Category: Opinion

  • Bishan Singh Bedi Calls IPL a “Scam”, Questions League Funding Practices

    Bishan Singh Bedi Calls IPL a “Scam”, Questions League Funding Practices

     

    Bishan Singh Bedi is a living legend in the cricket community. He went on the record again against the Indian Premier League (IPL). The retired spinner and captain also had some harsh words for the T20 tournament, which he views as a platform for money-laundering.

    The world-class spinner told Sahitya Aaj Tak that,

    “I don’t want to say anything about IPL. There’s not a bigger scam in India than IPL. Nobody here knows where IPL’s money comes and goes. The second edition of the IPL happened in South Africa, millions of money was taken out of the country without the permission of Finance Minister.”

    There are numerous controversies surrounding the Indian cricket elite. Al Jazeera has also aired a documentary the puts the ethics in Indian cricket into serious question.

    The broadcaster claims that there was a conspiracy to point-fix international matches, which the International Cricket Council (ICC) is investigating.

    Bishan Singh Bedi Raises Tough Questions

    Bishan Singh Bedi seems to be well aware of the betting that takes place in the cricket world. He was very critical of the national team selection process, which could be contributing to corruption in the league.

    “IPL should not be the basis of Indian selection, local T20 tournaments should be. A team has players who are paid high and ones who get less money. The lower income player doesn’t have the skills, how does he catch up? The only way he sees is betting. I have a lot of experience in cricket, you can tell what is happening in what match. If we stay blind even while seeing, then it’s our choice.”

    Al Jazeera’s documentary seems to back-up Bedi’s assertion. They were able to secure footage that shows an illegal bookmaker in India gets 25 out of 26 point ‘fixes’ correct.

    The alleged mastermind behind the plot is a man named Aneel Munawar. The footage that Al Jazeera has shows games involving India, England, Australia, and New Zealand, among others.

    Munawar speaks to a bookmaker who is allegedly in Ahmedabad immediately before batsmen take to the crease and tells the bookmaker which way to bet before the session.

    Clearly, the odds of being correct 25 out of 26 times are very low. Unless of course, there was corruption involved.

    Money and Sexual Favors

    Akram Saifi is the former personal assistant to IPL chairman and Congress leader Rajeev Shukla. His career was marred by evidence gathered by The Indian Express, which showed the functionary demanding money and sexual favours as payment for selection in Uttar Pradesh’s under-23 team.

    The story broke over the summer, but Akram Saifi is still showing up to T20 matches with an all-access pass around his neck!

    A week ago he was spotted at the T20 between India and the West Indies, which was held in the Ekana Cricket Stadium, in Lucknow. He was never officially a part of the IPL, which may be why he has been able to dodge corruption charges.

    Vinod Rai, who is the chairman of the Supreme Court-appointed Committee of Administrators that is running the The Board of Control for Cricket India (BCCI), told The Indian Express that,

    “Since he (Saifi) was never a BCCI employee but a personal assistant of the IPL chairman, as soon as he was sacked by the IPL chairman, no probe could be done against him.”

    This all seems like a very convenient way to engage in corruption, and avoid any consequences. Appoint someone as an assistant, let them do the dirty work, and if their deeds ever come to light, dismiss them before an investigation can make a difference in the league.

    Bishan Singh Bedi is probably right that corruption runs rampant in the IPL, but his accusations may not go far enough.

    Image from YouTube.

  • Rob Kardashian Dumps Failing Sock Company on Mom, Blames Blac Chyna

    Rob Kardashian Dumps Failing Sock Company on Mom, Blames Blac Chyna

    Rob Kardashian’s ‘Arthur George’ sock brand is apparently $300,000 USD in the hole. According to a slew of reports, his mother just jumped into the fray and bought up half the company.

    The reason his socks just won’t sell?

    A temptress named Blac Chyna. At least according to Rob.

    Last year Rob Kardashian decided to post nudes of Blac Chyna on social media and earned a restraining order from her for his efforts. She has been demanding $20,000 USD a month in child support payments from Rob, which he says is part of the reason he can’t move his socks.

    Rob Kardashian Has to Pay 20K (a Month) for a Kid?

    If a man helps make a baby, he should have to pay child support. No decent person would debate that. How that turns into a $20,000 USD monthly payment is something of a mystery.

    What does Blac Chyna’s spawn eat?

    It’s hard to imagine how Blac Chyna would need thousands of dollars, a month, to support a toddler. Even with private daycare and a trip to Whole Foods every-other-day, she would have a hard time going through a few thousand in a month.

    If she was just spending it on the kid.

    Is it out of line to speculate on how nearly a quarter of a million dollars is spent on a child annually? Given the circumstances, I think it is fine.

     

    This All Seems Excessive

    The average household income in the USA is a wee bit north of $50,000 USD. That means Rob Kardashian has to pony-up FIVE TIMES the amount of money that an entire family survives on for one child.

    Blac Chyna clearly has a tremendous legal team and is probably skimming that child support like a fiend.

    While I have no evidence to support this, her propensity to spend thousands of dollars on athletic footwear may suggest that she isn’t the best custodian of her child’s money.

    She is also the reason Rob Kardashian seems to feel shy on social media. This seems more like a cop-out on his part, because he’s the reason he hasn’t been able to use social media to pimp socks (according to him).

    If he didn’t post those nudes, she never would have taken out that restraining order.

    Think before you post guy!

    Mommy Jenner Saves the Day

    According to court documents, Kris Jenner:

    “infused it [Arthur George] with capital… and from her infusion gained a 50% share in the company.”

    That is an extremely nice way to say that Rob Kardashian made a string of terrible decisions, both personal and professional (if these people even make that kind of distinction anymore), and needed his mother to bail him out.

    Now that mom is on-board, she may be able to turn the failing luxe sock brand around. She has been somewhat successful in doing a similar thing with another one of her children’s companies.

    Last year she took over Kylie Cosmetics, which had been founded by her daughter. She spruced up the brand with flashy Kris Jenner pics and renovated the brand identity.

    All of this begs the question: is Kris Jenner the mother of a family, or a shrewd venture capitalist?

    Featured image from CCNLA.

  • Kim Says Kanye West Likes Trump’s Personality, Not His Politics

    Kim Says Kanye West Likes Trump’s Personality, Not His Politics

    Is Kanye West in bed with wife Kim Kardashian or Donald Trump? It depends what day of the week it is. Kardashian says that Kanye is more of a fan of Trump’s personality than his politics.

    Kim Kardashian reckons that she had a talk with her hubby after his recent trip to the White House to educate him and set him straight on politics.

    Is Kim Saving Kanye West from Himself?

    Although Kanye West and Kim Kardashian should not really be your first reference point when discussing US politics, they have massive sway with the younger generations of today. I might not be a Trump advocate in any way, shape or form, but Kardashian talking about politics makes me dizzy.

    When speaking at a public appearance on Wednesday, Kardashian took some time to dig Kanye out of the political hole he has created for himself. Talking about Kanye, his wife was quoted as saying:

    “He is very not political, actually. He just happens to like Donald Trump’s personality, but doesn’t know about the politics.”

    She elaborated even further to inform us she has “educated” Kanye West on the nuances of domestic politics. She also said that her husband really liked Trump before he made office and still does and that Kanye fights for what he wants to like, even if others oppose that opinion.

    Making America Great Again?

    Some might say that Trump, West, and Kardashian all have no place in politics, and again, I wouldn’t argue with any of that.

    I am personally not a Donald Trump fan or an American. But I believe that you have to accept what the majority vote for. If not, what have you got left? Hillary Clinton soiling her panties every time she sneezes?

    I used to be a liberal until they changed what liberal meant. And I am definitely against the far-left liberals who think that freedom of speech is now not important. Sounds like a bunch of kids complaining because things didn’t go their way and want to change the rules to suit their opinions. It’s the entitled Western culture we live in today.

    One way or another, it’s great to see Kim Kardashian stand up for Kanye West like that with the media, whether she knows what she’s talking about or not.

    Featured image from Hot 100.5 FM.

  • 5 Expensive Things Totally Worth Spending Money on

    5 Expensive Things Totally Worth Spending Money on

    Spending money doesn’t necessarily have to be about extravagant tastes. Sure, there are plenty of billionaires who splurge on a private jet, a hideaway island or dress exclusively in Chanel.

    But there are plenty of others who realize that a watch is just a watch, or that a simple black shirt is still made in China even if it comes wrapped up in pink tissue paper and delivered in a box with a bow.

    Most of the people I know who have money are positively stingy with it, which is probably how they amassed their fortunes in the first place.

    But whether you’re wealthy or not, there are certain occasions where it’s worth digging a little deeper into your pockets and paying the extra cash.

    Money can’t buy you happiness. But it can buy you decent health care, a more comfortable bed, convenience, and a better education. And all these things naturally lead to a happier life and, ultimately, a return on your investment.

    So, whether you’re positively frugal or used to spending money like it’s going out of style, here are five expensive things in life that are totally worth the splurge.

    1. Education

    Spending money isn’t always about parting with your cash and not seeing the returns. This is particularly key when it comes to your education. Return on investment is especially apparent here, as a good education is something that will yield dividends throughout your life.

    However, with the rising expense of tuition fees in many countries, students often graduate up to their necks in debt. In fact, according to a study, some 70% of students graduate with debt, leading to debates over whether it’s really worth the spend.

    But then again, most college grads earn more over the course of their lives. And even if you can’t afford an Ivy league education, you can still choose to invest in yourself.

    There are plenty of local college courses, online classes, and specialist programming certifications that are worth the money.

    Since most millionaires will tell you continued learning is key, this is one case where you need to put down money to make money.

    2. Travel

    One of the ironies with travel is that usually, the more money you make, the less time you have to enjoy it. So, if you’re short on vacation time, that’s when you should particularly invest in travel.

    luxury beach

    Take those four-day trips, spend money on a decent hotel with space inside and a big jacuzzi. Studies repeatedly find that people are happier when they spend money on experiences rather than physical objects.

    Travel opens the mind, allows you to recoup and get new ideas for your business or personal life. Spending money on travel is never a waste due to the number of good things you get back.

    3. A Good Bed

    I remember my grandmother always used to say, if there are two things in life worth spending money on, it’s a good pair of shoes and a good mattress, because if you’re not in one you’re in the other.

    Think about it. Approximately one-third of your life is spent sleeping. Even if you’re a raging insomniac, chances are your mind’s spinning around as you lie on your mattress.

    An uncomfortable one with springs that hang out and cause you to wake up feeling like you’ve done 10 rounds with Mike Tyson is detrimental to your health as you go through your life. So don’t scrimp on this important item.

    4. Convenience

    I had a choice the other day of adding some 35 euros to my low-cost flight to use the airport lounge. That was around 50% of the initial flight price.

    In fact, the base price started at some 70 euros. Then I paid 15 extra to get a decent seat and be first on the plane.

    I got to the airport, sat in the lounge, plowed through an extra pile of work, got free coffee, snacks, and champagne, and then sauntered passed the minions lining up fighting about getting their suitcases on board.

    In short, I paid for convenience and it was worth every cent. Time is money, so paying for things that give you more of it are worth the investment.

    The same goes for takeaway food when you need to get a project finished, and someone to outsource your menial tasks to like coordinating your appointments or cleaning your apartment. How much is the extra time worth to you? Pay for it.

    5. Your Health

    Ironically, even though our health is the most important thing in life, it’s often where we cut the most corners. It might suck spending extra on getting your teeth fixed, your eyes lasered, or simply buying vitamins, but if you look after your health you’ll have a happier and longer life.

    Why dress from head to toe in Gucci if you’re miserable as sin because you can’t afford to spend money getting that molar pulled out?

    If you’re not sure if something is worth spending money on, ask yourself if it’s going to add value to your life. If the answer is yes, go ahead and get your wallet out.

    Images from Shutterstock.

  • Julian Assange May Lose Asylum in Ecuadorian Embassy

    Julian Assange May Lose Asylum in Ecuadorian Embassy

    Julian Assange is in a strange situation. He has been hiding out in the Ecuadorean embassy in London for many years and may have to leave soon. As it stands today no one knows for sure what will happen to the head of Wikileaks, or if he would even face prosecution if he did leave the embassy.

    The latest hearing that could see him evicted was over the $6 million USD tab that he has run up since he moved into the Ecuadorian embassy six years ago.

    He was originally granted asylum, as he was being threatened with extradition to Sweden on rape charges. Mr. Assange feared that he would face deportation to the USA, who has a very nebulous legal position on the serial leaker.

    Wikileaks has been prolific in supplying the public with leaked documents that have precipitated numerous scandals. The organization has posted documents on illegal (under international law) acts committed by the US military, released millions of highly classified communications, and also gave the so-called Panama Papers a home on the internet.

    Is Julian Assange in Trouble?

    Apparently, Julian Assange feels like he should be allowed to stay in the Ecuadorian embassy in London and have his living expenses paid for by the good people of Ecuador. Not only does he want to have his internet and medical bills paid for by the small South American country, but he also wants them to pick up after his cat and let him pop off about whatever political issue he finds interesting.

    The most recent issue that Ecuador had with Julian Assange relates to comments he made in regards to Cataluna’s bid for independence, which Ecuador claims was a violation of an agreement he made not to comment on sensitive global political matters.

    The details of that agreement must be nuanced, but given the nature of Wikileaks, it would seem to be shortsighted to ask Julian Assange to keep is nose out of politics.

    In response to the comments, Ecuador cut Mr. Assange off from the internet, which he compared to ‘solitary confinement’.

    There have been many complaints hurled at Julian Assange over the six years since he arrived at the embassy. He has reportedly been aggressive with security personnel and taken to riding a skateboard aggressively in the hallways.

    The Drone Option

    Let’s be extremely clear, there is no objective evidence to suggest that Hillary Clinton ever seriously considered sending a US drone to kill Julian Assange. There is circumstantial evidence that she suggested it, and given how much classified US information Wikileaks published, it is totally possible that the USA has designs on Julian Assange’s life.

    So far the US hasn’t made any kind of formal attempt to charge him for the multitude of federal laws he has broken. During the Obama years the US Department of Justice (DoJ) concluded that if he was charged, the newspapers that ran the information would also have to be prosecuted, which clearly never happened.

    The UK and Sweden also have the ability to go after Julian Assange on minor charges, and the original rape charge that pushed him into the Ecuadorian embassy in the first place hit its statute of limitations. Other than a contempt-of-court charge in the UK, there is little in the way of formal charges standing against him at this point.

    Problems in the Private Sector

    In addition to leaking countless classified government secrets, Wikileaks has been responsible for distributing information that blew the lid of money laundering operations and organized crime.

    The governments that Wikileaks has offended might be beaten to Julian Assange by the throngs of gangsters and wildly violent dictators that have been presumably been bothered by the do-gooder. Stealing out of the pockets of the Sicilian or Russian Mafia seems like a terrible idea.

    When the Panama Papers hit the wires, a whole bunch of headaches was probably caused by people one wouldn’t want to look at the wrong way. In the end, paying for cat litter could be the last thing on Julian Assange’s mind.

    Given the potential enemies that he has created with a decade-long campaign to rid the world of corruption, he could end up being turned into cat food.

    Meow!

    Featured image from Wikipedia.

  • The Truth About the Pittsburgh Shooting – Freedom of Speech Reminds Us What We Don’t Want to Hear

    The Truth About the Pittsburgh Shooting – Freedom of Speech Reminds Us What We Don’t Want to Hear

    For the most part of my life, I’ve been blanketly in favor of freedom of speech. Growing up in my formative years in Saudi Arabia, a country in which women have no voice, and later witnessing the sweeping injustices between rich and poor while working in Latin America, I became somewhat of a champion for it.

    But over the last couple of years, I’ve realized that I’m not as in favor of freedom of speech as I thought I was. Which means I’m only really in favor of selective freedom of speech–which means, like so many of us, I’m not really in favor of freedom of speech at all.

    Selective Freedom of Speech

    I want to hear from those who’ve been repressed or suffered atrocities, from women who’ve been molested, or ethnic minorities who’ve been sidelined. I want to listen to the eccentric opinions of journalists and conspiracy theorists and make up my own mind about whether Neil Armstrong stood on the moon or 9/11 was ordered by Bush.

    What I don’t want to be reminded of is the glaring reality that giving people a voice also means having to accept that we don’t like what they have to say.

    It’s very easy to sit in an educated position and insist that people should be given a voice–until they use it and unleash an unholy trail of chaos and destruction.

    Let’s take 2016 for our first example. Would any proponent of free speech and civil liberties have imagined in their wildest dreams that the British public would lose control of all their senses and use their collective voice to vote out of the European Union? Or that the majority of Americans would say yes to having a misogynistic reality TV star in the White House?

    2016 was a year that shook even the staunchest supporters of freedom of speech to the core. They started to realize that they didn’t want to hear what their neighbors and colleagues had to say after all. They began to understand exactly how powerful words really are.

    We Might Not Like What People Have to Say

    Then there are social media platforms like Gab offering freedom of speech for those who may have been banned from socially acceptable sites like Facebook or Twitter. In these breeding grounds of racial hate and intolerance, everyday people can have a space to say what they want.

    GAB

    They can share in their mutual support of Trump and his travel ban. They can philosophize on nationalistic tendencies and they can spit their fiery rhetoric of white supremacy without being censored. And everyone’s happy. Until those words turn into a mass shooting in a synagogue.

    Like everything else in life, one might argue that freedom of speech is not black and white. But I have to disagree. It is absolutely black and white and you must come down on one side of the fence or the other. There’s no such thing as sitting in the middle. You are either for it or against, whether you like the implications of that or not.

    If you decide to throw yourself under the banner of freedom of speech, then under the banner you must be. You can’t pick and choose when to withdraw your support if you don’t like what people say–when the realization hits you that most of the world is xenophobic, racist, ignorant, undereducated, and resentful.

    Tech Companies’ Reactions to Gab

    So after the news emerged that the killer of the Pittsburgh shooting was a user of Gab, tech companies like PayPal, GoDaddy, and Stripe responded “appropriately” by threatening to withdraw their services. But they’re missing the point entirely.

    Freedom of speech has consequences. Freedom of speech is absolute. Not selective. And if we are to condone and even market it as a good thing, we must be prepared to accept that it may end up in the killing of 11 people in a synagogue.

    Gab has been thrust into the spotlight for failing to do enough to prevent the crime from happening. For failing to censor its users or curtail their right to post what they want. In short, for keeping their promise of defending freedom of expression.

    The Pittsburgh killer Rober Bowers was able to feature images of guns and white supremacist iconography, and even post anti-Semitic threats on the site just hours before the shooting. And while Gab said in a statement afterward:

    “Gab unequivocally disavows and condemns all acts of terrorism and violence”

    This only seems at odds with the whole purpose of freedom of speech in the first place and the truth that most of us simply don’t want to be reminded about. That we are not, in fact, the defenders of freedom of speech that we thought we were.

    And in fact, we need some kind of monitoring by a central authority whether it be a Facebook bot or a federal agency because the sad truth is that human beings are capable of things that most of us simply don’t want to hear about.

    Featured image from Manila Bulletin.

  • Did Elon Musk Commit Securities Fraud with Tesla Q3 Earnings?

    Did Elon Musk Commit Securities Fraud with Tesla Q3 Earnings?

    During the Tesla Q3 earnings Q&A webinar, Elon Musk was questioned on the gross margin for the Model 3 by Pierre Ferragu of New Street Research. Other “analysts” on the call included Adam Jonas of Morgan Stanley, Dan Galves of Wolfe Research, and CNBC’s Phil LeBeau. The analyst from Morgan Stanley started his questioning with a dig at CEO, Musk.

    “… as the company conducts its search for a new Chairman, what are the attributes, experiences of that person that you think would be a best shared or best value for Tesla?”

    Musk, noticeably offended, pushed him for an alternative question on operational matters. Many analysts were wide of the mark with their forecasts for Tesla Q3 earnings. The median forecast was another loss-making quarter for Tesla Motors. During the one hour webinar, several questions came up on the better-than-expected gross margin. Analysts were trying to justify their inept forecasting.

    Chief Financial Officer, Deepak Ahuja, in an earlier earnings call had stated profitability would come from their improved gross margins on the Model 3. It was widely known that the revenue mix swung significantly from the Model S and X to the Model 3 in the quarter.

    This was reinforced in the Model 3 teardown conducted by Sandy Munro of Munro & Associates. Previously, Munro had criticized the build quality of the vehicle, but his final analysis was very different. Munro assessed the gross margin for the Model 3 at a staggering 30%. Well ahead of the “financial analysts” crunching their numbers.

    In June, Musk took to Twitter when news leaked that 9% of the workforce was to be offloaded. Some of these cost savings probably came through in Q3.

    Choose Your Analyst Carefully

    Market analysts, on the whole, got the Tesla Q3 earnings wrong. The internet is awash with opinions on the earnings with some asking if the numbers are accurate. One YouTube channel held their own Q&A session straight after the webinar. One viewer asked:

    “Is there any way that Tesla could have manipulated or event [sic] faked the numbers in their earnings call or is there some overseight [sic] from agencies?”

    The host pointed out it would mean jail time if the earnings were false and those involved are not that stupid. Interim results are not just provided for investors. Quarterly statements are required by the SEC, and indeed it would be very foolish to “cook” the books.

    However, accountancy is not an exact science. Errors do occur, and accounting principles can be “modified,” subject to auditors’ approval. When executives own a significant share of the company’s stock, they might be tempted to do an “Enron.”

    Small owner-occupied businesses tend to understate their earnings to reduce tax liabilities. Whereas larger corporations have done the opposite to boost the stock price.

    In my very early days as a junior accountant, I was told an interesting tale about one of the largest engineering companies in the world. For some unknown reason, one of their many subsidiaries wanted to show lower earnings for the current accounting period. This was achieved by loading up a fleet of trucks with finished goods on the day the auditors attended the annual stock count.

    Analyst Harris Kupperman Calls Tesla Q3 Earnings a Fraud

    When you read an analyst’s report decide for yourselves if they have a hidden agenda. Some are short selling the stock. Others have a grievance with the executives, and some are just poor analysts. Harris Kupperman scores highly on the latter. Kupperman’s blog site states:

    “I’ve been successfully investing in the markets for over two decades. In 2003 I started a hedge fund, Praetorian Capital, so that others could invest alongside me.”

    How he can be a successful trader with little or no understanding of financial statements is beyond me. Following the release of Tesla Q3 earnings, he published an article on his blog which was also covered by ZeroHedge. Part of the mission statement for ZeroHedge is:

    “to widen the scope of financial, economic and political information available to the professional investing public.”

    They are certainly widening the “scope” with Kupperman’s shoddy analysis. It’s abundantly clear that he hasn’t studied the published accounts for Tesla. Strangely, the full year accounts don’t seem to be available on Tesla’s website. The weighty 276-page report for the year ending December 2017 is widely available on other sites.

    Kupperman starts his review of the earnings figures with:

    “While I am certain that Tesla collapses in the near future, all evidence seems to show that they’ve used every trick from every financial fraud over the past 100 years to put lipstick on the Q3 financial results.”

    Why Kupperman Is Wrong

    Kupperman goes on to illustrate his lack of knowledge by proclaiming the earnings are false because depreciation per car in Q3 was almost half that of Q2. Kupperman’s cursory glance of the financial statements probably picked up the entry towards the top of page 78:

    “Depreciation for tooling is computed using the units-of-production method whereby capitalized costs are amortized over the total estimated productive life of the respective assets. As of December 31, 2017, the estimated productive life for Model S and X tooling was 250,000 vehicles based on our current estimates of production. As of December 31, 2017, the estimated productive life for Model 3 tooling was 1,000,000 vehicles based on our current estimates of production.”

    I have reproduced the calculations done by Kupperman but for clarity switched to $m rather than $000, except for the depreciation per car.

    Tesla Q3 earnings report fact or fiction

    Two glaring mistakes by the analyst. Firstly, the mix of vehicles changed dramatically from Model S and X to Model 3. The Model 3 being depreciated over 1 million vehicles compared with just 250,000 vehicles for the S and X. This would significantly reduce depreciation despite the doubling of the total number of cars sold.

    Tooling Costs

    Secondly, the original cost of tooling in December 2017 was just $1.3 billion. Whereas the total asset costs are close to $18 billion. Pages 89 and 90 of the financial reports show the historical costs for solar energy systems and property, plant and equipment. Some of these fixed assets are depreciated over decades, especially the big-ticket items. They are not written off based on cars produced in the quarter.

    The figures for depreciation picked up by Kupperman are the total for all assets depreciated and not just the $1.3 billion of tooling. The financial records do show a further $2.5 billion of assets in construction. Some of which ultimately will be depreciated as tooling. Also, further tooling costs from Q1 to Q2 would be depreciated in Q3. However, we don’t have a breakdown of these figures from the interim results. It is my opinion that Kupperman’s assertion that the Tesla Q3 earnings are fraudulent is without basis.

    Featured image Evening Standard.

  • US Dollar Shortages Could Spur Major Equity Selling

    US Dollar Shortages Could Spur Major Equity Selling

    Big tech had a rough week. Stock market darling Amazon was hit hard on slowing growth, and the shares ended the week nearly 10% lower. Amazon shares are still trading above 90 times earnings, which could mean more potential downside for a company that still has loads of optimism surrounding it. Despite their slowing growth, the US dollar could mean trouble for Amazon and the equity markets.

    The US dollar has been on a breakneck rally. It has gained 5% against other major currencies that make up the US Dollar Index. This puts big companies, and investors, in a difficult situation.

    In addition to a rising value, there also appears to be a shortage of US dollars emerging. The London Interbank Offer Rate (LIBOR) has been shooting up, which could be signaling trouble in the debt markets.

    The 3-month US dollar LIBOR rate has risen to the highest level since the financial crisis of 2008, and if these high rates stick, it could mean much higher funding costs for borrowers everywhere.

    3m_dollar_LIBOR

    Who Wants All These Dollars?

    For those of you who are under the impression that the world is awash in dollars, you aren’t wrong. The US Fed created trillions of US dollars over the last decade. Thanks to fractional reserve banking, those dollars have been used to create debt which now has to be serviced, and there is a whole lot more debt than dollars.

    Adem Tumerkan from Palisade Research captures one of the problems that the debt markets are grappling with perfectly:

    “The soaring U.S. deficit requires an even greater amount of dollars from foreigners to fund the U.S. Treasury. But the Fed is shrinking their balance sheet… which means they’re sucking dollars out of the economy (the reverse of Quantitative Easing which was injecting dollars into the economy). This is creating a shortage of U.S. dollars – the world’s reserve currency – therefore affecting every–global economy.”

    The end result of this appears to be a rising need for US dollars, which could also be one of the reasons why the US dollars rally has been so strong. For big companies that are highly leveraged to economic growth, expensive money is terrible.

    sc

    The Big Let Down

    Equity markets in the US are still at high levels, despite the fact that funding costs are on the rise. Even if bond yields stabilize from here, if credit markets continue to contract, stock prices could be vulnerable to serious selling.

    Not only do rising funding costs create a fundamental problem for businesses like Amazon or Apple, but their customers won’t have as much to spend. Higher rates could also mean a rush to secure liquidity, which can be easily found by selling shares.

    It’s no secret that the equity markets are basically run by trading algorithms, which could mean that when selling materializes, it may be faster and more severe than many realize.

    It’s worth remembering that for every basis point that LIBOR rises, billions of dollars in interest payments are created. That money has to come from somewhere, and it could start flowing out of the equity markets before too long.

    Featured image from Shutterstock.

  • A Global Economic Downturn Could be Coming – Are You Ready?

    A Global Economic Downturn Could be Coming – Are You Ready?

    There’s no flashing red light or bell that goes off when the global economy tilts towards the abyss. But over the last few months, numerous data points have signaled a weakening economy, and the potential for another global economic downturn is very real. The reasons the post-2008 recovery is probably over are varied, but the end result is a trying environment for investors.

    With the US stock market near all-time highs, it might be hard to believe that a global economic downturn is imminent. Yet Investor AB is preparing for harder times.

    Investor AB is the investment arm of Sweden’s Wallenberg family. The company controls a portfolio that’s worth more than $40 billion USD and owns shares in one-fifth of the large-cap companies listed on Sweden’s benchmark exchange.

    Investor AB just sold a 12-year 500 million Euro bond to build up their cash reserves. According to CEO Johan Forssell:

    “For us, the most important part is that we’re prepared, and that’s why we issued a big bond and why we work closely with our companies to make sure we’re flexible and can adapt to different environments as good as we can.”

    The Risk of a Global Economic Downturn is Real

    Forssell went on to cite deteriorating economic data from Asia and Europe, as well as currency devaluation and a global trade war as reasons for concern. And Mr. Forssell isn’t alone in making preparations for harder times. The trade war that US President Donald Trump began is starting to bite the global economy. The US is also upping the ante in the South China Sea.

    A recent video released by The Economist brought up the risk of another global recession, but the moderate tone that was struck by Senior Editor Ryan Avent may be lagging the global economic reality.

    As it stands today, China’s Financial Stability and Development Committee has held 10 meetings over the last two months. The Committee is led by Vice-Premier Liu He, who is directly connected to Chinese President Xi Jinping.

    The previously unscheduled meetings began on August 24 of this year, but they’ve been kept out of the news. Xu Jianwei, who is the senior China economist at French bank Natixis, commented:

    “The anxiety among the top [Chinese] leadership is 100 percent”

    It isn’t hard to see why the Chinese government would be concerned. In addition to an increasingly hostile relationship with their largest trading partner, the benchmark Shanghai Composite Index has fallen to 4-year lows, and the Chinese housing market is crumbling.

    Shanghai Stock Exchange

    Real War Would be Bad News for the Global Economy

    A global economic downturn would certainly challenge central banks and governments. As Avent correctly pointed out, the regular tools that policymakers have used to fight off recession aren’t available.

    The post-2008 world order has destroyed the role of interest rates, and quantitative easing has introduced an entirely new role for major central banks.

    Compared to the potentially hot war that is emerging in the South China Sea, monetary policy and interest rates are of little concern. Over the last few days, the US Navy sent two guided-missile warships on a freedom of navigation mission. They sailed in the Taiwan Strait, between the heavily disputed island of Taiwan, and mainland China.

    This isn’t the first naval provocation by the US in disputed waters.

    While Beijing has yet to respond officially to the naval exercises, an op-ed published in the Global Times (an unofficial mouthpiece for the Chinese Communist Party) on Monday penned by Chen Xiangmiao, a researcher at the National Institute for South China Sea Studies, stated that:

    “Beijing needs to safeguard territorial sovereignty and maritime jurisdiction in the area and ensure secure corridors for energy import and freight transport… Judging by the current circumstances, China has no other choice than taking countermeasures, including increasing military deployment in the region.”

    It’s worth remembering that when Archduke Franz Ferdinand was shot dead in Sarajevo on the 28 June 1914, the financial markets didn’t react. It wasn’t until the bond markets suddenly slammed shut a month later across the European continent and the UK that people realized the gravity of the event.

    Don’t wait for a bell to ring, and pay attention to what is happening. The next global economic downturn could be much faster, sharper, and more violent than anyone can imagine. There’s no time like the present to prepare.

    Featured image from Shutterstock.

  • Canada Runs out of Legal Cannabis Only 4 Days After Legalization

    Canada Runs out of Legal Cannabis Only 4 Days After Legalization

    Canadian cannabis stores in Alberta and other parts of the nation have run out of legal cannabis just four days after legalization came into effect. Annual sales for the cannabis industry in Canada are expected to reach $6.5 billion… but that won’t happen if stores are already ‘smoked out’ just a few days in.

    After the first day of cannabis legalization in Canada, Vice reported that pot stores across Canada’s Northwest Territories, Newfoundland, Quebec, and Saskatchewan were already struggling to keep up with the demand. It appears that when Canadians voted with their lungs to legalese weed, they were deadly serious.

    Running out of Legal Cannabis

    One of the ongoing issues that the cannabis industry faces is the amount of legally compliant growers is now not enough to feed the rabid demand for marijuana in Canada.

    Although cannabis legalization sounds great, there are only a handful of licensed growers and websites in Canada to stock the licensed stores. Stores can’t just buy weed from local unlicensed home-growers or black market green-thumbs.

    The owner of Waldo’s 420 licensed cannabis store in Alberta Patrick Wallace summed up the sentiments that Canadian cannabis stores are currently experiencing by telling CBC that:

    “It’s a mess. The supply is just a mess.”

    Vast Gulf in Supply and Demand

    Reports were surfacing after only one day of legalization that cannabis stores across the nation were already struggling to meet the high demand for legal cannabis.

    One company out of Winnipeg told Vice that they sold out on the first morning, selling more than $50,000 worth of products. Other news articles reported how Alberta ran dry of Cannabis oil on the first day, although some products were still available across Nova Scotia.

    Smaller unlicensed growers across Canada were initially concerned that legalization would affect their underground grow-ops as stores could only buy products from licensed growers of ‘legal’ weed. However, eager consumers might now look to the streets to solve the problem, which is the exact opposite of what the legalization was supposed to achieve in the first place.

    It seems that authorities were completely taken off guard by the supply and demand for legal cannabis in Canada. Maybe they were hitting the pipe too hard and thought it seemed like a good idea at the time. Let’s be honest, we’ve all been there!

    Featured image from Shutterstock.