Cryptocurrency relates geopolitical bipolarity, seeking regulatory transparency

The largest cryptocurrency exchange in the world, Binance, withdrew its helping hand for FTX's liquidity crisis earlier this month, citing results of due diligence. At the NATEA US-Taiwan Hi-tech Forum, Alex Liu, founder and CEO of Taiwan-based cryptocurrency exchange MaiCoin, talked about the parallel geopolitical bipolarity in the virtual space of crypto with Troy Cross, fellow at the Bitcoin Policy Institute......»»

Category: topSource: digitimesNov 27th, 2022

The World’s Largest Crypto Exchange Is Buying a Major Competitor. Here’s Why That Matters

Binance, the largest crypto exchange in the world, just bought its fastest-rising competitor, FTX. Here's what that means for the crypto world and beyond Binance, the world’s largest centralized crypto exchange, said on Tuesday that it reached a deal to buy its fastest-rising competitor, FTX. Binance’s co-founder and CEO Changpeng Zhao announced the move on Twitter, and immediately sent shockwaves through a crypto landscape already besieged by turbulence and falling prices. In the hours after, Bitcoin fell by more than 10%. The exact terms of the transaction were not disclosed on Tuesday. (In January, FTX was valued at $32 billion.) But the deal exposes the vulnerability of even crypto’s most iron-clad dealmakers—and could draw the increased scrutiny from regulators across the world. It also delivers a blow to the public image of FTX founder Sam Bankman-Fried, one of crypto’s most well-known figures—who was widely acknowledged as an industry leader working to push crypto toward the mainstream. Critics now argue that under Bankman-Fried’s leadership, FTX mismanaged its rapid growth and hid its financial shortcomings, which necessitated a bailout from one of its closest (and savviest) competitors. [time-brightcove not-tgx=”true”] “It will probably go down in history as one of the greatest corporate raids of all time,” Alex Svanevik, the CEO of the blockchain analytics firm Nansen, tells TIME, noting that the deal greatly increases Zhao’s power and stature. A spokesperson from FTX declined to comment beyond Bankman-Fried’s announcement of the deal on Twitter. Zhao helped set off the turn of events on Sunday by publicly sowing doubt on Twitter about the amount of cash FTX had on hand. Zhao announced that Binance intended to sell off more than $500 million worth of FTX’s native token, FTT, creating a bank run in which crypto investors—jumpy from a year’s worth of financial disasters—rushed to pull their money out. This caused an actual liquidity crisis for FTX, which reacted by temporarily pausing withdrawals. On Tuesday, Bankman-Fried tweeted that Binance was helping FTX to repay all of its users who were trying to withdraw their holdings. He said that all users would eventually be able to withdraw their money at a “1:1” ratio. Notably, Binance’s purchase does not include its FTX.US retail operation, which operates as a separate company. History: FTX challenges Binance Binance has long been the foremost crypto exchange. It facilitates billions of dollars in trading volume every day, and generated revenue of at least $20 billion last year, according to Bloomberg. Users turn to Binance to convert dollars into Bitcoin, Ether, or Dogecoin, and also trade Binance’s more risky financial products, including crypto derivatives, which allow them to make bets on future fluctuations in cryptocurrency prices. In 2019, the rising crypto entrepreneur Sam Bankman-Fried founded the exchange FTX, seeking to onboard a new generation of curious investors into the crypto world. At the height of crypto’s recent bull run, from 2020 to 2021, FTX was one of the fastest-growing platforms of the ecosystem, with its revenue soaring more than 1000%. Bankman-Fried himself became one of crypto’s leading celebrities. He held conferences with Bill Clinton and Tony Blair, poured millions into political campaigns and appeared regularly in Washington for congressional hearings and backroom meetings with lawmakers and regulators. He argued that crypto would democratize finance, graced the cover of FORTUNE magazine, and spent heavily on branding, including buying the naming rights to the Miami Heat’s arena, which is now FTX Arena, for $135 million. In May, Bankman-Fried was named to the 2022 TIME100. And when the crypto world suffered one devastating crash after another, Bankman-Fried played the role of white knight, bailing out struggling businesses with huge loans, in the process building an enviable crypto empire. (His notable deals included taking a 30 percent stake in SkyBridge Capital, the hedge fund founded by Anthony Scaramucci.) FTX unravels But on Nov. 2, the crypto news outlet CoinDesk reported that the balance sheet of FTX’s sister company, Alameda Research, seemed to be built on a shaky foundation. On Nov. 6, Zhao announced on Twitter that Binance would sell off the $2 billion worth it owned in FTT, FTX’s token, due to “recent revelations that have came [sic] to light.” “Liquidating our FTT is just post-exit risk management, learning from LUNA,” Zhao wrote, referring to the failed stablecoin ecosystem whose demise played a huge role in deepening the overall crypto crash this May. Zhao’s comparison of LUNA, a disastrous project, with FTX, one of the industry’s trusted power players, raised many eyebrows, including Bankman-Fried’s. “A competitor is trying to go after us with false rumors,” Bankman-Fried tweeted. “FTX is fine. Assets are fine.” Read More: What Terra’s Crash Means For Crypto and Beyond But Zhao’s actions unnerved many investors, and a growing number of crypto analysts began to support the idea that Alameda Research was secretly insolvent. So over the past two days, hundreds of millions of dollars worth of crypto was pulled out of FTX. Investors’ fears compounded upon themselves, and the overall market sank as well, with Bitcoin dropping 6%. FTX suddenly faced a major cash shortage. On Tuesday morning, the platform stopped processing clients’ requests for withdrawals. Hours later, Zhao announced that Binance would be buying FTX, tweeting: “FTX asked for our help.” He stipulated that the agreement was “nonbinding.” The move came as a major surprise to crypto insiders, especially given Bankman-Fried’s stature in the industry. “If you suggested something like this 48 or even 24 hours ago—I don’t think anyone saw this coming,” Kristin Smith, the executive director of the Blockchain Association, a D.C.-based crypto lobbying group, says. “This is absolutely mind-blowing news for the crypto community, and a day that is going to be looked back upon for years ahead.” “Most people did not expect FTX to end up in this situation, given they were the savior of these other distressed companies,” Svanevik says. “We of course know that Sam Bankman-Fried had been quite active trying to influence regulation in the U.S. It looks a bit embarrassing to end up in this situation so shortly after.” What this means for crypto In the short term, the news sent major shockwaves through crypto, with Bitcoin dropping 10% and Ether dropping more than 17%. It’s possible that the downward spiral could continue, as collapses of crypto platforms or companies have proved to be contagious to the larger ecosystem. Smith predicts that the sale will cause Bankman-Fried to take a backseat in U.S. crypto regulatory negotiations. “I don’t imagine that we’re going to see him walking the halls of Capitol Hill anytime soon,” she says. She also says that FTX’s downfall could lead to increased urgency from legislators to regulate large exchanges. “If there’s one thing the events have shown, it’s that we really do need to have more transparency into how centralized crypto exchanges work,” she says. “We need to get legislation passed.” Zhao’s Binance, on the other hand, is now the undisputed powerhouse of the centralized crypto world. The company’s acquisition of FTX is concerning to many crypto idealists given the importance they place on decentralization. And others in the industry are concerned that the deal will draw antitrust scrutiny in more stringent jurisdictions around the world, including in the E.U. John Lo, managing partner of digital assets at the investment firm Recharge Capital, wrote in an email to TIME that after the sale, crypto “is more centralized than ever.” However, he hopes that the events serve as a wake-up call to the crypto community to re-orient its priorities toward the technology’s core values. “Centralized actors will continue to curb stomp decentralization when presented the opportunity,” he wrote. “However, the ascent of decentralized and autonomous solutions are inevitable.”.....»»

Category: topSource: timeNov 8th, 2022

Multipolar World Order – Part 1

Multipolar World Order – Part 1 Authored by Iain Davis via, Russia’s war with Ukraine is first and foremost a tragedy for the people of both countries, especially those who live—and die—in the battle zones. The priority for humanity, though apparently not for the political class, is to encourage Moscow and Kyiv to stop killing men, women and children and negotiate a peace deal. Beyond the immediate confines of the conflict, the war is also seen by some as representative of an alleged clash between great powers and, perhaps, between civilisations. All wars are momentous, but the ramifications of Ukrainian war are already global. Consequently, there is a perception that it is the focal point of a confrontation between two distinct models of global governance. The NATO-led alliance of the Western nations continues to push the unipolar, G7, international rules-based order (IRBO). It is opposed, some say, by the Russian and Chinese-led BRICS and the G20-based multipolar world order. In this 3 part series we will explore these issues and consider if it is tenable to place our faith in the emerging multipolar world order. There are very few redeeming features of the unipolar world order, that’s for sure. It is a system that overwhelmingly serves capital and few people other than a “parasite class” of stakeholder capitalist eugenicists. This has led many disaffected Westerners to invest their hopes in the promise of the multipolar world order: Many have increasingly come to terms with the reality that today’s multipolar system led by Russia and China has premised itself upon the defense of international law and national sovereignty as outlined in the UN Charter. [. . .] Putin and Xi Jinping have [. . .] made their choice to stand for win-win cooperation over Hobbesian Zero Sum thinking. [. . .] [T]heir entire strategy is premised upon the UN Charter. If only that were so! Unfortunately, it doesn’t appear to be the case. But even if it were true, Putin and Xi Jinping basing “their entire strategy” upon the UN Charter, would be cause for concern, not relief. For the globalist forces that see nation-states as squares on the grand chessboard and that regard leaders like Putin, Biden and Xi Jinping as accomplices, the multipolar world order is manna from heaven. They have spent more than a century trying to centralise global power. The power of individual nation-states at least presents the possibility of some decentralisation. The multipolar world order finally ends all national sovereignty and delivers true global governance. World Order We need to distinguish between the ideological concept of “world order” and the reality. This will help us identify where “world order” is an artificially imposed construct. Authoritarian power, wielded over populations, territory and resources, restricted by physical and political geography, dictates the “world order.” The present order is largely the product of hard-nosed geopolitics, but it also reflects the various attempts to impose a global order. The struggle to manage and mitigate the consequences of geopolitics is evident in the history of international relations. For nearly 500 years nation-states have sought to co-exist as sovereign entities. Numerous systems have been devised to seize control of what would otherwise be anarchy. It is very much to the detriment of humanity that anarchy has not been allowed to flourish. In 1648, the two bilateral treaties that formed the Peace of Westphalia concluded the 30 Years War (or Wars). Those negotiated settlements arguably established the precept of the territorial sovereignty within the borders of the nation-state. This reduced, but did not end, the centralised authoritarian power of the Holy Roman Empire (HRE). Britannica notes: The Peace of Westphalia recognized the full territorial sovereignty of the member states of the empire. This isn’t entirely accurate. That so-called “full territorial sovereignty” delineated regional power within Europe and the HRE, but full sovereignty wasn’t established. The Westphalian treaties created hundreds of principalities that were formerly controlled by the central legislature of the HRE, the Diet. These new, effectively federalised principalities still paid taxes to the emperor and, crucially, religious observance remained a matter for the empire to decide. The treaties also consolidated the regional power of the Danish, Swedish, and French states but the Empire itself remained intact and dominant. It is more accurate to say that the Peace of Westphalia somewhat curtailed the authoritarian power of the HRE and defined the physical borders of some nation states. During the 20th century, this led to the popular interpretation of the nation-state as a bulwark against international hegemonic power, despite that never having been entirely true. Consequently, the so-called “Westphalian model” is largely based upon a myth. It represents an idealised version of the world order, suggesting how it could operate rather than describing how it does. Signing of the Peace of Westphalia, in Münster 1648, painting by Gerard Ter Borch If nation-states really were sovereign and if their territorial integrity were genuinely respected, then the Westphalian world order would be pure anarchy. This is the ideal upon which the UN is supposedly founded because, contrary to another ubiquitous popular myth, anarchy does not mean “chaos.” Quite the opposite. Anarchy is exemplified by Article 2.1 of the UN Charter: The Organization is based on the principle of the sovereign equality of all its Members. The word “anarchy” is an abstraction of the classical Greek “anarkhos,” meaning “rulerless.” This is derived from the privative prefix “an” (without) in conjunction with “arkhos” (leader or ruler). Literally translated, “anarchy” means “without rulers”—what the UN calls “sovereign equality.” A Westphalian world order of sovereign nation-states, each observing the “equality” of all others while adhering to the non-aggression principle, is a system of global, political anarchy. Unfortunately, that is not the way the current UN “world order” functions, nor has there ever been any attempt to impose such an order. What a shame. Within the League of Nations and subsequent UN system of practical “world order,”—a world order allegedly built upon the sovereignty of nations—equality exists in theory only. Through empire, colonialism, neocolonialism—that is, through economic, military, financial and monetary conquest, coupled with the debt obligations imposed upon targeted nations—global powers have always been able to dominate and control lesser ones. National governments, if defined in purely political terms, have never been the only source of authority behind the efforts to construct world order. As revealed by Antony C. Sutton and others, private corporate power has aided national governments in shaping “world order.” Neither Hitler’s rise to power nor the Bolshevik Revolution would have occurred as they did, if at all, without the guidance of the Wall Street financiers. The bankers’ global financial institutions and extensive international espionage networks were instrumental in shifting global political power. These private-sector “partners” of government are the “stakeholders” we constantly hear about today. The most powerful among them are fully engaged in “the game” described by Zbigniew Brzezinski in The Grand Chessboard. Brzezinski recognised that the continental landmass of Eurasia was the key to genuine global hegemony: This huge, oddly shaped Eurasian chess board—extending from Lisbon to Vladivostok—provides the setting for “the game.” [. . .] [I]f the middle space rebuffs the West, becomes an assertive single entity [. . .] then America’s primacy in Eurasia shrinks dramatically. [. . .] That mega-continent is just too large, too populous, culturally too varied, and composed of too many historically ambitious and politically energetic states to be compliant toward even the most economically successful and politically pre-eminent global power. [. . .] Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire. [. . .] [I]t would then become a predominantly Asian imperial state. The “unipolar world order” favoured by the Western powers, often referred to as the “international rules-based order” or the “international rules-based system,” is another attempt to impose order. This “unipolar” model enables the US and its European partners to exploit the UN system to claim legitimacy for their games of empire. Through it, the transatlantic alliance has used its economic, military and financial power to try to establish global hegemony. In 2016, Stewart Patrick, writing for the US Council on Foreign Relations (CFR), a foreign policy think tank, published World Order: What, Exactly, are the Rules? He described the post-WWII “international rules-based order” (IRBO): What sets the post-1945 Western order apart is that it was shaped overwhelmingly by a single power [a unipolarity], the United States. Operating within the broader context of strategic bipolarity, it constructed, managed, and defended the regimes of the capitalist world economy. [. . .] In the trade sphere, the hegemon presses for liberalization and maintains an open market; in the monetary sphere, it supplies a freely convertible international currency, manages exchange rates, provides liquidity, and serves as a lender of last resort; and in the financial sphere, it serves as a source of international investment and development. The idea that the aggressive market acquisition of crony capitalism somehow represents the “open markets” of the “capitalist world economy” is risible. It is about as far removed from free market capitalism as it is possible to be. Under crony capitalism, the US dollar, as the preferred global reserve currency, is not “freely convertible.” Exchange rates are manipulated and liquidity is debt for nearly everyone except the lender. “Investment and development” by the hegemon means more profits and control for the hegemon. The notion that a political leader, or anyone for that matter, is entirely bad or good, is puerile. The same consideration can be given to nation-states, political systems or even models of world order. The character of a human being, a nation or a system of global governance is better judged by their or its totality of actions. Whatever we consider to be the source of “good” and “evil,” it exists in all of us at either ends of a spectrum. Some people exhibit extreme levels of psychopathy, which can lead them to commit acts that are judged to be “evil.” But even Hitler, for example, showed physical courage, devotion, compassion for some, and other qualities we might consider “good.” Nation-states and global governance structures, though immensely complex, are formed and led by people. They are influenced by a multitude of forces. Given the added complications of chance and unforeseen events, it is unrealistic to expect any form of “order” to be either entirely good or entirely bad. That being said, if that “order” is iniquitous and causes appreciable harm to people, then it is important to identify to whom that “order” provides advantage. Their potential individual and collective guilt should be investigated. This does not imply that those who benefit are automatically culpable, nor that they are “bad” or “evil,” though they may be, only that they have a conflict of interests in maintaining their “order” despite the harm it causes. Equally, where systemic harm is evident, it is irrational to absolve the actions of the people who lead and benefit from that system without first ruling out their possible guilt. Since WWII, millions of innocents have been murdered by the US, its international allies and its corporate partners, all of whom have thrown their military, economic and financial weight around the world. The Western “parasite class” has sought to assert its IRBO by any means necessary— sanctions, debt slavery or outright slavery, physical, economic or psychological warfare. The grasping desire for more power and control has exposed the very worst of human nature. Repeatedly and ad nauseam. Of course, resistance to this kind of global tyranny is understandable. The question is: Does imposition of the multipolar model offer anything different? Signing the UN Charter – 1948 Oligarchy Most recently, the “unipolar world order” has been embodied by the World Economic Forum’s inappropriately named Great Reset. It is so malignant and forbidding that some consider the emerging “multipolar world order” salvation. They have even heaped praise upon the likely leaders of the new multipolar world: It is [. . .] strength of purpose and character that has defined Putin’s two decades in power. [. . .] Russia is committed to the process of finding solutions to all people benefiting from the future, not just a few thousand holier-than-thou oligarchs. [. . .] Together [Russia and China] told the WEF to stuff the Great Reset back into the hole in which it was conceived. [. . .] Putin told Klaus Schwab and the WEF that their entire idea of the Great Reset is not only doomed to failure but runs counter to everything modern leadership should be pursuing. Sadly, it seems this hope is also misplaced. While Putin did much to rid Russia of the CIA-run, Western-backed oligarchs who were systematically destroying the Russian Federation during the 1990s, they have subsequently been replaced by another band of oligarchs with closer links to the current Russian government. Something we will explore in Part 3. Yes, it is certainly true that the Russian government, led by Putin and his power bloc, has improved the incomes and life opportunities for the majority of Russians. Putin’s government has also significantly reduced chronic poverty in Russia over the last two decades. Wealth in Russia, measured as the market value of financial and non-financial assets, has remained concentrated in the hands of the top 1% of the population. This pooling of wealth among the top percentile is itself stratified and is overwhelmingly held by the top 1% of the 1%. For example, in 2017, 56% of Russian wealth was controlled by 1% of the population. The pseudopandemic of 2020–2022 particularly benefitted Russian billionnaires—as it did the billionaires of every other developed economy. According to the Credit Suisse Global Wealth Report 2021, wealth inequality in Russia, measured using the Gini coefficient, was 87.8 in 2020. The only other major economy with a greater disparity between the wealthy and the rest of the population was Brazil. Just behind Brazil and Russia on the wealth inequality scale was the US, whose Gini coefficient stood at 85. In terms of wealth concentration however, the situation in Russia was the worst by a considerable margin. In 2020 the top 1% owned 58.2% of Russia’s wealth. This was more than 8 percentage points higher than Brazil’s wealth concentration, and significantly worse than wealth concentration in the US, which stood at 35.2% in 2020. Such disproportionate wealth distribution is conducive to creating and empowering oligarchs. But wealth alone doesn’t determine whether one is an oligarch. Wealth needs to be converted into political power for the term “oligarch” to be applicable. An oligarchy is defined as “a form of government in which supreme power is vested in a small exclusive class.” Members of this dominant class are installed through a variety of mechanisms. The British establishment, and particularly its political class, is dominated by men and women who were educated at Eton, Roedean, Harrow and St. Pauls, etc. This “small exclusive class” arguably constitutes a British oligarchy. The UK’s new Prime Minister, Liz Truss, has been heralded by some because she is not a graduate of one of these select public schools. Educational privilege aside, though, the use of the word “oligarch” in the West more commonly refers to an internationalist class of globalists whose individual wealth sets them apart and who use that wealth to influence policy decisions. Bill Gates is a prime example of an oligarch. The former advisor to the UK Prime Minister, Dominic Cummings, said as much during his testimony to a parliamentary committee on May 2021 (go to 14:02:35). As Cummings put it, Bill Gates and “that kind of network” had directed the UK government’s response to the supposed COVID-19 pandemic. Gates’ immense wealth has bought him direct access to political power beyond national borders. He has no public mandate in either the US or the UK. He is an oligarch—one of the more well known but far from the only one. CFR member David Rothkopf described these people as a “Superclass” with the ability to “influence the lives of millions across borders on a regular basis.” They do this, he said, by using their globalist “networks.” Those networks, as described by Antony C. Sutton, Dominic Cummings and others, act as “the force multiplier in any kind of power structure.” This “small exclusive class” use their wealth to control resources and thus policy. Political decisions, policy, court rulings and more are made at their behest. This point was highlighted in the joint letter sent by the Attorneys General (AGs) of 19 US states to BlackRock CEO Larry Fink. The AGs observed that BlackRock was essentially using its investment strategy to pursue a political agenda: The Senators elected by the citizens of this country determine which international agreements have the force of law, not BlackRock. Their letter describes the theoretical model of representative democracy. Representative democracy is not a true democracy—which decentralises political power to the individual citizen—but is rather a system designed to centralise political control and authority. Inevitably, “representative democracy” leads to the consolidation of power in the hands of the so-called “Superclass” described by Rothkopf. There is nothing “super” about them. They are ordinary people who have acquired wealth primarily through conquest, usury, market rigging, political manipulation and slavery. “Parasite class” is a more befitting description. Not only do global investment firms like BlackRock, Vanguard and State Street use their immense resources to steer public policy, but their major shareholders include the very oligarchs who, via their contribution to various think tanks, create the global political agendas that determine policy in the first place. There is no space in this system of alleged “world order” for any genuine democratic oversight. As we shall see in Part 3, the levers of control are exerted to achieve exactly the same effect in Russia and China. Both countries have a gaggle of oligarchs whose objectives are firmly aligned with the WEF’s Great Reset agenda. They too work with their national government “partners” to ensure that they all arrive at the “right” policy decisions. US President Joe Biden, left, and CFR President Richard N. Haass, right. The United Nations’ Model of National Sovereignty Any bloc of nations that bids for dominance within the United Nations is seeking global hegemony. The UN enables global governance and centralises global political power and authority. In so doing, the UN empowers the international oligarchy. As noted previously, Article 2 of the United Nations Charter declares that the UN is “based on the principle of the sovereign equality of all its Members.” The Charter then goes on to list the numerous ways in which nation-states are not equal. It also clarifies how they are all subservient to the UN Security Council. Despite all the UN’s claims of lofty principles—respect for national sovereignty and for alleged human rights—Article 2 declares that no nation-state can receive any assistance from another as long as the UN Security Council is forcing that nation-state to comply with its edicts. Even non-member states must abide by the Charter, whether they like it or not, by decree of the United Nations. The UN Charter is a paradox. Article 2.7 asserts that “nothing in the Charter” permits the UN to infringe the sovereignty of a nation-state—except when it does so through UN “enforcement measures.” The Charter states, apparently without reason, that all nation-states are “equal.” However, some nation-states are empowered by the Charter to be far more equal than others. While the UN’s General Assembly is supposedly a decision-making forum comprised of “equal” sovereign nations, Article 11 affords the General Assembly only the power to discuss “the general principles of co-operation.” In other words, it has no power to make any significant decisions. Article 12 dictates that the General Assembly can only resolve disputes if instructed to do so by the Security Council. The most important function of the UN, “the maintenance of international peace and security,” can only be dealt with by the Security Council. What the other members of the General Assembly think about the Security Council’s global “security” decisions is a practical irrelevance. Article 23 lays out which nation-states form the Security Council: The Security Council shall consist of fifteen Members of the United Nations. The Republic of China, France, the Union of Soviet Socialist Republics [Russian Federation], the United Kingdom of Great Britain and Northern Ireland, and the United States of America shall be permanent members of the Security Council. The General Assembly shall elect ten other Members of the United Nations to be non-permanent members of the Security Council. [. . .] The non-permanent members of the Security Council shall be elected for a term of two years. The General Assembly is allowed to elect “non-permanent” members to the Security Council based upon criteria stipulated by the Security Council. Currently the “non-permanent” members are Albania, Brazil, Gabon, Ghana, India, Ireland, Kenya, Mexico, Norway and the United Arab Emirates. Article 24 proclaims that the Security Council has “primary responsibility for the maintenance of international peace and security” and that all other nations agree that “the Security Council acts on their behalf.” The Security Council investigates and defines all alleged threats and recommends the procedures and adjustments for the supposed remedy. The Security Council dictates what further action, such as sanctions or the use of military force, shall be taken against any nation-state it considers to be a problem. Article 27 decrees that at least 9 of the 15 member states must be in agreement for a Security Council resolution to be enforced. All of the 5 permanent members must concur, and each has the power of veto. Any Security Council member, including permanent members, shall be excluded from the vote or use of its veto if they are party to the dispute in question. UN member states, by virtue of agreeing to the Charter, must provide armed forces at the Security Council’s request. In accordance with Article 47, military planning and operational objectives are the sole remit of the permanent Security Council members through their exclusive Military Staff Committee. If the permanent members are interested in the opinion of any other “sovereign” nation, they’ll ask it to provide one. The inequality inherent in the Charter could not be clearer. Article 44 notes that “when the Security Council has decided to use force” its only consultative obligation to the wider UN is to discuss the use of another member state’s armed forces where the Security Council has ordered that nation to fight. For a country that is a current member of the Security Council, use of its armed forces by the Military Staff Committee is a prerequisite for Council membership. The UN Secretary-General, identified as the “chief administrative officer” in the Charter, oversees the UN Secretariat. The Secretariat commissions, investigates and produces the reports that allegedly inform UN decision-making. The Secretariat staff members are appointed by the Secretary-General. The Secretary-General is “appointed by the General Assembly upon the recommendation of the Security Council.” Under the UN Charter, then, the Security Council is made king. This arrangement affords the governments of its permanent members—China, France, Russia, the UK and the US—considerable additional authority. There is nothing egalitarian about the UN Charter. The suggestion that the UN Charter constitutes a “defence” of “national sovereignty” is ridiculous. The UN Charter is the embodiment of the centralisation of global power and authority. UN Headquarters New York – Land Donated by the Rockefellers The United Nations’ Global Public-Private Partnership The UN was created, in no small measure, through the efforts of the private sector Rockefeller Foundation (RF). In particular, the RF’s comprehensive financial and operational support for the Economic, Financial and Transit Department (EFTD) of the League of Nations (LoN), and its considerable influence upon the United Nations Relief and Rehabilitation Administration (UNRRA), made the RF the key player in the transformation of the LoN into the UN. The UN came into being as a result of public-private partnership. Since then, especially with regard to defence, financing, global health care and sustainable development, public-private partnerships have become dominant within the UN system. The UN is no longer an intergovernmental organisation, if it ever was one. It is a global collaboration between governments and a multinational infra-governmental network of private “stakeholders.” In 1998, then-UN Secretary-General Kofi Annan told the World Economic Forum’s Davos symposium that a “quiet revolution” had occurred in the UN during the 1990s: [T]he United Nations has been transformed since we last met here in Davos. The Organization has undergone a complete overhaul that I have described as a “quiet revolution”. [. . .] [W]e are in a stronger position to work with business and industry. [. . .] The business of the United Nations involves the businesses of the world. [. . .] We also promote private sector development and foreign direct investment. We help countries to join the international trading system and enact business-friendly legislation. In 2005, the World Health Organisation (WHO), a specialised agency of the UN, published a report on the use of information and communication technology (ICT) in healthcare titled Connecting for Health. Speaking about how “stakeholders” could introduce ICT healthcare solutions globally, the WHO noted: Governments can create an enabling environment, and invest in equity, access and innovation. The 2015, Adis Ababa Action Agenda conference on “financing for development” clarified the nature of an “enabling environment.” National governments from 193 UN nation-states committed their respective populations to funding public-private partnerships for sustainable development by collectively agreeing to create “an enabling environment at all levels for sustainable development;” and “to further strengthen the framework to finance sustainable development.” In 2017, UN General Assembly Resolution 70/224 (A/Res/70/224) compelled UN member states to implement “concrete policies” that “enable” sustainable development. A/Res/70/224 added that the UN: [. . .] reaffirms the strong political commitment to address the challenge of financing and creating an enabling environment at all levels for sustainable development [—] particularly with regard to developing partnerships through the provision of greater opportunities to the private sector, non-governmental organizations and civil society in general. In short, the “enabling environment” is a government, and therefore taxpayer, funding commitment to create markets for the private sector. Over the last few decades, successive Secretary-Generals have overseen the UN’s formal transition into a global public-private partnership (G3P). Nation-states do not have sovereignty over public-private partnerships. Sustainable development formally relegates government to the role of an “enabling” partner within a global network comprised of multinational corporations, non-governmental organisations (NGOs), civil society organisations and other actors. The “other actors” are predominantly the philanthropic foundations of individual billionaires and immensely wealthy family dynasties—that is, oligarchs. Effectively, then, the UN serves the interests of capital. Not only is it a mechanism for the centralisation of global political authority, it is committed to the development of global policy agendas that are “business-friendly.” That means Big Business-friendly. Such agendas may happen to coincide with the best interests of humanity, but where they don’t—which is largely the case—well, that’s just too bad for humanity. Kofi Annan (8 April 1938 – 18 August 2018) Global Governance On the 4th February 2022, a little less then three weeks prior to Russia launching its “special military operation” in Ukraine, Presidents Vladimir Putin and Xi Jinping issued an important joint statement: The sides [Russian Federation and Chinese People’s Republic] strongly support the development of international cooperation and exchanges [. . .], actively participating in the relevant global governance process, [. . .] to ensure sustainable global development. [. . .] The international community should actively engage in global governance[.] [. . .] The sides reaffirmed their intention to strengthen foreign policy coordination, pursue true multilateralism, strengthen cooperation on multilateral platforms, defend common interests, support the international and regional balance of power, and improve global governance. [. . .] The sides call on all States [. . .] to protect the United Nations-driven international architecture and the international law-based world order, seek genuine multipolarity with the United Nations and its Security Council playing a central and coordinating role, promote more democratic international relations, and ensure peace, stability and sustainable development across the world. The United Nations Department of Economic and Social Affairs (UN-DESA) defined “global governance” in its 2014 publication Global Governance and the Global Rules For Development in the Post 2015 Era: Global governance encompasses the totality of institutions, policies, norms, procedures and initiatives through which States and their citizens try to bring more predictability, stability and order to their responses to transnational challenges. Global governance centralises control over the entire sphere of international relations. It inevitably erodes a nation’s ability to set foreign policy. As a theoretical protection against global instability, this isn’t necessarily a bad idea, but in practice it neither enhances nor “protects” national sovereignty. Domination of the global governance system by one group of powerful nation-states represents possibly the most dangerous and destabilising force of all. It allows those nations to act with impunity, regardless of any pretensions about honouring alleged “international law.” Global governance also significantly curtails the independence of a nation-state’s domestic policy. For example, the UN’s Sustainable Development Agenda 21, with the near-time Agenda 2030 serving as a waypoint, impacts nearly all national domestic policy—even setting the course for most domestic policy—in every country. National electorates’ oversight of this “totality” of UN policies is weak to nonexistent. Global governance renders so-called “representative democracy” little more than a vacuous sound-bite. As the UN is a global public-private partnership (UN-G3P), global governance allows the “multi-stakeholder partnership”—and therefore oligarchs—significant influence over member nation-states’ domestic and foreign policy. Set in this context, the UN-DESA report (see above) provides a frank appraisal of the true nature of UN-G3P global governance: Current approaches to global governance and global rules have led to a greater shrinking of policy space for national Governments [. . . ]; this also impedes the reduction of inequalities within countries. [. . .] Global governance has become a domain with many different players including: multilateral organizations; [. . .] elite multilateral groupings such as the Group of Eight (G8) and the Group of Twenty (G20) [and] different coalitions relevant to specific policy subjects[.] [. . .] Also included are activities of the private sector (e.g., the Global Compact) non-governmental organizations (NGOs) and large philanthropic foundations (e.g., Bill and Melinda Gates Foundation, Turner Foundation) and associated global funds to address particular issues[.] [. . .] The representativeness, opportunities for participation, and transparency of many of the main actors are open to question. [. . .] NGOs [. . .] often have governance structures that are not subject to open and democratic accountability. The lack of representativeness, accountability and transparency of corporations is even more important as corporations have more power and are currently promoting multi-stakeholder governance with a leading role for the private sector. [. . .] Currently, it seems that the United Nations has not been able to provide direction in the solution of global governance problems—perhaps lacking appropriate resources or authority, or both. United Nations bodies, with the exception of the Security Council, cannot make binding decisions. A/Res/73/254 declares that the UN Global Compact Office plays a vital role in “strengthening the capacity of the United Nations to partner strategically with the private sector.” It adds: The 2030 Agenda for Sustainable Development acknowledges that the implementation of sustainable development will depend on the active engagement of both the public and private sectors[.] While the Attorneys General of 19 states might rail against BlackRock for usurping the political authority of US senators, BlackRock is simply exercising its power as valued a “public-private partner” of the US government. Such is the nature of global governance. Given that this system has been constructed over the last 80 years, it’s a bit too late for 19 state AGs to complain about it now. What have they been doing for the last eight decades? The governmental “partners” of the UN-G3P lack “authority” because the UN was created, largely by the Rockefellers, as a public-private partnership. The intergovernmental structure is the partner of the infra-governmental network of private stakeholders. In terms of resources, the power of the private sector “partners” dwarfs that of their government counterparts. Corporate fiefdoms are not limited by national borders. BlackRock alone currently holds $8.5 trillion of assets under management. This is nearly five times the size of the total GDP of UN Security Council permanent member Russia and more than three times the GDP of the UK. So-called sovereign countries are not sovereign over their own central banks nor are they “sovereign” over international financial institutions like the IMF, the New Development Bank (NDB), the World Bank or the Bank for International Settlements. The notion that any nation state or intergovernmental organisation is capable of bringing the global network of private capital to heel is farcical. At the COP26 Conference in Glasgow in 2021, King Charles III—then Prince Charles—prepared the conference to endorse the forthcoming announcement of the Glasgow Financial Alliance for Net Zero (GFANZ). He made it abundantly clear who was in charge and, in keeping with UN objectives, clarified national governments role as “enabling partners”: The scale and scope of the threat we face call for a global systems level solution based on radically transforming our current fossil fuel based economy. [. . .] So ladies and gentleman, my plea today is for countries to come together to create the environment that enables every sector of industry to take the action required. We know this will take trillions, not billions of dollars. [. . .] [W]e need a vast military style campaign to marshal the strength of the global private sector, with trillions at [its] disposal far beyond global GDP, and with the greatest respect, beyond even the governments of the world’s leaders. It offers the only real prospect of achieving fundamental economic transition. Unless Putin and Xi Jinping intend to completely restructure the United Nations, including all of its institutions and specialised agencies, their objective of protecting “the United Nations-driven international architecture” appears to be nothing more than a bid to cement their status as the nominal leaders of the UN-G3P. As pointed out by UN-DESA, through the UN-G3P, that claim to political authority is extremely limited. Global corporations dominate and are currently further consolidating their global power through “multi-stakeholder governance.” Whether unipolar or multipolar, the so-called “world order” is the system of global governance led by the private sector—the oligarchs. Nation-states, including Russia and China, have already agreed to follow global priorities determined at the global governance level. The question is not which model of the global public-private “world order” we should accept, but rather why we would ever accept any such “world order” at all. This, then, is the context within which we can explore the alleged advantages of a “multipolar world order” led by China, Russia and increasingly India. Is it an attempt, as claimed by some, to reinvigorate the United Nations and create a more just and equitable system of global governance? Or is it merely the next phase in the construction of what many refer to as the “New World Order”? Tyler Durden Sat, 09/24/2022 - 19:40.....»»

Category: blogSource: zerohedgeSep 24th, 2022

A New U.S. Crackdown Has Crypto Users Worried About Their Privacy

Tornado Cash’s service has let hackers flourish, regulators say. But privacy experts worry the ban goes too far. The battle between the crypto community and the U.S. government over financial privacy just escalated dramatically, amid government efforts to crack down on criminals. Tornado Cash is a service that helps some cryptocurrency owners protect their anonymity by scrambling information trails on the blockchain. On Monday, the Treasury Department prohibited Americans from using the service, arguing that it has played a central role in the laundering of more than $7 billion. In a statement, the Office of Foreign Assets Control (OFAC), a Treasury Dept. agency, called Tornado Cash “a significant threat to the national security” of the United States, and alleged that it has been used repeatedly by North Korean hackers to launder money from multiple million-dollar thefts. [time-brightcove not-tgx=”true”] But the decision drew vicious backlash from many in the crypto community, who see it as a governmental overstep that runs contrary to their core values of privacy and autonomy. On Twitter, the crypto lawyer Collins Belton called it “arguably the most significant legal action that has occurred in crypto” and warned that it could produce “absolutely gargantuan ripple effects.” The Treasury’s decision could end up significantly altering the way users engage with crypto. It also sets the stage for a slew of fierce legal and rhetorical battles between the crypto industry and the U.S. government. Hiding crime When someone sends cryptocurrency from one account to another, a record of the transaction is etched into the blockchain forever. Investigators or eagle-eyed sleuths can then use this public information to follow money flows and learn about a person or company’s financial activity. The U.S. Department of Justice, for example, traced blockchain records to shut down a global child abuse website and arrest hundreds of offenders. This transparency has given rise to the creation of “mixing” services, which are designed to hide activity on the blockchain. A user can deposit cryptocurrency into a mixer, which uses complex cryptography to obfuscate the money’s trail and then send it to a brand new wallet address. From there, the user can recover the funds and eventually cash them out anonymously. As cryptocurrency has exploded in usage both for legal and illegal activity, mixers have become a “go-to tool for cybercriminals,” according to a recent report from the blockchain analysis firm Chainalysis. The study says that nearly 10% of all funds sent from illicit addresses are sent to mixers, and that the usage of mixers in illicit activity has increased significantly in 2022. “Mixers account for a small share of the overall cryptocurrency ecosystem, but play a significant role in illicit activity,” Andrew Fierman, the head of sanctions strategy at Chainalysis, wrote to TIME in an email. The role of North Korea One of the main drivers of this uptick is the increased activity of North Korean hackers, U.S. officials say. In April, U.S. Treasury officials accused the Lazarus Group, a hacking organization allegedly sponsored by North Korea’s government, of spearheading the $600 million hack of the popular crypto game Axie Infinity’s Ronin network. Those officials accused the North Korean government of using the hack to “generate revenue for its weapons of mass destruction and ballistic missile programs.” And the Ronin attackers used Tornado Cash to launder the money, officials say. They say that after $600 million was drained from the Ronin network into a wallet controlled by the Lazarus group, it was then sent to intermediary wallets, then rinsed via Tornado Cash, $10 million at a time. Tornado Cash developers’ attempts to block the Lazarus wallet from interacting with Tornado Cash were unsuccessful: about 18% of the total amount of Ether flowing through Tornado Cash in recent months—167,400 ETH—came from the Ronin hack, according to the blockchain analytics firm Nansen. Ari Redbord, the head of legal and government affairs at the crypto regulatory startup TRM Labs, says the Ronin hack was a major turning point with regards to crypto regulation. “Ronin really changed the way the U.S. government sees money laundering in the crypto space: they shifted from the idea that hacks were a financial crime to the idea that they were a true national security concern,” he says. Redbord estimates that a billion dollars in North Korean-related laundered funds have gone through Tornado Cash, and that the ten biggest hacks perpetrated by North Korean hackers employed Tornado Cash to launder those funds. So on Monday, the Treasury Department placed Tornado Cash and related smart contract wallet addresses on their Specially Designated Nationals (SDN) list, in the way they would an enemy of the state. Any Americans who interact with those addresses now may face criminal penalties. Crypto backlash But while Tornado Cash is used by criminals, it is also used widely and legally by all types of users. “There are all kinds of reasons people want to build anonymity: I don’t want anyone looking at my credit card statements or Venmo,” Redbord says. This week, Tornado Cash supporters have argued that the service is simply a neutral tool that can be used for good and bad: that it’s akin to virtual private networks (VPNs) or The Onion Router (TOR). “This is a rough equivalent to sanctioning the email protocol in the early days of the internet, with the justification that email is often used to facilitate phishing attacks,” Lia Holland, the campaigns and communications director at the digital rights nonprofit Fight for the Future, wrote in a statement. There are many reasons why someone would want to use Tornado Cash: An employee who gets paid by their company in crypto, for example, may not want their employer to know all of their financial details. An NFT enthusiast who has recently made a lot of money thanks to a savvy investment may not want to become the target of potential harassment or robbery. Tornado Cash may also be useful for those who live under oppressive governments. Vitalik Buterin, the founder of Ethereum, came out in defense of the service this week, writing on Twitter that he himself used Tornado Cash in order to donate to Ukrainian causes without putting the recipient organizations under extra scrutiny. And following the overturning of Roe v. Wade, donors to abortion funds may want to use Tornado Cash to keep their identities hidden. The brewing battles The Treasury’s decision to ban Tornado Cash could prove to be a significant turning point for crypto in several ways. First, it shows how far the U.S. government is willing to go in its attempts to corral crypto as it creeps toward mainstream adoption. Tornado Cash defenders have pointed out that the decision is unprecedented in that sanctions have been placed upon a piece of code as opposed to an entity. (Tornado Cash is not an incorporated organization, but a mechanism controlled by software logic.) This step could mean that other types of decentralized bodies, including other smart contracts or DAOs (decentralized autonomous organizations), might soon be in the crosshairs. Redbord, at TRM Labs, says that the treasury’s decision reveals the U.S. government’s desire to push crypto toward more centralized systems and platforms that are easier to regulate. The trading platform Coinbase, for example, has requirements that tie every crypto wallet to a verifiable human identity. “This action sends a message to crypto exchanges that they need to ensure that they have compliance controls in place to stop cyber criminals from using their platforms,” Redbord says. And some major crypto players have fallen in line. Circle, the issuer of the USD Coin (USDC), the second biggest stablecoin, froze over $75,000 worth of funds linked to Tornado Cash addresses. And Github, a software development platform owned by Microsoft, deleted the accounts of Tornado Cash developers. But crypto enthusiasts resist centralized attempts to control policies or transactions. Bitcoin, after all, was created in the wake of the 2008 financial crash, with early adopters seeking a global and unregulated form of currency resistant to the pressures of Wall Street. Many have flocked to crypto because it allows anonymous financial transactions, hidden from surveillance by authorities. In the last few days, Tornado Cash defenders have launched their own offensive against the decision, in several ways. First, they have drawn attention to a perceived logical flaw in the decision: that anyone who interacts at all with a Tornado Cash contract is doing so illegally. Individual users cannot reject incoming transactions—small amounts of cryptocurrency have been sent to prominent public wallet addresses—including those associated with Jimmy Fallon and Shaquille O’Neal—in a stunt that essentially dares the Treasury to take action upon an entire community. (Redbord, for what it’s worth, says he doubts that individuals were the target of the decision in the first place, or that OFAC will pay much attention to the campaign.) A much bigger battle may be in store: some prominent crypto lawyers have begun floating the idea of challenging the decision on constitutional grounds. “Banning software publication is banning speech,” Peter Van Valkenburgh, the director of research at Coin Center, said onstage at a crypto conference in Las Vegas on Monday. “Even laws that unreasonably chill speech are constitutionally suspect, and can be challenged even before enforcement.” As crypto enthusiasts look for a way forward, they must contend with several tough choices: how much to compromise their values in their quest to reach the mainstream; how to tamp down on illegal activities in systems that were built to be oversight-resistant; and whether to cooperate with governments or oppose them, thereby invoking even more ire and scrutiny. For now, it seems that many in the crypto space are responding forcefully to the Treasury’s decision by taking an ideological stand. “While most people won’t ever use a service like Tornado Cash, the government’s approach represents a dangerous precedent for limiting the right of Americans to use privacy tools for legitimate and lawful reasons,” Miller Whitehouse-Levine, policy director of The DeFi Education Fund, wrote in an email to TIME. “Privacy is not—and cannot become—a crime.”.....»»

Category: topSource: timeAug 10th, 2022

Voyager Files For Bankruptcy, But Customers Might Not Get All Their Crypto Back

Crypto broker Voyager Digital has filed for bankruptcy in the wake of the collapse of Three Arrows. The crypto hedge fund filed for bankruptcy only days ago, defaulting on a Voyager loan just days before that. Voyager Files For Bankruptcy In a press release, Voyager Digital said it’s seeking Chapter 11 protection so that it […] Crypto broker Voyager Digital has filed for bankruptcy in the wake of the collapse of Three Arrows. The crypto hedge fund filed for bankruptcy only days ago, defaulting on a Voyager loan just days before that. Voyager Files For Bankruptcy In a press release, Voyager Digital said it’s seeking Chapter 11 protection so that it can restructure. It believes its reorganization plan creates an “efficient path to resume account access and return value to customers.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Voyager Digital said it has about $1.3 billion worth of crypto assets on its platform and over $350 million in cash held in its For Benefit of Customers account for customers at Metropolitan Commercial Bank. The firm also has more than $110 million in cash and owned crypto assets on hand, which it expects to support daily operations during the Chapter 11 process. Voyager also holds claims in excess of $650 million against Three Arrows Capital, which borrowed 15,250 bitcoins and $350 million in USD Coin, a stablecoin pegged to the U.S. dollar. CEO Stephen Ehrlich said in a statement that their reorganization plan is "the best way to protect assets on the platform and "maximize value for all stakeholders, including customers." He explained that the Voyager Digital platform was built to "empower investors by providing access to crypto asset trading with simplicity, speed, liquidity and transparency." Implementation Of The Plan Like management at other crypto-related firms that have collapsed in recent weeks, Ehrlich also called attention to the "prolonged volatility and contagion in the crypto markets over the past few months." He also mentioned Three Arrows Capital's default on the Voyager loan. When implemented, Voyager's proposed reorganization plan would again grant customers access to their accounts and return value to them from multiple sources. The plan involves reimbursing customers via a combination of the cryptocurrency in their accounts, proceeds from whatever Voyager recovers from Three Arrows Capital, common shares in the newly reorganized company, and Voyager tokens. The reorganization plan could allow customers to choose the proportion of common equity and crypto they will receive, "subject to maximum thresholds." Customers who have U.S. dollars in their accounts won't be granted access to those funds until Voyager completes a reconciliation and fraud prevention process with Metropolitan Commercial Bank. Voyager Customers Might Not Get Their Crypto Back Unfortunately, customers who were storing cryptocurrency or cash in their Voyager Digital accounts shouldn't expect to get all their money back. The FDIC protects money stored at traditional banks, but there is no such protection for crypto-related firms. Voyager's plan also includes a statement to the effect that it expects its account holders to be "impaired" by the bankruptcy process, which means they won't receive back exactly what they are owed. According to court papers seen by Bloomberg, Voyager doesn't store customer assets in designated wallets for each customer. It combines crypto assets into different pots for each crypto type. The firm also lends its deposits to third parties so that it can pay interest to its customers. According to Bloomberg, Ehrlich said in sworn bankruptcy papers that billionaire Sam Bankman-Fried's Alameda Research, Mike Novogratz's Galaxy Digital and Wintermute Trading are among those that owe Voyager money on their loans. Voyager has about $1.12 billion worth of outstanding loans to third parties. Stock Halted, Coinbase Tumbles The Toronto Stock Exchange and the OTC Markets in the U.S. have suspended trading on shares of Voyager Digital amid a review on whether the stock continues to meet the listing requirements. Meanwhile, shares of certain crypto companies, like Coinbase, tumbled during regular trading hours today. Coinbase had made a statement in a recent regulatory filing that in the event of a bankruptcy or similar type of event, customers might not receive all their cryptocurrency back. Voyager's implementation plan appears to demonstrate that risk in action. Others, like Silvergate Capital, which is somewhat protected from such issues, were seemingly unaffected by the Voyager news. Updated on Jul 6, 2022, 2:42 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJul 6th, 2022

Is Crypto Coming To An End? This $100 Million Settlement Will Impact Crypto Forever

Back on February 14, 2022, crypto exchange extraordinaire BlockFi was slapped with an unprecedented SEC fine. How large are we talking here? A massive $100 million fine. If you didn’t know, this is the largest penalty ever recorded against crypto firms. If you’re a BlockFi customer, like I am, I’m sure you have a lot […] Back on February 14, 2022, crypto exchange extraordinaire BlockFi was slapped with an unprecedented SEC fine. How large are we talking here? A massive $100 million fine. If you didn’t know, this is the largest penalty ever recorded against crypto firms. If you’re a BlockFi customer, like I am, I’m sure you have a lot of questions and concerns about how this settlement will impact you. What if you aren’t a BlockFi customer? You may be wondering how this is going to affect the crypto space going forward. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more So, to help address these concerns, let me quickly explain what BlockFi did, as well as their response. I also want to go over how this is going to affect BlockFi customers and how you should proceed with BlockFi and crypto in general. BlockFi Overview Now, before I can any further, let me give you all a little background here on BlockFi if you aren’t familiar with them. Currently headquartered in Jersey City, NJ, BlockFi was founded in 2017. A major goal of BlockFi was to expand the reach of traditional banking services into communities that had not previously had access. And, it appeared to work as the company quickly gained a global presence. BlockFi’s variety of products was what drew users to the platform. In addition to offering an exchange, BlockFi also offers loans at low-interest rates, a cryptocurrency rewards credit card, and an interest-bearing account where you can earn up to 9.25% APY. Of course, BlockFi isn’t the only company that offers high-yield crypto accounts. This is where customers deposit cryptocurrency for the promise of high APY while the company lends out that cryptocurrency for fees. Similar features are available from Celsius, Nexo, and Eco. BlockFi, however, provides its users with a centralized mobile app, a unique credit card, and an array of other financial services. Moreover, a handy help center provides unique cryptocurrency use cases and teaches BlockFi’s users how to utilize the platform. Another distinction? BlockFi is the first company to reach an agreement with the SEC that mandates it register its products as securities. What Did BlockFi Do? Alright, so let’s get into it. What exactly did BlockFi do to receive such a hefty penalty from the SEC? Basically, BlockFi was charged with failing to register its crypto lending product for retail sale. And, as a result, this violated the Investment Company Act of 1940 registration requirements. In particular, BlockFi marketed its interest accounts as a way to accumulate “up to 9.25 percent” interest on crypto deposited into the accounts. But in reality, the percentage varied from month to month. And, it was also determined by how much you had deposited in your account. If you’re lost, here’s a breakdown of the process. Customers deposited crypto assets into BIAs (BlockFi Interest Accounts) offered by BlockFi — usually Bitcoin and Ethereum. Customers, in turn, receive substantial interest in the form of crypto deposited back into their accounts every month. Essentially, this system acted as a traditional savings account. But, you know, with crypto assets instead of dollars. What made BlockFi’s returns seem so much higher than an average savings account? Well, it would lend crypto both to institutional traders and other collateralized borrowers. But, thanks to demand and limited access, BlockFi could charge higher rates of interest. From the SEC’s point of view, this is a security. That means it needs either to be registered as a security or exempt from registration. The SEC’s Response SEC Response on BlockFi Settlement “This is the first case of its kind with respect to crypto lending platforms,” SEC Chair Gary Gensler said. “Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws. I’d like to thank and commend our remarkable SEC staff and state regulators for their efforts and collaboration on this settlement.” “Crypto lending platforms offering securities like BlockFi’s BIAs should take immediate notice of today’s resolution and come into compliance with the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Adherence to our registration and disclosure requirements is critical to providing investors with the information and transparency they need to make well-informed investment decisions in the crypto asset space.” Although the government says its settlement with BlockFi is “the first case of its kind with respect to crypto lending platforms,” this isn’t its first run-in with a crypto company. Coinbase pulled the plug on its Lend program in 2021, which is called a “high-yield alternative to traditional savings accounts.” Because it was a security, the SEC allegedly threatened legal action. Coinbase said at the time it was seeking “regulatory clarity for the crypto industry.” Since then, it released a product that lets non-US customers earn interest on their crypto. Nevertheless, BlockFi will have to dish out $100 million charges. Payments will be made to the SEC, with $50 million being paid directly, and the remainder going to 32 states. And, BlockFi also agrees to stop selling BlockFI Interest Accounts (BIAs) to new customers. How is BlockFi Responding? You’d think that a company that was just imposed the biggest penalty ever would have a grim demeanor. That hasn’t exactly happened so far. “From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies,” said Zac Prince, CEO, and Founder of BlockFi. “Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan.” “We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets.” Now, this is unprecedented. Why? The SEC does not regulate interest products at this time. Because, you know, it’s all decentralized lending. This is one of the reasons why they are able to offer such insane interest rates. We almost expected that BlockFi would release a registered securities product, the BlockFi Yield. It appears, then, that Block Fi has to take the lead and I have to assume that other crypto exchanges will follow. Now, here’s where I have a problem with this. The company said that they “intend” to file. Why’s that an issue? Well, for months BlockFi customers have been receiving emails about this new product. So, they knew something was up. And, in my opinion, they should have something else to offer right now. But, there’s a little more to that. The Real Impact of the BlockFi Settlement Impact of BlockFi Settlement For starters, BlockFi says that customers based outside of the United States will not be affected by the SEC settlement. U.S users, like me, will still earn interest on cryptos they already have in their interest accounts. But, they won’t be able to make additional deposits. And, those accounts will also be turned into BlockFi Yield accounts once the SEC approves this What I found interesting is that when you now go to BlockFi’s website, there’s no boasting about how much money you can make on your Stablecoin. Now, the site is focusing on a crypto rewards card. So, when I login into my BlockFi, everything appears to be on the up-and-up. But, I’m really curious. Has BlockFi done something illegal? “BlockFi has not been very transparent. I think that is part of the reason why [the] SEC went after them,” said PitchBook fintech analyst Robert Le. “These are new products, so no one really knows what the real risks of these products look like.” Users don’t yet know whether or not they can lose their bitcoin and Ethereum if they lend them out or if the product is 100% risk-free. Additionally, regulators are reportedly investigating Celsius, Gemini, and Voyager Digital’s digital lending practices. “Other providers could either register their products with the SEC, or they can try to fight it out in court,” Le said. His prediction is that Celsius, which is mainly about crypto lending, will try to prove these aren’t securities so they don’t have to be registered with the SEC. And, considering that the company made false and misleading statements regarding the level of risk in the loan portfolio and lending, investors have every right to be concerned with the risk-level is working with BlockFi. Is Crypto Coming to an End? I hate to break the news to all the crypto haters out there. But, as long as there is demand, this is not the end of crypto. And, if you want to know, the demand is high. At the same time, there will be ripple effects. Well, it puts pressure on its peers to follow suit by playing nice with the SEC (due to its responsibilities). BlockFi would have a huge edge over its competitors if it got the SEC to approve its high-yield crypto loan plan. As far as BlockFi is concerned, this settlement is just a minor setback. The situation is kind of like DraftKings and FanDuel’s settlement with the New York Attorney General last year, which helped them become industry leaders. But, there could be more serious consequences too. In an interview with TechCrunch, Max Dilendorf said that the SEC’s action against BlockFi essentially “wiped out” the crypto lending business model. What if a crypto company wanted to keep selling interest-bearing products? It must complete an S-1 registration statement. And, that would be just like a publicly-traded company would. In order to buy into interest-bearing products, investors must be accredited. That is, unlessm they qualify for specific exemptions (and win), he said. Smaller players in the space could get crushed by the new rules, regulations, and associated costs. “BlockFi can probably afford to go forward with [offering registered securities] even though the outcome is not certain, because it’s a $3 billion company,” Dilendorf said. “What about a smaller DeFi protocol? They are going to get wiped out if they become targets of similar enforcement action.” The worst-case scenario. There remains a possibility that the SEC won’t approve the products BlockFi, Celsius, Nexo, and Eco want to offer. It’s what SEC Commissioner Hester Peirce wants to happen. According to a statement on the SEC website, she wasn’t on board with the settlement and thinks BlockFi’s S-1 process will take “longer than it would for more traditional filings.” In addition, BlockFi will have to “leap through another regulatory hoop,” the Investment Company Act. Additionally, she considers 60 days-or 90 days if BlockFi receives an extension-to be “extremely ambitious.” The bottom line? I don’t think you need to panic and withdrawal everything from your BlockFi account if you have one. But, I wouldn’t add any more to it. And, I would probably explore alternatives like Celsius or diversify my crypto accounts. This way it will be easy to transfer just in case. Article by Jeff Rose, Due About the Author Jeff Rose is an Iraqi Combat Veteran and founder of Good Financial Cents. He teaches people wealth hacking. He is a frequent on CNBC, Forbes, Nasdaq and many other publications. He is author of the book "Soldier of Finance: Take Charge of Your Money and Invest in your Future" where he teaches how he escaped from $20,000 in credit card debt to a life of wealth. Updated on Apr 5, 2022, 5:19 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 5th, 2022

3 ESG Friendly Stocks Poised For Green Returns

Once a niche corner of the investment world, ESG investing is now mainstream. Since the turn of the century, corporations have devoted more and more resources to promoting sound environmental, social, and governance practices in conjunction with tighter regulatory scrutiny. It is a trend that has accelerated in the wake of the pandemic amid an […] Once a niche corner of the investment world, ESG investing is now mainstream. Since the turn of the century, corporations have devoted more and more resources to promoting sound environmental, social, and governance practices in conjunction with tighter regulatory scrutiny. It is a trend that has accelerated in the wake of the pandemic amid an increased focus on transparency and higher standards of living. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more As companies have made ESG causes a greater priority, so too have investors. This is especially true of Millennials and other younger generations who have been credited with ushering in the era of sustainable investing. Given its relatively youthful base, the ESG space is expected to have a long road of growth ahead. In its 2022 ESG Outlook, J.P. Morgan Asset Management stated that $500 billion flowed in ESG-integrated funds last year representing 55% growth in AUM. It also noted “we expect growth in ESG investing to continue through 2022, and well beyond”. Of course, choosing a stock to do good and choosing a stock to do good for portfolio performance aren’t always one and the same. Yet the two approaches can certainly be combined to fulfill both goals. Here are three companies that can have a positive impact on the world—and on investment returns. Is Archer-Daniels-Midland ESG-Friendly? Archer-Daniels-Midland Co. (NYSE:ADM) is an ESG leader in the food products industry according to MSCI’s ESG Research methodology. This mostly relates to the strength of the company’s climate change programs. ADM provides technical and financial support to its suppliers to promote sustainable agriculture practices. This in turn reduces both its upstream greenhouse gas emissions and overall water usage. Compared to its peers, the farm commodity distributor is considered to have better water conservation measures in place and lower water withdrawal intensity. One of the ways ADM acts as a steward for sustainable water practices is by participating in the World Wildlife Fund’s AgWater Challenge. Since 2016, the project has gotten food and beverage companies like ADM to commit to protecting freshwater in their supply chains. Already up 30% this year, ADM stock is in the midst of a nice run. While a dip may present a better entry point, the company’s position as a key food chain cog and worldwide demand for nutrition makes it a healthy long-term ESG play. What Are Owens Corning’s Sustainability Goals? Owens Corning’s (NYSE:OC) position as an ESG leader for the building products industry is driven by the ‘S’ component of ESG—strong social practices. The insulation and roofing manufacturer is known to put employees at the center of its workforce productivity and safety management efforts. Its 2021 Sustainability Report details several stories about how its employees make a difference in day-to-day operations and are an active part of the decision-making process. Sustainability is also a big focus at Owens Corning where it has three goals: 1) expanding its product handprint; 2) reducing its environmental footprint, and 3) increasing its social handprint. Each of these goals is linked to more specific targets around making products that have a positive impact, reducing negative operational impacts, improving employees’ quality of life, promoting diversity, and having positive impacts on local communities. Owens Corning’s ESG focus starts at the top. CEO Brian Chambers was the recipient of 3BL Media’s 2021 Responsible CEO of the Year Award in the category of ESG Transparency. What’s also transparent is the company’s growth opportunities in the housing and construction markets. With the Street forecasting 22% profit growth this year, the stock’s 9x forward P/E makes it a bargain ESG investment. What Makes Target An ESG Friendly Stock? Target Corp. (NYSE:TGT) scores high among retailers because of strong ESG practices across the board but especially with regard to the environment. That’s because product design and management initiatives incorporate principles of green chemistry, which is all about making things that reduce the presence of hazardous substances. It accomplishes this by continually seeking out viable, less hazardous alternatives to stock the shelves and keep customers and the environment safe. The company’s Target Forward program is a series of measurable goals around caring for employees, the community, and the planet. The goals relate to creating sustainable brands, finding innovative ways to eliminate waste, and bringing opportunity and equity to the workplace. Among Target’s goals is to become the market leader in sustainable brands and inclusive experiences by 2030. It is aiming to have all of its own brands made from 100% recycled materials like wood and cotton by the end of the decade. Earlier this year Target Zero was launched, an effort to help guests find products that create less packaging waste. Target’s private brands are not just ESG-friendly but are becoming an increasingly important part of the business. Last year they accounted for nearly 30% of revenue and provided a big boost to margins. This trend is expected to continue which, along with a strong e-commerce channel, should keep this ESG-friendly stock delivering the green for investors. Should you invest $1,000 in Archer-Daniels-Midland right now? Before you consider Archer-Daniels-Midland, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Archer-Daniels-Midland wasn't on the list. While Archer-Daniels-Midland currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by MarketBeat Updated on Mar 30, 2022, 5:11 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMar 30th, 2022

Futures Fade As Yields Soar, Oil Slides And China Stocks Crater

Futures Fade As Yields Soar, Oil Slides And China Stocks Crater US equity futures held on to modest gains overnight as the market desperately clung on to hope that the latest ceasefire talks between Russia and Ukraine which started on Monday, may yield results (clearly forgetting how the rug was pulled from under the market on Friday in an identical setup), which initially sent stocks higher especially in Europe, despite a surge in 10Y TSY yields to 2.10%, the highest since July 2019, two days ahead of the first Fed rate hike, and a complete collapse in Chinese stocks. And while U.S. index futures were still pointing to a positive open around 8am ET this gain is fading fast, with spoos now up just 0.5% after rising 1% earlier... ... as headlines from the Kremlin suggested that a ceasefire is the last thing on Putin's mind. *KREMLIN: RUSSIA WILL REALIZE ALL ITS PLANS IN UKRAINE OPERATION *KREMLIN: UKRAINE OPERATION WILL BE COMPLETED ON SCHEDULE *KREMLIN: RUSSIA DIDN'T REQUEST CHINA MILITARY AID FOR OPERATION *KREMLIN: RUSSIA HAS RESOURCES NEEDED TO COMPLETE UKRAINE ACTION And while futures would normally be deep in the red by now, and will be shortly now that AAPL is at LOD... APPLE FALLS TO SESSION LOW, DROPS 1.6% IN PREMARKET TRADING ... this morning algos are confused by the drop in oil which has emerged as an inverse barometer for peace, however the reason oil is down today is due to the unprecedented lockdown of China's Shenzhen, announced over the weekend, and which the market is worried may spread to the rest of the market and lead to another Chinese shutdown (spoiler alert: it won't, but it will cripple US-facing supply chains as the Russia-China alliance makes itself felt). Meanwhile, and as previewed last night, in addition to the latest surge in covid cases and Shenzhen lockdown, Chinese stocks listed in Hong Kong had their worst day since the global financial crisis, as concerns over Beijing’s close relationship with Russia and renewed regulatory risks sparked panic selling. The Hang Seng index dropped more than 4%, sliding below 20,000 to the lowest level since 2015... ... while the Hang Seng China Enterprises Index closed down 7.2% on Monday, the biggest drop since November 2008. The Hang Sang Tech Index tumbled 11% in its worst decline since the gauge was launched in July 2020, wiping out $2.1 trillion in value since a year-earlier peak, after the southern city of Shenzhen, a key tech hub near Hong Kong, was placed into lockdown to contain rising Covid-19 infections. The broader Hang Seng Index lost 5%. “If the U.S. decides to impose sanctions on China in total or on individual Chinese companies doing business with Russia, that would be a concern,” said Mark Mobius, who set up Mobius Capital Partners after more than three decades at Franklin Templeton Investments. “The whole story is still up in the air in this case.” In premarket trading, U.S.-listed Chinese stocks resumed a steep selloff on Monday, following an 18% rout last week, as concerns about Beijing’s close relationship with Russia added to losses spurred by a Chinese crackdown on tech giants and the growing risk of U.S. delistings. Alibaba (BABA US), (JD US) both fall 5%. U.S. casinos stocks are also lower in premarket, with multiple headwinds weighing on the sector, including inflation, while listed names with exposure to Macau face additional pressure from surging Covid cases in China’s Guangdong province and in Hong Kong. Wynn Resorts (WYNN US) -1.8%; Las Vegas Sands (LVS US) and MGM Resorts (MGM US) also down in thin trade. Meanwhile, Apple is down 1.6% after supplier Foxconn announced it was halting operations at its Shenzhen sites, one of which produces iPhones, in response to a government- imposed lockdown on the tech-hub city. Apple +0.2% in premarket. Besides all the geopolitical chaos, this week’s main focus will be on the Fed’s policy meeting, with traders expecting a quarter percentage-point rate hike. “There is little a central bank can do about commodity prices -- Fed Chair Powell can hardly dig an oil well in the middle of Washington D.C.,” said Paul Donovan, chief economist at UBS Global Wealth Management. “The concern will be about second-round effects -- prices encouraging higher wage costs.” In Europe, the Stoxx 600 was 1.7% higher with automakers and banks leading gains, while miners and energy stocks underperformed.  Tech investor Prosus falls as much as 11% in Amsterdam, the most since March 2020 and touching a record low, following a continued selloff in Chinese technology shares as concerns about Beijing’s close relationship with Russia added to worries over regulatory headwinds. Naspers, which holds a 29% stake in Chinese online giant Tencent through Prosus, slides as much as 15% in Johannesburg, the steepest plunge since November 2000. Here are some of the biggest European movers today: VW preference shares jump as much as 8.7% in Frankfurt and are among the top performers in a buoyant Stoxx 600 Automobiles & Parts Index after the carmaker pre-released results late Friday. Stifel called it a strong fourth quarter and a “surprisingly confident” outlook. Uniper gains as much as 11%; the power plant operator might benefit from the U.K. government’s potential plans to extend the life of coal-fired power plants, RBC says. Telecom Italia shares rise as much as 9.7% after the firm agreed to a deeper review of KKR’s takeover proposal and said it will ask the private equity giant for more details about its business plan. Phoenix Group shares rise as much as 3.7% after reporting full-year results, with Peel Hunt saying the insurer’s cash generation was “better than expected.” Danone rises as much as 5.6% after Bernstein says the French yogurt maker “seems to be doing everything right” under new management. The brokerage raises its recommendation on Danone and downgrades Reckitt and Unilever. Prosus shares fall as much as 11% in Amsterdam, the most since March 2020, following a continued selloff in Chinese technology shares as concerns about Beijing’s close relationship with Russia added to worries over regulatory headwinds Sanofi slumps as much as 6.2% after the French drugmaker says its mid- stage trial for amcenestrant in breast cancer didn’t meet the primary endpoint. Basic resources shares drop in Europe as commodity prices decline, underperforming the benchmark Stoxx Europe 600, which is gaining on Monday. Rio Tinto falls as much -4.2%, Glencore -4.5%, Anglo American -5.3% lead drop in the Stoxx Europe 600 basic resources sub-index. As noted above, Asian stocks plunged, led by a record 11% plunge in Chinese tech shares as a lockdown in Shenzhen added to woes including Beijing’s crackdown on the sector and mounting concerns about the economic fallout from sanctions on Russia. The MSCI Asia Pacific Index dropped as much as 1.5% to reach a low last seen September 2020, with heavyweights Alibaba and Tencent diving 11% and 9.8%, respectively. The Hang Seng Tech Index plunged 11% after the southern city of Shenzhen, a key tech hub near Hong Kong, was placed into lockdown to contain rising Covid-19 infections. The broader Hang Seng Index lost 5%. “The latest coronavirus outbreak is raising uncertainties over the Chinese economic outlook while high commodity prices are a drag for the Chinese economy no less than for many other countries, limiting the room for monetary easing,” said Aw Hsi Lien, a strategist at Tokai Tokyo Research. “There’re rising perceptions that this year’s growth target of 5.5% is becoming difficult to achieve.”    Investors also remain on edge over risks for Chinese companies stemming from U.S. actions due to Russia’s invasion of Ukraine. Sentiment was also rattled late last week as U.S. regulators identified Chinese companies that could be kicked off exchanges if they fail to open their books to U.S. auditors. While the delisting risk has been known since last year, the Securities and Exchange Commission’s list served as a “wake up call,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd. “I see no way to solve the dispute” between the U.S. and China under current policies, he said.  The historic sell-off in China also drove many peer Asian equity gauges into the red. Still, shares in resource-rich Australia gained and Japan’s Topix climbed amid expected benefits for exporters from the yen’s fall to a five-year low near 118 per dollar. Japanese equities climbed, rebounding after last week’s losses, as a weaker yen bolstered the outlook for exporters and a decline in oil provided a respite amid recent inflation concerns. Auto makers and banks were the biggest boosts to the Topix, which gained 0.7%. Tokyo Electron and Advantest were the largest contributors to a 0.6% rise in the Nikkei 225. The yen approached 118 per dollar, extending its loss after weakening more than 2% last week.  The Nikkei 225 dropped 3.2% last week, its worst since November, while the Topix fell 2.5%. In addition to developments on Russia’s war in Ukraine, investors this week will be monitoring monetary-policy decisions from the Bank of Japan and Federal Reserve. “As Japan’s economy and wage growth are more subdued than in the U.S., and, thus, the BOJ will be slower to tighten than the Fed, the yen may well trend weaker, although any move beyond 120 would not be encouraged by officials,” Nikko Asset Management strategist John Vail wrote in a note. In FX, the Bloomberg Dollar Spot Index inched inched lower and the greenback traded mixed against its Group-of-10 peers. European currencies, lead by the Swedish krona and Norwegian krone, were the best performers while the Australian and New Zealand dollars, as well as the yen, fell. Sweden’s krona rallied as much as 1.8% as sentiment improved and as economists expect the country’s central bank to make a policy U-turn later this year, after inflation reached a new 28-year high last month and as price increases are seen accelerating on the fallout from Russia’s invasion of Ukraine The pound was steady after falling to November 2020 lows on Friday, while gilts slumped. Focus this week will be on the Bank of England, which is expected to raise interest rates for a third time in a bid to control inflation. The yen fell to a five-year low against the dollar as traders boosted bets on the pace of the Federal Reserve’s rate hikes this year amid accelerating U.S. inflation and as risk reversals backed a less-favorable outlook for the Japanese currency. Australia’s dollar dropped for a second day as oil and iron ore lead commodity prices lower, while sliding Chinese equities weighed on risk sentiment. In rates, as noted above, Treasuries sold off, led by the belly, following wider losses across bunds as core European rates aggressively bear-steepen. Treasuries and the 5-year Treasury yield topped 2% for the first time since May 2019 while the yield on 10-year Treasuries rose to 2.10%, the highest since July 2019, before easing back to 2.06%. The US front-end slightly outperforms, steepening 2s5s and 2s10s spreads by 1.7bp and 1.3bp. IG dollar issuance slate empty so far; volumes projected for the week are around $30b, following one of the busiest weeks on record In commodities, WTI drifts ~5% lower to trade at around $103. Brent falls more than 4% to the $107 level. Spot gold falls roughly $27 to trade near $1,962/oz. Spot silver loses 2.6% near $25. Most base metals trade in the red; LME aluminum falls 3.6%, underperforming peers. Bitcoin was initially subdued beneath USD 38,000 ahead of an EU vote on environmental sustainability standards measure that could lead to a ban on Bitcoin, but later recovered with support also seen following a tweet from Elon Musk. Elon Musk tweeted "I still own & won’t sell my Bitcoin, Ethereum or Doge fwiw". Japan demanded that cryptocurrency transactions be blocked if they are sanctions related. Besidesall that, it is a quiet start to thge week with no macro news on today's calendar. Market Snapshot S&P 500 futures up 0.5% to 4,223.50 STOXX Europe 600 up 0.4% to 433.05 German 10Y yield little changed at 0.31% Euro up 0.4% to $1.0952 MXAP down 1.4% to 168.91 MXAPJ down 2.1% to 549.22 Nikkei up 0.6% to 25,307.85 Topix up 0.7% to 1,812.28 Hang Seng Index down 5.0% to 19,531.66 Shanghai Composite down 2.6% to 3,223.53 Sensex up 1.2% to 56,207.96 Australia S&P/ASX 200 up 1.2% to 7,149.40 Kospi down 0.6% to 2,645.65 Brent Futures down 2.7% to $109.60/bbl Gold spot down 0.8% to $1,971.65 U.S. Dollar Index down 0.21% to 98.92 Top Overnight News from Bloomberg The U.S. and China plan to hold their first high-level, in- person talks since Moscow’s invasion on Monday. The meeting comes after China rejected accusations by U.S. officials that Russia had asked it for military equipment to support the invasion of Ukraine Chinese stocks listed in Hong Kong had their worst day since the global financial crisis, as concerns over Beijing’s close relationship with Russia and renewed regulatory risks sparked panic selling Global bond markets are flirting with a 10% drawdown for the first time in over a decade as surging inflation forces yields higher. The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt, has fallen about 9.9% from a high in early 2021, the biggest decline from a peak since 2008, the data show Already pivoting to tightening monetary policy amid the fastest consumer price gains in four decades, Fed Chair Jerome Powell and colleagues now have to deal with the economic fallout of the war, which threatens to deliver the twin blows of weaker growth and even-quicker inflation ECB Governing Council member Martins Kazaks says “it’s very possible that the bond-buying program will end in the third quarter” Germany’s coronavirus infection rate hit a record for the third straight day on Monday, with the renewed surge prompting the country’s top health official to issue a grim warning Leveraged fund net short aggregate Treasuries bets across the curve have hit the highest in over a year, the latest CFTC data show. The U.S. Treasury market just endured one of its worst weeks of the past decade, with yields propelling toward their highest levels of the past year thanks to worsening inflation and the imminent expected shift in policy The yen’s plunge to a five-year low shows no signs of easing as surging commodity prices have worsened the outlook for Japan’s trade balance and put pressure on the currency’s haven credentials. The nation is a net importer of a long list of raw materials from crude oil and grains to metals, exposing it to higher costs as prices of all these have risen due to sanctions imposed on Russia over its invasion of Ukraine Russia has already lost access to almost half of its reserves and sees more risks to President Vladimir Putin’s war chest due to increased pressure from the West on China, said Finance Minister Anton Siluanov Nickel’s 250% price spike in little more than 24 hours plunged the industry into chaos, triggering billions of dollars in losses for traders who bet the wrong way and leading the London Metal Exchange to suspend trading for the first time in three decades. It marked the first major market failure since Russia’s invasion of Ukraine jolted global markets, showing how the removal of one of the world’s largest exporters of resources from the financial system in the space of weeks is having ripple effects across the world A more detailed look at global markets courtesy of newsquawk Asia-Pacific stocks were somewhat mixed as participants digested varied geopolitical headlines ahead of key risk events. ASX 200 was underpinned by strength in its largest-weighted financial sector and encouragement from M&A related headlines. Nikkei 225 benefitted from further currency weakness but failed to hold above the 25,500 level. Hang Seng and Shanghai Comp. were pressured amid several headwinds, including COVID-19 concerns with the technology hub of Shenzhen under a one-week lockdown, which pressured tech and weighed on Macau casino names, as well as dragged the Hong Kong benchmark beneath the 20K level for the first time since 2016 Top Asian News Developers Sink After Weak Home Mortgage Data: Evergrande Update Marcos Keeps Big Lead in Philippine Presidential Survey Funds Managing $130 Trillion Target Lobbying in Climate Plan Hang Seng China Stock Gauge Sinks 7.2%, Most Since Nov. 2008 China Locks Down Shenzhen, Entire Jilin Province as Covid Swells European bourses are firmer, Euro Stoxx 50 +2.1%, following a mixed APAC handover amid conflicting headlines as we await details of the latest Ukrainian-Russia talks. Stateside, US futures are firmer across the board but with magnitudes more contained, ES +0.9%, ahead of multiple risk events. Sectors in Europe are mostly firmer though some of the more defensive names are lagging modestly, Autos outperform post-Volkswagen Top European News European Gas Slumps as Russia, Ukraine to Hold Further Talks British Airways-Operator Comair Still Grounded in South Africa Funds Managing $130 Trillion Target Lobbying in Climate Plan ECB’s Kazaks: ‘Very Possible’ Net Bond-Buying Will End in 3Q U.S.-Listed Chinese Stocks Sink Again as China-Russia Ties Weigh In FX, Aussie bears the brunt of reversal in commodity prices; AUD/USD hovering around 0.7250 ahead of RBA minutes tomorrow. Yen extends decline on yield and BoJ policy divergence towards 118.00 vs the Dollar. Euro rebounds with risk appetite amidst hopes of constructive Russian-Ukrainian dialogue; EUR/USD finds support around 1.0900 where 1.84bln option expiries reside to trade above 1.0960. Rouble firmer on the premise that positive words will speak louder than negative actions. Yuan depreciates as Covid cases mount in China and PBoC sets a weaker than expected onshore midpoint rate, USD/CNH probes 6.3800 at one stage. Swedish Crown strong in line with latest inflation data and hawkish Riksbank rate calls from Nordea and SEB, EUR/SEK tests Fib support circa 10.5252 In commodities, WTI and Brent continue to unwind geopolitical premia amid mixed Russia-Ukraine developments and the possibility of progress soon. Currently, benchmarks lie near fresh lows of USD 103.42/bbl and USD 107.59/bbl respectively, further impeded by IEA's Birol. Iraq set April Basrah medium OSP to Asia at Oman/Dubai + USD 3.50/bbl, OSP to Europe at Dated Brent - USD 3.05/bbl and OSP to North and South America. UK PM Johnson is seeking a mega oil deal with the Saudis and is pushing for solar and nuclear energy to cut reliance on foreign oil, while the UK is also considering keeping some coal-fired power stations operational, according to Express and The Times. IEA Chief Birol says responsible producers should increase oil output. French PM Castex said the government will offer EUR 0.15/litre rebate on petrol prices from April to counter high prices with the rebate on fuel to last four months and is expected to cost around EUR 2bln. Japanese PM Kishida will look at measures for high oil prices and raw material food prices whilst watching the situation carefully, according to the Japanese ruling party secretary general; subsequently, Japanese government is to increase the petrol subsidy to around JPY 24/litre and close to the ceiling of JPY 25/litre. Gazprom says it is continuing shipping gas to Europe via Ukraine, Monday's volume is broadly unchanged at 109.5mln cubic metres; does not intend holding spot gas sale sessions on its electronic sales platform this week. China is planning to boost its coal output by as much as it imports. Spot gold and silver are pressured unwinding safe-haven appeal in-fitting with other typical havens In Fixed income, the debt rout rages on on as futures take out near term technical supports and yields reach or breach psychological levels. Curves continue to steepen on resurgent risk sentiment rather than any read respite from sharp retracement in crude prices. USTs and Gilts anticipating tightening from the Fed and BoE later this week. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap I've tried to keep the introductory paragraphs fairly sober in recent weeks as the challenging time for the world doesn't really need my flippancy. However I have to share with you this morning that 5 minutes before I started typing this I started walking again for the first time in 6 weeks. The crutches were left by the bed and my morning coffee made without hopping between the cupboard, the sink and the fridge, and then working out how to get my coffee back upstairs while on crutches. It's amazing how good normality felt. Fingers crossed this operation will buy me a few years before knee replacement. We will see. The newsflow didn't look good late on Friday as some earlier positive signs on the conflict talks petered out. In terms of developments there was mixed news last night though as on the positive side some progress seemed to be made on talks, but on the negative side the FT reported that US officials suggested that Russia have asked China for military and economic assistance since the invasion began. The article said that the officials didn't details China's response but this came just few hours after White House officials announced that a high-level delegation from the US would meet with a top Chinese official in Rome today. On the positive side however, Ukrainian negotiator and presidential adviser Mykhailo Podolyak tweeted and posted a video online saying, "Russia is already beginning to talk constructively... ... I think that we will achieve some results literally in a matter of days,". A Russian delegate echoed the sentiment and US Deputy Secretary of State Wendy Sherman also highlighted that Russia was showing signs of willingness to engage in substantive negotiations. DM equity futures are making modest gains in Asia with contracts on the S&P 500 (+0.59%), Nasdaq (+0.35% and DAX (+0.59%) all trading higher. US Treasuries are seeing a pretty big move for an Asian session with the 5-yr yield (+6.3bps) moving above 2% for the first time since May 2019 whilst the 10-yr yield is up +5.3bps to 2.044%. Elsewhere Brent futures (-1.93%) are down to $110.50/bbl while WTI futures (-2.41%) are at $106.70/bbl. Asian equity markets are mostly trading lower though as we start the week following the broadly negative cues from Wall Street on Friday. The Hang Seng (-3.81%) is leading losses across the region with Chinese tech stocks again seeing major declines. Shares in mainland China are also weak with the Shanghai Composite (-1.30%) and CSI (-1.73%) both in negative territory after the southern Chinese tech hub Shenzhen was put under a citywide lockdown over the weekend to slow an outbreak of Covid-19. Elsewhere, the Kospi (-0.72%) is down but the Nikkei (+0.95%) is trading up this morning, reversing its previous session's losses. Coming back to the Covid news, the Chinese authorities have placed 17.5 million residents of Shenzhen under lockdown after the city reported 66 fresh Covid cases on Sunday while the nationwide official figure nearly doubled to 3,400. The lockdown and suspension of public transport will last until March 20 and will be accompanied by three rounds of mass testing of residents. At the same time, the surge in cases across China has also prompted the authorities to shut schools for students from kindergarten through middle schools next week in Shanghai. In the neighbouring Hong Kong, the health authorities reported 32,430 new Covid-cases on Sunday with city leader Carrie Lam highlighting that the outbreak has not past its peak yet despite recent number of daily cases “slightly levelling off”. Looking forward now, and as we all know it's a big central bank week with the Fed the obvious focal point mid-week. The BoE and the BoJ also hold meetings, along with some of their emerging markets counterparts. We'll also see CPI for Japan and Canada and a number of housing market statistics in the US and China. Earnings will include Volkswagen, FedEx and Enel, among others. Wednesday will also be a landmark day even outside of the Fed as this is the date that two Russian Eurobonds have coupon payments. These are small (c.$120bn out of c.$1.75bn of annual hard currency coupons) but will be hugely symbolic. Speaking to one of our EM strategists, Christian Wietoska, and one of our European economists, Peter Sidorov, over the weekend their view was that this would likely mark the start of the 30-day grace period that issuers have before a default is officially triggered. 30-days still gives time for there to be a negotiated end to the war and therefore this probably isn't yet the moment where we see where the full stresses in the financial system might reside. There has already been a huge mark to market loss already anyway with news coming through or write downs. However this is clearly an important story to watch. Onto the Fed now and the FOMC concludes on Wednesday, with the Fed expected to raise rates for the first time since December 2018. Markets are pricing in a +25bps hike, in line with the rhetoric from Chair Powell at his congressional testimonies a couple of weeks back. Before the invasion we thought a 50bps was likely this week and the problem is that by delaying such a move they may have to do more later. The market seems to agree to some degree as at Friday's close the market was pricing in 6.7 hikes this year, the most seen in this cycle and above the post invasion intra-day lows of 4.45. This morning we are at 6.92. A full preview from our US economists is available here. With regards to QT, they anticipate that the Fed will use this upcoming meeting to announce caps determining the maximum monthly runoff and, in May, announce QT that would begin in June. They think we will see $800bn of runoff this year and an additional $1.1tn drawdown in 2023, a cumulative reduction we think is roughly equal to between three and four rate increases (see "QT update: The sooner the better"). The fascinating thing for me is what this does to the yield curve if they are correct. For me nirvana for the Fed is getting to around neutral, somewhere with a 2 handle on Fed Funds and trying to ensure that 10yr yields rise enough to prevent inversion but not enough to lead to a tightening of financial conditions. So if in 12-18 months time 2 year yields are 2.25-2.5%, 10 year yields are 2.75-3% and inflation is coming back towards trend then the Fed have pulled off a masterstroke. If however, 2yr yields are above 2% and 10yr yields below this level, the inversion will likely bite. On the other hand, if the curve steepens up too much and longer end yields are notably above 3% the risk is that financial conditions tighten too much given the global debt load. So the Fed are trying to thread a needle and its possible inflation will give them an impossible task. Time will tell. Ahead of the Fed watch out for US PPI (Tuesday) and Retail Sales (Wednesday). They are highly unlikely to change the equation for this FOMC but will be important for the direction of the economy and inflation thereafter. We also get a plethora of US housing data to end the week with Thursday's housing starts and Friday's existing homes sales. These are going to be important for both activity and the rents component in CPI. Back to central banks and on Thursday, it will be the BoE's turn. Our UK economist previews the meeting here, and is expecting a +25bps hike to 0.75%, the pre-pandemic level. Their projected terminal rate is 1.75%. Finally, on Friday, the Bank of Japan will hold a meeting as well and a preview can be found here. The central bank is expected to hold the key rate steady but there is a chance of economic assessment being downgraded. The Bank of Russia's decision on the same day will be scrutinised for the response to risks to the economy from the ongoing geopolitical turmoil. Back to the week that was now. The war in Ukraine raged on, while negotiations continued to generate little tangible progress as leaders managed expectations down for any near-term resolution. However, there were various green shoots throughout the week when it appeared both Ukrainian and Russian officials left some room for compromise from their original positions. The glimmers of hope on the war front, along with a more hawkish-than-expected ECB sent sovereign bond yields higher on both sides of the Atlantic this week. Positive news about the supply of oil and gas sent futures lower on the week, despite the US and UK moving to restrict Russian imports. Oil and European natural gas prices fell -5.07% (+3.05% Friday) and -30.15% (+3.82% Friday) over the week, following a proclamation from President Putin that Russia would honor its energy export commitments, instead of unilaterally cutting off supply in retaliation to sanctions. For its part, the Iraqi oil minister noted OPEC would increase oil production were supply to reach scarcity levels. The other major story on the week was the ECB meeting, where the central bank signaled more focus on price stability than the potential downside impact to growth from the war. The governing council announced an accelerated tapering of its APP purchases, which would end in Q3, maintaining the option for increases to their policy benchmark rate sometime thereafter should the data merit. The ECB also updated their forecast for 2022 inflation to 5.1 percent and 2.1 percent for 2023. The tighter than expected policy stance gave rise to higher sovereign bond yields on both sides of the Atlantic, with 10yr bunds, OATs, gilts, and Treasuries rising +31.8bps (-2.5bps Friday), +28.9bps (-2.6bps Friday), +28.3bps (-3.2xbps Friday), and +26.1bps (+0.5bps Friday), respectively. For 10yr bunds that was the largest weekly gain since June 2015, 10yr gilts the largest weekly gain since September 2017, September 2019 for Treasuries, and March 2020 for OATs. Money markets ended the week pricing +40.5bps of ECB tightening this year, up from +24.1bps of tightening at last week’s close. European equities latched on to this week’s marginally more optimistic news, with the STOXX 600 finishing +2.23% (+0.95% Friday), the first weekly gain in a month. The DAX and CAC also finished the week +4.07% (+1.38% Friday) and +3.28% (+0.85% Friday) higher, respectively. US investors proved more pessimistic, with the S&P 500 retreating -2.88% (-1.30% Friday), with tech underperforming again, as the NASDAQ fell -3.53% (-2.18% Friday). The US indices took a leg lower Friday afternoon after Europe called it a week when Ukrainian leadership didn’t strike as optimistic a tone as Russian leaders surrounding the prospects of negotiations, as well as reports that Belarussian troops were about to join the invasion of Ukraine. University of Michigan consumer inflation expectations for the next year increased to 5.4 percent, above expectations of 5.1 percent on Friday. This followed the February US CPI data which showed headline and core measures increasing to their highest readings in four decades, which would have headlined just about any other week. In line with this, market-based measures of inflation expectations increased, with 10yr Treasury breakevens widening +27.3bps on the week. Tyler Durden Mon, 03/14/2022 - 08:15.....»»

Category: blogSource: zerohedgeMar 14th, 2022

Why Most Crypto Backers Are Excited That the Biden Administration Is Wading Into Digital Currency

“I am pretty darn optimistic about it,” says Alexis Ohanian, the co-founder of Reddit who is now a major investor in crypto technology A version of this article was published in TIME’s newsletter Into the Metaverse. Subscribe for a weekly guide to the future of the Internet. You can find past issues of the newsletter here. It’s been a momentous couple weeks in crypto. In the midst of Russia’s invasion of Ukraine, millions of dollars in cryptocurrency donations have streamed toward the Ukrainian government and relief efforts, providing a lifeline for those unable to access traditional banks. On the flip side, regulators have worried that crypto provides a way for Russian oligarchs to circumvent sanctions (although no concrete evidence has surfaced that this is the case). Earlier this week, rumors spread that President Joe Biden was about to issue an executive order cracking down on crypto, especially with regards to its role in this geopolitical conflict. [time-brightcove not-tgx=”true”] But many crypto insiders were pleasantly surprised when the Administration released its executive order on Wednesday, marking the first time the White House has weighed in formally on cryptocurrencies. The order recognized the popularity of cryptocurrencies and directed the U.S. Department of the Treasury and other federal agencies to coordinate their efforts to come up with a regulatory plan. “I am pretty darn optimistic about it,” says Alexis Ohanian, the co-founder of Reddit who is now a major investor in crypto technology. “I’m grateful we’re at the point where the utility of this tech has proven to be very obvious to all levels of our government.” The order tasks a variety of agencies with studying and planning around cryptocurrency policy in key areas like consumer protection, national security, and illicit finance. It also urges the Federal Reserve to continue exploring the development of a U.S. Central Bank Digital Currency (CBDC)—a digital U.S. dollar that would be widely available to the general public, and could make digital transactions more secure, faster and cheaper. TIME spoke to several leaders in crypto about the executive order. Here the main reasons they’re generally excited. The tone signals positivity about cryptocurrency The tone of the executive order is evident from the very first line of the fact sheet, which comments on the “explosive growth” of digital assets. The order then declares that the U.S. “must maintain technological leadership in this rapidly growing space.” Kristin Smith, the executive director of the Blockchain Association, a D.C.-based crypto lobbying group, says that the order’s language is “incredibly bullish, especially compared to the last Administration, which was much more hostile towards crypto.” (President Trump tweeted in 2019 that he was “not a fan” of cryptocurrencies and that they were “based on thin air.”) “We’re pretty happy; it’s an acknowledgement that this is a growing, important space,” Smith says. Jeremy Allaire, the co-founder and CEO of Circle, the digital currency company behind the world’s second-largest stablecoin, went a step further, writing on Twitter that the order represents a “watershed moment for crypto, digital assets, and Web 3, akin to the 1996/1997 whole of government wakeup to the commercial internet.” And the market seemed to agree with him: Bitcoin jumped 9% on Wednesday afternoon. A thoughtful look at risks Of course, the executive order isn’t uniformly positive: It lays out the many risks of cryptocurrencies, including the prevalence of scams, its use in illicit finance, and environmental concerns. But Smith says the detail and nuance of the report show the Biden Administration’s commitment to studying the space carefully. “They’ve asked a really good series of questions that relate to a lot of policy goals,” she says. “They’re not pre-determining policy outcomes, but rather have a really methodical and thoughtful process to go about finding answers and figuring out where the regulatory gaps are.” Setting the stage for regulatory clarity Over the past couple years, different governmental agencies have jostled for the authority to regulate cryptocurrencies, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). While the order doesn’t specifically say who is in charge, it calls on the various regulators to create a united front and to determine spheres of influence, and a chain of command. These agencies publicly fell in line in support on Wednesday. CFTC chairman Rostin Behnam wrote that the order would “ensure greater cooperation and coordination between various cabinet-level agencies.” SEC Chairman Gary Gensler issued a similar statement on Twitter. Treasury Secretary Janet Yellen wrote in a statement that she would work under the guidelines of the order to “promote a fairer, more inclusive, and more efficient financial system.” Meanwhile, inside the the crypto world, there are some libertarians who take a hardline view against any sort of regulation. But most of the leaders of cryptocurrency platforms are already complying with government know-your-client (KYC) regulations—and have spoken up about the fact that they want more clarity, not less, on their responsibilities. “There’s a strong case to be made that the lack of regulatory guidance and policy certainty has hindered the ability of responsible investors and entrepreneurs to innovate in this space because they’re unclear of what regulations they may be subject to two, three, four years down the line if they become successful,” says Ariel Zetlin-Jones, an associate professor of economics at Carnegie Mellon University’s Tepper School of Business. “So to the extent that this executive order will spur a wide number of agencies to establish some kind of predictable policy rationale behind how blockchain and crypto innovations will be treated, you would think that would enhance enthusiasm for investing in this space.” Sam Kazemian, the founder of the stablecoin Frax, agrees. “I don’t see it as black or white. I think in democratic, liberal societies like ours, people want to see regulations, fairness, and transparency,” he says. “We’re very collaborative and cooperative, and want to make sure we’re on the right side of history.” Crypto lobbying in Washington will only increase Biden’s order doesn’t actually make any immediate demands, but rather calls for research to unfold over the year, eventually leading to a set of concrete recommendations. Crypto boosters are taking this process as a green light to flood Washington with suggestions. “This [executive order] should be viewed as the single biggest opportunity to engage with policy makers on the issues that matters,” Allaire wrote on Twitter. The lobbying presence of crypto in D.C. is already sizable: its expenditures rose from $2.2 million in 2018 to $9 million in 2021, according to a report this week by Public Citizen, a progressive advocacy group. The Blockchain Association, one of the largest lobbying groups, is expected to continue to play a significant role in the coming conversations this year. “We’ve already had some people in government reach out to us asking to come in and talk to them,” Smith says. “We’ve got a lot of work cut out for us over the next six or so months.” “I know a couple regulators and folks in office. They’ve always got my number if they want to talk about this stuff,” Ohanian says. “I’ll certainly continue to be a resource as best as I can.” The digital dollar is still far away The issue of Central Bank Digital Currencies (CBDCs) is a contentious one in the crypto community. While having a government-issued digital currency could be useful to foster greater access to the financial system, many feel it would run counter to crypto’s decentralized ideals. Biden’s order doesn’t make a declaration in either direction, but does call for a study into whether a CBDC would “enhance or impede” financial systems and the power of the U.S. dollar. While a digital dollar would theoretically compete with Kazemian’s stablecoin Frax, he says he’s not particularly concerned with this development. “The government’s timelines… are so slow that the first real world payments, if they ever even happen, won’t be until like 2026,” he says. “That’s why I think it’s important for the private sector and these innovations to stay within the U.S.—and to have people with expertise actually collaborating with the government.” Subscribe to Into the Metaverse for a weekly guide to the future of the Internet. Join TIMEPieces on Twitter and Discord.....»»

Category: topSource: timeMar 10th, 2022

Yield farming: An investing strategy involving staking or lending crypto assets to generate returns

Yield farming involves lending cryptocurrency in exchange for interest payments and other rewards - but it comes with a high degree of risk. Yield farming involves staking, or locking up, your cryptocurrency in exchange for interest or more crypto. Alyssa Powell/Insider Yield farming involves lending or staking cryptocurrency in exchange for interest and other rewards. Yield farmers measure their returns in terms of annual percentage yields (APY). While potentially profitable, yield farming is also incredibly risky. Visit Insider's Investing Reference library for more stories. Yield farming is a means of earning interest on your cryptocurrency, similar to how you'd earn interest on any money in your savings account. And similarly to depositing money in a bank, yield farming involves locking up your cryptocurrency, called "staking," for a period of time in exchange for interest or other rewards, such as more cryptocurrency."When traditional loans are made through banks, the amount lent out is paid back with interest," explains Daniel R. Hill, CFP, AIF and president of Hill Wealth Strategies. "With yield farming, the concept is the same: cryptocurrency that would normally just be sitting in an account is instead lent out in order to generate returns."Since yield farming began in 2020, yield farmers have earned returns in the form of annual percentage yields (APY) that can reach triple digits. But this potential return comes at high risk, with the protocols and coins earned subject to extreme volatility and rug pulls wherein developers abandon a project and make off with investors' funds.Note: The returns you earn by yield farming are expressed as APY, or the rate of return you'd earn during a year.Understanding how yield farming worksAlso known as liquidity farming, yield farming works by first allowing an investor to stake their coins by depositing them into a lending protocol through a decentralized app, or dApp. Other investors can then borrow the coins through the dApp to use for speculation, where they try to profit off of sharp swings they anticipate in the coin's market price."Yield farming is simply a rewards program for early adopters," says Jay Kurahashi-Sofue, VP of marketing at Ava Labs, a team supporting development of the Avalanche public blockchain that works with several defi applications that offer yield farming. Blockchain-based apps offer incentives for users to provide liquidity by locking up their coins in a process called staking. "Staking occurs when centralized crypto platforms take customers' deposits and lend them out to those seeking credit," Hill says. "Creditors pay interest, depositors receive a certain proportion of that and then the bank takes the rest.""This lending is usually facilitated through smart contracts, which are essentially just a piece of code running on a blockchain, functioning as a liquidity pool," says Brian Dechesare, former investment banker and CEO of financial career platform Breaking Into Wall Street. "Users who are yield farming, also known as liquidity providers, lend their funds by adding them to a smart contract."Investors who lock up their coins on the yield-farming protocol can earn interest and often more cryptocurrency coins - the real boon to the deal. If the price of those additional coins appreciates, the investor's returns rise as well.This process provides the liquidity newly launched blockchain apps need to sustain long-term growth, says Kurahashi-Sofue. "[These apps] can increase community participation and secure this liquidity by rewarding users with incentives like their own governance tokens, app transaction fees and other funds," Kurahashi-Sofue says.Kurahashi-Sofue adds that you could compare yield farming to the early days of ride-sharing. "Uber, Lyft, and other ride-sharing apps needed to bootstrap growth, so they provided incentives for early users who referred other users onto the platform," he says.Another incentive for staking is to accumulate enough shares of the cryptocurrency to force a hard fork where a major infrastructural change is made to the design of the cryptocurrency, says Daniel J. Smith, professor of economics in the Political Economy Research Institute at Middle Tennessee State University.Note: A hard fork is a change in a cryptocurrency network's protocol that causes blocks or transactions to be either validated or invalidated, forcing developers to upgrade their protocol software."Hard forks enable the holders of crypto to force changes that would, at least in the opinion of the majority of the holders, improve the cryptocurrency going forward," Smith says. In a way, hard forking gives crypto investors a power similar to what share voting does for stockholders. The same way shareholders can vote on key matters affecting the management or direction of the companies they invest in, cryptocurrency holders can use hard forks to push a cryptocurrency protocol in a certain direction.Staking coins to cause a hard fork "allows crypto to take on (this) important characteristic of equity investments," Smith adds, and "moves crypto from a cash-like investment in a portfolio to a quasi-equity investment."Is yield farming safe? Yield farming is rife with risk. Some of these risks include:Volatility: Volatility is the degree to which an investment's price fluctuates. A volatile investment is one that experiences a lot of price movement in a short period of time. The price of your tokens could crash or surge while they're locked up.Fraud: Yield farmers may unwittingly put their coins into fraudulent projects or schemes that make off with all of the farmer's coins. In fact, fraud and misappropriation account for the vast majority of the $1.9 billion in crypto crimes in 2020, according to a report by CipherTrace.Rug pulls: Rug pulls are a type of exit scam where a cryptocurrency developer gathers investor funds for a project then abandons the project without returning investors' funds. The previously mentioned CipherTrace report noted that nearly 99% of the major fraud that occurred during the second half of the year was due to rug pulls and other exit scams, which yield farmers are particularly susceptible to.Smart contract risk: The smart contracts used in yield farming can have bugs or be susceptible to hacking, putting your cryptocurrency at risk. "Most of the risks with yield farming relate to the underlying smart contracts," Kurahashi-Sofue says. Better code vetting and third party audits are improving the security of these contracts.Impermanent loss: The value of your cryptocurrency could rise or fall while it is staked, creating temporarily unrealized gains or losses. These gains or losses become permanent when you withdraw your coins, and may result in you having been better off if you'd kept your coins available to trade if the loss is greater than the interest you earned.Regulatory risk: There are still many regulatory questions around cryptocurrency. The SEC has stated that some digital assets are securities and thus fall under its jurisdiction, allowing it to regulate them. State regulators have already issued cease and desist orders against one of the biggest crypto lending sites, BlockFi."There's always risk in using decentralized apps," Kurahashi-Sofue says. "It's all about minimizing the risk enough for you to be comfortable with using them, based on your own research. Users should always look into the team behind the application and its transparency and diligence with security audits."In the news: The biggest cryptocurrency theft to date involved hackers stealing $600 million from the Poly Network in August 2021.Is crypto yield farming profitable? While yield farming is unquestionably risky, it can also be profitable - otherwise no one would bother attempting it. CoinMarketCap provides yield-farming rankings with various liquidity pools' yearly and daily APY. It's easy to find pools running with double digit yearly APY, and some with those thousand-percentage point APYs. But many of these also have a high risk of impermanent loss, which should make investors question if the potential reward is worth the risk. "The profitability of yield farming, just like investment in crypto more generally, is still very uncertain and speculative," Smith says. He believes the potential return pales in comparison to the risk involved in locking up your coins while yield farming.Your overall profit will also depend on how much cryptocurrency you're able to stake. To be profitable, yield farming requires thousands of dollars of funds and extremely complex strategies, Dechesare says.5 yield-farming protocols to know aboutYield farmers sometimes use DeFi platforms that offer various incentives for lending to optimize the return on their staked coins. Here are five yield-farming protocols to know about:Aave is an open source liquidity protocol that lets users lend and borrow crypto. Depositors earn interest on deposits in the form of AAVE tokens. Interest is earned based on the market borrowing demand. You can also act as a depositor and borrower by using your deposited coins as collateral.Compound is an open source protocol built for developers that uses an algorithmic, autonomous interest rate protocol to determine the rate depositors earn on staked coins. Depositors also earn COMP tokens.Curve Finance is a liquidity pool on Ethereum that uses a market-making algorithm to let users exchange stablecoins. Pools using stablecoins can be safer since their value is pegged to another medium of exchange.Uniswap is a decentralized exchange where liquidity providers must stake both sides of the pool in a 50/50 ratio. In exchange, you earn a portion of the transaction fees plus UNI governance tokens.Instadapp is designed for developers and allows users to build and manage their decentralized finance portfolio. As of Oct. 31, more than $12 billion is locked on Instadapp.The financial takeawayYield farming involves staking, or locking up, your cryptocurrency in exchange for interest or more crypto. "As crypto becomes more popular, yield farming will become more mainstream. It's a simple concept that has been around for as long as banks have existed and is just a digital version of lending with interest for profit to the investors," Hill says.While it's possible to earn high returns with yield farming, it is also incredibly risky. A lot can happen while your cryptocurrency is locked up, as is evidenced by the many rapid price swings known to occur in the crypto markets."As with anything in life, if something is too good to be true, it likely is," Kurahashi-Sofue "It's best to understand how yield farming works and all of the underlying risks and opportunities prior to participating in yield farms."What to know about non-fungible tokens (NFTs) - unique digital assets built on blockchain technologyWhat is a crypto wallet? Understanding the software that allows you to store and transfer crypto securelyReady to invest in Bitcoin? Here are 4 steps to get startedAltcoins are the alternative digital currencies to bitcoin - here's what they are and how they workRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 9th, 2021

The U.S. Is Losing the Global Race to Decide the Future of Money—and It Could Doom the Almighty Dollar

"I don’t think the U.S. is aware there is a race" In cities across China, the country’s central bank has begun rolling out the e-renminbi—an all-digital version of its paper currency that can be accessed and accepted by merchants and consumers without an internet connection, credit or even a bank account. Already having conducted more than $5 billion in e-renminbi transactions, China has opened its digital currency up to foreigners. Next year, when Beijing hosts the Winter Olympic Games, authorities are expecting to let the world test drive its technological achievement. The U.S., by contrast, is having trouble even concluding its multi-year exploration into the possibility of an e-dollar. In fact, an upcoming Federal Reserve paper on a potential U.S. digital currency won’t take a position on whether the central bank of the United States will, or even should, create one. [time-brightcove not-tgx=”true”] Instead, Federal Reserve Chair Jerome Powell said in recent testimony to Congress, this paper will “begin a major public consultation on central bank digital currencies…” (Once planned for July, the paper’s release has since been moved to September.) Once the world leader in digital payments and technological innovation, the U.S. is being outpaced by its top global adversary as well as much of the industrialized and the developing world. The Bahamas recently announced the integration of its digital Sand Dollar into a stock exchange, while Australia, Malaysia, Singapore and South Africa are moving forward with the world’s first cross-border central bank digital currency exchange program led by the Bank for International Settlements (BIS), which is known as the central bank of central banks. Such developments have been somewhat outshined by El Salvador’s recent decision to make bitcoin a legally accepted currency, which few expect to make significant impact in the payment space. But outside of the cryptocurrency space, nations around the globe are making significant strides in the development of the digital future of money — supported by governments and backed by powerful central banks. Leadership in this space will have implications for more than just payments: geopolitical ambitions, economic growth, financial inclusion and the very nature of money could all be dictated by who leads the charge and how. “I don’t think the U.S. is aware there is a race” Digital currencies are the next wave in the “evolution of the nature of money in the digital economy,” Hyun Song Shin, economic adviser and co-leader of the Monetary and Economic Department at the Bank for International Settlements, tells TIME. As more of our world migrates from physical brick-and-mortar to wireless and cloud-based, the way we pay for things is changing as well. A central bank digital currency would operate just like cash, but instead of having to carry it in a physical wallet or put it into a bank account, it would be stored and accessed digitally. Not only could U.S.-backed digital currency facilitate easier, modern banking, it could prove vital in protecting American international influence. Late to the party, the U.S. is “stepping up its research and public engagement” on digital currencies, the Federal Reserve says, including forming working groups on cryptocurrency and other kinds of digital money, and experimenting with technology that would be central to producing a digital dollar. The Fed’s regional Boston branch is overseeing these efforts with the Massachusetts Institute of Technology on what’s known as Project Hamilton. But the path towards a digital U.S. dollar has met many challenges, skeptics and outright opponents. All while China, and other countries, push forward. Lagging behind the world Just how far behind is the U.S. in the development of a central bank-issued digital currency (CBDC)? According to global accounting firm PwC’s inaugural CBDC global index, which tracks various CBDCs’ project status from research to development and production, the U.S. ranks 18th in the world. America’s potential efforts trail countries like Sweden, South Korea and China but also countries like the Bahamas, Ecuador, Eastern Caribbean and Turkey. China, with its government’s hyperfocus on maintaining control and overseeing data, has been working to develop a CBDC for almost a decade. And the U.S. is probably not close to catching up. Analysts like Harvard economics professor Kenneth Rogoff, who study monetary policy and digital currencies, estimate that the U.S. could be at least a decade away from issuing a digital dollar backed by the Fed. In that time, Rogoff argued in an op-ed earlier this year, the modernization of China’s financial markets and reduction or removal of its currency controls “could deal the dollar’s status a painful blow.” Read More: How China’s Digital Currency Could Challenge the Almighty Dollar China has already largely moved away from coin and paper currency; Chinese consumers have racked up more than $41 trillion in mobile transactions, according to a recent research paper from the Brookings Institution, with the lion’s share (92%) going through digital payment processors WeChat Pay and Alipay. “The reason you could say the U.S. is behind in the digital currency race is I don’t think the U.S. is aware there is a race,” Yaya Fanusie, an Adjunct Senior Fellow at the Center for a New American Security, and a former CIA analyst, tells TIME in an interview. “A lot of policymakers are looking at it and concerned…but even with that I just don’t think there’s this sense of urgency because the risk from China is not an immediate threat.” Not only is the U.S. running significantly behind in the development of a CBDC, we are trailing the rest of the world in digital payments broadly. Kenya, for example, has almost fully digitized its economy through its digital currency and payment system MPESA, making transactions free and almost instantaneous. India’s Unified Payments Interface (UPI) allows users to transfer money instantly between bank accounts with no cost. Brazil’s PIX facilitates the transfer of money between people and companies in up to 10 seconds. All of these programs work through and are overseen by the countries’ central banks rather than commercial banks or other private companies. What’s holding the U.S. back? Critics argue CBDCs are simply a solution in search of a problem and potentially harmful. Many see support from the banking sector as vital to the success of a digital U.S. dollar, however commercial banks in the U.S. have taken a largely adversarial stance. “The proposed benefits of CBDCs to international competitiveness and financial inclusion are theoretical, difficult to measure and may be elusive,” the American Bankers Association said in a statement at a recent congressional hearing on digital currencies. “While the negative consequences for monetary policy, financial stability, financial intermediation, the payments system, and the customers and communities that banks serve could be severe.” The Bank Policy Institute, which lobbies on behalf of the country’s largest banks, went so far as to argue that neither the Fed nor the U.S. Treasury even has the constitutional authority to issue a digital currency. Commercial banks dominate the U.S. financial system to such a degree that unraveling them would be ostensibly impossible, experts say, they also would be a powerful adversary. Former Goldman Sachs managing director Nomi Prins notes banks have clearly seen the writing on the wall. “Banks are centralized middlemen with respect to financial transactions,” Prins, author of Collusion: How Central Bankers Rigged The World, tells TIME. “The more popular cryptocurrency or digital currency becomes, the fewer profits the banking system can reap from traditional services and verification methods that allow them to hold, take or use their customers’ money, and the more financial power they stand to lose as a result.” Even disruptive financial technologies like PayPal, Venmo and Zelle work through the banking system, rather than around it, thanks in large part to the banks’ power. Central bankers also generally have concluded that commercial banks are a necessary piece of a potential CBDC ecosystem, thanks to their pre-existing regulatory guardrails and ability to move money. Read More: How Jay Powell’s Coronavirus Response Is Changing the Fed Forever Top policymakers at the Fed, including influential Vice Chair for Supervision Randal Quarles, have joined the banking industry in arguing that a digital dollar “could pose significant and concrete risks” and that the potential benefits “are unclear.” Fed Governor Christopher Waller said in August he was “skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system,” in a recent speech he titled “CBDC: A Solution in Search of a Problem?” Further, there’s no central U.S. authority with direct oversight or responsibility for any of this. In addition to the Fed, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, Office of Thrift Supervision, Financial Stability Oversight Council, Federal Financial Institutions Examination Council and the Office of Financial Research would all have some stake in the development of a digital currency backed by the central bank, to say nothing of state and regional authorities. “The U.S. has an active congressional debate, which is beneficial and very important,” Federal Reserve Governor Lael Brainard tells TIME in an interview. “But the U.S. also has a diffusion of regulatory responsibility with no single payments regulator at the federal level, which is not as helpful. That diffusion of responsibility is part of what creates the lags that our system is working through.” None of this exists in China where the Chinese Communist Party oversees the central bank, commercial banks and their regulators and is unconcerned with privacy. How a downgraded dollar could hamstring U.S. influence An American CBDC could have lasting geopolitical impact and curb a longstanding international effort to reduce reliance on the mighty U.S. dollar. “Why we should care about this is that the U.S. financial system is not intrinsically dominant,” Fanusie says. “Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar.” With the U.S. dollar as the world’s reserve and primary funding currency, the U.S. can restrict access to funding from financial markets, limit countries’ ability to sell their natural resources and hinder or block individuals’ access to the banking sector. “Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar” While dollar dominance has rankled much of the world for decades, there has been no suitable replacement for the U.S., with its massive economy, sophisticated banking system and sprawling international presence. China is in the midst of a long-term push to simultaneously grow its financial markets and internationalize its currency. Both have the end goal of allowing China and its allies to limit the ability of the U.S. to enforce its will through economic actions like sanctions. Fanusie wrote in a January report that being the first major economy to roll out a digital currency is “part of China’s geopolitical ambitions.” However, the renminbi will not become the world’s reserve currency — at least, not any time soon. But what China has done by being in the forefront of CBDC development is put itself in position to take the lead on development and implementation of rules and regulations for digital currencies on a global scale. “While America led the global revolution in payments half a century ago with magnetic striped credit and debit cards, China is leading the new revolution in digital payments,” writes Brookings’ economic studies fellow Aaron Klein. Why should central banks offer digital currencies? Over the past decade, digital currencies, including cryptocurrency and “stablecoins,” have sprung up like weeds. Some purport to be just as safe as dollars, but are backed by questionable assets. In a crisis regulators worry they could fluctuate wildly in value or lose their value altogether. Having central banks, which are responsible for the printing and circulation of coins and paper money, issue digital currencies is in part a reaction to this private sector activity, Shin says, “accelerated by the potential encroachment of private digital currencies, and the need to preserve the role of money as a public good.” “The status quo is not an option” Notably, a U.S. digital currency could provide benefits to everyday people. It could increase financial inclusion and fix flaws in current payments systems, Shin adds, citing findings of a recent BIS study. For example, transferring money between U.S.-based bank accounts, even those held by the same person, can take days. The process can be even longer when crossing international borders. Credit and debit card transactions similarly don’t settle for days and come with significant fees for merchants, who sometimes pass them on to customers. CBDCs could grant universal access to the banking sector and quickly facilitate the distribution of paychecks and government funds, reducing the need for costly bank workarounds like check cashing and payday loans. Championing CBDCs Brainard has been pushing the Fed to move on a digital currency for years, but there was little urgency from others at the Fed or in Congress. Companies developing their own currencies, consumers investing in cryptocurrency and the COVID-19 pandemic making paper notes anathema to many Americans changed that. Before COVID-19, Facebook’s Libra project (now known as Diem) showed lawmakers and central bankers the potential for a private company to step in and fill the void by effectively minting its own currency that could be spent by users around the world. “The status quo is not an option,” Diem co-creator David Marcus said at the International Monetary Fund’s 2019 fall meeting. “Whether it’s Libra or something else, the world is going to change in a profound way.” Brainard, for one, has taken notice. “My own thinking is that stablecoins and related private sector initiatives are moving very rapidly, which makes it incumbent on us to move more rapidly,” she tells TIME. “That is why I have been pushing to advance outreach, cross-border engagement, and policy and technology research for several years now.” So-called stablecoins — unregulated digital currencies created by private companies that purport to represent dollars but are completely unregulated — have become a significant worry for lawmakers and shown the importance of considering tying currency to a central bank. “It’s getting harder and harder for community banks to compete for new customers when big tech companies can afford to spend billions on marketing and technology,” Sen. Sherrod Brown, who chairs the Senate Banking Committee, tells TIME. “But many of these new ‘fintech’ products don’t come with the consumer protections, federal backing or customer service and relationships with the community that small banks and credit unions provide.” During a hearing on digital currencies in June, Sen. Elizabeth Warren, the ranking member of the Subcommittee on Financial Institutions and Consumer Protection, compared stablecoins to worthless “wildcat notes” that were issued by speculators in the 19th century. Her expert at that hearing, Lev Menand, an Academic Fellow and Lecturer in Law at Columbia Law School, went further in his testimony, calling stablecoins “dangerous to both their users and … to the broader financial system.” With private companies pushing deeper into the digital currency space, rival countries seeking to seize leadership and a public that is moving further away from physical currency, the U.S. is facing a world in which it may not control or even lead the world’s payment systems. That would make the future of money look very different from the past......»»

Category: topSource: timeSep 21st, 2021

How Will Maersk-MSC Split Redraw Container Shipping Landscape

How Will Maersk-MSC Split Redraw Container Shipping Landscape By Greg Miller of FreightWaves The decision by MSC and Maersk — the world’s two largest container lines — to terminate the 2M vessel-sharing alliance was predictable. The bigger surprise will be what happens next. Will both MSC and Maersk go it alone after 2M ends in January 2025? Will Maersk join another alliance or create a new one? How will this affect the remaining two global alliances: Ocean Alliance and THE Alliance? And how will it affect cargo shipper pricing? According to Alphaliner, MSC has acquired 271 secondhand ships since August 2020, with capacity of just over 1 million twenty-foot equivalent units. MSC’s recent secondhand acquisitions exceed the entire capacity of HMM, the world’s eighth-largest carrier. MSC has over 1.8 million TEUs of newbuild capacity on order, more than double the orderbook of any other carrier. Its orderbook capacity is higher than the existing tonnage of Hapag-Lloyd, the world’s fourth-largest shipping line. “To me, it is obvious that MSC will go on its own,” Alphaliner shipping analyst and Europe editor Stefan Verberckmoes told American Shipper. “It will have enough resources to offer a worldwide network without any partners, which is what it was used to doing before it joined 2M in 2015. “It is indeed no surprise [that 2M will end],” said Verberckmoes. “That was really a forced marriage, because at that time, economies of scale were very important, everybody wanted to have large vessels, and the only way to fill them was to cooperate. Now times are completely different. MSC is now able to fly on its own wings.” Sea-Intelligence CEO Alan Murphy said in an interview with American Shipper: “If MSC was going to invest itself out of the alliance, it has done all the right things, through its secondhand purchases and newbuilding expansion.” Questions on Maersk In sharp contrast to MSC, Maersk has kept its fleet capacity flat over the past three years. It focused instead on being an end-to-end logistics integrator, seeking to earn more from long-term customers’ logistics spend. “For Maersk, the question is completely different,” said Verberckmoes. “They have chosen another strategy and not focused on fleet expansion, so if they want to keep the same network they have now, they need to find a replacement. They will have to review their options.” American Shipper asked Maersk whether it could provide the same level of service coverage and quality to its customers post-2M without a new alliance partner, and whether it was committed to finding an alliance replacement. The company responded: “Maersk will continue to be active in vessel sharing agreements [VSAs]. We are already active in over 40 VSAs in other geographies and we remain open to more targeted VSAs than the broad scope of 2M after the agreement ends in 2025.” For several reasons, Murphy believes it is unlikely that Maersk will replace MSC with a major carrier in a new alliance, or join an existing alliance.  “What I think is more likely is that Maersk will do VSAs. You see how they’ve managed to integrate with Zim [NYSE: ZIM], which is not a 2M member, on the Asia-East Coast trade. They can also do slot charters with THE Alliance on some trades and slot charters with Ocean Alliance on others. “Rather than formally being in an alliance, I think it’s more likely they will focus on the key markets where they can provide end-to-end services and then find [VSA and slot-charter] partners in the other markets.” Strategies ‘completely at odds’ One difficulty Maersk faces in replacing MSC relates to a core problem with 2M itself. “The strategic focuses of the two shipping lines have been completely at odds with each other,” explained Murphy. “Maersk has staked everything on being an end-to-end logistics integrator. If you’re focused on the customer experience and end-to-end logistics, ocean transport becomes just a cog in a big machine. That cog just needs to work. You don’t need to necessarily make money on it because you’re making money on end-to-end logistics. “But MSC’s focus has seemingly been: We need to make money as a vessel operator. That might very well mean blanking [canceling] sailings at a much higher rate and not wasting money on schedule recovery. In some trades where MSC operates independently, it looks more like tramp [unscheduled] than liner service. “These two strategies have led to friction within the alliance. I wouldn’t say anybody is wrong here. It’s just that they don’t seem to be a good match.” Maersk is much more focused on the end-to-end integrator model than any other carrier. So, replacing MSC would present Maersk with the same friction yet again. “Joining another alliance is very unlikely although not impossible,” said Murphy. “But it would just open Maersk up to all of the challenges it already had with MSC.” Other hurdles to replacing MSC Several analysts believe that the 2M divorce will ultimately lead to a broader reshuffling of alliances. Vespucci Maritime’s Lars Jensen — who has been predicting the demise of 2M for months —  said in an online post, “My view is that this is only the beginning of a reshaping of the alliance/VSA constellations, especially on the major east-west trades. In essence, this should be seen as the first domino of many to fall over the next one to two years.” According to Verberckmoes, “In every alliance breakup, there is always an opening for new perspectives. We have seen in the past that every change in big alliance structures might trigger other changes.” But Murphy pointed to multiple hurdles, beyond the issue of Maersk’s integrator strategy.  In the case of 2M, Maersk and MSC were roughly equal-sized partners. Maersk would be the dominant partner of any alliance it joined. “You can bring in a Hyundai [HMM], because they’re tagging along, but to bring in an alliance partner that will now dominate the alliance would be very difficult,” he said. There’s also the regulatory challenge. Chinese regulators barred the proposed P3 alliance among MSC, Maersk and CMA CGM, prior to the formation of 2M. “Can you disallow P3 but allow the Ocean Alliance plus Maersk? I can’t see that,” said Murphy. Consultancy Drewry said in a research note on Wednesday, “Competition authorities will probably block any move [by Maersk] to join one of the other two alliances, which are contractually committed beyond the termination of 2M. Ocean Alliance runs to 2027 and THE Alliance to 2030.” Another possibility is that Maersk could woo away a carrier in one of the two remaining alliances, such as France’s CMA CGM, and create a new alliance. “That’s not impossible, because CMA CGM and Maersk cooperated in the past, prior to P3. But there are a lot of challenges with siphoning off someone like CMA CGM,” said Murphy. Cycle timing Yet another complication is cycle timing. “You have to remember that alliances were the consequence of massive oversupply,” said Murphy. Carriers overordered large-size vessels and needed alliances to fill them effectively. “Alliances come under pressure when things are going really well,” he continued. “There’s probably many a carrier that felt hemmed in and restricted by alliance obligations during the pandemic, because they couldn’t make tactical decisions on their own. “Are things going to go well for shipping lines over the next two years? Probably not. In my opinion, we’re heading into a repeat of 2015-16, with massive oversupply and freight rates at or below cost. It’s going to be a bad two or three years. “So, it makes no sense to leave an alliance now. But they’re not leaving an alliance now. They’re leaving in two years. It might make sense then. There is an expectation that at some point, [the market] will turn again. I assume that both shipping lines believe that when it does, they will be better positioned outside of an alliance.” As for Maersk finding a new alliance home, the market outlook is highly uncertain, raising questions about whether other carriers would be willing to play the game of alliance “musical chairs” in the midst of a container shipping recession. “I think the other alliance [partners] will be cautious about making any major changes now, heading into what is clearly a bear market,” said Murphy. Bearish or bullish for rates? Drewry outlined two scenarios in which the end of 2M could lead to lower shipping costs. In one, an independent MSC faced with rapid fleet growth could “return to its old market-share/low-cost model, which could destabilize the market.” In another, Drewry speculated that “a radical shake-up of the alliances” while “a remote possibility,” could “lead to carnage in the freight-rate market as new members court shippers over to their new teams.” But Verberckmoes and Murphy do not see the alliance situation lowering shipping costs. “I don’t think that alliances have had an impact on price,” said Verberckmoes. “If prices are declining, that means one or two carriers are going for market share, and I don’t think alliance changes have any effect on that. When it comes to rates, it is always the market that decides.” According to Murphy, “A lot of customers hate alliances and believe them to be the source of all evil in the world. I think a lot of shippers will look at this [the 2M breakup] and think this is good for them. “That depends on what they mean by ‘good.’ If they mean ‘cheap,’ probably not. In every simulation we’ve done where we look at how you could operate services more independently, with fewer VSAs and fewer alliances, the price goes up.” He argued that alliances have led to reduced freight costs, in part because members of alliances must compete with each other on price while providing the same ocean service. “In an alliance, you lose all product differentiation on your liner product,” said Murphy. “You’re offering the exact same product — which was a massive driver of very low freight rates pre-pandemic.” Tyler Durden Fri, 01/27/2023 - 05:00.....»»

Category: blogSource: zerohedge16 hr. 11 min. ago


QUINCY, Mass., Jan. 24, 2023 /PRNewswire/ -- CFSB Bancorp, Inc. (the "Company") (NASDAQ Capital Market: CFSB), the holding company for Colonial Federal Savings Bank (the "Bank"), today announced net income of $341,000, or $0.05 per basic and diluted share, for the three months ended December 31, 2022 compared to net income of $645,000, or $0.10 per basic and diluted share, for the three months ended September 30, 2022 and net income of $234,000 for the three months ended December 31, 2021. For the six months ended December 31, 2022, net income was $986,000, or $0.16 per basic and diluted share, compared to net income of $706,000, for the six months ended December 31, 2021. Net income on a non-GAAP basis, excluding certain nonrecurring items, was $666,000, for the six months ended December 31, 2021. Please see the tables attached hereto for a reconciliation of these and other non-GAAP financial measures. Michael E. McFarland, President and Chief Executive Officer, stated, "We are pleased to see loan growth during the quarter and continued improvement in interest-earning asset yields. We are proud of the Bank's accomplishments during calendar year 2022, and I want to thank our employees for their continued efforts and commitment. Looking forward, we are likely to see headwinds in deposit pricing in our highly competitive banking environment. We will continue to focus on pricing and expense discipline in the current rising interest rate and inflationary environment." Second Quarter Operating ResultsNet interest income, on a fully tax-equivalent basis decreased by $25,000, or 1.0%, to $2.4 million for the three months ended December 31, 2022 from $2.4 million for the three months ended September 30, 2022. This decrease was primarily due to a 41 basis point increase in the average rate paid for certificates of deposit, partially offset by a 13 basis point increase in the average yield earned for interest-earning assets. The interest earned on loans increased $38,000, to $1.7 million for the three months ended December 31, 2022, from $1.6 million for the three months ended September 30, 2022. The interest earned on loans benefitted from rising interest rates and from an increase in the average balance of loans of $1.0 million during the second fiscal quarter. The net interest margin increased by 1 basis point to 2.77% for the fiscal second quarter from 2.76% for the fiscal first quarter. Net interest income, on a fully tax-equivalent basis increased by $324,000, or 15.9%, to $2.4 million for the three months ended December 31, 2022, from $2.0 million in the same period in the prior year. Relative to the prior year quarter, the net interest margin increased by 27 basis points to 2.77% from 2.50%. The improvement reflects growth in the average balance of loans and securities of $5.1 million and $33.8 million, respectively, from the prior year quarter and a 357 basis point increase in the interest earned on cash and short-term investments due to the higher interest rate environment. Partially offsetting the improvement in interest and dividend income was a 15 basis point increase in the cost of interest-bearing liabilities from the prior year quarter due primarily to increased interest paid on certificates of deposit in the higher interest rate environment. The Company did not record a provision for loan losses for the quarter ended December 31, 2022 or September 30, 2022, as loan growth was offset by decreases in the unallocated portion of the allowance for loan losses. A provision for loan losses of $10,000 was recorded during the three months ended December 31, 2021, driven by loan growth. The allowance for loan losses as a percentage of total loans was 0.97%, 0.99% and 1.00% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively. Non-interest income decreased $48,000, or 24.0%, to $152,000 for the quarter ended December 31, 2022 from $200,000 in the quarter ended September 30, 2022, due to a decrease of $46,000 in other income. The prior quarter included $50,000 for the annual collection of safe deposit box fees. Non-interest income decreased $9,000, or 5.6%, to $152,000 for the quarter ended December 31, 2022, from $161,000 for the quarter ended December 31, 2021, principally due to a decrease of $12,000 in income on bank-owned life insurance. Non-interest expenses increased $339,000, or 19.4%, to $2.1 million for the quarter ended December 31, 2022 from $1.7 million for the quarter ended September 30, 2022. The increase was due to an increase in salaries and employee benefits expense of $232,000, or 22.8%, primarily attributed to a discretionary year-end bonus awarded to employees in the quarter ended December 31, 2022. In addition, advertising expense increased $32,000 from the prior quarter due to employment agency fees, and other general and administrative expense increased by $72,000 from the prior quarter due to increases in expenses related to public filings, uncollectable check expense and directors' compensation expense. Non-interest expenses increased $191,000, or 10.1%, to $2.1 million for the quarter ended December 31, 2022 from $1.9 million for the quarter ended December 31, 2021. The increase was principally due to an increase in salaries and employee benefits of $83,000, attributed to ESOP expenses incurred in the current year, an increase in headcount, and increases to employee salaries and health insurance benefits. Income tax expense was $65,000 for the three months ended December 31, 2022, compared to $170,000 for the three months ended September 30, 2022 and $32,000 for the three months ended December 31, 2021. The decrease in the effective tax rate for the three months ended December 31, 2022, compared to the three months ended September 30, 2022 was due to increases in tax-exempt municipal securities income. The increase in the effective tax rate for the three months ended December 31, 2022, compared to the three months ended December 31, 2021 was due to decreases in tax-exempt municipal securities income and decreases in bank-owned life insurance income. Year-to-Date Operating ResultsNet interest income increased on a fully tax-equivalent basis by $702,000, or 17.3%, to $4.8 million for the six months ended December 31, 2022 from $4.1 million for the six months ended December 31, 2021. Total interest-earning assets income increased $702,000 from the prior year period due to an increase in the average balance of securities and higher average yields earned on securities and cash and short-term investments. An increase in the average balance of securities of $38.1 million, or 34.0%, and a 16 basis point increase in the average yield earned on securities contributed to a $550,000 increase in securities income. The interest earned on cash and short-term investments increased $217,000 from the prior year, due to a 270 basis point improvement in the average yield earned due to the higher interest rate environment, partially offset by a $21.7 million decrease in the average balance. Partially offsetting the increase in interest and dividend income was a $47,000 increase in the interest expense. The increase in the interest paid on certificates of deposit of $49,000 from the prior year period contributed to a 5 basis point increase in the cost of interest-bearing liabilities. The net interest margin improved 26 basis points for the six months ended December 31, 2022, to 2.76%, from 2.50% in the prior year. The Company did not recognize a provision for loan losses for the six months ended December 31, 2022 compared to a provision for loan losses of $25,000 in the prior year period. For the six months ended December 31, 2021, loan growth was the primary contributor to the provision for loan losses. Non-interest income decreased $65,000, or 15.6%, to $352,000 for the six months ended December 31, 2022 from $417,000 in the prior year period, principally due to a decrease of $48,000 in the gain on sale of securities available for sale and a $22,000 decrease in income on bank-owned life insurance. Excluding the gain on sale of securities available for sale, which management believes is a non-recurring operating activity, non-interest income would have decreased $17,000, or 4.6% from the prior year period. Non-interest expenses increased $287,000, or 8.1%, to $3.8 million for the six months ended December 31, 2022 from $3.5 million for the six months ended December 31, 2021. Salaries and benefits increased $121,000, or 5.6%, to $2.3 million, due to annual increases to salaries and health insurance of employees, an increase in headcount, and the addition of ESOP expense in the current year. Occupancy and equipment expense increased $80,000, or 19.1%, to $498,000 for the six months ended December 31, 2022 from $418,000 for the six months ended December 31, 2021, due to the renewal of a branch lease in the current fiscal year and for increases to service maintenance contracts. Advertising expense increased $32,000 from the prior year period due to an employment agency fee incurred during the six months ended December 31, 2022. Other general and administrative expense increased $47,000, or 6.8% from the prior year period due to increases in professional fees. Income tax expense was $235,000 for the six months ended December 31, 2022 compared to income tax expense of $132,000 for the six months ended December 31, 2021. Balance SheetAt December 31, 2022, total assets amounted to $356.8 million, compared to $360.9 million at September 30, 2022, a decrease of $4.1 million, or 1.1%, as a $5.2 million decrease in total cash and cash equivalents and a $2.7 million decrease in securities held to maturity were partially offset by a $3.4 million increase in total loans from the prior quarter. Commercial real estate loans were the main contributor to total loan growth, as commercial real estate loans grew $5.4 million, or 34.8%, to $21.1 million at December 31, 2022, from $15.6 million at September 30, 2022. Deposits decreased by $4.6 million, or 1.6%, in the quarter, as the Bank is experiencing decreases of customer deposits with the absence of government stimulus and increases in inflation, in addition to mix-shift changes by depositors to higher-yielding term certificates due to the higher interest rate environment. Total stockholders' equity was $75.3 million at December 31, 2022 compared to $74.9 million at September 30, 2022. The increase of $362,000 reflects net income of $341,000 and earned ESOP compensation of $26,000, partially offset by other comprehensive losses of $1,000. Total assets at December 31, 2022 decreased $5.0 million, or 1.4%, from $361.8 million at December 31, 2021. Contributing to the decrease in assets was a decrease of $37.3 million in cash and cash equivalents to $10.6 million at December 31, 2022 from $47.8 million at December 31, 2021, partially offset by a $26.5 million increase in securities held to maturity and $5.7 million in loan growth. Commercial real estate loans increased by $5.6 million, or 35.9%, as we focused on diversifying our loan mix. Total deposits decreased by $32.1 million, or 10.4%, to $275.5 million at December 31, 2022 from $307.6 million at December 31, 2021, principally due to the utilization of subscription funds held in escrow to purchase shares in the initial public offering. Total stockholders' equity was $75.3 million at December 31, 2022 compared to $49.3 million at December 31, 2021. The increase of $25.9 million relates mainly to net proceeds from the initial public offering of $27.8 million and net income earned during the previous twelve months of $622,000, partially offset by the establishment of the Company's ESOP plan, net of earned compensation of $2.5 million. About CFSB Bancorp, Inc.CFSB Bancorp, Inc. is a federal corporation organized as the mid-tier holding company of Colonial Federal Savings Bank and is the majority-owned subsidiary of 15 Beach, MHC. Colonial Federal Savings Bank is a federally chartered stock savings bank that has served the banking needs of its customers on the south shore of Massachusetts since 1889. It operates from three full-service offices and one limited-service office in Quincy, Holbrook and Weymouth, Massachusetts. Forward Looking StatementsThis press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "believe," "contemplate," "continue," "target" and words of similar meaning. These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Certain factors that could cause actual results to differ materially from expected results include the impact of the COVID-19 pandemic or any other pandemic on our operations and financial results and those of our customers, increased competitive pressures, demand for loan products, deposit flows, changes in the interest rate environment, the effects of inflation, potential recessionary conditions, general economic conditions or conditions within the securities markets, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the FRB, changes in the quality, size and composition of our loan and securities portfolios, changes in demand for our products and services, legislative, accounting, tax and regulatory changes, the current or anticipated impact of military conflict, terrorism or other geopolitical events, a failure in or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's financial condition and results of operations and the business in which the Company and the Bank are engaged, the failure to maintain current technologies and the failure to retain or attract employees. You should not place undue reliance on forward-looking statements. CFSB Bancorp, Inc. undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release. Non-GAAP Financial MeasuresThe Company uses certain non-GAAP financial measures, such as return on average assets, return on average equity, the efficiency ratio, profit percentage, tangible book value per share, non-interest income to total income and, where applicable, as adjusted for non-recurring items. These non-GAAP financial measures provide information for investors to effectively analyze financial trends of on-going business activities, and to enhance comparability with peers across the financial services sector.   CFSB Bancorp, Inc. and Subsidiary Consolidated Balance Sheets (Unaudited) (In thousands, except per share data) % Change December 31, September 30, December 31, Dec 2022 vs. Dec 2022 vs. 2022 2022 2021 Sep 2022 Dec 2021 Assets Cash and due from banks $ 1,502 $ 1,481 $ 1,475 1.4 % 1.8 % Short-term investments 9,072 14,260 46,358 (36.4) % (80.4) % Total cash and cash equivalents 10,574 15,741 47,833 (32.8) % (77.9) % Certificates of deposit - - 980 - % (100.0) % Securities available for sale, at fair value 168 183 254 (8.2) % (33.9) % Securities held to maturity, at amortized cost 149,473 152,141 122,931 (1.8) % 21.6 % Loans: 1-4 family 140,898 143,417 139,079 (1.8) % 1.3 % Multifamily 13,239 13,055 16,173 1.4 % (18.1) % Second mortgages and home equity lines of credit 2,590 2,514 2,162 3.0 % 19.8 % Construction 600 415 - 44.6 % - % Commercial 21,077 15,639 15,508 34.8 % 35.9 % Total mortgage loans on real estate 178,404 175,040 172,922 1.9 % 3.2 % Consumer 63 71 111 (11.3) % (43.2) % Home improvement 2,232 2,231 1,999 0.0 % 11.7 % Total loans 180,699 177,342 175,032 1.9 % 3.2 % Allowance for loan losses (1,747) (1,747) (1,747) 0.0 % 0.0 % Net deferred loan costs and fees, and purchase premiums (383) (350) (354) 9.4 % 8.2 % Loans, net 178,569 175,245 172,931 1.9 % 3.3 % Federal Home Loan Bank of Boston stock, at cost 191 191 453 0.0 % (57.8) % Premises and equipment, net 3,272 3,310 3,337 (1.1) % (1.9) % Accrued interest receivable 1,303 1,306 1,112 (0.2) % 17.2 % Bank-owned life insurance 10,271 10,208 10,008 0.6 % 2.6 % Deferred tax asset 1,001 1,139 592 (12.1) % 69.1 % Operating lease right of use asset 999 1,021 - (2.2) % - % Other assets 1,012 457 1,398 121.4 % (27.6) % Total assets $ 356,833 $ 360,942 $ 361,829 (1.1) % (1.4) % Liabilities and Stockholders' Equity Deposits: Non-interest bearing NOW and demand $ 32,618 $ 34,148 $ 52,378 (4.5) % (37.7) % Interest bearing NOW and demand 32,241 32,791 33,082 (1.7) % (2.5) % Regular and other 69,924 74,703 71,975 (6.4) % (2.8) % Money market accounts 37,470 43,349 41,173 (13.6) % (9.0) % Term certificates 103,209 95,061 108,952 8.6 % (5.3) % Total deposits 275,462 280,052 307,560 (1.6) % (10.4) % Federal Home Loan Bank of Boston advances - - 288 - % (100.0) % Mortgagors' escrow accounts 1,680 1,618 1,650 3.8 % 1.8 % Operating lease liability 1,003 1,023 - (2.0) % - % Accrued expenses and other liabilities 3,409 3,332 2,991 2.3 % 14.0 % Total liabilities 281,554 286,025 312,489 (1.6) % (9.9) % Stockholders' Equity: Common stock 65 65 - 0.0 % - % Additional paid-in capital 27,714 27,718 - (0.0) % - % Retained earnings 49,956 49,615 49,334 0.7 % 1.3 % Accumulated other comprehensive income (loss), net of tax (2) (1) 6 100.0 % (133.3) % Unearned compensation - ESOP (2,454) (2,480) - (1.0) % - % Total stockholders' equity 75,279 74,917 49,340 0.5 % 52.6 % Total liabilities and stockholders' equity $ 356,833 $ 360,942 $ 361,829 (1.1) % (1.4) %   CFSB Bancorp, Inc. and Subsidiary Consolidated Statements of Net Income (Unaudited) (In thousands, except per share data) For the Three Months Ended For the Six Months Ended December 31, September 30, December 31, December 31, December 31, 2022 2022 2021 2022 2021 Interest and dividend income:.....»»

Category: earningsSource: benzingaJan 24th, 2023

9 of the fastest-growing industries to start a business, according to the founders of Ritual, Feed, and Kaiyo

Founders surveyed by Insider said AI technology, healthcare, wellness, and cannabis were among the industries poised to gain market value in 2023. Alpay Koralturk of Kaiyo, Katerina Schneider of Ritual, and Lauren Bush Lauren of Feed.Kaiyo/Ritual/FEED If you're starting a business in 2023, it helps to enter a lucrative market. Insider asked 68 founders for their predictions of 2023's best industries for business. Many listed AI, healthcare, wellness, cannabis, and e-commerce as promising sectors. If you're starting a business in 2023, it helps to enter a market that's poised to grow in value and demand — especially as experts warn of a recession on the horizon.The industries with the most potential will be the ones that can withstand a recession and won't be deterred by dwindling venture-capital funding, entrepreneurs told Insider. Insider surveyed 68 founders for their predictions on the types of businesses with the most potential to succeed this year.Of course, it's impossible to foresee the future, but these founders described how technology could transform new endeavors, how customers will want more sustainable products, and why they expected a big year for cannabis and psychedelics. Entrepreneurs might see big returns if they can tap into these demands.Here are the best industries to start a business in, according to the founders' predictions.1. Artificial intelligence and blockchainA man uses facial recognition for payment.Weiquan Lin/GettyOf the many trends founders spoke of, artificial intelligence was the most frequently mentioned. Several founders said the technology would become more integrated into their industries and into society at large. Austin Drabik, a cofounder of the hiring-technology company Helm, believes AI will have widespread adoption in 2023."We're seeing exponential growth in this space already, but the value and benefits are becoming more and more clear for its application to nearly every other industry," he said. Matt Woodruff, a cofounder and the chief product officer of the software-as-a-service company Constellation, believes the tech companies that can innovate AI will gain significant market value. "We already are seeing consumers dabble in the AI craze now, flooding Instagram with photos of them using AI art applications," he said. "The businesses who embed the right technology like AI throughout their processes and in every area of operations are the ones who will stand out in 2023."While blockchain had a rough year — cryptocurrency values plummeted 60% — some founders said they believed the decentralized technology would make a comeback. Ronan Levy, a cofounder and the CEO of the psychedelics-therapy company Field Trip Health & Wellness, compared last year's market crash to the dot-com bubble near the turn of the century."It will pave the way for smarter, more sophisticated, and better-managed blockchain companies to emerge and become a central part of the fabric of our economy and society," he said. Tim Dierckxsens, a cofounder of the Web3 company Venly, sees blockchain and nonfungible tokens gaining momentum this year."Whether it is a business case around fan engagement, loyalty program, in-game asset ownership, royalty distribution," Dierckxsens said, "the technology is maturing, and the businesses are starting to see the benefits."2. Supply-chain management, manufacturing, and logisticsA warehouse worker checking a computer system.Thomas Barwick/Getty ImagesThe past two years have upended supply chains as we knew them: Manufacturing delays early in the pandemic became a regular occurrence, the war in Ukraine prompted global inflation, port blockages pushed import hubs east, and some companies pulled their manufacturing out of China."The industry has experienced intense volatility, and the pandemic showed a lot of cracks in the way our supply chain functions," Suki Mulberg Altamirano, the founder of Lexington Public Relations, said.Now brands are investing in their own logistics to combat a long-term supply-chain crisis. Armon Petrossian, a cofounder and the CEO of the data company Coalesce, believes logistics, manufacturing, and energy markets will see unprecedented growth because of this."There will be a race to innovate to overcome the challenges in each of these industries and understand how businesses can leverage data to be more efficient in their processes," he said.3. Health food and wellness productsDrinks at a Whole Foods in Miami Beach, Florida.Jeffrey Greenberg / Universal Images Group via Getty ImagesCustomers are becoming more aware of how the products they purchase affect them and the environment, so they're demanding healthier alternatives and more transparency. Founders expect this trend to reach far and wide, from fashion and technology to food and wellness."With the looming recession, people are going to take more things into their own hands to avoid expensive doctor visits and save costs," Cynthia Plotch, a cofounder and the CEO of the women's health brand Stix, said. Katerina Schneider, the founder and CEO of the multivitamin and supplements company Ritual, believes cleaner and "better for you" brands are here to stay in 2023, from food and beverages to home goods and cookware.  "Over the last few years, we've seen a shift to consumers caring more than ever about their health, the transparency around the sourcing of ingredients, and the alignment around mission-driven brands," she said. "Additionally, it's no longer enough to be just clean; brands have to be clear with their standards around what is in their products."While a recession may motivate customers to cut costs, Beatrice Dixon, a cofounder and the CEO of the feminine-care brand The Honey Pot Co., said people would continue to spend on groceries and essentials."The realities of coming out of several years of a pandemic have elicited a need for humans to prioritize wellness, namely what they put in and around their bodies," she said.Chelsea Neman Nassib, the founder and CEO of the art marketplace Tappan Collective, believes customers are also becoming more socially conscious."People have become more considerate with their buying power and are looking for ways to spend that align with their values," she said.Luis Gramajo, a cofounder of the cookie brand Wunderkeks, said customers were demanding more from the food industry, both in product quality and in branding."The new generations are buying brands that not only mean something to them, but also they feel represented by them," he said. "This is forcing companies to put a soul into their brands. We're seeing that trend in the food industry, and that's why it keeps growing."4. Sustainably made consumer productsA woman holds up a lab-grown diamond.AP ImagesJust as customers are demanding higher-quality food and wellness products, founders say that sentiment is true for other consumer products, such as clothing, jewelry, and furniture.Lauren Bush Lauren, the founder of the handbag brand Feed, said businesses offering long-term value would thrive this year."As an example, Patagonia offers products that are made to last, and the brand acts as a mentor for those of us seeking to lead a sustainable lifestyle," she said. Alpay Koralturk, the founder and CEO of the furniture-resale platform Kaiyo, believes greentech and climate-focused companies would gain value this year."There's a large amount of federal money that will be deployed," he said. "VCs are also getting more interested in the space."Carolina Cordon-Bouzan, the founder of the jewelry brand Montserrat New York, is hopeful that cost-conscious consumers will recognize lab-grown diamonds as a sustainable alternative to mined diamonds. "The diamond-jewelry industry has been stagnant for years and is ripe for change," she said. "Millennials and Gen Z are looking for more environmentally friendly alternatives, while upholding quality in their jewelry purchases."5. E-commerceA woman shops online.FG Trade/GettyThe past three years saw huge growth for e-commerce brands. At the beginning of the pandemic, many companies that weren't previously selling online were forced to create e-commerce sites to cater to an influx of at-home shoppers.Then, e-commerce sales hit record highs as entrepreneurs and side hustlers started their own brands online. Founders say this boom will continue, as shoppers have grown accustomed to online shopping. "E-commerce is one of the fastest-growing industries, and I am sure it will continue to boom," Sivan Baram, a cofounder of the social-shopping platform Radd, said.Wellness brands, in particular, could benefit from this trend, Gabriella Tegen, the founder and CEO of the e-commerce-subscription platform Smartrr, said, adding that the demand for supplements had skyrocketed since COVID-19's onset."Gen Z and millennials are especially embracing this trend," she said. "As a result, this group is fueling a new wave of lifestyle-product brands that are seeing a lot of success as online brands."Of course, online brands are finding it harder to market on social platforms, so Jonathan Zacharias, a cofounder and the president of the marketing agency GR0, sees subscription models becoming a viable channel for companies to lean in to. "The costs per acquisition for marketing are skyrocketing," he said. "The only businesses that make sense now in e-commerce are ones where you can afford to pay a lot for a new customer because they continue to buy the products."6. Healthcare and mental wellnessA doctor with patients.Getty ImagesMany of the founders Insider surveyed saw 2023 as a big year for advancements in healthcare, from technology innovations and mental health to feminine care and sexual wellness. Ariela Safira, the founder and CEO of the mental-wellness membership startup Real, believes that mental-health care will begin to be focused more on children. "While mental health for the adult population needs changing urgently, kids' mental health is plummeting at a rate we've never seen before," she said. "From the pandemic to social media, this generation of kids is facing anxiety, depression, and self-harm at rates we've never seen before."Ashley Tyrner, the founder and CEO of the produce-delivery service FarmboxRx, believes that healthcare will gain momentum in 2023 and innovation will reach rural locations."We are really beginning to look at a whole-person model of care" and "wake up to the realities that rural America faces when trying to access healthcare," she said.Mulberg Altamirano, the founder of Lexington Public Relations, sees menopausal healthcare as a growing market."Women are seeking targeted health and wellness products at all stages of life, and this is poised to be a fast-growth sector," she said. Daphne Chen, a cofounder and the CEO of the at-home STD- and STI-screening-kit company TBD Health, said COVID-19 had taught people the importance of preventive measures and routine testing. In the same way, she believes this innovation will translate to sexual wellness. "As a result, there's been accelerated adoption of healthcare services like at-home testing that make it more convenient to get tested and treated," she said.7. Cannabis and psychedelicsMarijuana.REUTERS/Hannah BeierIn the past two years, several states have passed legislation to legalize cannabis for recreational use, including New York and New Jersey, which are expected to be one of the largest markets of legal cannabis in the nation. In 2022, New York City opened its first licensed recreational-cannabis dispensary, and Colorado became the second state to legalize medicinal psychedelics.As more retail operations open in the US and business models mature, founders expect it to be a big year for the industry's growth. Levy, the Field Trip founder, added that legalization efforts in Mexico, Thailand, and Germany could launch further opportunities."As the world continues to open up to cannabis, the cannabis industry will continue to grow into a massive sector," he said.Payton Nyquvest, the founder and CEO of the psychedelics company Numinus, said the market for psychedelic medicine, which is becoming more common in the mental-health industry, was "on the cusp of realizing its potential."8. ResaleClothing in an Oxfam store.Grace Dean/InsiderResale is another industry that has been trending upward since the pandemic started — fueled by both an increase in entrepreneurs selling secondhand goods and a greater consumer interest in thrift shopping to recycle resources and reduce waste.Abigail Price, the founder and CEO of the vintage-home-decor shop Abbode, thinks this trend will keep growing in 2023."The new-fashion industry is struggling, but the secondhand market is continuing to boom," she said. "Consumers are getting sick of fast fashion and looking like everyone else, and buying secondhand items has become completely normalized."9. Personal branding and professional servicesSmall-business owners should create social-media content to attract customers.Carlina Teteris/Getty ImagesLast year, at least 52 major companies announced layoffs. So far, prominent firms like Amazon, Salesforce, and Compass have said they will cut staff this year.As more people are looking for work, Lola Bakare, the founder and chief marketing officer of the marketing agency Be/Co, said everyone was looking to revamp their personal branding."My colleagues in that space are making bank," she said. "The age of the professional micro influencer is just getting started, especially for B2B companies who need quality, not quantity, when it comes to leads."Read the original article on Business Insider.....»»

Category: worldSource: nytJan 10th, 2023

House Republicans voted to gut the House Ethics Committee, and George Santos said it was "fantastic"

"It's a good thing for transparency, it's a good thing for Americans," Santos said of rule changes that advocates warn will hobble the ethics body. Republican Rep. George Santos of New York in the House chamber on January 4, 2023.Tom Williams/CQ-Roll Call via Getty Images House Republicans voted on Monday to hobble the Office of Congressional Ethics. The body will now likely be limited in its ability to carry out investigations due to staffing shortages. George Santos, facing multiple investigations and ethics complaints, called the changes "fantastic." The House of Representatives on Monday passed a new set of rules to govern the chamber that will severely weaken the ability of the Office of Congressional Ethics (OCE) to investigate members of Congress for potential wrongdoing."I think it's fantastic," Republican Rep. George Santos of New York said of the rules package, which passed by a 220-213 margin, in a brief interview with Insider at the Capitol on Monday.The changes come just days after Santos — who was revealed to have lied about much of his background, is under investigation in multiple countries, and faces at least two OCE complaints related to his financial disclosures — was sworn into Congress."The proposed rules package severely curtails the ability of OCE to do the job it exists to do," a constellation of good-government groups wrote in a letter published on January 4.The Office of Congressional Ethics, first established in 2008, is a quasi-independent body tasked with investigating allegations of misconduct against members of Congress. It then makes a determination as to whether those allegations are worth investigating further, at which point it makes a referral to the House Ethics Committee, which is evenly divided between Republicans and Democrats.But the rules package for the 118th Congress, put forward by House Speaker Kevin McCarthy, re-imposes eight-year term limits for the OCE's board members, made up of former members of Congress, that were originally laid out when the office was established in 2008 and later extended in subsequent congresses.The practical effect of that will be the immediate removal of three of four Democratic-appointed board members: former Reps. Mike Barnes, Belinda Pinckney, and Karan English. House Minority Leader Hakeem Jeffries can appoint their replacements, but that could take months.Furthermore, the rules prevent the office from hiring new staff after one month and require four board members to sign off on any staffing decision. That means the office — which currently has just one investigative counsel on staff and is actively seeking to hire two more — likely won't have enough time to hire new staff, and will not be able to fill any vacancies that might occur in the next two years.Taken together, the rules will make it extraordinarily difficult for the body — which otherwise operates independently of Congress and has generally been more effective at investigating wrong-doing than self-policing Ethics Committee in the House or Senate — will not have the necessary resources it needs to carry out its work.That means less ability to investigate wrongdoing, and more time needed to carry out investigations.But Santos, who has otherwise declined to comment on the myriad scandals facing him, disagreed with the idea that the office would be weakened by the rules."I think it just gives them more power," he said. He added that the newly-imposed rules wouldn't "allow people to sit there without term limits," apparently referring to the board members. "I believe in term limits."He also brushed off the staffing restrictions, saying it would allow "new members of the board to pick their discretionary members" without acknowledging that all of this must happen in just 30 days."It's a good thing for transparency, it's a good thing for Americans," said Santos. "Renewal!" A 'disturbing development'House Democrats also condemned the changes in interviews with Insider at the Capitol on Monday."I don't understand how anyone interprets the results of the midterms to say we need less ethics standards," said Democratic Rep. Ro Khanna of California. "I have a lot of respect for the Office of Congressional Ethics. I think they've operated in a way that is fair, bipartisan, fact-based, and they there's no justification for doing this."Democratic Rep. Abigail Spanberger of Virginia — who told Insider that the rules package would render OCE a "toothless body in a forgotten hallway of the Capitol complex" in a statement — didn't rule out seeking to fix it via legislation in the future.The OCE has allowed for public accountability of several members of Congress during the last two years.The body made referrals for several Republicans related to STOCK Act violations, led to significant fines for former Rep. Madison Cawthorn of North Carolina for improperly promoting a cryptocurrency, and referred a case against Democratic Rep. Alexandria Ocasio-Cortez to the House committee.Ocasio-Cortez also condemned the rules changes, saying it was a "disturbing development" while declining to comment on her own ethics case — though she alluded to "spurious claims" filed against Democrats."It does call into question if they're just going to remove it every time they're in the majority," said Ocasio-Cortez. McCarthy's office did not immediately respond to a detailed set of questions from Insider seeking an explanation of the proposed changes.In 2017, House Republicans voted in conference to subsume the office under the House Ethics Committee, effectively neutering it. But they reversed course when President Donald Trump tweeted his opposition.—Donald J. Trump (@realDonaldTrump) January 3, 2017—Donald J. Trump (@realDonaldTrump) January 3, 2017 Read the original article on Business Insider.....»»

Category: worldSource: nytJan 9th, 2023

12 Events To Watch For In 2023

12 Events To Watch For In 2023 Authored by Michael Wilkerson via The Epoch Times, The year 2022 was one of surprises: Russia’s invasion of Ukraine, persistent inflation fueled by energy costs, the collapse of FTX and crypto markets, the revelations of the so-called Twitter Files, and one of the worst equity markets in recent history, to name but a few. The year 2023 is poised to present some equally challenging circumstances. Here are 12 trends, events, or surprises that may come to shape and define the year ahead. 1) Inflation Returns I may be the minority report here, but I do not believe we’ve seen the end of—or worst of—inflation in the United States. I argue that following a lag in which price growth appears to moderate, Consumer Price Index (CPI) inflation returns to the 8–12 percent range, where it persists for the rest of the year. This will be cost-push inflation, not demand-pull (see the second point below), and a lagging result of trebling the money supply in the United States since 2009. Stagflation returns, with the Misery Index (inflation plus unemployment) hitting new highs. 2) The U.S. Economy Enters Recession This is a less controversial proposition at this stage, as most economists and analysts agree that recession looks highly probable for 2023. The first half of 2023 is likely to be characterized by negative GDP, rising unemployment, and an insecure consumer. The wave of layoffs which began in the tech sector in 2022 spreads to other industries and sectors, and migrates down from large-cap corporations like Meta and Amazon to small- and medium-sized enterprises which are disproportionately affected by the slowdown. 3) European Energy Crisis Worsens While in the near term Western Europe may be spared the worst possible outcomes due to a mild winter, the underlying factors which led to the energy crisis haven’t been resolved. Germany, the European Union’s largest economy, made a Faustian bargain believing that it could abandon its coal industry and any nuclear aspiration and instead place their trust in the Russians—against all historical experience—and a green utopia. France similarly backed away from its path to energy independence—nuclear power—and are paying the price. While both have recently repented these misjudgments, the path to recovery will take years, not months. In the meantime, supply shortages will continue to plague these economies. 4) Oil, Crypto, and Gold Perform Energy markets will continue their bull run for the foreseeable future as a result of continued supply disruptions and refinery constraints. Bitcoin and Ethereum emerge from a long, dark crypto winter, but altcoins remain frozen out. The dollar begins a long, if slow and turbulent, slide from 2022 highs, as peak demand from rapidly rising interest rates eases. 5) Continued Rise of Resource Nationalism The unforgettable geopolitical lesson of the pandemic era has been that just-in-time supply-chain dependence on countries that many or may not have another nation’s interest at heart represents a dangerous strategic folly. It’s well and good that we learned this lesson when we did. Countries around the world are now aggressively working to realign their supply chains and ensure that they have strategic resources in adequate supply to meet unexpected, Black Swan events. Look for increasingly protectionist and nationalistic policies to dominate trade discussions. 6) Traditional Global Alliances Break, New Ones Form Long-standing partnerships, such as the United States’s relationship with Saudi Arabia, have already begun to unravel. Expect further strengthening of the China and Russia-led alliance involving former U.S. allies, or at least non-aligned nations such as India, Turkey, South Africa, and Brazil. Most vulnerable to geopolitical shifts are countries in Africa, Southeast Asia, and South America. Because of sanctions warfare and incoherent or at least inconsistent foreign policy, the United States ends up in a net deficit position, losing more friends than it gains in this process. 7) U.S. Dollar Dominance Continues to Erode Hard money returns to favor, with commodity-backed currencies taking the spotlight. Alt payment systems, petrodollars being replaced with petrorubles or petroyuans, as well as central bank-issued digital currencies, will all conspire to slowly erode the U.S. dollar’s share of global financial and trade flows. 8) The West, Weary of Cost of Ukraine War, Sues for Peace While it may not be realistic to think that Russia can bomb the Ukrainian people into submission, the increasing costs of supporting Ukraine’s war with Russia will challenge political leaders across the West. This fatigue will increase as more citizens start to ask reasonable questions about whether hundreds of billions of dollars or euros might not be better spent to take on some of the domestic economic and social challenges that these nations face at home. Eventually, Western governments and Putin each decide that a half a loaf is better than no loaf at all. 9) Domino Effect of Exposure The recent uncovering of high-level frauds and corruptions involving U.S. government agencies and personnel continues. Increasing transparency leads to accountability. Eventually, the evidence becomes too overwhelming to ignore; arrests, trials, and convictions ensue. Congressional hearings lead to wave of resignations and first steps toward fundamental institutional reform. 10) China Barks, but Doesn’t Bite, at Taiwan While we should expect the growling and barking to grow louder, with more frequent air space incursions, naval activity, intimidations, and outright threats, it is highly unlikely that China invades Taiwan in 2023. While China most certainly would prefer to confront Taiwan while the Biden administration remains in power, rather than face an improbable return of Donald Trump to the presidency, Xi Jingping’s government will conclude that they are not ready, militarily, politically, or otherwise, to invade Taiwan. Domestic issues, including a worsening economy and rising social unrest within mainland China, will mean that creating a row with the United States and other trading partners in the West remains untenable for the time being. While Russia might be able to make do without selling gas to Germany, there is no way the Chinese economy can survive if abruptly cuts itself off from the United States and Western Europe. 11) Second-Half Rebound in Economy and Markets While I am not optimistic about the first half, I take great comfort in the breadth and resilience of the American economy. There is enormous unleashed latent potential in oil and gas, in manufacturing onshoring, in supply-chain realignment, and in new technologies such as AI, quantum computing, blockchain, and cold fusion. 12) More of the Same What could derail a more V-shaped recovery are the same forces that helped bring the recession about: poor policy decisions that continue to damage our energy industry, keep our borders insecure, and fail to dismantle the out-of-control regulatory bureaucracy that is impeding innovation in energy, manufacturing, financial services, and technology. These are some of the largest sectors in the economy and those which have been most negatively affected by the Biden administration’s imprudent return to Obama-era economic policies. Tyler Durden Wed, 01/04/2023 - 23:25.....»»

Category: blogSource: zerohedgeJan 5th, 2023

Macleod: Gold In 2023

Macleod: Gold In 2023 Authored by Alasdair Macleod via, This article is in two parts. In Part 1 it looks at how prospects for gold should be viewed from a monetary and economic perspective, pointing out that it is gold whose purchasing power is stable, and that of fiat currencies which is not. Consequently, analysts who see gold as an investment producing a return in national currencies have made a fundamental error which will not be repeated in this article. Part 2 covers geopolitical issues, including the failure of US policies to contain Russia and China, and the consequences for the dollar. By analysing recent developments, including how Russia has secured its own currency, the Gulf Cooperation Council’s political migration from a fossil fuel denying western alliance to a rapidly industrialising Asia, and China’s plans to replace the petrodollar with a petro-yuan crystalising, we can see that the dollar’s hegemonic role will rapidly become redundant. With about $30 trillion tied up in dollars and dollar-denominated financial assets, foreigners are bound to become substantial sellers - even panicking at times. The implications are very far reaching. This article limits its scope to big picture developments in prospect for 2023 but can be regarded as a basis for further debate. Part 1 — The monetary perspective Whether to forecast values for gold or fiat currencies This is the time of year when precious metal analysts review the year past and make predictions for the year ahead. Their common approach is of investment analysis — overwhelmingly their readership is of investors seeking to make profits in their base currencies. But this approach misleads everyone, analysts included, into thinking that precious metals, particularly gold, is an investment when it is in fact money. Most of these analysts have been educated to think gold is not money by schools and universities which have curriculums which promote macroeconomics, particularly Keynesianism. If their studies had not been corrupted in this way and they had been taught the legal distinction between money and credit instead, perhaps their approach to analysing gold would have been different. But as it is, these analysts now think that cash notes issued by a central bank is money when very clearly it has counterparty risk, minimal though that usually is, and it is accounted for on a central bank balance sheet as a liability. Under any definition, these are the characteristics of credit and matching debt obligations. Nor do the macroeconomists have an explanation for why it is that central banks continue to hoard massive quantities of gold bullion in their reserves. Furthermore, some governments even accumulate gold bullion in other accounts in addition to their central banks’ official reserves. The wisdom of central banks and Asian governments to this approach was illustrated this year when the western alliance led by America emasculated the Russian central bank of its currency reserves with little more than the stroke of a pen. This is the other side of proof that the legal distinction between money and credit remains, despite any statist attempts to redefine their currency as money. That it can be reneged upon further confirms its credit status. We must therefore amend our approach to analysing gold and its bed-fellow, silver. Other precious metals have never been money, so are not part of this analysis. Silver was dropped as an official monetary standard long ago, so we can focus on gold. With respect to valuing gold, the empirical evidence is clear. Over decades, centuries, and even millennia its purchasing power measured by commodities and goods on average has varied remarkably little. But we don’t need to go back centuries: an illustration of energy prices since the dollar was on a gold standard, in this case of crude oil, makes the point for us. The first point to note is that between 1950—1971, the price of oil in dollars was remarkably stable with almost no variation. Pricing agreements stuck. It was also the time of the Bretton Woods agreement, which was suspended in 1971. Bretton Woods tied the dollar credibly to gold, until the expansion of dollar credit became too great for the agreement to bear. The link was then broken, and the price of oil in dollars began to rise. Priced in US dollars, not only has the price of crude been incredibly volatile but before the Lehman crisis by June 2008 it had increased fifty-four times. Measured in gold it had merely doubled. Therefore, macroeconomists have a case to answer about the suitability of their dollar currency replacement for gold in its role as a stable medium of exchange.  The next chart shows four commodity groups, consolidating a significant number of individual non-seasonal commodities, priced in gold. Over the last thirty years, the average price of these commodities has fallen a net 20%, with considerably less volatility than priced in any fiat currency. Whichever way we look at the relationships between commodities and mediums of exchange, the evidence is always the same: price volatility is overwhelmingly in the fiat currencies. The only possible conclusions we can draw from the evidence is that detached from gold, fiat currencies as money substitutes are not fit for purpose. Our next chart shows how the four major fiat currencies have performed priced in gold since the permanent suspension of the Bretton Woods agreement in 1971. Since 1970, the US dollar, which establishment economists accept as the de facto replacement for gold, has lost 98% of its purchasing power priced in gold which we have established as still fulfilling the functions of sound money by pricing commodities with minimal variation. The other three major currencies’ performance has been similarly abysmal. Analysts analysing the prospects for gold invariably assume, against the evidence, that price variations emanate from gold, and not the currencies detached from legal money. There is little point in following this convention when we know that priced in legal money commodities and therefore the wholesale values of manufactured goods can be expected to change little. The correct approach can only be to examine the outlook for fiat currencies themselves, and that is what I shall do, starting with the US dollar. 2023 is likely to make or break the US dollar Outlook for dollar credit We know that the commercial banking system is highly leveraged, measured by the ratio of balance sheet assets to shareholders’ equity, typical of conditions at the top of the bank credit cycle. While interest rates were firmly anchored to the zero bound, lending margins became compressed, and increasing balance sheet leverage was the means by which a bank could maintain profits at the bottom line. Now that interest rates are rising, the bankers’ collective attitude to bank credit levels has altered fundamentally. They are increasingly aware of risk exposure, both in financial and non-financial sector lending. Already, losses in financial markets are accumulating both for their customers and for banks themselves, where they have bond exposure on their balance sheets. Consequently, they have begun to modify their business models to reduce their exposure to falling asset values in bond, equity, and derivative markets. Furthermore, while US banks appear less leveraged than, say, the Eurozone and Japanese banking systems, paring down bank equity to remove intangibles and other elements to arrive at a Tier 1 capital definition severely restricts an American bank’s ability to maintain its balance sheet size. There are two ways a bank can comply with Basel 3 Tier 1 regulations: either by increasing shareholders’ capital or de-risking their balance sheets. With most large US banks capitalised in the markets at near their book value, issuing more stock is too dilutive, so there is increased pressure to reduce lending risk. This is set by the net stable funding ratio (NSFR) introduced in Basel 3, which is the ratio of available stable funding (ASF) to required stable funding (RSF). The application of ASF rules is designed to ensure the stability of a bank’s sources of credit (i.e., the deposit side of the balance sheet). It applies a 50% haircut to large, corporate depositors, whereas retail deposits being deemed a more stable source of funding, only suffer a 5% haircut. This explains why Goldman Sachs and JPMorgan Chase have set up retail banking arms and have turned away large deposits which have ended up at the Fed through its reverse repo facility. The RSF applies to a bank’s assets, setting the level of ASF apportionment required. To de-risk its balance sheet, a commercial bank must avoid exposure to loan commitments of more than six months, deposits with other financial institutions, loans to non-financial corporates, and loans to retail and small business customers. Physically traded commodities, including gold, are also penalised, as are derivative exposures which are not specifically offset by another derivative. The consequences of Basel 3 NSFR rules are likely to see commercial banking move progressively into a riskless stasis, rather than attempt the reduction in balance sheet size which would require deposit contraction. While individual banks can reduce their deposit liabilities by encouraging them to shift to other banks, system-wide balance sheet contraction requires a net reduction of deposit balances and similar liabilities across the entire banking network. Other than the very limited ability to write off deposit balances against associated non-performing loans, the creation process of deposits which are always the counterpart of bank loans in origin is impossible to reverse unless banks actually fail. For this reason, system-wide non-performing loans can only be written off against bank equity, stripped of goodwill and other items regarded as the property of shareholders, such as unpaid tax credits. For this reason, US money supply (a misnomer if ever there was one, being only credit — but we must not be distracted) has stopped increasing.  Short of individual banks failing, a reduction in system-wide deposits is therefore difficult to imagine, but banks have been turning away large deposit balances. These have been taken up instead by the Fed extending reverse repurchase agreements to non-banking institutions. In a reverse repo, the Fed takes in deposits removing them from public circulation. More to the point, they remove them from the commercial banking system, which is penalised by holding large deposits.  The level of reverse repos at the Fed started to increase along with the coincidence of the introduction of Basel 3 regulations and a new rising interest rate trend. In other words, commercial banks began to reject large deposit balances under Basel 3 NSFR rules as a new set of risks began to materialise. Today, reverse repos stand at over $2.2 trillion, amounting to about 10% of M2 money supply. Further rises in interest rates seem bound to undermine financial asset values further, encouraging banks to sell or reclassify any that they have on their balance sheets. According to the Federal Deposit Insurance Commission, in the last year securities available for sale totalling $3.186 trillion have fallen by $750bn while securities held to maturity at amortised cost have risen by $720bn. This sort of window dressing allows banks to avoid recording losses on their bond positions.  This treatment cannot apply to collateral liquidation against financial and non-financial loans. In the non-financial sector, many borrowers will have taken declining and very low interest rates for granted, encouraging them to enter into unproductive borrowing. The continuing survival of uneconomic businesses, which should go to the wall, has been facilitated. By putting a cap on banking activities the Basel 3 regulatory regime appears to starve both the financial and non-financial economy of bank credit. In any event, the relationships between shareholeders’ equity and total assets has become very streached. Even without bank failures the maintenance of credit supply will now fall increasingly on the shoulders of the Fed, either by abandoning quantitative tightening and reverting to quantitative easing, or by the inflationary funding of growing government deficits. But the Fed already has substantial undeclared losses on its assets acquired through QE, estimated by the Fed itself to have amounted to $1.1 trillion at end-September. Not only is the US Government sinking into a debt trap requiring ever-increasing borrowing while interest rates rise, but the Fed is also in a debt trap of its own making. We have now established the reasons why broad money supply is no longer growing. Furthermore, commercial banks are thinly capitalised, and therefore some of them are at risk of insolvency under Tier 1 regulations, which strip out goodwill and other intangibles from shareholders’ capital. Working off the FDIC’s banking statistics for the entire US banking system at end-2022Q3, these factors reduce the US banking system’s true Tier 1 capital from $2,163bn to only $1,369bn, on a total balance sheet of $23,631bn. Shifting on-balance sheet debt from mark-to-market to holding to redemption conceals losses on a further $720bn.  Furthermore, with counterparty risks from highly leveraged banking systems in the Eurozone and Japan where asset to equity ratios average more than twenty times, systemic risk for the large American banks is an additional threat to their survival. The ability of the Fed to ensure that no major bank fails is hampered by its own financial credibility. And given that the only possible escape route from a crisis of bank lending and the US Government’s and the Fed’s debt traps is accelerating monetary inflation, foreign holders of dollars and dollar-denomicated assets are under pressure to turn sellers of dollars. The euro system faces its own problems The euro system’s exposure to bond losses (collectively the ECB and national central banks) are worse proportionately than those of America’s Fed, with the euro system’s balance sheet totalling 58% of the Eurozone’s GDP (versus the Fed’s at 37%). The yield on the German 10-year bond is now higher than at its former peak in October, leading the way to further Eurozone bond losses at a time when Eurozone governments are increasing their funding requirements. While Germany and the Netherlands are rated AAA and should not have much difficulty funding their deficits, the problem with the Club Med nations will become acute.  With the ECB belatedly turning hawkish on interest rates, a funding crisis seems certain to hit Italy in particular, repeating the Greek crisis of 2010 but on a far larger scale. Furthermore, in the face of falling prices Japanese investment which had supported French bond prices in particular is now being liquidated. The Eurozone’s global systemically important banks (G-SIBs) are highly leveraged, with average asset to equity ratios of 20.1. Rising interest rates are more of a threat to their existence than to the equivalent US banks, with a bloated repo market ensuring systemic risk is fatally entwined between the banks and the euro system itself. The Club Med national central banks have accepted dubious quality collateral against repos, which will have a heightened default risk as interest rates rise further. It should be borne in mind that the ECB under Mario Draghi and Christine Lagarde exploited low and negative rates to fund member states’ national debt without the apparent consequences of rising price inflation. This has now changed, with international holders of euros on inflation-watch. It is probably why Lagarde has turned hawkish, attempting to reassure international currency and debt markets. But does a leopard really change its spots?  A combined banking and funding crisis brought forward by a rising interest rate trend is emerging as a greater short-term threat to the euro system and the euro itself than runaway inflation. The importance of the latter is downplayed by official denial of a link between inflation of credit and rising prices. Instead, in common with other central banks, the ECB recognises that rising prices are a problem, but not of its own making. Russia is seen to be the culprit, forcing up energy prices. In response, along with other members of the western alliance the EU has capped Russian oil at $60. This is meaningless, but for the ECB it allows the narrative of transient inflation to be sustained. The euro system hopes that the dichotomy between Eurozone CPI inflation of 10.1% while the ECB’s deposit rate currently held at 2% can with relatively minor interest rate increases be ignored. This amounts to a policy based on hope rather than reality. It also assumes central banks will maintain control over financial markets, a policy united with the other central banks governing the finances of the entire western alliance. But foreign exchange markets are slipping out of their control, because in terms of humanity, the western alliance covers about 1.2 billion souls, with the rest of the world’s estimated 8 billion increasingly disenchanted with the alliance’s hegemony. Part 2 — Geopolitical factors The foreign exchange influence on currency values A currency’s debasement and the adjustment to its purchasing power is realised in two arenas. First and foremost, economists tend to concentrate on the effects on prices in a domestic economy. But almost always, the first realisation of the consequences of debasement is by foreign investors and holders of the currency.  According to the US Treasury TIC system, in September foreigners had dollar bank deposits and short-term securities holdings amounting to $7.422 trillion and a further $23.15 trillion of US long-term securities for a combined total of $30.6 trillion. To this enormous figure can be added Eurodollar balances and bonds outside the US monetary system, and additionally foreign interests in non-financial assets. These dollar obligations to foreign holders are the consequence of two forces. The first is that the dollar is the world’s reserve currency and dollar liquidity is required for global trade. The second is that declining interest rates over the last forty years have encouraged the retention of dollar assets due to rising asset values. Now that there is a new rising trend of interest rates, the portfolio effect is going into reverse. Since October 2021, foreign official holdings of long-term securities (including US Treasuries) have declined by $767bn, and private sector holdings by $3,080bn. Much of this is due to declining portfolio valuations, which is why the dollar’s trade weighted index has not fully reflected this decline. Nevertheless, the trend is clear. By weaponizing the dollar, the US Government chose the worst possible timing in the context of a financial war against Russia. By removing all value form Russia’s foreign currency reserves, a signal was sent to all other nations that their foreign reserves might be equally rendered valueless unless they toe the American line. Together with sanctions, the intention was to cripple Russia’s economy. These moves failed completely, a predictable outcome as any informed historian of trade conflicts would have been aware. Instead, currency sanctions have handed power to Russia, because together with China and through the memberships of the Shanghai Cooperation Organisation, the Eurasian Economic Union, and BRICS, effectively comprising nations aligning themselves against American hegemony, Russia has enormous influence. This was demonstrated last June when Putin spoke at the 2022 St Petersburg International Economic Forum. It was attended by 14,000 people from 130 countries, including heads of state and government. Eighty-one countries sent official delegations. The introductory text of Putin’s speech is excerpted below, and it is worth reflecting on his words.  It amounts to an encouragement for all attending governments to dump dollars and euros, repatriate gold held in financial centres controlled or influenced by partners in the American-led western alliance, and favour reserve policies angled towards commodities and commodity related currencies. More than that, it amounts to a declaration of financial conflict. It tells us that Russia’s response to currency and commodity sanctions is no longer reactive but has turned aggressive, with an objective to deliberately undermine the alliance’s currencies. Being cut off from them, Russia cannot take direct action. The attack on the dollar and the other alliance currencies is being prosecuted by the supra-national organisations through which Russia and China wield their influence. And Russia has protected the rouble from a currency war by linking it to an oil price which it controls. And as we have seen in the discussion of the relationship between oil prices and gold in Part 1 above, the rouble is effectively tied more to gold than to the global fiat currency system. Other than looking at the dollar overhang from US Treasury’s TIC statistics, we can judge the forces aligning behind the western alliance and the Russia-China axis in terms of population. Together, the western alliance including the five-eyes security partners, Europe, Japan, and South Korea total 1.2 billion people who by turning their backs on fossil fuels are condemning themselves to de-industrialising. Conversely, the Russia-China axis through the SCO, EAEU, and BRICS directly incorporates about 3.8 billions whose economies are rapidly industrialising. Furthermore, the other 3 billions, mainly on the East Asian fringes, Africa and South America while being broadly neutral are economically dependent to varying degrees on the Russia-China axis. In terms of trade and finance, the geopolitical tectonic plates have shifted more than is officially realised in the western alliance. Led by America, it is fighting to retain its hegemony on assumptions that might have been valid twenty years ago. But in recent months, we have even seen Saudi Arabia turn its back on America and the petrodollar, along with the entire Middle East. Admittedly, part of the reason for the ending of the petrodollar, which has sustained the dollar’s hegemony since 1973, must be the western alliance’s policies on fossil fuels, set to cut Saudi Arabia off from Western markets entirely in the next few decades. Contrast that with China, happy to sign a gas supply agreement with Qatar for the next 27 years, and the welcome Mohammed bin Salman, Saudi Arabia’s de facto leader gave to President Xi earlier this month. In return for guaranteed oil supplies, China will recycle substantial sums into Saudi Arabia and the Gulf region, linking it into the Silk Roads, and a booming pan-Asian economy. The Saudis are turning their backs not only on oil trade with the western alliance but on their currencies as well. There is no clearer example of Putin’s influence, as declared at the St Petersburg Forum in June. Instead, they will accumulate trade balances with China in yuan and bring business to the International Shanghai Gold Exchange, even accumulating bullion for at least some of its net trade surplus. The alignment of the Saudis and the Gulf Cooperation Council behind the Russia-China axis gives Putin greater control over global energy prices. With reasonably consistent global demand and cooperation from his partners, he can more or less set the oil price as he desires. Any response from the western alliance could even lead to a blockade of the Straits of Hormuz, and/or the entrance to the Red Sea, courtesy of Iran and the Yemeni Houthis.  He who controls the oil price controls the purchasing power of the dollar. The weapons at Putin’s disposal are as follows: At a moment of his choosing, Putin can ramp up energy prices. He would benefit from waiting until European gas reserves begin to run down in the next few months and when global oil demand will be at its peak. By ramping up energy prices, he will undermine the purchasing power of the dollar and the other western alliance currencies. At a time of economic stagnation or outright recession, he can force the alliance’s central banks to raise their interest rates to undermine the capital values of financial assets even further, and to undermine their governments’ finances through escalating borrowing costs. Putin is increasing pressure on Ukraine. He is doing this by attacking energy infrastructure to force a refugee problem onto the EU. At the same time, he is rebuilding his military resources, possibly for a renewed attack to capture the Ukraine’s Eastern provinces, or if not to maintain leverage in any negotiations. He can bring forward the plans for a proposed trade settlement currency, currently being considered by a committee of the Eurasian Economic Union. The development of this currency, provisionally to be backed by a basket of commodities and participating national currencies can easily be simplified into a commodity alternative, perhaps represented by gold bullion as proxy for a commodity basket. By giving advance warning of his strategy to undermine the dollar, he can accelerate selling pressure on the dollar through the foreign exchanges. Already, members of the Russia-China axis know that if they delay in liquidating dollar and euro positions they will suffer substantial losses on their reserves. While he is in a position to control energy prices, it is in Putin’s interest to act. By a combination of escalating the Ukraine situation before battlefields thaw and the need to ensure that inflationary pressures on the western alliance are maintained, we can expect Putin to escalate his attack on the western alliance’s currencies in the next two months. China’s renminbi (yuan) policy While Putin took a leaf out of the American book by insisting on payment for oil in roubles in order to protect its purchasing power, less obviously China has agreed a similar policy with Saudi Arabia. Instead of dollars, it will be renminbi, or “petro-yuan”. Payments for oil and gas supplies to the Saudis and other members of the Gulf Cooperation Council will be through China’s state-owned banks which will create the credit necessary for China and other affiliated nations importing energy to pay the Saudis. Through double-entry bookkeeping, the credit will accumulate at the banks in the form of deposits in favour of the exporters, which will in turn be reflected in the energy exporters’ currency reserves, replacing dollars which will no longer be needed. Through its banks, China can create further credit to invest in infrastructure projects in the Middle East, Greater Asia, Africa, and South America. This is precisely what the US did after the agreement with the Saudis back in 1973, leading to the creation of the petrodollar. The difference is that the US used this mechanism to buy off regimes, principally in Latin and South America, so that they would not align with the USSR.  We can expect China to follow a commercial, and not a political strategy. Bear in mind that both China and Russian foreign policies are not to interfere in the domestic politics of other nations but to pursue their own national interests. Therefore, the expansion of Chinese bank credit will accelerate the industrialisation of Greater Asia for the overall benefit of China’s economy. So long as the purchasing power of the yuan is stabilised, this petro-yuan policy will not only succeed, but generate reserve and commercial demand for yuan. It was the policy that led to the dollar’s own stabilisation. With the yuan prospectively replacing the US dollar, we can see that the dollar’s hegemony will also be replaced with that of the yuan. The Saudis will be fully aware of their role in providing stability for the dollar. Triffin’s dilemma describes how a reserve currency needs to be issued in large quantities for it to succeed in that role. The creation of the petrodollar assisted materially. In America’s case, the counterpart of that was deliberate budget and trade deficits. But China has a savings culture, which tends to lead to a trade surplus. Therefore, it must satisfy Triffin by credit expansion. Looking through an initial phase of currency disruption, which we are bound to experience as markets gravitate towards petro-yuan, in the longer-term China might find itself in the position of having to put a lid on the yuan’s purchasing power to stop it rising to a point which becomes economically disruptive. Bizarrely, this might end up being the role for China’s undoubted massive hidden gold reserves. By introducing a gold standard for its currency, China could put a cap on the yuan’s purchasing power. Given the initial disruption to global foreign exchanges as the dollar loses its status, there would be sense in China declaring a gold standard sooner rather than later. Remember, gold retains a stable purchasing power over the long term with only modest fluctuations, the characteristics the Chinese planners are bound to want to see in their currency as the transacting and financing medium for its pan-Asian plans. In this scenario the US Government and the Fed will be faced with collapsing currency, which can only be stabilised by going back onto a gold standard. But this igoes so against ingrained US policy, a move back to securing the dollar’s purchasing power is hardly even a last resort. Finally, some comments on gold From the foregoing analysis, it should be clear that in estimating the outlook for gold it is not a question of forecasting what the gold price will be in 2023, but what will happen to the dollar, and therefore the other major fiat currencies. These currencies have shown themselves not fit to be mediums of exchange, only being stealthy fund raising media for governments. While western market analysts appear to have failed to grasp this point, President Putin certainly has, as his speech in Leningrad last June demonstrated. If he follows through on his comments with action, he has the potential to inflict serious damage on the dollar and the other western alliance currencies. Furthermore, China has also made a major step forward with its agreement with Saudi Arabia to replace the petrodollar with a petro-yuan. Throughout history, gold, which is legal money, has maintained its value in general terms with only modest variation. It is fiat currencies which have lost purchasing power to the point where from 1970 the dollar has lost 98% of it. The comparison between gold and the dollar is simply one between legal money and fiat credit — the only way in which relative values can be determined between them. Our last chart will not be a technical presentation of gold, but of the dollar, for which we will use a log scale so that we can think in terms of percentages. Watch for the break below the support line at about 2%.  The modest fall projected by the pecked line is a halving of the dollar’s purchasing power, measured in real money, which suggests a gold price for the dollar at 1/3,600 gold ounces. This is not a forecast but gently chides those who think it is the gold price which changes. Where the rate actually settles in 2023 will depend on President Putin, who more than any technical analyst, more than any western investment strategist, and even more than the Fed itself has the power to set the dollar’s future price measured in gold. One thing we will admit, and that is when fiat currencies begin to slide to the point where domestic Americans realise that it is the dollar falling and not gold rising, a premium will develop for gold’s value against consumer items and assets, such as residential property, reflecting the awful damage a currency collapse does to the collective wealth of the people. Tyler Durden Sat, 12/31/2022 - 08:10.....»»

Category: dealsSource: nytDec 31st, 2022

Dave Collum"s 2022 Year In Review, Part 1: All Roads Lead To Ukraine

Dave Collum's 2022 Year In Review, Part 1: All Roads Lead To Ukraine Authored by David B. Collum, Betty R. Miller Professor of Chemistry and Chemical Biology - Cornell University (Email:, Twitter: @DavidBCollum), This Year in Review is brought to you by Pfizer, FTX, and Raytheon... Every year, David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year’s is no exception, with Dave striking again in his usually poignant and delightfully acerbic way. To download Part 1 as a pdf, click here: 2022 Year in Review: All Roads Lead to Ukraine. Introduction Every year, I write an annual survey of what happened in the world. After posting at Peak Prosperity, it gets a bump from the putative commies at Zerohedge1,2,3,4 who I read religiously. (I have topped over 60 cameo appearances at Zerohedge, consistent with getting booted off Twitter four times.) Why do I write it? My best answer is that you do not understand something until you have written your ideas down coherently. I am also trying to figure out who keeps yelling “Beetlejuice!” Write as often as possible, not with the idea at once of getting into print, but as if you were learning an instrument. ~ J. B. Priestley, English novelist I break every rule of blog marketing. Nobody writes one gigantic blog a year, but it makes the rounds. It is onerous and exhausting, especially since I must necessarily procrastinate up to the deadline. 2022: The Year I spent reading Dave Collum’s 2021 Year In Review. ~ Commenter Most years, I write what I can and then wrap it. In 2021, however, I had a primal drive to cover the usual stuff plus two topics that do not lend themselves to abbreviation: the Covid pandemic and rising global authoritarianism. Many are now realizing that the former is a manifestation of the latter. While I may not have been correct I had to get it right…if that makes any sense. Like so many young athletes in 2021, I left it all on the field. I uploaded it too demoralized and depressed to even send it to friends, confidants, and family. The peeing was special. ~ David Einhorn Diehards found it anyway and reached out with comments. Two I call good friends had diametric views that I will take the liberty of paraphrasing. Sitting on one shoulder was Tony Deden, founder of Edelweiss Holdings based in Switzerland and a saint, who sensed my pain and urged me to stop writing. He went beyond the pale by inviting me to detox in his chalet in the Swiss Alps or on his 25-acre strawberry farm on Crete. I had to pass because traveling is hard on the family. On the other shoulder was David Einhorn, a friend of a dozen years who has helped me in ways few will ever know. He told me I must keep writing it. I think 2021 could have been the apex and a perfect time to stop. I sided with David this year but may soon follow Tony’s advice. OK, Dave, but what is that peeing thing about? Well, I was scheduled to host David and his lovely girlfriend, Natalie, for a late dinner on a Thursday night at my house. I answered the door in my bathrobe, they had horrified looks, and I exclaimed, “Fuck. It’s Thursday?” We got takeout, and all was fine, even after my sweet little Boston Terrier puppy, Fiona, pissed on Natalie. That, dear friends, is how you treat financial royalty! All Roads Lead to Ukraine. Trying to understand the war from a dead cold start was monumentally hard. Geopolitical events occur to teach Americans geography; I am no exception. As a combination of foreshadowing and trigger warning, I am going to steelman the debate by taking a decidedly Russian perspective but am not sure it is steelmanning if you come to believe it. If this is gonna drive you nuts, I beg you to stop reading because you will just get mad while I wallow in the slime of your frustrated soul. I propose Vladimir Putin for the Nobel Prize in Medicine, for solving COVID globally in 48 hours. ~ Anonymous As Ron Popeil would say, “But wait. There’s more!” The Ukrainian theme runs deeper than that. Here is a little more foreshadowing. Canadian trucker crusher Chrystia Freeland has deep Ukrainian Nazi roots. Nina Jankowicz, initially appointed as head of Biden’s Orwellian “Disinformation Governing Board” (Ministry of Truth for short) was doing psy-op work in Ukraine in her previous gig. The collapse of the second largest cryptocurrency exchange in the world (FTX) revealed a massive money laundering scheme through Ukraine with political ties in the US. The rising tide of a global neo-Nazism—an idea I am still dubious about—connects tiki torchers in Charlottesville, suspicious rabble-rousers in the January 6th “insurrection”, the Patriot Front, and the Azov Battalion in Ukraine.5 Who is that guy with the horns hanging out with Ukrainian “nationalist”? The U.S.-sponsored bioweapons lab in Wuhan that spawned the SARS-Cov-2 virus has 36 counterparts in Ukraine. The crackhead son of the President of the United States ran scams in Ukraine via Burisma Holdings, the same country that his dad funded a proxy war. And who was the largest donor to the Clinton Foundation for 15 years? Ukraine. Go figure. A Year in Transition. This was my runner up for the title. Aren’t we always stuck on the “Mobius Strip from Hell” that never ends? Francis Fukuyama and Tom Friedman were wrong: history did not end, and the world is going spherical again rather quickly. Of course, we never know the future, but each year seems to have themes that play out with a quantized feel to it. By contrast, 2022 has left world economies heading south but with no bottom in sight. Neither the Fed nor the markets are done inflicting pain. The risk of global famine is real but with inestimable consequences. The futures of Bitcoin and other crypto currencies hang in the balance with more than just price corrections now in play. The war in Ukraine could end with a whimper (but only if Russia wins) or with a thermonuclear conflagration (nobody wins). Europeans are pondering the relative merits of freezing to death owing to lack of energy or starving to death owing to lack of food, but maybe those potentially biblical events are just clickbait. The WEF has reared its ugly head—the WEF’s Great Reset is not just a theory—yet we still haven’t a clue what those diabolical authoritarian meat puppets are up to. Why do we have to start eating bugs and forfeiting all earthly belongings and to whom. It is hard to see how we smoothly get to 2023 from 2022. Me by email: [blah blah, blah…we are hosed…blah, blah, gurgle, gurgle] Larry Summers: Thanks for these thoughtful comments. I mostly agree. Stephen Roach: Thanks Dave. I am in violent agreement with Larry these days. Under Powell, the Fed is currently in the deepest hole it has ever been in. Anything is possible, I guess—including a night-time landing on an aircraft carrier in the midst of a raging typhoon. Might not be soft, though… Maybe the markets and economy will be fine—maybe I am merely full of shit—but the other guys in that email threesome are deep and dark too. Stephen, who has been so generous with his time and wisdom over many years, expressed dismay in an op-ed over a particularly inaccurate call about what would happen. I offered wisdom in return: Me by email: Several years ago I promised myself I would stop reading about what will happen. I am not sure we ever know what had happened and am clueless about what is happening. Roach: You are a better man than me! My accrued wisdom comes from having read and made too many predictions that were garbage or profoundly early. I have spent countless hours over the years pondering alternative narratives via suppositories offered in the press, good versus evil, the meaning of life, contemporary events in historical contexts, and what it means to be human. The future is too much to handle. Michael Crichton once noted that it is sobering to read newspapers from 30 years ago; the above-the-fold hot topics seem so irrelevant. He also pointed out that persistent fear can lay waste to your mental and physical health.6 I identify as a conspiracy theorist. My pronouns are They/Lied. When there’s no such thing as truth, you can’t define reality. When you can’t define reality, the only thing that matters is power. ~ Maajid Nawaz, British activist and radio host I am confounded that I—one of the 15% returns into the banking system and consumers’ pockets. Maybe Volcker’s recession initiated the reversal of the inflation mindset and money flows while Russia’s cheap resources, China’s cheap labor, and the U.S.’s great demographics did the heavy lifting. I’m still pondering Andolfatto’s thesis a decade later. Engineering a higher nominal GDP growth through a higher structural level of inflation is a proven way to get rid of high levels of debt. That’s exactly how many countries, including the US and the UK, got rid of their debt after World War II.16 ~ Russell Napier, author of Anatomy of a Bear There is too much debt in the world, so they must inflate it away, which they will. That’s the only thing you need to know.17 ~ Eric Peters, CIO of One River Asset Management Ominously, the inflation is global.18 How else could the dollar be so strong in the Forex markets? Germany, for example, put together back-to-back quarters of 33% rises in producer prices (45% year-over-year in September), which ought scare the hell out of all of us given their history.19 The combined balance sheets of the world’s central banks grew tenfold in less than two decades.20 We have a global debt problem which appears to be getting addressed by global inflation. Much of it comes from the tens of trillions of dollars rammed into the global system during and following the GFC (Great Financial Crisis)21,22 and then trillions more to enable the IFL (Insane Fucking Lockdown) that completely screwed up the supply chains. If the Fed had not promised somebody behind closed doors that they would do their part, the lockdown would not have happened. No Fed, no lockdown. Period. Now you know who to blame. Let’s not let that “inflate away debt” idea—Ray Dalio’s “beautiful deleveraging”—go by uncontested. It reminds me of picking yourself up by your bootstraps: have you ever tried to do it? Those who say the world is doing it right now seem unaware that the rate of debt growth is outpacing inflation. Hard to see how that gets you anywhere. The U.S. debt-to-GDP has grown >15% in four years.23 Wobbling on a weak understanding of global finance, I called out to financial Twitter (fintwit) for examples of countries that inflated away their debt without a deflationary default in the end. (Of course, inflation is a default too but humor me.) I got answers, many from smart guys who thought their answers were obvious but don’t work for me: Weimar Germany? No. They screwed the populace but big sovereign debts were denominated in gold, ultimately leading to WWII. Argentina? Please: They defaulted 6 times in the last century. An obscure answer: Canada in the 1980s and 1990s? They did burn down their debt, but the inflation rate was way too low to account for it; austerity and growth get a lot of the credit. Japan? Nope. Although not imploding yet, their debt-to-GDP is a monster with inflation just beginning to flicker. The post-World War II United States for the win! They had double-digit negative rates on sovereign debt, and bondholders got crushed. So that is a valid case, but let us not forget that the U.S. was the only industrial nation standing—a juggernaut—controlling 80% of global GDP. How much post-war debt reduction was inflation and how much was American Exceptionalism (a term coined by Stalin)? Someone smarter than me could do that math. The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. A large-scale reorientation of supply chains will inherently be inflationary. ~ Larry Fink, CEO of Blackrock There are other problems looming that are ominous. The world is said to be at the precipice of deglobalizing, propelled by a collapse of the global population. Yes. You heard that right. imploding. Deglobalization means that goods and services may no longer be made most efficiently and economically. Former Stratfor demographer, Peter Zeihan, claims population collapse and accompanying deglobalization is already baked into the cake (see Books).24 The conflict in Ukraine has been horrible for inflation since energy prices drive the prices of everything, and one could imagine the conflict accelerating deglobalization. If the conflict gets worse or spreads, I’d say it is time to panic. I grew up in France, so I had a good dose of Marx in my education. The first thing Marx teaches you is that revolutions are typically the result of inflation. ~ Louis-Vincent Gave, 2021 The Fed We have got to get inflation behind us. I wish there were a painless way to do that, there isn’t…there will be pain. ~ Jerome “J-Pain” Powell, being clear We’re going to have a good deal of pain and suffering before we can solve these things. ~ William McChesney Martin, 1969, and there was pain to come The Fed is now in a bind. The drag queen shows at the Eccles Building are over. Forty years of disinflation and jawboning to the point of blowers cramp created a gargantuan recency bias, leaving generations of Americans unfamiliar with the socioeconomic horrors that bad monetary policy can inflict on an economy and society. We are confronting an inflation problem, but what policy tools do we have to defeat it? Recall that when Volcker took on the inflation Balrog, the national debt was 31% of GDP. Now it is more than four times that. Total public and private debt relative to GDP is up almost threefold. Volcker did not have to worry about the systemic risk that his successors at the Fed nurtured to maturity. Since the Fed has been accused of keeping rates “too low for too long” too many times by too many smart guys, they can’t plead ignorance no matter how compelling that defense seems. Hiking rates to bring down inflation is not a ‘policy mistake,’ it’s the Fed’s mandate. The true policy mistake was believing that 0% rates, buying billions of mortgage bonds in a housing bubble, & increasing the money supply by 40% in 2 yrs would have no negative consequences. ~ Charlie Biello, CEO of Compound Capital Advisors Leading up to 2019, the Fed had belatedly started hiking rates and reducing its balance sheet. I thought it was way too late and possibly a mistake to do both concurrently. The repo market started convulsing in late 2019, prompting the Fed to pivot yet again by “going direct”—shoving money straight at the consumers—at the behest of Blackrock in a white paper.1,2,3 A few months later the Fed agreed to put the economy in an induced covid coma, causing much bigger problems. Inflation is now in our DNA as the dreaded “inflation expectations” have taken root. Unlike his predecessors, Powell is in a brawl with fiscal policymakers—way too many tools inside the beltway spending money to slay inflation—with whom Powell has neither control nor allegiance. It will turn out to be largely impossible to normalize interest rates without collapsing the economy. ~ Edward Chancellor, market historian The second fundamental problem is one of legacy and credibility. Many market participants—pivot watchers—see Powell et al. as swamp creatures, controlled by some higher power to mitigate all pain and damage. I see Powell as a guy who wants to be in the pantheon of central bankers alongside Paul Volcker while being compared with the profoundly destructive Arthur Burns by the likes of Roach, Summers, and others.4,5 Bill Gross called them an “ignorant—yes ignorant—Federal Reserve” while making allusions to “Ponzi finance.”6 What path will a narcissist at the peak of his power choose: protector of credibility and legacy or savior of markets and destroyer of currencies? I suspect legacy wins, but it is just a hunch. The markets are currently taking the other side of the bet. So far, Jerome Powell looks more like Arthur Burns than Paul Volcker. ~ Bill Dudley, former head of the New York Fed Before looking at what the Fed might do going forward and with what level of fortitude, let’s look at what prominent Fed detractors have to say in their own words juxtaposed with a few Fed comments for comic relief. Mind you, most of these are not just loose-cannon bloggers. The country is suffering from the worst cost-of-living crisis in 42 years. The Fed wasn’t data-dependent and now has sacrificed its credibility. ~ Lacy Hunt, Hoisington Investment Management and former deflationist This is the fundamental problem…It is a fundamental trap…It’s gonna be really bad. I think we should worry more about deflation. I think that is a huge risk people aren’t thinking about. If the Fed pops this bubble there will be a deflationary spiral…It is going to cause devastation.7 ~ Mark Spitznagel, Universa Investments, on Dr. Frankenstein and the monster There is a whole generation of people who don’t remember inflation. They don’t know what it is, and so I think inflation is a non-existent threat. ~ Alice Rivlin, former Fed governor, circa 2017 The Fed’s latest moves are consistent with a central bank that is continuously scrambling to catch up with realities on the ground. It is the kind of thing that one typically finds in developing countries with weak institutions, not in the issuer of the world’s reserve currency and the custodian of the world’s most sophisticated financial markets. ~ Mohamed El-Erian, former PIMCO I think we’re in one of those very difficult periods where simply capital preservation is I think the most important thing we can strive for…[The Fed] has inflation on the one hand, slowing growth on the other, and they’re going to be clashing all the time. You can’t think of a worse environment than where we are right now for financial assets…Look at the level of overvaluation we’re in right now in terms of rates and stocks…Sub-two-percent inflation is a much better problem to have than above-two-percent inflation.8 ~ Paul Tudor Jones, founder of Tudor Investment Corp. Hitting or exceeding 2 percent inflation for a few months does not mean victory. To fully achieve the goal of price stability, we need to see a sustained period of moderately above-target inflation. Only then will the job be complete.9 ~ Mary Daly, San Francisco Fed President Mary Daly, in 2020 showing zero understanding of “price stability” I don’t feel the pain of inflation anymore. I see prices rising but I have enough…I sometimes balk at the price of things, but I don’t find myself in a space where I have to make tradeoffs because I have enough, and many Americans have enough.10 ~ Mary Daly, San Francisco Fed President, in 2022 showing zero understanding of inflation. I know from studying history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time…Perhaps we are simply responding to the same type of cycles that most advanced civilizations fell prey to, whether it was the Romans, sixteenth-century Spain, eighteenth-century France, or nineteenth-century Britain.11 ~ Paul Tudor Jones, founder of Tudor Investment Corp. The West is now awakening from decades of poor policy. The consequences will appear overwhelming at first. We’ll get through, but that long, painful process has only just begun.12 ~ Eric Peters, CIO of One River Asset Management I think now we have more credibility, we’re moving faster, we will be able to bring inflation under control sooner and with less disruption to the economy than we had in the ’70s. ~ James Bullard, President of the Saint Louis Fed Now that the Fed finds itself in such an uncomfortable situation—one largely of its own making—it may be inclined to eschew further rate hikes, particularly given the growing criticism that it is tipping the economy into recession, destroying wealth, and fueling instability. Yet such a course of action would risk repeating the monetary-policy mistake of the 1970s, saddling America and the world with an even longer period of stagflationary trends. ~ Mohamed El-Erian, former head of PIMCO The Fed’s application of its framework has left it behind the curve in controlling inflation. This, in turn, has made a hard landing virtually inevitable. ~ Bill Dudley, former head of the New York Federal Reserve Because inflation is ultimately a monetary phenomenon, the Federal Reserve has the capacity and the responsibility to ensure inflation expectations are firmly anchored at—and not below—our target. ~ Lael Brainard, current Vice Chair of the Federal Reserve, May 16, 2019 Staff economists at the Federal Reserve predict…a measured inflation rate of slightly less than 2% in 2022, according to minutes of the September Federal Open Market Committee meeting released last Wednesday. ~ James Grant, @Grantspub, October 2021 Valuations have only begun to retreat from record extremes as a decline in the economy begins and at a time when the Fed is not only unable to come to its rescue but is forced to implement policy that will only make things worse. ~ Jesse Felder, The Felder Report The length of predicted recession—two full years—is extraordinary. Add to that probably the most bearish comment I have ever heard from a Fed bank—“the odds of a hard landing are around 80%” and wow! ~ Albert Edwards, Societe General (SocGen) We want to see inflation move up to 2%. And we mean that on a sustainable basis. We don’t mean just tap the brakes once. But then we’d also like to see it on track to move moderately above 2% for some time. ~ Jerome Powell, April 2021, on pain avoidance Possibly the most robust indicator of an impending recession is when the Fed dismisses the inverting yield curve as a predictor of an impending recession. ~ Albert Edwards, SocGen Since 2010, Central Bankers became active market participants—uneconomic market participants with infinite balance sheets, seeking to distort market mechanisms for pricing of risk. These distortions spread into all financial markets…this easing cycle has no precedent and undoing something so unique will not resemble previous cycles…To return balance sheets to where they were in 2010 at the beginning of QE would mean a sale of $20 trillion in assets, or roughly equivalent to selling the entire $24 trillion in U.S. annual GDP.13 ~ Lindsay Politi, One River Asset Management The Fed doesn’t want to get into the credit allocation business. ~ Loretta Mester, Cleveland Fed President, after buying $1.3 trillion of mortgage-backed securities in less than two years It could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions. ~ Janet “Yeltsin” Yellen, on the credit allocation business The Fed since Volcker has been pretty clueless and remains so. What has been more remarkable, though, is the persistent confidence…despite the demonstrable ineptness in dealing with asset bubbles. ~ Jeremy Grantham, GMO We are on the cusp of a rare paradigm shift in interest rates. Such changes take decades—or even generations—to occur. But when they do, the financial implications are profound. ~ Nick Giambruno, founder of The Financial Underground Their job is to fight inflation. They’ve done a terrible job of it so far. ~ Jeff Gundlach, founder of Doubleline Capital, in reference to the Fed Underlying inflation appears to still be well anchored at levels consistent with the Fed’s average 2 percent objective, and so—unlike in the Volker and Greenspan eras—no extra monetary restraint is needed to bring trend inflation down.14 ~ Charles Evans, President of the Chicago Fed You know what upsets me the most? People say why do you get so exercised about the Federal Reserve? It’s because the people they screwed going in were the lower and middle-class people, and the people getting screwed on the way out are those same people. They’re getting it on both ends. ~ Guy Adami, money manager and CNBC host (a good one) We will not allow inflation to rise above 2% or less…We could raise interest rates in 15 minutes if we had to. ~ Ben Bernanke, winner of the 2022 Nobel Prize in Economics Thank you, President Fisher, I know we put a lot of value on anecdotal reports around this table, and often to great credit. But I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics. ~ Ben Bernanke The Fed surely put the holdout deflationists—Napier, Hunt, and Shedlock—in their place, although it could still be the end game; David Rosenberg thinks so.15 I am going to disagree with Milton Friedman here: I did not believe inflation is just a monetary problem or government spending problem. It may start that way, but it mutates. Now the Fed has to deal with the Bronteroc. By assuming inflation is always just a monetary phenomenon, market participants stop thinking because the Fed has their backs. I think this model is now wrong. I think the Fed absolutely does not get the pain associated with a collapsing bubble.16 ~ Jeremy Grantham, founder of GMO I am not sure there is widespread agreement on the Fed’s goals. Is it to fight inflation, pop an all-time record bubble across all asset classes, euthanize the market zombies,17,18 regain credibility by detonating the Fed put19—the implicit guarantee under the markets—or…wait for it…destroy the Europeans?20 Maybe Powell is channeling the legendary King Canute, showing that even the most omnipotent King can’t stem the tides. No matter what, the bulk of the stock toshers seem unwilling to grasp that the Fed will push rates up until the will to speculate is broken. Michael Every of Rabobank suggests “They are being told clearly they can no longer have their cake, and everyone else’s cake, and eat it and fit in their jeans. And they are ignoring it.”21 Failure is not an option for Jay Powell. I think they’re going to 4% come hell or high water. Until inflation comes down a lot, the Fed is really a single-mandate central bank.22 ~ Richard Clarida, former Fed Vice Chair Does the Fed have the fortitude? The Bank of England folded fast to save their pension system.23 Some thought the Fed couldn’t lift rates above 1%.24 This is no longer 14 days to flatten the yield curve. They are up against a wall: “The Fed has never before started a rate hiking cycle when inflation was already 7.9%.”25 An anonymous (but prominent) commentator with the pseudonym Mr. Skin noted how many times Powell has referred to “real interest rates” and said he wanted them “over +1%.” They are camped at about –10% right now, so that is an unveiled threat to “unwind unknown globs of leverage.” Roach sees the “Fed funds rate up 10% from here.”26 Powell insisted that a neutral policy stance is “not a place to pause or stop” and that the Fed would embrace “a restrictive policy stance for some time.” Fed President Loretta Mester warned that they would raise rates “even in a recession.” I don’t think the Fed is gonna let up just because the economy starts popping a few rivets. There isn’t enough blood in the streets for a Theranos lab test. Before this is over, there will be bloated corpses, shattered dreams, and milk cartons with Cathie Wood’s face. I am still waiting for [Powell] to act boldly—‘boldly’ means he has to shock the market. If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand, you have to hit them in the face. ~ Henry Kauffman, legend The Federal Reserve appears to be braced and wants participants in the market to understand they will stay the course…the rough landing odds are very high…Monetary policy is currently on the right course but current right course will have to persevere.” ~ Lacy Hunt What about other central banks? It appears that they have been cast adrift while we try to solve our domestic problems. This could become a monetary Monroe Doctrine. The strengthening dollar is wreaking havoc on global credit markets. The Fed sent a few currency swaps to alleviate a few currencies getting pegged by the strong dollar, but my sympathies are not high. We have a $2 quadrillion notional value derivatives market that has overstayed its welcome in the world of wealth creation, serving only to finance finance. The Swiss National Bank stress really leaves me cold since they were printing francs to buy US equities. When in Econ 101 did you guys learn about that? Fuck ’em. We now understand better how little we understand about inflation. ~ Jerome Powell Broken Markets My money remains on the likelihood that this is the early stages of a profound bear market in assets. Populism in the west has a long way to go. QE has undermined savings, and now populism will undermine the price mechanism. We are at the start of a 25-year cycle, so get used to it. ~ Crispin Odey, Odey Asset Management and a notorious bear I am suspecting that the broken YIR clock is finally right. What we will find out is whether it blows up your house at high noon. The presumption that bailouts by the Fed would always be forthcoming and would always work has allowed investors to buy speculative non-GAAP tech garbage. That model may be tested. We are looking at some events that have not been seen for many years (decades). For starters, we are coming off a frothy high in the equity markets said to be the biggest bubble of them all. This is occurring concurrently with a serious, if not potentially disastrous, downturn in the bond market. Recall that a 60:40 portfolio in the 2007–09 bear market was cushioned by the bond market. The risk parity cult—those striving to bring risks and rewards of stocks and bonds to parity by leveraging their bond portfolios—may have overshot their mark. We also haven’t seen inflation levels like this for four decades. To top it off, we are not coming off a euphoric high. Investors may have done well in their portfolios, but all other geopolitical and social pressures have left us plebes in sour moods. Entering a secular bear market in stocks and bonds pissed off at the World is not a solid foundation to begin a long slog. When I look back at the bull market that we’ve had in financial assets really starting in 1982. All the factors that created that boom not only have stopped, they’ve reversed…We are in deep trouble. ~ Stan Druckenmiller With the Fed boxed in by rapidly rising but still historically low rates and serious inflation, it is akin to a visit to your oncologist. What comes next? You get your affairs in order. The luminary Murray Stahl of Horizon Kinetics has a way with words. He notes that “the Age of Monetary Policy is over.” Channeling some of Murray’s thoughts blended with a few of my own, we may be at the end of a unique economic cycle. In the early ‘80s, the Russians were starved for capital and began flooding the world with dirt-cheap commodities. The Chinese were starved for capital—quite literally China had $38,000 of foreign reserves in its banking system as it exited its self-exile1—so they began flooding the market with dirt-cheap labor. The US long-bond rates began a four-decade trek from 16% to essentially zero. Meanwhile, the boomer demographic not only hit the workforce, but they brought their wives with them in large numbers. I have argued generously that buybacks are a reach for yield given the low returns even on fortress balance sheets, but debt-fueled price pumping nicely propelled executive stock option valuations too. These tailwinds will not repeat over the next four decades. Globalization is fraying at the edges and, according to Zeihan, will be ripped apart in a global demographic collapse.2 Prior droughts have been due to rising inflation and/or high market valuation. The U.S. is now at risk from both… U.S. returns are at now risk from both the prospect of higher inflation AND the headwind to returns from high starting-point valuations. ~ Gerard Minack, Minack Advisors and former Morgan Stanley economist And, by the way, my definition of a correction is that it adjusts asset values and investors’ attitudes significantly. When was our last correction? March 2020? Not a chance. What attitudes got corrected? How about 2007–09? Not in my book. Investors were rewarded for their tenacity. The last real correction was 1967–81. Equity investors lost 70% of their equity gains inflation corrected. You could not give equities away even though, by all metrics, they were dirt cheap, but why take a risk on equities after 14 years of bludgeoning? A simple reversion to trend, if it happened tomorrow, would require the S&P 500 Index to fall back below 2,000, the prospect of an even greater decline is a frightening one, indeed. ~ Jesse Felder, The Felder Report Every year, I take a swipe at valuations. Two years ago I went at the egregiously overpriced FAANGs and related tech garbage. Moreover, the FAANGs et al. have an enormous collective market cap compared to the dot-coms that caused pain.3 Although the FAANGs et al. humiliated me in 2021 by continuing their moonshot, their two-year returns are slightly sobering and exonerating: Table. Two-year total returns of the FAANGs et al. critiqued in 2020 Amazon                        –43% Apple                            +9% Facebook*                     –56% Genius Brands              –59% Google                          +7% Microsoft                      +6% Netflix                          –46% Nvidia                           +26% Salesforce                     –31% Shopify                         –62% Tesla                             –30% Zoom                            –81% *Metaverse Today, only finance is profitable, while production is in crisis. ~ Thierry Meyssan, French journalist At the end of 2021, an analysis of 25 valuation metrics showed the markets to be 120–150% above historical fair value.5,6I obsessed over 1994 as the year that valuations left Earth’s gravitational field. The markets have been steadily climbing the wall of worry residing above historic fair value with occasional pauses that refresh since then, propelled by (a) a bond rout intervention in 1994 that never really stopped and (b) the rapid rise of passive index investing. The curve in the following has no mathematical basis, but I think it captures the problem and the 1994 launch date nicely: Find a metric that makes you more optimistic—be my guest—but it would be perilous to ignore the 25 I laid out in detail last year.7 With the S&P doing an orderly swan dive of 20% as of 12/16/22, many investors are looking to buy the dips. Do you really think unwinding.....»»

Category: smallbizSource: nytDec 24th, 2022

CENTOGENE Reports Second Quarter and First Half 2022 Financial Results

CAMBRIDGE, Mass. and ROSTOCK, Germany and BERLIN, Dec. 22, 2022 (GLOBE NEWSWIRE) -- Centogene N.V. (Nasdaq: CNTG), the essential life science partner for data-driven answers in rare and neurodegenerative diseases, today announced unaudited financial results for the second quarter and first half ended June 30, 2022 and updated its fiscal year 2022 financial outlook. The quarterly and half year results are compared to the same periods in the prior year, unless otherwise specified, and reflect revisions as described below. Second Quarter 2022 - Financial Highlights Overall revenues increased by 21.6% year-over-year to €11.2 million Diagnostics segment revenues increased by 18.3% year-over-year to €7.5 million Pharmaceutical segment ("Pharma") revenues increased by 29% year-over-year to €3.7 million Net loss from continuing operations of €11.9 million in the second quarter of 2022, an improvement of 11.9% compared to net loss from continuing operations of €13.5 million in the second quarter of 2021. (Excludes discontinued operations reflecting the Covid-19 testing business exited first quarter of 2022.) Total segment adjusted EBITDA (reflecting the Diagnostics and Pharma segment) of €3.5 million was recorded in the second quarter of 2022, an improvement of 289% compared to €0.9 million in the second quarter of 2021. First Half 2022 - Financial Highlights Overall revenues increased by 12.6% year-over-year to €21.4 million Diagnostics segment revenues increased by 15.3% year-over-year to €14.5 million, mainly driven by 34.7% growth in test requests received for higher value Whole Exome Sequencing (WES) and Whole Genome Sequencing (WGS). Pharma revenues increased by 7.1% year-over-year to €6.9 million, mainly driven by increased activity in the clinical studies of our pharmaceutical partners. Net loss from continuing operations of €23.1 million in the first half of 2022, an improvement of 16.9% compared to net loss from continuing operations of €27.8 million in the first half of 2021. Total segment adjusted EBITDA (reflecting the Diagnostics and Pharma segment) of €5.3 million in the first half of 2022, an improvement of 60.6% compared to €3.3 million in the first half of 2021, mainly reflecting gross margin improvements in both segments. Cash and cash equivalents were €33.5 million as of June 30, 2022, compared to €17.8 million as of December 31, 2021. Kim Stratton, Chief Executive Officer at CENTOGENE stated, "The current year is part of a transition at CENTOGENE, with renewed focus on the Core Business and exit of the COVID business. We are delivering on our goals in the Diagnostics segment, continuing to show double digit growth (+15.3%) year-over-year with strong execution on our initiatives around WES, WGS and multiomics. The first half of the year also indicated 7.1% year-over-year growth in our Pharma segment, putting us on a solid trajectory. We are experiencing strong growth in our pipeline of Pharma projects, which points to robust growth in revenues from this segment in 2023. However, given the lumpiness and timing of late year-end contract signings, we expect 2022 annual revenue growth between 9% to 13%." Commenting on the financial performance, Miguel Coego, Chief Financial Officer of CENTOGENE noted, "The second quarter has been another period of improvements in efficiencies and business operations, including managing margins and corporate expenses. The reporting of our results was delayed due to a lengthier than anticipated review of reimbursements in the U.S. for diagnostic tests done by a third party service provider. The overall revenue impact were revisions of approximately €2.2 million across the periods 2019, 2020, 2021, and Q1 2022, or approximately 0.5% of the revenues over the same time-frame. In the meantime, we have selected a new service provider for reimbursement processing in the US market and initiated an upgrade of our controls in this area." Recent Business Highlights Corporate Added ~24,000 individuals to the CENTOGENE Biodatabank in the second quarter of 2022; with nearly 700,000 patients total represented from over 120 highly diverse countries, estimated over 70% of whom are of non-European descent. Authored 38 peer-reviewed scientific publications in the first half of 2022, focusing on advanced multiomic diagnostics and generating critical insights into an array of diseases, including rare genetic and neurological diseases, such as Parkinson's disease, Gaucher disease, and Niemann-Pick disease. Announced the appointment of Mary Sheahan as a member ad interim of the Supervisory Board, to be confirmed at the Company's next General Meeting of Shareholders; it is planned that Ms. Sheahan will assume the role of Chair of the Audit Committee. Strengthened our Core Business focus with key additions to the team including appointment of CFO and expansion of Pharma leadership team bringing significant sector and commercial expertise. Closed the $20 million second tranche of secured loan from Oxford Finance, with funding expected before the end of the year. Pharma 45 active collaborations as of June 30, 2022; 12 contracts were signed in the first half of 2022; 10 of which with existing customers. Launched the Biodata Network, a portfolio of data-driven partnering solutions for biopharma and research institutions; collaborating with BC Platforms to increase access to tranche of 80,000 genetic sequences via Global Data Partner Network, Expanded partnership with Agios Pharmaceuticals for clinical development of PYRUKYND® (mitapivat) to treat children with rare blood disease. Leading three observational studies for patient finding and market access in collaboration with our pharma partners in rare and neurodegenerative disorders. Diagnostics Reported order intake of approximately 16,300 test requests in our diagnostics segment in the second quarter of 2022, representing an increase of approximately 17% as compared to 13,900 test requests in the second quarter of 2021. Published study in the European Journal of Human Genetics revealing the power of multiomic testing in diagnosing and accelerating treatments for patients with Inherited Metabolic Disorders (IMDs). Awarded a three-year tender for genetic testing in Malta by the Ministry for Health. Launched the latest version of CentoArray, a genome-wide analysis optimized for best cytogenetic disease coverage and designed to represent the latest clinical and genetic insights; cytogenic variations known to cause a broad range of developmental disorders, primarily neurodevelopmental and congenital anomalies. Received CE-mark for CentoCloud, making it one of the only decentralized SaaS and clinical decision support platforms compliant with European IVD regulatory framework. Contributed to Europe-wide efforts to update guidelines for WGS in rare disease diagnostics. Second Quarter and First Half 2022 Financial Summary Our total revenues for the second quarter and first half of 2022 were €11,198 thousand and €21,389 thousand respectively, representing an increase of €1,989 thousand and €2,387 thousand, or 21.6% and 12.6% respectively, as compared to the second quarter and first half of 2021. Revenues from our pharmaceutical segment were €3,653 thousand for the second quarter of 2022, an increase of €822 thousand, or 29%, from €2,831 thousand for the second quarter of 2021. Our partnership agreements are structured on a fee-per-sample basis, milestone basis, fixed fee basis, or a combination thereof. The 29% increase was primarily due to increased activity in the clinical studies of our pharmaceutical partners. Revenues from our pharmaceutical segment were €6,888 thousand for the first half of 2022, representing an increase of €459 thousand, or 7.1%, from €6,429 thousand for the first half of 2021. During the first half of 2022, we entered into twelve new collaborations and successfully completed twelve collaborations resulting in a total of 45 active collaborations at June 30, 2022, compared to 45 active collaborations at December 31, 2021 and 53 active collaborations as of June 30, 2021. Revenues from our new collaborations totalled €298 thousand and €329 thousand, respectively, for the second quarter and first half of 2022. Revenues from our diagnostics segment were €7,545 thousand for the second quarter of 2022, an increase of €1,167 thousand, or 18.3%, from €6,378 thousand for the second quarter of 2021 due to a 17.4% increase in test requests received. Revenues from our diagnostics segment were €14,501 thousand for the first half of 2022, an increase of €1,928 thousand, or 15.3%, from €12,573 thousand for the first half of 2021 due to a 17.8% increase in test requests received. The increase in revenues was primarily related to an increase in test requests for WES and WGS during the second quarter of 2022. Total revenues from WES and WGS for the second quarter of 2022 amounted to €4,144 thousand, representing an increase of 26.7% as compared to €3,270 thousand for the second quarter of 2021. The total number of WES and WGS test requests received in the diagnostics segment for the second quarter of 2022 was approximately 5,800, representing an increase of 39.5% as compared to approximately 4,159 test requests received for the second quarter of 2021. Total revenues from WES and WGS for the first half of 2022 amounted to €7,853 thousand, representing an increase of 22.1% as compared to €6,431 thousand for the first half of 2021. The total number of WES and WGS test requests received in the diagnostics segment for the first half of 2022 was approximately 11,266, representing an increase of 34.7% as compared to approximately 8,365 test requests received for the first half of 2021. Cost of sales decreased by €31 thousand, or 0.5%, to €6,586 thousand for the second quarter of 2022, and increased by €211 thousand, or 1.6%, to €13,036 thousand for the first half of 2022. Cost of sales for second quarter and first half of 2022 represented 58.8% and 60.9%, respectively, of total revenue, representing a decrease of 13.0% percentage points and 6.5% percentage points, respectively, as compared to 71.9% and 67.5%, respectively for the second quarter and first half of 2021. The decrease was mainly due to operational efficiency improvements and product mix which resulted in lower consumable costs. As a result of the above factors, our gross profit increased by €2,020 thousand, or 77.9%, to €4,612 thousand for the second quarter of 2022, from €2,592 thousand for the second quarter of 2021 while our gross profit for the first half of 2022, increased by €2,176 thousand, or 35.2%, to €8,353 thousand from €6,177 thousand for the first half of 2021. Research and development expenses increased by €404 thousand, or 10%, to €4,457 thousand for the second quarter of 2022, from €4,053 thousand for the second quarter of 2021 while our research and development expense increased by €683 thousand, or 8.1%, to €9,071 thousand for the first half of 2022, from €8,388 thousand for the first half of 2021. The increase is mainly driven by the increased IT expenses incurred on the enhancements of internally generated software that do not qualify for capitalization. General administrative expenses decreased by €1,116 thousand, or 10.6%, to €9,378 thousand for the second quarter of 2022 compared to €10,494 thousand incurred for the second quarter of 2021 while general administrative expenses decreased by €4,806 thousand, or 21.8%, to €17,284 thousand for the first half of 2022, from €22,090 thousand for the first half of 2021. The decrease is principally due to the reduction in personnel costs due to cost savings driven by the restructuring that occurred at the end of the fourth quarter of 2021 and the true-up impact of share-based compensation expenses recognized in previous period and expenditure on IT support. Selling expenses for the second quarter and first half of 2022 were €2,798 thousand and €5,192 thousand, respectively, representing an increase of €856 thousand, or 44.1% as compared to €1,942 thousand for the second quarter of 2021 and an increase of €1,301 thousand, or 33.4%, as compared to €3,891 thousand for the first half of 2021. The increase for the second quarter and first half of 2022 was principally due to increases in sales and marketing personnel costs within the pharmaceutical segment. There were no impairment expenses for financial assets incurred for the second quarter and first half of 2022 as compared to €544 thousand and €615 thousand, respectively incurred for the second quarter and first half of 2021. Instead, a gain on reversal of financial asset impairment was recorded for the second quarter and first half of 2022 due to improved collection of aged accounts receivable resulting in a positive re-assessment of receivables and contract assets arising from contracts with customers. The gain on reversal of financial asset impairment for the second quarter and first half of 2022 was €1,035 thousand and €919 thousand, respectively. Other operating income decreased by €619 thousand, or 48.5%, to €657 thousand for the second quarter of 2022, from €1,276 thousand for the second quarter of 2021 and decreased by €252 thousand, or 15.3%, to €1,390 thousand for the first half of 2022, from €1,642 thousand for the first half of 2021, principally due to lower grant income released during the period. Other operating expenses which relate to currency losses increased by €504 thousand, to €506 thousand in the second quarter of 2022 and increased by €471 thousand, to €507 thousand in the first half of 2022, compared to €2 thousand and €36 thousand, respectively, for the second quarter and first half of 2021. The increase in currency losses in the second quarter and first half of 2022 mainly relates to transactions denominated in USD that have been impacted by the devaluation of the EUR against the USD in the three and six months period. The change in net financial costs by €702 thousand and €1,063 thousand, for the second quarter and first half of 2022 is mainly due to the increased interest expense and unrealized foreign exchange impact of the Oxford Loan Facility. As a result of the factors described above, our loss before taxes from continuing operations for the second quarter and first half of 2022 was €11,712 thousand and €22,889 thousand, respectively, representing a decrease of €1,630 thousand and €4,746 thousand, respectively, from a loss before taxes from continuing operations of €13,342 thousand and €27,635 thousand, respectively, for the second quarter and first half of 2021. Adjusted EBITDA from our pharmaceutical segment for the second quarter and first half of 2022 was €1,472 thousand and €2,571 thousand representing an increase of €825 thousand and €427 thousand respectively, as compared to €647 thousand and €2,144 thousand respectively for the second quarter and first half of 2021. The increase was primarily attributable to the increase in revenues from the pharmaceutical segment. Adjusted EBITDA from our diagnostics segment for the second quarter and first half of 2022, was €2,005 thousand and €2,719 thousand, respectively, an increase of €1,727 thousand and €1,551 thousand as compared to €278 thousand and €1,168 thousand respectively, for the second quarter and first half of 2021. The increase is mainly due to the gain on reversal of financial asset impairment of €1,035 thousand and €919 thousand, respectively, recognized for the second quarter and first half of 2022, compared to the impairment of financial asset expense of €544 thousand and €615 thousand, respectively, for the second quarter and first half of 2021. Revision of previously issued financial statements During the preparation of unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022, the Group identified unadjusted differences related to certain property, plant and equipment and lease liabilities balances on the consolidated statement of financial position and cost of sales and other operating income amounts in the statements of comprehensive loss as of and for the year ended December 31, 2021. The unadjusted differences were related to COVID segment which was discontinued as of March 31, 2022. During the preparation of the unaudited financial results for the second quarter ended June 30, 2022, the Group identified unadjusted differences related to revenue recognized and impairment losses for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 and trade receivables outstanding as of December 31, 2021, 2020 and 2019 for the Diagnostics segment. Management assessed the materiality of these unadjusted differences on the previously issued consolidated financial statements and concluded that the errors were not material to any period presented. The Group revised the relevant amounts for the previously issued financial statements. Refer to "Note 2 - Revision of previously issued financial statements" to our unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021 for further details. 2022 Financial Guidance The Company expects to report 2022 annual revenue growth between 9% to 13% versus fiscal year 2021 revenues as revised. As a result, CENTOGENE expects revenues to be in the range of €46.5 million to €48.2 million. (This reflects the classification of the COVID-19 Business as discontinued operations.) Earnings Cadence The Company's next financial report will be the FY 2022 results. Going forward, the Company plans to follow a semi-annual reporting cadence. About CENTOGENE CENTOGENE's mission is to provide data-driven, life-changing answers to patients, physicians, and pharma companies for rare and neurodegenerative diseases. We integrate multiomic technologies with the CENTOGENE Biodatabank – providing dimensional analysis to guide the next generation of precision medicine. Our unique approach enables rapid and reliable diagnosis for patients, supports a more precise physician understanding of disease states, and accelerates and de-risks targeted pharma drug discovery, development, and commercialization. Since our founding in 2006, CENTOGENE has been offering rapid and reliable diagnosis – building a network of approximately 30,000 active physicians. Our ISO, CAP, and CLIA certified multiomic reference laboratories in Germany utilize Phenomic, Genomic, Transcriptomic, Epigenomic, Proteomic, and Metabolomic datasets. This data is captured in our CENTOGENE Biodatabank, with nearly 700,000 patients represented from over 120 highly diverse countries, over 70% of whom are of non-European descent. To date, the CENTOGENE Biodatabank has contributed to generating novel insights for more than 260 peer-reviewed publications. By translating our data and expertise into tangible insights, we have supported over 50 collaborations with pharma partners. Together, we accelerate and de-risk drug discovery, development, and commercialization in target & drug screening, clinical development, market access and expansion, as well as offering CENTOGENE Biodatabank Licenses and Insight Reports to enable a world healed of all rare and neurodegenerative diseases. To discover more about our products, pipeline, and patient-driven purpose, visit and follow us on LinkedIn. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of the U.S. federal securities laws. Statements contained herein that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "continues," "expect," "estimate," "intend," "project," and similar expressions and future or conditional verbs such as "will," "would," "should," "could," "might," "can," and "may," are generally intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause CENTOGENE's actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward- looking statements. Such risks and uncertainties include, among others, negative economic and geopolitical conditions and instability and volatility in the worldwide financial markets, possible changes in current and proposed legislation, regulations and governmental policies, pressures from increasing competition and consolidation in our industry, the expense and uncertainty of regulatory approval, including from the U.S. Food and Drug Administration, our reliance on third parties and collaboration partners, including our ability to manage growth, execute our business strategy and enter into new client relationships, our dependency on the rare disease industry, our ability to manage international expansion, our reliance on key personnel, our reliance on intellectual property protection, fluctuations of our operating results due to the effect of exchange rates, our ability to streamline cash usage, our continued ongoing compliance with covenants linked to financial instruments, our requirement for additional financing, or other factors. For further information on the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to CENTOGENE's business in general, see CENTOGENE's risk factors set forth in CENTOGENE's Form 20-F filed on March 31, 2022, with the Securities and Exchange Commission (the "SEC") and subsequent filings with the SEC. Any forward-looking statements contained in this press release speak only as of the date hereof, and CENTOGENE's specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Media Contact: Ben LeggCorporate Lennart StreibelInvestor Centogene N.V.Unaudited consolidated statements of comprehensive loss (in EUR k)     For the three months ended June 30   For the six months ended June 30     2022   2021* (Revised)   2022   2021* (Revised) Revenue   11,198     9,209     21,389     19,002   Cost of sales   6,586     6,617     13,036     12,825   Gross profit   4,612     2,592     8,353     6,177   Research and development expenses   4,457     4,053     9,071     8,388   General administrative expenses   9,378     10,494     17,284     22,090   Selling expenses   2,798     1,942     5,192     3,891   Impairment of financial assets   —     544     —     615   Gain on reversal of financial asset impairment   1,035     —     919.....»»

Category: earningsSource: benzingaDec 22nd, 2022

Coinbase CEO Brian Armstrong says more regulatory oversight of centralized platforms is needed because they have the "most risk for consumer harm"

Coinbase's Brian Armstrong says centralized firms like crypto exchanges, custodians, and stablecoin issuers carry the "most risk for consumer harm." Coinbase CEO Brian Armstrong.Patrick T. Fallon / Getty Images Coinbase's CEO says lawmakers should address regulatory oversight for centralized players in the industry first. This includes cryptocurrency exchanges, stablecoin issuers, and custodians, Armstrong tweeted on Monday.  The exec's comments follow the collapse of FTX, the crypto exchange which lost $8 billion of customer money.  Coinbase chief executive officer Brian Armstrong hopes policymakers will prioritize oversight for centralized players in the industry following the downfall of FTX. The exec cited cryptocurrency exchanges, custodians, and stablecoin issuers as needing further regulatory clarity in a series of tweets on Monday, adding that these operators carry "most risk for consumer harm."Legislation for these players is something "pretty much everyone can agree it should be done," he said. "It's the low hanging fruit."Armstrong outlined how lawmakers can navigate regulatory clarity in crypto in a series of tweets, which was accompanied by a Coinbase blog titled "Regulation Crypto: How we move forward as an industry from here."—Brian Armstrong (@brian_armstrong) December 20, 2022The exec's comments follow the collapse of Sam Bankman-Fried's FTX, the crypto exchange that lost $8 billion of customer money last month. FTX filed for bankruptcy protection amid a severe liquidity crisis. In his "hundreds of meetings" with policy makers, Armstrong hopes that FTX can be the catalyst that ignites regulatory clarity in crypto and get legislation passed.Stablecoins can be regulated under traditional financial services laws such as a state trust charter, according to Armstrong."You shouldn't have to be a bank to issue stablecoins, unless you want to do fractional reserve lending. Bank regulation is the most stringent because it comes with permission to lend out customer funds," Armstrong wrote in a blog post.Armstrong added: "But many stablecoin issuers will be fine being required to hold assets 1-to-1 and only being allowed to invest in high quality assets like treasuries."For custodians and exchanges, lawmakers can look at the framework for regulation in traditional financial services as well.This could include strict know-your-customer procedures and anti-money laundering policies, standards for safeguarding client funds, along with "strong consumer protection rules, such as disclosure of risks, and transparency around fees and conflicts of interest," to name a few. "Right now there is too much distraction from bad actors causing harm, and we all need to take responsibility for improving this," Armstrong said. "I'm optimistic that we can make significant progress on the above in 2023 and get crypto legislation passed."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 20th, 2022

Mark Cuban says last year"s crypto boom was "99% noise" – and Sam Bankman-Fried"s arrest could pop the bubble

Disgraced FTX founder Sam Bankman-Fried's arrest in the Bahamas will force the crypto world to get its act together, billionaire investor Mark Cuban has said. Sam Bankman-Fried's arrest on fraud charges could pop the crypto bubble, Mark Cuban said Monday.Mike Blake/Getty Images Mark Cuban said there's still some underlying value in crypto despite the ongoing sell-off. "99% of it was noise but there's real value there," he told 'The Problem with Jon Stewart' Monday. Cuban added that Sam Bankman-Fried's arrest on fraud charges will force crypto to "get its act together". Billionaire investor Mark Cuban still believes there's some value in the crypto space, but says the asset class's stratospheric rise in 2021 now looks like it was almost all "noise".Last year's bull run led to cryptocurrencies becoming overvalued, before signs of stress in the industry — such as the fraud charges against FTX founder Sam Bankman-Fried — could pop that bubble this year, he said."There's the signal and the noise," Cuban told Apple TV+'s "The Problem with Jon Stewart". "In crypto, 99% of it was noise. But there's real value and signal there."Cuban — the owner of the Dallas Mavericks NBA team and "Shark Tank" investor — was speaking Monday as a brutal year for digital assets draws to a close.The price of bitcoin, the leading cryptocurrency, has plunged 64% to below $17,000 since January, and it's down 75% from its all-time high of almost $68,790 in November 2021. The value of the global crypto market is 63% lower than a year ago.Stablecoin issuer Terra and hedge fund Three Arrows Capital collapsed earlier in 2022 as the crypto selloff brought to light potential instabilities in the digital asset sector. More recently, the disgraced founder of now-bankrupt FTX Bankman-Fried — commonly known as "SBF" — was arrested in the Bahamas last week and faces fraud charges in the US.Those events prompted Cuban to talk about the collapse of Enron and WorldCom MCI during the early-2000s selloff in tech stocks."It takes a couple of frauds to pop a financial bubble," he said. "It took Enron and WorldCom MCI.""Now it's going to take what we saw with Sam and Terra and Luna and Three Arrows Capital," he added. "So now crypto will get its act together."But the sector can only do that if there's greater transparency and regulatory oversight, according to the billionaire investor, who has described crypto as a big part of the future.FTX's new CEO John Ray III has said the exchange misstated the overall value of its crypto holdings, while a Reuters investigation into rival exchange Binance showed most of its balance sheet remains hidden from public view."Where you find opacity and lack of transparency, you're going to find fraud," Cuban said. "When it comes to legislating any of this, it comes down to who is willing to keep the kimono open.""Because it's digital, it's easier to disclose, it's easier to review, it's easier to analyze. But we have no transparency and as long as that's the case, SBF can do what he did," he added.Cuban is a longtime crypto bull who previously said he would accept joke token dogecoin — which has tumbled 56% during this year's selloff — as a method of payment for Dallas Mavericks merchandise and tickets. He has owned the Texas-based NBA franchise since 2000.Read more: FTX's collapse could be crypto's dot-com crash moment – with the industry struggling to ever regain investors' trustRead the original article on Business Insider.....»»

Category: worldSource: nytDec 20th, 2022