghai Composite down 0.3% to 3,035.05 Sensex down 0.3% to 58,948.91 Australia S&P/ASX 200 down 1.0% to 6,730.73 Kospi down 0.9% to 2,218.09 STOXX Europe 600 down 0.5% to 395.57 German 10Y yield up 3% to 2.45% Euro little changed at $0.9777 Brent Futures up 0.9% to $93.26/bbl Gold spot little changed at $1,630.01 U.S. Dollar Index down -0.1% at 112.86 Top Overnight News from Bloomberg Giorgia Meloni, the right-wing leader poised to form a new Italian government, said she’d give up on the fledgling coalition if her allies can’t commit to supporting Ukraine along with Italy’s European Union and NATO partners France’s Economy & Finance minister Bruno Le Maire targets inflation of 4% by the end of 2023, AFP reports, stressing these are “objectives, not forecasts” Turkey’s central bank is poised to take another step toward cutting interest rates into single digits this year, a gamble masterminded by President Recep Tayyip Erdogan to power economic growth ahead of elections next June German Chancellor Olaf Scholz warned that a proposal to introduce a European Union-wide cap on gas prices could backfire as the region seeks to offset a drastic supply cut from Russia. A more detailed look at global markets courtesy of Newquawk Asia-Pacific stocks were pressured following the weak handover from Wall Street owing to the higher yield environment and as global inflationary headwinds offset the recent earnings momentum. ASX 200 was led lower by the underperformance in tech and following disappointing jobs data, although the energy sector bucked the trend after gains in oil prices and strong quarterly output updates from Woodside Energy and Santos. Nikkei 225 briefly fell beneath 27,000 with participants on intervention watch, while stronger-than-expected Exports and Imports failed to spur risk appetite as the data also contributed to a record trade deficit for the fiscal first half. Hang Seng and Shanghai Comp. declined from the open with the former on course for its lowest close since 2009 amid heavy losses in tech and with the mainland also downbeat after the lack of surprises from the PBoC which maintained its benchmark lending rates unchanged as widely expected, although news of China mulling shortening its quarantine eventually lifted the Shanghai Comp into the green. Top Asian News PBoC 1-Year Loan Prime Rate (Oct) 3.65% vs. Exp. 3.65% (Prev. 3.65%); 5-Year Loan Prime Rate (Oct) 4.30% vs. Exp. 4.30% (Prev. 4.30%) China reportedly held emergency talks with chip firms after US curbs, according to Bloomberg. China is reportedly mulling cutting inbound quarantine to 7 days from 10 days which will be presented to the top leaders, according to Bloomberg. Indonesian 7-Day Reverse Repo (Oct) 4.75% vs. Exp. 4.75% (Prev. 3.75%); will intervene in FX to prevent imported inflation. Japanese Finance Minister Suzuki provides no comment on FX levels; cannot tolerate speculative moves; will take action against any speculative, excessive and sudden moves, via Reuters. Japanese currency diplomat Kanda says excessive and disorderly FX moves have a negative impact on the economy, will not comment on whether Japan is intervening now or has intervened today European cash bourses trade mixed with the breadth of the market narrow (Euro Stoxx 50 -0.2%; Stoxx 600 -0.4%). Sectors in Europe are mostly negative with no overarching theme – Energy and Banks outperform amid price action in underlying crude and yields respectively. Meanwhile, Telecom names sit at the bottom of the pile as Ericsson (-14%) and Nokia (-5.3%) slide following red flags on margins. US equity futures are softer across the board but to varying degrees, with the NQ (-0.9%) lagging the ES (-0.5%) and RTY (-0.4%), with Tesla carrying a larger weight in the NDX (circa. 4.0%) than the SPX (circa. 1.8%). Tesla Inc (TSLA) - Q3 2022 (USD): Adj. EPS 1.05 (exp. 1.00), Revenue 21.45bln (exp. 21.96bln). Q3 FCF USD 3.30bln (exp. 2.89bln). Q3 Automotive gross margin +27.9% (exp. +28.4%). Tesla sees initial phase of semi deliveries begin in December 2022. Tesla still sees 50% avg. annual growth in vehicle deliveries. Raw material cost inflation impacted quarterly profitability along with ramp inefficiencies from Gigafactory Berlin-Brandenburg, Gigafactory Texas, 4680 cell production. Battery supply constraints will be main limiting factor. CEO Musk said looking forward to a record-breaking Q4 and the Co. is gaining rapid traction in 4680 cell production. -5.0% in the pre-market Top European News BoE's Broadbent says the MPC is likely to respond relatively promptly to news about fiscal policy. Remains to be seen if rates need to rise as much as currently priced in by markets, via BoE. The justification for tighter policy is clear. If government support mitigates the effect of import costs, there is more at the margin for monetary policy to do. If Bank Rate really were to reach 5.25%, the cumulative impact on GDP of the entire hiking cycle would be just under 5% - of which only around one quarter has already come through UK Tory 1922 Committee officers are expected to meet on Thursday to discuss the leadership crisis in the Tory party, according to The Telegraph's Editor. However, recent reporting indicates the Committee will not be meeting today. UK PM Truss's office noted that the Tory party's chief whip and deputy chief whip remain in their posts. ITV's Peston, citing a member of UK Cabinet, that it is clear there is a will among ministers to attempt to keep PM Truss in office until October 31st (when the budget will be announced). A view that contrasts the recent update from ITV's Brand, citing a 1922 member, that the “odds are against” PM Truss surviving the day as PM FX Pound precarious as pressure continues to build against UK PM Truss and BoE's Broadbent infers that market expectations on rates may be too hawkish, Cable pivots 1.1200 Yen slips under 150.00 mark vs Dollar as yields continue to rally, but rebounds amidst further Japanese verbal, if not actual intervention Franc remains on the backfoot due to as a funding currency, but Euro gleans traction from data and EGB/UST spread convergence, USD/CHF straddles 1.0050 and EUR/USD bounces ahead of 0.9750 to reclaim 10 and 21 DMAs Aussie labours after payrolls miss consensus by some distance and before recovery in tandem with Yuan on reports that China may relax some Covid rules for inbound travellers, AUD/USD eyes 0.6300 from sub-0.6250 and USD/CNH off peaks near 7.2800 Riksbank's Ingves, to Swedish parliament, says easing mortgage repayment rules would be inappropriate. RBI is continuing spot USD sales and receiving December forwards, according to traders cited by Reuters. Fixed Income Debt remains depressed though notably off worst levels after dovish remarks from BoE's Broadbent lifted Gilts to the mid-98.00 region. In turn, both USTs and Bunds have climbed off lows of 109.19+ and 134.86 respectively, though still post downside of circa. 3 and 50 ticks respectively. The complex looks to US data and Fed speak while BTPs await updates out of Italy as potential PM Meloni is set to begin constructing her cabinet, with particular focus on the Berlusconi's Foreign Minister nominee. Commodities WTI and Brent December contracts are firmer intraday with the former around USD 86/bbl (84.49-86.27 range) whilst the latter resides around USD 93.50/bbl (91.95-93.92 range). The crude complex is buoyed by the pullback in the Dollar after receiving a boost from source reports that China is considering easing its COVID rules for travellers. Spot gold sees some support from the DXY remaining under 113.00, although remains well off recent highs, with the yellow metal still around the USD 1,630/oz mark (vs yesterday’s 1,654.50/oz high). LME metals are mixed but 3M copper receives a boost from the Buck alongside the aforementioned China source reports, but the red metal remains under USD 7,500/t. MMG's (1208 HK) Las Bambas copper mine in Peru reportedly halted copper transportation due to protests. German Energy Regulator says potential gas emergency is now end of February at the earliest, rather than end of November which was part of the scenario analysis in the August forecast, via Reuters. Geopolitical Russia's Deputy UN envoy said Russia would reassess cooperation with the UN Secretariat if the UN chief sends experts to Ukraine to inspect downed drones and is not optimistic about the renewal of the Ukraine grain Black Sea export deal, according to Reuters. US State Department said the US, UK and France raised the issue of Iran's transfer of drones to Russia at a meeting of the UN Security Council on Wednesday, according to Reuters. US Treasury senior official travelled to Turkey this week and discussed sanctions and export controls imposed on Russia, according to Reuters. US and South Korea are conducting military drills at their fastest pace in years to show their readiness as tensions rise on the divided Korean Peninsula, according to Nikkei Asia Review. EU states have agreed on new sanctions against Iran regarding the supply of drones to Russia, according to the Czech EU presidency; to freeze assets of three individuals and one entity responsible for the drone sale. US Event Calendar 08:30: Oct. Initial Jobless Claims, est. 232,000, prior 228,000 08:30: Oct. Continuing Claims, est. 1.38m, prior 1.37m 08:30: Oct. Philadelphia Fed Business Outl, est. -5.0, prior -9.9 10:00: Sept. Existing Home Sales MoM, est. -2.1%, prior -0.4% 10:00: Sept. Home Resales with Condos, est. 4.7m, prior 4.8m 10:00: Sept. Leading Index, est. -0.3%, prior -0.3% Central Bank Speakers 12:00: Fed’s Harker Discusses the Economic Outlook 13:30: Fed’s Jefferson Makes Opening Remarks at Careers Event 13:45: Fed’s Cook Speaks on Panel at Careers Event 14:05: Fed’s Bowman Has Opening Remarks at Community Development... DB's Jim Reid concludes the overnight wrap It's half-term and unfortunately I can't completely escape my responsibilities. Tomorrow I'm off to Center Parcs for the first time for a few days. It's fair to say I'm the least excited of the five of us going. All tips on how to survive the experience welcome. I'll be broadcasting the EMR live from there on Monday morning whilst on holiday as my co-authors are both off with Tim getting married. So many congratulations to him. Since I started the EMR nearly 16 years ago I think 9 of my co-authors have got married while working on it, 10 including me. It's a publication that breeds stability and wholesome values. All are still going strong as far as I'm aware! The honeymoon rally of the last few days petered out yesterday, with Treasury yields hitting multi-year highs as investors turned their focus back to central banks and how fast they’ll hike rates. All the big central banks are deciding policy over the next couple of weeks, so it’s not surprising that’s happening, but sentiment wasn’t helped either by further inflation surprises from the UK and Canada for September, which echoed what we’d already seen from the US last week. and added to the sense that the hiking cycle will be extended. After the close, we then heard from Tesla who missed revenue estimates, sending their shares -7% lower in after hours trading. Supply chain issues continued to beleaguer the company, particularly around batteries. Nevertheless, they still forecast strong growth and Elon Musk said a meaningful share buyback was likely. For whatever it’s worth on the macro side, Musk also believes commodity prices will continue to fall. Meanwhile, in overnight trading, futures tied to the S&P 500 (-0.3%) and NASDAQ 100 (-0.6%) are pointing to further losses. However these losses have halved as I type, possibly on breaking news on Bloomberg that China is considering cutting quarantine for arrivals from abroad from 10 to 7 days. I'd imagine there are hopes the zero covid policy is loosening a bit. Back to bonds and treasury yields rose to new highs for this cycle across the yield curve, with the 10yr yield up +12.7bps at 4.13%. This morning in Asia, they are another +1.25bps higher trading at a fresh 14-yr high of just under 4.15% as I type. This comes as investors move to expect an increasingly aggressive tightening cycle from the Fed over the months ahead, with the rate priced in for the December meeting up a further +3.2bps to 4.51%. It's gone just above the previous high for this cycle of 4.52% overnight. Furthermore, the peak rate for this hiking cycle priced in for May went up by +8.6bps to 4.97%. This morning in Asia it's gone above 5% for the first time in this cycle. We heard from a few Fed officials yesterday, including Presidents Bullard, Evans, and Kashkari. President Bullard noted the Fed could yet still bring forward tightening into 2022. If policy got tight enough, he noted that 2023’s inflation profile could look better. A point often cited by those expecting a rapid improvement in inflation is the composition of certain rent measures the Fed follows presents a lagged reading, and therefore inflation is not currently as bad as they expect. Bullard directly addressed that point in his remarks and that unsurprisingly, the Fed is aware of such methodological shortcomings and takes them into account when evaluating the stance of policy. President Kashkari spoke along similar lines, noting the Fed still needed tighter policy but could wind up pausing tightening come next year. Evans struck the same tone, expressing hope that the September dot plot would prove the optimal amount of tightening, so a much slower pace of tightening next year. Regardless of the above, we still have more than 75bps priced for November at 78.1bps. As we await their next decision in just under a couple of weeks from now, there was further evidence yesterday that the Fed’s hikes were filtering their way through to the real economy, with data from the mortgage Bankers Association showing the contract rate on a 30yr fixed mortgage hit 6.94% in the week ending October 14. That’s the highest it’s been since 2002, and came as their gauge of applications to purchase or refinance a home fell a further -4.5% to its lowest level since 1997, which echoes the decline in other housing indicators we’ve seen recently. US housing starts for September were also down more than expected, hitting an annualised rate of 1.439m (vs. 1.461m expected), with the previous month’s number also revised down by -9k. On the other hand, building permits rose to an annualised rate of 1.564m (vs. 1.530m expected). For equities it was also a rough session, with the S&P 500 coming down -0.67% after having gained +3.82% over the two days at the start of the week. Netflix (+13.09%) was the top performer in the index following its earnings release the previous day, but otherwise it was a broad-based decline that saw over 76% of the index move lower. The Nasdaq underperformed, falling -0.85%, and that was before Tesla’s earnings miss after the close. The major indices lost ground in Europe too, with the Stoxx 600 (-0.53%) bringing an end to its run of 4 consecutive gains. Back in Europe, sovereign bonds also lost ground across much of the continent as we approach the ECB’s decision next week. Yields on 10yr bunds were up +9.0bps to a post-2011 high of 2.37%, which followed comments by Slovenian central bank governor Vasle that the ECB should hike by 75bps at the next two meetings in October and December. Here in the UK, gilts outperformed other European sovereign bonds for a third day running, with markets remaining calm as they looked forward to the government’s fiscal announcement on October 31. That outperformance was particularly noticeable among long-dated gilts, with yields on 30yr gilts down -31.9bps after the BoE’s announcement the previous evening that their Q4 gilt sales as part of quantitative tightening would only involve short- and medium-maturity gilts, rather than long-dated ones. To be fair though, gilts rallied right across the curve, and that came in spite of the latest UK inflation data for September, which showed CPI rising to +10.1% (vs. +10.0% expected), so back up to its level in July. In addition, core inflation continued to accelerate, hitting a 30-year high of +6.5% in September (vs. +6.4% expected). Whilst UK markets were more subdued yesterday, there was fresh turmoil on the political front as Home Secretary Suella Braverman left the government after what was reported as a security breach. In Braverman’s resignation letter, the strong implication was that Truss herself should go, saying that “The business of government relies upon people accepting responsibility for their mistakes. Pretending we haven’t made mistakes, carrying on as if everyone can’t see that we have made them, and hoping that things will magically come right is not serious politics.” A chaotic parliamentary vote late in the session won't make life any easier for PM Truss in the short-term. Back on inflation, there wasn’t much respite elsewhere, as Canadian inflation similarly surprised on the upside with a +6.9% reading in September (vs. +6.7% expected). That prompted investors to ratchet up their expectations of future rate hikes from the Bank of Canada, with another 75bp move at their meeting next week now fully priced in. That said, there was some marginally better news from the Euro Area on inflation, as the final CPI release for September was revised down a tenth to +9.9%, having come in at +10.0% on the earlier flash reading. But although that revision takes it out of double-digit territory, it’s worth noting that’s still the fastest inflation since the single currency’s formation. Asian equity markets are tumbling this morning with the Hang Seng (-2.36%) leading losses, after briefly sliding -3.0% in early trade, its lowest intraday level since 2009 due to a selloff in Chinese listed tech shares. Elsewhere the KOSPI (-1.47%) and the Nikkei (-1.11%) are also deep in the red. Mainland China’s Shanghai Composite (-0.39%) and the CSI (-0.80%) are also falling. Early morning data showed that exports in Japan advanced +28.9% y/y (v/s +26.6% expected), increasing for the 19th consecutive month in September and compared to the prior month’s +22.0% rise. This was on the back of strong demand for autos and mineral fuels. At the same time, imports surged +45.9% y/y (v/s +44.9% expected) and against a +49.9% gain in the previous month. Staying on Japan, yields on 10yr JGBs again briefly moved beyond the BoJ's upper limit of 0.25%, prompting the central bank to announce unscheduled bond buying for the first time this month to bring it back within its target range. Adding to the challenge for policy makers, the Japanese yen continues to press towards the 150 level, as it reached yet another fresh 32-yr low of 149.96 against the US dollar, thus increasing the possibility for further government intervention to support the battered currency. Separately, the People’s Bank of China (PBOC) left its benchmark lending rates unchanged for a second month, keeping the 1-yr loan prime rate at 3.65% and the 5-yr rate at 4.3%. To the day ahead now, and data releases from the US include the weekly initial jobless claims and existing home sales for September, whilst in Germany there’s the PPI reading for September. Central bank speakers include the Fed’s Harker, Jefferson, Cook and Bowman, the ECB’s de Cos and BoE Deputy Governor Broadbent. Earnings releases include Danaher, Philip Morris International, Union Pacific, AT&T and Blackstone. Finally, EU leaders will gather for a summit in Brussels. Tyler Durden Thu, 10/20/2022 - 07:49.....»»

Category: dealsSource: nytOct 20th, 2022

Russia is scraping the bottom of the manpower barrel in order to hold off Ukraine"s advance

As Russia's new mobilization drive scoops up reluctant and ostensibly ineligible conscripts, it is stirring memories of another war. Russians drafted in the partial mobilization during military training in Rostov on October 4.Arkady Budnitsky/Anadolu Agency via Getty Images Moscow has launched a "partial mobilization" of up to 300,000 troops amid its struggles in Ukraine. It appears more sweeping than officials said, with the elderly and disabled among those called up. That, and Russia's military setbacks in Ukraine, have drawn comparison to events at the end of WWII. As Russia's new mobilization drive scoops up reluctant and ostensibly ineligible conscripts — including the elderly and disabled — it is stirring memories of another war.Ironically, as Soviet armies advanced on Berlin almost 80 years ago, it was Nazi Germany that was drafting old men and children into the Volkssturm ("people's militia") in a futile last-ditch effort to stave off defeat.Those black-and-white images of a dying Third Reich are haunting: grim middle-aged men — some still clad in business suits — cradling submachine guns, while frightened 12-year-old boys shouldered Panzerfaust anti-tank rockets.It was part of the Nazi regime's "total war" strategy, which aimed to reorient civilian resources and infrastructure toward fighting off the Allies.Members of the German Volkssturm march during their swearing-in ceremony in Berlin on November 12, 1944.German Federal ArchiveBy late 1944, after five years of war, most fit, young German men were already in uniform — or buried in the steppes and deserts of Eastern Europe and North Africa — prompting Nazi leaders to widen their sweep.Russian President Vladimir Putin doesn't even have that excuse. The invasion he launched in late February was poorly planned and improperly managed, and it was carried out by a force that was too small for the task and took far heavier losses than expected.While Russia still has a military draft, only about 30% of its troops are conscripts, with the remainder contract soldiers. Fear of antagonizing public opinion has made the government hesitant about expanding the draft.But with Russian forces in Ukraine wilting against Ukraine's counteroffensive, there haven't been enough volunteers to compensate for the casualties — estimated to be more than 60,000 so far — in an increasingly unpopular war.Drafted Russian troops during military training in Rostov on October 4.Arkady Budnitsky/Anadolu Agency via Getty ImagesHence, Putin signed an executive order for partial mobilization on September 21. Moscow's stated goal is to raise 300,000 new soldiers, though a secret clause in the order suggests that up a million men could be drafted.Some provisions would be familiar to Americans who served in Afghanistan and Iraq, such as a restriction allowing only the call-up of Russians with military experience and a stop-loss order retaining soldiers whose enlistments were up.But the hundreds of thousands of Russian men fleeing the country know better. Reports suggest not a mobilization but a dragnet scooping up anyone it can get, including those who never served in the military, disabled citizens, and those normally too old for military service.Even pro-Kremlin figures have documented the indiscriminate nature of the call up.Drafted Russians begin military training in Rostov on October 2.Arkady Budnitsky/Anadolu Agency via Getty ImagesMargarita Simonyan, editor in chief of state-backed media outlet RT, compiled a list of such cases on Twitter, including a 63-year-old reserve lieutenant colonel with diabetes and cerebral ischemia who was still deemed fit for duty and a 35-year-old with a spinal fracture and artificial vertebrae.Amid domestic backlash to the call up, Russian leaders, including Putin, have admitted there were mistakes. Authorities have rescinded some of those conscription orders and some conscripts home.Some in Russia believe that ethnic minorities and residents of poorer, more remote regions are being targeted, but even men in big cities are being handed draft notices while walking on the street.There is even a punitive aspect to it: Convicts are being given a choice of the army or prison, while Russians seeking to leave the country are being slapped with call-up papers while waiting at border crossings.Desperate measuresRussians at a military recruiting office in Moscow on October 10.Sefa Karacan/Anadolu Agency via Getty ImagesMuch like the Third Reich in 1945, Russia is playing for time. Hitler believed that if Germany could hang on long enough, the US-British-Soviet alliance would fall apart and the Third Reich would be saved.Putin seems to believe that if he can prolong the war while cutting Europe off from Russian oil and gas during winter, freezing and exhausted Europeans will demand that their governments cease aiding Ukraine.The gamble didn't pay off for Hitler, and it probably won't pay off for Putin. When fear of Russian expansion drives Sweden into abandoning 200 years of nonalignment by joining NATO, it's a sign that Moscow's threats aren't working.The question is the human cost of a dictator's stubbornness. The Volkssturm and Hitler Youth were poorly trained and equipped and died in droves. Yet their cheap but effective Panzerfaust rockets still took a toll on Allied tanks at roadblocks and in city streets.A Volkssturm member explains a Panzerfaust to a woman in civilian clothes in March 1945.German Federal ArchiveThis exasperated Allied soldiers, who couldn't understand why their buddies — and German kids — had to die when the war was so obviously lost.Those new Russian soldiers will receive barely any training. Their weapons will mostly be old Cold War-era gear in poor condition, because Russia has already lost its best equipment and Western sanctions prevent it from manufacturing more.They will have a certain military value as boots on the ground, but more likely they will be cannon fodder in a conflict where artillery and tanks are the decisive weapons.What mobilization will do is make the war personal for the Russian public, who will see their sons sent off to a lost war. The same phenomenon has in the past helped undermine regimes in Moscow and stoked unrest in the US. This bodes ill for Putin.Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds a master's in political science. Follow him on Twitter and LinkedIn.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 11th, 2022

Nuclear weapons expert says we should be "extraordinarily concerned" about Putin nuking Ukraine

Hans Kristensen, a nuclear expert at the Federation of American Scientists, said he's increasingly concerned that Vladimir Putin could go nuclear. Russian President Vladimir Putin is seen on a screen set at Red Square as he addresses a rally and a concert marking the annexation of four regions of Ukraine Russian troops occupy - Luhansk, Donetsk, Kherson and Zaporizhzhia, in central Moscow on September 30, 2022.ALEXANDER NEMENOV/AFP via Getty Images Nuclear expert Hans Kristensen said he's "extraordinarily concerned" Putin could use nukes in Ukraine. In an interview, Kristensen said he is alarmed by Putin's increasingly threatening rhetoric. Kristensen is director of the Nuclear Information Project at the Federation of American Scientists. In a speech on Friday, an increasingly unhinged Vladimir Putin, facing battlefield setbacks abroad and growing dissent at home, railed against what he portrayed as a hypocritical and gender-mad West — his address included a transphobic rant about sex-change operations and "outright Satanism" — as he announced the formal annexation of occupied eastern Ukraine, territory he said that Russia would defend with "all the means at our disposal."The Russian president is no stranger to colorful attacks on liberalism and, indeed, nuclear threats. Days after he ordered the Feb. 24 invasion, Putin tried to intimidate Ukraine's allies by announcing that he was putting his country's nuclear forces on a heightened state of alert and warning that those who continued supporting Ukrainian armed resistance would face "consequences they have never seen."But that threat was almost subtle compared to those made in the months since. Earlier this week, Putin warned that Russia's potential use of nuclear weapons was "not a bluff."Dmitry Medvedev, deputy chairman of Russia's security council and always eager to demonstrate his loyalty to Putin and his "special military operation," echoed the remarks days later, saying that Russia could use nuclear weapons in Ukraine — "without asking anyone's permission, without long consolations" — if it felt "the very existence of our state," now expanded to include the Donbas region, were threatened.NATO would not dare respond, Medvedev added, and risk a broader nuclear conflagration over "a dying Ukraine that no one needs."The rhetoric could be dismissed as simple tough-guy posturing from a country that's current at risk of losing a war of choice. But long-time observers are alarmed, with Russia's long-time reliance on nuclear blackmail to get its way now more explicit than ever. Putin, indeed, on Friday pointed to the United States' dropping of atomic bombs on Hiroshima and Nagasaki in World War II as "setting a precedent" for the use of nuclear arms in a conflict.Hans Kristensen is director of the Nuclear Information Project at the Federation of American Scientists who has been monitoring Russia's nuclear rhetoric. In an interview, he spoke to Insider about signs the US and others are looking for that might point to Putin pulling the trigger on a battlefield nuke — and why his latest speech is cause for alarm. Some questions and answers have been edited for brevity.Q. President Putin gave a speech just today marking the annexation of occupied eastern Ukraine. And in it he reiterated that he would use "all the means at our disposal" to defend Russian territory. Does that, to you, imply nuclear weapons? Did anything he say diverge from what we understand to be Russian nuclear doctrine? Anything alarming?A. Yeah, it confirms, what he said, earlier, last week, where he was more explicit. It's his style, if you will — he likes to rattle this sword and be very dramatic, but of course, the generic term, "all means at our disposal," could also mean many other things. It remains to be seen. I think the key here is that obviously he's trying to create a new condition, in Russian declaratory nuclear policy, where just someone upsetting the integrity of Russian territory somehow, potentially, is a recipient of a nuclear attack. And that goes beyond anything that is in the current declaratory policy. That certainly requires much more significant steps here. Obviously he's trying to create a situation where there's additional coercion — pressure — on Ukraine and the West to stop fighting and seek some kind of negotiated settlement here.Q. As you said, his rhetoric goes beyond Russian doctrine, which is, as I understand it, not so dissimilar to US doctrine: if there's an existential threat to the state, they might resort to nuclear weapons. So when you see Putin going a little bit more inflammatory, do you, as an expert, see that as just playing politics and — despite his protests that he isn't in fact bluffing — playing tough guy? Or do you think that does reflect a change in their doctrine?A. It reflects a change in the way that the president of Russia talks about this; whether it reflects an actual change in Russia's planning for these scenarios is another matter. Frankly, I think the Russian military is probably a little less excited about throwing nuclear weapons around because they know full well what the consequences of doing that will be.I think one could read it to sort of say this is what Putin does. This is his chest-thumping style — he likes to use big words to scare other people. But whether it's reflected in the actual planning they're doing is another matter and I think that'll take some time actually before we see that. But there are a number of steps they would have to take before they could use a tactical nuclear weapon in the Ukraine conflict. It's not like he has a red button on his desk and he could just press that when he feels like it. Q. I'm curious if there was anything that Putin could say that you would interpret as more alarming than just rhetoric? Whether there are kind of code words that, if you saw the introduction of them into Putin's speeches, you would take that as more than just posturing.A. Well, I thought I heard that. One of the lines in his speech was that the United States had already set a precedent for the use of nuclear weapons in war by referring to the use of nuclear weapons against Japan in World War II. I would say that's a new signal where he could begin to sort of argue, "We're not the first doing this, the Americans have already done this kind of stuff." And that could add another level of indicator that he's thinking about this in a new way.Q. Max Seddon, the Moscow bureau chief for the Financial Times, was commenting on this speech today and he was just saying, in general, it's the most blistering attack on the West as a whole that he's ever heard from Putin. And he said that, if he were a Western policymaker wondering if Putin would really use nuclear weapons, "I'd be very concerned."Do you share that concern or should we kind of take a step back and not get wrapped up in hysteria over nuclear weapons?A. No, I think we should be extraordinarily concerned. And I think that concern has to translate into very deliberate efforts to convince Putin and the Russian leadership that this would take the conflict to a whole new level. We've heard some statements from US officials, of course, that they've been trying to convey that for a long time and that urgency seems to have been deepened by Putin's latest speeches and his annexation of these territories into Russia.Q. As you probably saw, Dmitry Medvedev was basically saying that "the degenerate west" — they're not gonna want to get in a war of annihilation. That Ukraine doesn't matter, it's a failing state, if we use a tactical nuclear weapon, they're not going to risk the existence of London, Brussels, New York City over poor little Ukraine. How could the West respond to that, without laying all its cards out, to say that, "Well, no, we're not gonna tolerate that."A. Well, Medvedev might be right about that — that the West would not want to use nuclear weapons even if Putin used a nuclear weapon in Ukraine. The point is, the use of a nuclear weapon by Russia and Ukraine is not an attack on NATO. It is not an attack on the United States. Can NATO — can the United States — decide suddenly to attack Russia with nuclear weapons if they have not been attacked first? And that's a real tough issue and I don't think that is a likely outcome.I think the outcome is much more some intensifying of sanctions and diplomatic isolation, political isolation, maybe some cyber attacks, and in the most extreme form, probably some kind of military action. But again here, even that is hard to think about because, again, NATO has not been attacked. The United States has not been attacked. So can you start attacking Russia? That is a real hard dilemma here. So I think Medvedev, to some extent, is correct when he's saying that. Of course, the danger is that suppose Russia really thinks that it can just pop a nuke there — or several — and the West really is sort of armstrung; it can't really act, certainly not at the nuclear level.Q. I'm certainly not chomping at the bit myself to see a war between two nuclear-armed powers. But when you talk about things like sanctions and diplomatic isolation, it's hard not to roll one's eyes and be like, okay, so essentially what you are saying is that, "Yes, they could get away with using a nuclear weapon."A. One wildcard scenario you can imagine, of course, is that if he did do it that NATO would then — or the United States, more likely — would conduct strikes against Russian forces inside Ukraine. And that would be sort of, not quite be an attack on Russia — but of course it would be considered an attack on Russia because they are Russian forces — but it would be sort of at a half step, if you will. You could still say to the Russians, "We're doing this not to threaten Russia, as such, but to tell you that if you continue to do this then the next phase would be a lot more serious."Q. Just to get into the more nitty gritty here, when you used the term "tactical" nuclear weapon earlier, what is the difference between a tactical nuclear weapon and a non-tactical nuke?A. Well, tactical, or non-strategic — these are terms from the Cold War, where tactical to a large extent referred to battlefield weapons, where they were developed for wars involving nuclear weapons in a small region. Those were the type of scenarios that were very much at the center of planning during the Cold War and also because arms control treaties have looked at long-range strategic offensive forces, and never — except for the INF Treaty — looked at sort of medium- or shorter-range systems.Today, tactical nuclear weapons are essentially anything that's not covered by the strategic arms control treaties. It tends to generally just be shorter-range systems, most of which are also dual capable: they serve both conventional and nuclear roles. They tend to be shorter range, have a wider spectrum of explosive yield options, ranging all the way from one kiloton, perhaps even less, but certainly from one kiloton to tens of kilotons even up to 100, 150, 200 kilotons in some tactical systems.A Russian Tu-95 bear bomber and its escort fighter during an event in Russia.Photo by Elizaveta Becker/ullstein bild via Getty ImagesQ. When people talk about nuclear weapons, and the treaties that you're talking about that govern them, we tend to think about something that would trigger an existential war — the destruction of Earth as we know it — whereas these are to gain, to be obvious, a tactical advantage on the battlefield by hitting, say, a bunker that's deep underground. Or perhaps the reason Russia would be thinking about it is just simply the message that it would send, right?A. Yeah, I mean all of those missions could be accomplished with strategic weapons as well. It's more about what kind of attack are you doing. What's the intensity of the attack? And here the Russians, because of their geographic position. They're surrounded by potential adversaries in their near region, right? They have the Brits, they have the French, and of course NATO forces, and then they have the Chinese. So they need, in their military planning, they need sort of regional nuclear forces, to engage those adversaries in those regions.We could really think about them as strategic, because any use of a nuclear weapon would be strategic in nature. The "tactical" just comes in in the sense about the range of it and the intensity of the attack.The United States does not rely on tactical nuclear weapons as much as Russia does and that's partly because the United States doesn't have regions rights next to it where it has to fight nuclear wars. It used to have more tactical nuclear weapons when it had a lot of them deployed in Europe and in South Korea, but most of those were retired and pulled out after the Cold War. It has a few hundred nuclear tactical bombs left for fighter jets, and some of them are in Europe right now, but it's not something it relies heavily on for its nuclear war planning. So the US would choose instead, if it had to respond lightly — so like a small strike in response to something — they would rely more on strategic, for example, most prominently in that scenario, strategic bombers with either gravity bombs or long-range cruise missiles.Q. What would be the thinking behind using a tactical nuclear weapon in Ukraine? Is it kind of a situation where the worse Russia is doing on the battlefield increases the likelihood that they would use a nuclear weapon to say, "Look, just back off, NATO, stop arming this force that we're considering a proxy army against Russia"? What would be the strategic thinking — getting into the Russian mindset — of potentially using a tactical nuclear weapon in Ukraine?A. Well, there could be several, or a combination of them. One, for example, could be to try to turn the the tide of the war — to try to knock out some Ukrainian forces or key military facilities that they need to sustain their offensive. That would be a real battlefield use, if you could say that, but that takes more than probably one weapon because you would have to hit a number of areas and a number of facilities to have a real impact on the battle, if you will. And that's also a little complicating because if you start detonating nuclear weapons in the area you potentially get radioactive fallout that you can't control — it could rain over your own troops as well, so it might not be an advantage to do that in the field.Before the Gulf War in 1991, the Pentagon did a study on whether the use of tactical nuclear weapons against Saddam Hussein's forces there in the desert was an option. But they discovered that they would have to use a large number of tactical nuclear weapons to have a real impact — a real effect — on those forces. "Tactical" nuclear use is not as necessarily as limited and benign as some people sometimes think.That's one option, battlefield interest. The other one is of course related, in terms of psychological effect, but it would be more sort of a more clean terror attack where they use it against, for example, Kyiv — or a couple of cities — just to break the Ukrainian will to resist. But that would also be considered a much more significant attack — much more significant use — because of the human casualties involved.That could backfire in another way, politically, by motivating the West go in much more directly, so they really have to be careful about how they think about this. I think the big problem is with people both inside the Russian system, but also in the public in general, if they think about tactical nuclear weapons as something small; something less severe or something almost okay. That's the big danger here — that to treat that as sort of something that is doable.Russian President Vladimir Putin (L), accompanied by Valery Gerasimov, the chief of the Russian General Staff, oversees the 'Vostok-2022' military exercises at the Sergeevskyi training ground outside the city of Ussuriysk on the Russian Far East on September 6, 2022.MIKHAIL KLIMENTYEV/SPUTNIK/AFP via Getty ImagesQ. There's been a lot of talk of concern among US officials that Russia could potentially use nuclear weapons, and the US has been at least talking about stepping up its surveillance of Russian forces. What exactly does that mean? What are the US and its allies looking for that would signal a potential use of a tactical nuclear weapon?A. Well, there are several steps that the Russians have to go through that they will be looking for. One has to do with the process of the decision itself. Putin would be involved in a conversation with his military leadership about this and they will have to agree. That's the most common theory about how the command decision will be made. It's not just that Putin has a red button on his desk. There are thought to be three people involved in this: Putin, the minister of defense, and the chief of the armed forces, and each of them has a vote. Presumably, if just one of them doesn't agree, then it can't happen. But it's very iffy if that is indeed the case. We don't quite know the details of this, but even if they make a decision, that decision has to be communicated down through the command and control system to the units that have to carry it out. That traffic is potentially detectable. And then you get to the units that are then activated. So for example, before you can even fire a tactical nuclear weapons system, you have to bring the warhead for it out of central storage. So that would be activity at the bunkers — the special units that are the custodial units and the security units, they would be activated. And then they would have to either transport it by truck or fly by helicopter out to the front line to the units that would actually have to launch it. And there you would have another team that would have to install it.So there are a number of these steps that would have to be sort of set in motion that would give away that something is happening. Whether the US is turning up its surveillance of this? I think it's been pretty busy surveilling this for a long time, actually. Satellite observations, both the visible spectrum of satellites, like normal images we can find on Google Earth, but also infrared and signal detection and then, of course, also intel. You see these spy planes that are flying along the borders all the time. They've been busy. They've been busy for a long, long time. This is a normal level of activity, I would say. And then there's spies on the ground. You have people in the system or maybe even out with some of the units that will relay information.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 30th, 2022

Ukraine says its forces "eliminated" an Iranian drone deployed by Russia as Putin"s forces lose ground to the Ukrainian counterattack

US officials said in July that Iran was preparing to send drones to Russia. When they arrived, the drones experienced technical issues. This undated photograph released by the Ukrainian military's Strategic Communications Directorate shows the wreckage of what Kyiv has described as an Iranian Shahed drone downed near Kupiansk, Ukraine.Ukrainian military's Strategic Communications Directorate via AP In a first, Ukraine's military said it downed an Iranian drone being used by Russian forces. The White House said in July it was aware that Iran was preparing to send drones to Russia. Upon arrival the following month, however, the drones experienced technical issues.  Ukraine's military claimed for the first time on Tuesday that its forces downed an Iranian drone used by Russian troops. The news comes as the Ukrainians continue to press ahead with a rapid counteroffensive. "The Armed Forces of Ukraine destroyed an Iranian strike unmanned aerial vehicle for the first time," Ukraine's military said in a statement. "This was namely a Shahed-136 long-range kamikaze UAV."In a separate statement, Ukraine's defense ministry said the drone was "eliminated" near Kupiansk, in the northeastern Kharkiv region, and published photos of what appeared to be the destroyed weapon.  "Russia and Iran: A perfect union of two despots," the ministry said. —Defense of Ukraine (@DefenceU) September 13, 2022Ukraine's military said Iran's Shahed-136 is a "loitering munition" with a range of roughly 1,250 miles. Loitering munitions, which are sometimes called suicide or kamikaze drones, are smaller systems packed with explosives that can fly like a standard unmanned aerial vehicle but then strike and detonate on target once one is located and identified, giving it a combat role somewhere between traditional UAVs and missiles.The Royal United Services Institute — a UK-based security think tank — said Iran views armed UAVs as compensation "for the vulnerabilities of its conventional air force."In this file photo released Friday, Jan. 15, 2021, by Imamedia, a triangle-shaped suicide drone approaches the target during a drill in Iran.Imamedia via AP, FileCiting intelligence, the Biden administration said in July that Iran was preparing to send drones to Russian forces fighting in Ukraine. In August, the first batch of drones, a mixture of Shahed and Mohajer units, arrived — only to experience technical issues. The US Treasury Department has since sanctioned a handful of Iranian companies for their involvement in getting the drones into Russian hands. US officials said earlier this month that Russia's hunt for weapons in countries like Iran are a sign that things are going poorly on the battlefield and that Russian President Vladimir Putin is becoming increasingly desperate. Russia has also looked to North Korea for ammunition.Ukraine's Kharkiv region — where the drone was downed — has been the center of a lightning-fast counteroffensive against Russian forces that has seen their lines shattering and Russian troops retreating.Ukraine's surprise offensive has sent Russian troops scrambling from their positions — some fleeing in civilian clothes, looting property, and stealing vehicles and even bicycles from locals, according to the General Staff of the Armed Forces of Ukraine.Britain's defense ministry said the advance has forced Russian military leadership to withdraw its soldiers from significant pockets of territory. Since the start of September, Ukrainian forces have liberated thousands of square miles of territory previously occupied by Russia, President Volodymyr Zelenskyy said on Monday.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 13th, 2022

Escobar: Ukraine - Somewhere Between Afghanization And Syrianization

Escobar: Ukraine - Somewhere Between Afghanization And Syrianization Authored by Pepe Escobar, Ukraine is finished as a nation – neither side will rest in this war. The only question is whether it will be an Afghan or Syrian style finale... One year after the astounding US humiliation in Kabul – and on the verge of another serious comeuppance in Donbass – there is reason to believe Moscow is wary of Washington seeking vengeance: in the form of the 'Afghanization' of Ukraine. With no end in sight to western weapons and finance flowing into kyiv, it must be recognized that the Ukrainian battle is likely to disintegrate into yet another endless war. Like the Afghan jihad in the 1980s which employed US-armed and funded guerrillas to drag Russia into its depths, Ukraine's backers will employ those war-tested methods to run a protracted battle that can spill into bordering Russian lands. Yet this US attempt at crypto-Afghanization will at best accelerate the completion of what Russia's Defense Minister Sergei Shoigu describes as the “tasks” of its Special Military Operation (SMO) in Ukraine. For Moscow right now, that road leads  all the way to Odessa . It didn't have to be this way. Until the recent assassination of Darya Dugina at Moscow's gates, the battlefield in Ukraine was in fact under a 'Syrianization' process. Like the foreign proxy war in Syria this past decade, frontlines around significant Ukrainian cities had roughly stabilized.  Losing on the larger battlefields, kyiv had increasingly moved to employ terrorist tactics.  Neither side could completely master the immense war theater at hand. So the Russian military opted to keep minimal forces in battle – contrary to the strategy it employed in 1980s Afghanistan. Let's remind ourselves of a few Syrian facts: Palmyra was liberated in March 2016, then lost and retaken in 2017. Aleppo was liberated only in December 2016. Deir Ezzor in September 2017. A slice of northern Hama in December and January 2018. The outskirts of Damascus in the Spring of 2018. Idlib – and significantly, over 25 percent of Syrian territory – are still not liberated. That tells a lot about rhythm in a war theater. The Russian military never made a conscious decision to interrupt the multi-channel flow of western weapons to kyiv. Methodically destroying those weapons once they're in Ukrainian territory – with plenty of success – is another matter. The same applies to smashing mercenary networks. Moscow is well aware that any negotiation with those pulling the strings in Washington – and dictating all terms to puppets in Brussels and kyiv – is futile. The fight in Donbass and beyond is a do or die affair. So the battle will go on, destroying what's left of Ukraine, just as it destroyed much of Syria. The difference is that economically, much more than in Syria, what's left of Ukraine will plunge into a black void. Only territory under Russian control will be rebuilt, and that includes, significantly, the bulk of Ukraine's industrial infrastructure. What's left – rump Ukraine – has already been plundered anyway, as Monsanto, Cargill and Dupont have already bagged 17 million hectares of prime, fertile arable land – over half of what Ukraine still possesses. That translates de facto as BlackRock, Blackstone and Vanguard, top agro-business shareholders, owning whatever lands that really matter in non-sovereign Ukraine. Going forward, by next year the Russians will be applying themselves to cutting off kyiv from NATO weapons supplies. As that unfolds, the Anglo-Americans will eventually move whatever puppet regime remains to Lviv. And kyiv terrorism – conducted by Bandera worshipers – will continue to be the new normal in the capital. The Kazakh double game By now it's abundantly clear this is not a mere war of territorial conquest. It's certainly part of a War of Economic Corridors – as the US spares no effort to sabotage and smash the multiple connectivity channels of Eurasia's integration projects, be they Chinese-led (Belt and Road Initiative, BRI) or Russian-led (Eurasian Economic Union , EAEU). Just like the proxy war in Syria remade large swathes of West Asia (witness, for instance, Erdogan about to meet Assad), the fight in Ukraine, in a microcosm, is a war for the reconfiguration of the current world order, where Europe is a mother self-inflicted victim in a minor subplot.  The Big Picture is the emergence of multipolarity. The proxy war in Syria lasted a decade, and it's not over yet. The same may happen to the proxy war in Ukraine. As it stands, Russia has taken an area that is roughly equivalent to Hungary and Slovakia combined. That's still far from “task” fulfillment – ​​and it's bound to go on until Russia has taken all the land right up to the Dnieper as well as Odessa, connecting it to the breakaway Republic of Transnistria. It's enlightening to see how important Eurasian actors are reacting to such geopolitical turbulence. And that brings us to the cases of Kazakhstan and Turkey. The Telegram channel Rybar  (with over 640k followers) and hacker group Beregini revealed in an investigation that Kazakhstan was selling weapons to Ukraine, which translates as de facto treason against their own Russian allies in the Collective Security Treaty Organization (CSTO). Consider too that Kazakhstan is also part of the Shanghai Cooperation Organization (SCO) and the EAEU, the two hubs of the Eurasian-led multipolar order. As a consequence of the scandal, Kazakhstan was forced to officially announce the suspension of all weapons exports until the end of 2023. It began with hackers unveiling how Technoexport – a Kazakh company – was selling armed personnel carriers, anti-tank systems and munitions to kyiv via Jordanian intermediaries, under the orders of the United Kingdom. The deal itself was supervised by the British military attaché in Nur-Sultan, the Kazakh capital. Nur-Sultan predictably tried to dismiss the allegations, arguing that Technoexport had not asked for export licenses. That was essentially false: the Rybar team discovered that Technoexport instead used Blue Water Supplies, a Jordanian firm, for those. And the story gets even justice. All the contract documents ended up being found in the computers of Ukrainian intel. Moreover, the hackers found out about another deal involving Kazspetsexport, via a Bulgarian buyer, for the sale of Kazakh Su-27s, airplane turbines and Mi-24 helicopters. These would have been delivered to the US, but their final destination was Ukraine. The icing on this Central Asian cake is that Kazakhstan also sells significant amounts of Russian – not Kazakh – oil to Kiev. So it seems that Nur-Sultan, perhaps unofficially, somehow contributes to the 'Afghanization' in the war in Ukraine. No diplomatic leaks confirm it, of course, but bets can be made Putin had a few things to say about that to President Kassym-Jomart Tokayev in their recent – ​​cordial – meeting. The Sultan's balancing act Turkey is a way more complex case. Ankara is not a member of the SCO, the CSTO or the EAEU. It is still hedging its bets, calculating on which terms it will join the high-speed rail of Eurasian integration. And yet, via several schemes, Ankara allows Moscow to evade the avalanche of western sanctions and embargoes. Turkish businesses – literally all of them with close connections to President Recep Tayyip Erdogan and his Justice and Development Party (AKP) – are making a killing, and relishing their new role as crossroads warehouse between Russia and the west. It's an open boast in Istanbul that what Russia cannot buy from Germany or France they buy “from us.” And in fact several EU companies are in on it. Ankara's balancing act is as sweet as a good baklava . It gathers economic support from a very important partner right in the middle of the endless, very serious Turkish economic debacle. They agree on nearly everything: Russian gas, S-400 missile systems, the building of the Russian nuclear power plant, tourism – Istanbul is crammed with Russians – Turkish fruits and vegetables. Ankara-Moscow employ sound textbook geopolitics. They play it openly, in full transparency. That does not mean they are allies. It's just pragmatic business between states. For instance, an economic response may alleviate a geopolitical problem, and vice versa. Obviously the collective west has completely forgotten how that normal state-to-state behavior works. It's pathetic. Turkey gets “denounced” by the west as traitorous – as much as China. Of course Erdogan also needs to play to the galleries, so every once in a while he says that Crimea should be taken back by kyiv. After all, his companies also do business with Ukraine – Bayraktar drones and otherwise. And then there's proselytizing: Crimea remains theoretically ripe for Turkish influence, where Ankara may exploit the notions of pan-Islamism and mostly pan-Turkism, capitalizing on the historical relations between the peninsula and the Ottoman Empire. Is Moscow worried? Not really. As for those Bayraktar TB2s sold to kyiv, they will continue to be relentlessly reduced to ashes. Nothing personal. Just business. Tyler Durden Thu, 09/01/2022 - 02:00.....»»

Category: worldSource: nytSep 1st, 2022

The Twitter Whistleblower Needs You to Trust Him

An exclusive interview with Twitter whistleblower Peiter 'Mudge' Zatko, the famous hacker fighting a messy battle with the platform Peiter Zatko, the Twitter whistle-blower, is a black belt in jiu-jitsu. The day before his complaint against the social media company was published, Zatko was sitting in his lawyer’s office in Washington, scrolling through his camera roll to find a photo of his legs locked around someone’s neck. The move is called a side-triangle. It’s totally safe, he says, because the opponent will black out before a lack of blood flow to the brain can cause any lasting damage. One of the things Zatko likes about the martial art, he explains, is that it’s less about brute strength than finding creative ways to maneuver your opponent into a weaker position. [time-brightcove not-tgx=”true”] That talent translates to cybersecurity. In Nov. 2020, Zatko, the hacker known as “Mudge,” was hired as Twitter’s security lead, with a global remit to fix gaping vulnerabilities in one of the world’s most important communications platforms. But 14 months later, he was fired. Six months after that, he filed a sweeping whistle-blower complaint that paints a damning portrait of a company in crisis. In an 84-page complaint to federal regulatory agencies and the Department of Justice, which was first reported by the Washington Post and CNN and which TIME obtained from a congressional source, he describes Twitter as crippled by rudderless and dishonest leadership, beset by “egregious” privacy and security flaws, tainted by foreign influence, a danger to national security, and susceptible even to total collapse. Zatko says he felt an ethical duty to come forward. “Being a public whistle-blower is the last resort, something that I would only ever do after I had exhausted all other means,” he told TIME in a lengthy interview on Aug. 22. “It is not an easy path, but I view it as continuing to help improve the place where I was employed.” Twitter quickly hit back. Zatko was fired for “ineffective leadership and poor performance,” CEO Parag Agrawal wrote in an email to employees, calling the disclosures a “false narrative that is riddled with inconsistencies and inaccuracies” and presented out of context. “Mudge was accountable for many aspects of this work that he is now inaccurately portraying more than six months after his termination,” Agrawal said. The story of how a top Twitter official turned whistle-blower is not a straightforward saga. In more than a dozen interviews with Zatko’s friends, family, and current and former colleagues, the portrait that emerges is more complicated. Eight current and former Twitter employees, who spoke with TIME on condition of anonymity in order to discuss issues they were not authorized to speak publicly about, said that many aspects of Zatko’s disclosures rang true to their experience, particularly his allegations of security deficiencies and shortcomings in company leadership. Some of the same sources, many of whom professed to like and admire Zatko, suggested that various allegations were misleading, overblown, or lacking context—in part because Zatko was straying into areas of the company into which he had only basic insight. Read More: ‘Egregious Deficiencies,’ Bots, and Foreign Agents: The Biggest Allegations From the Twitter Whistle-Blower Zatko’s allegations have emerged at a pivotal moment for Twitter, which is locked in a legal battle over an agreement to sell the company to Elon Musk. That makes the accuracy and credibility of Zatko’s claims a multibillion-dollar issue, and the object of considerable debate by his former colleagues. “Is Mudge generally correct? Yes,” says one current Twitter employee who worked with Zatko. “Where he is correct is that Twitter has absolutely been negligent in creating the appropriate security infrastructure for a company that has the level of impact it has … Is Mudge wrong about lots of things? Also yes. I think there’s a lot of sour grapes.” Zatko had come from a long line of jobs where he had free rein to tear up organizational structures and prioritize security above all else. But at Twitter, current and former colleagues say, he found himself in a different environment: navigating tense internal politics at a corporation bent on boosting revenue, without support from his superiors. Some employees caught up in the tumult perceived Zatko to be a figure hired by then CEO Jack Dorsey for publicity reasons, stepping on the toes of qualified colleagues with more institutional knowledge. Technically brilliant and morally rigid, Zatko was an iconoclast stepping into a corporate bureaucracy. “It’s like asking a doctor who’s been trained to do brain surgery to suddenly become a podiatrist,” says a former Twitter colleague. The polarized reactions to Zatko’s disclosures illustrate just how atypical a tech whistle-blower he is. Last year, Frances Haugen, a former Facebook product manager, disclosed tens of thousands of pages of internal company documents that revealed a company prioritizing profits over user safety. But readers didn’t have to take Haugen’s word for it; they could read the words of Facebook’s own safety teams. Zatko is different. As a former senior executive, he had a bird’s-eye view into Twitter’s decisionmaking, ultimately responsible for hundreds of staff in some of Twitter’s most high-priority work streams. But he didn’t release the same breadth of documentation as Haugen; while Zatko supplied some exhibits to support his claims, including internal emails, his partially redacted disclosures rely largely on his own credibility as one of the most celebrated figures in cybersecurity. He is implicitly asking the public to trust that his version of events is the correct one, and that Twitter is lying. Zatko may lose money by coming forward. Half of his compensation at Twitter was in cash, but the rest came in stock, says John Tye of the law firm Whistleblower Aid, which is representing Zatko. The value of those shares dropped by about 9% when news of Zatko’s allegations broke. Tye insists Zatko’s motivations are rooted in a desire to see the company succeed in the long term, not his own financial self-interest. The fate of Twitter’s stock price may be just the first of a cascading series of consequences from Zatko’s disclosures. His contention that Twitter has a bigger bot problem than executives admit may prevent them from forcing completion of the Musk deal. Tye says that his client prefers Twitter to remain a public company, for the public good. “We have concerns if the SEC were to lose jurisdiction if the company goes private, because there’s one less law-enforcement lever,” Tye says. “That’s a problem for accountability.” Zatko told TIME he has never met Musk and did not provide any information to him in advance of his disclosures becoming public knowledge. Zatko’s allegations could ripple out even further, in Washington and beyond. On Sept. 13, he is set to testify in Congress about the allegations, which could spur investigations by the SEC and FTC. That could in turn further erode public faith in social media companies generally, as they face escalating questions about their influence on politics and society, as well as global efforts to rein them in. All of which means the question of what kind of whistle-blower Peiter “Mudge” Zatko is has consequences well beyond Twitter’s future. In his Twitter profile picture, Zatko has flowing, shoulder-length brown hair, with a ring of light hovering above his head like a halo. But it’s been more than two decades since he traded this long-haired look—“hacker Jesus,” his wife Sarah Zatko jokes—for a clean-cut mien befitting a man who’s done tours at the highest levels of government. As Zatko sat down for his interview with TIME on the eve of the allegations becoming public, he sported a crisp goatee flecked with gray, wired spectacles, and a lapel pin depicting the logo of his lawyers, Whistleblower Aid. The profile picture is no accident. Zatko cites his famous work in the 1990s as both the defining era of his life and the grounding for his present morality. “I always ask myself: What would the Mudge of the late ‘90s think about what I’m doing now?” he says of his decision to blow the whistle on Twitter. “I want to make sure I haven’t lost that drive, that my ethics are still just as strong, that I’m fighting for people just as hard.” Dina Litovsky for TIMESarah Zatko at home on Aug. 23, 2022 Zatko is both attuned to and skilled at nurturing the mythology surrounding him. When he was a toddler, his father hung over his crib a mobile made of circuit boards. “He wanted me not to be afraid of technology,” he said in a 2011 interview with a trade magazine. He says he began hacking at the age of 5, picking locks and reverse-engineering computer games with his dad on a late-1970s Apple II computer to get around copyright protections. As a teenager, he spent his time surfing ARPANET, the predecessor to the modern internet, along with the bulletin boards where communities of online hackers were taking shape. Growing up in Alabama and Pennsylvania in the 1980s, his childhood heroes were the social activist Abbie Hoffman and the musician Frank Zappa. Zatko studied the guitar and the violin, and chose music over computer science, attending the Berklee College of Music in Boston. After graduating, he split his time between playing at clubs with his progressive metal band Raymaker, part-time tech-support work, and working with a high-profile hacker “think tank” called the L0pht (pronounced Loft) to expose corporate security flaws. He would soon become its most prominent member and went on to join a hacking cooperative known as the Cult of the Dead Cow. At the L0pht, Zatko pioneered a strategy of publicly embarrassing companies that refused to patch vulnerabilities that he and his fellow hackers had flagged to them. His biggest nemesis in the 1990s was Microsoft. When Zatko and his colleagues showed it was possible to insert malicious code to run secretly on any machine, Microsoft ignored it. So the L0pht released a user-friendly tool that allowed anybody to break into Windows users’ personal accounts, reasoning that it was the only way to force the company to finally fix its vulnerabilities. It worked. Today, Zatko says, Microsoft has one of the most advanced security programs in the world. Still, “responsible disclosure,” as the tactic of public embarrassment became known, is a bit of a misnomer. Criminals could use the hacking program he released to crack passwords in less than 24 hours, enabling them to steal credit-card or medical data from innocent users using unpatched machines. Zatko says that he thought “long and hard” before deciding that releasing the tool was the only way to make Microsoft change its ways and protect its users, even if some people got hurt in the short term. “Dishonesty is definitely something that frustrates him,” says his wife Sarah, a former mathematician at the National Security Agency. “It doesn’t mean he’s always trying to make a big public fuss, because if you can get things fixed … through proper channels it’s always easier on everybody. But if that’s not possible, there’s always this fallback.” Zatko and other members of the L0pht agreed to testify about internet security on Capitol Hill in May 1998. In the congressional hearing room, they were identified on their placards only by their hacker names. Zatko sat in the center of the group of seven hackers and did most of the talking. Even then, he flashed a flair for the dramatic, getting lawmakers’ attention by infamously claiming he could take down the internet in 30 minutes. “How can we be expected to protect the system and the network,” Zatko asked the assembled Senators, “when all of the seven individuals seated before you can tear down the foundation that the network was built upon?” Douglas Graham—Congressional Quarterly/Getty ImagesComputer hackers from the L0pht testify before a Senate Governmental Affairs hearing on government computer security on May 19, 1998 Still in his 20s, he began to work as an unofficial adviser on internet-security issues to Richard Clarke, who would become the cybersecurity czar for three different U.S. Presidents. A photo from 2000 shows Zatko at the first White House meeting on cybersecurity, talking to then President Bill Clinton. After the terrorist attacks of Sept. 11, 2001, cybersecurity suddenly became an urgent part of counterterrorism strategy. Bad actors and “spam gangs” run out of Russia and Eastern Europe were releasing viruses and other malware, wreaking havoc on systems unprepared to counter them. Zatko began advising U.S. intelligence agencies and the military for free. Zatko was shaken by what he uncovered when he started digging. “I started to figure out numerous ways of knocking the financial sector down,” he says. “It just started to dawn on me that I, as an individual actor, could wreak serious havoc. And this is shortly after 9/11.” He had a bad reaction to drugs that his psychiatrist prescribed to deal with his rising anxiety, which only made things worse. It took a long time for him to emotionally recover. “Every security professional has the moment where they have started to learn enough about the field that all of a sudden they have this existential crisis,” says Zatko’s wife Sarah. “Then you either become [nihilistic] and everything’s hopeless, or else you have to figure out a way to get past it and try to fix your corner of things.” Out of his rut and adopting that new mindset, Zatko was tapped in 2010 to lead cybersecurity efforts at the Defense Advanced Research Projects Agency (DARPA). “I didn’t go there because I thought it was cool. I didn’t go there because I wanted to be a part of the government,” he told the audience at the DEF CON hacker conference in 2013. “I actually went there because I thought they and other parts of government had kind of lost their way, and I had an opportunity to go in and fix it.” One of his first moves was bringing in hackers and forcing career officials at the military office to spend three days in a conference room with them, says Renee Rush, a U.S. Air Force veteran who worked with him at the agency. “Mudge could go anywhere and get a big paycheck,” Rush says, “but you’ll never find him in a job that doesn’t have a distinctive mission.” AlamyPresident Clinton meets with technology leaders, including Peiter “ Zatko’s sense of principle has a way of engendering loyalty among his many mentees, both inside and outside his field. Ryan Hall, a champion mixed martial artist, became close friends with Zatko after Zatko joined Hall’s gym in Arlington, Va., in 2010 to practice jiu-jitsu. He recalls seeing Zatko at a coffee shop a block from the gym, sporting jeans and a T-shirt, surrounded by men in well-cut suits. “Peiter has very little time for moral waffling,” Hall says. After 3½ years, Zatko left DARPA for stints doing security research at Google and the payment processor Stripe. He cast both as companies that took security advice seriously. “The executives actually back security and let us do things differently (otherwise I wouldn’t be there!),” he tweeted approvingly in 2018 while at Stripe. Over the years, internet security has grown more complicated as its impact expands beyond scams, cyberattacks, and corporate or government security hacks. Zatko publicly expressed his frustration that veteran security experts’ advice was being ignored in the lead-up to the 2016 election. The Democratic National Committee reached out to him for help to improve its network and information security, but even his most basic suggestions were considered too “annoying,” he said. “DNC creates Cybersecurity board made up of well-meaning people with no cybersecurity expertise,” he tweeted in August 2016. “Your move Russia…” Four years later, after the Trump era showed just how essential the security of social media platforms was for safeguarding democracy, Zatko was sitting in his home office in New Jersey. The room is in an extension with no central heating or cooling system. In the winter, it is warmed by “way too many” computer cores—over 100, he estimates. It’s a messy space, with dog-eared textbooks strewn across the floor and framed letters of praise from national security luminaries on the walls. Zatko’s phone rang. On the other end was Dorsey. The man who had co-founded Twitter addressed him as Mudge, and told Zatko the hacker’s work during the 1990s was one of the reasons he pursued a tech career. “That just blew my mind,” Zatko recalls. “I’m talking to the guy who created, let’s face it, a platform that is critical worldwide. It influences governments, social change, it is the perception many people have of the world. And he was telling me that he was interested in me.” Zatko eventually decided to accept the unorthodox job Dorsey was offering, overseeing Twitter’s entire security operations, both data and physical. Zatko saw the protection of a platform as influential as Twitter as perhaps his most effective way to “make a dent in the universe”—a personal motto originating from his time at the L0pht. The move was hailed by experts as a sign of Twitter’s serious commitment to fixing long-standing security issues. As one security analyst put it, “A rare moment of cybersecurity sunshine where it seems the right person is put in the lead on addressing a major issue.” Twitter needed him. The company was reeling from one of the most embarrassing incidents in its 16-year history. In July 2020, a trio that included two teenagers used extremely basic phishing methods to gain access to the accounts of Twitter employees. They were then able to send tweets from the accounts of Joe Biden, Barack Obama, Elon Musk, and a slew of other blue-checked accounts, setting up a scam that netted them over $100,000 in Bitcoin. The incident was hardly the company’s first major security lapse. The year before, the U.S. government had accused two Twitter employees of being moles for the Saudi Arabian government. This month, one of them was found guilty in federal court. Back in 2011, the FTC had filed a complaint against Twitter for failing to protect consumer information. That complaint was supposed to result in Twitter implementing a robust security program resistant to cyberattacks. Yet the success of the July 2020 hackers showed how vulnerable the platform remained. “While Google, Microsoft, Apple, and Meta consistently put out new features to help people protect their accounts and information, Twitter’s focus seemed to be a bit stale,” says Runa Sandvik, a privacy and security researcher. “It’s unclear what Twitter was doing in that space, if anything at all.” Zatko’s whistle-blower complaint says he expected to spend the remainder of his career working at Twitter. But it quickly became apparent that the company was “a decade behind” its competitors, he wrote in a staff memo included in the disclosures. Teams fighting bots were understaffed and overworked, he alleges, and internal security measures Twitter promised to develop in the wake of the 2011 FTC mandate had yet to be rolled out. Zatko’s complaint claims that a serious security breach was occurring at Twitter on average every week. Read More: What the Twitter Whistle-blower Disclosure Means for Elon Musk. On Jan. 6, 2021, Zatko was watching the Capitol insurrection unfold online and asked a Twitter engineering executive to curtail employees’ access to internal systems. He learned that too many employees had irrevocable access. One rogue engineer with the right system privileges could have sabotaged the platform, sowing misinformation and discord, Zatko alleges in his disclosure. Zatko tried to patch these holes. He shuttered several existing security and privacy programs in favor of a new department, optimistically named Confidence. He drew up a three-year plan to improve defense efforts and measure spam bots, which he alleges were running rampant and unchecked across the platform. According to his disclosure, he was met with continual pushback at senior levels of the company, and when it came to security issues, he says, “deliberate ignorance” was the norm. Some product managers were “encouraged” to override security and privacy issues in order to release new products more quickly, his complaint alleges. Current and former Twitter employees who spoke with TIME corroborated the general sweep of Zatko’s allegations that Twitter often prioritized profit over security. “Unless you can make a compelling trade-off argument for why improved security or privacy will benefit the business more than their cost,” says one former Twitter employee, “it’s very hard to enforce change.” Zatko’s complaint adds that his efforts to inform Twitter’s board about various security issues were met with alarm or anger, and that at least twice he was asked by executives to withhold information from the board. Twitter declined multiple requests from TIME to address specific parts of Zatko’s allegations. In his email dated Aug. 23, Agrawal said Zatko’s disclosures as a whole had many inaccuracies in them. Meanwhile, Dorsey, the man who Zatko thought would be his main ally, was increasingly absent and unfocused, Zatko’s disclosure says. A representative for Dorsey’s company, Block, did not respond to a request for comment for this story. The situation began to come to a head in November 2021, when Dorsey resigned. His replacement was Agrawal, who had formerly been the most senior executive in charge of security issues before Zatko arrived. Tensions between the two quickly escalated. Zatko says in his disclosures that he became concerned that Agrawal was going to use the first board meeting of his tenure to diminish the severity of security issues. He wrote to Agrawal on Dec. 15, arguing that there were “numerous, and some significant, misrepresentations” in materials for an upcoming presentation, according to emails contained in the complaint. Agrawal brushed him off, Zatko’s complaint alleges, and the next day, the documents were presented at a high-level Risk Committee board meeting. In a Jan. 4, 2022, email to Agrawal, Zatko called the documents “at worst fraudulent,” and wrote, “I was hired to achieve certain goals and to fix problems here at Twitter. In order to do that, we need to recognize the actual state of affairs at the company.” A few days later, Agrawal wrote back to Zatko, saying that the company had launched an internal investigation into Zatko’s allegations of “fraud.” Zatko was asked for a detailed report to back up his claims, which he began to pull together. Less than two weeks later, before he was able to file the report, he was fired. Zatko retained Whistleblower Aid on March 17, a month before Musk offered to buy Twitter. He concluded he had no choice but to blow the whistle. “Change sometimes requires, you know, kicking the hornet’s nest a little bit,” he says. “Ethically and morally, I had to pursue this.” In interviews, current and former Twitter officials had differing perspectives on Zatko’s allegations. Several said that Zatko was right about many things, including data-management issues, chaotic leadership, and platform vulnerabilities. But some felt he mischaracterized or exaggerated certain details in the disclosure, particularly when it came to issues that he himself did not work on. “He didn’t know what was happening with the bots stuff,” says a current employee who worked with Zatko. “That did not fall under his security purview.” Zatko’s attorneys dispute this, arguing that he did in fact have insight into and authority over the bots issue as the ultimate supervisor of Twitter Services, which oversees global content moderation at scale. The disagreement can be chalked up to Twitter’s messy organizational structure, in which different arms of the company have competing claims to ownership of the bots issue. Hannah McKay—AFP/Getty ImagesJack Dorsey, chief executive officer of Twitter, testifies remotely during a Senate Judiciary Committee hearing on “ Other parts of Zatko’s disclosures simply pit his word against Twitter’s. One of his most explosive claims is that Twitter “knowingly” hired “agents” of the Indian government. Because of access privileges afforded to many Twitter employees, Zatko says in his disclosure, these alleged agents could access sensitive user data. The hires came at a time when the Indian government was bristling at Twitter’s refusal to identify details about people using the platform to criticize the nation’s ruling party. Zatko had direct responsibility for the physical security of employees at Twitter, and would likely have been directly briefed on alleged espionage efforts. The disclosures state that Zatko has given more details about this incident to the Department of Justice and the Senate Select Committee on Intelligence. Twitter declined multiple requests from TIME to address Zatko’s claims about Indian agents on the record. One person with direct knowledge of Twitter’s internal affairs in India told TIME they had no knowledge of the supposed agent, but said they would not be surprised if the Indian government had at least tried to covertly appoint an agent to Twitter’s payroll, similar to the Saudi case. Some of Zatko’s other claims strike experts as overstated. His disclosure argues that Twitter’s failure to own the rights to training data of machine-learning models constitutes “fraud,” for example. That shortcoming is an industry-wide practice, according to two former Twitter employees and others familiar with industry standards. As the pushback mounts, Zatko tells TIME he stands by his allegations and for legal reasons is unable to talk about his time at Twitter beyond what’s in the disclosures. “I was aware of the most common tactics that would happen, that there would be attempts to character assassinate me or make things personal—anything that would distract from the data and the problem at hand,” Zatko says. While Zatko describes his decision to go public in idealistic terms, the timing of the disclosures is notable. The trial to decide whether Musk must go through with his initial agreement to buy Twitter is set to start in Delaware on Oct. 17. Zatko inserts himself into this battle from the opening pages of his disclosure, claiming that Twitter is “lying about bots to Elon Musk.” Zatko may be drawn directly into the court case: Musk’s lawyer, Alex Spiro, tells TIME his team has subpoenaed Zatko, although Zatko’s lawyers say he has received no such subpoena. Two legal experts say they’re skeptical Zatko’s claims will have a major impact on the lawsuit. He provides scant new information about spam bots, and what he does claim about them has little to do with the merger agreement. Ann Lipton, a law professor at Tulane University, says that Zatko’s claims that Twitter lied in its SEC filings will be hard to prove. “When a disgruntled employee disagrees with management decisions,” Lipton says, “that’s frequently not taken as a sufficient basis for treating an SEC filing as false.” “The question ultimately boils down to the credibility of the assertions made by the whistle-blower, and that is usually determined by the existence of hard evidence,” says Howard Fischer, a former SEC attorney. “Twitter’s real regulatory risk lies in whether or not the documentary evidence, and not the potentially self-serving statements of a former employee, shows knowing or reckless misleading of regulators or investors in public filings and statements.” Greg Kahn for TIMEZatko attending meetings in Washington on Aug. 23, 2022 The disclosures could have other long-lasting financial and political ramifications. The company’s stock price dropped by around 9% in the wake of the disclosures’ publication. The same day, Democratic Senator Dick Durbin and Democratic Representative Frank Pallone announced they were investigating Zatko’s claims, with Pallone calling for “the need to pass comprehensive privacy legislation.” Zatko’s allegations have demoralized Twitter employees, some current staffers say, and may exacerbate a brain drain at a company that has lost many of its leaders and significantly slowed its spending while in Musk-induced limbo. Twitter still has a significant impact on elections and political discourse around the world, and those who are still working on its security and privacy teams will “have to work three or four times harder,” says a former Twitter employee. Knowing that his actions would cause corporate chaos and catalyze government investigations, Zatko says he made his decision with one goal in mind: to make Twitter, and thus the world, safer. Although right now the public can only take him at his word, that may not hold true for long. When he testifies before Congress in September, Zatko—who refused to discuss the meat of his complaint in his interview with TIME—will have the legal cover to expand on the allegations, potentially revealing new and damaging details about what happened within Twitter. Zatko is not the youthful star hacker he used to be. Two days before his interview with TIME, he broke a toe while sparring with a jiu-jitsu opponent, an accident he chalks up in part to partial paralysis of his back, which he says his doctor told him has been brought on by the stress of the past few months. Injury, however, may be necessary if you’re going to engage in the fight. “If you’re just reacting to what an adversary is doing, they’re the ones that are moving you around and manipulating you,” he says. “That’s all too common in this industry.” —With reporting by Leslie Dickstein, Nik Popli, Simmone Shah, and Julia Zorthian.....»»

Category: topSource: timeAug 25th, 2022

Forget Free Speech: Rushdie"s Fatwa Is Winning

Forget Free Speech: Rushdie's Fatwa Is Winning Authored by Giulio Meotti via The Gatestone Institute, "Salman Rushdie is a champion of free speech, bravely standing up for Western ideals when so many shy away from the fight. If only more people could follow his example, instead of taking the path of appeasement in the name of cultural sensitivity, the long years of murder and mayhem wrought by the Islamists on the West might come to an end... I know all too well the threat Islamism poses. After I came out as an apostate, I was forced into a bubble of protection that still surrounds me to this day. I have 24-hour security. I still receive death threats. My friend, the sweet, vulgar, brilliant Theo Van Gogh was murdered simply for making a film with me. His attacker used a knife to stab a letter into Theo's chest: it said that I would be next". That is how Ayaan Hirsi Ali reacted to the attempted murder of Salman Rushdie in Chautauqua, New York. Many of the slogans, paraphrases on "free speech" and demonstrations of solidarity to the author of The Satanic Verses hide a terrible and different reality: the fatwa is gaining ground, and more and more people have to live under protection due to criticism of Islam. In the words of the Algerian writer Boualem Sansal writing for L'Express last week: "[T]o speak only of France, the police will soon no longer be enough, it will be necessary to recruit battalions or form a new body of bodyguards, who know Islam and can recognize under which dress it is presented." Islamic extremists in 2012 published a terrifying "most wanted list", like those of the FBI. Title: "Yes we can. A bullet a day keeps the infidel away..." What happened to the faces and names on that list? They have been killed, left the public arena to protect themselves, or died under police protection. The Swedish cartoonist Lars Vilks died with his police guards in a terrible car accident. As journalist Douglas Murray explained: "Lars Vilks was a man and artist of enormous courage. He should never have been in this situation, and if other artists and others across Europe hadn't been so cowardly then he never would have been". Carsten Juste, who as editor of the Danish newspaper Jyllands Posten published the cartoons on Muhammad in 2005, apologized and left journalism. Flemming Rose, the editor of the Jyllands Posten who commissioned the cartoons (the Taliban put a bounty on his head), resigned and published a book with the eloquent title The Tyranny of Silence. "The drama and the tragedy is that the only ones to win are the jihadists," Rose told the Danish newspaper Weekendavisen. Kurt Westergaard, the cartoonist of the most famous of the Danish cartoons, passed away in his "bunker house" where Islamists had tried to assassinate him. Molly Norris, a Seattle Post cartoonist, became a "ghost". She changed name and disappeared. Nothing is known about her after the FBI put her in the witness protection program. Geert Wilders is alive only because he is protected by a military unit of the Dutch army generally assigned to ensure the security of the embassy in Afghanistan. Wilders still lives in safe houses and must wear a bulletproof vest during televised debates. Stéphane Charbonnier, editor-in-chief of the French satirical magazine Charlie Hebdo, was murdered along with eight of his colleagues. Ayaan Hirsi Ali left the Netherlands and sought asylum in the United States, where she is under around-the-clock protection. Now there was the attempt to assassinate Salman Rushdie. "The lesson of this story is atrocious: Rushdie is alive, but the camp of the killers has not completely lost, it has even won a little", wrote Etienne Gernelle, the editor of French weekly Le Point. British columnist Kenan Malik told the BBC that if Salman Rushdie's critics "lost the battle", they "won the war". The Egyptian-German scholar Hamed Abdel-Samad just recalled his meeting with Rushdie: "'So, you are the Egyptian Salman Rushdie everyone is talking about?', Salman Rushdie said with a smile during our first and only meeting in Berlin three years ago. It was a celebration of the thirty-year anniversary of the fall of the Berlin Wall and coincided with the 30th anniversary of the fatwa issued by Ayatollah Khomeini against Rushdie. 'Thirty years ago, there was a single Salman Rushdie in the world, today there is at least one Salman Rushdie in every Islamic country not to mention those in the western countries. That should please you', I replied". We do not even know they exist: our fearful conformist media never tell their amazing stories. They live among us, in Paris, London, Oslo, Copenhagen, Berlin, Amsterdam and all the other European capitals. They live according to a strict security protocol: they have to tell the police in advance what they will do during the day, who they will see and where they will go, and if any place is not considered safe, these captives are forced to change plans. Often, if there is a not a new threat, they change homes, and disappear for a while to be protected by anonymity. They are not "repentants of the Mafia", mobsters turned into witnesses for the state prosecution. No, they are academics, activists, writers, journalists, intellectuals. We are talking about more than a hundred personalities in Europe. Their "fault"? They criticized Islam. Their precautions to protect themselves are never too many. Rushdie had ceased to be protected for many years. A professor of Iranian origin and a critic of Islam, Afshin Ellian, works at the University of Utrecht in the Netherlands, where he is protected by bodyguards. On the second floor of the Law Department, where he teaches, Ellian can be reached through a corridor with electronic access and armored glass. The place looks more like a bank vault than a normal law department. In Denmark, Lars Hedegaard, director of the International Free Press Society, who miraculously survived an attack at his home, is under police protection. An assassin dressed as a postman came to Hedegaard's front door in Copenhagen and shot at his head, missing him only narrowly. The Turkish writer Lale Gül is under protection for having denounced Koranic schools in the Netherlands. French journalist Zineb El Rhazoui has more bodyguards than many Macron ministers. "Zineb El Rhazoui must be killed to avenge the Prophet," reads a fatwa. The new address of the Charlie Hebdo newspaper offices is secret and it has six armored doors and a safe room that the journalists can enter in case of attack. The entire editorial office of Charlie Hebdo is now protected by 85 police officers. Former Charlie Hebdo director Philippe Val lives in a house with bulletproof windows, police officers and an armored safe room where there is a special telephone line to call for help. Each Charlie Hebdo employee is always accompanied by a car with two policemen. If the need arises, another police motorcycle or armored car should arrive. Mina Ahadi, who founded the Council of Former Muslims in Germany, does not move without an escort, and like the novelist Fatma Bläser, who was the victim of a forced marriage, is protected by the police. Turkish-born lawyer Syran Ates, in Berlin, is protected by six police officers. "She receives three thousand threats," her lawyer said. When Can Dündar, the bravest Turkish journalist, who as the director of the newspaper Cumhuriyet expressed solidarity with Charlie Hebdo, left Turkey for Germany, he would never have imagined that he would need the police protection. The biggest difference is that in Turkey, policemen searched his house looking for items to compromise him, while in Berlin they are guarding his home. "Critics of Islam must fear for their lives: death threats and attacks," notes the German website Tichys Einblick. "Anyone who criticizes Islamism must expect to be violently attacked in this country and without anyone being offended," said journalist Jan Aleksander Karon. "In Germany it is increasingly dangerous to criticize Islam". In Denmark, the editorial office of Jyllands Posten today resembles a military bunker. With a razor wire barrier, bars, metal plates and cameras that surround the newspaper for a kilometer, the office is now protected by the same mechanism as river locks. A door opens, a car enters, the door closes and the one opposite opens. Journalists enter one at a time, typing in a personal code (a measure that did not protect Charlie Hebdo reporters). The Jyllands Posten cartoonists have escaped numerous attacks, including at home. Even after the January 7, 2015 massacre in Paris at the Charlie Hebdo office, which was targeted partly because it had republished the Danish Mohammed cartoons, Jyllands-Posten announced that, out of fear, it would not republish its own cartoons, saying: "We have lived with the fear of a terrorist attack for nine years, and yes, that is the explanation why we do not reprint the cartoons, whether it be our own or Charlie Hebdo's. We are also aware that we therefore bow to violence and intimidation." Also under protection is the French-Algerian journalist Mohammed Sifaoui. His photograph and name are published on jihadist websites next to the word "apostate". Many people under protection are women, such as Marika Bret, a Charlie Hebdo employee who was "exfiltrated" from home, and the French television presenter originally from Turkey, Claire Koc. Or the journalist Ophélie Meunier, the reporter from Zone Interdite who reported on the Islamization of Roubaix in prime time with the French politician Amine Elbahi, of the Républicains Party, who received threats of beheading. Threats and intimidation demonstrate the tenacity of the journalistic work done by these courageous people. They demonstrate a commitment to show the Islamization by force and terror of sectors of French society, while the Islamists answer them: Do you disagree with me? Do you criticize me? I will kill you, slit your throat, behead you. Meanwhile, the states and institutions, which find themselves trying to protect dozens of people, prove to be paper tigers. Terrorism works. Nobody wants to live between two cops or see his name on the internet. Meanwhile, the journalistic class goes looking somewhere less hazardous. The French state has to protect simple teachers such as Fatiha Agag-Boudjahlat, who reproached some students for not respecting the minute of silence during the homage to Samuel Paty, a high school teacher who was beheaded by an Islamist. Imams such as Hassen Chalghoumi are included in "Uclat 2", the protection program enjoyed by the ambassadors of the United States and Israel in Paris. Chalghoumi, protagonist of many battles in favor of the French Republic and against Islamic fundamentalists, told BFMTV that he has not slept more than three nights in the same place and that he wears a bulletproof vest during prayer: "I never talk about it, but I have been wearing it for years. I take care of my life. I have responsibilities towards my family and myself. I continue to fight at a very high price. I cannot be at my mosque every day, it is impossible". Professor Didier Lemaire recounted his last visit to Trappes for a TV documentary: "I was only allowed a five-minute filming in front of the police station, surrounded by a dozen officers. The rest of the time I had to stay hidden in the car. One of the policemen told me: 'If they bring out the Kalashnikovs, we have nothing to answer with, so we won't stay long.' The reporter wanted me to say a few words in front of the school, but the police refused for security reasons. I was allowed to pass by without stopping. I was escorted to a hotel, whose entrance was guarded by four police officers, to conduct the interview". "Give us his head," Islamists shouted outside a British school in Batley. They wanted to murder a teacher whose name we do not even know and who was forced to leave the school after heavy death threats. What was he guilty of? Having shown in class some of the Muhammad cartoons during a lesson on freedom of expression. He now lives in a safe house with his wife and children, out of fear of being killed. The threat is deemed so serious that not even the family's relatives know where they live. "The windows of the house where the teacher lived for more than eight years are covered with white sheets". All decent people should stand with Salman Rushdie and against his persecutors. Is it now a little bit clearer that radical Islam is today one of the biggest threats to Western culture and that we are not winning, but instead becoming like turkeys celebrating Thanksgiving? Tyler Durden Mon, 08/22/2022 - 03:30.....»»

Category: blogSource: zerohedgeAug 22nd, 2022

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero"

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero" One day after futures ramped overnight (if only to crater during the regular session) on hopes China was easing its highly politicized  Zero Covid policy after it cut the time of quarantine lockdowns, this morning futures slumped early on after China's President Xi Jinping made clear that Covid Zero isn't going anywhere and remains the most “economic and effective” policy for China during a symbolic visit to the virus ground zero in Wuhan, in which he cast the strategy as proof of the superiority of the country’s political system. That coupled with renewed recession worries (market is again pricing in a rate cut in Q1 2023) even as monetary policy tightens in much of the world to fight supply-side inflation, sent US futures and global markets lower. S&P futures dropped 0.2% and Nasdaq 100 futures were down 0.4% after the underlying index slumped on 3.1% on Tuesday. The dollar was steady after rising the most in over a week while WTI crude climbed above $112 a barrel, set for a fourth session of gains. In cryptocurrencies, Bitcoin dipped below the closely watched $20,000 level on news crypto hedge fund 3 Arrows Capital was ordered to liquidate. The Nasdaq's Tuesday’s slump added to what was already one of the worst years in terms of big daily selloffs in US stocks. The S&P 500 Index has fallen 2% or more on 14 occasions, putting 2022 in the top 10 list, according to Bloomberg data. Not helping the tech sector, on Wednesday morning JPMorgan cut its earnings estimates across the sector, especially for companies exposed to online advertising, citing macroeconomic pressures, forex and company-specific dynamics. One of the chief drivers for overnight weakness, China's Xi said during a trip Tuesday to Wuhan where the virus first emerged in late 2019 that relaxing Covid controls would risk too many lives in the world’s most populous country. China would rather endure some temporary impact on economic development than let the virus hurt people’s safety and health, he said, in remarks reported Wednesday by state media. As a result, China’s CSI 300 Index extended loss to 1.4% after the headline, while the yuan drops as much as 0.2% to trade 6.7132 against the dollar in the offshore market. Among key premarket movers, Tesla slipped in US premarket trading. The electric-vehicle maker laid off hundreds of workers on its Autopilot team as it shuttered a California facility, according to people familiar with the matter. Carnival slumped as Morgan Stanley analysts warned that the London and New York-listed cruise vacation company’s shares could lose all their value in the event of another demand shock. Pinterest gained 3.7% as the company’s co- founder and CEO Ben Silbermann quit and handed the reins to Google and PayPal veteran Bill Ready in a sign the social-media company will focus more on e-commerce. Also, despite the pervasive weakness, the Energy Select Sector SPDR Fund ETF (XLE) rebounded off key support (50% Fibonacci) relative to the SPDR S&P 500 ETF (SPY). That said, energy was alone and most other notable movers were down in the premarket: Carnival (CCL US) shares fall 8% premarket as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Nio (NIO US) shares drop 8.2% after short-seller Grizzly Research published a report on Tuesday alleging that the electric carmaker used battery sales to a related party to inflate revenue and boost net income margins. The company rejected the claims. Upstart Holdings (UPST US) shares slump about 9% after Morgan Stanley downgraded the consumer finance company to underweight from equal-weight amid rising cyclical headwinds. Ormat Technologies (ORA US) rallies as much as 5% after the renewable energy company is set to be included in the S&P Midcap 400 Index. 2U (TWOU US) shares rise 16% premarket. Indian online-education provider Byju’s has offered to buy the company in a cash deal that values the US-listed edtech firm at more than $1 billion, a person familiar with the matter said. Watch Amazon (AMZN US) shares as Redburn initiated coverage of the stock with a buy recommendation and set a Street-high price target, saying “there is a clear path toward a $3 trillion value for AWS alone.” Shares in data center REITs could be active later in the trading session after short-seller Jim Chanos said in an FT interview that he’s betting against “legacy” data centers. Watch Digital Realty (DLR US) and Equinix (EQIX US), as well as data center operators Cyxtera Technologies (CYXT US) and Iron Mountain (IRM US) Investors are growing increasingly skeptical that the Fed can avoid a bruising economic downturn amid sharp interest-rate hikes. Evaporating consumer confidence is feeding into concerns that the US might tip into a recession. Naturally, Fed officials sought to play down recession risk. New York Fed President John Williams and San Francisco’s Mary Daly both acknowledged they had to cool inflation, but insisted that a soft landing was still possible. “It seems the market is in this tug of war between on the one hand the hope that we are close to the peak in inflation and rates, and on the other hand the challenge of a slowing economy and potential recession,” Emmanuel Cau, head of European equity strategy at Barclays Bank Plc, said in an interview with Bloomberg TV. “Central banks are walking a very tight line and to a certain extent dictate the mood in the markets.” European equities snapped three days of gains, trading poorly but off worst levels with sentiment also hurt by China remaining committed to its zero-Covid approach. Spanish inflation unexpectedly surged to a record, dashing hopes that inflation in the euro zone’s fourth-biggest economy had peaked, and emboldening European Central Bank policy makers pushing for big increases in interest rates. The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow. German benchmark bonds rose, while 10-year Treasury yields slipped to 3.16%. DAX lags, dropping as much as 1.8%. Real estate, autos and miners are the worst performing sectors. In notable moves in European stocks, Hennes & Mauritz (H&M) gained after the Swedish low-cost retailer’s earnings beat analyst estimates. Just Eat Takeaway.com NV tumbled to a record low after Berenberg analysts rated the stock sell, saying the food delivery firm’s UK business will remain under pressure. Here are some of the biggest European movers today: Just Eat Takeaway shares plunge as much as 21% after Berenberg initiated coverage with a sell rating, saying the firm’s UK business will remain under pressure and a sale of its Grubhub unit is unlikely to satisfy the bulls. Carnival stocks slumped over 12% in London as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Pearson drops as much as 6.1% after the education company was cut to sell at UBS, which reduced forecasts to reflect a weak outlook for 2022 college enrollments. Grifols shares plunge as much as 13% on a media report the Spanish plasma firm is weighing a capital raise of as much as EU2b to cut its debt. Diageo shares fall after downgrades for the spirits group from Deutsche Bank and Kepler Cheuvreux, while Pernod Ricard also dips on a rating cut from the latter. Diageo declines as much as 4.2%, Pernod Ricard -3.7% Fluidra shares fall as much as 8.4% after Santander cut its rating on the Spanish swimming pools company. The bank’s analyst Alejandro Conde cut the recommendation to neutral from outperform. H&M shares rise as much as 6.8% after the Swedish apparel retailer reported 2Q earnings that beat estimates. Jefferies said the margin beat in particular was reassuring, while Morgan Stanley said it was a “positive surprise” overall. Ipsen shares rise as much as 3.1% after UBS analyst Michael Leuchten said that accepting palovarotene refiling priority review should be a net present value and confidence boost. Asian stocks fell, halting a four-day gain, as renewed angst over the outlook for global economic growth and inflation help drive a selloff across most of the region’s equity markets. The MSCI Asia Pacific Index dropped as much as 1.5%, led by consumer discretionary and information sectors. Chinese equities in particular took a hit, as the CSI 300 Index fell 1.5% Wednesday after Xi Jinping reiterated his firm stance on Covid zero. Tech-heavy indexes in markets such as South Korea and Taiwan took the brunt of Wednesday’s drop amid lingering concerns that monetary tightening in much of the world to fight inflation will cause an economic slowdown. While Federal Reserve members have played down the risk of a US recession, gloomy data such as US consumer confidence have damped investor sentiment. “Volatility is going to be the enduring feature of the market, I suspect, for the next couple of quarters at least until we get a firm sense that peak inflation has passed,” John Woods, Credit Suisse Group AG’s Asia-Pacific chief investment officer, said in an interview with Bloomberg TV. “Markets, I think, have aggressively priced in quite a serious or steep recession.”  China’s four-day winning streak came to a halt, putting its advance toward a bull market on hold.  “We will continue to see a risk of targeted lockdowns, and that spoils the initial euphoria seen in the markets from the announcement on relaxation of quarantine requirements,” said Charu Chanana, market strategist at Saxo Capital Markets. “Still, economic growth will likely be prioritized as this is a politically important year for China.”  Japanese equities decline as investors digested data that showed a drop in US consumer confidence over inflation worries and increased concerns of an economic downturn.  The Topix Index fell 0.7% to 1,893.57 in Tokyo on Wednesday, while the Nikkei declined 0.9% to 26,804.60. Toyota Motor Corp. contributed the most to the Topix’s decline, decreasing 1.8%. Out of 2,170 shares in the index, 1,114 fell, 984 rose and 72 were unchanged. “There are concerns about stagflation,” said Hideyuki Suzuki a general manager at SBI Securities. “The consumer sentiment from the University of Michigan, which provides one of the fastest data points, has already shown poor figures.” Stocks in India tracked their Asian peers lower as brent rose to the highest level in two weeks, while high inflation and slowing global growth continued to dampen risk-appetite for global equities. The S&P BSE Sensex fell 0.3% to 53,026.97 in Mumbai, while the NSE Nifty 50 Index declined by an equal measure. Both gauges have lost more than 4% in June and are set for their third consecutive month of declines. The main indexes have dropped for all but one month this year. Twelve of the 19 sub-sector gauges compiled by BSE Ltd. eased, led by banking companies while power producers were the top performers.   Investors will also be watching the expiry of monthly derivative contracts on Thursday, which may lead to some volatility in the markets.  Hindustan Unilever was the biggest contributor to the Sensex’s decline, decreasing 3.5%. Out of 30 shares in the Sensex, 10 rose and 20 fell. The Bloomberg Dollar Spot Index inched up modestly as the greenback traded mixed against its Group-of-10 peers; the Swiss franc led gains while Antipodean currencies were the worst performers and the euro traded in a narrow range around $1.05. The relative cost to own optionality in the euro heading into the July meetings of the ECB and the Federal Reserve was too low for investors to ignore and has become less and less underpriced. The yen strengthened and US and Japanese bond yields fell. In rates, fixed income has a choppy start. Bund futures initially surged just shy of 200 ticks on a soft regional German CPI print before fading the entire move over the course of the morning as Spanish data hit the tape, delivering a surprise record 10% reading for June and more hawkish ECB comments crossed the wires. Treasuries and gilts followed with curves eventually fading a bull-steepening move. Long-end gilts underperform, cheapening ~4bps near 2.75%. Peripheral spreads are tighter to core.  Treasuries are slightly higher as US trading day begins, off the session lows reached as bund futures jumped after the first monthly drop since November in a German regional CPI gauge. Yields are lower across the curve, by 1bp-2bp for tenors out to the 10-year with long-end yields little changed; 10-year declined as much as 5.3bp vs as much as 8.2bp for German 10- year, which remains lower by ~3bp. Focal points for the US session include a final revision of 1Q GDP, comments by Fed Chair Powell, and anticipation of quarter-end flows favoring bonds. Quarter-end is anticipated to cause rebalancing flows into bonds; Wells Fargo estimated that $5b will be added to bonds, with most of the flows occurring Wednesday and Thursday. In commodities, crude futures advance. WTI drifts 0.3% higher to trade near $112.13. Base metals are mixed; LME tin falls 5.6% while LME zinc gains 0.4%. Spot gold falls roughly $5 to trade near $1,815/oz Looking ahead, the highlight will be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Market Snapshot S&P 500 futures little changed at 3,829.00 STOXX Europe 600 down 0.8% to 412.69 MXAP down 1.3% to 159.96 MXAPJ down 1.6% to 531.04 Nikkei down 0.9% to 26,804.60 Topix down 0.7% to 1,893.57 Hang Seng Index down 1.9% to 21,996.89 Shanghai Composite down 1.4% to 3,361.52 Sensex little changed at 53,204.17 Australia S&P/ASX 200 down 0.9% to 6,700.23 Kospi down 1.8% to 2,377.99 German 10Y yield little changed at 1.59% Euro little changed at $1.0510 Brent Futures down 0.4% to $117.46/bbl Gold spot down 0.2% to $1,816.09 U.S. Dollar Index little changed at 104.55 Top Overnight News from Bloomberg The Fed’s Loretta Mester said she wants to see the benchmark lending rate reach 3% to 3.5% this year and “a little bit above 4% next year” to rein in price pressures even if that tips the economy into a recession The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow ECB has “ample room” to hike in 25bps-50bps steps to “whatever rate we think, we consider reasonable,” Governing Council member Robert Holzmann said in interview with CNBC Swedish consumers are gloomier than they have been since the mid-1990s, as prices surge on everything from fuel to food and furniture China’s President Xi Jinping declared Covid Zero the most “economic and effective” policy for the nation, during a symbolic visit to Wuhan in which he cast the strategy as proof of the superiority of the country’s political system NATO moved one step closer to bolstering its eastern front with Russia after Turkey dropped its opposition to Swedish and Finnish bids to join the military alliance A more detailed look at markets courtesy of Newsquawk Asia-Pac stocks were pressured amid headwinds from the US where disappointing Consumer Confidence data added to the growth concerns. ASX 200 failed to benefit from better than expected Retail Sales and was dragged lower by weakness in miners and tech. Nikkei 225 fell beneath the 27,000 level as industries remained pressured by the ongoing power crunch. Hang Seng and Shanghai Comp. conformed to the negative picture in the region although losses in the mainland were initially stemmed after China cut its quarantine requirements which the National Health Commission caveated was not a relaxation but an optimization to make it more scientific and precise. Top Asian News Chinese President Xi said China's COVID prevention control and strategy is correct and effective and must stick with it, via state media. Shanghai will gradually reopen museums and scenic sports from July 1st, state media reports. US Deputy Commerce Secretary Graves said the US will take a balanced approach on Chinese tariffs and that a clear response on China tariffs is coming soon, according to Bloomberg. China State Council's Taiwan Affairs Office said it firmly opposes the US signing any agreement that has sovereign connotations with Taiwan, according to Global Times. BoJ Governor Kuroda said Japanese Core CPI reached 2.1% in April and May which is almost fully due to international energy prices and Japan's economy has not been affected much by the global inflationary trend so monetary policy will stay accommodative, according to Reuters. Japanese govt to issue power supply shortage warning for a fourth consecutive day on Thursday, according to a statement. European bourses are on the backfoot as the region plays catch-up to the losses on Wall Street yesterday. Sectors are mostly lower (ex-Energy) with a defensive tilt as Healthcare, Consumer Products, Food & Beverages, and Utilities are more cushioned than their cyclical peers. Stateside, US equity futures trade on either side of the unchanged mark with no stand-out performers thus far, with the contracts awaiting the next catalyst. Top European News UK expects defence spending to reach 2.3% of GDP and said PM Johnson will announce new military commitments to NATO, according to Reuters. UK Weighs Capping Maximum Stake in Online Casinos at £5 Europe Is the Only Region Where Earnings Estimates Are Rising European Gas Prices Rise as Supply Risks Add to Storage Concerns Gold Steady as Traders Weigh Fed Comments on US Recession Risks Choppy Start for Euro-Area Bonds on Mixed Inflation FX Dollar mostly bid otherwise as rebalancing demand underpins - DXY pivots 104.500 within 104.700-350 confines. Franc outperforms on rate and risk considerations - Usd/Chf breaches 0.9550 and Eur/Chf approaches parity. Euro erratic in line with conflicting inflation data - Eur/Usd rotates around 1.0500. Aussie and Kiwi undermined by downturn in sentiment - Aud/Usd loses 0.6900+ status, Nzd/Usd wanes from just over 0.6250. Yen rangy following firmer than forecast Japanese retail sales and BoJ Governor Kuroda reaffirming intent to remain accommodative - Usd/Jpy straddles 136.00. Nokkie welcomes oil worker wage agreement with unions to avert strike action, but Sekkie hampered by softer Swedish macro releases pre-Riksbank policy call tomorrow - Eur/Nok probes 10.3000, Eur/Sek hovers around 10.6800. Rand rattled by decline in Gold and ongoing SA power supply problems, but Rouble rallies irrespective of CBR and Russian Economy Ministry divergence over deflation. Central Banks ECB's Lane said there are two-way inflation risks: "on the one side, there could be forces that keep inflation higher than expected for longer. On the other side, we do have the risk of a slowdown in the economy, which would reduce inflationary pressure", via ECB. ECB's Holzmann said "We will have to make an assessment where the economic development is going and where inflation stands and afterwards there’s ample room to hike in 0.25 and 0.5 levels to whatever rate we think, we consider reasonable" via CNBC. ECB's Simkus said if data worsens, then he wants a 50bps July hike as an option, 50bps hike is very likely in September; ECB's fragmentation tool should serve as a deterrent, via Bloomberg. ECB's Herodotou said EZ inflation will peak this year, via CNBC. ECB's Wunsch said government aid may spell more rate hikes, via Bloomberg; 150bps of hikes by March 2023 is reasonable ECB is said to be weighting whether or not they should announce the size and duration of their upcoming bond-buying scheme, according to Reuters sources. Fed's Mester (2022, 2024 voter) said on a path towards restrictive interest rates; July debate between 50bps and 75bps hike, via CNBC. Mester said if inflation expectations become unanchored, monetary policy would have to act more forcefully; current inflation situation is a very challenging one, via Reuters. SARB Governor said a 50bps hike is "not off the table", Via Bloomberg CBR Governor said she does not see risks of deflation; sees room to cut rates; sticking to policy of floating RUB exchange rate. PBoC will step up implementation of prudent monetary policy, will keep liquidity reasonably ample. Fixed Income Bunds unwind all and a bit more of their hefty post-NRW CPI gains as other German states show smaller inflation slowdowns and Spanish HICP soars. Gilts suffer more pronounced fall from grace in relative terms and US Treasuries slip from overnight peaks in sympathy. UK debt and STIRs also await testimony from MPC member elect to see if newbie leans dovish, hawkish or middle of the road 10 year benchmarks settle off worst levels within 147.37-145.14, 112.66-11.85 and 117-12+/116-27 respective ranges awaiting comments from ECB, Fed and BoE heads at Sintra Forum. Commodities WTI and Brent front-month futures traded with no firm direction in early European hours before picking up modestly in recent trade. US Private Inventory (bbls): Crude -3.8mln (exp. -0.6mln), Cushing -0.7mln, Distillate +2.6mln (exp. -0.2mln) and Gasoline +2.9mln (exp. -0.1mln). Norway's Industri Energi and SAFE labour unions agreed a wage deal for oil drilling workers and will not go on strike, according to Reuters. OPEC to start today at 12:00BST/07:00EDT; JMMC on Thursday at 12:00BST/07:00EDT followed by OPEC+ at 12:30BST/07:30EDT, via EnergyIntel. Libya's NOC suspends oil exports from Es Sider port. Spot gold is under some mild pressure as the Buck and Bond yields picked up, with the yellow metal back to near-two-week lows Base metals are mixed but off best levels after President Xi reaffirmed China's COVID stance – LME copper fell back under USD 8,500/t US Event Calendar 07:00: June MBA Mortgage Applications, prior 4.2% 08:30: 1Q PCE Core QoQ, est. 5.1%, prior 5.1% 08:30: 1Q GDP Price Index, est. 8.1%, prior 8.1% 08:30: 1Q Personal Consumption, est. 3.1%, prior 3.1% 08:30: 1Q GDP Annualized QoQ, est. -1.5%, prior -1.5% Central Banks 09:00: Powell Takes Part in Panel Discussion at ECB Forum in Sintra 09:00: Lagarde, Powell, Bailey, Carstens Speak in Sintra 11:30: Fed’s Mester Speaks on Panel at ECB Forum in Sintra 13:05: Fed’s Bullard Makes Introductory Remarks DB's Jim Reid concludes the overnight wrap I'm finishing this off in a taxi on the way to the Eurostar this morning and I made the mistake of telling the driver I was slightly pressed for time. He seems to be taking the racing line everywhere and my motion sickness is kicking in. A little like this car journey, it's been another volatile 24 hours in markets, with a succession of weak data releases raising further questions about how close the US and Europe might be to a recession. That saw equities give up their initial gains to post a decent decline on the day, whilst there was little respite from central bankers either, with sovereign bonds selling off further as multiple speakers doubled down on their hawkish rhetoric. That comes ahead of another eventful day ahead on the calendar, with investors primarily focused on a panel featuring Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey, as well as the flash German CPI print for June, who are the first G7 economy to release their inflation print for the month, which will provide some further clues on how fast central banks will need to move on rate hikes. Just as we go to print the NRW region of Germany has seen CPI print at 7.5% YoY, way below last month's 8.1%. This region is around a quarter of GDP so it could imply the national numbers will be notably softer when we get them later. The energy tax cuts were always going to come through in June so some respite was always possible but at first glance this seems materially below what might have been expected. This comes after a significant sovereign bond selloff in Europe once again yesterday as President Lagarde reiterated the central bank’s determination to bring down inflation, and described inflation pressures that were “broadening and intensifying”. And although Lagarde stuck to the existing script about the ECB raising rates by 25bps at the next meeting, we also heard from Latvia’s Kazaks who said that “front-loading the increase would be a reasonable choice” in the event that the situation with inflation or inflation expectations deteriorates. Lagarde did nod to this in part, saying that if the ECB was “to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resources availability, we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.” Separately on fragmentation, Lagarde said that they could “use flexibility in reinvesting redemptions” from PEPP starting July 1 in order to deal with the issue. For now, overnight index swaps are only pricing in a +31.3bps move in July from the ECB, so still closer to 25 than 50 for the time being. Meanwhile the rate priced in by year-end rose also by +7.9bps as investors interpreted the comments in a hawkish light. That supported a further rise in yields, with those on 10yr bunds up another +8.1bps yesterday, following on from their +10.7bps move in the previous session. That’s now almost reversed the -21.9ps move over the previous week, which itself was the third-largest weekly decline in bund yields for a decade, and brought the 10yr yield back up to 1.63%, so not far off its multi-year high of 1.77% seen last week. A similar pattern was seen elsewhere, with 10yr yields on 10yr OATs (+9.6bps), BTPs (+4.2bps) and gilts (+7.2bps) all moving higher too. Things turned near the European close with some poor US data releases piling on to some lacklustre confidence figures in Europe. Earlier in the day the GfK consumer confidence reading from Germany fell to -27.4 (vs. -27.3 expected), taking it to another record low. Separately in France, consumer confidence fell to 82 on the INSEE’s measure (vs. 84 expected), which we haven’t seen since 2013. Then in the US, the Conference Board’s measure fell to 98.7 (vs. 100.0 expected), which is the lowest since February 2021. The Conference Board’s one-year ahead inflation expectations hit a record high of 8.0%, surpassing the June 2008 record of 7.7%, adding to the pessimism. Along with waning confidence, the Richmond Fed’s Manufacturing Index registered a -19, its lowest since the peak onset of the pandemic, versus expectations of -7 and a prior of -9, showing that production data has weakened as well. This put a serious damper on risk sentiment which drove Treasury yields and equities lower intraday during the New York session. 10yr Treasury yields ended down -2.8bps after trading as much as +5.5bps higher during the European session. They are down another -4bps this morning. Concerningly as well, there was a fresh flattening in the Fed’s preferred yield curve indicator (which is 18m3m – 3m), which came down another -9.1bps to 165bps, which is the flattest its been since early March. With that succession of bad news helping to dampen risk appetite, US equities gave up their opening gains to leave the S&P 500 down -2.01% on the day. Tech stocks saw the worst losses, with the NASDAQ (-2.98%) and the FANG+ (-3.74%) seeing even larger declines. And whilst there was a stronger performance in Europe, the STOXX 600 ended the day up just +0.27%, having been as high as +0.95% in the couple of hours before the close. We didn’t hear so much from the Fed ahead of Chair Powell’s appearance today, although New York Fed President Williams said that at the upcoming July meeting “I think 50 to 75 is clearly going to be the debate”. Markets are continuing to price something in between the two, although since the last Fed meeting futures have been consistently closer to 75 than 50, with 69.0 bps right now. Those sharp losses in US equities are echoing across Asia this morning. The Hang Seng (-1.86%) is leading the losses followed by the Kospi (-1.82%), the Nikkei (-1.07%) and the ASX 200 (-1.06%). Over in mainland China, the Shanghai Composite (-0.77%) and the CSI (-0.80%) are slightly out-performing after yesterday’s surprise move by China to slash the quarantine period for inbound travellers (more on this below). Looking ahead, US stock index futures point to a positive opening with contracts on the S&P 500 (+0.18%) and NASDAQ 100 (+0.19%) mildly higher. Earlier today, data released showed that Japan’s retail sales advanced for the third consecutive month in May (+3.6% y/y) but lower than the consensus of +4.0%, but with the previous month's data revised up to +3.1% (vs +2.9% preliminary). Meanwhile, South Korea’s consumer sentiment index (CSI) fell sharply to 96.4 in June (vs 102.6 in May), sliding below the long-term average of 100 for the first time since Feb 2021. Separately, Australia’s retail sales put in another strong performance as it climbed +0.9% m/m in May, surpassing analyst estimates of a +0.4% increase. Oil has fallen back slightly overnight after three sessions of gains with Brent futures down -0.84% at $116.99 and WTI futures (-0.64%) at $111.04/bbl as I type. Just after we went to press yesterday, it was also announced that China would be shortening the required quarantine period for inbound travellers to one week from two. So although China is still very-much committed to a Covid-zero strategy for the time being, this step towards loosening rather than tightening restrictions is an interesting development that helped support Chinese equities in yesterday’s session towards the close which filtered through into early northern hemisphere risk performance. In terms of other data yesterday, there were signs that US house price growth might finally be slowing somewhat, with the S&P CoreLogic Case-Shiller index up by +20.4% in April, which is down slightly from the +20.6% gain in March. So still a long way from an absolute decline, but that marks a reversal in the trend after the previous 4 months of rises in the year-on-year measure. To the day ahead now, and the highlight will likely be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Tyler Durden Wed, 06/29/2022 - 08:00.....»»

Category: smallbizSource: nytJun 29th, 2022

Ukraine War Blows Up EU"s Superpower Delusion

Ukraine War Blows Up EU's Superpower Delusion Authored by Soeren Kern via The Gatestone Institute, The leaders of France, Germany and Italy have jointly visited Ukraine in an attempt to present a unified European front regarding the Russia-Ukraine war. The one-day visit was long on rhetoric but short on substance: European unity remains elusive. When Russian President Vladimir Putin launched his invasion of Ukraine on February 24, the European Union responded the following day with a package of unprecedented economic sanctions aimed at isolating Russia. The EU, which was praised for displaying "determination, unity and speed" in its response to Putin, was said to be facing a "transformative moment" that would allow the bloc to become a "geostrategic actor" on the global stage. An observer claimed that the EU had become "a top geopolitical protagonist" and that Europe "discovered that it's a superpower." On March 21, less than a month after Russia invaded Ukraine, European officials announced an ambitious plan for the EU to achieve "strategic autonomy" aimed at placing the 27-member bloc on equal footing with China and the United States. The implicit objective was to enable a "sovereign" EU to act independently of the United States and the North Atlantic Treaty Organization (NATO) in matters of defense and security. That plan is now in shambles. As the war has dragged on, European unity has collapsed and efforts to transform the European Union into a European superstate — a United States of Europe — have been exposed for what they are: delusions of grandeur. The EU's largest member states — France and Germany — have sought to appease Putin at the expense of Ukrainian sovereignty. French President Emmanuel Macron, the strongest backer of European strategic autonomy, insists that Putin should not be "humiliated" and has even called on Ukraine to make territorial concessions to help the Russian dictator save face. Meanwhile, German Prime Minister Olaf Scholz, for reasons that remain unclear, has stubbornly refused to supply Ukraine with the weapons it needs to defend itself against Russian aggression. The Franco-German appeasement has infuriated most Central and Eastern European members of the EU and NATO. They rightly fear that if Putin's imperial pretensions are not stopped in Ukraine, he will set his sights next on them. Russian revanchism, and the EU's divided response, has produced a clear shift in the bloc's balance of power on security matters. France and Germany have long arrogated to themselves de facto leadership of the EU — and have expected other member states to fall into line. The failure of Paris and Berlin to confront Putin's aggression has created an EU leadership vacuum that Poland, the Baltic states and other former communist countries have filled. A return to the pre-war status quo seems unlikely. Putin's invasion of Ukraine has underscored the indispensability of the United States and NATO for European defense and security. France and Germany, by failing to defend the most basic Western values, have undermined their own trustworthiness and dependability. Other EU member states can be expected to strongly oppose any efforts to develop an independent European military capacity that undermines the transatlantic alliance. Humiliating Putin Macron and Scholz in particular have repeatedly sought to accommodate Putin. Both, for instance, have held numerous one-on-one telephone calls with the Russian leader — calls that other EU member states have criticized as counterproductive because such conversations may convince Putin that he can end the war on his terms. After one such phone call on May 13, Scholz called for a ceasefire in Ukraine but did not demand that Russia immediately withdraw all its troops from Ukrainian territory. Germany, despite repeated promises, still has not transferred a single heavy weapon to Ukraine, according to the German newspaper Welt am Sonntag. Some say Scholz is playing for time. The German newsmagazine Der Spiegel recently reported that Scholz refuses to utter the words "Ukraine must win" because he believes that Ukraine cannot achieve victory. Others think the German chancellor is waiting for the war to end so that German industry can resume doing business with Russia. Whatever his motivation, Scholz's dithering has seriously damaged Germany's credibility, according to policy experts from across the political spectrum. Scholz seems unable or unwilling to consider, after the lessons of Britain's appeasement of Adolf Hitler in the 1930s, that if Putin wins in Ukraine, he might turn his sights next on Europe. Meanwhile, Macron has clung to his pretense of turning the EU into a sovereign superstate. During a speech to the European Parliament on May 9, the French president called for building a "stronger and more sovereign Europe" that can become "the master of its own destiny." He added that the war in Ukraine "must not distract us from our agenda." Macron, who has provided military support to Ukraine, also warned against humiliating Putin and called for reaching an agreement with Russia "to build new security balances" in Europe. That was widely interpreted as a call for Ukraine to make territorial concessions to Putin. On June 3, Macron repeated his warning about humiliating Putin. Speaking to French media, he said: "We must not humiliate Russia so that when the fighting stops we can build an exit ramp through diplomatic channels. I am convinced that France's role is to be a mediating power." Ukrainian Foreign Minister Dmytro Kuleba responded: "Calls to avoid humiliation of Russia can only humiliate France. We all better focus on how to put Russia in its place. This will bring peace and save lives." Polish President Andrzej Duda, in an interview with the German newspaper Bild, said that the phone calls with Putin were akin to talking to Adolf Hitler: "I'm amazed at all the talks that are being held with Putin at the moment. By Chancellor Scholz, by President Emmanuel Macron. These talks are useless. What do they do? They only legitimize a person responsible for the crimes committed by the Russian army in Ukraine. Vladimir Putin. He is responsible for it. He made the decision to send the troops there. The commanders are subordinate to him. Did anyone talk to Adolf Hitler like that during WWII? Did someone say Adolf Hitler had to save face? That we should proceed in such a way that it is not humiliating for Adolf Hitler?" John Chipman, head of the London-based International Institute for Strategic Studies, tweeted: "The end of French exceptionalism. Once you claim your main role to be a mediator between right and wrong, days of grandeur are over. "'Saving face' is a weak diplomatic aim; Putin can take personal responsibility for his face. "Humiliation: a mild punishment for war crimes." National Interests Some observers have speculated that Macron's obsession with Putin's humiliation stems from a faulty understanding of the June 1919 Treaty of Versailles, which officially ended World War I. Long-standing orthodoxy has held that the terms imposed on Germany were humiliating and fueled the nationalist sentiment that led to the rise of Adolf Hitler and World War II, but contemporary scholars have challenged that narrative: the Treaty of Versailles, they say, was not tough enough on Germany. Others suspect that Macron and Scholz are seeking a new 19th century-style Concert of Europe in which France, Germany and Russia agree to divide Europe into spheres of influence. Such an agreement would, presumably, turn Ukraine into a vassal state of Russia. Still others believe that France and Germany are primarily concerned with protecting national business and financial interests in Russia. German Member of the European Parliament Reinhard Bütikofer noted: "As Moscow hardliners question whether Europe will 'survive' the current crisis, President Macron says: 'We must not humiliate Russia.' Macron appears not to realize that defending Ukraine against Russia's aggression is also about defending Europe's common security. Putin wants more than just to dominate Ukraine. Macron sees France's interests decoupled from those of Eastern and Central Europe." Bütikofer's comment goes to the heart of the issue: national interests still matter. One of the EU's founding myths has been that national sovereignty is an outmoded concept and that the national interests of the EU's 27 member states can be subsumed under a new "European interest." The war in Ukraine and the differing responses to it have proven that national interests still matter and will continue to do so. Latvian Prime Minister Krišjānis Kariņš, in an interview with Politico, argued that the only way to achieve lasting peace and security in Europe is for Russia to lose the war in Ukraine: "The difficulty is that some of my colleagues have a false belief ... peace at any cost. Peace at any cost is what we have done for 20 years with Putin. Peace at any cost means Putin wins. We end up losing. Now, in the self-interest of Germany, and France and Italy and everyone else, if we really want security in Europe, Russia has to lose, they finally have to realize they cannot operate in this way. And collectively, we have the ability to make that happen." Transatlantic Relations Meanwhile, transatlanticism is enjoying a surge in popularity. A new survey by Globsec, a think tank based in Bratislava, found broad support (79%) across nine countries in Central and Eastern Europe (Bulgaria, Czechia, Hungary, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia) for NATO's role as security guarantor. The survey also found significant growth in the CEE countries' perception of the United States as a strategic partner. In Poland, for instance, such perceptions increased from 54% in 2021 to 73% in 2022. By contrast, Polish perceptions of Germany as a strategic partner plummeted from 48% in 2021 to 27% in 2022. "The perception that the US is a strategic partner has soared by 10 percentage points since 2021," according to the report. "Washington is now viewed as a key ally in NATO by 3/4 of respondents in the CEE region." German analyst Marcel Dirsus noted: "Without American support, Ukraine would already be done. Countries like Germany and France have made European autonomy even more difficult because nobody east of the Oder River trusts them to come through when things get rough.... "What good are more German tanks to Poland or Estonia if neither they nor Russia thinks that Berlin would be willing to use them to defend Warsaw or Tallinn? "I very much doubt central Europeans who were already skeptical about European autonomy or sovereignty or whatever the phrase of the day is are looking at Macron and Scholz and think now is the time to rely more on Paris and Berlin. If anything, they'll double-down on America." Polish analyst Konrad Muzyka agreed: "Ukraine's shown that France and Germany are unwilling to increase costs on Russia for its attack on Ukraine. Paris and Germany are unwilling to send equipment to Ukraine, what makes people think its soldiers will die for Tallinn, Vilnius, Riga or Warsaw?" American foreign policy expert Elliot Cohen concluded: "President Macron continues, perversely, to talk about an exit from the war, to include European security guarantees for Ukraine. Why on earth would any Ukrainian think France or Germany could or would fight on their behalf? This is vanity, not statesmanship, at work." Rhetoric versus Substance On June 16, Macron, Scholz and Italian Prime Minister Mario Draghi, joined by Romanian President Klaus Iohannis, arrived in the Ukrainian capital Kyiv for the first time since the beginning of the war. The visit was designed, apparently, to dispel criticism of European disunity and inconsistent support for Ukraine. The leaders pledged that the EU would not force Ukraine to surrender or give up territory to end the war. "Ukraine will choose the peace it wants," Draghi said. "Any diplomatic solution cannot be separated from the will of Kyiv, from what it deems acceptable to her people. Only in this way can we build a peace that is just and lasting." Ukrainian President Volodymyr Zelenskyy was also invited to attend the G7 Summit to be held in Germany on June 26-28, and the NATO Summit in Madrid on June 29-30. The three leaders expressed support for Ukraine to be given candidate status for EU membership, but Macron stressed that such status would be accompanied by a "roadmap" that would include "conditions." Previously, Macron, Scholz and Draghi all said that Ukraine's EU bid could take decades. German MP Norbert Röttgen criticized Scholz's trip to Ukraine as political showmanship: "Chancellor Scholz created high expectations for his trip to Ukraine. He did not fulfill them with the 'yes' to EU membership and the invitation to the G7 summit. Ukraine needs quick help now, we owe it. EU membership is a matter of decades." Europe analyst David Herszenhorn, writing for Politico, noted: "Despite the encouraging rhetoric, the trio of leaders — representing the EU's biggest, richest and most powerful countries — did not announce any dramatic new military or financial assistance for Ukraine, which might help tip the war in Kyiv's favor. "By contrast, U.S. President Joe Biden on Wednesday announced an additional $1 billion in support for Ukraine.... "While Ukraine has been pushing hard to win candidate status, that designation alone offers little indication about when, or even if, Ukraine would ever formally become a member.... "Many EU officials and diplomats said it is difficult to imagine Ukraine making much progress toward actual membership until it is no longer at war, and Macron has said that the overall process could take a decade or longer." Correspondents Guy Chazan, Roman Olearchyk and Amy Kazmin, writing for the Financial Times, concluded: "French president Emmanuel Macron, German chancellor Olaf Scholz and Italian prime minister Mario Draghi did not just have warm words for Ukraine — they also backed its bid to join the EU. "But once the euphoria wore off, some Ukrainians wondered whether the visit of the three leaders, who were also joined by Romania's president Klaus Iohannis, marked a triumph of ceremony over substance. "Andriy Melnyk, Ukraine's ambassador to Berlin, summed up the ambivalence. EU membership for Ukraine lay far off in the future, he told Germany's ZDF TV. 'But right now what we need is to survive,' he said. 'And for that we need heavy weapons.' "Anyone hoping the visit would break the logjam in the delivery of such kit will have been disappointed. The only new pledge came from Macron, who said France would supply six additional Caesar howitzers, on top of the 12 it has already given Ukraine.... "The issue of weapons continues to loom over relations between Ukraine and its allies. Presidential adviser Mykhailo Podolyak tweeted earlier this month that Ukraine needed 1,000 howitzers, 300 multiple rocket launchers, 500 tanks, 2,000 armored vehicles and 1,000 drones to achieve parity with Russia and 'end the war.' The equipment western countries have committed to provide so far falls far short." Expert Commentary Irish analyst Judy Dempsey, in an article — "German Ambiguity Is Deciding Ukraine's Future" — published by the Brussels-based think tank Carnegie Europe, wrote that Scholz's delay in sending heavy weapons to Ukraine was hurting Kyiv's chances of preserving its sovereignty, and that it was damaging Germany's standing across Europe: "Scholz's position reveals a lack of leadership and with it a lack of conviction and consistency. It is also about a fear of antagonizing the Kremlin. The German political elites that grew up during the Cold War don't want to give up their special business and political ties to Moscow. They are still reluctant to accept Russia's motives in Georgia, Syria, Belarus, and now Ukraine. "These motives are about Russia positioning itself to reshape Europe's post–Cold War order. The longer Scholz continues his ambiguity toward Ukraine, the greater the likelihood that Putin will use the German chancellor and French President Emmanuel Macron to push Ukraine into a compromise and ultimately change Europe's security architecture. "In practice, that would have devastating consequences for the transatlantic relationship which Putin has long sought to weaken. It would divide Europe. As it is, Poland and the Baltic states are deeply distrustful of France's and Germany's relations with Putin. They are also frustrated that Paris and Berlin do not take the Russian imperialist agenda seriously. "Beyond Ukraine, Scholz's ambiguity is hurting all of Europe. Putin will not hesitate to exploit it both militarily and politically." Former MI6 head John Sawers, in an article — "Macron is Playing a Risky Game on Ukraine" — published by the Financial Times, warned that the French president's insistence that Putin should not be humiliated could lead to a premature ceasefire that locks in Russian gains: "The west has two goals in the war in Ukraine: to uphold Ukrainian sovereignty and to deter Russia from any similar assaults on European countries in the future. "However, the fighting in the Donbas region is ugly and it is tempting to support any move that would bring it to an end. Unsurprisingly, there have been calls for an early peace initiative, while French president Emmanuel Macron has said that it is important not to 'humiliate' Russia over its invasion — a remark that drew a frosty response from Ukrainian president Volodymyr Zelenskyy's chief of staff. "The problem is that a ceasefire now would lock in Russia's military gains on the ground. There is no reason to think that Vladimir Putin would agree to pull back.... "If another round of European diplomacy leaves Russia once again sitting on its military gains in Ukraine, then Putin will regain political strength at home and feel empowered to launch new military adventures in the future. The Ukrainians want to fight on and they need our continued support — advanced weapons and ever tougher sanctions on Russia. That means several more months of ugly fighting. But a premature ceasefire will help Putin snatch victory from the jaws of defeat. No western leader should be his enabler." Austrian political scientist Ralph Gert Schöllhammer, in an article — "Why Europe Hedges Its Support for Ukraine" — published by The Wall Street Journal, argued that Paris and Berlin worry that an EU with Ukraine could lead to a competing Warsaw-Kyiv axis: "Despite the supranational ambitions of the EU and its most ardent supporters, national interests still dominate the political calculations of member states. For Paris and Berlin the Ukraine crisis isn't only a security issue, it could also determine the EU's future power distribution. "The most prestigious positions in the EU are held by Western European politicians, reflecting a power imbalance between Eastern and Western Europe, from Ms. von der Leyen (Germany) and European Central Bank President Christine Lagarde (France) to the high representative of the Union for Foreign Affairs and Security Policy Josep Borrell (Spain) and the president of the European Council, Charles Michel (Belgium). Eastern European governments have made clear that this status quo is increasingly unacceptable to them, and the war in Ukraine has given them additional confidence to change it. "The EU is built around Germany and France, and both states have jealously guarded their position as the ultimate decision makers in Europe. Policy makers in both countries are aware that an EU with Ukraine could lead to a competing Warsaw-Kyiv axis, something neither France nor Germany wants. Ukraine is politically and culturally closer to Poland than Germany, meaning that German power in the EU could be diminished significantly and replaced by growing Eastern European influence. "These thoughts might seem cynical in light of the heroic struggle of Ukraine and its people, but it would be a mistake to believe that power politics has been replaced by universally held ideals." Europe expert Stefan Auer, in an opinion essay — "Ukraine's Fight for Freedom Exposes 'Sovereign Europe' as a Delusion" — published by the Financial Times, wrote that Central Europeans understand better than France or Germany the connection between national independence and security: "The shared outrage over Russia's invasion of Ukraine initially strengthened European unity. But the challenges that the war has generated appear to be reinforcing European disunion. Central and eastern European states, with the notable exception of Hungary, strongly support Ukraine's fight for territorial integrity, while Germany, France and Italy seek ways to accommodate Russia. "For the EU, the return of sovereignty is unexpected. European integration supposedly made nation states increasingly obsolete. Dialogue, not threats of violence, would uphold peace.... "Rather than enemies, Europeans thought they had partners, competitors or at worst rivals. The Russian invasion of Ukraine has forced an abrupt re-evaluation of this view.... "It was once a truism that France needed the EU to conceal its weakness, while Germany needed it to hide its strength. In relation to Russia, one could argue that Germany uses the EU's relative weakness to justify its own inaction.... "But when it comes to assisting Ukraine in the war itself, it is national capitals that matter, not Brussels. What Moscow wants and many of Putin's western supporters appear willing to accept is the division of Europe into spheres of influence. This is redolent of the Grossraum thinking articulated by the crown jurist of Nazi Germany, Carl Schmitt: a theory of large economic spaces controlled by major powers.... "German chancellor Olaf Scholz echoes such arguments when he declares that 'Russia must not win this war,' rather than unambiguously advocating a Ukrainian victory. This is as logical as it is misguided. Where there are no enemies, there can be no victors. "By contrast, leaders in central and eastern Europe are not afraid to combine the language of values with power politics. The French and German visions for peace imply Ukrainian territorial concessions. Such ideas are foolhardy and will not ensure security for Europe or Ukraine. A sovereign Europe must not be pursued at the expense of Ukrainian sovereignty.... "In fact, for Europe to have a future in freedom, Ukraine must win this defining battle of our times. The losers will include not just Putin's Russia. The defeat of Russian imperialism should finally put to rest Franco-German delusions, whether they aim at a sovereign or a post-national Europe." German analyst Ulrich Speck, in an essay — "The Ukraine War and the Rebirth of NATO" — published by the Swiss newspaper Neue Zürcher Zeitung, concluded that the actions of Macron and Scholz has cemented NATO, not the EU, as the cornerstone of European security: "Three developments have catapulted NATO back into the center of events. "First: Russia's open attack on Ukraine in February 2022. This time, not only East Central Europeans, but also West Europeans and North Americans were shocked by the breach of all norms on which the European peace order is based: an open war of aggression and conquest with countless atrocities and war crimes. It is therefore clear that Putin is ready to implement his project of a new Russian empire, even at great expense. It is also clear that if he is successful, he will probably not stop at Ukraine. "The second reason for the renaissance of NATO is that the United States is fulfilling its classic leadership role in the Western alliance. For the Biden administration, the revival of alliances is at the center of foreign policy: close cooperation with allies is seen as providing a decisive advantage over China and Russia, which allows it to deal with the autocratic challengers from a 'position of strength.' "The third reason is that the EU leaders, France and Germany, have been very reluctant to react to Russia's attack on Ukraine. While the United States made decisive progress on arms deliveries and sanctions, flanked by a resolutely acting Great Britain, it seemed that Paris and Berlin were hoping to the last to be able to change the mind of the Russian President. Both are reluctant to supply arms to Ukraine, and they are more likely to play along than lead when it comes to sanctions. The fact that Macron and Scholz have not been in Kyiv since the beginning of the war underscores the distance they maintain from Ukraine. "With this attitude, Berlin and Paris have discredited themselves in the eyes of East Central Europeans and Scandinavians as reliable partners in the event of a Russian threat. More than ever, Eastern and Northern Europe will rely on the United States and Great Britain — ​​that is, on NATO — for security policy. "This means that there is no alternative to NATO — at least as long as Russia takes a revisionist stance, does not respect borders and does not recognize the reorganization of the region after the end of the Cold War. The lesson of current experience is that only the United States is capable of holding Russia in check. The vehicle for this remains NATO, which has not outlived itself, but is more important as the security policy core of a free West than it has been for decades." Tyler Durden Thu, 06/23/2022 - 02:00.....»»

Category: blogSource: zerohedgeJun 23rd, 2022

Timeline shows Putin"s alleged health problems after contested Ukrainian claims that he is concealing a serious illness

After multiple claims that Putin may be suffering seriously from cancer, Insider compiled a 10-year timeline of the Russian president's health. Left: President Vladimir Putin grips the table in an April 2022 meeting, while right, Putin shirtless in 2017 while holding up a freshly caught fishKremnlin / Alexei Nikolsky/Sputnik/AFP via Getty Images/Insider President Vladimir Putin has long tried to project an image of abundant good health. Ukrainian officials claimed in May that he is hiding that he is "very ill" with cancer.  Rumors of health problems and secret surgery have followed the Russian president for decades. Speculation about President Vladimir Putin's health reached fever pitch on Sunday after former MI6 Russia spy Christopher Steele indicated the Russian president could be seriously ill. Speaking to Sky News, Steele said Putin's health could be a factor in the unfolding invasion of Ukraine.Since invading Ukraine Putin has had shaky media appearances and has been described — with varying reliability — as suffering from everything from Parkinson's disease to dementia. Putin has for decades cultivated an image of virile masculinity at peak fitness — but an investigation by independent Russian media outlet Proekt alleged that this was only possible with significant deception.  Most specifics about Putin's health are almost impossible to confirm. His top spokesperson, Dmitry Peskov, has repeatedly denied any issues. Medical professionals have refused to give weight to the rumors, as Deutsche Welle reported, arguing that accurate diagnoses can only be made by in-person examinations. Here is a timeline of moments when Putin's health has come into question. October 2012: Kremlin denies looming surgery after hang-gliding accidentIn fall 2012, Reuters cited three government sources saying Putin had back trouble and would need surgery soon.The Kremlin denied this, but after Russian newspaper Vedomosti said that Putin had hurt himself while hang-gliding, Peskov said the trouble was due to "an ordinary sporting injury" in which Putin had strained a muscle, as The Atlantic reported. November 4, 2012: Kremlin suppresses footage of Putin with a limp By the end of December 2012, Proekt alleged that Putin was wearing a corset and significantly limiting — or even skipping — sit-down engagements due to likely back problems. The outlet cited unnamed Russian officials for the information.On November 4, Russia's National Unity Day, the Kremlin limited itself to still photos of Putin's appearance at a ceremony in Red Square, according to Proekt. However, footage posted by religious leaders in Moscow showed the president with a slight limp. 2016-2017: At least five doctors with Putin wherever he goesBy matching the check-in dates of medical specialists with Putin's travel schedule, Proekt found that Putin was regularly accompanied by at least five doctors in these years — a number that would later swell to 13.They included an ENT specialist, an infectious diseases specialist, a staff rescuscitologist, and a neurosurgeon, the outlet reported. November 2016: Putin disappears for possible back surgeryBetween November 25 and December 1, Putin appeared only in pre-recorded meetings, Proekt reported. Meanwhile, 12 specialists suddenly checked in at the Sochi hospital near his residence, including his personal doctors, neurosurgeons, and a rehabilitation specialist, according to Proekt. May 2017: Putin tumbles during ice hockey crashRussian President Vladimir Putin falls as he takes part in a gala match of the Night Hockey League teams in the Bolshoy Ice Arena in the Black Sea resort of Sochi, Russia, Wednesday, May 10, 2017.Yuri Kochetkov/Pool Photo via AP PhotoPutin, an avid ice hockey player, almost somersaulted when he crashed to the ground during a match in Sochi at the age of 64, CNN reported.According to Proekt, the player Pavel Bure had crashed into him. After this, an orthopedic traumatologist known to regularly treat the president checked in to a hospital just outside Putin's residence, Proekt reported. August 2017: Putin disappears with cancer doctors in towBetween August 8 and 16 that year, the president disappeared from public view, with oncologist-surgeon Evgeny Selivanov, Proekt reported. The presence of an ENT doctor suggested a thyroid issue, the outlet said.Selivanov joined Putin's medical entourage, flying to his location 35 times in the space of four years, the outlet reported. Only ENT doctors have seen him more often, the outlet said.February 2018: Putin vanishes with "cold" at height of election campaignPutin disappeared from view from February 12 to 1 in 2018, just one month before polling day, Proekt reported. Acknowledging his canceled events, Peskov said Putin has a cold, per ABC News. Fall 2021: An obsession with COVID-19 self-isolation Russian President Vladimir Putin (L) meets French President Emmanuel Macron (R) on February 07, 2022 in Moscow, Russia.Kremlin Press Office/Anadolu Agency via Getty ImagesA COVID-19 outbreak among presidential staff in September last year led Putin to self-isolate for two weeks. Ten days later, he denied any ill health after he was seen coughing during a televised meeting. Soon after, The New York Times reported that Putin was imposing increasingly stringent isolation procedures on anyone due to see him face-to-face — including isolation for two weeks prior and the requirement to pass through a disinfectant tunnel.This came weeks after Russia lifted most of its COVID-19 measures nationwide, the paper reported. By February 2022 — as world leaders implored him not to invade Ukraine — Putin was having his in-person meetings at an extraordinarily long table. April 2022: Shaky meeting footage fuels speculation Bizarre footage of Putin meeting with his defense minister on April 21 showed the president gripping the edge of the table, looking uncomfortable and fidgety, as Newsweek reported.Along with his bloated appearance, the video prompted a welter of tabloid speculation — none of which was confirmed — that he could be suffering from the effects of steroid treatment or Parkinson's disease. —max seddon (@maxseddon) April 21, 2022Further unverified rumors were emanated from an anonymous Telegram account claiming to be a former Kremlin insider. May 2022: Anonymous oligarch says Putin has blood cancerIn early May, New Lines Magazine obtained a recording of an unnamed Russian oligarch saying that Putin "is very ill with blood cancer."The oligarch, who did not know he was being recorded, went on to criticize Putin's invasion of Ukraine, saying that "we all hope" he dies, and that "the problem is with his head."May 14: Ukrainian military intelligence chief claims Putin "is very sick" and a coup is under wayUkrainian intelligence chief Maj. Gen. Kyrylo Budanov told Sky News on May 14 that plans to overthrow Putin were in motion within Russia, and that the 69-year-old was in a "very bad psychological and physical condition and he is very sick."Putin is sick with cancer, Budanov said. He denied trying to spread that idea for propaganda to advantage Ukraine, but did not provide evidence for his claims. May 18: MI6 experts weigh in, with one saying Putin will be "gone by 2023"The former head of Britain's MI6 spy agency, Richard Dearlove, suggested on a podcast Putin has long-term illness by saying he will be "gone" by the end of the year, and would be put into "the sanatorium, from which he will not emerge as the leader of Russia."Former MI6 Russia bureau chief Christopher Steele also said in an interview with British talk radio station LBC that Putin is "increasingly ill," to an extent that is affecting his leadership in the Kremlin and managing the war in Ukraine.He said that Putin often has to take breaks from meetings to receive medical treatment. Steele compiled the partially discredited Trump-Russia dossier that contained the explosive "pee tape" allegation, whose existence has never been confirmed.May 23: Western officials pour cold water on health-related rumorsWestern officials cast doubt on numerous rumors about Putin and how his health affected his leadership. The comments came after Budanov claimed there had been a failed assassination attempt on Putin two months prior. But the officials, who spoke anonymously, made no confirmation either way about Putin's health but called it "speculation." They also refused to confirm the assassination claim. One said: "President Putin is firmly in control of his inner circle, the country, and the decisions which are being made, irrespective of any speculation about his health."May 24: Ukrainian intel chief doubles down on Putin sickness claims, but says he has "a few more years"In an interview published May 24 with Ukrainian newspaper Pravda, Budanov claimed that he can "fully confirm" that Putin has cancer. He did not offer any evidence for his claims, however."He has several serious illnesses, one of which is cancer," Budanov said. "But it is not worth hoping that Putin will die tomorrow. He has at least a few more years," he added. "Like it or not, but it's true."May 29: Russia's foreign minister denies that Putin is unwell, experts agree it's unlikelyForeign Minister Sergei Lavrov told French TV station TF1, according to Russian news agency TASS: "President Vladimir Putin makes public appearances on a daily basis. You can see him on TV screens, read and listen to his speeches."I don't think that a sane person can suspect any signs of an illness or ailment in this man."I'll leave it on the conscience of those who disseminate such rumors despite daily opportunities for everyone to see how he and others look like."Three US intelligence and military experts also told Insider's John Haltiwanger and Mattathias Schwartz  that they are not taking the claims of illness very seriously, citing a lack of evidence.Read the original article on Business Insider.....»»

Category: worldSource: nytMay 30th, 2022