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After October's "bloodbath across all strategies" resulted in the second-worst monthly hedge fund performance of the decade, many in the 2-and-20 crowd are bracing for the industry's worsening capital bleed to accelerate on Thursday as LPs scramble to request redemptions ahead of Thursday's deadline to get their money back before the end of the year. But as overpaid hedgies' paranoia about a feared culling of the herd reaches a fever pitch, one of the industry's most infamous figures isn't doing his competitors any favors.

During a talk at the 92nd Street Y on the Upper East Side of Manhattan on Thursday, former SAC Capital founder Steve Cohen revealed that he had successfully raised $5 billion in outside money since opening Stamford Harbor Capital (Cohen's new fund, which opened to outside capital earlier this year after a temporary ban on Cohen running outside money was lifted). Cohen raised this money at a time when redemptions for the industry as a whole had accelerated through the end of Q3.

Cohen

While most funds have been struggling to keep the money that they already have, Cohen said he didn't have to try hard to raise the money.

Here's the FT:

"It was actually not hard," Mr Cohen told a sold-out audience of his fund-raising at a 92nd Street Y event, which included former New Jersey governor Chris Christie.

"I did only 10 or 15 meetings, it was really easy," he said. "I made one trip overseas to see one client and my staff did an amazing job and we raised probably $5bn."

Cohen said he's happy to be taking outside money again, because it has allowed his firm to grow.

"It never bothered me not having other people’s money because I had a lot of my own money" but "frankly we couldn’t grow."

But for any LPs who might have been in the room (Chris Christie reportedly attended the event), Cohen shared his market outlook, which was notably similar to that of his Fairfield County neighbor Bridgewater.

Like a growing number of funds, Cohen believe the US economy is "late cycle" and that a bear market could arrive some time within the next two years.

Mr Cohen said he sees the US economy as “late cycle”, and predicts a possible bear market in the next year and a half to two years.

"I’m not comfortable, I’m not uncomfortable, I’m somewhere in the middle," he said.

"I don’t think returns over the next two years are going to be very good. If the market hangs in there, there’s just going to be marginal returns."

According to the investing theory that helps hedge funds justify their existence, hedge fund investors see the most benefit during down turns, when their sophisticated stock pickers can more easily choose outperformers, allowing their ability to pick winning stocks to truly shine. In other words, as Cohen implied, everybody who is pulling their money from hedge funds is merely succumbing to panic. Now's the time to get in before the market's bottom falls out.

In what sounded like an attempt to check Cohen's ego, his interviewer jokingly pointed out during the talk that Cohen "isn't Warren Buffett."

"And Warren Buffett's not me," he replied.

Author: Tyler Durden
Posted: November 15, 2018, 6:44 pm

Authored by Adam Sabes via Campus Reform,

North Carolina State University announced a Ph.D. in social justice education on Monday.

The program, which will debut in fall 2019, aims to teach educators, or "scholar-activists," about social justice and how they can bring about change in the classroom setting, according to an NC State news release.

“The goal of the program is to help educators recognize and disrupt systems of oppression by helping to foster and create equitable learning environments,” Jessica DeCuir-Gunby, a professor of educational psychology and director of graduate programs for the Teacher Education and Learning Sciences Department, said in the news release.

Faculty will come from various research areas, such as “social justice teacher education, multicultural education and literacy, education and immigration and diversity and equity in schools and communities,” according to the Ph.D. program’s webpage. The program also claimed it would focus on “equity in STEM” and “scholar activism.”

“This program area of study promotes social diversity while naming, interrogating and challenging oppression, exploitation and marginalization within education at the local, state, national and international levels,” the website states.

Courses that are required to attain the Ph.D. in social justice education include “Social Justice in Education,” “Diversity & Equity Scholar Leader Course,” and more.

NCSU College Republicans chairman Kye Laughter told Campus Reform he views this new Ph.D. program as a way to push social justice on future students.

“I think any person pursuing a degree or a Ph.D. in social justice already has an agenda in mind and this field will only allow bias to grow not only among those in academia but for those being taught this dangerous ideology,” Laughter said.

The chairman also suggested that the program shows that the university has a double standard, contending that a Ph.D. in a conservative thought field would never be created.

“Our university should not be afraid of discussing different ideas, but I am doubtful we will see any Ph.D. programs in conservative ideologies anytime soon, as academia has been infested with liberalism,” Laughter said, while noting that the university excels in fields like agriculture, engineering, and architecture. 

Author: Tyler Durden
Posted: November 15, 2018, 6:25 pm

After years of resolutely ignoring any adverse macro news and negative fundamental developments, bonds - whose spreads had touched decade tights at the start of October amid an unprecedented scramble for yield within the fixed income community - are suddenly being dumped with a passion. Indeed, it appears that the good times for bonds - both investment grade and high yield - are coming to an end, with this week’s turmoil in General Electric credit - first profiled here and subsequently in the WSJ - a clear sign that things can and likely will get much worse.

To see the sudden revulsion surrounding junk bonds in action, look no further than the spread on the Bloomberg Barclays Corporate High Yield index, which has spiked from a decade low of 3.03% on October 3 to 3.92% overnight, the widest since April 2017.

To be sure, there is some good news. According to Bank of America, it is far too soon to panic, because when the next slowdown strikes, investment-grade bonds will see a record-low rate of cuts to junk.

"The credit quality of high-grade companies is the best it has been in decades, as companies and industries have been tested and forced to improve,” BofA credit strategist Hans Mikkelsen wrote in a Nov. 14 note. And that’s "one key reason that in the next downturn the rate of downgrades to high yield is likely to be the lowest ever."

According to Mikkelsen, who dedicated his entire note to placate panicked bond investors, the reason not to worry about the energy sector - one of the biggest subsectors of the US high yield market - is because 4 years ago "it went through a major stress-test" when oil prices last plunged. "That forced companies to deleverage, be conservative about capex and work to aggressively lower break-even oil prices." Additionally, Mikkelsen argues that the financial crisis and Dodd-Frank greatly improved the credit quality of banks.

Of course, one could easily argue the opposite, namely that artificially low interest rates enabled a massive debt-issuance spree which has left most companies burdened with more debt than they can handle either during the next financial crisis or as rates keep rising, resetting the cash interest rate ever higher on existing debt along the way. This was precisely the argument behind Jeff Gundlach's most recent warning to corporate bond investors.

And while BofA's complacent take may be the good news, the bad news is that the market - having engaged its semi-panic puke mode, refuses to step off the gas and even though oil has stabilized in the past 48 hours after a record, 12-day rout, that's not helping high-yield energy.

As shown in the chart below, Bloomberg's HY Energy OAS Index soared this morning to the highest in 12 months, at just shy of 500 bps. And since energy is the third-largest sector in U.S high yield indexes, it's now dragging the whole market wider.

Commenting on this blow out, Bloomberg's Sebastian Boyd writes that while it's tempting to argue that bondholders are anticipating further declines in oil prices, the index has tracked oil prices pretty closely in the past 12 months, so "it's hard to say which one leads and which lags."

Separately, CreditSights analysts have joined Bank of America in advising bondholders to hang on and wait for the pain to pass while Wells Fargo also agrees with Mikkelsen that high-yield oil and gas companies are better placed to get through a price slump now than they were in 2014 after deleveraging and improving balance sheets.

As a counter to this optimism, Boyd presents the following chart showing ratings of bonds in the ICE BofAML index over time. While ratings are a simplistic reflection of reality, if one accepts that they're a decent enough proxy for credit risk then "the data does not show credit quality in the sector improving over time."

Boyd is not the only one who is skeptical on credit, which has been hammered not only in junk, but more notably also in high grade. In the aftermath of the previously noted rout in the bonds of GE, which is facing weak demand for gas turbines, high debt levels, a federal accounting probe and is no longer eligible for commercial paper issuance and so has to rely on bank revolving credit facilities...

...blue-chip company debt has been clobbered this week, and is on track for its worst year since 2008, largely due to concerns about some $2.5 trillion in BBB-rated bonds - more than double the size of the entire high yield bond market - which risk being downgraded to junk during the next crisis resulting in a yield explosion across the high yield space.

"GE is a harbinger for what’s going to happen when large capital structures get downgraded,” said Josh Lohmeier, head of U.S. investment-grade credit at Aviva Investors, which manages more than $480 billion. "It’s going to be messy, and it’s going to be painful."

Lohmeier isn’t the only one flagging such risks. Earlier this week, Guggenheim CIO Scott Minerd said that GE’s selloff is just the start of a “slide and collapse” in investment-grade credit. As we previously noted, Jeffrey Gundlach said corporate debt is the "most dangerous" part of the high-grade bond market.

What is notable is that for years, virtually nobody had anything bad to say about credit, whether IG or HY, and now - following the blow out in yields - it suddenly seems that everyone, with a few exceptions, is bearish as commentary once again follows price action (as usual).

Which is not to say that the bears are wrong: in fact, if the Fed indeed continues to hike rates and if oil continues to slide, if vol continues to rise and stocks continue to sell off, it is only a matter of time before the selling across credit hits a tipping point and the next widespread market puke hits, sending yields to levels that will force either the Fed, or other central banks, to step in and buy what investors have to sell. Because 10 years into the biggest central planning experiment in capital markets history, expecting traders to be able to price assets only on fundamentals, may be asking too much.

Author: Tyler Durden
Posted: November 15, 2018, 6:04 pm

Authored by Mike Shedlock via MishTalk,

Throughout his career, Greenspan has mostly been a contrarian indicator. But he has been consistently right about trade.

Alan Greenspan says Trump's Tariff Policies are ‘Insane’ and I agree.

Former Federal Reserve Chairman Alan Greenspan called President Donald Trump’s tariff policies “insane” and said “why we’re doing it probably is very deep in the psyche of somebody.”

Responding to a question about China at an event in New York on Wednesday, he said both sides lose out in such a clash.

“It’s an excise tax, and people think of tariffs other than what it is, it’s a tax and everybody engaged in warfare of this type, it would mean that you’re withdrawing credit or purchasing power from a whole series of countries,” Greenspan said at New York University. “There are victors and there are losers in a tariff fight, but that doesn’t say that a more important issue is both are losing, it’s just the winner loses less.”

Greenspan also said the notion that China would outrace the U.S. in all economic respects “is a mistake,” pointing to their lower gross domestic product per capital.

Greenspan is correct on that as well.

Greenspan BS Detector

It's usually easy to detect when Greenspan is right or wrong about something.

Generally, if the public agrees with what Greenspan says, he's wrong, and vice versa.

Art of the Deal

In this case, Trump's die hard supporters believe the crazy notion that Trump really understands the "Art of the Deal".

Trump did not even wrote the book.

Please note the ‘Art of the Deal’ Ghostwriter Says Trump is ‘Deeply Disturbed’ and ‘Utterly Untrustworthly’

Arguably, that is carrying things too far, but Trump is no brilliant deal maker or businessman.

Enter the Democrats

The Democrats generally want to support the unions, and that's always the wrong thing to do.

The Wall Street Journal provides an interesting case in point: Democrats’ House Victory Complicates Passage of New Nafta, Trade Deals

Most Democrats, backed by unions, have voiced skepticism about liberalizing trade unless the deals allow workers in the other countries to take advantage of higher labor standards and wages. Passage “will depend on whether unions will want to push it,” a senior White House official said.

NAFTA liberalized virtually nothing. Rather, it is essentially the same deal we had before.

So here we are. Trump is bragging about a deal that changed nothing and Democrats want even more Tariff stupidity.

Democrats and Republicans Skeptical

With Democrats and Republicans skeptical of free trade but Greenspan an advocate, we have a clear winner.

Not only does this setup fit my Greenspan rule, it fits a more obvious rule:

When Democrats and Republicans both want the same thing, it's nearly always worth taking the opposite side.

EU Silliness

Note that the EU and UK just finalized a 585 page document on a "customs union".

Yes, it's asinine.

Good Free Trade Agreement

A good free trade agreement can be written on a napkin with a crayon.

"Effective today, all tariffs and subsidies on all goods and services are eliminated"

That holds true no matter what any other nation does. The first nation to do so will have a monstrous advantage in jobs and wealth creation.

Greenspan was generally wrong!

Absolutely
Greenspan was generally wrong!

He warned of Irrational Exuberance years early, then embraced the productivity miracle in 2000.

Consistently right about free trade. https://t.co/dKYP1XQ8IU

— Mike Mish Shedlock (@MishGEA) November 15, 2018
Author: Tyler Durden
Posted: November 15, 2018, 5:50 pm

“The end of the 10-year run is going to be a really challenging time for policymakers going forward," warns billionaire hedge fund manager Paul Tudor Jones.

Speaking at at the Greenwich Economic Forum this morning, Jones explained to investors that another hike in interest rates triggered by faster growth from U.S. tax cuts may cause the bubble in credit to pop.

“We’re going to stress test our whole corporate credit market for the first time...”

“From a markets perspective, it’s going to be interesting. There probably will be some really scary moments in corporate credit.

And thos cracks are starting to show - dramatically...

And unless The Fed stops its so-called 'normalization' of the balance sheet, yields are going to explode and credit conditions will collapse:

The hedge fund manager said the next trade will be a “front-end rates trade” of figuring out when policymakers will cease interest rate hikes.

Jones is not alone.

As Josh Lohmeier, head of U.S. investment-grade credit at Aviva Investors, which manages more than $480 billion, notes:

"GE is a harbinger for what’s going to happen when large capital structures get downgraded,” said.

“It’s going to be messy, and it’s going to be painful.”

Additionally, Guggenheim’s Scott Minerd said Tuesday that GE’s selloff is just the start of a “slide and collapse” in investment-grade credit.

 Jeffrey Gundlach, CEO of DoubleLine Capital LP, said corporate debt is the "most dangerous" part of the high-grade bond market.

Distressed-debt investor Marc Lasry is eyeing an eventual sell-off in the investment-grade market for his next opportunities, including bonds sold by GE if they become even cheaper.

It had better be different this time - or credit is in big trouble!!

Credit markets are fundamentals have never been more decoupled.

Author: Tyler Durden
Posted: November 15, 2018, 5:26 pm

In what is the most shocking geopolitical news of the day, NBC reports that the Trump administration is weighing extraditing the nemesis of Turkish President Recep Erdogan, cleric Fethulah Gulen who has been living for years in relative seclusion in rural Pennsylvania, from the U.S. in order to placate Turkey over the murder of journalist Jamal Khashoggi.

According to the NBC report, Trump administration officials last month asked federal law enforcement agencies to examine legal ways of removing the exiled Turkish cleric in an attempt to persuade Erdogan to ease pressure on the Saudi government. The effort includes directives to the Justice Department and FBI that officials reopen Turkey's case for his extradition, as well as a request to the Homeland Security Department for information about his legal status, four sources told NBC.

In hopes of finding immigration irregularities, the White House has requested details about Gulen's residency status in the U.S. Gulen - who has been living in Pennsylvania since the late 1990s - has a Green Card.

As NBC also adds, there was a certain level of incredulity at this sequence of events: career officials at the agencies pushed back on the White House requests, the U.S. officials and people briefed on the requests said.

"At first there were eye rolls, but once they realized it was a serious request, the career guys were furious," said a senior U.S. official involved in the process.

What is strange is that while Trump appears eager to appease Erdogan by handing him his arch enemy, the person whom the Turkish president has blamed for creating a "shadow government", and being responsible for the failed 2016 coup attempt, a Turkish official said the government does not link its concerns about the Khashoggi murder with Gulen's extradition case.

"We definitely see no connection between the two," the official said. "We want to see action on the end of the United States in terms of the extradition of Gulen. And we're going to continue our investigation on behalf of the Khashoggi case."

So why the extradition push? According to NBC, the secret effort to resolve one of the leading tensions in U.S.-Turkey relations – Gulen's residency in the U.S. – provides a window into how President Donald Trump is trying to navigate hostility between two key allies after Saudi officials murdered Khashoggi on October 2 at the kingdom's consulate in Istanbul.

It suggests the White House could be looking for ways to appease and contain Erdogan's ire over the murder while preserving Trump's close alliance with Saudi Arabia's controversial de facto leader, Crown Prince Mohammed bin Salman.

Trump has been desperate to brush aside the entire Khashoggi affair so Riyadh can continue to purchase billions in US weapons without complaints from Congress; Erdogan, meanwhile, has kept the pressure up by leaking pieces of evidence and repeatedly speaking out to accuse Prince Mohammed of orchestrating the murder of Khashoggi.

Of course, as regular readers know, Erdogan has for years demanded the U.S. send Gulen back to Turkey, however such requests have been regularly denied by both the Obama and Trump administration, at least until now.

The Turkish leader accuses the elderly cleric of being a terrorist who was behind a failed coup against Erdogan's government in 2016. After the coup attempt, Ankara made a formal request to the U.S. for Gulen's extradition.

Turkish officials made clear to Secretary of State Mike Pompeo during his Oct. 17 meeting with Erdogan in Ankara that they wanted the Trump administration to turn over Gulen, the U.S. officials and people familiar with the matter said.

"That was their number one ask," said a person briefed on the meeting.

One option that Turkish and Trump administration officials recently discussed is forcing Gulen to relocate to South Africa rather than sending him directly to Turkey if extradition is not possible, said the U.S. officials and people briefed on the discussions. But the U.S. does not have any legal justification to send Gulen to South Africa, they said, so that wouldn't be a viable option unless he went willingly.

Whether or not Gulen is ultimately extradited remains unclear, however the fact that Trump is even considering this shows just how much leverage the Turkish president now has over Trump. As a result, it will hardly come as a surprise that the Turkish Lira has surged on the news, rising to just above 5.300 after trading at 5.45 earlier...

... as Turkey slowly emerges as one of the most powerful nations in the middle east, engaged in friendly diplomatic relations with Moscow on one hand, while seemingly calling the shots in the US as well.

 

 

Author: Tyler Durden
Posted: November 15, 2018, 5:13 pm

Following a shocking exposé in the New York Times revealing how Facebook resorted to guerilla tactics to deflect blame amid their various scandals, including hiring Republican PR firm Definers which cast liberal critics as operatives for liberal financier George Soros, top representatives for the Hungarian-American billionaire have demanded answers. 

While Facebook was under fire on Capitol Hill for allowing Russians to purchase advertising during and after the 2016 US election, liberal critics blamed the company for Hillary Clinton's loss - including activist protesters who put a public face on liberal opposition to the social media giant.

Defenders sought to discredit the activists by linking them to Soros

A research document circulated by Definers to reporters this summer, just a month after the House hearing, cast Mr. Soros as the unacknowledged force behind what appeared to be a broad anti-Facebook movement.

He was a natural target. In a speech at the World Economic Forum in January, he had attacked Facebook and Google, describing them as a monopolist “menace” with “neither the will nor the inclination to protect society against the consequences of their actions.”

Definers pressed reporters to explore the financial connections between Mr. Soros’s family or philanthropies and groups that were members of Freedom from Facebook, such as Color of Change, an online racial justice organization, as well as a progressive group founded by Mr. Soros’s son. (An official at Mr. Soros’s Open Society Foundations said the philanthropy had supported both member groups, but not Freedom from Facebook, and had made no grants to support campaigns against Facebook.) -NYT

Responding to the Times report, Soros adviser Michael Vachon responded Thursday, stating "It is alarming that Facebook would engage in these unsavory tactics, apparently in response to George’s public criticism in Davos earlier this year of the company’s handling of hate speech and propaganda on its platform."

The Times’ story raises the question of whether Facebook has used similar methods to go after other critics or public officials who have tried to hold Facebook accountable. Zuckerberg and Sandberg’s claim that they were unaware of what the company was doing is more alarming than reassuring. What else is Facebook up to?
 
The company should hire an outside expert to do a thorough investigation of its lobbying and PR work and make the results public. 

Until then, this episode further demonstrates that Facebook continues to pursue its narrow corporate interests at the expense of the public interest. -Michael Vachon

Patrick Gaspard, president of Soros's Open Society Foundations wrote to Sandberg: "I was shocked to learn from the New York Times that you and your colleagues at Facebook hired a Republican opposition research firm to stir up animus toward George Soros," adding: "As you know, there is a concerted right-wing effort the world over to demonize Mr. Soros and his foundations, which I lead—an effort which has contributed to death threats and the delivery of a pipe bomb to Mr. Soros’ home. You are no doubt also aware that much of this hateful and blatantly false and anti-Semitic information is spread via Facebook."

The notion that your company, at your direction, actively engaged in the same behavior to try to discredit people exercising their First Amendment rights to protest Facebook’s role in disseminating vile propaganda is frankly astonishing to me. 
 
It’s been disappointing to see how you have failed to monitor hate and misinformation on Facebook’s platform. To now learn that you are active in promoting these distortions is beyond the pale.

These efforts appear to have been part of a deliberate strategy to distract from the very real accountability problems your company continues to grapple with. This is reprehensible, and an offense to the core values Open Society seeks to advance. But at bottom, this is not about George Soros or the foundations. Your methods threaten the very values underpinning our democracy.  -Patrick Gaspard

 Which PR firm will Facebook call now?

Author: Tyler Durden
Posted: November 15, 2018, 5:01 pm

Submitted by Robert Huebscher of Advisor Perspectives

Corporate bonds offer incredibly poor prospects under any scenario, according to Jeffrey Gundlach. If rates rise, prices will drop quickly because their durations are between 7 and 10 years. Falling rates are no better, he said, because they would be accompanied by a bear market in stocks with effects that would extend to corporate bonds.

Gundlach, the founder and chief investment officer of Los Angeles-based DoubleLine Capital, spoke via a webcast with investors on November 13. The focus of his talk was DoubleLine’s core and flexible fixed-income mutual funds, DFLEX and DBFLX. The slides from his presentation are available here.

The problem facing the corporate bond market is excessive debt and an oversupply of bonds. There is a lot of leverage among corporations, Gundlach said, which can be seen in “massive increases” in the size of the investment-grade market and a deterioration in the quality of debt. Spreads are tight, according to Gundlach, but are “tighter than you think, because quality has been systematically going down” in the covenants that are offered by corporate issuers.

Spreads and debt levels are out of sync with one another,” Gundlach said.

That dichotomy is illustrated in the graph below. The shaded area depicts leverage (the corporate debt-to-GDP ratio) and the black line is the option-adjusted spread between high-yield (junk) and Treasury bonds. The two moved in sync from 1994 until 2013, after which leverage increased without a similar increase in spreads.

As a result, both corporate and high-yield bonds are at or close to their most extreme levels of overvaluation historically, based on DoubleLine’s proprietary methodology. That methodology looks at the spreads of those bonds relative to similar-risk Treasury bonds; those spreads are approximately two standard deviations above their normal level.

The BBB-rated market, which has the lowest rated corporate bonds, is two-times bigger than the high-yield market. If those bonds are downgraded to junk, Gundlach said, it will “flood” the high-yield market.

If corporate bonds were rated based on their degree of leverage, then 55% would be rated junk, according to Gundlach. They have not been downgraded by the ratings agencies because corporate issuers have made “soothing statements” to assuage the agencies. Gundlach called those statements “hopeful talk” about addressing debt in the future, which has kept ratings high. But a supply shock would lower junk bond prices, he said.

Gundlach said he doesn’t own a lot of corporate bonds relative to his fund’s normal weightings.

He also commented on the economy, politics and prospects for economic growth.

Deciphering the global stock markets

The driving force behind global economic performance is central-bank monetary policy.

The G4 central-bank balance sheets are now shrinking, largely due to the Fed’s $50 billion per month quantitative tightening (QT), which Gundlach said represents bond issuance that will add to the size of the deficit. On a cash-account basis, he said our $1.3 trillion deficit will increase to $2.0 trillion with QT, plus there is “hundreds of billions” of pending corporate-bond issuance. (By “cash basis,” he includes money which is borrowed to support the Social Security system.)

The global stock market has changed course, Gundlach said. Those markets rose in parallel with rising central-bank balance sheets, but are now falling across the globe, he said.

The NYSE composite is down 4% on a price-basis year-to-date. It peaked on January 26. Since then the U.S. and global equity markets followed one another until early May, at which point the rest of the world fell sharply. The S&P went up until early October, when the U.S. and the rest of the world fell and moved in sync, he said.

Why did the rest of the world fail to keep pace with U.S. markets until October? Gundlach said that it is because tariffs are clearly worse for other counties than the U.S., which has only 8% of its economy reliant on exports. For other counties, that percentage is much higher – he cited 43% for South Korea.

The U.S. has outperformed the rest of the world since 2009, as it has out-earned other countries on an EPS basis, he said. “But the most recent up-move was not justified on an EPS basis,” Gundlach said, in reference to the S&P gains until October.

The midterm election outcome will widen the deficit further, Gundlach said. Democrats will support a 10% middle-class tax reduction, as will Republicans and Trump. “I think that will go through,” he said.

Nancy Pelosi, the likely next speaker of the House, has been talking about infrastructure, he said, as has Trump. This could happen as well, he said, which would “get the deficit growing further.”

The outlook for deficit reform is cloudy. Four of the 2020 Democrat presidential candidates (Cory Booker, Kamala Harris, Bernie Sanders and little-known Andrew Yang) are all campaigning by advocating a form of “free money,” Gundlach said. Their programs range from negative income taxes to straight giveaways to segments of the population.

All quiet on the recession watch

All of the recession indicators are “flat-out positive” (not signaling a recession) or are not in a flashing-yellow warning zone, Gundlach said.

There has never been a recession without the leading economic indicators going below zero. “We are a long way from that,” he said. Small business optimism is just below its all-time high, CEO confidence is at a very high level and consumer confidence is its highest in 16 years, he said.

High-yield bond spreads over Treasury bonds rose approximately 400 basis points prior to the 2001 and 2007 recessions. Those spreads have recently widened by about 75 basis points, Gundlach said. “It looks a little bit like the 2007 recession, but it is not definitive,” he added.

As the Fed started its QT, the 10-year Treasury yield has risen pretty much in sync with the shrinkage of the Fed’s balance sheet, Gundlach said. When the stock market fell in October, the 30-year Treasury yield went up slightly, he said. It is very unusual for this to happen when equities are in distress, according to Gundlach.

As a result, he said it’s very possible yields could go up in a recession, if for no other reason than the large amount of pending bond issuance.

The deficit suicide mission

Strong economic growth in the U.S. is being caused by the growth in the deficit, Gundlach said. “This is good for the short term, but we are borrowing from the future.” Historically, the Fed has cut rates when economy was bad, and vice versa. That Keynesian view changed after the global financial crisis, according to Gundlach, when the Fed started raising rates while the deficit rose. That was because of Trump’s policies – specifically, the Tax Cuts and Jobs Act. As a result, he said the deficit is now 4% of GDP, “but if you include loans from Social Security it is 6%. This is why interest rates have been stubborn to fall.”

“These are very alarming trends,” Gundlach said. There are $7 trillion of Treasury bond maturities due in the next five years with a 2% average coupon, he said. With yields at 3%, those bonds will have to be replaced with higher cost debt, resulting, he said, in another $150 billion of interest-rate expense given current market conditions.

We are on a suicide mission,” Gundlach said. “This will be an important issue in the next five years.”

How will the deficit crisis be resolved? Gundlach said it will be through devaluation – by entitlement reform “once the nation wants it, once the nation realizes that path we are on leads to catastrophe.”

Problems abroad

Gundlach referenced “underlying problems in the core of the European banking system,” based on the fact that the stock prices of Deutsche Bank and Credit Suisse, two large European banks, have declined precipitously.

Emerging markets have been weak as the dollar has strengthened, he said. “The success and failure of emerging markets are with the fate of the dollar,” he said. “Bullishness on the dollar is extraordinary,” but he said he does not expect the dollar to rise to the level of its high in 1984.

China and the European central bank want to have a role as a reserve currency, according to Gundlach. China is trading oil futures of its own currency, the Yuan. “Once you start trading in global commodities,” he said, “you are taking steps to be a reserve currency.”

Treasury bonds are unattractive to foreign borrowers because of the U.S. trade policies and because hedging costs are too high, Gundlach said; the currency-hedged yields on foreign sovereign bonds are below zero. Domestic demand for Treasury bonds has been higher and has offset the lack of foreign demand.

There is a positive, albeit small, real rate of return on Treasury bonds. Unless inflation goes down (which Gundlach said is likely) Treasury bonds are unattractive to domestic buyers.

The 30-year yield could be 5% or 6%, he said, “but it may take a while. We are on track to hit 6% by 2021,” as per a prediction he made some time ago.

Those looking for a risk-free investment should opt for two-year Treasury bonds, he said, which yield 2.90%. When they mature, he said, there will be better opportunities.

* * *

Gundlach's full November 13 slideshow is below:

Author: Tyler Durden
Posted: November 15, 2018, 4:55 pm

After 'oil god' Andy Hall shut down his main fund in 2017, Pierre Andurand has taken on the mantra of the world's largest oil trader. But the last few years have been tempestuous to say the least.

After facing huge losses in Q1 last year, Andurand blamed his losses on the irrational actions of CTAs and trend-followers. Well its Q3 2018, and as The Wall Street Journal reports, Andurand, who runs one of the last big oil-focused hedge funds, took significant losses in October as petroleum prices cratered.

Pierre Andurand, who earlier in 2018 predicted oil could soon hit $100 a barrel - and even predicted that $300 oil is "not impossible" - suffered the largest-ever monthly loss of his flagship fund in October. The $1 billion Andurand Commodities Fund lost 20.9% last month, taking the fund down more than 12% for the year, according to numbers sent to investors and reviewed by The Wall Street Journal.

The last few weeks have seen not only crude collapse but NatGas explode higher and lots of chatter of a 'behemoth' fund liquidating (buying back Nattie shorts and selling back WTI longs)...

Andurand confirms it was not his fund...

“It was nothing to do with us,” Mr. Andurand told The Wall Street Journal on Wednesday.

“I do not think the move is related to large funds in trouble.”

In addition to forecasting $100 oil in 2018, he also said that prices could hit as high as $300 a barrel in a few years, although that wasn’t his forecast.

Mr. Andurand’s new fund, the Andurand Commodities Fund, has gained every year since its 2013 inception, helped by bullish bets, including buying one day after oil hit a 13-year low in 2016. That year, the fund gained 22.1%. The fund is still up around 100% since its start.

So it appears his strategy is "buy oil"...

Author: Tyler Durden
Posted: November 15, 2018, 4:35 pm

Authored by Jeffrey Snider via Alhambra Investment Partners,

There was more than enough evidence that QE didn’t work fifteen years ago. The Japanese had accumulated these monetary experiments at the dawn of the 21st century. And there was even a time when US and Western central bankers were skeptical. What happened was 2008; a dislocation so big and widespread they had no choice but to embrace the failure for lack of any other options.

Once they did, what was most charitably ambiguous suddenly became genius. When the Japanese did these things, they were suspect; when Western central bankers did, they were awesome. Same planet, different worlds.

Only, the Japanese central bankers kept doing them, too. It’s much harder to hide in Japan than it has been in the United States or Europe. The decimated economic landscape there leaves little open to interpretation. This is not a positive comparison since Japan is merely our forerunner, a look into our future.

To begin with, the central bank is (largely) irrelevant. QE or QQE is nothing more than a series of tricks, smoke and mirrors glossed up to sound impressive and a little scientific (portfolio effects!) In reality, the world which we share with the impoverished (literally) Japanese, unfortunately, magic tricks can’t replace true economic processes. That’s why QE never worked to begin the millennium and it doesn’t now no matter how many additional letters and numbers are added to it.

The Bank of Japan, like Economists in the West, can’t admit it. They just can’t. To do so would mean to confess decades of incompetence and gross dereliction. It is a binary choice; we keep getting these non-answers until someone forces them to stop. They won’t do it voluntarily.

I wrote in April 2016, more than two wasted years ago:

Central banks have proven by their own actions, not their words, that they will only allow “their” recovery which in the end means none. As I have written before, if they were given a choice of maintaining power and control but only leading to more lost decades, or stepping aside and being guaranteed a full and sustainable recovery, they would choose the former every single time. True global economic recovery is purely a political action now; central banks will not restrain themselves no matter how much their schemes backfire and create only more disruption and havoc.

In Japan in 2018, the Bank of Japan forecasts:

Japan’s economy is likely to continue growing at a pace above its potential in fiscal 2018, mainly against the background of highly accommodative financial conditions and the underpinnings through government spending, with overseas economies continuing to grow firmly on the whole.

But instead that country’s Cabinet Office today reports that Japan’s economy isn’t growing at all, regardless of potential. The passage quoted above was prepared by the central bank at the end of October, meaning a full month after Q3 had ended. Japanese GDP in Q3? Minus 0.3%.

This is the second contracting quarter in the last three, meaning two out of the three so far in 2018. On a year-over-year basis, the economy has ground to a halt. It’s the timing of it that should be our global focus.

Japan’s economy peaked in Q3 2017. This had nothing whatsoever to do with monetary policy or even Japan specifically. That was the quarter when the eurodollar system began showing signs of distress. Japan, as Germany, is uniquely susceptible to trade disruptions; which is where turmoil churning within the global reserve currency system hits first.

Japan’s external slowdown predates any trade war concerns (by a lot). Growth in Final Sales of Domestic Product, for example, a GDP component that includes export sales, peaked in Q2 2017. It has been nearly flat over the last year, too.

QQE has been an utter disaster. Economic growth during its more than half decade run has actually been worse than the overall “recovery” as a whole from the 2009 trough.

The BoJ now practically owns companies and financial markets with what to show for it? GDP growth over the last five plus years since it started has been 0.9% per year compared to 1.5% since Q1 2009. Caught up in the mess are the regular Japanese citizens who are being stuck with the short end of the stick. And it’s not even close.

Since QQE, consumer spending growth has disappeared altogether. The opposite was supposed to happen, what with the inflation expectations supposedly attached to so much “money printing.”

This is because Japan’s economic fate has never been tied to the BoJ one way or another. Every single time the Japanese economy, meaning the global economy, begins to take a step forward (reflation) it doesn’t get very far for very long (eurodollar squeezes). The Japanese people, like Italians, Brazilians, or Americans, can sense these changes at the margins in a way that central bankers just aren’t capable (ideology).

It’s a total disaster not because QQE or the first QE in 2001 was the cause(s), rather by keeping the same ideological blindness in place nothing else is ever tried. There is never an honest search for answers. Central bankers can’t even admit there is a problem, even the obvious one for Japan in 2018.

The whole economic system rots for lack of imagination. And what Japan’s plight proves most of all is that it can go on and on far longer than you might otherwise think possible (a recovery has to happen at some point, right? NO.) It’s something out of Keynes; the economy can go without legitimate growth far longer than any peoples can remain rational.

For good measure, Destatis, Germany’s government bureau responsible for producing that country’s GDP estimates, also reports today a negative number for its last quarter (Q3). It is being dismissed as emissions and climate/weather, but Japan’s concurrent weakness shows otherwise. This is a growing global downturn.

This year is proving to be a trainwreck in too many important places. It was supposed to be the arrival of worldwide recovery. Worse, too many arrows are still pointing down for 2019. But you wouldn’t know it from the Bank of Japan, ECB, Federal Reserve, etc. Not until they are forced into some honest assessments for once.

What I wrote in 2016 still applies. There is plausible path back to full and complete recovery. It just has nothing to do with QE’s or even Economics, except the total purge of any thoughts about QE’s as well as to transform Economics back into economics (starting with monetary economics). It is purely political. And this is why populism becomes increasingly radical (in both directions, left and right) as all this economic pain goes unanswered each and every time.

Author: Tyler Durden
Posted: November 15, 2018, 4:15 pm

NFA News Releases

October 30, Chicago—NFA orders New York, NY swap dealer Mizuho Capital Markets LLC to pay a $900,000 fine
Posted: October 31, 2018, 4:59 am

Elite Forex Blog - Market Research & Analysis

Sadly, Man has proven throughout history that given the opportunity, he will find the lowest common denominator.  Sociologically speaking we are in a time of “Peak Freedom” man has never been so free.  But this comes at a cost, and as we will see in this article, a cost so great entire civilizations can rise and fall because of it.  If you give a naughty teenager a million dollars and tell him ‘do whatever you want’ probably he will not build a business empire or cure cancer.  Likewise, supported by the European Union, Malta was given a pack of matches and using simple household chemicals made it into an IED but as powerful as a Nuclear Bomb; which is about to explode in their face.
Malta created a wormhole allowing black criminal elements a ‘shortcut’ to legitimize themselves with an EU Passport; but it was the EU which allowed them to do this, and thus it will be the EU that first faces Malta about this issue.  Before digging deeper let’s go through a little background about Malta this little ‘hole in the sea’ near Italy.  Malta is a culture with ancient roots dating back to Phoenicians.  Throughout history Malta has served as neutral territory for negotiations and even ‘staging grounds’ for the crusades, Knights of Malta (Knights Templar) and other groups.  So, Malta has a history of selling their soul to the highest bidder.  As there are no natural resources on Malta, they rely on tourism and financial services like many islands in similar situations.  But you can only sell so much sun; more than 1 Million Tourists visit Malta each year[1], and their current infrastructure can’t even support that.  The real-estate construction boom (which is fitting for Malta as they have a natural obsession with Cranes) is expanding more than most developed countries, but it still can’t keep up.  There are even internet problems as experienced by companies like Bet Fair who have had to limit the amount of on-shore staff in Malta due to connectivity issues[2].
Malta joined the European Union (EU) in 2004, and for a period of about 10 years promoted Malta as a place to do financial business and gambling; ending in 2013 with the election of Joseph Muscat (note that, this is a Maltese name and not related to the rodent Muskrat[3]).  During this 10-year period Malta was promoted in the Forex community, among others, and saw a boom in retail and institutional Forex operation moving to the island and had barely a single fraud.  Compared to similar jurisdictions like Cyprus especially, Malta was white.
Muscat changed all this with an aggressive Passport selling program that netted Malta substantial profits both in actual fees and in capital flowing to the island.  It was the sort of thing that was common in Cyprus, and one reason why many avoided Cyprus in favor of Malta and other white places.  But what rules were in place, to check the participants in this program, their backgrounds, and other important information?  Or did the Maltese simply take the money and look the other way, which is so easy to do when you have the strong EU behind you.  Malta seems to believe that it can have its cake and eat it too; getting quick money from the black market without the risks and liabilities associated with it.  Unfortunately, the world doesn’t work that way, and Malta is in for a big wake up call.
Prior to his sudden death, Gaddafi began to implement a plan to create and sustain a Gold backed Dinar for black Africa – a real threat to USD and EU global hegemony.  Wikileaks emails have revealed explicitly that this was the reason for the Libya intervention and subsequent toppling and killing of Gaddafi[4].  This story is really an algorithm that has been replayed hundreds of times since World War 2 which is the sole and exclusive reason the US Dollar remains the supreme and only settlement currency for global business.  It is also the reason why countries like the United Kingdom, Germany, Japan, and many others – freely accept US Dollars and do not attempt to start their own competitive versions of the US Dollar.
This more obvious, practical, economic policy motif is not on the surface, but it is real.  As a matter of policy enforcement, the US takes an aggressive stance on terrorist financing on the financial level (if terrorists cannot be financed, they don’t exist.)  This policy was enforced globally well before the Patriot Act and other post 9/11 measures.  Financial tools were even used in the Cold War – ‘spending them to death’.
The US Dollar is backed by bombs, vis a vis the US Military[5].  The alliance between Washington, Wall St. has been very close since World War 2, because after World War 2 USA was the only country that wasn’t bombed into oblivion and was tasked to literally ‘rebuild the world’ which included structuring of a new global monetary system agreed upon at Breton Woods[6].  Although the world has changed much in 60 years, the unipolar power system of global management, using the US Dollar as the funding currency, has not.  Despite rhetoric from socialists, libertarians, and anarchist commentators – emerging markets such as BRICS pose a limited or non-existent threat to this system of global management.
The way that this system survives and has survived for 60 years, is by eliminating any threat to its existence.  There are a few types of threats; the most obvious and pulpable being that of a currency alternative to the US Dollar which is not controlled by the Fed, such as proposed by Gaddafi.  Another threat that is subtler is a means by which unsavory actors like criminals can completely avoid the US Dollar system, such as proposed by some Crypto Currency alt-coins.  Malta has created these means with their no questions asked passport program, and thus has opened the gates of hell into a previously impervious barrier of entry into the EU-US system.  Having an EU passport is nearly just as good as having a US passport not only for travel but for banking reasons.  An example from our Forex business; Russian nationals are subject to several layers of additional checks when opening a new investment account, which can be so complicated they are impossible even for the legitimate Russian investor to complete.  They can ask for notarized documents from previous addresses you lived, which is not possible to collect in Russia.  Or they can ask for multiple forms of ID, which may not be easily accessible.  Russia is considered a ‘red flag’ country and thus additional scrutiny and AML checks are required in most compliance systems.  As they should be – the amount of crime and corruption in Russia is widespread, so much so that it is considered to be endemic (part of the system).  In this example by having the Malta issued EU passport the Russian criminal could completely circumvent AML rules designed stop terrorist financing, money laundering, and other criminal activities.
These topics are not abstract issues for academic discussion they are serious issues that can have devastating effects.  Bloomberg broke the ice on this topic very politely in Bloomberg style:
For critics of Muscat, one powerful symbol of cronyism is Ali Sadr Hasheminejad, head of Pilatus Bank, the institution allegedly in the middle of the suspicious transactions involving the Panamanian shell companies linked to government officials. Sadr is an Iranian national, but when establishing and registering the bank in Malta he used a passport he’d purchased from St. Kitts. While Sadr was enmeshed in controversy in Malta, a parallel investigation into him and his bank culminated in his arrest by U.S. authorities, who charged him this spring with setting up a network of shell companies and bank accounts to hide money being funneled from Venezuela to Iran—transactions that allegedly violated economic sanctions against Iran. Prosecutors also alleged that Sadr established Pilatus Bank using illegal funds. Sadr pleaded not guilty and has been released on bail in the U.S.; his lawyer didn’t respond to requests for comment.
Ali Sadr Hasheminejad is a character which deserves his own article so in order not to get distracted we will just say that he’s been charged in New York with setting up a “Sanctions evasion scheme” to the tune of $115 Million USD – using his bank in Malta as the go between[7] This is unrelated to the passport scheme mentioned earlier, which is why we needed to allow the reader to connect the dots for yourself to see what’s going on here.  A client of Pilatus bank could, in theory (we haven’t seen the client lists yet) could buy an EU passport and as an account holder of Pilatus bank, launder money to any country in the US-EU sphere, which is 90% of the Western world.  What this means is a figure from organized crime for example, could ‘wash’ himself both his money and his identity, through Malta.
This dual fake ID money laundering scheme is the first of its kind in the modern world.  What’s sad is that Malta was previously mostly a white country (meaning not criminal) 95% catholic, with a strong tradition of ‘trading’ as merchants.  Cyprus has been polluted with criminal elements for a long time, but people know it, and many avoid it.  But even in the twisted world of Cyprus black mafia, something like this never existed.  What the Maltese have done is in one-way criminal genius, and in another way extremely stupid.  We can say that ‘studies show crime doesn’t pay’ but that’s not necessary here.  Just look at the political fallout from Malta’s handling of the Pilatus situation (car bombing reporters who won’t shut up).  The Global Perception of Malta has done a complete 180, but the war against Malta is only beginning.  They violated untold and unagreed rules of the game, by exploiting the fairness of the EU system for their own profit and passing the liability to their EU owners. 
(Guys, a country is a Currency, you gave up sovereignty in 2004 Brussels is not going to allow this.)
Furthermore, Malta has a convoluted understanding of law, but it is with reason.  Malta doesn’t have a unique legal system and history of precedent as exists in Great Britain, or Switzerland.  They have a ‘mixed system’ which is a little of this and little of that[8], and when you mix it together it becomes a big pile of crap.  It’s like keeping 3 sets of laws and using which one is convenient to you at the time.  Nice try, but the world doesn’t work like that, especially when you have allowed criminals to violate US sanctions.
We can assume that, Iranians avoiding sanctions are just part of the VIP client list at Pilatus bank.  Since 2013 the number of wealthy Russians in Malta has exploded, as they are preferring the passport program and ease of banking in Malta’s new program over their previous choice of Cyprus.  Russia is a growing economy and part of early stage capitalism is the growth of quasi illegal robber baron class as was in the United States during the late 19th century.  It’s unfair to call them ‘Mafia’ because they aren’t really ‘criminals’ any more than John Rockefeller was a criminal, but for the purposes of this article we can add “Russian Mafia” to the list.  And certainly many Russians who have bought passports are legitimate businessmen, but consider this.  US imposed sanctions on Russia over the 2014 Ukrainian dispute, and by having an EU passport from Malta, it circumvents those sanctions.
Those who forked out for Maltese and - by default - EU citizenship last year included Arkady Volozh, the founder of Yandex, a Russian Uber-type firm, and his entire family.  They also included: Alexey Marey, the former CEO of Alfa Bank Russia, the country's largest private lender; Alexey De-Monderik, a co-founder of Russian cyber security firm Kaspersky Lab; and Alexander Mechatin, the CEO of Beluga Group, Russia's largest private spirits company.  The newly-minted Maltese nationals emerged in a list of more than 2,000 names published in the country's legal gazette at the end of last year.  The gazette does not say who bought passports in 2016 and who was naturalised for other reasons.  But the names of wealthy foreign nationals stand out as the most likely to have paid the €1.1 million in fees, Maltese bond, and Maltese real estate investments that it costs to get nationality.  The Russian roll-call for 2016 went on to name: Dmitry Semenikhin (a media millionaire); Alexander Rubanov (energy firm executive); Roman Trushev (oil and gas); Andrey Gomon (transport magnate); Alexey Kirienko (investment broker); Dmitry Lipyavko (petroleum products tycoon); Andrei Melnikov (cobalt and uranium magnate); and Anatoly Loginov (owner of an online payment systems firm).  It also named Russian real estate developers, retailers, and agricultural land owners.  It came out after the previous gazette showed that 40 percent of new passport buyers in 2015 were also Russians.  Owning a Maltese passport gives people the right to visa-free travel to 160 countries, including the US, and to live and move around their money anywhere in the EU.  The surge in Russian applications comes after the EU and US imposed economic sanctions and visa-bans and asset-freezes on Russia over its invasion of Ukraine in 2014.  It also comes amid US plans to create a new blacklist on 29 January 2018 of cronies of Russian president Vladimir Putin over his meddling in the 2016 US election.
Right now, the Department of Justice (DOJ) is embroiled in a scandal targeted at Trump using Russia as a scapegoat.  Forces inside the US Government, for the first time, are staging what can only be referred to (and has been) as a cold coup on the legitimately elected President.  These powerful deep-state actors are in agencies like FEMA, CIA, FBI, IRS, and others.  These are powerful agencies.  Now is not a good time to be hiding or laundering money for Russians! 
And we’re only getting started!  Malta recently adopted the world’s first Crypto Currency legislation, right at a time when the public is learning thatbillions of dollars have been laundered through Bitcoin, and that hot money from Asia was a leading cause to the rapid rise of Bitcoin.  The point is that Crypto Currency is now the leading solution for money laundering.
So why are they being so flagrant?  Are they stupid, bold, or a little of both?
Non-Maltese foreigners in the island have reported that the regulators do not understand the underlying business.  There are other anecdotal accounts, such as from a tourist:
We were staying in a hotel that had a kitchen and living room it was like a hybrid half hotel half apartment, there was daily cleaning service, but we cooked our meals on the stove.  So early in the week we bought salt, oil, spices, and other basic kitchen elements.  Near the end of our stay, near the last day, the maid approached me and asked if she could have the salt.  It was almost empty.  It cost about $0.25 cents.  To which I said, “But we might use it we are still here for another day, but I will leave it here for you, ok?”  To which the maid replied, “But the other maid has a shift tomorrow and she will get it.”  Over a pinch of salt! 
Anyone who has been to Malta can attest to their peculiar behavior.  If you want to close a corporation, you have to appoint a special liquidator (similar to a bankruptcy judge) who must wear a special hat and sit on a special ‘throne’ in the town square, where he must by voice ask if there are any company debts.  These outdated traditions are more than antiquated, they are a problem if you are a serious professional company that wants to do business in Malta.
Malta is rated 84 out of 100 by the World Bank ‘ease of doing business[9]’ What it takes 1 man to do in New Zealand, it takes 8 men in Malta.  Must be all the heavy lifting from those big stones.
This can work for you because it protects your empire from new competition, but sadly, they are using this ‘bureaucratic fog’ for aiding and abetting international criminals.
Let’s take a look at Iran’s currency 10 year chart:



















Here’s why we believe Malta is about to be pummeled into submission. 
  1. Malta is providing a way for those on the OFAC list to avoid / circumvent sanctions
  2. By providing an OFAC loophole, Malta is as a state, aiding and abetting criminals (who are criminals according to the United States)
  3. As a side business, it is easy for these participants to launder money directly (for themselves) or for their criminal network friends.  It is possible, and likely, that copy cats of Pilatus have setup laundry businesses using similar and less obvious loopholes.
  4. On the regulated front, Malta is providing a backdoor to the European Union (EU) with light regulation.  This isn’t necessarily, by itself, a bad thing – but combined with the other more serious problems, it becomes a matter of discussion.
  5. Malta’s financial system can survive Pilatus bank and Ali Sadr trial.  But what’s next?  What next scandal lies in the shadows, another fraud to be unraveled?  Could it involve a high-profile Russian diplomat on DOJ’s black list?  If Pilatus is isolated, Malta can survive.  As soon as the next mole pops up in the garden, it will be impossible for Malta to whack them all.
Some material facts:
  • Not only is the case about Ali Sadr Hasheminejad disturbing by itself, his bank, which was financed with his own illegal gains, was used to open a bank.  That bank, among other things, was a laundry for Iranian capital.  The bank was approved by MFSA, Malta’s regulator, who recently asked the ECB to rescind its bank license[10].
  • The creator of this passport program, Joseph Muscat, is accused of taking bribes from wealthy criminals from banned/blocked places due to his name appearing in the Panama Papers[11].  We need to note here that we have not seen the contents of these documents, so there is no smoking gun evidence.  But the timing is otherwise too coincidental for a forensic auditor.
The most significant financial whistleblower in US history, and perhaps in all history, said that it was the CIA behind the Panama Papers.  While this story has been featured on CNBC, the analysis of the implications has died on the vine:
Bradley Birkenfeld is the most significant financial whistleblower of all time, so you might think he'd be cheering on the disclosures in the new Panama Papers leaks. But today, Birkenfeld is raising questions about the source of the information that is shaking political regimes around the world.
Birkenfeld, an American citizen, was a banker working at UBS in Switzerland when he approached the U.S. government with information on massive amounts of tax evasion by Americans with secret accounts in Switzerland. By the end of his whistleblowing career, Birkenfeld had served more than two years in a U.S. federal prison, been awarded $104 million by the IRS for his information and shattered the foundations of more than a century of Swiss banking secrecy.
"The CIA I'm sure is behind this, in my opinion," Birkenfeld said.
Let’s run with that for the moment, especially since the CIA has such a deep history in Central and South America.  How is Malta connected to NATO, Ukraine, and the periphery of the EU?  Does Malta represent the opposite of what’s happening in Britain, Catalonia, and other potential breakaway states?  Is Malta leading the way to corporate national Fascism? Is this pleasing, or worrisome to their friends in Washington?  These are the types of questions we need to answer to really understand how this small country plays a big role in regional politics, with their bold cash for passports program.
What are the interests here, in the proxy jurisdictions like Malta?  Libya for one, not only due to Malta’s close presence to Africa, but both Libya and Malta gained independence within 13 years of each other[12].  Certainly, there was a lot of oil business run through Malta, for reasons of convenience if anything. 
Malta is not, the vortex of criminal activity in the Mediterranean, that is Cyprus.  In Cyprus, you can find drug trafficking, human trafficking, gambling, money laundering, and more – all in a country that can lose power for days on end.  Cyprus is the real black hole in the Sea.  There is no comparison in size, the criminal industry in Cyprus is 100x greater than Malta could ever grow to.  But 2 wrongs don’t make a right and being another criminal island in the sea doesn’t make the case here against Malta any less disturbing.  But there are some big differences we need to understand, such as:
  1. For Malta, this is a recent phenomenon, that started around 2013. 
  2. Cyprus isn’t flagrantly taunting violating US rules.  Russian Mafia has been in Cyprus for decades, but so are many other interests as well.  Malta’s passport program and the Panama Papers leaks made Malta stick out as a world leader in EU passport selling to those on a black list OFAC or other.
  3. There is Mafia in Italy, but Mafia doesn’t run the government (anymore).  What Muscat has done is created his own Maltese Mafia.
It seems like Malta has really lost their soul.  You know there’s a catch with America as the land of milk and honey.  It is possible to come to America with nothing and become a billionaire.  But there’s a catch – you must give up your soul.  Has Malta tried to Americanize themselves? 
Finally, Malta is now the number one jurisdiction in terms of Crypto volume (but not OTC, where Russia leads)[13].  This is really the reason for this in-depth analysis of the place.  If Malta is going to blow up, and we’ve outlined reasons well in this article – is this really a place you want to keep your Crypto?  As we’ve learned from past experiences, when dominoes fall – you don’t want to be one in the line (even if your exchange is the best one). 
Malta as a jurisdiction has become shaky.  If Pilatus can launder money using a bank which was approved by MFSA, how easy will it be to launder Crypto through exchanges when MFSA has a clear lack of understanding for financial markets, and when Crypto is by its nature completely opaque.
If Malta cannot provide protections from criminals like Ali Sadr Hasheminejad, then what remains for Crypto exchanges which are not only mostly unregulated – they are mostly opaque and anonymous.
The conclusion is that we expect massive capital outflows from Malta.  Some of that capital will flow to home – but others will look for alternative jurisdictions, like Bahamas. 
__________________________________________________________________________________
Crediblock is a Bahamas Blockchain and FinTech consultancy that can assist in your Bahamas Blockchain enterprise setup such as Crypto Exchange, Hedge Fund, Insurance Company, Brokerage, or Bank[i].

Important Reference Articles to read on this topic

 
Posted: November 5, 2018, 1:07 am
Bloc10 @ Atlanta, GA 10/27/2018 — Bloc10 today has launched Total Cryptos University offering multiple courses about Crypto Currency, Blockchain Technology, and Day Trading Crypto.  “We launched this program because there is a huge education factor in Crypto.” says Joseph Gelet, Chief Strategy Officer of Bloc10.  “Like with anything new, there is a lot to learn. Not everyone spent their last 10 years on Wall St. or in Finance School.  So we launched an online university.”
Courses come complete with actual products that can be used like trading signals, alerts, algorithmic trading systems ‘robots’ – books, software, and more.  The plan is to offer members new strategies each week and each month.  “We want to provide our members with the most value to maximize their trading potential.  So we are going to launch new products every week.” he says.
The course uses the practical ‘hands on’ learning approach which means that students are provided products to use and trade with, rather than a ‘textbook method’ used in Universities.  Practically, there aren’t Universities offering Blockchain or Crypto classes yet – but that will certainly change in the future.  For now, we have Total Cryptos University.  
Some snapshots of what you’ll learn inside the course:

Predator Arbitrage trading dashboard

Predator arbitrage dashboard

Traditional Macro Economic Analysis

Arbitrage vs. Traditional Trading

Learn more @ www.totalcryptosuniversity.com

Posted: October 27, 2018, 8:18 pm
The US legal system has a message for those who not only feel like manipulating the currency market, but have picked a delightfully appropriate name for their FX rigging operation: just do it.
Moments ago, the three former British currency traders who formed the core of the infamous currency rigging "Cartel", were found not guilty of using an online chatroom to fix prices in the $5.1 trillion-a-day foreign exchange market.
Chris Ashton, Rohan Ramchandani and Richard Usher
According to Bloomberg, a New York federal jury rejected the government’s claim that Richard Usher, Rohan Ramchandani and Christopher Ashton, better known as "The Cartel," rigged the market from 2007 to 2013 by coordinating trades and manipulating prices on the spot exchange rate for euros and U.S. dollars.
They wept in relief as the verdict was handed down in Manhattan federal court Friday after the jury deliberated for less than a day.
Usher, a former JPMorgan foreign-exchange trader, Ramchandani, former trader at Citigroup, and Ashton, the ex-head of spot FX trading at Barclays, were charged in January 2017. The case followed an investigation into conduct that was exposed by Bloomberg in 2013.
The three men faced as long as 10 years in prison had they been convicted, but since their conviction would make any future FX rigging that much more problematic, or simply because the government was incompetent and was unable to prove a slam dunk case, they are now free.
The acquittal is that much more bizarre because previously four banks, JPMorgan, Citigroup, Royal Bank of Scotland and Barclays all pleaded guilty to manipulating currency markets in 2015 and agreed to pay $2.5 billion in fines. At the time, UBS - which ratted everyone else out - received immunity from antitrust charges for being the first institution to report misconduct in the FX market, although it pleaded guilty to a related fraud and paid a $203 million penalty. Overall, more than a dozen financial institutions have paid about $11.8 billion in fines and penalties globally, with another $2.3 billion spent to compensate customers and investors.
As Bloomberg notes, The three men, who were based in London, waived extradition to New York to fight the single charge of conspiracy to restrain trade. None of the defendants took the stand to testify.
So how did they walk free when their own employers admitted to currency manipulation?
Matt Gardiner, a former currency trader at Barclays and UBS Group AG who helped organize the group, testified for the government in exchange for an agreement that he won’t be prosecuted. Gardiner said the group agreed on trading strategies and would congratulate each other when their bets paid off. He also testified that he had no idea the group was doing anything illegal until he began negotiating with U.S. prosecutors. In closing arguments, lawyers for the defendants urged jurors to reject his testimony.
Jurors heard testimony that the men spent almost all of their work days in the chatroom, where they exchanged market color, inside jokes and personal information.
Prosecutors showed transcripts of some of the chats, recorded phone calls and trading records which showed coordination among the group. The defense said the chats reflected innocent banter and that the traders sought to profit off one another. We profiled some of these exchanges previously in "Accused "FX Cartel" Members Joined Forces After Trying To "End" Each Other."
Speaking before the acquittal, Mayra Rodriguez Valladares, a former foreign-exchange analyst for the New York Fed, said that the verdict would "send a general signal to the market that the FX code is not going to be seen as having any teeth,” referring to the FX Global Code, a set of guidelines aimed at raising standards after the rigging scandal. "They’ll go back to same old, same old,” of the acquittal in an interview before the verdict. “It’s business as usual, everybody does it."
Especially the Fed, her former employer.
Javier Paz, founder of research and advisory firm Forex Datasource told Bloomberg before the verdict that the investigation has signaled to traders that “illegal actions carry a high risk of betrayal.” Whether the case will have a longer term impact remains to be seen.
“There’s definitely more awareness by clients of what could go wrong in trades, there is much more employer oversight, and, as we saw on this case, there’s government oversight and appetite to prosecute wrongdoers,” Paz said.
However, Pax was "under no illusion that banks and bankers will stop misbehaving long term. The kinds of lessons being experienced today have a way of being forgotten in a few years."
They certainly won't stop misbehaving if after years of documented manipulation, a jury of their peers finds them innocent.
Game On!
Posted: October 26, 2018, 7:18 pm
As regulators' campaign to kill off Libor continues unabated, helping to squeeze the 3 month dollar Libor rate to its highest level since the financial crisis, federal prosecutors in New York have won convictions on charges of wire fraud and conspiracy against two former Deutsche Bank traders for rigging the benchmark rate that underpins the value of nearly $400 trillion in financial instruments denominated in a range of currencies.
Matthew Connolly, who supervised the bank's money-market derivatives desk in New York, and Gavin Black, who traded derivatives in London, were convicted on the basis of testimony from three junior traders (two of whom pleaded guilty, and a third signed an agreement to avoid prosecution in exchange for his testimony), who said Connolly and Black directed them to aid in the altering of the bank's Libor submissions to benefit the desk's trading positions. The illicit behavior for which the two men were convicted took place between 2004 and 2011, according to Bloomberg.
The convictions represent a major win for federal prosecutors, but they can't celebrate just yet; last summer, convictions won by the DOJ against two London-based Rabobank traders were reversed on appeal, dealing an embarrassing blow to prosecutors in New York and the DOJ. All told, global regulators have secured $9 billion in fines from a collection of some of the world's largest investment banks, including DB and Barclays.
But for the duration of the trial, it appeared that Connolly and Black would also beat the rap, as the judge treated the fumbling prosecutors with open hostility, particularly after one of the government's key witnesses was called out by the defense in open court for lying about his bonus in a federal plea agreement.
The defense had some success in portraying the three witnesses as liars who molded their stories to avoid prosecution.
The three former traders told jurors that, at the urging of the defendants, they altered the rate or pressured others to submit false data to benefit trading positions held by Connolly and Black. Parietti said Connolly ordered him to disclose positions to the submitters in London because Connolly believed his team was being undermined by others at the bank who were rigging the rate in their favor.
The defense argued that there were no clear guidelines on how banks should submit their rates for the calculation of Libor until at least 2008, and that they weren’t expressly forbidden from taking derivative trading positions into account when making the submission until 2013.
During cross-examination, attorneys for Connolly and Black attempted to portray the government’s witnesses as liars who initially defended their practices to investigators and changed their stories only in exchange for a deal with prosecutors.
All told, at least 10 former Deutsche Bank traders have been charged with rigging interest-rate benchmarks, including Libor and Euribor, in the US and UK. Christian Bittar, a former DB prop trader who was effectively directed by the bank to influence rates (and who was pushed out after DB clawed back some of his bonus and turned him into a convenient scapegoat), was sentenced to five years and four months alongside Barclays trader Philippe Moryoussef, who received 8 years but was sentenced in absentia because he chose to stay in France. 
The challenge for the prosecution will now shift to ensuring that these convictions stick. But while prosecutors will no doubt hold up the scalps of Simon and Connolly as a warning to others who might dare to impinge upon the sacred integrity of markets, the fact remains that not a single senior executive was charged in the scandal (though it contributed to the downfall of former Barclays CEO Bob Diamond). In fact, regulators even stepped up to protect DB CEO Anshu Jain despite his bank's flagrantly illegal activity, after Bafin, the German securities regulator, declared in 2015 that Jain had no knowledge of the illicit trading despite a preponderance of evidence to the contrary.
Posted: October 17, 2018, 11:50 pm
TOKYO (Reuters) - If European Central Bank chief Mario Draghi appears slightly more downbeat at his regular news conference than before, it could foreshadow a possible move by to the bank to trim its monetary policy stimulus.
FILE PHOTO - European Central Bank (ECB) President Mario Draghi holds a news conference at the ECB headquarters in Frankfurt, Germany, March 7, 2018. REUTERS/Ralph Orlowski/File Photo
That’s the conclusion of two Japanese researchers who’ve used artificial intelligence software to analyze split-second changes in Draghi’s facial expressions at his post-policy meeting press conferences.
The findings follow a similar analysis by the same researchers of Draghi’s Japanese counterpart, Haruhiko Kuroda, last year, which claimed to have identified a correlation between patterns in his facial expressions and subsequent policy changes.
Yoshiyuki Suimon and Daichi Isami, the paper’s authors, think that subtle changes in Draghi’s facial expressions could reflect a sense of frustration Draghi might have been feeling before making policy adjustments.
Their study covered Draghi’s news conference from June 2016 to December 2017 and found signs of “sadness” preceding two recent major policy changes — when the central bank announced a dovish tapering in December 2016 and another quantitative easing cutback in October last year.
FILE PHOTO - European Central Bank (ECB) President Mario Draghi attends the 27th European Banking Congress at the Old Opera house in Frankfurt, Germany November 17, 2017. REUTERS/Ralph Orlowski/File Photo
However, Suimon noted changes in Draghi’s emotion scores were smaller than Bank of Japan Governor Kuroda’s, pointing to the European central banker’s greater degree of inscrutability.
“This suggests that Draghi is maintaining more control on his expressions, whether he is doing so consciously or not,” said Suimon, who is the lead author of the study.
In both the Kuroda and Draghi studies, screenshots of the policymakers’ faces were captured every half-second from video footage.
Suimon and Isami analyzed those images with a program developed by Microsoft called “Emotion API” that uses a visual recognition algorithm to break down human emotions into eight categories: happiness, sadness, surprise, anger, fear, contempt, disgust and neutral.
(For a graphic on Draghi's facial expressions click reut.rs/2HPNq0F)
Reuters Graphic
They also examined the facial expression of ECB Vice President Vitor Constancio, who sits next to Draghi at his news conferences. Constancio showed more joy even when Draghi’s joy score dropped.
Slideshow (4 Images)
Kiyoshi Izumi, professor of the University of Tokyo, who specializes in financial data mining and artificial market simulation, said studying simultaneous facial expressions from a team of policymakers, such as Draghi and Constancio, provided stronger sample sizes.
“Some people — President Draghi, in this case – are better at poker facing than Governor Kuroda. So it’s interesting and worth analyzing the news conference as a whole,” Izumi said.
Suimon and Isami presented their latest findings to a meeting of the Japanese Society for Artificial Intelligence (JSAI) on Tuesday. The pair studied together at the University of Tokyo’s Graduate School of Frontier Sciences and did the research in their personal capacity.
Suimon said they have looked into Kuroda’s recent news conferences, and have not found any facial data to suggest an imminent major policy change. The BOJ kept settings unchanged at its last policy meeting.
In October, Kuroda laughed at the notion that artificial intelligence could analyze his face to predict changes in monetary policy, noting such studies would only prompt those being scrutinized to manage their facial expressions more carefully.
Posted: October 16, 2018, 2:33 am
Oil is still the world’s leading energy source, with growing demand, a fluctuating pricing system, and much of its production in volatile regions. The oil market’s value is larger than the world’s valuable raw metal markets combined, with an annual production valued at US$1.7 trillion. A flourishing black market is no surprise, with about US$133 billion worth of fuels stolen or adulterated every year. These practices fund dangerous non-state actors such as the Islamic State, Mexican drug cartels, Italian Mafia, Eastern European criminal groups, Libyan militias, Nigerian rebels and more – and are a major global security concern.
The top five countries accused of oil trafficking – Nigeria, Mexico, Iraq, Russia, and Indonesia – are also producersIt is estimated that Nigeria alone loses US$1.5 billion a month due to pipeline tapping, illegal production and other sophisticated schemes. In Southeast Asia, about 3 percent of the fuel consumed is sourced from the black market, estimated to be worth up to US$10 billion a year. In Mexico, drug cartels launder drug revenues through the oil trade
Other countries are not immune. Turkey is not an oil producer yet serves as a major transit route for hydrocarbons flowing to Europe from OPEC countries like Iraq and Iran. As an energy hub, Turkey is strategically situated for the illegal trade and lost an estimated US$5 billion in tax revenue in 2017. An uptick in smuggling oil and other refined products began 2014, when ISIS took control of major Syrian and Iraqi oil fields.
As with most commodities, the volume of oil smuggling is primarily linked to fluctuating prices. With climbing oil prices, illicit trade is expected to increase. The European Union is a prime example on how price disparities of fuel within its own member state countries tend to incentivize illegal trade producing counterintuitive routes. Lower oil prices in Eastern Europe have created maritime smuggling routes to the United Kingdom and Ireland. Ireland estimates it loses up to $200 million annually with fuel fraud, while up to 20 percent of fuel sold in regular gas stations in Greece is illegal.
The legal complexities and ambiguities of the global oil and gas trade often create an opening for illegal activity.
In some cases, subnational actors openly export oil despite official prohibition by central governments. The Kurdistan Regional Government in Iraq maintains it is their region’s constitutional right to export oil independently, in defiance of the central government. With Baghdad withholding the region’s 17 percent of budget share, the regional government sought economic independence through hydrocarbons and found a degree of international sympathy, given its role in combatting ISIS and hosting 1.9 million refugees and internally displaced people. The unrefined product was sent via pipeline through Turkey’s Ceyhan port, loaded by various Greek shipping companies on tankers, then stored in Malta or Israel until buyers were found. Shifting routes of Kurdish oil tankers can be observed on sites like tankertrackers.com.
Authorities who benefit from the trade often stymie efforts to combat illegal trafficking, as seen in countries like Iraq or North Korea, with terrible consequences for citizens. Conflict and illicit trading near the Niger River Delta reduced overall foreign direct investment in recent decades.
With 90 percent of the world’s goods, 30 percent of which are total hydrocarbons, traded by sea, much of the illegal fuel trade is conducted on water. Two thirds of global daily oil exports are transported by sea, reports the UN Conference on Trade and Development, and a staggering 64 percent of international waters are areas beyond any national jurisdiction. Non-state actors offshore West Africa, Bangladesh or Indonesia take advantage of loopholes created by international law and the law of the sea. Transfer of illegal fuel is often done ship to ship on neutral waters – with one ship commercially legal, recognized as carrying legitimate imports at the final port of destination. Thus, illegal crude from countries such as Libya or Syria finds its way to EU markets. Recently Russian ships have been found involved in smuggling oil products to North Korea through ship to ship transfers.
Armed theft and piracy also occur. Hijackings off the coast of Somalia resumed in 2017, the first since 2012, after the international community reduced enforcement. Beyond jurisdictional issues, many governments are overwhelmed by other maritime security threats and cannot prioritize the illegal trade. In fact, fuel traders have reported that the problem is so pervasive that many companies calculate in advance for losses up to 0.4 percent of any ordered cargo volumes.
The industry runs on high risk tolerance.
Transparency International estimates that over the next 20 years, around 90 percent of oil and gas production will come from developing countries. The relatively low average salaries of state employees relative to the private sector in developing countries encourage the temptation to look for other income sources.
Consider Mozambique, where immense offshore natural gas reserves have been discovered. Emerging from decades of civil war, the country has a diverse wasta system – an Arabic term for bribing and asking for favours – along with strong political allegiances and state structures that struggle to withstand internal and external pressures. Estimates suggest that 54 percent of all cargo movements in the capital city, Maputo, involve bribes, and Mozambique risks following the path of Nigeria, a country in need of socioeconomic development despite vast oil and gas reserves under development since 1958. The country is reported to have already lost around US$400 billion since its independence in 1960 due to theft or mismanagement in its oil sector.
The Organization of Economic Co-operation and Development suggests that the impacts of the illegal oil trade go underestimated, and the affected countries suffer from the deteriorating rule of law, loss of biodiversity, pollution, degradation of critical farmland, increasing health problems and armed conflicts. Other opportunity costs include increased financial risk premiums for investors with billions of dollars lost annually due to illegal bunkering, pipeline tapping, ship-to-ship transfers, armed theft, adulteration of fuel and bribery. Illicit trade allows authoritarian states to maintain revenue flows for years despite international sanctions designed to weaken their rule. In the 11th year of UN oil sanctions, Iraq’s dictator Saddam Hussein had managed to become one of the world’s richest men, with an estimated US$3 billion in wealth
Some governments condone the illicit trade. An intertwining of regime structures and corruption – often supported by governments and corporations – is a major stumbling block for the international community’s attempts to contain illegal trading. So far, governmental and industry efforts to halt the practice have been ineffective – and it could be that the illegal oil trade offers enough benefits to consumers, producers and government officials to disincentivize investigation. Some officials suggest that condoning trade in illicit oil and petroleum products helps keep regional and local security intact.
The first global conference on fuel theft, held in Geneva in April, may be a watershed moment. The conference aimed at encouraging discourse among stakeholders within the hydrocarbons industry on how to tackle the scale of this global crime and was based on the work of Ian Ralby, I.R. Consilium and the Atlantic Council’s Global Energy Center, which produced Downstream Oil Theft: Global Modalities, Trends, and Remedies, the most extensive examination of illicit downstream hydrocarbons activity published to date.
Courtesy of: Visual Capitalist
Similar challenges confront the rapidly growing liquefied natural gas market. Strong international cooperation is required, or detrimental effects for global security, the environment and economic prosperity will continue. Unless monitored and addressed by robust policy and regulation, the illegal oil activities will remain a key funding source for terrorism, organized crime, authoritarian states and violent non-state actors.

Posted: October 14, 2018, 3:54 pm
Finance professor John Griffin, along with his doctoral student companion, Amin Shams, were the two academics that drew market-moving conclusions about bitcoin last year, while the digital currency was trading around $20,000. After sifting through 2 terabytes of trading data, they alleged that bitcoin was being manipulated by someone using the cryptocurrency Tether to purchase it. Tether remains a relatively little-known crypto, which is pegged to one US dollar. Part of its appeal is that it can "stand in" for dollars when necessary, according to Bloomberg.
Griffin and Shams authored a paper in June, with the results of their findings ultimately catalyzing many digital assets to move lower, despite the fact that the CEO of Tether publicly denied that its currency was used to prop up bitcoin.
Griffin works at the University of Texas at Austin, and has become quite an unpopular figure on Wall Street for similar work he has done in the past on ratings companies, the VIX and investment banks. In most of his findings, he claims that these well-known financial instruments and players are, in one way or another, rigged. And the professor seems to enjoy exposing precisely that: rigged, manipulated markets and shady players.
"I not only want to understand the world, but make it better," he told Bloomberg.
Griffin's work has become popular reading within the DOJ and the Commodity Futures Trading Commission, according to Bloomberg. These regulators – many of them low on resources, time and staff - welcome any additional help they can get (the SEC’s budget has forced it into a hiring freeze and the CFTC budget was cut by Congress in March of this year).
John Reed Stark, a former attorney in the SEC’s enforcement division, stated: “It’s incredibly helpful to have an expert of Griffin’s caliber."
After spending the beginning of his tenure as a professor tackling little-known and inconsequential parts of the market, he started to feel the need to take on bigger tasks. In fact, he claims that part of the Bible spoke to him, when he read a passage that motivated him. It stated “Have nothing to do with the fruitless deeds of darkness, but rather expose them.”
His targets – like the VIX index, owned by CBOE Global Markets - say that he misreads data. In response to work that he did on the VIX, CBOE stated his “...academic paper’s analysis and conclusions are based upon a fundamental misunderstanding about how VIX derivatives are traded and settled.”
In 2017, Griffin's work revealed that one or more market participants had been trading S&P 500 options in a way to artificially boost or depress the VIX, which would then have an impact on VIX futures. They argued that the volume of S&P 500 options would spike suspiciously at times, but only in the contracts that were used to help price the VIX. He claimed these trades simply didn’t make sense unless somebody was trying to manipulate the VIX.
And he’s not buying the explanation given to him by the CBOE: “There is no doubt we understand how the market works,” he said.
As a result, the CBOE has been sued many times over for this supposed manipulation. Meanwhile, riffin says he’s not going to work with any individual plaintiffs, but he does not rule out the possibility that he may work as a consultant in the future – if he can get paid.
Every time he publishes a new paper, he gets more attention. His paper on the alleged bitcoin manipulation has been downloaded more than 20,000 times and was cited by the SEC when the regulator rejected a bitcoin ETF that would have made it easier for retail investors to trade the crypto.
And as he continues to expose one fraud after another, Griffin - unlike Goldman - is truly doing God's work. 
Posted: October 14, 2018, 12:55 am
From Bloomberg:

Good Friday claims a sacred spot on the Maltese calendar, and this year the holiday was casting its reliable spell. In the late afternoon, hundreds of people streamed from Baroque cathedrals outside the capital city of Valletta, forming slow parades through steep and narrow streets. Men in biblical robes lugged crosses, children clutched bright flowers, and small brass bands marched behind with raised trumpets and inflated cheeks. A breeze wrinkled the Mediterranean, and the sun slipped to a flattering angle, encasing all that charm in amber.

At the same time, the nation’s top-rated prime-time television show was wrapping up a special daytime broadcast: an annual telethon to raise money for children receiving cancer treatments abroad. In the bottom-left corner of the screen, a digital counter tallied the donations. When the number finally hit €1.26 million ($1.46 million), the studio audience began to stir, eager to applaud the fundraising record.

That’s when Prime Minister Joseph Muscat called into the telethon’s phone bank. He, too, seemed in a celebratory mood. The day before, the country had announced that it had registered a €182 million surplus for 2017, its second straight year in the black after decades of deficits. Patched through to the telethon’s host, Muscat pledged €5 million to the cancer charity on behalf of the government, nearly quadrupling the previous telethon record in an instant. The audience erupted. Some of the operators on the dais behind the stage removed their headsets and laid them on the table, as if to declare victory.

But these days in Malta, feel-good stories never seem to last. When Muscat hinted that the donated money would come from a fund fed by Malta’s Individual Investor Programme—a government initiative that sells Maltese passports to foreigners for €650,000 (less for additional family members), plus a €150,000 investment in government bonds—Good Friday took a turn.


Prime Minister Joseph Muscat and his wife, Michelle.PHOTOGRAPHER: DANIEL LEAL-OLIVAS/WPA POOL/GETTY IMAGES
An opposition Parliament member wrote on Facebook that, as a cancer survivor, he was disgusted by the possibility that the patients’ care was being financed by money from “criminals and the corrupt.” Another suggested Malta was trying to clean its dirty money by funneling it through a good cause. “It’s [like] thinking that prostitution is OK once part of the proceeds are donated by the pimp to charity,” Jason Azzopardi, a Parliament member, complained on Facebook.

The story of how Malta got to this point—where a holiday donation to a children’s charity can spark outrage and lament—starts brightly enough. A tiny country carves a small but lucrative niche in the global economy. Money flows in, thousands of jobs are created, and the government intensifies the strategy, opening the country to more partners and funding sources. Then comes the twist: Allegations of money laundering, political skulduggery, smuggling, organized crime, and even a murder.

Multiple investigations—by local magistrates, American prosecutors, and European politicians and banking regulators—have been rattling Malta’s financial and political networks for more than a year. Some of the most powerful countries in the world have suggested that a nation of about 450,000 people might pose a serious threat to global efforts to track money laundering, enforce economic sanctions, and maintain fair transnational standards.

A 15-month inquiry into one of the most contentious of the allegations—one suggesting that Muscat’s wife was directly involved in setting up a shell company for money laundering—wrapped up in late July without uncovering evidence that would justify criminal charges. “One hundred threads of suspicion don’t stitch together a single strand of proof,” the investigating magistrate concluded.

The story isn’t over yet, because some of those threads still dangle, and critics of the government both inside and outside Malta remain convinced that they tie into other scandals, other crimes. The government continues to try to nurse its battered reputation back to health, and how it all turns out will likely depend on how the Maltese ultimately answer the question lingering over their country: To supercharge its financial-services sector, did the smallest country in the European Union sell its soul?

Taking a sunset dip in Sliema Harbor, near Manoel Island.
Taking a sunset dip in Sliema Harbor, near Manoel Island.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
South of Sicily, east of Tunisia, and north of Libya, Malta’s three tiny islands have been eyed as well-placed steppingstones by the Phoenicians, Greeks, Romans, Byzantines, Arabs, Normans, French, and British. All coveted Malta as a staging ground, which makes its history a swashbuckling saga of raids, sieges, bombings, and rotating occupations. When the last British military base finally left in 1979, it took with it the country’s main economic engine. Malta turned to tourism, doing its best to sell ancient ruins, fortress walls, sloping medieval streets, and sheer limestone cliffs. The country eventually discovered, as most sunbaked islands do, that while it’s possible to get by on atmospherics, it’s hard to do much more.

In the early 1990s, Malta’s two major political parties argued over whether to take a shot at EU membership—generally speaking, the Labour Party didn’t like the idea and the Nationalist Party did. By the mid-’90s, with the Nationalists in power, the country began to prepare its application to join the bloc.

To convince the rest of Europe that it could be a trusted partner, Malta began instituting a series of financial and regulatory reforms. In the process, the country was reinventing itself as a new sort of steppingstone: a transit hub not for ships or soldiers but for money, in an environment of regulatory legitimacy, transparency, and stability. Malta discovered that the residue from centuries of turmoil (an ingrained adaptability, strong links to disparate cultures, the English language) was an asset, as was the country’s size, which allowed it to nimbly sidestep bureaucratic delays and cater to rapidly evolving industries that valued good computer connections more than natural resources. The traditional downsides of island economies—the high costs of transporting supplies in and out, for one—didn’t apply to the financial-services industry.

By the time the country’s membership in the EU was formally approved in 2004, Malta had staked out its place within Europe’s economy, and the nation’s attractive tax schemes—effective rates as low as 5 percent for foreign-owned companies, vs. an average of 22 percent for other European countries—helped attract investment funds, banks, and financial-services firms from all over the world. The steady influx of new business helped the local economy avoid a significant downturn during the 2008 financial crisis. Shortly after Muscat and his Labour Party took office in 2013, effectively ending 25 years of Nationalist electoral dominance, the country instituted the controversial passport-selling scheme, which was denounced by EU officials who feared it could create a back door for shady individuals or dirty money to gain access to Europe’s financial markets. But Muscat energetically pushed the plan, traveling abroad to sell it to prospective citizens, and it quickly took off. In 2014, Malta began a three-year run as the fastest-growing economy in Europe, and Muscat and his allies described the passport program as a complete success. By the beginning of this year, the government had collected about €600 million through it.

Muscat’s opponents in the Nationalist Party, as well as some members of the Maltese press, weren’t sold. In 2016 investigative journalist Daphne Caruana Galizia dug into the documents released in the Panama Papers leak and discovered that two of Muscat’s closest aides had established companies in Panama. She accused them of using those businesses to launder money from kickbacks she said they’d received for helping to arrange the sales of passports to Russian nationals. They denied it; a separate magisterial inquiry regarding those allegations is under way.

Later, Caruana Galizia reported that Muscat’s wife, Michelle, had established her own Panamanian shell company through the same middleman who’d set up those for Muscat’s aides—the accusation that the magistrate this summer said he’d found no proof to support. Caruana Galizia also accused Pilatus Bank, a Maltese institution founded in 2014, of handling much of the money in those alleged transactions, as well as those involving the shell companies set up by the prime minister’s aides.

Additionally, the journalist alleged that the first lady had received at least $1 million from Azerbaijan’s ruling family. Last year an international consortium of investigative journalists accused members of Azerbaijan’s ruling elite of operating a $3 billion scheme to launder money, pay off European politicians, and buy luxury goods; the reports cited “ample evidence” tying the ruling family to the schemes. Azeri President Ilham Aliyev last year labeled the accusations “totally groundless, biased and provocative.”

Caruana Galizia’s blog became the most-read news source in Malta. And even though she criticized both parties, it was a clearinghouse for critics of Muscat’s government. On any given day she might have accused a Maltese official of visiting a prostitute; or exposed an alleged local oil smuggling ring that helped Libya evade sanctions; or traced personal connections between government officials and suspected criminals; or slammed Muscat for trying to pitch Malta as a cryptocurrency capital, which she suggested would attract more corruption; or detailed alleged links between the country’s growing online gaming sector and the Italian Mafia. The list of her enemies was large and growing, and by last fall she faced 47 lawsuits—42 civil, 5 criminal—about 70 percent of them from government officials, according to her sister, Corinne Vella.

Prime Minister Muscat was one of those suing her, and he labeled her accusations as “the biggest lie in Malta’s political history.” Many in Malta seemed to believe him; in June 2017, as the allegations swirled, Muscat called for a snap election, and he was reelected with 55 percent of the popular vote.

Last October, as she drove away from her house, Caruana Galizia was killed by a car bomb. Police later arrested three men, low-level criminals, for planting and detonating the device. But no one in Malta considers the crime solved. Whoever ordered the killing remains unidentified. Some speculate that criminals involved with the Libyan smuggling ring might have targeted her, or that the Sicilian Mafia put out the hit. Many others blame the government.

Muscat and his administration loudly condemned the murder, calling it a tragedy and energetically denying any link to it. But the killing marked a turning point for Malta. The notion that corruption might have overtaken Malta’s economy now spread far beyond the confines of an opposition party, and the eyes of the world turned toward the tiny country. It has been struggling to clear its name ever since.

Protesters call for action following the killing of Caruana Galizia last October.
A recent protest over the killing of journalist Daphne Caruana Galizia, murdered last October.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
Everyone knows everyone in Malta. It’s an exaggeration, of course, but among the nation’s financial elite, the people who run the banks and institutions and sit on the governing boards, the notion is all but taken for granted. “There are, unofficially, some 10,000 people who work in Malta’s financial industry, and the guys in charge—there are maybe 50 or 70 of us—we know each other fairly well,” says Joseph Portelli, chairman of the Malta Stock Exchange.

In describing the financial community as small and closely knit, Portelli is defending it. He grew up in New York with his Maltese parents, and 15 years ago moved to Malta to manage his own fund, which specializes in emerging-market investments. He entered a financial-services industry that was fiercely protective of its reputation and keenly sensitive to insinuations of corruption. Now, as allegations of wrongdoing swirl, that defensive sensitivity is more acute than ever. Portelli has adopted it as naturally as any lifelong resident.

“We’re getting this blemish that we’re money launderers,” he says, “and that’s the worst irony.” There have been a few small problems, he concedes, with a handful of small banks. “You know what they all have in common?” he asks. “Not one of the principals was Maltese, they were all foreigners.” The locals, he suggests, police one another.

It’s a variation on an argument that’s been around since Plato and Aristotle. Small states tend to be less susceptible to corruption for two reasons: It’s more difficult to hide indiscretions, and higher levels of social cohesion discourage dishonesty. In the early 2000s several academic studies used data to support this theory, and some analysts suggested that globalization might be of particular benefit to small countries—freer trade and the increased mobility of labor and capital would reduce the costs of being small, they argued, while the advantages associated with less corruption could be retained.

An alternative theory is that small states will be susceptible to cronyism—all those close connections might enable, rather than discourage, financial subterfuge. More recent studies, including research conducted by the World Bank, have found that the data used in the earlier reports were incomplete, and the suggestion that smaller countries are statistically less corrupt than large ones remains unproven.

By the beginning of this year, the government had collected about €600 million through the passport program

For critics of Muscat, one powerful symbol of cronyism is Ali Sadr Hasheminejad, head of Pilatus Bank, the institution allegedly in the middle of the suspicious transactions involving the Panamanian shell companies linked to government officials. Sadr is an Iranian national, but when establishing and registering the bank in Malta he used a passport he’d purchased from St. Kitts. While Sadr was enmeshed in controversy in Malta, a parallel investigation into him and his bank culminated in his arrest by U.S. authorities, who charged him this spring with setting up a network of shell companies and bank accounts to hide money being funneled from Venezuela to Iran—transactions that allegedly violated economic sanctions against Iran. Prosecutors also alleged that Sadr established Pilatus Bank using illegal funds. Sadr pleaded not guilty and has been released on bail in the U.S.; his lawyer didn’t respond to requests for comment.

Malta’s government attempted to distance itself from Sadr, but the same sort of intimate connections found throughout the financial sector have undermined those efforts. Local news outlets reported that among the 250 guests at Sadr’s 2015 wedding in Italy were Muscat, his wife, and one of the aides accused of moving money from kickbacks related to the passport program through Pilatus Bank.

The July magistrate’s report stated that some of the evidence used by Caruana Galizia and others to implicate Michelle Muscat—including Pilatus Bank documents suggesting she was the owner of the shell company at the center of the scandal—bore falsified signatures. Muscat and the lawyers for Pilatus Bank immediately presented the findings as a “certification” that the whole story had been a lie cooked up by Caruana Galizia and foreign critics, and they denounced it in terms familiar to anyone conversant with the new vocabulary of political grievance: It was “fake news,” part of a “witch hunt.” They also drove home the point that the magistrate’s report identified serious improprieties on the part of their critics.

But the family of Caruana Galizia pointed out that the identity of the owner of the Panamanian shell company is still a secret. Furthermore, the European Banking Authority just weeks before had cited “serious and systematic shortcomings” in how Maltese regulators monitored Pilatus Bank before and after Sadr’s ties to Iran were exposed. A confidential 2016 regulatory report that was leaked last year confirmed that the bank’s profitability depended on politically involved clients from Azerbaijan. And the U.S. allegations that Sadr founded Pilatus Bank with criminal proceeds remain unaffected by that magisterial report.

The result of all this is a contagion of suspicion. Many of the allegations of money laundering and other financial crimes have proved difficult to either verify or dismiss outright, but collectively they make it increasingly hard to swallow the idea that corruption is strictly a foreign import here. The country’s only independent think tank, the Today Public Policy Institute, ceased operations in April. Its stated reason for closure was bluntly condemnatory: “a sense of defeatism over the government running roughshod over standards of professionalism, transparency, and accountability.”

Muscat and those in his government generally have responded to such criticisms by going on the offensive: Instead of putting the brakes on controversial policies, they’ve stomped on the gas. Muscat this year pushed for an expansion of the passport sales program, arguing that such investments and the economic activity they spur could help Malta become one of the wealthiest countries in Europe within his lifetime. Last year alone, private wealth in Malta jumped by more than 20 percent, thanks in part to its newly minted citizens.

“Globalization is like a treadmill—you can’t say you are tired, because the second you stop, you will fall off,” Muscat said during a press conference earlier this year. “Once in the race, we must not simply be there to take part, but we are there to win.” Previously he’d outlined the types of policies that would power Malta’s sprint toward success: “some sensible, others risky, yet others which might sound, and be, outright insane.”

In April, just as several Asian countries were cracking down on cryptocurrencies, Muscat announced that Malta would become the first country in Europe to create a regulatory and legislative framework specifically designed to attract virtual currencies. Shortly thereafter, Binance Holdings, the world’s largest cryptocurrency exchange, announced it was moving its headquarters from Hong Kong to Malta. Within weeks, Morgan Stanley analysts were reporting that a majority of the world’s crypto trading volume was moving through companies based in Malta.

There are people who insist that the government’s continued success in attracting investment and generating revenue is itself an answer to the disputed allegations of money laundering, kickbacks, and other financial crimes. “Luckily, this comes at a time when it washes off,” says Edward Scicluna, the country’s finance minister. “The false and fake parts are washing off, because Malta is being so successful that it’s very hard to accept them and to correlate them with a successful country. Normally corruption is rife in backward countries where there are no investments. So you find it very difficult to reconcile these two.”

A yacht moored in Sliema.
Yachts have largely displaced fishing boats in the harbor in Sliema.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
In Sliema, one of the most affluent towns in Malta, open-air restaurants line the harbor road. A few decades ago, diners here would look out upon dozens of Maltese fishing boats bobbing in the water, their prows upturned and their wooden hulls painted in rainbow stripes. Now the harbor is crowded with hundreds of fiberglass yachts—large, modern, colorlessly impressive.

The view helps explain why many Maltese are ambivalent about their country’s progress: They know that economic opportunities are more plentiful than they used to be, but they fear progress might be smoothing away the country’s distinctive edges. The skyline is dotted with cranes rising above the cathedral domes, and those cranes always seem to be hovering over the same sort of building: tall, rectilinear, and cut in clean angles. Malta is the most densely populated country in the EU, and the economic boom of recent years has intensified the pace of construction. Locals often complain of the dust from all of the building sites; when it rains, the drops sometimes hit windshields as small, powdery explosions—tiny puffs of brown smoke.

Competing real estate agencies line Sliema’s coast road, stretching for several blocks. Constantly changing listings for apartments and houses paper their windows. “There’s big demand, and the prices keep getting higher,” says Carl Peralta, director and founder of 77 Great Estates, one of the agencies.

Driving that demand is a new genus of Maltese resident that, Peralta insists, can easily be spotted in the cafes and restaurants of Sliema. Many are from northern Europe, and almost all are young—20s, maybe early 30s. They carry backpacks, they don’t drive cars, and they’re rarely spotted anywhere before 10 a.m. They work for the hundreds of internet gaming companies that have flocked to Malta in recent years. The companies offer the range of gambling services, from online poker and games of chance to sports betting.

In the early 2000s, only two online gaming companies could be found in Malta; now there are up to 300, and the sector accounts for an estimated 12 percent of the economy, according to the Malta Gaming Authority. Both the governing party and the opposition agree that the growth was a result of commendable foresight: In 2004, Malta became the first country in Europe to regulate online gaming, helping to legitimize an industry that previously stood on the fringes of respectability and legality.

“Laugh all you like, prime minister. But we will insist that you don’t get off scot-free”

The new arrivals who’ve bought citizenship through the passport program maintain a much lower profile than the gaming-industry workers. You can’t pick them out of a crowd on the street, and it’s difficult to even identify them in government documents. When Malta last released its annual list of new passport holders, it was maddeningly difficult to decipher; purchasers were listed in order of their first names, without a country of origin, and mixed among thousands of others who obtained their citizenship though birth or naturalization.

The Maltese press has discovered that the list of new citizens includes Russian oligarchs and even a woman who was suspended from the Vietnamese parliament for having dual citizenship, which is illegal in Vietnam. Roberta Metsola, who represents Malta in the European Parliament, suggests that many of the passport purchasers want nothing to do with Malta; they simply want the financial and travel access that an EU passport provides. “We’ve had cases of people arriving on a private jet, meeting a real estate agent, taking out a basement flat somewhere here for a year, never even seeing it, and leaving in the afternoon,” Metsola says.

Peralta, the real estate agent, says that rings true to him. Those who are buying passports, he says, know the minimum they must spend on housing—either €350,000 for a purchase or rental payments of at least €16,000 a year for five years. Meeting those minimum requirements, Peralta says, is often the only feature they’re specifically looking for in a property. “I know there are checklists they have that say they need to open the water taps once a month, or send a cleaner once a month,” he says. “But no one is living there.”


The town of Sliema is a popular destination for expats and new citizens.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
Jonathan Ferris speeds through Valletta’s darkened streets, jumps off his motorcycle, and walks briskly into the lobby of the Phoenicia Malta Hotel, where he finds a table in the noisy lounge. His features are lean, and he moves with a restless energy. His eyes scan the room, and he raises his voice just loud enough to be heard above the lounge singer, who is halfway through a slow and torchy version of Fleetwood Mac’s Songbird.

“I was the top man,” Ferris says, “the top investigator of financial crimes in the country. Type my name in the internet. All bloody hell comes up.”

The European Parliament is concerned enough about Malta to have sent an investigative delegation to the country multiple times this year. The committee’s report, issued recently, described an atmosphere of fear had settled over the country—and a sense that criminals could operate with impunity. Ferris believes his life during the past year perfectly represents the intersection of both phenomena.

He says that in 2017 his bosses at Malta’s Financial Intelligence Analysis Unit, the national agency tasked with policing money laundering, asked him to step aside from the investigation of the allegations involving Muscat’s wife and aides. He had told them he didn’t trust one of the known sources that had fed Caruana Galizia information regarding Michelle Muscat’s alleged ownership of the shell company—a source Ferris had investigated before and who, incidentally, was later discredited by the magisterial inquiry. Ferris’s bosses told him they believed his history with that source compromised his objectivity. That angered him, and he told his bosses that within 72 hours he could determine the true owner of the company that Michelle Muscat was allegedly involved in. He explained to them how he would consult tax returns, political party documents, and bank records. The next day, he says, he was fired and stripped of access to investigative documents and records. His firing further fueled suspicions against Muscat and his wife.

Ferris
Investigator Jonathan Ferris.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
After Caruana Galizia was killed, Ferris says, he began to fear for his own life. He takes his bloodhound out for walks in the early morning, and several months ago he began to notice cars following him with the headlights off. “I decided, from now on, I’m always going to carry my gun around,” he recalls. Police officers now monitor his house for eight hours each night. “What good does it do? I don’t know, because for the rest of the 16 hours out of 24, I and my family are all alone.”

After Caruana Galizia’s murder a similar anxiety spread quickly among those seen as unfriendly to the government. Some of Malta’s neighbors pointed to that generalized unease as emblematic of the current state of the country. The European Parliament report described “systemized and serious deficiencies” in the rule of law in Malta, which had eroded the population’s general sense of security. Additionally, a police investigation in Italy has alleged that the Sicilian Mafia infiltrated companies in the online-gaming sector, using them to launder illicit funds.

When Muscat sat in front of European Parliament members during a plenary hearing to discuss the rule of law in Malta last June, he dismissed the allegations publicized by Caruana Galizia as politically motivated, setting a tone for his denials that he’s used ever since. His relaxed attitude—and particularly his periodic smiles—during the questioning rankled some of the politicians.

“You can laugh all you like, prime minister,” said Werner Langen, a German member. “But we will insist that you don’t get off scot-free.”

A vigil held to remember Caruana Galizia at the Great Siege Monument, nine months after she was killed.
A memorial for Caruana Galizia at the Great Siege Monument.PHOTOGRAPHER: NADIA SHIRA COHEN FOR BLOOMBERG BUSINESSWEEK
This past year was supposed to be Malta’s chance to showcase its economic gains to the outside world, to take a victory lap after years of growth. It assumed the presidency of the EU in 2017—a first for the country—and this year Valletta was named the EU’s Capital of Culture, another rotating title that was cast as a big deal for such a small country. Earlier this year Muscat went so far as to claim that national pride in Malta had hit an all-time high.

The country’s tourism authority kicked into high gear to take advantage of the promised attention. All sorts of cultural galas and grand openings were organized, and the National Museum of Archeology, a grand 16th century building in the middle of Valletta, became a nucleus for the celebrations.

One afternoon in April, tourists filed through the museum’s entrance and wound their way past exhibits that guided them along the country’s circuitous story. On the second floor, dozens of people entered the majestic Gran Salon, which centuries ago served as a banquet hall for the knights of the Order of St. John. Enormous tapestries, ancient and colorful, hung from the walls, and a small crowd gathered in front of a podium for a special event that had been organized just the day before. Scicluna, the minister of finance, stepped to the microphone.

“I’m very proud, and very pleased, to be the person to launch this national Anti-Money Laundering and Combatting of the Financing of Terrorism strategy and plan,” Scicluna said.

Despite the introduction, he didn’t appear to be particularly pleased to be delivering a speech denouncing money laundering, drawing more attention to a problem that he clearly sees as a threat to Malta’s reputation and livelihood. The reputational damage resulting from continued scrutiny from various quarters—the European Parliament, the European Banking Authority, Italian police, the U.S. Department of Justice—could trigger a backlash against the tiny country that might pose a real threat to its economic foundations.

As the investigation into Mafia involvement in Malta’s online-gaming sector continues, European lawmakers have several times proposed restrictions on cross-border betting, a change that would classify the services provided by many Maltese companies as illegal. Ana Gomes, a Portuguese parliamentarian who leads the EU commission investigating rule of law in Malta, has said the country’s low corporate tax rate is “anti-European” and saps billions in revenue from other member states. In March, the European Parliament voted to pursue a “tax harmonization” scheme that would create one common corporate tax rate applied throughout the EU. A U.K.-based nonprofit advocacy group, Tax Justice Network, issued a report estimating that such a policy would cut Malta’s tax base by more than half.

In the midst of these pressures, Scicluna stood at the podium and delivered a string of statements that should seem so self-evident that they’d never have to be uttered. “I’d like to say that Malta—and this is an important statement to make—is deeply committed to preventing, detecting, and prosecuting money laundering and terrorist financing activities. Financial crime threatens the safety of our society, the integrity of our financial system, and the stability of our economy.”

That economy, Scicluna hastened to add, was healthy and strong, and this year the International Monetary Fund’s executive board singled out the country’s “sound policies” as the root of its success.

When he wrapped up his remarks, the crowd in the Gran Salon filed out of the museum, where they joined the current of pedestrians flowing along Republic Street toward the Great Siege Monument, which sits in front of the main courts building in one of the city’s central squares.

Since last fall, people have been placing candles, flowers, and signs at the base of the monument as a makeshift memorial to Caruana Galizia. At least eight times since then, someone has swept away the items in the dark of night; each time, the flowers and candles and signs are quickly restored. Recently, a local governing council lobbied to ban the temporary memorial for good, arguing that it was time for the country to move on.

On this day, dozens of tourists stopped in front of the monument and faced the plaques that explained the historical significance of the statues. But none of them pointed their cameras up at the statues. Every one of them focused on the marble base and the makeshift memorial, and on the sign that read, “No Justice.”

https://www.bloomberg.com/news/features/2018-09-11/why-the-eu-is-furious-with-malta?srnd=cryptocurrencies 

Get Crypto Currency Information at www.totalcryptos.com 
Posted: September 24, 2018, 3:05 pm
Global Intel Hub - Zero Hedge Exclusive (9/15/2018) -- Weather modification isn't anything new, in fact we authored a piece last year on the topic when Irma came, but it seems that with Florence we need a reminder to put this in perspective.  As is the theme in our book seriesSplitting Bits, our doctrine is that everything you know is wrong - the world is not as it seems (and not as on TV.) 
As Hurricane Florence bears down on the southeastern United States, nearly 759,000 homes are in the storm’s path, and a worst-case rebuilding scenario could cost more than $170 billion, according to an estimate from real estate data provider CoreLogic.
CoreLogic calculated the reconstruction cost value, which is the total expense of completely rebuilding a property in case of 100% destruction, for 12 metro areas in the Carolinas and Virginia. The table below shows those estimates for a Category 4 storm, which is Florence’s current designation. Additional estimates based on other categorizations is available on CoreLogic’s web site.
That's ok, but where does the $170 Billion really go?  Home builders, re-modelers, laborers, real-estate, computers, rebuilding, insurance.. some people will take their insurance check and go spend it.  Here's the breakdown from Bloomberg, but note the word 'boost' appears only 4 times; car rental companies, transportation companies (truckers), Lowes and Home Depot (supplies), and generators; 
Equity investors are closely tracking Hurricane Florence as the worst storm to hit North Carolina in decades could also have a menacing effect on the insurance, retail, agriculture and restaurant industries. More than 1 million people are evacuating their homes as the Category 4 storm is expected to make landfall over the weekend. Analysts say the event could also be a boon for companies that specialize in roof repairs or disaster-related services, as well as transportation providers.
But that's just on the surface.  When we dig deeper, the disaster economy is booming.  Don't forget, after Hurricane Katrina, the state of Louisiana received $115 Billion in Federal funding:
According to National Hurricane Center, Hurricane Harvey is second only to Hurricane Katrina as the costliest hurricane to hit the United States at $125 billion. Katrina cost about $161 billion.  By the time December 2017 had rolled around, the United States government had sent about $11 billion in federal disaster aid to Texas, and the state was asking for $61 billion more in federal assistance.  After Hurricane Katrina, Louisiana had received almost $115 billion in federal aid.  Multiple organizations and companies have raised money and provided aid for the people of Houston. The companies and aid listed below have provided a combined amount of at least $26.82 billion of the $125 billion that Harvey caused.
$115 Billion is a lot of money!  So where does it all get spent?  Even if it goes into the pockets of greasy and sleazy politicians, the point is that it is getting distributed.  The case for the Hurricane economy is a proof for the US Military's whacked out economic theory invented by someone like Robert Macnamara "$1 into the Miliary = $2 in economic output"  but if war is such a good business, we have to ask why they don't have a staged demolition of an entire city, like Los Angeles (maybe just Century City, LA is too big).  They will warn everyone to get out, no one will be hurt, unlike 911.. (MUST READ- BLACK 911)
There is no evidence needed to understand what's going on here - the disaster economy is booming and weather wars are in full swing.  It's a $170 Billion + event that is started by a group inside the military that controls the weather.  They do it all, they can create hurricanes, intensify them, reduce them, they can control storms like one would with a video game.  If you don't know about this or don't believe it, have a small education on the topic by watching the video below:
FULL EDUCATION ON THE HISTORY OF WEATHER MODIFICATION

They have the technology for a long time.  They have the motive, and well - is it really all that bad?  A good storm clears out nature and resets everything.  It's good for business.  Why not?  That's their thinking, we are not condoning weather modification.  But if you believe that it doesn't exist, you live in fantasy land, where fairy tales come true and everyone lives happily ever after.
There is a huge political side benefit, that they can blame 'global warming' on Trump for example, when in fact it may be deep state Democrats installed by Obama who are pushing the buttons on these storms.  

Posted: September 16, 2018, 10:09 pm
 Total News - Atlanta, GA 9/3//2018 - Bitcoin is cool.  You can see people's faces light up when you talk about it.  It's like Gold.  Humans are fascinated by Gold for a number of psychological reasons which are well more powerful than its scarcity.  Other elements, such as Rhodium, Platinum, Iridium, and many others - are far more rare than Gold.  Gold is just something magic, that resembles happiness, wealth, and shines brightly.  There may be an ancient connection here we haven't yet stumbled upon.  
For 15 years, FX and other alternative asset classes have proven they have what it takes to outperform the stock market.  FX algorithmic strategies for example, are in a class of their own.  But few understand and those who don't aren't willing to spend the few minutes required to get it.  But Bitcoin has changed all that.  Tell someone you are an FX quantitative fund manager and they might look at you like you have a disease.  Tell you are trading Bitcoin and they will get excited.  Go figure!
Bitcoin made investing cool again, especially with millennials.  Although there are probably hundreds to thousands of better investments - Bitcoin is just cool.  This is the viral effect that shot BTCUSD to 20,000 - not because of its robust design, or anything else.  It's just cool.  And you can quantify cool - that's not the problem.  The problem is identifying the next 'trend' before it becomes a trend.
And what's interesting is that Bitcoin is a digital 'crypto' currency but so is the US Dollar, the key difference is that Bitcoin is not issued by any centralized authority.  But many have been trading electronic digital dollars for a long time.  So EUR/USD is not so different mechanically than BTC/USD - except the allure.  FX is complicated - Bitcoin is not.  You just buy and HOLD.  They've combined FX with penny stocks!  It's electronic day trading on steroids, with an IV drip Red Bull.  It's unregulated, it's decentralized - and we don't even know the names of the owners of the exchanges!  But it's cool.
You can get cool points probably in high school by talking about it (this is a theory we didn't ask any high schoolers).  But we remember the 90's when it was that way about stocks.  Got a stock tip?  What's hot?  ATHY?  OSTK?  Bitcoin is that plus more - because of social media and the internet which is worldwide.
So we're not saying that it's good or bad - maybe it is good because more people will be interested in investing.  Maybe it's bad because it has shown them the wrong example of what an investment should look like.  What is interesting though you can do arbitrage in Crypto.  There's really no minimum so you can invest $1.  So go ahead - have your crack at it!  
Hopefully, as more sane and reasonable approaches to Crypto markets become more prevalent - such as Total Cryptos BIT FIX - we will see an institutionalization of the Crypto markets.  -jg
Posted: September 3, 2018, 7:30 pm
Following a series of attacks on the Federal Reserve's rate hike policy and complaints about the strong dollar, some Wall Street observers are saying the possibility that Trump himself will launch a sustained campaign to weaken the dollar as a way to reduce the U.S. trade deficit can no longer be dismissed.
While a strong-dollar policy has been a cornerstone for successive U.S. administrations, Trump - like with many other things - has shown a penchant for upending the currency status quo. Since taking office in 2017, he has routinely talked about wanting a weaker dollar to support U.S. manufacturing. Additionally, Trump's administration has been lukewarm toward America’s traditional strong-dollar stance.
As Bloomberg notes in a Wednesday article, in recent months Trump has further stepped up the rhetoric as the dollar has bounced off its lows. In an interview published by Reuters this week, Trump once again accused China and the European Union of manipulating their currencies. Last Friday, he also complained to wealthy Republican donors that he was “not thrilled” with the Federal Reserve’s interest-rate increases under Chairman Jerome Powell, which have boosted the dollar.
As a result, after a flurry of tweets in which Trump complained that the dollar is blunting America’s “competitive edge,” Wall Street has started to pay attention: in a report this month, JPM's chief US economist, Michael Feroli, wrote in a report this month that he can’t rule out the possibility the administration will intervene in the currency markets to weaken the greenback. Both Deutsche Bank and OppenheimerFunds echoed the view, saying dollar intervention was no longer far-fetched.
Zach Pandl, co-head of global FX strategy at Goldman Sachs, recently said that "we haven’t had a deliberate effort to weaken the U.S. dollar perhaps since the Plaza Accord in 1985, so it is very unusual and against established practice over the last several decades. A deliberate policy to pursue a weaker currency could cause foreign investors to shy away from U.S. assets -- including Treasury bonds -- raising interest costs for domestic borrowers."
In a note from Nomura's Richard Koo, the strategist asks "how President Trump might respond if uncertainty did worsen, raising the likelihood of a slowdown in the US economy" and answers that "one possibility is that the administration would shift from tariffs, which require a separate staff to handle exemption requests for each product category, to the use of exchange rates, which would allow simultaneous adjustments to prices for all imported products."
Here is why Koo is confident that it is only a matter of time before Trump directly intervenes in the FX market:
A protectionist policy that must be individually tailored to each product category requires large numbers of administrative staff, and a period must be established during which companies can apply for exemptions. Exchange rate-based adjustments, on the other hand, entail no such costs.
In that sense, the more problematic administrative delays become and the more industry opposition mounts, the greater the likelihood that President Trump will replace tariffs with exchange rates as his main tool for addressing US trade imbalances.
The loudest warning to date that Trump could rock the currency world has come from Charles Dallara, the former U.S. Treasury official who was one of the architects of the Plaza Accord, the 1985 agreement between the U.S. and four other countries to jointly depreciate the dollar. "The trade debate will increasingly include the currency issues," he told Bloomberg "It’s inevitable."
As Bloomberg adds, a shift to a more protectionist and interventionist policy, à la 1985, would not only reverberate across the $5.1 trillion-a-day currency market and undermine the dollar’s status as the world’s reserve currency, but could also weaken demand for U.S. assets.
But can Trump really intervene unilaterally in the currency market, and what tools does the president have at his disposal if he wanted to go beyond mere talk?
The most direct choice for Trump would be to order the U.S. Treasury (via the New York Fed) to sell dollars and buy currencies like the yen and euro using its Exchange Stabilization Fund, according to Viraj Patel, an FX strategist at ING. But because the fund only holds $22 billion of dollar assets, the impact would likely be minimal. Any direct intervention that is larger and more ambitious in scope would also require congressional approval, he said quoted by Bloomberg.
Then there is the nuclear option: according to Patel there is one loophole Trump could exploit to get around the fund’s constraints and bypass Congress altogether: by declaring FX intervention a “national emergency.” He could then force the Fed to use its own account to sell dollars.
Such a move would be a long shot by any stretch of the imagination, but with Trump invoking national security to impose tariffs, Patel says he can’t “completely rule out” the possibility.
Such a move would certainly roil the market and potentially lead to a USD crash, not only due to Trump's intervention but due to the sudden collapse in faith in the global reserve currency; the result would be a flood of Treasury sales from global custodians around the globe who currently hold over $6 trillion in US Treasuries. To be sure, Trump’s persistent jawboning of the dollar may already be having an adverse effect on foreign demand for U.S. assets. While overall demand at auction has been up and down this year, foreign holdings of Treasuries have slumped to an almost 15-year low of 40%, forcing domestic investors to become the marginal buyer of US Treasurys. China, the largest overseas creditor, has pulled back this year. Japan, the second biggest, has reduced its share to the lowest level since at least 2000.
A less extreme, and more plausible, option would be for the Trump administration to include currency clauses in any new trade deals, like it did with the updated U.S.-South Korea trade agreement in March, although enforcement would be complicated and the implementation lengthy.
There is also the suggestion of a global accord on currencies, broached in the past by White House trade adviser Peter Navarro, however the chances of a multilateral agreement on the dollar are remote. Plus, there’s always the threat of retaliation by other nations if the U.S. goes it alone.
While it remains unclear what Trump will do, keep a close eye on China, where the yuan has tumbled nearly 10% since April, when the trade war with Beijing started in earnest.  The magnitude of the decline, the fastest since the 1994 devaluation, boosted speculation the People’s Bank of China is deliberately weakening the yuan to offset the tariff impact.
Even though China has denied it is "weaponizing the Yuan", many are skeptical, and Trump is among them: which is why the president has criticized the country for taking advantage of the U.S. by keeping its exchange rate artificially low. (However, Trump has not gone so far as to officially brand China a currency manipulator in the twice-yearly review of international foreign-exchange policies published by the Treasury).
Trump's single focus on the Yuan may explain why Beijing has pulled all stops to prevent the currency from sliding below the 'redline' of 7.00 vs the dollar (alternatively it is preparing to devalue further if and when Trump launches the next $250BN in tariffs he has warned he would). Stephen Jen of Eurizon SLJ Capital has warned that Trump may be quick to retaliate in the FX markets if it suspects that China is "playing games with its currency," which may have disastrous effects on demand for U.S. assets.
"If you’re an international portfolio manager with 30 percent of your exposure to the U.S., and you know the currency will be guided meaningfully lower as a policy tool, why would you be investing here?” he said. "The Trump administration needs to be very, very careful with its dollar policy." This was most vividly on exhibit during the Fed's QE phase when Guido Mantega, then Brazil's finance minister, siad the Fed was throwing "money from a helicopter" and "melting" the dollar.
Ironically, it is the stronger dollar that is crippling emerging markets now.
Whether or not Trump intervenes, however, Dallara is bracing for more turbulent times:
"I’ve lived through a lot of market gyrations in my career,” he said. “And I have an uneasy feeling that I can’t validate by data that tensions are going to, at some point, emerge into volatile market dynamics. This is a risk."
Posted: August 22, 2018, 5:06 pm
Total News - 8/19/2018 - Atlanta, GA - Venezuelan President Nicolas Maduras announced Friday a massive devaluation of the existing currency, while making a verbal peg 1 "Petro" (Venezuelas new CryptoCurrency which is not yet in circulation) to $60 US Dollars, effectively wiping out the value of the existing currency and forcing the population to use the Petro.
Crypto Enthusiasts will be eager to see the Petro trade, as it will be the first sovereign Crypto Currency in the world.  IBM has disclosed that it is contracted with more than 10+ central banks to investigate the possibility of making digital sovereign currencies based on cryptographic technologies like Blockchain, but it hasn't disclosed who they are.  Venezuela is an interesting case to be the guinea pig in this digital money experiment, because Venezuela has been a unique host of an underground mining community in the past years, because electricity there is practically free.  The interesting world of underground Bitcoin mining in Venezuela has been covered in an excellent article published on Hacker Noon "Extortion, Police Raids and Secrecy: Inside The Venezuelan Bitcoin Mining World."
Maduro told viewers:

"As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry."
What's interesting about Venezuela is that this is an act of desperation, Maduro really has few other choices.  Venezuela has become a war zone in recent years with rolling blackouts, rampant inflation, food shortages, rise in violent crimes, and social unrest.  The Petro is Venezuela's oil backed (government backed) Sovereign Crypto Currency, based on the NEM Blockchain.  But ultimately, it is backed by whatever Maduro says it is backed by, as any fiat currency is.  In fact the word 'fiat' means 'by decree' or in plain English, because I said so.  
Fiat: a formal authorization or proposition; a decree.
Maduro said the new currency, set to enter circulation on Monday, will be called the "sovereign bolivar" and will be based on the petro, which is valued at $60 or 3,600 sovereign bolivars, after the redenomination planned for August 20 slashes five zeroes off the national currency. The minimum wage will be set at half that, 1,800 sovereign bolivars. The government would cover the minimum wage increase at small and medium-size companies for 90 days, Maduro added. It was not clear what happens after.  "They've dollarized our prices. I am petrolizing salaries and petrolizing prices," Maduro explained in a Friday televised address. "We are going to convert the petro into the reference that pegs the entire economy's movements."
We will see the market reaction shortly, however Venezuela is already living in a world of it's own, even bragging about how the IMF doesn't have any 'fingers in our pies' type of speech.  Meanwhile, the population of Venezuela is forced to turn to things like Bitcoin and Alt coins in order to survive, as the national currency is completely unstable.
Posted: August 20, 2018, 1:17 am
Online retailer Overstock reported results which, unlike its much more famous and infinitely bigger online retailing peer Amazon, were nothing special: the company reported Q2 revenues of $483 million, generating a net loss for the quarter of $2.20 on a gross margin of 19% in the quarter.
But the company's earnings were not the reason why OSTK shares soared as much as 25% after hours: the reason was the surprising announcement by the company that Hong Kong-based private-equity firm GSR Capital had agreed to invest as much as $375 MM in exchange for equity in the retailer and, more importantly, its tZero blockchain subsidiary, which as a reminder capitalized on the cryptocurrency craze in late 2017 and concluded an Initial Coin Offering on December 18, 2017, almost to the day when Bitcoin hit an all time high of just under $20,000.
As Overstock announced in its press release, GSR agreed to:
  • i) buy $30MM in tZero tokens,
  • ii) buy up to 3.1MM shares of OSTK for $104 million (a 5% discount to the Aug. 1 closing price of $33.72),
  • iii) invest as much as $270MM for up to 18% of tZero’s equity at a whopping post-money valuation of $1.5 Billion.
And since Overstock's market cap as of Thursday's close was just over $1.1 billion, this means that with one term sheet, the company's tZero sub is suddenly worth more than the entire parent company. More importantly, the GSR transaction will boost the company's cash and equivalent holdings to over half a billion dollars.
Some more details from Byrne:
Having concluded its Security Token offering, tZERO has raised aggregate consideration of $134 million. This figured includes $30 million from repayment of intercompany debt between tZERO and Overstock. GSR has signed a repurchase agreement to acquire these tokens. As I will diagram in our earnings call, we have designed quite an ecosystem with a scale that matches the enormous opportunity in front of it. When GSR completes its planned investments, we should have over half-a-billion dollars. We believe this will provide ample capitalization with which to build a company that can upend global capital markets.
Back in December, when Overstock launched its tZero ICO, it said that it was hoping to raise at least $250 million - and as much as $500 million - "to build out a blockchain system that the firm said would allow it to create an exchange to trade blockchain-based assets, like ICOs." In the end it raised aggregated funds of just approximately $134 million, and today's transactions adds to that and enables CEO Patrick Byrne to pursue his Security Token ambitions.
As a result of the deal, OSTK stock has jumped and was trading as high as $46/share after hours.
Even with the surge however, the stock remains well below its highs hit in late 2017 and early 2018, when its share price more than doubled to a high of $86.90 in January, due to its blockchain investments rather than its online retailing activities, which have seen it categorised as a cryptocurrency "play."
Overstock has been one of the few retailers that has aggressively pursued cryptos as both a method of payment and as a means by which to grew the company with its own unique token. As we reported recently, following a burst of adoption of cryptos by various vendors, as the price of bitcoin has tumbled in 2018, so has the rate of adoption. Which is why Overstock's experiment with cryptos and tokens will be closely watched to determine if the digital currency has any chance of becoming useful in practice instead of just in theory.

cryptos
Posted: August 9, 2018, 10:31 pm

Past performance is not necessarily indicative of future performance.


Past performance is not necessarily indicative of future performance.

The risk of loss in trading commodity interests can be substantial. You should carefully consider whether such trading is suitable for you in light of your financial condition. This material does explain all the risks involved in futures and options trading. Please refer to the following for a fuller disclosure and our risk disclosure statement: https://alphazadvisors.com/risk-disclosure-statement/

About this podcast: EP 137: The horse bettor exploiting anomalies in financial markets – Dr. William Ziemba Dr. William Ziemba’s an academic, a practitioner, gambler, trader and an author. He’s worked with and consulted to many well-respected names in the field, such as; Edward Thorp, Blair Hull and the very successful horse bettor, Bill Benter. In the beginning, horse betting was William’s field of expertise (he even published a book titled, Beat The Racetrack!) And in many ways, for William, horse betting worked as a gateway to trading financial markets—which he’s been doing since 1983.

Visit AlphaZAdvisors.com for more info.
  alphaz options strategy
Posted: August 8, 2018, 6:51 pm
Crypto Day Trading - Electronic Day Trading became popular in the mid 1990's with the rise of 'retail' stock trading, meaning that anyone with $50,000 could open an account and trade with "Level 2" access which was purportedly the same access the market makers had.  Of course day-traders were no match for professional market makers but suddenly the .com bubble happened and stocks like (AMZN) and many others.  After the .com bubble burst, day traders looked for other electronic markets to trade, some gravitated to Futures & Forex.  Forex day traders thrived for a long time, until the Dodd-Frank regulations ended the hope of having a profit from a Forex strategy in the USA (and in the same action, effectively blocked access to decent honest brokers for US Citizens.  This void was filled with the Binary Options scam that continues to this day (people still believe that someone, somewhere is making money with Binary Options, contrary to forensic evidence).
Enter Crypto Currency which was relatively undeveloped as a traders' market until the huge rise of BTC/USD in the fall of 2017.  Now there is a quickly growing community of Crypto Day Traders and Total Cryptos is here to facilitate that.  The problem with trading Crypto vs. other markets is there is a huge amount of fake data in Crypto.  As any trader knows, information is king - which is why it's important to have real-time information that matters.  Just like in FX, that may mean looking at multiple exchange prices.  It means having multiple sources of news and data.  It means paying for information.  How bad is the problem of bad data?  Just look at today's news, from Coin Desk, where 'A CoinMarketCap "data issue" caused significant artificial inflation of several coins listed on the platform on Friday, with some prices inflated by nearly 1000 percent.':
While bitcoin's price spiked 12 percent on the crypto data site, other coins saw more drastic increases. The price of aeternity, the eighth most valuable cryptocurrency, increased more than 951 percent, while MOAC increased by 905 percent and bitcoin diamond saw an 876 percent jump on the site. The site's exchange tracker feature was also affected, and falsely indicated that bitcoin was trading above $73,000 on some exchanges.  While crypto Twitter speculated about potential price manipulation, bugs and hacking, CoinMarketCap told CoinDesk that the inflation was caused by a data error.  "There was a price calculation error on tether which caused any listing with a tether market to become artificially inflated," marketing vice president Carylyne Chan said in an email.  While most of the data appeared to have normalized at press time, the 24 hour change percentage for VeChain's VET token was listed as a question mark and its price graph was unavailable on the home page. The VeChain page also had no historical data listed.  The popular analytics platform has promised to release a "post-mortem" with further details in the near future.
Imagine that happened in the stock market.  So the good news, any new market presents new and uncharted opportunities.  With that as always comes big risks, but it is a traders job to manage and maintain control of those risks.  Having the right tools is par for the course.  Or take a look at this article "Why intra-day trading crypto can be better than holding":
If you are relatively new to trading crypto currencies, then this tutorial is what you need. In this tutorial I will try to explain how you can use crypto to grow your capital base by at least 1% per day.The reason why holding isn’t a very practical move for well established coins is because of their volatility. For instance, Bitcoin (see chart below), increased by ±30% over a period of ±20 days. But it doesn’t mean it had a linear increase of 1.5% per day, some days went down while others went up.
Of course, it's easy to go back and say if we had just bought at the low and sold at the high every day for the past 30 days we would have made a fortune, the reality is that trading is not so easy.  However, there are tools out there so advanced and sophisticated that it helps the Crypto Day Trader.
Total Cryptos is extensively researching this new market as well as working on our development of real time trading systems for Crypto Day Traders.  We've opened a public forum on the topic for open discussion which can be found here: https://portal.totalcryptos.com/forum/trading-cryptos Registration is free so join the discussion today!


Posted: August 5, 2018, 10:50 pm
  • Private Equity investors or Pre-IPO investors may want to look at this hot new Crypto option.
  • Cornucopia is an example of how Blockchain is really innovating the alternative investment space.
The pace of new Crypto Currency offerings has increased dramatically in recent years. First, there were ICOs, then there were STOs, and now there is a mix of many kinds of new token offerings. Sites are popping up that track the prices of new Crypto Currencies just like for stocks. The nuances of regulation, as in anything new, have been the focus of the debate. What makes a securities token vs. a utility token, or if proof-of-stake is better than proof-of-work. We’re going to skip that in this article to focus on essence not form, to get to the heart of what this token is and why it represents a real new type of token based on an existing model. We are going to contrast this model, not the token, with others of a similar nature. Many who have been enchanted by the allure of Bitcoin have lost touch with what Blockchain really is – a technology. The blockchain is very innovative for banking but compared with what Silicon Valley has been inventing recently it really isn’t such a great achievement. The reason Blockchain is such a ‘revolution’ is mostly because of the lack of technological innovation in the financial services industry in general. For example in the United States, the “Fedwire” system used to send ‘wire’ payments in between financial institutions, was designed and implemented before World War 2, actually before 1940. The reason it is called a ‘wire’ payment is because this was a world where not everyone had a telephone, but every business had a telegraph, which was connected by copper wire. It is important to understand this history, in order to see that Blockchain itself isn’t something so innovative like lasers or fiber optics, or the microprocessor. But in a world where payments are made by ‘wire’ – Blockchain is a new paradigm which really changes the entire global financial system.
One more important elaboration before we dig into this token offering is the mature pre-IPO sector of ‘unicorns.’ During the .com boom IPOs were the hottest rage – get a business plan, buy a .com name, and go public. Very similar to what has happened with many ICOs, many of them fail to vet their underlying business model (in many cases they do not care to, they just want to raise funds as a means to another end). After the .com bubble burst, new IPO issues were on the decline, and since the 2008 credit crisis, they declined even more (for a number of factors which is the subject for another article). Companies that are worth more than $1 Billion in private markets but are still not public are called “Unicorns” because they are rare, but Unicorns are not so rare like they were 5 years ago. Now many companies continue to operate as private companies without going IPO, some notable examples include Uber, AirBnB, SpaceX, Palantir, Lyft, and others. The pre-IPO space is opaque, as companies are not publicly listed, they are not subject to the same reporting requirements as public companies. For example, financial statements which they do of course produce, are based on what the company says only (no third-party oversight). Financial reports produced by public companies are the opposite – they are subject to audits, third party checks, and if a mistake is made – there can be a liability for the financial officer who is responsible for the reports and/or for the company itself. In private equity, none of this applies. So, it’s a unique type of investing.
The obvious upside is that if and when a Unicorn does go public, there can be an event which will produce a 10x or 20x return. So as you can imagine, there are a number of companies that offer sale of pre-IPO stock in mature companies that have revenue. The rules are different, all investors must be accredited generally, and there can be restrictions on the stock (for example you can’t sell your shares until the IPO event). Some companies, like PTN – offer accredited investors more liquidity that it is possible to buy and sell pre-IPO shares in what could be called a dark pool.
Enter the world of Cornucopia, a token offering that provides retail investors access to these companies based on a ratings system. Horn tokens act like a private equity index fund but require community participation. Here’s how it works. Users buy Horn tokens and then vote on which issues should be included in the fund. While most everyone knows Space X, there are more than 150 such companies that are Unicorns or close to the $1 Billion mark that are all good candidates for IPO. Many of them will never go IPO because they will be bought by larger companies (but that is a positive event for shareholders too). The voting system will reward more intelligent votes with a higher allocation of tokens, so for example if you vote for Space X and it ends up being the biggest winner, you will receive more tokens than if you vote for Uber and it ends up bombing.
What is unique about this model is that it’s simple – it can be explained in a few minutes. There’s no moving parts – it’s just as simple as that. It basically opens up access to companies like Space X to investors through the use of a token they are calling HORN. Token investors should love it. Wall St. investors, maybe not. Because they can get access to these companies directly or through the brokerage services like PTN. But what Cornucopia does is it tokenizes the offering – and it’s all wrapped into one token. In the future, there will likely be other similar tokens but for now, this is the only one. HORN is the only token offering pre-IPO mature companies to token investors.
We are not claiming here that Cornucopia has done anything new or unique – on the contrary, they have taken the pre-IPO model which is now very popular on Wall St. and tokenized it. The underlying ratings system, powered by Ignite Ratings, incentivizes users to participate in the process because they will be rewarded for doing so (and rewarded more for making better decisions).
Many have been claiming that Wall St. tokens are coming – while this doesn’t represent Goldman Sachs (GS) coin, this is a Wall St. model that will certainly attract copycats. Cornucopia doesn’t have a patent on this model nor would it be possible to patent a ‘business model’ – but as with any new standard, he who makes the standard has the most to gain from it (such as HORN token holders).
To compare this to other token offerings in the financial sphere, few can compare. For this reason, we believe that Cornucopia is going to make a big splash, and have no problem raising their $15 Million hard cap.
Lastly, let’s take a look at our favorite component (or potential component) to HORN – Space X. This is a bit of a controversial company, but we like it. We want to explain why – and then conclude that HORN is a great way to get exposure to Space X and other companies.
Since World War 2, which was the first time the United States invested massive resources in research and development of technology, the US Military has been a world leader in technology research and development, mostly led by DARPA, but also CIA, NSA, Navy, Army, Air Force, et. al. all working under the Director of Central Intelligence. The types of research projects are so vast we would need a library of books just to dig into them, covering all fields of science and even pseudo-science. If there was a guy who could bend spoons, the CIA had a guy there looking into it. Those who are interested in this topic can watch George Clooney’s “The Men who Stare at Goats” for some of the more bizarre and paranormal research experiments. The strategy is simple really – fund thousands of projects with more budget than needed and get the best minds in the world and even if 9 out of 10 projects fail, the 1 out of 10 that work, they will create something like the Atom bomb. The Manhattan project was perhaps the most ambitious and purposeful research effort in human history, the success of which won the war. Because of this, Military leaders understood the value of advanced weapon technology and this ethos is in the Pentagon to this day.
There is one side benefit for Corporate America to this strategy. Once technology has become ‘declassified’ and where there is clearly no military use, the technology is leaked to corporations (for free) and ultimately sold to the public. Most of what Silicon Valley has ‘invented’ can be credited to this cozy relationship. Technologies are leaked via research labs like ‘SPARC’ labs and others. Companies like XEROX, IBM, Microsoft, Apple, and recently Google and Facebook, participate in these programs.
Often how they acquire the technology is overlooked by investors, but it really is irrelevant, the US Military is not a for profit business per se, like many parts of the US Government it enables for-profit commercial enterprises to profit. As US Citizens are the indirect owners of this IP, transferring it to Corporations that are mostly in the average American’s 401k is widely appropriate (plus it stops the question ‘where all this money is going?’)
Due to the secret nature of much of this technology, this transfer is not something widely publicized – but we can see tangible benefits such as the internet itself, actually designed and built by the US Military. Space X has contracts for delivering rockets and launching them – but do they have something more? We have developed a hypothesis based on nothing other than the previous behavior of this relationship between the Military and Big Business – dating back to the 70’s, 80’s, and 90’s. Space X could have been the recipient of some of this IP, and if they were – it wouldn’t be something they could say publicly. This could explain Musk’s wild claims and his arrogant behavior (because if he had one of these transfers, it would make any competition impossible). One bright example is provided by the potential uses of Helium 3 as an energy source. Everyone knows and widely discusses about Oil – it’s use and utility for military purposes. But this is really a simplistic explanation for common folk to understand the larger doctrine, that energy is a key military resource – perhaps the most important.
For this reason, the US Military not only collects intelligence on new energy systems, but engages in their own research on potential alternative energy sources, such as “Zero Point” energy, Thorium Reactors, and Helium 3. Helium 3 only exists in places such as the moon and is difficult to extract and refine. If Space X had a way to do it, it will in 5 or 10 years be the biggest company on planet Earth. We do not have information to back up that statement it is a hypothetical mind experiment, to show the logic based on our hypothesis. There may be a far different story that we don’t know and will not know until it is revealed, however Helium 3 provides a good example of something that if Space X had IP about how to mine it, transport it, and convert it to Energy, it would be so profitable that the valuation of Space X would go parabolic. And if they were able to do it, they would be the exclusive provider.
Some of Musk’s claims such as colonizing Mars don’t really have a direct business benefit – Helium 3 does. If Space X does have such IP, these other businesses such as launching rockets and giving rides to Billionaire’s in space would be irrelevant. And again, this is just a hypothesis, based on history – we have no direct information that this is the case. For those of us who remember things like ‘the internet’ and the ‘Personal Computer’ that came out of nowhere, we remember a group of select companies having access to such technology and running with it. Remember, Apple (AAPL) didn’t invent the PC, they popularized it. Steve Jobs was not a technology guru or an engineer, he was a marketing genius that created a ‘cult of Mac’ based on his leadership and God-like personality he picked up while studying in India. We can agree that Woz was an engineer, but Apple didn’t invent the micro-processor, they were mostly a design and marketing firm that wanted to create a retail product from assembly. This is not a critique of Apple (AAPL) which is the obvious success of the century, but to point out a past example of a company that created an Empire from something they didn’t build or engineer themselves.
This is a ‘long shot’ hypothesis meaning it is a low probability high impact event. If it is true, the announcement of such news would shoot the value of Space X to the Stratosphere. If it is false, Space X would be evaluated based on its current public claims. But one thing is sure, Space X has exclusivity on this niche in the Aerospace/Defense Sector, and there’s only one place to access it with a token: Cornucopia.  www.cornucopia.io
Posted: August 2, 2018, 11:44 pm
Bitcoin has had a net negative effect on the perception of Main Street on investing, and a potential huge long term effect on the architecture of markets.  What Bitcoin has created in the short term, is a powerful analogy based on insane assumptions: We have a coin that will be like Bitcoin, and go up 1,000,000 %.  The sad fact, Bitcoins rise has been used as a story to raise capital: This time it’s different.  We’ve built a better Bitcoin.  Our coin will go up more than Bitcoin, so they have been telling us.  But the reality speaks the opposite story, that Bitcoin is likely a one time phenomenon, as even Ethereum, although the design is different, doesn’t come close to Bitcoin. 
Especially since the cross above the psychological 10,000 mark, investors everywhere have been piling funds into ICOs and other concepts claiming to be “The Next Bitcoin – only better” yet so far they have all failed to deliver on their promises, and look likely to continue to do so.  Just like there will never be another Google or Microsoft, there will likely never be another Bitcoin.  If you enjoyed the rise – enjoy your life.  Trying to recreate something again or catch what you missed is a fools errand. 
Some new coins of course are promising, they aren’t all a bunch of garbage – but most are.  All the wrong people decided to launch ICOs for all the wrong reasons.  There have been few quality offerings, so we can mention only a few by name; Basis.. Others which go unnoticed and don’t have the ‘sales pitch’ to capture the wrong type of investors, such as Sky Desks.
What Bitcoin did that was positive it forced the hand of the establishment to innovate.  As the ultimate use-case for digital money that ‘works’ – Bitcoin would never be forgotten or disregarded.  It takes time to build something substantial.  In 2017 we can say that it was the year that the work began.  The fruits of this work may not be seen until 2027 – just as Bitcoin took nearly 10 years to mature into popularity, so will any new Blockchain technology take time.  Regulations will evolve, law will evolve, that will support these more advanced efforts. 
The correct approach to this, is not to identify a single ‘opportunity’ and evaluate it, as one would an investment.  These are ‘stock pickers’ and in the long run this will not work well, statistics show.
The correct approach is to take any advanced idea and foster it – incorporate it into your existing business.  How can I use Blockchain to empower my sales process?  To accept payments from customers?  What else?  Hedging?  Communication?  Security? 
These hopers that think they have picked the next “Bitcoin” are sure to fail if they don’t adopt.  Adoption is what made Bitcoin rise – and it’s the only thing that will make any coin rise.  Ethereum, the only token that has come close – is driven by demand for it’s development platform.  When an ERC 20 token is issued, ultimately users need to first buy ETH in order to buy the underlying.  The coin is likely denominated in ETH (although it’s not an explicit requirement, the majority of ETH tokens are denominated in ETH).
To learn more about Cryptocurrency and real trading and investing opportunities, like Cornucopia, visit www.totalcryptos.com

Posted: July 28, 2018, 1:37 am
As we have often explained in our book Splitting Pennies, the world is not as it seems.  Politics often polarizes a country it seems every election there becomes 'two' Americas but the current polarization seems to be that of 'rational' and 'irrational' whereas on one side, there are facts; and on the other, hysterical opinions.  While no evidence was provided that any Russians 'hacked' the mere accusation in absentia is 'proof' for the irrational left that it was the Russians.  "Blame it on the Russians" seems to be the scapegoat story of the day, perhaps lingering from the previous generation that came to power during the cold war.  It's a bunch of nonsense, the entire Russian narrative is a fantasy created by intelligence operatives as a propaganda effort to smear Trump and anyone who doesn't fall into the Leftist/Liberal mindframe.  As any American who has ever been through the justice system in America knows, you are guilty until proven innocent, not the other way around.  Someone can sue you or call the cops and make any false claims and the burden is on you to prove it is false.  If the complaining witness is the US Government itself, you can forget about any 'rights' you may have had or the right to a fair trial (they have immunity and other powers that prevent any fair and reasonable defense if you are targeted).   As usual, these aggressive and toxic forces that are attacking Trump politically from inside the deep-state are exploiting the masses lack of education of history, so we would like to here expose perhaps one of the most important looked over historical facts pertinent to understanding the deep roots of the relationship between USA and Russia.  MUST READ: Wall St. and the Bolshevik Revolution.
Russia was ruled by a Monarchy similar to the rest of Europe until 1917 when the Bolshevik's staged a successful coup of the Kerensky regime thus installing a Soviet Dictatorship run by the Communist Party until its collapse in 1991.
The 1917 Revolution was financed by and orchestrated by Wall St. - Not only did New York bankers provide money, they allowed safe passage to Russia revolutionaries like Trotsky and others by use of diplomatic cover by the US and other governments.  The main character in this play was Thompson, wealthy banker and Chairman of the Federal Reserve Bank of New York.  Most of the bankers had first degree relationships with J.P. Morgan himself (the man, and the firm).  MUST READ: Wall St. and the Bolshevik Revolution.
Although this was reported in the press, at the time, it didn't seem that it required further examination by historians:
William B. Thompson, who was in Petrograd from July until November last, has made a personal contribution of $1,000,000 to the Bolsheviki for the purpose of spreading their doctrine in Germany and Austria ....
Washington Post, February 2, 1918
Of course, the official story is that the "American Red Cross" mission to Russia was a humanitarian effort (but if that was the case, why was it composed of mostly lawyers, bankers, and merchants, and only 2 doctors?) 
To really understand this one must read this book MUST READ: Wall St. and the Bolshevik Revolution.
The world is different now.  The politics of the time was different.  100 years ago, groups such as the Morgan firm would finance any revolutionary in hopes to gain contracts from a newly formed government.  Monopoly Capitalists were the perfect business partners to Communists which operated a state controlled regime.  And they achieved their means, guys like Armand Hammer made vast fortunes doing business with the Soviet Union.  You see, the Monopolists realized that the best market was one that was controlled.  In the example of Russia, consumers had no choices.  So if you sold shoes or pencils to the Soviet Government, you sold to all consumers (they had no choice).  It was one big customer that always paid on time.  There was no advertising.  No consumer protection.  It was a Monopoly Capitalist's wet dream.  And, remember that in this time America was undergoing massive consumer protection reforms that were not present during the previous century.  
The bankers who financed the Bolshevik revolution had no interest in politics, in Russia, or in 'helping people' - they wanted big juicy government contracts from Dictatorships.  Because in a Dictatorship, the Dictator and his friends make the rules (as in LATAM countries).  
But does the world still work like this?  It seems so, as Putin claimed in his recent meeting with Trump about Bill Browder, a guy who made unknown fortunes (Billions) in the wild times in the 90's in Russia and paid no taxes.  Then he uses his influence to buy politicians, create laws, and is a major financier behind the Russophobia campaign.  That's how these creeps use politics for gain, guys like Soros who know how to grease the palms of the wrong people to do their bidding and profit.  They only need to trick 30% of the population to create a critical mass of support, as most of their advertising efforts fly in the face of truth and reason.  But it's enough, to create a political divide and start a discussion in the wrong topic.  Since Trump has been 'defending' himself on the Russia collusion issue, it has been difficult to do anything else.  They have used this Russia topic as a stale fish to let rot in the market for days after it has spoiled, preventing any customers from coming close to the market even to discuss other issues.  
The take away here is, the deep state has existed for 100 years, as referenced by this book MUST READ: Wall St. and the Bolshevik Revolution..  Here we are just elaborating this historic fact, how the Elite manipulate the system for the benefits of the haves and to the detriment of the have-nots.  Browder, Soros, and others like this stand in the way of real democracy, as their real dream of a democracy is that of a Dictatorship with the illusion of Democracy (fixed voting machines).  As Trump attempts to 'drain the Swamp' he must confront these demons which he did in his recent meeting with Putin.  Ironically, Putin is at the end of a similar campaign in Russia in which he attempts to flush out corruption in Russia which although still widespread is on the decline.
Readers - don't forget the irony here.  The Soviet Union was made possible by Monopoly Capitalists who later made fortunes trading with them.  During the Cold War the US spent billions in taxpayer money fighting 'Communism' and finally this victory was achieved in 1991 - when the script was flipped and now the Russophobes are against "Russian Mafia" because they are greedy Capitalists!  The US convinced the Russians to be a market economy and are now chastising them for their Oligarch class, and other trappings that come with Capitalism.  Amazing! 
But it is the way of the world, we all have a role to play - and sadly for Russia their role has always been the macabre defender of Western Civilization from the evolving demographic threats whether from the Golden Horde, Third Reich, or ISIS.



Posted: July 18, 2018, 6:05 pm
As we have explained in Splitting Pennies - the global markets are not as they seem.  As we are now all aware, Trump started a trade war which really is the equivalent of a pissing contest (as it mostly is just talk), however it seems as though Trump's heart is in the right place putting America first but he needs to hire better financial advisers as the Chinese are winning this round of the game.  The chart to follow is this, as reported first on Zero Hedge (it seems the mainstream financial media is skipping over this huge glaring super important fact):

What the PBOC (The Chinese Central Bank) has been doing is artificially debasing their currency, thus offsetting any potential tariffs.  Currency Wars are nothing new and they didn't invent anything with this move.  It's simple really, the Yuan is a controlled currency (unlike others that freely float against other currencies) that means the PBOC can basically decide what it wants the rate to be, USDCNH.  So for example if Trump enacts a 20% hike on Chinese imports via tariff or taxes, and the Yuan sinks 20% - for the buyer the product is the same and likely nothing would change.  These buyers, like Home Depot for example, Wal Mart, and others - they are very sensitive about small thin margins.  An extra 1% would cause them to shop the deal.  Practically, there are hundreds of alternatives, but China has built their economy as a wholesale dumping ground where there are absolutely no labor laws, environmental controls, or other standards how their products are made, so that it really is cheap crap.  
I'd like to use an example from the real world not connected to this China problem.  Recently I visited a Gold Mine which is a tourist attraction in Georgia.  They explained there is plenty of gold there - but due to environmental regulations it would cost much more (twice or more) the current Gold price to extract it, whatever the number doesn't matter but let's say it's 5,000 Oz from this mine, if we follow all the rules and regulations.  In South Africa, in Russia, and many other places - they have no such rules.  So they are poisoning the environment!! Those jerks.. but who can stop them?  You don't see environmental protests in Red Square, liberals throwing red meat on Oligarchs as they leave posh hotels.  
The point is - considering all these costs - what is the REAL Price of the iPhone?  5,000 ? If made in USA.  Here's the problem with Trump's strategy.  And this statement is not a solution it is merely intended to elaborate on how complex this issue really is.
The FANGs have built an entire business out of being able to build cheaply without rules.  If we stripped away all that advantage, their stocks would look more like utilities.  Perhaps that is as it should be.  When investors buy Apple (AAPL) they think of technology, they think of innovation - they don't think of exploitation of child labor, forced slave labor, workers who commit suicide the conditions are so bad.  They don't consider the environmental cost (which is also ironic considering their liberal leftist base).
In Trump's trade war, we are talking about leveling the playing field.  We want to bring those jobs back home - back to Main St. 
"Make it on Wall St. - Spend it on Main St." used to be the saying.  But now it's more like "Make it on Wall St., spend it in China, Bermuda, anywhere but USA - just get the money out!"
Tax havens, cheap manufacturing bases, and other excuses have bled America dry of capital.  QE and the policies of the Fed have made the 1% even more rich - but have done nothing positive, in fact have acted more like a leech - to the real economy.  The banks didn't lend post crisis.  The rich didn't spend (at least as to help the real economy) and were so greedy that with a few token exceptions they likely made the problems worse.  This led to skyrocketing unemployment (now they are calling it 'underemployment'), opioid epidemics, explosion in crime, violence, roads and bridges in major need of repair, deterioration of schools and finally the creation of the mutant fakebook generation that has no skill other than posting to their wall.  Yes, all the problems, the bankrupt cities, deterioration of institutions, civic society - can all be laid to blame on decades of economic policies that have made USA rotten from the inside out.  Globalists have bought and sold all elements of American life and Trump is trying to reverse that.  If successful, which in the best case can take many years, we can hope for the 50s and 60s but with the benefits of technology.  Those who either are the 1% AND those who are too stupid to understand this economic analysis which you really don't need a high IQ or an economics degree to understand, represent the anti-Trump movement, and they will do anything to maintain their status quo.  
The Elite have led a bad example, not to single anyone out but here's one Mayor that really shouldn't act like this: Bloomberg.  Here's a guy who spends his free time in another country golfing and eating steaks.  While the news agency that carries his name slowly deteriorates into a liberal political tool (from what was once the only unbiased business and finance media in the world) promoting the agenda of whoever pays the most, Bloomberg is the mayor of New York but spends his spare time in Bermuda.  He's a public figure but the point is that most of the Elite are like this.  They look at America as a cash cow, certainly it's not a place you want to spend your weekends.  Why would you?  Been to the Bronx in the summer lately?  It's a heat island.
This is non-political economic analysis - the elaboration here is to demonstrate the forces at work here.  Trump is trying to take back this unfair advantage which is being exploited by: Foreign Countries, US Corporates (some, not all), the Elite, Banks, et. al.  But just like a gambler who has a winning ticket every day at the casino - if you one day tell him that his ticket is no longer a winner - of course he will react negatively, he'll sue your casino he'll do anything in his power to get back his winning ticket!  So we can expect a real push back on such policies, the most logical and rational is the Currency devaluation promulgated by the PBOC.
We can't stop environmentally devastating Gold mining in Russia - but we can set economic examples for fair business that's pro-USA.  In fact this laptop I'm writing on is made in Delaware (Eluktronics).  The BMW you drive may have been made in Spartanburg, South Carolina.  This move isn't about China vs. USA or "US vs. THEM" it's about restoring free trade to normalcy.  USA is currently giving the rest of the world a free ride (or a considerably cheaper one).  
The problem however is in the delivery.
Trump needs stronger economic advisors.  Larry Kudlow is well represented in a Clownocracy which Trump has created in his reality show, but has little understanding of macro economics and is in deep need in lessons in Mathematics.  They all have USA's interest #1 they aren't enemies they are just misinformed.  Trump may be a master negotiator and a top actor in a TV show which makes him a perfect candidate to be President but he is not a Quant nor a Gekko.  Where is Paul Volker?  Why aren't interest rates above 10%?  If Trump wants to SMASH China where it hurts all that needs to be done is raise rates.
As it stands, all of this commotion in Washington is being muted by PBOC manipulation of the USD/Yuan rate.  In order to stop this, there is one simple order: Raise rates 5%.  There are 2 sides to every coin.  As a Global Reserve Currency it's not possible to play in Yen and deflate / debase your way into exporter heaven.  For a strong country that wants USA first, aggressive rate hikes are the only way to stay ahead.  That's not likely to happen.  Of course there is an alternative route - lowering rates to ZIRP again allowing more cheap money to flow into the system (but it hasn't worked in the past and will not likely achieve anything).
This article is not meant to suggest economic policy, simply to elaborate that the Chinese are winning this round by simply devaluing their currency and they can continue to do so the higher the tariffs are raised.  So if Trump enacts a 50% tax on Asian imports it will be irrelevant if the Yuan is devalued by another 50%.  Capiche?  
Posted: July 3, 2018, 2:24 am
The Crypto Market isn't all it's cracked up to be.  Last year we wrote a book on this topic, Splitting Bits (you can get it here).  But the book was written in October, before the huge rise in price in November and December.   Just like with traditional markets - investors only seem interested in the winners.  When we said that 90% of ICOs are frauds - did anyone really hear that?  Or were they just 'listening' ?
As the digital money frenzy of the past few years cools, the crypto coin graveyard is filling up. Dead Coins lists around 800 tokens that are bereft of life, while Coinopsy estimates that more than 1,000 have bought the farm.
The carnage is mostly the consequence of failed projects from the thousands of startups that used initial coin offerings to raise billions in funding, and a global regulatory crackdown on questionable practices and scams. Names like CryptoMeth, Droplex and Roulettecoin may have been a clue to the coins’ dim prospects.
“There has obviously been a lot of fraud and hype in the ICO market,” Aaron Brown, a business author and investor who writes for Bloomberg Prophets, said in an email. “I accept figures I have seen that 80 percent of ICOs were frauds, and 10 percent lacked substance and failed shortly after raising money. Most of the remaining 10 percent will probably fail as well.”
While everyone is watching Bitcoin, many forget about the thousands of failed projects, frauds, and other failed ICOs that didn't meet the mark.


While this may seem like an obvious statement, with all the hype - some need a reminder of this.  As they say in Israel, most projects are 'shitcoin.'  Oh you think this is another joke, do you?  No no no... no no no .. it's not.
This is a great example of what comprises the majority of the Crypto Market.  Now of course, not all coins are shit coins - in fact many show signs of promise.  And also, not all ICOs are crap, there are those that actually have an underlying technology which look very promising, such as Sky Desks, Cornucopia, and others.  Some from the 'real world' are finding no trouble raising money, that is - coins that actually have viable business models - such as Box Bit.  Consulting companies are popping up everywhere.

But going back to SHIT, it really is wide spread.  So few ICOs are regulated, in fact there is only one 'official' regulated ICO and it's not an ICO it's an STO (Securities Token Offering) tZERO.
It seems that there is only one coin, that everyone agrees (at least the market) is good - and that's Bitcoin.  But yet, we don't know who created Bitcoin, even though the NSA said they can't say if they created it as this is classified (classic!).
Millions of people around the world are trying to start their own coins.  Platforms like Waves allow you to do this in a few minutes after paying the ETH fee.  But what value does a coin have which can be created in the equivalent of Microsoft Money?  
You know that many of us were not born yesterday, so we're not falling for the banana in the tailpipe.

It can be you!  Just liquidate your 401k and invest in the next 'Bitcoin' - which you probably have a friend who told you what it's going to be.  WARNING - THIS IS SARCASTIC HUMOR.  CRYPTO INVESTING IS RISKY AND YOU SHOULD ONLY INVEST FUNDS IN WHICH YOU PLAN ON LOSING IN ORDER TO OFFSET YOUR MASSIVE TAX BILL ON YOUR BITCOIN GAINS YOU HAVE CARRIED FORWARD SINCE 2017.
Posted: June 29, 2018, 6:59 pm
The New York Department of Financial Services (DFS) has fined the bank for unlawful, unsafe and unsound behaviour in its foreign exchange trading business
Deutsche Bank agreed to pay the fines for violations of New York banking law that included, among other things, skewing prices and misleading customers.
The violations were discovered during a DFS investigation, which found that the bank had acted improperly between 2007 and 2013, during which time it was the largest foreign exchange dealer in the world.
The behaviour by traders included use of multi-party chat rooms to coordinate activity and share confidential information, misleading customers on benefits of the bank, and manipulating foreign exchange currency prices and benchmark rates.
“Due to Deutsche Bank’s lax oversight in its foreign exchange business, including in some instances, supervisors engaging in improper activity, certain traders and salespeople repeatedly abused the trust of their customers and violated New York State law over the course of many years,” said DFS superintendent Maria Vullo.
She added that inadequate supervision could pose risks to the “soundness of an institution” and that compliance failures can lead to procedures harmful to customers and markets.
Vullo added that she appreciated the bank’s full cooperation and its internal investigation.
The bank will now provide plans on enhanced internal controls, an internal audit and a compliance risk management program in regards to its foreign exchange trading business.
In April, Mark Johnson, former head of HSBC Bank foreign exchange cash trading in the US became the first person to be imprisoned as part of a global crackdown on currency rigging.
 Deutsche Bank has been contacted for comment.
Posted: June 27, 2018, 2:24 am

Summary

The world forgot about the tZERO ICO.
tZERO recently announced a partnership with BOX Digital Markets.
They raised $250M, reaching their goal (according to sources).
There is nothing stopping tZERO and OSTK from a 10x or 20x return.
The crypto market has cooled down, with some sites indicating that the market is down to $268 billion market cap (total, including all coins). There is no debate that Bitcoin has failed to meet the hopes of many (that it would go to $100,000 or higher) - it has failed. The hopers and the HOLDers are still hoping and HOLDing, while major enterprise grade projects are taking shape in the crypto community, the most prominent and significant being the tZERO token trading platform, and we will explain why here.
First let's understand why this recent news is significant:

READ THE FULL ARTICLE HERE ON SEEKING ALPHA

OPEN A FOREX ACCOUNT


Posted: June 19, 2018, 5:50 pm
We've been closely watching the Crypto Currency Market if you can call it that, with all the fake data, fraud, and related problems.  One thing stands out - it's not so different than FX, commodities, futures, or stocks.  Market dynamics are market dynamics.  And as most readers of this fine site will already know - the majority of traders lose.  There's been analysis done on this, we all know how this ends.  A few early investors make a bundle and thousands or millions even are left holding the bag.  From one perspective, a bubble is much like a ponzi scheme.  In MLM, there are a few who get rich - the founders.  
Unless you are the founder - how do you know which Crypto is going to be the next Bitcoin?  You really don't.  You have no clue.  You can go to Korea and do all the due diligence you want, the fact remains that no one can see the future and even a top analyst can be wrong at times.  
Quant traders have a similar doctrine they all share - they are smart enough to know how stupid they are.  They know their own flaws and they submit to a higher power- that is Artificial Intelligence.
Computing power is now so massive that it is possible that anyone can from their own home office create an intelligent trading system that does well.  Of course, as with the laws of market dynamics, it's also possible to create a robot which is worth exactly zero - a big pile of crap.  When a quant makes an algorithm it's either priceless or worthless.  If it works, he has effectively created a money making machine.  If it doesn't work, there isn't any value to anyone not even academics.
So how do you know what method works, how to build a working bot or buy one?  There are obvious conflicts of interest in those who sell bots.  The internet has been dominated by good marketeers, while profitable quants mostly keep their strategies to themselves.  Selling a product, and trading a robot, are really 2 different skills.
Crypto so far has proven the same as most markets: impossible to trade.  Just look at this chart and tell me where you would have entered and exited without the foreknowledge of what is actually going to happen:

While many are kicking themselves for not buying and holding, I can tell you as a trader and I speak for many in the room that there is no way I would have had the patience to sit on a hugely profitable position for 3 years while the price goes parabolic.  
That's why quants develop and trade algorithms - picking entries and exits can prove to be brain-destroying.  There are dangers and risks with robots too of course, but they are of a different nature.
Choose your bot @ www.fxbot.market   ANNOUNCEMENT:  ROBOTS WANTED!  List your robot for free - connect to Handy the trade copy bot and let fxbot.market do all the work for you.

Posted: June 18, 2018, 11:36 pm
Bitcoin and other cryptocurrencies flash-crashed Saturday night, one day after the US Commodity Future Trading Commission (CFTC) sent subpoenas four cryptocurrency exchanges in an ongoing probe into bitcoin manipulation that began in late July - following the launch of bitcoin futures on the CME, according to the Wall Street Journal
CME’s bitcoin futures derive their final value from prices at four bitcoin exchangesBitstamp, Coinbase, itBit and KrakenManipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.
In delay reaction, Bitcoin fell as much as $433 or 5.6% in Saturday night trading, with some noting that the flash crash happened shortly after a 90th ranked crypto exchange, Coinrail, had suffered a "cyber intrusion", and was likely the more relevant catalyst for the crypto price drop.
While major Cryptocurrencies were down from 4.5 - 5.5%, Bitcoin Cash dropped over 8.4%. 
The CTFC subpoenas were issued after several of the exchanges refused to voluntarily share trading data with the CME after being asked last December. Of note, the CFTC regulates the CTC. 
According to the WSJ, the CME, which launched bitcoin futures in December, asked the four exchanges to share reams of trading data after its first contract settled in January, people familiar with the matter said. But several of the exchanges declined to comply, arguing the request was intrusive. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the people added.
What is curious, is that if there was indeed manipulation since the launch of bitcoin futures, it was to the downside, as the price of cryptos peaked around the time the crypto futures were launched, and are down well over 50% in the 6 months since.
Coinbase in particular has been under the watch government regulators. On February 23, Coinbase sent an official notice to around 13,000 customers to notify them they were legally required to turn over their information to the IRS
The IRS had initially asked Coinbase in July 2017 to hand over even more detailed information on every one of its then over 500,000 users in an attempt catch those cheating on their taxes. However, another court order in Nov. 2017 reduced this number to around 14,000 “high-transacting” users, which the platform now reports as 13,000, in what Coinbase calls a “partial, but still significant, victory for Coinbase and its customers.”
Coinbase told the around 13,000 affected customers that the company would be providing their taxpayer ID, name, birth date, address, and historical transaction records from 2013-2015 to the IRS within 21 days. Coinbase’s letter to these customers encourages them “to seek legal advice from an attorney promptly” if they have any questions. Their website also states that concerns may also be addressed on Coinbase’s Taxes FAQ. The ongoing legal battle between Coinbase and the US government dates back to November, 2016, when the IRS filed a “John Doe summons” in the United States District Court for the Northern District of California.
On Feb. 13, personal finance service Credit Karma released data showing that only 0.04 percent of their customers had reported cryptocurrencies on their federal tax returns. 
And in April, former New York Attorney General, Eric "we could rarely have sex without him beating me" Schneiderman, launched a probe of 13 major cryptocurrency exchanges according to the Wall Street Journal - claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.
Former AG Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.
CFTC Commissioner: Crypto is a "modern miracle"
While the CFTC, IRS and New York Attorney General's office are all cracking down on cryptocurrency exchanges, it seems to all be part of the government's embrace of virtual currencies.  Last week CFTC Commissioner Rostin Benham called cryptocurrencies a "modern miracleat the Blockchain For Impact Summit held at the UN in New York last week. 
But virtual currencies may – will – become part of the economic practices of any country, anywhere.  Let me repeat that:  these currencies are not going away and they will proliferate to every economy and every part of the planet.  Some places, small economies, may become dependent on virtual assets for survival.  And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.
We are witnessing a technological revolution.  Perhaps we are witnessing a modern miracle. -Rostin Benham
Rostin hinted at the upcoming legal action against the exchanges during his speech:
Under the CEA and Commission regulations and related guidance, exchanges have the responsibility to ensure that their Bitcoin futures products and their cash-settlement process are not readily susceptible to manipulation and the entity has sufficient capital to protect itself.  The CFTC has the authority to ensure compliance. In addition, the CFTC has legal authority over virtual currency derivatives in support of anti-fraud and manipulation including enforcement authority in the underlying markets.

Meanwhile, the official Bitcoin website removed references to Coinbase, Blockchain.com and Bitpay, according to Crypto News - only one of which, Coinbase, was subpoenaed. 
http://Bitcoin.org  just removed/censored the 2 largest US Bitcoin companies (@BitPay Payment processing and @coinbase Bitcoin Exchange). It’s a good move: Bitcoin Core is obviously no longer Bitcoin, and should ideally be removed from both @BitPay and @coinbase too.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it went after Coinflip for operating a platform for trading bitcoin options without the proper authorization. Since the agency effectively asserted its dominance over the bitcoin market with that decision, this is the first time it has given its blessing to an bitcoin options trading platform. Expect a burst of institutional trading activity to follow - especially since they approved institutional options trading in July
This post sponsored by Total Cryptos @ www.totalcryptos.com  
Posted: June 10, 2018, 8:13 pm
The Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, dramatically ratcheting up U.S. scrutiny of red-hot markets that critics say are rife with misconduct, according to four people familiar with the matter.
The investigation is focused on illegal practices that can influence prices -- such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling, said the people, who asked not to be identified because the review is private. Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, the people said.
Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets.
Bitcoin extended its Thursday declines after Bloomberg News reported the investigation, and was down 3 percent to $7,409 as of 9:32 a.m. London time. It’s down more than 20 percent since a May 4 peak.
Such concerns have prompted China to ban cryptocurrency exchanges and nations including Japan and the Philippines to regulate them, contributing to a slump that has sent Bitcoin below $8,000 this year. Still, digital coins continue to be a global investment craze, drawing legions of loyalists to industry conferences, generating celebrity endorsements and increasingly attracting the attention of Wall Street.

Traders Colluding?

The illicit tactics that the Justice Department is looking into include spoofing and wash trading -- forms of cheating that regulators have spent years trying to root out of futures and equities markets, the people said. In spoofing, a trader submits a spate of orders and then cancels them once prices move in a desired direction. Wash trades involve a cheater trading with herself to give a false impression of market demand that lures other to dive in too. Coins prosecutors are examining include Bitcoin and Ether, the people said.
A Justice Department spokesman declined to comment and CFTC officials didn’t respond to requests for comment.
The investigation, which the people said is in its early stages, is the U.S.’s latest effort to crack down on an industry that was initially embraced by those who were distrustful of banks and government control over monetary policy.
But Bitcoin’s meteoric rise -- it surged to almost $20,000 in 2017 after starting the year below $1,000 -- has been a lure for mom-and-pop investors. That’s prompted regulators to grow concerned that people are jumping into cryptocurrencies without knowing the risks. For instance, the Securities and Exchange Commission has opened dozens of investigations into initial coin offerings, in which companies sell digital tokens that can be redeemed for goods and services, due to suspicions that many are scams.
Cryptocurrency trading is fragmented on dozens of platforms across the globe, and many aren’t registered with the CFTC or SEC. As a derivatives watchdog, the CFTC doesn’t regulate what’s known as the spot market for digital tokens -- which is the trading of actual coins rather than futures linked to them. But if the agency finds fraud in spot markets, it does have authority to impose sanctions.

Fraud Target

The limited oversight of crypto trading makes it a target for crooks, said John Griffin, a University of Texas finance professor who has studied manipulation, including in digital-coin markets.
“There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”
Signs are emerging that some crypto exchanges realize the industry’s growth could be constrained if large swaths of investors conclude that trading platforms have a “buyer beware” approach to oversight.
Cameron and Tyler Winklevoss
Photographer: David Paul Morris
The Winklevoss twins, who are known for getting rich off Facebook Inc., hired Nasdaq Inc. last month to conduct surveillance of digital coins trading on their exchange, Gemini Trust Co. Cameron and Tyler Winklevoss have also urged trading platforms to band together to form a group that would serve as a self regulator for the industry.
Some market participants have alleged that crypto manipulation is rampant. Last year, a blogger flagged the actions of “Spoofy,” a nickname for a trader or group of traders that have allegedly placed $1 million orders without executing them.


Posted: May 24, 2018, 12:40 pm