Where finance and media intersect with reality


In The Blind Spot (Temasek, BlackRock, Poland)


This week’s edition of the Blind Spot Wrap was compiled by Izabella Kaminska (IK) and Dario Garcia Giner (DGG).

Business, Econ & Finance etc:

  • Did the Fed just admit that inflation may be non-transitory?

    Oh to remember the good old days when the fintwit community was so sure all inflation would be transitory. Even now, there’s an unhealthy market assumption that inflation will be beaten down by central banks in the end. That assumption extends to the belief that a slowdown — which is currently mostly impacting the hyper-growth tech sector (that was never sustainable) — will lead to job cuts and broad demand destruction. Sadly, this assumption ignores the compartmentalised nature of current inflation trends. Low productivity sectors and the tech jobs within them will be lost, for sure, but hyper productive sectors will continue to expand.

    And on that front, finally, there is a partial admission from Fed vice chair Lael Brainard that the restructuring to come will be something far more akin to a non-transitory inflation episode:

    “To conclude, the experience with the pandemic and the war highlights challenges for monetary policy in responding to supply shocks. A protracted series of adverse supply shocks could persistently weigh on potential output or could risk pushing inflation expectations above target in ways that call for monetary policy to tighten for risk-management reasons. More speculatively, it is possible that longer-term changes—such as those associated with labor supply, deglobalization, and climate change—could reduce the elasticity of supply and increase inflation volatility into the future.”

    – IK

  • Virtu Financial is trying to force the Securities and Exchange Commission to provide information about its rulemaking process through a Freedom of Information Act lawsuit.

    Virtu is a high frequency trading company and market maker, which means it definitely has a vested interest in pushing back against regulatory overreach. Even so, the company is in the right here. Sam Bankman-Fried’s FTX regulatory drama only made clear what many in the industry have been saying for years: that the SEC rule-making process is a nightmare, especially under Gensler. The market structure proposal they’re pushing back in particular is extreme overreach, experts tell me. – IK

  • The ECB blog takes on Bitcoin in a paper titled ‘Bitcoin’s last stand.’

    The ECB’s director general of market infrastructure and payments Ulrich Bindseil and his advisor Jürgen Schaaf make some strong points, including that regulation too often is confused with approval, and that the pressure for regulators to move in the name of “innovation” is unwarranted.

    Particularly noteworthy paragraphs include (my emphasis).

    “Large investors also fund lobbyists who push their case with lawmakers and regulators. In the US alone, the number of crypto lobbyists has almost tripled from 115 in 2018 to 320 in 2021. Their names sometimes read like a who’s who of US regulators.But lobbying activities need a sounding board to have an impact. Indeed, lawmakers have sometimes facilitated the influx of funds by supporting the supposed merits of Bitcoin and offering regulation that gave the impression that crypto assets are just another asset class. Yet the risks of crypto assets are undisputed among regulators. In July, the Financial Stability Board (FSB) called for crypto assets and markets to be subject to effective regulation and supervision commensurate with the risks they pose – along the doctrine of “same risk, same regulation”.


    “The current regulation of cryptocurrencies is partly shaped by misconceptions. The belief that space must be given to innovation at all costs stubbornly persists. Since Bitcoin is based on a new technology – DLT / Blockchain – it would have a high transformation potential. Firstly, these technologies have so far created limited value for society – no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it. – IK

  • Major TikTok investor Tim Gong purchases two condominiums at the so-called ‘Billionaires Row’ in Manhattan for $34mn.
  • Italy takes control of Lukoil’s refinery in Sicily.
  • Record $3 bn exodus hits credit LQD ETF in abrupt risk reversal (chart via Bloomberg):
  • Mortgages denominated in Swiss francs still constitute 19 per cent of the housing loan portfolio in Poland, an increasingly problematic issue due to the zloty’s devaluation.

    Extraordinary that this pre-GFC initiated problem still persists in Poland today and that Polish banks have still not absorbed the risks. – IK

Blackout Watch:

  • France prepares municipalities for potential rolling blackouts this winter, indicating rail and emergency hotline services would also be affected.
  • Switzerland considers limiting the use of electric vehicles under a four-step plan to forestall power cuts and blackouts.
  • Amidst faltering wind streams, Germany is burning so much coal its electricity carbon intensity is higher than South Africa or India’s, says Bloomberg’s Javier Blas.

Is BlackRock too big to fail?

  • Florida pulls out over $2bn of its holdings from BlackRock.
  • While the Bank of England planned to sell £40bn over a year and let £40bn mature without reinvestment, BlackRock and other LDI fund managers had threatened to firesell £50bn in gilts.

    This is an old Tweet from repo-tuned academic Daniela Gabor on October 6. But the question remains: was BlackRock really saved by the Bank of England or not?

  • BlackRock’s CEO Larry Fink believes that FTX’s implosion means most cryptocurrency firms will fold.

    It’s funny because it was only in August that Coinbase and Blackrock joined forces “to create new access points for institutional crypto adopttion by connecting Coinbase Prime to Aladdin”. The fact there is a Coinbase Prime at all should be a matter of concern at this point. Does anyone really know how it operates?  Should we have a look at what employees at Coinbase Prime describe their daily activities as?

    Here’s what Brian Foster, director of Coinbase Prime & Coinbase Ventures, says he is responsible for on his Linkedin page:

    Coinbase Ventures makes minority investments in early stage startups and protocol developers building the future of the crypto economy. Our 300+ investments span trading infrastructure, institutional tooling, protocols, data analytics, custody and security, DeFi, and more.”

    And here’s some detail from Bryan Callahan’s Linkedin. He describes himself as working for “Coinbase Prime – Introducing Brokers” [what an odd job title]. In that capacity:

Media Matters:

  • Matt Taibbi and Douglas Murray debate Malcolm Gladwell and Michelle Goldberg on why trust in mainstream media has fallen to an all-time low. The former manage to turn the audience to their side.
  • The British Online Safety Bill will insert a ‘spy clause’ which allows for state-led mass surveillance of the private sector’s communication services like WhatsApp or Telegram.

Crypto Crisis:

  • Redditors believe Binance is misleading users about its newly released proof of reserves mechanisms for clients.
  • Putin reportedly called for an international settlements scheme that is based on blockchain and digital currencies.
  • Maxine Waters, chairwoman of the US House Committee on Financial Services, says she appreciates Sam Bankman-Fried’s candidness and invites him to participate in the galactic senate on the 13th.
  • NSA whistleblower Edward Snowden believes that crypto is heading in the wrong direction.

    Crypto purists will be delighted if the whole sector recentres around core values like censorship resistance and decentralisation, rather than greed and speculation.- IK

  • Crypto exchange Kraken is laying off 30 per cent of its workforce.
  • Anthony Lewis, occasional blogger and former blockchain consultant now at Temasek, outlines how the Singaporean state asset manager began its crypto adoption journey in this unmissable fireside interview.

    The key takeaway and why you should at least click on the video is that this could very well be the man who conviced Temasek to invest in FTX. Hindsight, of course, is a wonderful thing. But for the full schadenfreude glory zoom ahead to the 24 min mark.

    A flavour of the diaologue goes like this (ouch):


    “So our first direct investment was FTX and FTX US…you know, when we first started, the legal and reg department were all like: ‘oh this is all illegal! They’re doing all of this unregulated legal stuff!?’ Well, if an activity is unregulated you don’t need a license to do that. You can just go and do that. It doesn’t mean you’re doing anything illegal it just means it’s not a licensed activity.” – IK

Politics, Politics, Politics:

  • Allister Heath at The Telegraph is not amused by the decrepit state of public affairs in the United Kingdom under Rishi Sunak’s premiership.
  • In a sign of consumers tiring of contemporary events, sales of fiction books since 2019 have risen by 45 per cent while non-fiction sales have dropped by 2 per cent.
  • The Pentagon is unable to account for over $2tn in assets. (Again.)
  • Ukrainian officials have banned certain Russian-affiliated religious sects.
  • Several editors and publishers of major media organisations have pushed for the US government to drop its prosecution of WikiLeaks co-founder Julian Assange.
  • Founder of the original leaking site Cryptome, John Young, has asked the US Department of Justice to make him a co-defendant with Julian Assange.
  • The Polish government is planning a commission to investigate if Russia influenced energy policies of the Tusk administration.

    The wider context is that both PiS (the Law and Justice Party) and Tusk’s Platforma Obywatelska (Civic Platform) are accusing eachother of being secretly influenced by Russia. There is also a lot of history here too. Some of it even connects to the Smolensk air disaster of 2010, which took the life of the then President Lech Kaczynski, the twin brother of Jaroslaw, the current leader of PiS.

    One of the longstanding conspiracies is that Poland was set to go big into shale gas exploration. But then by October 2010, it was inexplicably striking deals with Gazprom instead on very unfavourable terms. – IK

  • Additional details on China’s new orbital hypersonic weapons have been released.
  • Five bomb-containing letters have been sent to various addresses in Madrid.

    In November, a letter carrying a bomb was received at La Moncloa, residence of the Spanish President. Today, five additional letters have been counted – two at the Ukrainian embassy, another at an armaments factory in Zaragoza and two more at an aerial base in Torrejon de Ardoz and the Ministry of Defence. Though police believe the same individual is behind the letters, no additional information on the perpetrator has been disclosed. – DGG

Death On The Blockchain:

  • Russian cryptocurrency billionaire dies in a mysterious helicopter crash in good weather.

    This is the third such Russian crypto billionaire to have died this month. Last week, Tianian Kullander died in his sleep.

    And earlier in the month, Nikolai Mushegian drowned on a Puerto Rican beach after tweeting that the CIA and Mossad were planning to assasinate him. Conspiracies abound.

    As an aside, a formerly incarcerated source of mine reminded me this week that crypto mega fortunes inadvertently befell many felons while they were doing time. Even if they had only dabbled with crypto in the early days — and many would have been inclined to — the process of doing time would have seen their fortunes grow exponentially. Prison, after all, is a natural place to Hodl. Upon eventual release … well, let’s just say the plotline of Demolition Man comes to mind  – IK & DGG

China Syndrome:

  • Chinese social media users are claiming that their Huawei phones are automatically deleting videos taken of ongoing anti-lockdown protests.
  • Anti-lockdown protests went from being labelled conspiracy theorists, anti-vaxxers, or far-right protesters when done in the West, to heroic figures of the Chinese lockdowns.

WW3 Watch:

  • Unherd’s Freddie Sayers sits down with international relations realist, Professor John Mearsheimer, who believes the West is playing “Russian roulette” with its actions in Ukraine.
  • Biden outlines his administration is ready to speak to Putin ‘if he is looking for way to end the war.’

Biological Matters:

  • The Ninth Review meeting of the Biological Weapons Convention is underway in Geneva.
  • Emails between Fauci and virologists regarding Covid-19 have finally been released in an unredacted form.
  • Sir Jeremy Farrar, the head of the Wellcome Trust who previously publicly dismissed the lab leak theory, admitted in private correspondence that it was 50/50 whether the coronavirus was man-made or zoonotic.
  • Leaked internal documents revealed that listeria and mould were found at least 11 times in Beyond Meat’s Pennsylvania facility last year.
  • A Swiss doctor was forcibly imprisoned and transferred to a psychiatric ward for speaking out against COVID-19 lockdowns after being diagnosed with ‘Covid Insanity’, and then forced to medicate as a condition for his release.

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