Where finance and media intersect with reality


In the Blind Spot (Bund Chaos, LNG Deals, AWS)

Screenshot 2022-11-21 at 19.59.10

Susbcriber Note: The Blind Spot Wrap is becoming the new weekly free newsletter product! It will now be posted on the Blind Spot website on a Friday afternoon and will later be emailed out on Saturday morning. The wrap is authored by Izabella Kaminska, with contributions and cover from Dario Garcia Giner. You can sign up for the Blind Spot Wrap at the bottom right of our landing page.

This one-off curtain raiser is another bumper retrospective edition to catch up on two week’s of missed newsflow due to travel. Consider it a compendium of the stuff we think probably deserved more attention than it got.

Business, Econ, Market Matters:

  • The decline and fall of crypto is being expressed in very empty rooms at NFT shilling events.
  • Almost 40 per cent of small businesses in the US failed to pay their October rents.
  • The European Central Bank launched an inquiry into the energy derivative market in order to protect the stability of broader financial markets.
  • American Affairs goes long on how innovation theatre took over the economy. Quotes Izzy.
  • Austerity Britain is a really bad idea.
  • How a liquidity crunch in South Korea began at Legoland.
  • Blackrock has shelved plans to launch a Chinese bond ETF.
  • OMFIF Podcast with Tammo Diemer, member of Deutsche Finanzagentur’s management board, discussing the unprecedented volatility and challenges facing the German government bond market.

    The OMFIF reporter asks Diemer how this year’s volatility compares to anything he’s had to deal with before? Diemer says he hasn’t experienced that scale of volatility in his professional life, and he would say not only that it’s been huge but that there were days when it felt fragile. He says the Finanzagentur will have to be flexible in terms of generating the additional funding that is needed, which is why they increased their fourth-quarter calendar by 22bn euros and are now active in the repo market. He says those measures should be sufficient to fulfil all the funding needs until year-end.

    Those 18 ISINs they tapped and now keep in their own holdings, those were those bonds which were particularly expensive not just on a relative basis in the secondary market but also in the repo market. Now they have tapped them, he says, they have them in their hands to support the bund market and to generate cash simultaneously. He says it’s helpful there is strong auction for German bonds usually, so the weak auction that happened clearly reflected the difficulty in the market at the time.

A Very Crypto Collapse:

  • Ken Griffin has concerns about Generation Z investors caught up in the FTX collapse.
  • Some very interesting background about SBF’s former employer Jane Street.
  • A full timeline of the FTX collapse on Twitter.
  • Singaporean SOE Temasek had invested between $200mn and $300mn into FTX prior to its collapse.
  • Frances Coppola on the FTX-Alameda nexus.
  • David Gerard piece co-authored with Amy Castor onthe collapse of FTX.
  • An advert for FTX featuring Tom Brady and Gisele Bundchen is remarkably similar to textbook descriptions of a ponzi scheme.
  • Peter Thiel does a long-form interview with the Hoover Institution, referencing innovation malaise, resource curses and humanity having to find a balance between Armageddon and a one-world totalitarian state.
  • Grayscale bitcoin fund declines to post its proof of reserves.

Crypto Contagion and Other Shenanigans:

  • Amazon Web Services was reportedly conducting secret business in the Chinese cryptocurrency field.
  • How AWS ended up servicing crypto and blockchain in the first place.
  • What is going on at Softbank? The venture firm plunged almost 12 per cent last Monday in its biggest intraday drop since the COVID-19 pandemic.
  • Elon’s credentials are under scrutiny.

A Temporary Embarrassment of LNG Riches:

  • Ships carrying almost $2bn of natural gas are sat outside ports in Europe waiting for the opportunity to unload their reservoirs, as Europe’s gas capacity reach threshold limits. The LNG contango has reached unprecedented levels:
  • Japan is warning that there are no long-term LNG contracts available before 2026.
  • The trouble with Rishi Sunak’s LNG deal.

    As I spell out in this Unherd piece, Rishi’s grandstanding on LNG deals is meaningless unless he has control of the private energy companies that have to execute them. Cutting a supply deal is all very well, but guaranteed supply volumes are meaningless without guaranteed prices. To date, we’ve heard barely anything about how much this supply guarantee will cost us or on what terms the contracts have been struck.Then there’s the fact that the government doesn’t control the companies it has to rely on to execute these deals.In a liberal free market, all the sellers and buyers involved will continue to be non-government entities. That means they should, barring some major financial repression, be free to make their own commercial choices. What we should really be asking Sunak is what happens if the likes of Centrica, a private company, are not willing or able to purchase certain volumes at certain times, perhaps because of oversupply?  – IK

  • Germany’s LNG terminal development is getting expensive.
  • British solar firm Toucan Energy owes UK taxpayers £655mn collapses.
  • Solar manufacturing still has a major human rights problem.

    As I warned almost over a year ago at the FT, solar’s ESG credentials turn suspect when you consider that 90 per cent or more of the world’s supply of silicon wafers is produced in China – most of it in the Xinhiang province using very questionable labour practices. The whole thing becomes even more questionable when you appreciate the degree that coal-fired power generation plays in making Chinese solar industry cost-competitive.This slide chart from the Breakthrough Institute tells the story really well:As the report notes: “Such use of coal-fired electricity to manufacture solar-grade polysilicon is the rule, not the exception. All four of the major facilities operated by polysilicon producers in Xinjiang either possess direct on-site coal power units or are located within 1-2 kilometers of large coal-fired power plants (Figures 4-7).”

  • Back in July, Jonathan Ruffer had some very interesting reflections on inflation that are worth revisiting, notably that it might actually be a good thing. The quote that struck me as particularly thought-provoking was the following one:

    I see volatile inflation from here, but not so volatile as to allow the possibility that inflation is seen to be beaten. At this point in the inflation cycle, many hope that it will be beaten; as time passes, that will give way to a fear that it cannot be beaten.

    The character of inflation is that it promotes social mobility – it is the enemy of the status quo. It can be stated to be the unequivocal enemy of investors, who will be the losers in this world, and the labour force will be the winners: in times of prosperity, that will be a large workforce, and in times of deep recession, a smaller one. But the statistics show that real wages go up always, and fastest, at a time of inflation – capital pays its due to labour. Indeed, that could be rephrased as capital pays back what it has taken from labour. Inflation is a distributor, from the investor, to new aristocracies. Who are they? The young, with energy, but no capital. The workforce, if employed. The innovator. After forty years of sharp decline, the snapback might well be brutal for the investment community. The victims of inflation are the unimaginative rich, and the unemployed poor.

    Our job is to put risk into portfolios, and try (on a one year rolling basis) not to lose money. That ‘no loss of money’ emphatically is in nominal terms, not inflation-adjusted. We are currently faced, as all investors are, with every asset class under pressure, and cash on deposit still yielding next to nothing. It’s the hardest year in a long while to achieve what we set out to do. That’s just the way it is, and we’ll do our best.

Germany Divided:

  • The FT finally reports on East German Nato antipathy and the anti-sanction protests.

    Is the risk of German fragmentation priced in? East Germany’s relatively neutral stance on the Ukraine war (leaning towards anti-Nato) is hard to understand for other former communist bloc citizens, most of whom remain staunchly anti-Russian. It seems an inexplicable anomaly. This makes me wonder if there’s more to this story than meets the eye. – IK

Civil and Human Rights:

  • Open Rights Group shares their concern with the British government announcing their intention to read UK residents’ metre readings to conduct “financial checks” for “investigation, detection, or prosecution of criminal offences including fraud”.
  • A raft of articles related to the ongoing debacle in Canada as the Rouleau Commission studies the Trudeau government’s shambolic response to this winter’s Freedom Convoy.

    Trudeau told Ontario Premier Doug Ford that Freedom Convoy protesters weren’t ‘very smart people’.  But the Rouleau Commission has now established that the Freedom Convoy was not foreign funded and did not represent a threat to democracy in a blow to Trudeau’s right to invoke Emergency Act. Windsor Mayor Drew Dilkens testified that the Emergencies Act measures were not used to clear the blockades caused by the Freedom Convoy on the Ambassador Bridge. Canadian police relied on external media reports to asses the risk of violence presented by the Freedom Convoy as ‘armed and dangerous’. – DGG

  • The Truckers for Freedom have their own documentary.
  • British journalists keep getting arrested for covering the ‘Just Stop Oil’ protests on the M24 and M25.
  • Politico asks why do we still not have the JFK assassination files?
  • IKEA has been using Belarus prisoners to produce its furniture.

    Arguably not as surprising as US prisoners being used to make Patriot missiles, some years ago.

  • An armed gang attempts to rob a Spanish security executive at gunpoint in one of the fanciest districts of Madrid but fails when the bodyguard fires back.
  • Matt Taibi’s latest on the FBI’s shift from a national police to a domestic espionage agency.

Geopolitical Pivots:

  • Discontent following the slow enforcement of a license plate law in Kosovo, where old Serbian license plates must be changed to Kosovo-designated plates, heats up – Serbian flags were raised by ethnic Serbs in the Northern Kosovo region amidst Serbian resignations from the Kosovo government, as the Serbian military is placed on high alert.
  • Hungary blocked a EU plan to provide €18bn in aid to Ukraine next year.
  • The motivations behind Germany’s Sky Shield – the German-led initiative to create a multi-tiered European missile defence system.

Unidentified Things:

  • Former French Intelligence Chief Alain Julliet believes UFOs may be neither extraterrestrial, nor from any country on Earth, but from a ‘parallel world’.

    It goes to show – if you want quality UFO content, you can rely on the French. Alain Julliet’s argument closely resembles Jacques Vallee’s claims regarding the interdimensional origins behind genuine UFOs. As we noted in a recent piece highlighting the possibility of interdimensional origins, this possibility complicates their scientific study – DGG

Media Matters:

  • In the United States, revenue from newspaper circulation is now higher than advertisement revenue.
  • How SBF sweet-talked the media.
  • Call of Duty is a government psyops and Mint Press has the documents to prove it (allegedly).

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