A Few Good Bats

el gato malo: https://boriquagato.substack.com/p/a-few-good-bats


fauci: son, we live in a world that has bats, and those bats have to be experimented on by men with NIAID grants. who’s gonna do it? you? the wimps at DARPA? i have a greater responsibility than you can possibly fathom. you weep for wuhan and you curse their institute of virology. you have that luxury. you have the luxury of not knowing what i know — that this global pandemic, while tragic, probably saved lives; and my existence, while grotesque and incomprehensible to you, saves lives.

you don’t want the truth because deep down in places you don’t talk about at parties, you want me in that cave — you need me in that cave.


we use words like “spike protein” “gain of function” “illegal vaccine program.” we use these words as the backbone of a life spent feathering nests and generating plausible deniability. you use them as a punch line.

i have neither the time nor the inclination to explain myself to a man who rises and sleeps under the nagging cough of the diseases that i provide and then questions the side effects of the half baked vaccines we licensed out and claimed would stop them.

i would rather that you just said “thank you” and went on your way. otherwise, i suggest you pick up a virus and serially passage it though some rodents! either way, i don’t give a DAMN what you think you’re entitled to!

Dr. Fauci accuses Rand Paul of fueling threats against him

senator paul: did you order the gain of function?

fauci: I did the job —

21 Things You Never Knew About 'A Few Good Men' | Moviefone

senator paul: — did you order the gain of function?!

A Few Good Men (1992)


and, FADE.


The Market Clearing Price for a National Suicide Pact


Doomberg on the EU’s Carbon Credits: https://doomberg.substack.com/p/a-banana-worth-squeezing?r=9ozk&utm_campaign=post&utm_medium=email

To me, left unchecked, the price of carbon goes to infinity.” – Lawson Steele

On Friday, October 24, 2008, Volkswagen’s (VW) stock closed at EUR 210 per share, down 50% over the prior two weeks. Like many manufacturing companies, VW was reeling from the global financial crisis. Because of its high debt load and diminishing prospects, the stock was a popular pick among short sellers and approximately 13% of the total shares outstanding were sold short. That might not seem like a very high number, but as a percent of the company’s free float it was substantial. At that time, Porsche owned 42.6% of VW’s shares and the German state of Lower Saxony held 20.3%.

On Sunday, October 26, 2008, Porsche issued a press release that would kick off one of the most famous short squeezes of all time. Here’s how the English version of the release began (emphasis added through this piece):

Due to the dramatic distortions on the financial markets Porsche Automobil Holding SE, Stuttgart, has decided over the weekend to disclose its holdings in shares and hedging positions related to the takeover of Volkswagen AG, Wolfsburg. At the end of last week Porsche SE held 42.6 percent of the Volkswagen ordinary shares and in addition 31.5 percent in so called cash settled options relating to Volkswagen ordinary shares to hedge against price risks, representing a total of 74.1 percent. Upon settlement of these options Porsche will receive in cash the difference between the then actual Volkswagen share price and the underlying strike price in cash. The Volkswagen shares will be bought in each case at market price.

Further down in the same press release, Porsche lays bare their motivations and strategy with classic German humor:

Porsche has decided to make this announcement after it became clear that there are by far more short positions in the market than expected. The disclosure should give so called short sellers – meaning financial institutions which have betted or are still betting on a falling share price in Volkswagen – the opportunity to settle their relevant positions without rush and without facing major risks.

It doesn’t take a PhD in mathematics to understand that if Porsche claims to own 74.1% of VW and Lower Saxony has 20.3%, that leaves only 5.6% for everybody else. With short sellers on the hook to buy back 13% of the shares outstanding, panic buying in an effort to close out their short positions ensued. VW’s stock soared in the days following Porsche’s audacious gambit – at one point crossing EUR 1,000 per share – temporarily making the struggling automaker the most valuable company in the world. The crisis abated when Porsche announced it would close a portion of its option position, thereby freeing up float for short sellers to cover. Market participants lost billions in the fiasco, and there’s no telling where the price of VW might have risen absent Porsche’s opening of the release valve.

As argued in this outstanding and comprehensive research paper published just months ago in the Journal of Financial Economics, Porsche’s move was blatant and plainly illegal stock manipulation driven by their own looming insolvency. Ironically, Porsche’s bankruptcy risk arose from the very same options strategy it bragged about in its press release, although a critical detail went undisclosed: to pay for its call options in VW, Porsche had sold put options on the stock. As VW’s stock fell in the weeks prior to the infamous press release, Porsche faced a series of margin calls as those puts went in the money. If it had fallen much further, Porsche would have defaulted on its obligations. Instead, Porsche pocketed at least EURO 6 billion in illicit gains from the squeeze, turning a catastrophic and undisclosed trading blunder into a windfall.

Short squeezes are a hot topic in today’s frothy markets, which is ironic given how few short sellers are left standing. This is especially true with meme stonk AMC Entertainment Holdings (AMC), which we’ve written about here and here. There’s an entire cult of retail investors – the self-described AMC apes – who are conspiring together in the hopes of recreating a VW-like frenzy in what they call the mother of all short squeezes (MOASS). No really, MOASS is a thing. Find your way onto their Twitter Spaces “conference calls” and you’ll hear talk of dark pools, evil hedge funds, and various other theories concocted to rationalize why this squeeze has thus far failed to materialize.

Putting aside the fact that conspiring to manipulate the price of any security is illegal – even for a group of retail investors openly doing it on social media for all the authorities to see – we submit that the apes are chasing the wrong banana, because the real MOASS might well unfold in Europe in the coming months.

We tell the VW short squeeze story – and direct the apes to turn their attention to Europe – because we were reminded of both when we listened to this spellbinding edition of Chris Dark’s fantastic podcast Dr Dark After Dark. Dark interviewed Lawson Steele, a Senior Analyst at Berenberg Bank who has covered utilities for nearly three decades. In early 2018, Steele made a prescient call on where he thought the price of carbon credits was headed in Europe. Since he got long the trade, the price of those credits is up twelvefold, and he makes a compelling case for why this may be just the beginning. You can follow Dark’s Twitter account here and Steele’s account here.

The European Union Emissions Trading System (EU ETS) is designed to leverage market forces to achieve the EU’s aggressive emissions reduction targets, specifically its commitment to reduce carbon emissions 55% by 2030 (from the 1990 base). Here’s a relatively benign overview of the system from Wikipedia:

Under the ‘cap and trade’ principle, a maximum (cap) is set on the total amount of greenhouse gases that can be emitted by all participating installations. EU Allowances for emissions are then auctioned off or allocated for free and can subsequently be traded. Installations must monitor and report their CO2 emissions, ensuring they hand in enough allowances to the authorities to cover their emissions. If emission exceeds what is permitted by its allowances, an installation must purchase allowances from others. Conversely, if an installation has performed well at reducing its emissions, it can sell its leftover credits. This allows the system to find the most cost-effective ways of reducing emissions without significant government intervention.

This all sounds well and good, but, as Lawson describes, there appears to be a significant flaw in the design of the EU ETS: emitters are net short and the free float is shrinking.

Integrated across the European economy, companies are emitting far more CO2 than allowed by their ever-more-aggressive targets, and Lawson sees the situation getting worse in the years ahead. If a company has emitted more than the number of allowances it owns, it must go into the open market and procure more. If it fails to do so by the annual deadline of April 30, two things happen. First, the company must pay a fine of EURO 110 for each allowance shortfall, and – most critically – paying this fine does not alleviate its obligation to deliver the allowances! The obligation merely rolls forward to the next period, thus increasing the demand for next period’s limited allowances. Naturally, the market has begun to digest this dynamic and the price of these credits has soared, although they still trade well below this EURO 110 fine.

To compound matters, the EU measures and publishes the Total Number of Allowances in Circulation (TNAIC) and it uses this measure to further reduce the number of new allowances made available for auction in the upcoming period. Here’s a quote from a European Commission press release on the matter which was published in May of last year:

The European Commission published today the total number of allowances in circulation on the European carbon market. It amounts to 1,578,772,426 allowances. At the same time last year the amount was 1,385,496,166 allowances.

The total number of allowances in circulation plays an important role for the operation of the Market Stability Reserve (MSR), which began operating in January 2019. This indicator shows the amount of allowances in circulation in a transparent and predictable manner.

As long as the indicator exceeds the threshold set in the legislation of 833 million allowances, a certain share of the total number of allowances in circulation is placed in the MSR each year. For the years 2019 to 2023, this share is set at 24% of the total number of allowances in circulation. Allowances are placed in the MSR by decreasing the amount of allowances that Member States auction.

Based on the indicator published today and on the provisions of the legislation (Decision 2015/1814, the MSR Decision), auction volumes from September 2021 to August 2022 will be reduced by 378,905,382 allowances, which will be placed in the MSR.

This is, in effect, a HODL Mechanism™.  While the EU ETS reduces its newly issued allowances, their scheme simultaneously encourages outside speculators to buy and hold existing allowances, soaking up supply knowing full well there is a forced buyer on the other side of the trade. As the opening quote of this piece by Lawson accurately summarizes, absent a political intervention it is difficult to see a scenario where a VW-type short squeeze can be avoided. Of course, such intervention can happen at any moment, and Lawson and Dark spend a fair amount of time debating at what price a political relief valve must be opened. Since they are both bullish on the trade, it is natural that they agree that price is much higher, and we find it tough to argue with their informed opinions.

Europe has been doing its level best to hammer its domestic power producers and erode its industrial base for years. What stops foreign adversaries from helping them along by bidding up the price of these carbon credits to create economic advantage for themselves? How much money would it really take to double or triple the price of carbon in the EU from here? Whatever happens, this is one of the most fascinating stories we’ve come across in quite some time.

We should close with an important disclaimer. We do not give investment advice at Doomberg, nobody on our team has any investments related to these carbon credits schemes, and we will not open any positions for at least 72 hours after this piece publishes, if at all. There are several ways in which investors can participate in this market, including by directly speculating in futures or by using ETFs that attempt to track this and other carbon markets globally, and we encourage our readers to do their own due diligence before making investment decisions. In the Chicken Coop™, it’s every ape for themselves.

Maidan 2.0?

Hunter and Joe Biden with Kenes Rakishev (far left), and Kazakhstan’s former prime minister, Karim Massimov.

A year ago, NY Post published a photograph of “Corrupt Joe” Biden posing with Hunter Biden and Kenes Rakishev, a Kazakh oligarch who reportedly worked with the former veep’s scandal-scarred son.

The photo, first published by a Kazakhstani anti-corruption website in 2019, shared by the Kazhakhstani Initiative on Asset Recovery, the former vice president can be seen smiling with Kazakhstan’s former prime minister Karim Massimov and his son, who is flanked by Rakishev.

Last year, the Post exposé detailed Hunter Biden’s overseas business dealings and a report claiming Rakishev paid the Biden scion as a go-between to broker US investments.

Rakishev enjoys close ties to Kazakhstan’s kleptocratic former president, reportedly ran into trouble when Western business partners realized that the opaque origins of his reported $300 million fortune could become a “liability,” the Daily Mail reported.

Fast forward a year.

On the eve of crucial talks between the US and Russia regarding the previously-agreed limits of NATO expansion, Kazahkstan erupted in a well-organized uprising classified by the current President as a coup attempt.

Former intelligence chief Karim Masimov was fired earlier in the week has been detailed along wtih several other officials have been detained. The protests have also prompted President Tokayev to remove his predecessor Nursultan Nazarbayev as head of the Security Council.

Another ham-handed thrust by the Clown Car that is the Brandon Regime?

Certainly easily parried – but likely not to be forgotten.

Here is Robert Bridge of Strategic Culture providing his take on Kazahk events – a view you won’t see or her from inside the DC Bubble.

Nur-Sultan’s greatest challenge is removing self-interested foreign elements that are agitating on behalf of regional chaos.

Washington denies that the West played an active role in the massive protests that have engulfed the former Soviet republic of Kazakhstan. Yet the overall orchestration of the strife, in addition to the curious timing, points to some level of foreign intrigue.

“In politics, nothing happens by accident,” former U.S. President Franklin D. Roosevelt once remarked on the question of coincidences in political life. “If it happens, you can bet it was planned that way.”

And nowhere are coincidences running more amok than in Kazakhstan, the Central Asia steppe country that became engulfed in civil strife virtually overnight after the government imposed a price hike on liquefied gas, which many Kazakh motorists use to fuel their vehicles. With shocking alacrity, bands of protesters managed to breach government buildings in major cities, including the Almaty mayor’s office, a towering post-modern structure that was gutted by fire. Such rapid success on the part of a supposedly leaderless street mob against heavily armed military and police units took experts by surprise.

Dr. Erika Madat, who specializes in security structures and the former Soviet space, told the UN Dispatch that “what we saw in Kazakhstan was both surprising at the scale and intensity that the events and mobilization unfolded…”

President Kassym-Jomart Tokayev quickly conceded to the demands of the protesters, returning gas to its former price, while sidelining Nursultan Nazarbayev, 81, who, despite vacating the presidency in 2019 after 29 years in power, continued to exert heavy influence as head of the Security Council. Despite these concessions, the mob smelled weakness and demanded more.

The relative sophistication shown by some of the protesters, however, possessed as they were of firearms (strange considering that the Kazakh authorities placed tough restrictions on gun ownership following terrorist attacks in the city of Aktobe in 2016), urban camouflage and brazen street tactics, made Tokayev conclude that he was not merely dealing with outraged motorists, but rather “foreign-trained terrorists” seeking to overthrow his government.

The loss of internet service throughout the country makes confirming such allegations difficult to prove, yet intriguing nonetheless, especially coming as they did from the highest levels. Thus, when Tokayev pleaded for assistance, the Collective Security Treaty Organization (CSTO), comprised of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, did not hesitate to send in the peacekeepers.

Successful urban fighting tactics aside, there are other things to consider, not least of all the uncanny timing of this latest anti-government outbreak smack on Russia’s border, which occurred just days before U.S., NATO and Russian officials are scheduled to hold security talks. Following meetings between U.S. and Russian officials on January 10th in Geneva, a delegation from Russian and NATO will convene on January 12th.

The planned meetings were organized in response to Moscow’s proposal for a security agreement that aim to halt NATO expansion into the former Soviet countries, including Ukraine, which has been actively seeking membership in the 30-nation bloc, a clear red line for Moscow. It would be difficult to imagine a more effective method for disrupting these talks than by conjuring up yet another mess on Russia’s border.

“I find it interesting that the unrest seemed somewhat coordinated across the country occurring during the Orthodox Christmas period and just before the U.S.-Russia security dialogue,” Executive Vice President of Eurasia Group Earl Rasmussen told Sputnik. “Coincidence? One needs to wonder,” he added.

Another oddity worth mentioning is that the U.S. Embassy in Nur-Sultan just happened to issue a ‘demonstration alert’ for several Kazakh cities on Saturday, December 16, 2021, more than two weeks before the real fireworks began in earnest. Yes, probably just more coincidence theory, but such diplomatic ‘warnings’ have come under criticism before, notably by Moscow; under the pretense of providing travel warnings to U.S. citizens, these social media messages arguably serve to promote anti-government events more than anything.

In August 2019, Russia summoned a high-ranking U.S. diplomat after accusing the State Department of meddling in the country’s internal affairs by publishing a map on the internet showing the route of an unsanctioned protest in the Russian capital.

Meanwhile, any discussion on the possibility of a foreign-hatched Color Revolution would not be complete without mentioning the premier financier, philanthropist and regime-change artist himself, George Soros; the Soros Foundation has a hand so deep in Kazakhstan’s pockets it almost reaches Almaty’s ankles. Perusing the list of activities and institutions by this one foundation (incidentally, the International Center for Not-for-Profit Law estimates there are some 38,000 NGOs operating in Kazakhstan, with much of their funding coming from the U.S. Agency for International Development (USAID), the National Endowment for Democracy, Freedom House, and others), leaves one struggling to understand how any country could tolerate this level of influence from a ‘foreign agent,’ who has already been politely shown the door in a number of countries, including Uzbekistan, Belarus and Russia.

The Soros Foundation, which opened its doors in Kazakhstan back in 1995, has a heavy footprint in all areas of Kazakh life – from art, to education, to the world of media and politics; all bases are covered. Such a profound influence has not gone unnoticed by political observers.

The Kazakhstani media have repeatedly covered the activities of the Soros Foundation. In 2010, the Pavlodar newspaper “Our Life” wrote:

“In 2010, Soros-Kazakhstan Foundation announced its new role as an intermediary between the state, business and civil society in shaping public policy. And this is despite the Law of the Republic of Kazakhstan ‘On the activities of international and foreign non-profit organizations in the Republic of Kazakhstan’, which says: ‘In the Republic of Kazakhstan, the activities of international and foreign non-profit organizations, the goals or actions of which are aimed at interfering in the internal affairs of the state, are prohibited…’”

On this and similar questions, Nikita Danyuk, Deputy Director of the Institute for Strategic Studies and Forecasts of the RUDN University, penned a prophetic article back in 2016 entitled, ‘Kazakhstan under the gun of destructive political technologies.’

Danyuk writes: “The region of Central Asia, in particular Kazakhstan is an important geostrategic node, control over which makes it possible to influence the political and economic integration processes of the entire Eurasian space. Following Ukraine and Armenia, Kazakhstan over the past month has become another testing ground for the implementation of … destructive political technologies.”

Examining protests in Kazakhstan in the summer of 2016, which were focused on land reform, Danyuk reported that the “direct organizer of the protests was the Adil Soz International Foundation for the Defense of Freedom of Expression, whose donors include the U.S. and British embassies, George Soros’ Open Society Institute, Freedom House and the National Endowment for Democracy (NED).”

While there is no doubt that Kazakhstan is plagued by a host of social and political problems – not least of all economic underdevelopment, inequality, corruption and kleptocracy – that does not mean there are no foreign players on the ground in the country eager to take advantage of these issues for strategic gain. All things considered, that will be Nur-Sultan’s greatest challenge moving forward – removing those self-interested foreign elements that are agitating on behalf of regional chaos at the earliest opportunity.

The Omicron Chimera


Per eugyppius (https://eugyppius.substack.com/p/omicron-is-not-normal:

“Omicron is not normal. No immediate progenitors are known; its closest relatives are viruses last seen in early- to mid-2020. The orthodox explanation for this awkward fact, is that it has spent the last 18 months lurking “in a geography with poor genomic surveillance … or … in a chronically infect

Per elgatto (https://eugyppius.substack.com/p/omicron-is-not-normal):

  • vaccines, including boosters are showing strong negative efficacy vs omicron
  • this is consistent with omicron being as OAS enabled escape variant
  • omicron continues to show evidence of mildness relative to past variants

Per G. Wei et al. (2021) (https://www.ncbi.nlm.nih.gov/labs/pmc/articles/PMC8702434/):

“Collectively, our results suggest that the progenitor of Omicron jumped from humans to mice, rapidly accumulated mutations conducive to infecting that host, then jumped back into humans, indicating an inter-species evolutionary trajectory for the Omicron outbreak.”

Per S. Cele et al. (2021) (https://pubmed.ncbi.nlm.nih.gov/33780970/):

“SARS-CoV-2 variants of concern (VOC) have arisen independently at multiple locations1,2 and may reduce the efficacy of current vaccines that target the spike glycoprotein of SARS-CoV-23. Here, using a live-virus neutralization assay, we compared the neutralization of a non-VOC variant with the 501Y.V2 VOC (also known as B.1.351) using plasma collected from adults who were hospitalized with COVID-19 during the two waves of infection in South Africa, the second wave of which was dominated by infections with the 501Y.V2 variant. Sequencing demonstrated that infections of plasma donors from the first wave were with viruses that did not contain the mutations associated with 501Y.V2, except for one infection that contained the E484K substitution in the receptor-binding domain. The 501Y.V2 virus variant was effectively neutralized by plasma from individuals who were infected during the second wave. The first-wave virus variant was effectively neutralized by plasma from first-wave infections. However, the 501Y.V2 variant was poorly cross-neutralized by plasma from individuals with first-wave infections; the efficacy was reduced by 15.1-fold relative to neutralization of 501Y.V2 by plasma from individuals infected in the second wave. By contrast, cross-neutralization of first-wave virus variants using plasma from individuals with second-wave infections was more effective, showing only a 2.3-fold decrease relative to neutralization of first-wave virus variants by plasma from individuals infected in the first wave. Although we tested only one plasma sample from an individual infected with a SARS-CoV-2 variant with only the E484K substitution, this plasma sample potently neutralized both variants. The observed effective neutralization of first-wave virus by plasma from individuals infected with 501Y.V2 provides preliminary evidence that vaccines based on VOC sequences could retain activity against other circulating SARS-CoV-2 lineages.”

D.R.A.S.T.I.C. Update – Lab Leak

D.R.A.S.T.I.C: https://drasticresearch.org/

SARS-CoV-2’s closest relative, RaTG13, was generated from a bat transcriptome not a fecal swab: implications for the origin of COVID-19

November 2021


Steven E Massey at University of Puerto Rico at Rio Piedras

Steven E Massey

Abstract: RaTG13 is the closest related coronavirus genome phylogenetically to SARS-CoV-2, consequently understanding its provenance is of key importance to understanding the origin of the COVID-19 pandemic. The RaTG13 NGS dataset is attributed to a fecal swab from the intermediate horseshoe bat Rhinolophus affinis. However, sequence analysis reveals that this is unlikely. Metagenomic analysis using Metaxa2 shows that only 10.3 % of small subunit (SSU) rRNA sequences in the dataset are bacterial, inconsistent with a fecal sample, which are typically dominated by bacterial sequences. In addition, the bacterial taxa present in the sample are inconsistent with fecal material. Assembly of mitochondrial SSU rRNA sequences in the dataset produces a contig 98.7 % identical to R.affinis mitochondrial SSU rRNA, indicating that the sample was generated from this or a closely related species. 87.5 % of the NGS reads map to the Rhinolophus ferrumequinum genome, the closest bat genome to R.affinis available. In the annotated genome assembly, 62.2 % of mapped reads map to protein coding genes. These results clearly demonstrate that the dataset represents a Rhinolophus sp. transcriptome, and not a fecal swab sample. Overall, the data show that the RaTG13 dataset was generated by the Wuhan Institute of Virology (WIV) from a transcriptome derived from Rhinolophus sp. tissue or cell line, indicating that RaTG13 was in live culture. This raises the question of whether the WIV was culturing additional unreported coronaviruses closely related to SARS-CoV-2 prior to the pandemic. The implications for the origin of the COVID-19 pandemic are discussed.


Supply Chain Systemic Risk

The Great Supply Chain Collapse

James Rickards explains the obvious: https://dailyreckoning.com/the-great-supply-chain-collapse/

The Great Supply Chain Collapse

What’s at the root of the supply chain breakdown? That’s a critical question but the answer is almost irrelevant. The supply chain is a complex dynamic system of immense scale. It is of a complexity comparable to the climate as a system.

This means that exact cause and effect cannot be computed because the processing power needed exceeds the combined processing power of every computer in the world.

Most people have some notion of how supply chains work, but few understand how extensive, complex and vulnerable they are. If you go to the store to buy a loaf of bread, you know that the bread did not mystically appear on the shelf.

It was delivered by a local bakery, put on the shelf by a clerk, you carried it home and served it with dinner. That’s a succinct description of a supply chain – from baker to store to home.

Yet that description barely scratches the surface. What about the truck driver who delivered the bread from the bakery to the store? Where did the bakery get the flour, yeast and water needed to make the bread? What about the ovens used to bake the bread? When the bread was baked, it was put in clear or paper wrappers of some sort. Where did those come from?

Even that expanded description of a supply chain is just getting started in terms of a complete chain. The flour used for baking came from wheat. That wheat was grown on a farm and harvested with heavy equipment. The farmer hires labor, uses water and fertilizer and sends his wheat out for processing and packaging before it gets to the bakery.

The manufacturer who built the oven has his own supply chain of steel, tempered glass, semiconductors, electrical circuits and other inputs needed to build the ovens. The ovens are either hand crafted (engineered-to-order) or mass produced (made-to-stock) in a factory that may use either assembly lines or manufacturing cells to get the job done.

The factory requires inputs of electricity, natural gas, heating and ventilation systems, and skilled labor to turn out the ovens.

The store that sells the bread is on the receiving end of numerous supply chains. It also requires electricity, natural gas, heating and ventilation systems and skilled labor to keep the doors open and keep merchandise in stock. The store has loading docks, back rooms for inventory, forklifts and conveyor belts to move its merchandise from truck to shelf.

Every link in these supply chains requires transportation. The farmer relies on trucks or rail for deliveries of seeds, fertilizers, equipment and other inputs. The oven manufacturer also relies on trucks or rail for deliveries of its inputs, including oven components. The bakery and the store rely mainly on trucks for deliveries of their inputs and the finished loaves of bread. The consumer relies on her automobile to get to the store and return home.

These transportation modes have their own supply chains involving truck drivers, train engineers, good roads, good railroads, rail spurs and energy supplies to keep moving and keep deliveries on time.

This entire network (farms, factories, bakeries, stores, trucks, railroads and consumers) relies on energy supplies to keep working. The energy can come from nuclear reactors, coal-fired or natural gas-fired power plants or renewable sources fed to a grid of high-tension wires, substations, transformers and local connections to reach the individual user.

Everything described above sits somewhere in a complex supply chain needed to produce one loaf of bread. Now take everything else in the grocery store (fruits, vegetables, meat, poultry, fish, canned goods, coffee, condiments and so on) and imagine the supply chains needed for each one of those products.

Then take all the other stores in the shopping center (home goods, clothing, pharmacy, hardware, restaurants, sporting goods) and imagine all the goods and services available from those vendors and the supply chains behind each and every one of those.

In case you think I have exaggerated the components and steps in making a loaf of bread in the above example, I didn’t. The example above is a grossly simplified description of the actual supply chain.

A full description of the needed supply chain would reach back further (where do the seeds for the wheat come from?) and branch off in tangential directions (where do the bread wrappers originate?).

A full description of the loaf of bread supply chain with choice of vendor analysis, quality-control tests and bulk purchase discounts among other decision tree branches could easily stretch to several hundred pages.

Now consider all of the supply chain links and possible bottlenecks described above are purely domestic. But very few supply chains are actually that local. CEOs, logistics engineers, consultants and politicians have spent the past 30 years making supply chains global.

You’ve heard discussion of globalization since the early 1990s. What one may not have realized is that the process that was being globalized was the supply chain.

You know your iPhone comes from China. Did you know that the specialized glass used in the iPhone comes from South Korea? Did you know the semiconductors in the iPhone come from Taiwan? That the intellectual property and design of the iPhone are from California?

The iPhone includes flash storage from Japan, gyroscopes from Germany, audio amplifiers, battery chargers, display port multiplexers, batteries, cameras and hundreds of other advanced parts.

In total, Apple works with suppliers in 43 countries on six continents to source the materials and parts that go into an iPhone. That’s a quick overview of the iPhone supply chain. Of course, every supplier in that supply chain has its own supply chain of sources and processes. Again, supply chains are immensely complex.

Once the global perspective is added, we have to expand our transportation options from trucks and trains to include ships and planes. That means ports and airports are additional links in the chain.

Those facilities have their own links and inputs including cranes, containers, port authorities, air traffic controllers, pilots, captains and the vessels themselves. And to our list of trucks, trains, ships and planes we can add pipelines that transport liquids such as petroleum, gasoline and natural gas.

You get the idea. Supply chains may be hidden but they are everywhere. They are interconnected, densely networked and unimaginably complex.

The touchstone of these efforts was the idea of just-in-time inventory (JIT). If you’re installing seats on an automobile assembly line, it is ideal if those seats arrive at the plant the same morning as the installation. That minimizes storage and inventory costs. The same is true for every part installed on the assembly line. The logistics behind this are daunting but can be managed with state-of-the-art software.

All these efforts are fine as far as they go. The cost savings are real. The supply chains are efficient. The capacity of this system to keep a lid on costs is demonstrable.

The supply chain revolution since the early 1990s has been about cost reduction, which gets passed to consumers in the form of lower prices. That practically explains the entire phenomenon.

There’s only one problem. The system is extremely fragile. When things break down, everything gets worse at the same time. One missed delivery can result in an entire assembly line shutting down. One delayed vessel can result in empty shelves. One power outage can result in a transportation breakdown.

In a nutshell, that’s what has happened to the global supply chain. There’s a lack of redundancy. The system is not robust to shocks. The shocks have occurred nevertheless (pandemic, trade wars, China-U.S. decoupling, bank collateral shortages and more) and the system has broken down.

The failures have cascaded. Delays in receiving commodity inputs in China have resulted in manufacturing delays for exports. Energy shortages in China have resulted in further disruption of steel production, mining, transportation and other basic industries.

Port delays in Los Angeles have resulted in component and finished goods delayed in the U.S. Semiconductor shortages have halted production of electronics, appliances, automobiles and other consumer durables that rely on automated applications. You’ve seen how complex the system is.

The bottom line is if supply chains are breaking down, the economy is breaking down. If the economy breaks down, the breakdown of social order is not far behind.

And the costs of social disorder are far higher than any possible savings from supposedly efficient supply chains.


Jim Rickards
for The Daily Reckoning

Judgment Day for Evergrande

Sarah Connor (Terminator 2): “The Survivors of the nuclear holocaust called the war Judgement Day. They lived only to face a new nightmare: the way against the machines.”

ZeroHedge: https://www.zerohedge.com/markets/evegrande-default-inevitable-sp-warns-chinese-developer-misses-dollar-bond-payments

Evergrande Default Is “Inevitable” – S&P Warns As Chinese Developer Misses Dollar Bond Payments

Having sold its Gulfstream Jets, dumped assets (at fire-sale prices), and seen its CEO forced to pledge his Hong Kong mansion as collateral for a loan, it appears – as we warned yesterday – that time is up for Evergrande bond (and stock) holders.

Specifically, offshore (dollar) bondholders did note receive coupon payments by the end of a 30-day grace period, pushing the cash-strapped property developer closer to formal default.

And after this missed payment, there are billions more coming due… and soon ($300 billion in total liabilities)

S&P says it continues to believe that a default by the Chinese developer looks inevitable:

Evergrande’s “liquidity remains extremely weak,” according to the ratings firm.

Fitch piled on with a downgrade to C from CCC-, saying in a statement:

Default or default-like process has begun, based on the company’s announcement that it has not made payments or reached an agreement with creditors regarding its offshore financing, after it received notice from creditors demanding payment on financings with principal amount of around $651 million following recent rating actions by rating agencies.”

Bond prices are already priced for that ‘inevitable’…

As are Evergrande’s stock price…

Notably, as WSJ reportsthe debt blowup is also a landmark in China’s changing attitude to corporate defaults, which were once rare but are growing more common, both onshore and offshore. Recent failures include the chip maker Tsinghua Unigroup and the once-hyper-acquisitive conglomerate HNA Group, which is now undergoing a court-led restructuring in China.

The shifting stance on defaults is partly a recognition that after a huge run-up in the country’s corporate debt pile in recent years, Beijing can’t afford too many bailouts.

A barrage of statements from Chinese regulators, several of which landed just minutes after Evergrande’s announcement on Friday, suggested authorities are striving to contain the fallout on homeowners, the financial system and the broader economy rather than orchestrate a bailout.

And, as a reminder, another developer – Kaisa – is on course for default this week unless it can reach a last-minute agreement with creditors to delay payment. The firm has $11.6 billion in outstanding dollar debt, making it the nation’s third-largest issuer of such notes among property firms.

As Reuters reports, failure by Evergrande to make $82.5 million in interest payments due last month would trigger cross-default on its roughly $19 billion of international bonds and put the developer at risk of becoming China’s biggest defaulter – a possibility looming over the world’s second-largest economy for months.

Non-payment by Kaisa would push the 6.5% bond of Kaisa, China’s largest holder of offshore debt among developers after Evergrande, into technical default, triggering cross defaults on its offshore bonds totalling nearly $12 billion.

BTC – the Biden Trade

Cryptocurrency - Wikipedia

ZH: https://www.zerohedge.com/geopolitical/biden-mulls-cutting-russia-swift-ahead-putin-call-nuclear-option-response-ukraine

With the United States cutting back its own oil production in the name of “climate”, and fueling double-digit inflation, why would we consider shooting ourselves in the foot over Ukraine?

Well, maybe Hunter Biden knows – he’s pulled enough dough out of Ukraine’s oligarchs for himself with “10% for the Big Guy.”

One might want to be careful poking bears. Not our Regime – give lunatics access to nuclear weapons and, well, it reminds me of what Sadavir Errinwright had to say:

“You give a monkey a stick, inevitably he’ll beat another monkey to death with it.”

“The Expanse”

Knocking 12% of global oil production out of USD-denominated SWIFT and into BTC is something only Michael Saylor might dream of.

Here’s Tyler to report the latest lunacy from the Progressive Regime in DC.

Biden Mulls Cutting Russia Off SWIFT Ahead Of Putin Call In “Nuclear Option” Ukraine Response

CNN and others are reporting just a day ahead of the much anticipated video call between Russian President Vladimir Putin and US President Joe Biden that the White House is mulling “nuclear option” level actions against Moscow should it launch a military offensive against Ukraine – which US intelligence has lately said could be imminent based on assessing that some 175,000 troops have been mustered in the Crimea and regions near Ukraine’s eastern border.

This includes discussion of the possibility of disconnecting Russia from the SWIFT international payment system, seen as the most drastic potential measure which further includes fresh sanctions on Putin’s inner circle and on Russian energy producers.

The Kremlin has of course vehemently rejected the Ukraine threat accusations, saying it’s free to move its own troops wherever it sees fit within the Russian Federation’s sovereign territory and borders.

But the White House is now threatening the following, according to CNN on Monday:

People familiar with the discussions said new economic sanctions could target a variety of sectors, including energy producers and Russian banks. The new sanctions could also go after Russia’s sovereign debt.

They are also likely to go after top Russian oligarchs, limiting their ability to travel and potentially cutting off access to American banking and credit card systems.

And in particular, the “nuclear option” – which is now grabbing headlines…

Officials have also been weighing disconnecting Russia from the SWIFT international payment system, upon which Russia remains heavily reliant, according to two sources familiar with the discussions. This is being considered a “nuclear” option. The European Parliament passed a nonbinding resolution in the spring calling for such a move should Russia invade Ukraine, and the US has been discussing it with EU counterparts.

On Russia’s side, it has the “energy option” vis-a-vis Europe – something that the US has long warned the EU about, especially when it comes to the controversial Nord Stream 2 pipeline coming online. “The fear is Russia then tries to retaliate by holding back production,” a top US official told CNN.

“We have put together a pretty damn aggressive package,” an unnamed administration official additionally said to CNN, adding further that if Russia  invades Ukraine “the US and Europe together will impose the worst economic sanctions that have ever been imposed on a country, outside of Iran and North Korea,” according to the report.

It should be noted that with such an “option” in play, if things actually escalated to the historically unprecedented level of Russia’s being blocked from SWIFT – such a scenario would mark a huge future day for cryptos, given cryptos have been suggested as the first space Putin would likely migrate to amid total isolation for the West-based payment system used by banks around the world.

“Six-one going down, Six-one going down. Hold on!”


S&P 500 Futures Had a Bad Week, Worse Lies Ahead

By Mark Cranfield, Bloomberg Markets Live commentator and analyst

S&P 500 futures have a distinctly bearish tone after a week of whiplash trading, which began with the post-Thanksgiving Day meltdown.

Though it hasn’t been a one-way street lower, intraday bounces for the contract have been fading at lower peaks.

That is a clear enough signal for short-term traders to see if they are positioned for a declining asset.

And even though non-farm payrolls did miss forecasts, the Fed won’t be derailed from its path to tighter policy.

Moreover, the blackout period ahead of the Dec. 15 FOMC decision begins this weekend, which means there won’t be any walking back of the hawkish noises heard this week.

The decline from November’s peak for S&P futures is starting to look like the turning point in a long march lower, which will set the pace for a global bear market next year.

Or consider these charts from Slope of Hope: https://slopeofhope.com/2021/12/drama-charts.html#more-207294

Retail has broken its channel. I was bragging about my brilliant bear call from the tippy-top of the channel but apparently the comically-overvalued market is starting to dawn on even non-Slope readers, so channels like this are getting shattered.

Energy sector is doomed. The raging success we’ve had with bearish calls on energy of the past month are, I believe, merely the beginning.

Biotechnology sector, which would make us all six foot tall, blonde-haired, blue-eyed Adonis-like creatures, appears to have hit a bump in the road. This entire sector has already been nuked, but it seems to me only the first few ICBMs have exploded, and the global thermonuclear war has only just started. There’s nothing but empty air below the now-broken top.

Saxo Bank’s 22 Calls for 2022

Illustration of people raising fists on sunbeams background, Vector EPS 10 revolution stock illustrations


The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across financial markets:

  1. The plan to end fossil fuels gets a rain check
  2. Facebook faceplants on youth exodus
  3. The US mid-term election brings constitutional crisis
  4. US inflation reaches above 15% on wage-price spiral
  5. EU Superfund for climate, energy and defence announced, to be funded by private pensions
  6. Women’s Reddit Army takes on the corporate patriarchy
  7. India joins the Gulf Cooperation Council as a non-voting member
  8. Spotify disrupted due to NFT-based digital rights platform
  9. New hypersonic tech drives space race and new cold war
  10. Medical breakthrough extends average life expectancy 25 years

As culture wars rage across the world, it’s no longer a question of if we get a socioeconomic revolution, but a question of when and how. But which revolutionary prediction do you think is most likely?

Saxo CIO Steen Jakobsen summarizes the theme for 2022 Outrageous Predictions is Revolution.

There is so much energy building up in our inequality-plagued society and economy. Add to that the inability of the current system to address the issue and we need to look into the future with the fundamental outlook that it’s not a question of whether we get a revolution, but more a question of when and how. With every revolution, some win and some lose, but that’s not the point—if the current system can’t change but must, a revolution is the only path forward.

A culture war is raging across the globe and the divide is no longer simply between the rich and the poor. It’s also the young versus the old, the educated class versus the less educated working class, real markets with price discovery versus government intervention, stock market buy-backs versus R&D spending, inflation versus deflation, women versus men, the progressive left versus the centrist left, virtual signalling on social media versus real changes to society, the rentier class versus labour, fossil fuels versus green energy, ESG initiatives versus the need to supply the world with reliable energy—the list goes on.

What’s interesting for me, having done this Outrageous Predictions list for twenty years, is that all of the above issues point to a cycle ending rather than a continuation of more of the same. Post-pandemic (well, mostly) the market is hoping that things will continue as before, but as an old mentor of mine used to say, when I answered one of his questions with “I hope”: “Listen, son, save hope for church on Sundays, and come back when you have something more concrete.” The year 2022 is likely to see far less of what markets are hoping for and far more in the way of volatility as revolutionary movements kick into gear that challenge the status quo as we grope our way towards a new paradigm. Some of these movements will get things right, some of them will make mistakes, but we need to get started. Pretty much everything needs to change if we are to achieve zero emissions, less inequality, stable energy and importantly, more productivity.

2021 was a year in which we thought we could firmly put Covid behind us, but as 2022 rolls into view, we’re simply not there yet. It was a year with unprecedented fiscal transfers, especially to lower-income households, which created excess demand in a geopolitically and supply chain–fragmented world. The physical world simply became too small to absorb the good, if misguided, intentions of politicians and central banks to keep the economy on an even keel. Now we find ourselves with an energy crisis on our hands—and that’s not an outrageous call. But how we deal with it could create both policy mistakes and fundamental changes. A cold winter, for example, could spark a counter-revolution against the current alternative energy narrative, requiring that we reconfigure our expectations around how quickly we can abandon fossil fuels (Outrageous Prediction number 1 for 2022!) and even reclassifying nuclear energy as green. Doing anything else is simply not viable if we want to avoid a collapse in the real economy.

We do realise that the Revolution theme for OP 2022 can create negative associations. To many of us, the word Revolution calls forth the 1789 French Revolution with its call for “Liberty, Equality, and Fraternity”, but also the Russian Revolution and its “smash the capitalists” principles.

But our intent is the broader definition of revolution: not the physical overthrowing of governments, but eurekalike moments that trigger a change of thinking, a change of behaviour and a rejection of the unsustainable status quo. Hopefully, each of the Outrageous Predictions echoes that general point, with a couple of the revolutions triggered by the “involuntary” implications of technical progress: hypersonic missiles and longevity therapy. We need more liberty from governments in some areas, like a less heavy-handed monetary policy and the moral hazard of unproductively backstopping markets it brings. And we need more regulation in others, like avoiding the dangers of a hyper-financialised economy, too-powerful monopolies and inequality. Most urgently, we need to provide a brighter outlook for the world’s young people and better cooperation among nations instead of the present trend away from globalisation and multilateral institutions.

We collaborated globally on Covid vaccines in 2020 and 2021. Now we need a new Manhattan Project–- type endeavour to set the marginal cost of energy, adjusted for productivity, on the path to much lower levels while eliminating the impact of our energy generation on the environment. Such a move would unleash the most significant productivity cycle in history: we could desalinate water, make vertical farms feasible almost anywhere, enable the leap to quantum computing, and continue to explore new boundaries in biology and physics.

Remember that the world is forever evolving if at varying speeds, while business and political cycles are always finite. We are betting that in 2022 the speed of evolution kicks up a few notches into a revolutionary state as a new cycle gets under way. ‘Change is good’ needs to be the new mantra, or at minimum: “trial and error”. Let’s at least try and err some more rather than trying to forever kick the can down the road!

Finally, we must emphasise our annual caveat, that these Outrageous Predictions should not be seen as our official view on the market and politics. This year, more than ever, we’re trying to provoke you and ourselves to think outside the box and to engage in discussing the important topics we raise. Let the fun, and the future, begin.

*  *  *

The plan to end fossil fuels gets a rain check

Summary: Policymakers kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest while rethinking the path to a low-carbon future.

Facebook faceplants on youth exodus

Summary: The young abandon Facebook’s platforms in protest against their mining of personal information for profit; the attempt by Facebook parent Meta to reel them back in with the Metaverse stumbles.

The US mid-term election brings constitutional crisis

Summary: The US mid-term election sees a stand-off over the certification of close Senate and/or House election results, leading to a scenario where the 118th Congress is unable to sit on schedule in early 2023.

US inflation reaches above 15% on wage-price spiral

Summary: By the fourth quarter of 2022, US CPI inflation reaches an annualized 15% as companies bid up wages in an effort to find willing and qualified workers, triggering a wage-price spiral unlike anything seen since the 1970’s.

EU Superfund for climate, energy and defence announced, to be funded by private pensions

Summary: To defend against the rise of populism, deepen the commitment to slowing climate change, and defend its borders as the US security umbrella recedes, the EU launches a bold $3 trillion Superfund to be funded by pension allocations rather than new taxes.

Women’s Reddit Army takes on the corporate patriarchy

Summary: Mimicking the meme stock Reddit Army tactics of 2020-21, a group of women traders launch a coordinated assault on companies with weak records on gender equality, leading to huge swings in equity prices for targeted companies.

India joins the Gulf Cooperation Council as a non-voting member

Summary: The world’s geopolitical alliances will lurch into a phase of drastic realignment as we have an ugly cocktail of new deglobalising geopolitics and much higher energy prices.

Spotify disrupted due to NFT-based digital rights platform

Summary: Musicians are ready for change as the current music streaming paradigm means that labels and streaming platforms capture 75-95 percent of revenue paid for listening to streamed music. In 2022, new blockchain-based technology will help them grab back their fair share of industry revenues.

New hypersonic tech drives space race and new cold war

Summary: The latest hypersonic missile tests are driving a widening sense of insecurity as this tech renders legacy conventional and even nuclear military hardware obsolete. In 2022 a massive hypersonic arms race develops among major militaries as no country wants to feel left behind.

Medical breakthrough extends average life expectancy 25 years

Summary: Young forever, or for at least a lot longer. In 2022, a key breakthrough in biomedicine brings the prospect of extending productive adulthood and the average life expectancy by up to 25 years, prompting projected ethical, environmental and fiscal crises of epic proportions.

Read the full report below: