Category Archives: Investing

Wall Street’s Takeover of Nature Advances with Launch of New Asset Class, by Whitney Webb

There is nothing Wall Street can’t monetize, and that includes nature. From Whitney Webb at unlimitedhangout.com:

A project of the multilateral development banking system, the Rockefeller Foundation and the New York Stock Exchange recently created a new asset class that will put, not just the natural world, but the processes underpinning all life, up for sale under the guise of promoting “sustainability.

Last month, the New York Stock Exchange (NYSE) announced it had developed a new asset class and accompanying listing vehicle meant “to preserve and restore the natural assets that ultimately underpin the ability for there to be life on Earth.” Called a natural asset company, or NAC, the vehicle will allow for the formation of specialized corporations “that hold the rights to the ecosystem services produced on a given chunk of land, services like carbon sequestration or clean water.” These NACs will then maintain, manage and grow the natural assets they commodify, with the end of goal of maximizing the aspects of that natural asset that are deemed by the company to be profitable.

Though described as acting like “any other entity” on the NYSE, it is alleged that NACs “will use the funds to help preserve a rain forest or undertake other conservation efforts, like changing a farm’s conventional agricultural production practices.” Yet, as explained towards the end of this article, even the creators of NACs admit that the ultimate goal is to extract near-infinite profits from the natural processes they seek to quantify and then monetize.

NYSE COO Michael Blaugrund alluded to this when he said the following regarding the launch of NACs: “Our hope is that owning a natural asset company is going to be a way that an increasingly broad range of investors have the ability to invest in something that’s intrinsically valuable, but, up to this point, was really excluded from the financial markets.”

Framed with the lofty talk of “sustainability” and “conservation”, media reports on the move in outlets like Fortune couldn’t avoid noting that NACs open the doors to “a new form of sustainable investment” which “has enthralled the likes of BlackRock CEO Larry Fink over the past several years even though there remain big, unanswered questions about it.” Fink, one of the world’s most powerful financial oligarchs, is and has long been a corporate raider, not an environmentalist, and his excitement about NACs should give even its most enthusiastic proponents pause if this endeavor was really about advancing conservation, as is being claimed.

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“Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play, by Tyler Durden

The financial situation of a number of Chinese property developers is dire, but the most serious issue is the state of the Chinese property market. Property is a huge part of Chinese people’s assets, and weakness there will translate directly into economic weakness and perhaps a recession. From Tyler Durden at zerohedge.com:

o matter how the Evergrande drama plays out – whether it culminates with an uncontrolled, chaotic default and/or distressed asset sale liquidation, a controlled restructuring where bondholders get some compensation, or with Beijing blinking and bailing out the core pillar of China’s housing market – remember that Evergrande is just a symptom of the trends that have whipsawed China’s property market in the past year, which has seen significant contraction as a result of Beijing policies seeking to tighten financial conditions as part of Xi’s new “common prosperity” drive which among other things, seeks to make housing much more affordable to everyone, not just the richest.

As such, any contagion from the ongoing turmoil sweeping China’s heavily indebted property sector will impact not the banks, which are all state-owned entities and whose exposure to insolvent developers can easily be patched up by the state, but the property sector itself, which as Goldman recently calculated is worth $62 trillion making it the world’s largest asset class, contributes a mind-boggling 29% of Chinese GDP (compared to 6.2% in the US) and represents 62% of household wealth.

It’s also why we said that for Beijing the focus is not so much about Evegrande, but about preserving confidence in the property sector.

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How to Fight the Investment Enemies Now Mobilizing, by MN Gordon

As an investor, what do you do if the Federal Reserve can’t bail markets out? From MN Gordon at economicprism.com:

Default averted!

That was the dispatch made by the popular press on Thursday following word there would be a short-term debt limit extension.  But was a default really averted?

Was a default averted when Nixon closed the gold window and put the world on an irredeemable paper standard?

Naturally, Wall Street didn’t bother considering the long-term effects of Washington’s policies of infinite debt – or the soft inflationary default Congress is engineering.  Instead, Wall Street did what it loves to do most; it bid up the major stock market indexes.

What a difference a week makes.  September may have been painful for stocks.  But the first week of October has been all pleasure.

Once again, Washington has a plan to keep the money spigots flowing.  It’s roughly the same plan that’s been in operation for the last 50 years.  The playbook is real simple: kick the can down the road.

Wall Street generally favors this plan.  More debt, both public and private, has loosely translated to higher stock market indexes.  And higher stock prices make everyone believe they’re getting rich.

There have been several notable episodic exceptions.  But, by and large, the rampant influx of debt based money has brought forth higher stock market indexes.

Still, this relationship is not set in stone.  What if things don’t go according to plan?  What if the recent past turns out to be much different than the near future?

What would then happen to investors?

We’ll have more on this in just a moment.  But first, some perspective is needed…

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The No-coiners don’t get it: It’s not up to the government, by Mark Jeftovic

Cryptocurrencies don’t need governments’ permission. From Mark Jeftovic at bombthrower.com:

Prometheus Donation of Fire to Mankind – Wilhelm Luksch 1925-1927

My last couple of posts, the first on why a China-style Bitcoin ban can’t happen in Westernized liberal democracies  and the second on how cryptos are a beneficial counterforce to the coming CBDCs seem to have a hit a nerve.

More people than usual made the trip all the way over here to my blog to be sure to tell me how clueless I am and there was a lot of defeatism  in the comments on Zerohedge that all converged around a theme that governments will simply not permit the use of cryptocurrencies once their existence ceases to suit them.

I’ve been involved in cryptos since 2013, and for a long time I too was strategizing out the game theory around why would governments permit cryptos to gain traction.

It wasn’t until relatively recently, that I started to fully grasp something I read a long time ago, before all this crypto business ever started. It was in a rather obscure book by one W R Clement called Quantum Jump: A survival guide for the new Renaissance and it helped me understand the key point of today’s post.

I started alluding to it in A Network State Primer that described how what we understand as “the nation state” is in the process of losing relevance to ascendent network states and crypto-claves. You can chart out the structural differences between those three different governance models based on what the architecture of the monetary layer is:

When it comes to technological leaps like the internet and then public key cryptography and decentralized, non-state, sound money; those who eschew the new paradigms generally do so because they have difficulty fitting the new model into their worldview.

People like Alvin Toffler called this “Future Shock” and he ascribed it mostly to an accelerating rate of change. He wasn’t wrong about that, but what Clement layered atop of that was the ascending level of abstraction.

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Why The West Can’t Ban Bitcoin The Way China Did, by Mark Jeftovic

While they’re headed that direction, the West’s governments are not yet dictatorships like China’s. They’d have to convert themselves to full-fledged totalitarian states to do what China did to Bitcoin. From Mark Jeftovic at bombthrower.com:

Only a complete “dictatorship of the proletariat” can kill Bitcoin

Evergrande is being called China’s “Lehman moment” and overnight the PBC closed the loop on their clampdown on crypto with a total ban on virtual currency transactions.

For those paying attention, however, China isn’t just moving against crypto, they’ve been bringing their entire technology sector to heel. They also stated that it is time to redistribute wealth from the top tier of the nations wealth holders to the rest of the peasant class.

This isn’t a return to their Communist roots as much as it is a move of self-preservation against rising internal powers. In the words of my friend Charles Hugh Smith via some correspondence we’ve been having this week “Xi has set out to crush the Network State”.

I said in my earlier Network State Primer about the coming tension between Nation States and Network States: the former will go down swinging.

The power structures of the nation states won’t go gently into the dustbin of history. They will go down swinging, over a transitional era that may span decades or longer, similar to the centuries long tensions between monarchs and the Papacy that shaped the transition from the Middle Ages into the Renaissance.

China has decided to make their last stand of the Nation State, now. Here at this moment in time. They will not bail out Evergrande, they will allow their side of the Everything Bubble to pop, and they will use the economic crash to make a final sweep of consolidation of their power. They will make sure their Big Tech knows who is in charge and that it is not them.

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What’s Really Going On In China, by Charles Hugh Smith

Is China trying to stop the easy credit shenanigans and fun and games that characterize the US financial system? From Charles Hugh Smith at oftwominds.com:

Losses will be taken and sacrifices enforced on those who don’t understand the Chinese state will no longer absorb the losses of speculative excess.

Let’s start by stipulating that no one outside President Xi’s inner circle really knows what’s going on in China, and so my comments here are systemic observations, not claims of insider knowledge.

Many western observers have noted the centrality of Marxist-Leninist-Maoist doctrine in President Xi’s writings. This is somewhat akin to invoking America’s Founding Fathers to support one’s current policies: if you’re trying to modify state policy in China, you have to explain it in the context of the Chinese Communist Party’s history and doctrines. Never mind if the ideals were not met; what’s important is establishing continuity and resonance with the history of China, the core doctrines of Chinese Communism and the CCP’s leadership based on those doctrines.

That said, we should be careful not to read too much into doctrinal evocations such as common prosperity, which are useful conceptual anchors and slogans but not the full story.

What’s actually happening in China isn’t Marxist or Capitalist–it’s plain old non-ideological human greed, hubris and magical thinking manifesting as moral hazard running amok.. Moral hazard— the separation of risk and consequence, as speculators make increasingly risky bets because they know any losses will be covered by the state–is effectively the new State Religion in China: everyone is absolutely confident that every punter, especially all the rich, powerful, well-connected speculators–will be bailed out by the central government.

Greed knows no bounds when a speculator is insulated from risk, for people have an insatiable appetite for risky bets when the gains will be theirs to keep but any losses will be covered by the government.

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From the Notebook: Evergrande and How About that Dollar Bear Market . . . by Tom Luongo

It appears that Xi Jingping is well aware of American and British color revolution and regime change efforts and is determined to avoid that in China. From Tom Luongo at tomluongo.me:

From the Notebook posts are reworks of articles originally published for my Patrons. This one was first published on September 7th.

While it’s becoming easier to see how the various projects supporting the Great Reset are progressing just by reading the headlines and seeing how things are spun to manufacture consent, sometimes a story is deeper than the headlines.

I’ve watched the situation surrounding Evergrande’s collapse in China unfold like everyone else in this space.  Like many of you, and hat tip to Zerohedge for being on this from the beginning, I could tease out some of the story just by following the progression of the headlines, especially in light of China’s big changes in attitude towards foreign capital.

Over the past 2 years China has cracked down on a number of sectors within its economy. It started with the moves on Hong Kong and the extradition law which sparked huge protests in the summer of 2019. It evolved into the curious disappearance from public life for months of Alibaba CEO Jack Ma. This summer we saw China uproot the cryptocurrency market by kicking out all of the bitcoin miners over a weekend, they’ve doubled down on this policy again recently.

In September 2019 I wrote that I thought China’s moves on Hong Kong were pre-emptive moves to undermine British influence there through the banking system. Because, the protests in Hong Kong last year looked an awful lot like Portland’s and Minsk’s and Kiev’s (2014) etc. etc.

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China Braces for ‘Nightmare Scenario’ As Evergrande Offers Broke Investors Discounted Apartments, by Tyler Durden

We’re keeping an eye on Evergrande because it’s big and interconnected enough that it could be the first domino falling in a chain reaction that leads to a global financial crisis. From Tyler Durden at zerohedge.com:

Up until now the collapse of China’s Evergrande was very much a slow motion affair, captured perhaps best by Forte Securities trader Keith Temperton who said that “the Asian banks will get hit hard if there’s a default, but then there will be a 10-year recovery process. The market’s getting a hang of it. The way they’ve managed the news flow seems quite clever. They haven’t let a swathe of bad news at once.” But while Beijing was indeed successful in extending the period of collapse as long as possible, now that Evergrande is effectively insolvent and having suspended its bonds from trading we have finally gotten to the endgame and the realization that hundreds of billions in capital (Evergrande’s total debt was just over $300 billion) is gone for ever.

This realization has already prompted angry protesters at China Evergrande Group offices across the country as the developer has fallen further behind on promises to more than 70,000 investors. Construction of unfinished properties with enough floor space to cover three-fourths of Manhattan grinds to a halt, leaving more than a million homebuyers in limbo.

In an effort to appease its angry (and very soon, poor) stakeholders, Evergrande plans to let consumers and staff bid on discounted properties this month to repay them for billions in overdue investment products as the embattled developer seeks to preserve cash, according to people familiar with the matter.

According to Bloomberg, the company will organize an online property event by Sept. 30 for investors who opt for discounted real estate in lieu of cash, said two employees who were briefed on an internal call Thursday and asked not to be identified. The world’s most-indebted property developer is pushing the discounted real estate as the preferred of three options for angry investors seeking repayments.

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The funny-money game, by Alasdair Macleod

Eventually fiat-debt-blown bubbles pop, and down go bond, stock, and most other financial asset prices. One non-financial asset that will keep you in good stead will be precious metals. From Alasdair Macleod at goldmoney.com:

The sense of general unease that I detect among those I meet and discuss economics and financial matters with is increasing —with good reason. Clearly, what everyone calls inflation, rising prices or more accurately currency debasement, will lead to higher interest rates, threatening markets which are unmistakably in bubble territory.

The consequences of rising prices and interest rates are still being badly underestimated.

In this article I get to the source of the inflation problem, which is the monetary debasement of the dollar and other major currencies. An important part of the problem is that mathematical economists have lost sight of what their beloved statistics represent —none more so than with GDP.

I explain why GDP is simply the total of accumulating currency and credit which is wrongly taken reflect economic progress – there being no such thing as economic growth. Once that point is grasped, the significance of this basic error becomes clear, and the fiat currency paradigm is revealed for what it is: a funny-money game that will go horribly wrong.

There is only one escape from it, and that is to own the one form of money that is no one’s counterparty risk; the one form of money that always comes to humanity’s rescue when fiat fails.

And that is gold. It is neglected by nearly everyone because it is the anti-bubble. The more that people believe in fiat-denominated assets, the less they believe in gold. That is until their funny-money games implode, inevitably triggered by sharply rising interest rates.

Introduction

Those of us with grey hairs gained in financial markets can, or should, recognise that after fifty years the funny-money game is ending. Accelerated money printing has led to what greenhorn commentators call inflation. It is not, as they claim, rising prices: they are the consequence of the monetary expansion which was the original and remains the correct definition of inflation.

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Is Anyone Willing to Call the Top of the Everything Bubble? by Charles Hugh Smith

Charles Hugh Smith is bravely calling the top of the everything bubble for sometime this month. Many of us won’t be too surprised if he’s right. From Charles Hugh Smith at oftwominds.com:

Can extremes become too extreme to continue higher? We’re about to find out.

Is anyone willing to call the top of the Everything bubble? The short answer is no. Anyone earning money managing other people’s money cannot afford to be wrong, and so everyone in the herd prevaricates on timing. The herd has seen what happens to those who call the top and then twist in the wind as the market continues rocketing higher.

Money managers live in segments of three months. If you miss one quarter, the clock starts ticking. If the S&P 500 beats your fund’s return a second time because you were bearish in a bubble, your doom is sealed.

When the bubble finally pops and everyone but a handful of secretive Bears is crushed, the rationalization will cover everyone’s failure: “nobody could have seen this coming.”

Actually, everyone can see it coming, but the tsunami of central bank liquidity has washed away any semblance of rationality. My friend and colleague Zeus Y. recently summarized the consequences of this decoupling of markets and reality:

“I used to be with the Bears until the uncoupling was complete when the Fed started guaranteeing non-investment grade junk bonds. At that point, any semblance of sanity, much less probity, much less integrity was gone. Rinse and repeat with digital dollars going into the tens and even hundreds of trillions of dollars.

For two decades we fiscal sanity-ists have been assuming SOME baseline reality. I see none in sight and still plenty of assets to plunder and pump and still resources to suck and suckers to shake down. The system is running hot and wild on its own algorithms, and actual people are lying back and simply lapping up the “passive” income created by delusion-made-reality.

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