Expect Desperate, Insane Behavior From Government In 2018 – Part 2

Authored by Mike Krieger via Liberty Blitzkrieg blog,

The financial crisis of 2008/09 was the most significant event to happen in my lifetime. That event, coupled with the deeply unethical and corrupt response to it, led to a direct delegitimization of governments and institutions worldwide. It’s precisely this self-inflicted destruction of credibility which opened up the window for the birthing of a new monetary and financial system in the wake of Bitcoin’s emergence in early 2009.

Bitcoin is a system designed to be everything the status quo isn’t. Decentralized, transparent, permissionless, with a well-defined and restricted monetary supply curve.

Given the backdrop upon which it emerged, it’s unsurprising that as more time passes, the more popular it becomes.

Humanity is desperate for a major reboot and an entirely different way of doing things. Bitcoin and other crypto assets offer exactly that opportunity in the realm of finance and money, thus capturing the imagination of millions of the most brilliant and passionate people across the world. Since the status quo stubbornly refused to reform and change the system after the financial crisis, humanity had no choice but to take charge and do it independently at the grassroots level.

One thing that’s become increasingly clear to me as I’ve added years and experiences to my life, is that governments, generally speaking, hate freedom. It’s why something as beneficial and benign as cannabis remains illegal throughout the world, and why people like Jeff Sessions still want to criminalize it even in states where the actual people living there voted to make it legal (see Part 1 of this series). While the fairytale we’re conditioned to believe tells us government exists to protect us and create an environment in which humans can thrive, the reality is quite clearly the opposite. The crooked response to the financial crisis demonstrated this in spades to anyone paying even the slightest amount of attention.

As we transition into 2018, increasing numbers of people will see government and large corporations as the unified threat they represent to the global economy and human freedom. Younger generations are particularly aware, as they’ve been thrust into a parasitic system designed to prey upon them via a lifetime of debt serfdom. The more people learn about the way the world really works, the more they’ll want to reject it and create something entirely different. This is where Bitcoin and crypto assets come into play.

As Bitcoin rose through the $10,000 mark, I noticed an explosion in panic and fear on behalf of those who want to keep the current system in place.  This is to be expected, as Bitcoin’s popularity is and should be seen as a report card on the global status quo. The financial system as it’s currently constructed is being publicly rejected with every uptick in the Bitcoin price, and with every billion dollars added to total crypto asset market capitalization. Naturally, this will make those in charge of the current predatory system, and those who have benefited most from it (oligarchs), increasingly hostile to its popularity.

There are so many recent examples of such hostility it’d be impossible to highlight them all, but I’ll provide you with a few examples so you know what I mean.

First, there was the clip of two billionaires discussing Bitcoin on Bloomberg.

These weren’t the only two billionaires who chirped in about Bitcoin last week. Financial oligarch Ken Griffin came out with the truly original line of comparing Bitcoin to tulips, something I’ve heard non-stop in the more than five years I’ve been involved in the community. Via CNBC:

Citadel’s Ken Griffin said Monday that bitcoin may be in a bubble.

 

“Bitcoin right now has many of the elements of the tulip bulb mania we saw back hundreds of years ago in Holland,” said the billionaire hedge fund manager in an exclusive interview with CNBC’s Leslie Picker.

 

Griffin, however, said he does believe the blockchain technology backing the cryptocurrency is valid.

Griffin’s estimated net worth is $8.6 billion. Makes you wonder what sort of society and economy enriched someone like this to such an extent.

Carl Ichan also chimed in. Via Coindesk:

Billionaire investor Carl Icahn has jumped on the bandwagon of financial bigwigs saying bitcoin is in a bubble

 

The business magnate and founder of Icahn Enterprises told CNBC that the cryptocurrency “seems like a bubble” and that he didn’t understand the hype around bitcoin.

 

Icahn stated:

 

“I got to tell you honestly, I don’t understand it … I just don’t get it. I just stay out of something if I don’t understand it.”

He admits he doesn’t understand it, but calls it a bubble anyway. This is surprisingly common.

Of course, there was the infamous nonsense spouted by Nobel Prize winning economist Joseph Stiglitz who appears viscerally triggered by Bitcoin, saying it has no social function and should be outlawed.

Add to the above a plethora of central banker commentary about how dangerous Bitcoin is, and you know status quo types are beginning to sweat. Which brings me to the point of this piece. With Bitcoin having succeeded beyond the wildest imagination of status quo sycophants, many will begin to clamor and beg for an official response in order to defend their sleazy government sanctioned rackets.

At this point, I could attempt to outline all the various ways the U.S. government and others could target free market crypto assets, but I’m not going to do that. The reason I’m not going to do this is because I think the cat’s already too far out of the bag for the power structure to stop this trend. The benefits to humanity generally, and younger generations specifically, will make any attempts to stop this freight train futile. Any government that tries to do so will simply shoot themselves in the foot.

We stand on the precipice of historical shifts in relative economic power.
Those regions that embrace crypto assets will thrive, those that reject them will die.

— Michael Krieger (@LibertyBlitz) December 4, 2017

Unfortunately, most governments exist to protect and defend the status quo, versus doing what’s best for the public. If government actually cared about the future, every single country would be competing aggressively right now to be the most crypto asset friendly region on earth. The human brainpower and talent voluntarily dedicating their lives to this space is extraordinary. It’s a global movement and community the likes of which has rarely, if ever, emerged on this planet.

The smartest people on earth are dedicating their lives to Bitcoin and other crypto assets.

You want to bet against that?

— Michael Krieger (@LibertyBlitz) December 1, 2017

That tweet above more or less summarizes how I see the situation. Anyone who bets against this overall space will ultimately end up historical roadkill. The emergence of Bitcoin and the crypto-asset ecosystem generally is one of the most liberating, paradigm disrupting events that’s ever manifested on this planet. Of course, entrenched interests won’t like it and will try to fight back, but they’ll be no more successful than those who wanted to ban the printing press.

Bitcoin is achieving what global central banks completely failed at. Animal spirits, a dynamic economy and revolutionary innovation.

— Michael Krieger (@LibertyBlitz) November 26, 2017

The above occurred despite governments having placed many roadblocks in the way. Imagine the innovation explosion that would be unleashed if governments decided to support this extraordinary community rather than fight it? At over $11,000 per bitcoin, a lot of money’s been made. While hodlers certainly prefer to spend fiat as opposed to bitcoin, the higher the price rises, the higher the percentage of their net worth is denominated in crypto.

If the U.S. government actually cared about dynamic economic growth as opposed to merely protecting status quo interests, it would unleash the power of this crypto asset wealth creation machine by eliminating taxes on gains. If no capital gains were owed, it’d encourage people to spend some of this newly created wealth in the economy. It’s an obvious move, but because governments are mainly about control and power, their initial reaction likely will be to go in the opposite direction.

The opportunities available right now for regions and nations willing to be openminded about Bitcoin and crypto assets generally are extraordinary. Government roadblocks and bans cannot and will not kill the spirit of this community and the ideals that motivate it. The only question is which regions/governments will put arrogance and control aside to do the right thing by their people. We’ll find out the answer to that question soon enough.

As a declining global empire, the U.S. is unfortunately prone to doing particularly stupid things in order to protect the predatory system beloved by the oligarchs in charge. On the flip-side, there are plenty of wealthy Americans and others with influence who see Bitcoin for the incredible opportunity it is, and cooler heads may prevail. The truth is nobody knows exactly how all of this will turn out.

In the short-term, we’re likely to face increased push back and we should be mentally prepared to face it. In the longer-term, the future appears exceptionally bright.

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Five Ways To Short Bitcoin

Looking to put bitcoin’s rise in context? How about this: Over the last five years, the world’s most valuable digital currency has risen an astonishing 11,000,000%. Furthermore, since Jan. 1, it has climbed 950%, compared with a total return of 18% for the S&P 500.

Given the torrid pace of bitcoin’s climb, one would imagine that there are few traders left who possess the wherewithal to short the digital currency. And until recently, the options to short bitcoin were mostly offered through unregulated exchanges, and very risky given bitcoin’s volatility.

But increasingly, mainstream exchanges have begun offering bitcoin-based derivatives that could make it easier for retail traders to short the digital currency. CME Group has said it will introduce a suite of bitcoin-linked products by the end of the year, and LedgerX, the first CFTC-approved Swap Execution Facility (or SEF), traded more than $1 million in bitcoin swaps and options during its first week.

In Switzerland, one exchange has introduced options that make it easier for investors to profit if the bitcoin price drops. But other more creative ways to short the digital currency have existed for a while now – in some cases, for years.

“All the options to short in common markets are becoming available in the bitcoin market,” said Charles Hayter, co-founder of market tracker CryptoCompare. “There’s pretty good liquidity for shorting bitcoin. The main difference with shorting the Nasdaq for example, is it will be a lot more volatile, so there’s a lot more risk. The rate to borrow will also be a bit higher."

With bitcoin on the cusp of breaking above $10,000 for the first time, here’s a list of popular options for shorting bitcoin, per Bloomberg.

Contracts for Difference

"One of the most popular ways to short bitcoin is through CFDs, a derivative that mirrors the movements of the asset. It’s a contract between the client and the broker, where the buyer and seller of the CFD agree to settle any rise or drop in prices in cash on the contract date.

"CFD is currently a great market if you want to short bitcoin, especially ahead of that milestone 10K mark, which we think will bring some retracement," said Naeem Aslam, a chief market analyst at TF Global Markets in London, which offers the contracts. "The break could push the price well above $10,100 and it would be in that area when we could see some retracement.""

Margin Trading

"Another common way to short bitcoin is through margin trading, which allows investors to borrow the cryptocurrency from a broker to make the trade. The trade goes both ways; a trader can also increase their long or short position through leverage. Depending on the funds kept as collateral to pay back the debt, this option increases the already risky bitcoin trade. Bitfinex, one of the biggest cryptocurrency exchanges, requires initial equity of 30 percent of the position.

Short-margin trading positions on Bitfinex were at around 19,188 bitcoins on Monday, versus 23,931 long positions, according to bfxdata.com, which tracks data on the bourse."

Borrow to Short Bitcoin

"Most of the brokerages that allow margin trading will also let clients borrow bitcoin to short with no leverage. This will be a less risky way to bet bitcoin price will fall."

Futures Contracts

"The futures market isn’t as widely developed as CFDs and margin trading, but it’s still possible to make bearish bets on bitcoin with options. For now, LedgerX is the only regulated exchange and clearing agent for cryptocurrency options in the U.S. The CME Group Inc. and the Chicago Board Options Exchange have both asked for approval to list bitcoin futures, so that may open up the market to more investors."

Shorting Bitcoin ETNs

"Investors can also indirectly bet against bitcoin by shorting exchange traded notes with exposure to the cryptocurrency, like Stockholm-based Bitcoin Tracker One, and Grayscale Investments LLC’s Bitcoin Investment Trust. The risk is that these notes don’t always trade in line with bitcoin, so the exposure won’t be perfect."

* * *

Yesterday, Citadel’s Ken Griffin opined that he believes bitcoin is a bubble that will end in tears, joining a list of finance luminaries who have all expressed reservations about the digital currency’s epic rally.

As a reminder:

$0000 - $1000: 1789 days
$1000- $2000: 1271 days
$2000- $3000: 23 days
$3000- $4000: 62 days
$4000- $5000: 61 days
$5000- $6000: 8 days
$6000- $7000: 13 days
$7000- $8000: 14 days
$8000- $9000: 9 days
$9000-$10000: ?

The rise is even making some central bankers nervous. “The problem with bitcoin is that it could easily blow up and central banks could then be accused of not doing anything,” European Central Bank policymaker Ewald Nowotny told Reuters.

But in his confirmation hearing earlier today, incoming Fed Chairman Jerome Powell said bitcoin is still too small to pose a real threat.

"They don’t really matter today," Mr. Powell said. "They’re just not big enough."

Investors Redeem Half Of Paul Tudor Jones' Main Fund In Past Year

The woes for hedge funds continued in the second quarter, and nowhere more so than among the macro fund community, which posted its worst first half since 2013, losing 0.7% , and according to Hedge Fund Research have returned just 1% annually in the past five years, in an investing world which no longer makes much sense courtesy of central bank intervention. Most impacted by this revulsion against the active investing community has been none other than Paul Tudor Jones, whose investors are increasingly deserting him according to Bloomberg, which reports today that clients yanked 15% of their assets from his main BVI fund in the second quarter, leaving AUM at just $3.6 billion, roughly half from a year ago.

Jones, whose BVI Global Fund is down 1.9% through July 21, has been taking aggressive steps to revive his firm, including reducing fees and headcount. As revenue at Tudor declined, Jones last month sold the firm’s 43-acre Greenwich, Connecticut, headquarters’ property. Tudor then said it plans to move to a location in lower Fairfield County that’s more convenient to New York City, where the firm has offices. It is probably also cheaper. One year ago, Jones also dismissed 15% of his employees. He has told clients he will manage a larger chunk of their money and has encouraged his portfolio managers to take more risk. Jones has also leaned on quantitative tools to help with trading, including introducing technology that replicates the bets of his best managers.

Finally, Tudor has this year reduced its management fee to between 1.75% and 2.25% while taking a 20% cut in profits, after decades of being one of the most expensive hedge funds. The firm had once charged management fees as high as 4% for some clients, and a performance fee of as much as 27% for others, Bloomberg reports.

Alas, so far these "aggressive steps" have failed to yield results. Jones, 62, and his peers including Brevan Howard"s Alan Howard and, of course, John Paulson, are experiencing a "punishing shift":

The old guard who shot to fame in the 1980s and 1990s are foundering, while a younger set of managers are making money, hiring and attracting new investments. The veterans are finding it’s no easy feat to replicate stand-out profits of yesteryear, when markets were more opaque and less efficient.

One can debate whether markets were less efficient then compared to now, but one thing is certain: icons such as PTJ have failed to find their groove in a world where central banks have injected $15 trillion in liquidity. Aside from BVI Global, Tudor also manages a fund tied to the performance of multiple teams of managers, an event-driven portfolio, and individual accounts. In total, the firm now has just under $8 billion in assets, compared with $14 billion in June 2015 according to Bloomberg.

Meanwhile, Tudor employees have also defected along with clients.

Global rates money manager Adam Grunfeld quit in May after nine years and is set to join Element Capital, the macro fund run by 42-year-old Jeff Talpins. Zorin Finkelsen and Dudley Hoskin left to join Balyasny Asset Management. Other departures have included risk-management chief Joanna Welsh, who departed for Ken Griffin’s hedge fund Citadel last year. Separately, money manager Dan Pelletier took a sabbatical to design quantitative tools for trading, people with knowledge of the firm said. Pelletier, who had worked at Tudor for nine years, couldn’t be reached for comment.

Jones" recent troubles are a humiliating fall from grace for the once-storied investor, whose main BVI Global Fund produced average annual gains of about 26% from 1987 through 2007. However, since 2008 his annual average return has slid to about 4.7% with results turning increasingly more negative in recent years.

In his biggest losing bet - so far - Jones banked on macro making a comeback. Last year he said central bank policies, which have suppressed volatility and encouraged more government debt, will backfire and macro strategies will profit when the debt bubble bursts. So far that hasn’t materialized.

Photos Of Aleppo Rising: Swimsuits, Concerts And Rebuilding In First Jihadi-Free Summer

When taxi and bus drivers take journalists into Syria via the Beirut-Damascus Highway these days, there"s a common greeting that has become a kind of local tradition as the drivers pull into their Damascus area destinations. They confidently tell their passengers: "welcome to the real Syria." Local Syrians living in government areas are all too aware of how the outside world perceives the government and the cities under its control. After years of often deceptive imagery and footage produced by opposition fighters coordinating with an eager Western press bent on vilifying Assad as "worse than Hitler", many average Syrian citizens increasingly take to social media to post images and scenes of Syria that present a different vision: they see their war-torn land as fundamentally secular, religiously plural, socially tolerant, and slowly returning to normalcy under stabilizing government institutions.

As the most intense phase of fighting in Aleppo was unfolding in 2016, veteran journalist Stephen Kinzer took to the editorial pages of the Boston Globe to remind Americans that the media has created a fantasy land concerning Syria. Kinzer painted a picture quite opposite the common perception:

Coverage of the Syrian war will be remembered as one of the most shameful episodes in the history of the American press... For three years, violent militants have run Aleppo. Their rule began with a wave of repression. They posted notices warning residents: “Don’t send your children to school. If you do, we will get the backpack and you will get the coffin.” Then they destroyed factories, hoping that unemployed workers would have no recourse other than to become fighters. They trucked looted machinery to Turkey and sold it...

The United States has the power to decree the death of nations. It can do so with popular support because many Americans — and many journalists — are content with the official story.

Now, during the first summer of relative calm Aleppo residents have seen in over four years of grinding conflict, the city commonly referred as "the jewel of Syria" is once again rising from the ashes. Foreign journalists are also accessing places like East Aleppo and the heart of the walled "old city" for the first time. Some few honest correspondents, unable to deny the local population"s spirit of hopefulness and zeal with which they undertake rebuilding projects, acknowledge that stability and normalcy have returned only after the last jihadists were expelled by the Syrian government and its allies.

Aleppo orchestra concert, Summer 2017/via Sarah Abdallah

A Western press and political class which generally mourned the liberation of the city from al-Qaeda groups like Nusra (AQ in Syria), calling government actions a "massacre" and "genocide", now finds a reality that can"t be ignored or denied: Aleppines are returning to ravaged parts of the city to rebuild, they are enjoying nightlife, going to music concerts, staying out late at cafes; families are swimming at local pools, women are strolling around in t-shirts and jeans free of the oppressive Wahhabi fighters that once ruled parts of the city.

Kinzer"s Boston Globe piece further concluded that the entire web of assumptions on Syria woven by the media and fed to the public over the years were "appallingly distant from reality" and warned that these lies are "likely to prolong the war and condemn more Syrians to suffering and death." As new photos continue to emerge of the real Aleppo and the real Syria it is essential to revisit the most destructive among the lies that have helped serve to prolong this tragic and brutal war.

Aleppines didn"t want to live under Wahhabi Islamist rule

Andalusia Swimming Pool in Aleppo, Summer 2017/via Syria Daily

According to multiple eyewitness reports and studies, the story of how war entered Aleppo"s environs was not primarily one of mass public protests and government crackdown, but of an aggressive jihadist insurgency that erupted suddenly and fueled from outside the city. According to then Indian ambassador to Syria, V.P. Haran (Amb. to Syria from 2009 to 2012), Aleppo on the whole was unwillingly dragged into the war after remaining silent and stable while other cities raged. In an interview which detailed his own on-the-ground experience of the opening years of war in Syria, the ambassador said:

Soon parts of Latakia, Homs and Hama were chaotic but Aleppo remained calm and this troubled the opposition greatly. The opposition couldn’t get the people in Aleppo to rise up against the regime so they sent bus loads of people to Aleppo. These people would burn something on the streets and leave. Journalists would then broadcast this saying Aleppo had risen.

Why did it take until July 2012 - well over a year since conflict in Syria began - for Aleppo to see any fighting? Why did residents not "rise up" against the government?

The answer is simple. The majority of Syrians, whether Sunni, Shia, Alawi, Christian, Kurd, or Ismaili, are sane individuals – they’ve seen what life is like under the “alternative” rebel rule marked by sharia courts, smoke and alcohol bans, public floggings, street executions, desecration of churches, and religious and ethnic cleansing of minorities. They recognize that there is a real Syrian national identity, and it goes beyond mere loyalty to the current ruling clique that happens to be in power, but in Syria as a pluralistic Levantine society that rejects Saudi style theocracy.

Rebuilding Aleppo, Summer 2017. Latin Parish of St. Francis/via Sarah Abdallah

The kind of religious and cultural pluralism represented in the liberal democracies of the West are present in Syria, ironically, through a kind of government-mandated “go along, get along” policy backed by an authoritarian police state. One can even find Syrian Jews living in the historic Jewish quarter of Damascus’ walled old city to this day.

Syrian urban centers have for decades been marked by a quasi-secular culture and public life of pluralist co-existence. Aleppo itself was always a thriving merchant center where a typical street scene would involve women without head-coverings walking side by side with women wearing veils (hijab), cinemas and liquor stores, late night hookah smoke filled cafés, and large churches and mosques neighboring each other with various communities living in peaceful co-existence. By many accounts, the once vibrant secular and pluralist Aleppo is now coming back to life (and largely never left government-held West Aleppo).

"Moderates" did not "liberate" Aleppo, but gave cover to an ISIS and al-Qaeda invasion

Image: "moderate" rebels mock a Christian government soldier—This photo was originally posted online by a Swedish based terror group in Syria after the Summer 2013 rebel offensive against the Menagh airbase near Aleppo. A rebel fighter mocks a captured Christian government soldier’s cross. Another photo posted in the original set reveals that the soldier was later tortured by being crushed with a large rock on his chest as he lay on his back.

One of the most under reported and least understood events surrounding the history of how all of Aleppo province and the Northern Syria region became a hotbed of foreign jihadists is the fall of the strategically located Menagh airbase near Aleppo. As a Reuters timeline of events indicates:

In early 2012 rebels take control of the rural areas northwest of Aleppo city, besieging the Menagh military air base and the largely Shiite towns of Nubl and Zahra.

After a lengthy siege of Menagh, the base finally fell to jihadist factions under the command of the US-backed Free Syrian Army (FSA) in August of 2013. This event was key to rebel fighters gaining enough territory to cut off the Aleppo-Damascus Highway, which allowed them to encircle all of Aleppo for much of that year. But a little known yet hugely important detail of the Menagh episode is that rebels only got the upper hand after being joined by ISIS suicide bombers commanded by Omar the Chechen (ISIS" now deceased most senior military commander). The fall of this government base is what opened a permanent jihadi corridor in the North, allowing terrorists to flood the area. The commander for the operation was US Ambassador Robert Ford"s personal friend, Col. Abdel Jabbar al-Okaidi, who was head of the US and UK funded Revolutionary Military Council of Aleppo (FSA). Okaidi worked in tandem with ISIS military commander Omar the Chechen and his crew for the operation - all while being supported by the United States and Great Britain.

Concerning US-backed Okaidi"s close relationship to the ISIS faction in the summer of 2013, there is actually video evidence and eyewitness testimony (US Ambassador Ford himself later admitted the relationship to McClatchy News). Amazingly, the video, titled “US Key Man in Syria Worked Closely with ISIL and Jabhat al Nusra” never had very widespread public distribution, even though it has been authenticated by the top Syria expert in the U.S., Joshua Landis, of the University of Oklahoma, and author of the hugely influential Syria Comment. Using his Twitter account, Dr. Landis commented: “in 2013 WINEP advocated sending all US military aid thru him [Col. Okaidi]. Underscores US problem w moderates.”

The video, documenting (now former) U.S. Ambassador Robert Ford’s visit to FSA Col. Okaidi in Northern Syria, also shows the same Col. Okaidi celebrating with and praising a well-known ISIS commander, Emir Abu Jandal, after conducting the joint Menagh operation. In an interview, this U.S. “key man” at that time, through which U.S. assistance flowed, also praised ISIS and al-Qaeda as the FSA’s “brothers.” Abu Jandal was part of Omar the Chechen"s ISIS crew assisting the FSA. Further video evidence also confirms Omar the Chechen"s role at Menagh. The videos also show Okaidi proudly declaring that al-Nusra (Al-Qaeda in Syria) makes up ten percent of the FSA. The FSA was always more of a branding campaign to sell the rebels as "moderates" to a gullible Western media than a reality on the ground; it was a loose coalition of various groups espousing militant jihad with the end goal of establishing an Islamist polity in Syria.

Foreign fighters flooded Aleppo Province. The U.S. State Department’s own numbers: read the full report at STATE.GOV

In the end, terror groups like ISIS enjoyed a meteoric rise in Syria due to US government and media support for these so-called "moderate rebels" - all entities which collectively sought regime change at all costs - even the high cost of mass civilian death and suffering that inevitably results from unleashing an insurgency in urban areas.

The Syrian Army and government were never "Shia" or sectarian-based

Al Aziziyah neighborhood in Aleppo/via Syria Daily

The Arab Spring narrative was the ideological lens through which experts initially pit the oppressive supposedly “Alawite/Shia regime” against a popular uprising of Syria’s majority Sunnis. As Sunnis make up about 70% of Syria’s population, it was simply a matter of numbers, and of time. But this view proved overly simplistic, and according to one little known West Point study, utterly false. It was commonly assumed that the Syrian Army was a hollowed out Alawite institution with its Sunni conscripts apprehensively waiting for the right moment to defect to the rebel side. This was the fundamental supposition behind years of repetitious predictions of the Assad regime’s impending collapse, and predicated upon a view of the Syrian military as a fundamentally weak and sectarian institution. But West Point"s 2015 study entitled Syria’s Sunnis and the Regime’s Resilience concluded the following:

Sunnis and, more specifically, Sunni Arabs, continue to make up the majority of the regular army’s rank-and- file membership.

The study"s unpopular findings confirmed that the Syrian Army, which has been the glue holding the state together throughout this war, remains primarily a Sunni enterprise while its guiding ideology is firmly nationalistic and not sectarian.

The highest ranking Syrian officer to fall victim to rebel attack was General Dawoud Rajiha, Defense Minister and former chief of staff of the army, in a major 2012 bombing of a Damascus national security office. General Rajiha was an Orthodox Christian. Numerous Christians and officers of other religious backgrounds have served top positions in the Syrian Army going back decades - a reflection of Syria"s generally nationalist and religiously tolerant atmosphere.

Mainstream press did not report from Aleppo, but was hundreds of miles away.

Outside the Citadel of Aleppo: life returning to normal, Summer 2017/via Syria Daily

The heavily populated urban areas of Syria continue to be held by the government. But most reporting has tended to dehumanize any voice coming out of government held areas, which includes the majority of Syrians. The war has resulted in over 6.5 million internally displaced people - the vast majority of which have sought refuge in government territory. 

The fact remains that there are some popular figures in the establishment media and analyst community who speak and write frequently about Syria, and yet have never spent a significant amount of time in the country. Throughout much of the war they"ve primarily reported from Western capitals - thousands of miles away - or, if they are in a Middle East bureau, without ever leaving the safety of places like Beirut or Istanbul. Fewer still have the necessary Arabic language skills to keep pace with local and regional events. Some have never been to Syria at all. They become willing conduits of rebel propaganda beamed through WhatsApp messages and Skype interviews, which was especially the case when it came to the battle for Aleppo. That much of the world actually considers these people as authorities on what’s happening in Syria is a joke – it’s beyond absurd.

Outdoor concert venue and Aleppo springs back to life, Summer 2017/via Maram Kasem

We are hopeful that the jihadist menace will be fully expelled and that the international proxy war which has taken so many lives and reduced much of a beautiful nation to rubble will finally come to an end. Aleppines and other Syrians are rebuilding - they are optimistically preparing for the future. Welcome to the real Aleppo.

Final national exams just before summer 2017/via Syria Daily

Hedge Fund Traders Return To Banking As Trump Promises To 'Make Prop Trading Great Again'

The hedge fund industry is finding itself in increasingly dire straits as persistently weak returns and the advent of low-cost investing have forced more and more funds to shut down. So, it"s unsurprising that, amid this steadily worsening backdrop, more traders are heading for the exits. But where are the heading? Increasingly, more traders are moving back from where they came - i.e. the big banks, which expect to see a boost in trading revenue as President Donald Trump has vowed to dial back postcrisis regulations that forced banks to wind down their prop desks.

In recent months, a number of high-profile hedge fund names have made the leap back to banking, according to Bloomberg.

“This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around U.S. rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks.

Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.

One recruiter says he expects defections to increase over the next nine months.

“In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,” said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. “The banks will become more attractive in terms of jobs and pay.”

The Trump administration has struggled to pass elements of its agenda - most notable its plan to repeal and replace Obamacare. And it only recently scored a partial victory on its immigration ban. Yet financial deregulation is one area where the Trump agenda is moving inexorably forward. On June 13, Treasury Secretary Steven Mnuchin issued a report – the first in a series that will detail how the administration plans to proceed with paring back post-crisis regulations.  Some of the more notable proposals in the highly-anticipated report include: adjusting the annual stress tests, easing trading rules (i.e., gutting the Volcker Rule), and paring back the power of the watchdogs - like the Consumer Financial Protection Bureau. Unlike the administration’s health-care plans, these measures enjoy broad support among Republicans.

Meanwhile, hedge funds are finding it increasingly difficult to compete for top talent.

"...the bar within the hedge-fund world has increased dramatically over the last year,” Kennedy said.

Hedge funds, stung by years of underperformance and revolts from investors, are increasingly under pressure to dump their traditional 2 percent management and 20 percent performance-fee model, curtailing their ability to hire and retain talent. Louis Bacon’s Moore Capital Management, Tudor Investment Corp., Och-Ziff Capital Management Group LLC, Canyon Capital Advisors and Brevan Howard were among money managers who cut fees last year. More hedge funds shuttered last year than started, a trend that continued in the first quarter of 2017, according to data from Hedge Fund Research Inc.

“It is not surprising that traders are looking for a safe haven, and if banks have more room to operate these moves could make sense,” said John Purcell of Purcell & Co., a London-based executive recruitment firm."

The unprecedented easy money policies adopted by the world"s largest central banks in the aftermath of the crisis have hurt macro funds" profits by suppressing two-way volatility.

“Tim Sharp made the move back to the sell side even earlier, and says banks now have attractive niche trading businesses and many are nearly done downsizing. He joined Credit Suisse Group AG in July 2015 after less than a year running money at BlueCrest Capital Management LLP, the firm led by Michael Platt. At the end of that year, Platt’s firm, once among Europe’s largest hedge funds, announced it would return about $7 billion of the $8 billion it managed.

“It’s very difficult for macro funds," Sharp said in an interview. “Central bank policies have crushed volatility and reduced opportunities, and also it’s survival of the fittest.”

Sharp, who is now a director at Credit Suisse, left BlueCrest a few months after the Swiss central bank’s shock decision to remove its currency cap, which caused losses at several firms.

"Macro as an overall strategy has recently experienced a prolonged phase of lackluster returns, triggering a number of unwinds at big shops," said Nicolas Roth, co-head of alternative assets at Geneva-based Reyl & Cie.”

As Bloomberg explains, the flow of traders back into banking is a reversal of a trend that began in 2008, when banks, reelingfrom the crisis, saw an exodus of traders move to the buy side as many hoped to cash in on the postcrisis recovery. The advent of the Volcker rule forced banks to wind down their prop trading desks, spurring even more defections. Another factor: the rising cost of regulatory compliance is making it increasingly expensive to start a hedge fund.

"Hedge funds were booming. In 2009, hedge funds gained almost 20 percent, their best yearly performance since 1999, according to the HFRI Fund Weighted Composite Index; a year later, they returned 10.3 percent.

While macro strategies raised $13.8 billion in the first five months of this year, the most of any trading strategy tracked by eVestment, investors are disappointed by their returns. Traders wagering on currencies and rates continue to struggle, even as peers are showing signs of recovering from their multi-year funk.

Andrew Law’s Caxton Associates lost 8 percent this year through May and told clients that it’s slashing performance and management fees. Paul Brewer’s hedge fund Rubicon Global Fund plunged about 27 percent this year, hurt by wrong-way currency wagers, people said earlier this month.

It’s also more expensive to start a hedge fund than it was, because of the difficult capital raising environment and rising cost of regulatory compliance.

“Some macro traders are returning to the sell side, maybe in a hope that a Dodd-Frank rollback will re-open proprietary trading activity,” Roth said."

Here’s a breakdown of other personnel moves, courtesy of Bloomberg.

• Anthony Kemp returned to Morgan Stanley at the beginning of May from Stone Milliner Asset Management, which he joined in summer 2015


• Alex Silverman left Citadel to join Morgan Stanley in New York at the end of March 2017


• Dipak Shah joined Citigroup Inc. as director in October 2016 from Capula Investment Services after previously working at Goldman Sachs Group Inc.
   

Turkish-American Relations At Crossroads

Authored by M.K.Bhadrakumar via The Strategic Culture Foundation,

When President Donald Trump received President Recep Erdogan on Tuesday at the White House, his legendary deal-making prowess was be on trial.

Trump has not been in a tearing hurry to receive Erdogan. During the first 100 days of his presidency, Trump received the leaders of Israel, Egypt, Saudi Arabia, UAE, Jordan (twice), Iraq and Palestine. Yet, none of them belongs to a Nato member country and or is a crucial “swing” state in Trump’s messianic war against ISIS, as Turkey is.

Could it be Erdogan’s dalliance with ISIS in the past that put a dampened Trump’s enthusiasm for this “strongman”? But then, Saudi Arabia too was promoting al-Qaeda groups in Syria.

Or, was it Erdogan’s growing friendship with Russian President Vladimir Putin that discouraged Trump? But then, Trump greeted Egypt’s President Abdel Fattah el-Sisi in the White House as an old ally.

Clearly, the only good reason could be that Trump deliberately decided that there is a time for everything – even for meeting Erdogan. Trump thoughtfully let the Turkish referendum on constitutional reform run its course first. Trump now has the answer.

Erdogan extracted a “yes” vote in the referendum alright, and is set to concentrate executive power in his hands, but, paradoxically, he is a wounded man, having lost the referendum vote in all major cities, especially Istanbul, which has been his citadel. Erdogan barely scraped through.

On the other hand, an invigorated German-French axis following the resounding election victory of Emmanuel Macron means that a consolidated EU pressure is building on Erdogan to curb his authoritarian drift. Erdogan knows that a rupture of Turkey’s ties to the West would have grave economic and political consequences.

Meanwhile, if Erdogan had calculated that he could play off the US and Russia, that is also not to be. Trump simply outflanked him by opening a line to Putin regarding Syria before he met Erdogan.

Erdogan has been naïve. The Kremlin won’t risk annoying Trump. Détente with the US is an overriding concern for Russia.

All things taken into account, therefore, Trump did the right thing to meet Erdogan in the fullness of time. Trump’s decision to sign the executive order allowing the Pentagon to transfer heavy weapons to the Kurdish militia on the eve of Erdogan’s visit underscores it.

Trump is looking for a quick victory in Raqqa. The liberation of Raqqa will be prime time news in America. Who’d pay attention anymore to “a showboat” such as James Comey when the pictures are beamed from Raqqa into the living rooms of America?

The Pentagon commanders estimate that the Kurdish militia with US air support will liberate Raqqa successfully and swiftly. Indeed, latest reports suggest that the Kurdish militia has reached within two kilometers of Raqqa city limits.

Simply put, Erdogan who was hoping to dissuade Trump from aligning with the Kurds will now have to discuss concerns over post-liberation Raqqa. The ground beneath Erdogan’s feet has dramatically shifted.

He still can resort to strategic defiance by resorting to air strikes against the Kurdish militia, similar to the attacks staged by the Turkish air force on April 25 on the town of Sinjar (Iraqi Kurdistan) and on targets in the Karachok Mountains (northeastern Syria).

However, the US and Russian deployments to the Kurdish cantons in northern Syrian show that both Washington and Moscow have factored in such a possibility and have a tacit understanding that only their physical presence might act as a deterrent against Erdogan’s adventurism.

This opens up a tantalizing prospect – US and Russia having an unwritten division of labor to “tame” Erdogan. The Russian diplomacy has shown masterly skill in shepherding Turkish policies away from covert backing for extremist groups toward new directions that help to end the fighting in Syria. The Russia-US cooperation in Syria drastically curbs Erdogan’s elbow room.

What are Erdogan’s options? Trump has put him out of business since the US is no longer using Turkish proxies to push the “regime change” agenda in Syria. American retrenchment affects Saudi and Qatari policies, too.

Besides, Erdogan will be wary of provoking Trump. Apart from the discord over the extradition of Islamist preacher Fetullah Gulen, the US is keeping under detention the top executive of Halkbank Mehmet Hakan Attila whom it implicates in the sensational criminal case (which is also linked to Erdogan’s immediate family members) regarding abuse of the US financial system to conduct fraudulent transactions on behalf of Iranian entities.

Will Erdogan retaliate by shutting down Incirlik air base? Such a possibility exists, but remains unlikely. At any rate, Washington is focused on the liberation of Raqqa, and access to Incirlik is a secondary issue at the moment.

The bottom line is that Erdogan is running out of options and may be coming under pressure, finally, to (re)open his own channels to the Kurdish groups. Indeed, Turkey got along well with the leadership of Iraqi Kurdistan and a similar deal can be worked out with Syrian Kurds.

Being the consummate pragmatist that he is, Erdogan may well decide to pick up the threads of the peace process with the Kurds from where he summarily left them in 2015 due to compulsions over forthcoming electoral battles culminating in the March referendum to transform Turkey into a presidential system.

Significantly, Erdogan has reacted with extraordinary restraint to the Pentagon move to arm Kurds in Syria. He is mulling over his options. Trump can encourage him to seek a deal with Kurds. It may not be the mother of all deals, but a historic deal nonetheless, which will go a long way to stabilizing Syria and the wider Middle East.

Where There's Smoke...

Central banks around the world have colluded, if not conspired, to elevate and prop up financial asset prices.  Here we"ll present the data and evidence that they"ve not only done so, but gone too far.

When we discuss elevated financial asset prices we really are talking about everything; we"re talking not just about the sky-high prices of stocks and bonds, but also of the trillions of dollars’ worth of derivatives that are linked to them, as well as real estate in dozens of countries and locations.  All are intricately linked together. For instance, stocks are elevated, in part, because bond yields are so low.  Sam for real estate. 

Here are three questions most alert investors are asking:

• Question #1: When will financial assets ever ‘correct’ and fall in price?


• Question #2: How much does overt propping by the central banks have to do with today"s elevated prices?


• Question #3: How much does covert propping by central banks play a role in these inflated markets?

These are important questions to consider because if central banks have been too involved and gotten themselves mixed up in trying to ‘wag the dog’ by using elevated financial asset prices as a means to drive economic expansion -- then the risk is a big implosion in financial asset prices if their efforts fail. 

The difficulty, as always, is that you can"t print your way to prosperity.  It"s never worked in history and it won"t work this time either.  You can, however, print (or borrow) to delay a correction, after which a boost in real economic growth (or additional income) had better materialize to save your bacon.   But if enough growth does not emerge to both pay back all the old outstanding loans plus all the newly created debt and currency, then you"re going to experience a worse correction than if you had not tried to print/borrow your way to prosperity.  

As I’ve outlined before, that economic boom the central banks have been staking everything on been MIA the entire time during the “recovery” following the Great Recession.  And there’s no sign of it showing up any time soon.

The latest Atlanta Fed GDPNow forecast for the US stands at a paltry 0.5%:

(Source)

Folks, that just isn’t going to cut it. You cannot justify a massive increase in debt and sky-high stock and bond prices on the basis of such “growth.”   So something has to give.  Either much higher GDP (income) growth is right around the corner, or these financial asset prices are grotesquely over-inflated.

To explain this in depth, let"s tackle those questions above one at a time, in reverse order.

Question #3: How much does covert propping by central banks play a role in these inflated markets?

This one is fascinating. It takes forensic analysis and connecting a few dots to make the case that central banks are propping up a lot more than they admit to.  Before we begin, whether it is a central bank directly, or one of its agents or proxies, it doesn"t matter who"s doing the intervention if any one of these entities (or all of them) is responsible for goosing asset prices for the purpose of achieving a policy aim.

Second, my motivation here has nothing to do with having a trade going against me and then seeking to explain it away as some nefarious working of a secret group. 

Instead, this is about pointing out that the preponderance of evidence points to repeated and direct market intervention by “some entity” that appear to be very afraid to see stocks and bonds decline in price (or for gold to go up too much).

Here are three pieces of data for you to consider.

1. The NY Fed moved part of its market group operations to the same place that Citadel (one of the key ‘proxy" suspects in this story) and the Chicago Mercantile Exchange (CME) just magically happen to have their operations.  For those of you unfamiliar with the CME, that’s the place one uses massive leverage to participate in (or move) markets.  Futures, options and other derivative products which are the perfect vehicles for telegraphing loaded messages to all the robot computers that watch the CME feeds like hungry hawks.


2. The CME actually has a Central Bank Incentive Program.  The CME incentive programs are reserved for their very best (i.e., highest volume) customers.  So we can state, without question, that central banks are heavy participants at the CME.


3. No central bank admits to having any of the CME products on their balance sheet.

An additional fourth observation is that the equity markets continue to experience remarkable recoveries time and time again, even when only the slightest weakness in prices is seen, and at all key support levels. 

So let’s break all that down and dig a little deeper.

The (cover) story behind the NYFed moving its market-oriented trading operations to Chicago was because they allegedly got worried by superstorm Sandy and wanted to relocate a little further inland, away from the effects of any future such storms. 

It’s just a massive coincidence that the chosen spot happens to be right where the CME lives:

Wary of natural disaster, NY Fed bulks up in Chicago

April 14, 2015

The New York branch of the U.S. Federal Reserve, wary that a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike, has added staff and bulked up its satellite office in Chicago.

Some market technicians have transferred from New York and others were hired at the office housed in the Chicago Fed, according to several people familiar with the build-out that began about two years ago, after Hurricane Sandy struck Manhattan.

Officials believe the Chicago staffers can now handle all of the market operations that are done daily out of the New York Fed, which is the U.S. central bank"s main conduit to Wall Street

(Source)

Shortly after this news became known (and there is only this sole Reuters article to pull from, I couldn’t find any other major news outlet that covered it)  some sharp eyes at ZeroHedge noticed that the new job offerings that opened up soon after in the Chicago area included this job description element: Perform account services to foreign central banks, international agencies, and U.S. government agencies.

You’ll find out why that’s meaningful in the next few paragraphs.  It will support the contention that moving the Fed"s offices to the Chicago area might have had less to do with superstorm Sandy and more with preventing superstorm financial meltdowns.

Now let’s look at the CME"s Central Bank Incentive Program ("CBIP").  Here’s the notice from the CME webpage.

(Source)

The first two things we note in the program is that it heavily discounts fees to central banks to help them conduct “proprietary trading of CME products.”  As a reminder, those "products" are options and futures (both leveraged derivatives). 

We can also note that the program is reserved for non-US central banks (more on that in a minute) and that the trading can be conducted by a “manager or representative.”  Could that representative or agent be a NYFed staffer?  We don’t know, but it’s not forbidden in the rules. And we know the NYFed was actively recruiting for people whose job description included the duty of “Perform account services to foreign central banks, international agencies, and U.S. government agencies.”

Next, let’s take a look at the most recent discount schedule for the CBIP and see what it can tell us:

Well, first up it’s obvious that the central banks are playing with a huge array of leveraged derivative products.

Second, we might glean something from the offered discounts.  Assuming that the heavier the trading the greater the discount, this table makes sense to me.  Everything in yellow has a discount of 30% or greater.

The heaviest discounts are applied to Eurodollar futures and options, a category that makes perfect sense for central banks to play in given their legal role and public mandates. 

Coming in next in order are US Treasury futures and options. Again, these make sense if central banks have exposure to US Treasury bonds that they’d like to hedge, and I have no complaint with these.

However, I cannot find a good reason that central banks should be monkeying around in US stock futures.  Nor can I make a good case for energy, agricultural or metal contracts.  Yet they all appear on there.

Note in orange at the bottom are thee metals contracts. We can deduce that they are bought and sold by central banks, but coming in at a 27% discount, perhaps not in the same large quantities as other products.  This doesn’t seem odd to me because the commercial bullion banks do such a good job of smashing gold and silver with disturbing regularity and zero regulatory response. Perhaps the central banks only feel the need to intervene every so often.

Finally, I have no idea what “Other financial products” are at the CME but they"re traded often enough to garner the largest discount (49%) on the entire table.  One wonders if perhaps this isn’t a “masked bucket” that includes everything the central banks would prefer was not revealed at all.

The central bank that I could imagine might have some justification for hedging stock exposure, as opposed to buying stock futures to goose the market at key moments, would the Swiss National Bank because they have about $60 billion in direct US equity ‘investments.’

But there’s nothing remotely on here that looks anything like a CME option or future product:

(Source)

Nor is there anything on their income statement that looks like a CME related gain or loss.

Further, I have not been able to find a single central bank that admits to using CME products. But we know that they are, so having some secrecy there is clearly important to them.  This supports the “market propping” idea because admitting such a thing is simply a big no-no….unless you are the Bank of Japan which not only buys equities and ETFs hand over fist, but openly does so specifically on down days when the Japanese stock markets could use a helping hand going in the “right “ direction (which is always "up").

The Fuse Is Lit...

Many people might be tempted to shrug their shoulders and say “why should I care if the central banks are monkeying around the in the markets?”

In Part 2: The Coming Conflagration, where we answer Question #2 and the all-important Question #1 raised above, it becomes abundantly clear why all of us should care -- deeply. A tumble from these heights would destroy jobs by the millions, wipe out trillions of (phony) wealth, and invite great populist angst opening up the possibility of truly horrible leaders to emerge.  As I’ve quipped to some people, if you don’t like Trump you are going to positively *hate* whoever comes next if the current wealth gap persists (or worsens). But make no mistake: it will be the ordinary people who will be forced to eat the losses when all this blows up. So we should care. As well as remain very alert to what the Federal Reserve and other central banks are doing. Because if they fail, it’s our wealth, our jobs -- and possibly even our lives -- on the line. Click here to read the report (free executive summary, enrollment required for full access)

Investigation Into Suicide Of Arrowgrass Capital Trader Reveals Ties To Organized Crime, Fraud And David Brock

Via Disobedient Media

On March 1st, 2017, the New York Post reported the suicide of Kevin Bell, head of credit risk at British hedge fund Arrowgrass Capital Partners LLP. He had previously worked at Saba Capital Management, Citadel Investment group, Citigroup and Deutsche Bank, according to his Linkedin page. An investigation into Arrowgrass Capital Partners in the aftermath of his death has revealed that Arrowgrass was connected to think tanks tied to DNC propaganda chief David Brock, has ties to a number to individuals and corporations with histories of fraudulent financial activity and uses a web developer which appears to be a shell company. Mr. Bell"s suicide provides a glimpse into a more shadowy element of the finance world where the line between legitimate business and organized crime becomes increasingly thin.

I. Number Of Arrowgrass Employees Had Come From Sabu Capital Management, Arrowgrass Is Connected To Establishment-Run Think Tanks

Arrowgrass Capital Partners appears to have had a number of employees present at their firm who had recently come from Sabu Capital Management. In November 2015, Bloomberg reported that Paul Andorio, a former partner at Sabu, was joining Arrowgrass to work alongside Bell in credit risk. Andorio was one of multiple former Sabu employees who had recently moved to Arrowgrass after the firm had lost several employees in its credit trading group.

The presence of multiple former employees from Sabu at Arrowgrass is interesting given the colorful history of Sabu"s founder. Boaz Weinstein is a chess and gambling savant turned hedge fund manager. Weinstein has achieved a legendary status in the financial world, although his career has been marked by controversy. In 2012, the New York Times reported that Weinstein was one of a number of traders who benefitted from a "hunch" about multi-billion dollar losses incurred by JP Morgan after a number of bad transactions that were booked through its London branch. Mr. Weinstein was also accused of fraud in 2015 by Canada"s Public Sector Pension Investment Board (PSP Investments) after Saba Capital reduced the value of PSP"s portfolio right before paying out on a redemption request, marking the value back up shortly after the money was cashed out.

Weinstein"s connections to the world of organized crime were revealed when it emerged that he was a member of a private, high stakes poker group along with billionaire and Avenue Capital Group cofounder Marc Lasry. In 2013, Lasry was forced to withdraw his name from a list of contenders for Obama"s U.S. Ambassador to France when it emerged that the FBI was sniffing around his "close friendship" with Illya Trincher. Trinchner, an alleged Russian mobster, was arrested along with three dozen others in connection with a $100 million betting and money-laundering scheme that included Hollywood personalities accused of facilitating illegal gambling events for celebrities such as Tobey Maguire, Matt Damon, and Leonardo DiCaprio and was laundering money through a Carlyle hotel art gallery. Lasry"s Avenue Capital Group has teamed up with Donald Trump in the past as Trump attempted to navigate the mob-controlled gambling scene in Atlantic City. Weinstein"s various connections to crime figures and his penchant for courting accusations of fraud raise questions about why Arrowgrass was bringing on so many employees from Sabu Capital Management in the years before Mr. Bell"s suicide.

The head of Arrowgrass Capital Partners, Michael Edwards, is also affiliated with centrist think tank Third Way. Despite its purported mission to return politics to a more neutral, middle of the road environment, Third Way recieves most of its funding from Wall Street donors and in effect serves as little more than an outlet for ideas which promote the interests of their donors. Third Way and other special interest-supported figures such as David Brock have been widely panned by the media for promoting censorship and propaganda instead of substantive ideas. Brock has directly involved Third Way in conferences held with donors in the past and is utilizing Third Way employees in efforts to help the DNC regain power in the 2018 congressional elections.

II. Arrowgrass" Web Developer Appears To Be Front Organization

In addition to having ties to firms with suspicious connections, the group providing online support for Arrowgrass appears to be a front organization, listing an address that leads to a small, nondescript building as its office despite having a multitude of large name clients in finance. Arrowgrass" website lists CAPTEC Systems as its web developer. CAPTEC"s other clients include several Swiss accounts such as Argentière Capital, set up in 2013 by J.P. Morgan’s former global head of prop trading Deepak Gulati, and LindenGrove Capital. LindenGrove was founded by Borut Miklavcic, the former head of global inflation trading business at the infamous Lehman Brothers who also began his career at JP Morgan.

An examination of the listed address on CAPTEC Systems" website leads to a small structure in Oxford, England that does not even feature CAPTEC"s logo on the exterior. The nondescript, ramshackle building is odd given CAPTEC"s role as a web developer for several multibillion dollar corporations.

Street view of CAPTEC Systems" listed office address

The apparent anomalies with Arrowgrass" web developer and its connections to various Swiss groups run by individuals tied to companies involved in the 2008 financial crisis creates questions about what appears to be either a front company with no real place of business or CAPTEC"s attempt to conceal the true location of their office.

It is not clear what caused Mr. Bell to take his own life earlier this month, although in 2015 a deal with Foundation Capital to buy Deutsche Bank’s stake in Arrowgrass Capital came undone amid speculation that Arrowgrass" principals did not wish to dilute their ownership, and that the head executive of Foundation was facing a contempt-of-court order over debts he owed to Los Angeles based City National Bank. While an anonymous source informed the New York Post that Bell was depressed, Arrowgrass" use of an apparent shell company for their web development and the presence of a number of employees at Arrowgrass from Sabu Capital Management raises concerns given the accusations of fraud that have been levied against the group and their founder"s connections to figures involved in organized crime.

Prominent Hedge Fund Trader Jumps To His Death In Manhattan

A prominent 47-year-old hedge fund trader was killed when he jumped from a luxury apartment building on Manhattan"s Upper West Side, in an apparent suicide, authorities told the NY Post.

Kevin Bell, most recently head of Credit Risk at Arrowgrass Capital, jumped from a ninth-floor kitchen window at the Apthorp building on West End Avenue near West 79th Street around 7:20 a.m. He landed on scaffolding that was set up in front of the building and was pronounced dead at the scene.

Bell left a note indicating he had been depressed, the source said. He had a history of depression, the source added.

According to the NY Post, Bell left behind a wife and two daughters. His family was at home when he jumped, according to the source. “The family is hysterical. He was under a lot of meds. He did not give a specific reason why he jumped, but he was depressed,” the source said.

Bell, a graduate of Duke University, worked at Arrowgrass Capital Partners, where he was head of credit risk, according to his LinkedIn page. Arrowgrass managed $4.5 billion as of mid-2016. It is run by former Deutsche Bank traders Henry Kenner and Nicholas Niell, and in 2015 had been stocking its ranks with Saba alumni after losing several employees in its credit-trading group in April. The firm focuses on strategies including corporate distressed assets in the U.S. and Europe.

Prior to Arrowgrass, Bell worked at various prominent hedge funds and banks including Saba Capital, Citadel, Citigroup and Deutsche Bank.

“We are deeply saddened that our friend and colleague Kevin Bell has passed away today. We extend our sympathies and condolences to his family,” Arrowgrass spokesman Nick Lord told The Post in a statement from the UK.

A building worker said some residents saw the man’s body. “A couple of our residents reported hearing a thud,” the worker said. “The daughter of a tenant looked out the window and she told her mother there was a man lying down on the scaffolding.”

The worker said the mother saw the body and notified building workers.

“He was bleeding,” the worker said. “Some of the residents are pretty shaken up.”

Based on resident reports, this is not the first suicide at the building: a man who works in a nearby doctor’s office was stunned about the suicide. “Oh my God, another one?” he said in disbelief. “Somebody committed suicide a few months ago … on the other side of the building. I can’t believe it, it’s almost exactly the same thing, but just around the side.”

Among the Apthorp building’s famed tenants were Al Pacino, Sydney Poitier and singer and Oscar-winning actress Jennifer Hudson. The building, which is modeled after the Palazzo Pitti in Florence, is listed on the National Register of Historic Places and takes up an entire city block, from Broadway to West End Avenue between 78th and 79th streets.

It was unknown as of this writing if Bell"s alleged depression had been impacted by recent market performance.

80% Of Central Banks Plan To Buy More Stocks

Regular readers remember how, when we first reported around the time of our launch eight years ago that central banks buy stocks, intervene and prop up markets, and generally manipulate equities in order to maintain confidence in a collapsing system, and avoid a liquidation panic and bank runs, it was branded "fake news" by the established financial "kommentariat." What a difference eight years makes, because today none other than the WSJ writes that "by keeping interest rates low and in some cases negative, central banks have prompted some of the most conservative investors to join the hunt for higher returns: Other central banks."

To be sure, nothing that the WSJ reports is news to our readers, who have known for years how central banks overtly, in the case of the BOJ, PBOC and SNB most prominently, and covertly, as the infamous "leave no trace behind" symbiosis between the NY Fed and Citadel, however we find it particularly enjoyable every time the financial paper of record reports what until only a few years ago was considered "conspiracy theory", and wonder what other current "fake news" will be gospel in 2020.

Meanwhile, for those few who are still unfamiliar, this is how central banks who create fiat money out of thin air and for whom "acquisition cost" is a meaningless term, are increasingly nationalizing the equity capital markets. As the WSJ puts it "these central banks care relatively little about whether such investments make profits or losses—though they can matter politically—because they can always print more of their currency. So risk is less important, analysts say." And since risk was no longer part of the equation, leaving only return, central banks started buying stocks.

“When yields started to get really low and closer to zero in 2014, we decided to start equity investments,” said Jarno Ilves, head of investments at the Bank of Finland, who said he plans to increase his allocation to stocks.

But if you think the farce is bad now, wait until next year. According to a recent study by Invesco on central- bank investment which polled 18 reserve managers, some 80% and 43% of respondents to questions on asset allocation said they planned to invest more in stocks and corporate debt, respectively. Low government-bond returns were behind the moves to diversify, said 12 out of 15 respondents, while three declined to answer.

So between central banks outbidding each other to buy "risky" assets with "money" that is constantly created at no cost, very soon all other private investors will be crowded out but not before every stock is trading at valuations that even CNBC guests won"t be able to justify.

The good news is that instead of focusing on Ultra High Net Worth clients, a desperate for revenue Wall Street can just advise central banks on which stocks to buy.

The shift has significant implications for markets and the global economy, analysts say. Many central banks are hiring outside managers to handle the nontraditional assets in their portfolios, presenting an opportunity to a financial industry struggling with stagnant revenue growth.

“We see more and more appetite by central banks for riskier strategies,” said Jean-Jacques Barberis, ‎who manages central-bank money for Amundi, Europe’s largest asset manager.

The bad news, is that as more people realize that a free "market" now only exists in textbooks, and that Soviet-style central planning is the only game in town, confident in price formation will evaporate, in turn pushing even more market participants out of the quote-unquote market, until only central banks are left bidding on each other"s otherwise worthless stock certificates.

At the same time, efforts to invest reserve funds more broadly mean that more markets will be subject to what some critics describe as central-bank distortion, as large and often price-insensitive buyers run the risk of driving up prices and reducing prospective returns for other market participants.

For virtually all central banks, however, the grotesque central planning shift of the past decade means that instead of engaging in monetary policy, the world"s central banks are now activist hedge funds, who are focused first and foremost on "investment management":

The South African Reserve Bank’s growing piggy bank drove it to switch “from being a liquidity manager to focusing on investment management,” said Daniel Mminele, its deputy governor.

In the third quarter of 2016, global foreign-exchange reserves totaled $11 trillion, according to the International Monetary Fund, up from $1.4 trillion at the end of 1995.

But in the world of central bank hedge funds, no other bank comes even remotely close to the (publically-traded) Swiss National Bank, which has taken risky investing to a whole new level.

In 2013, the SNB opened a branch in Singapore to manage its Asia-Pacific assets, which as of 2015 include emerging-market equities and Chinese government bonds. It was a necessity, since the SNB now manages a mammoth 645 billion franc ($643 billion) in foreign reserves, a pile that grew as the bank tried to push down the value of its currency in a bid to fight deflation and help exporters.

In 2009, equities only made up 7% of the SNB’s reserves, four years after it started buying them. Now they are 20%, including investments of $1.7 billion in Apple Inc., $1.08 billion in Exxon Mobil Corp., and $1.2 billion in Microsoft Corp., according to third-quarter Securities and Exchange Commission filings.

Having bought hundreds of billions in equities carries risks even for central banks, if only on paper: in 2015, the SNB booked a loss of 23.3 billion francs, when officials stopped maintaining a ceiling on the value of their currency. As the currency jumped by as much as 22% against the euro, the value of their foreign assets fell. Last year, it offset those losses with a 24 billion-franc profit, as its equity investments paid off.

Others did not fare quite as well: "the Czech National Bank started buying stocks in June 2008 just before the financial crisis. The subsequent stock market crash wiped out a third of its equity investment that year, then roughly 2.5% of its total reserves."

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By now it is common knowledge that central banks openly intervene in markets, the most vivid and recent example of which is the BOJ, which as of this moment owns two-thirds of all Japanes ETFs...

... and at the current rate of expansion, within a few years the world"s monetary authorities who are tasked with "financial stability", will have acquired a majority of the world"s equity tranche, effectively nationalizing it. We bring it up in light of recent ridiculous allegations that "Russia hacked the US elections" - we wonder, will the liberal press blame the USSR after it dawns upon the world"s intrepid press that while it was busy comparing the Obama and Trump crowds, the world"s greatest wealth transfer was taking place right below everyone"s nose.

Citadel Pays $22 Million Settlement For Frontrunning Its Clients

Last May we reported that, after years of railing against Citadel"s dominant position at the intersection of HFT trading and retail orderflow - Citadel was recently found to be the largest private US trading venue - Federal authorities were investigating the market-making arms of Citadel LLC and KCG Holdings looking into the possibility that the two giants of electronic trading are giving small investors a poor deal when executing stock transactions on their behalf.

As a reminder, Citadel is so big and its own private stock-trading platform is so large that, if it were an official exchange recognized by the Securities and Exchange Commission, it would one of the largest registered exchanges in the United States - bigger than Nasdaq. Citadel Execution Services, the firm’s wholesale market-making unit, recently executed 35% of all trades by retail investors in U.S.-listed stocks.

It was this retail trading giant that authorities were probing, and specifically looking at internal data concerning the firms’ routing of customer stock orders through exchanges and other trading systems, to see whether they are giving customers unfavorable prices on trades in order to capture more profit on the transactions.

In other words, the DOJ is looking into whether Citadel is frontrunning its clients, something we have claimed for years.

So what would happens if the DOJ did find what has been obvious to most market participants for years, namely that Ken Griffin"s firm was frontrunning retail orderflow fore years?

As we summarized at the time, if authorities do move ahead, they would be marching forcefully into the debate over high-speed trading. Critics of HFT, such as this website, have alleged that firms with the fastest trading technology are using speed to manipulate stock prices, giving investors a raw deal. The industry counters that its technology delivers cheaper and more transparent trades to investors.

It also delivers guaranteed profits to itself, because while on one hand Citadel is a massive market-maker, responsible for the biggest portion of retail flow traffic, on the other it happens to be the most leveraged hedge fund in the world in terms of regulatory to net assets.

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Or maybe nothing at all. Because fast forward to today, when without much fanfare at all, Citadel announced it would pay $22.6 million to settle allegations that it "misled clients about pricing trades", a euphemism for it was frontrunning its clients.

The Securities and Exchange Commission, soon to be run by a former deal lawyer who was particularly close to Goldman Sachs, said in a statement on Friday that Citadel, without admitting or denying the findings, had agreed to pay $5.2m disgorgement of ill-gotten gains, plus interest of $1.4m, in addition to a $16m penalty.

The SEC found precisely what we had said all along: that the company"s business unit handling retail suggested to its broker-dealer clients that it would internalize retail orders to provide the best price, but it used algorithms that failed to perform the task from 2007 to 2010; i.e. Citadel was actively trading against the best interests of its clients, and adverse in its own best interests.

"These two algorithms represented a small part of Citadel Securities" internalization business, but they nevertheless affected millions of orders placed by retail investors because of Citadel Securities" large role in that market," said Robert Cohen, co-chief of the SEC enforcement division"s market abuse unit.

Citadel, which has since discontinued use of the algorithms, said in a statement Friday that it takes legal compliance "very seriously." 

Today, Citadel Securities resolved an issue related to the adequacy of certain disclosures from late 2007 to January 2010. We take very seriously our obligations to comply fully with all laws and regulations. As the market leader we are committed to providing superior service and execution quality to our clients each and every day.

To those who want to see a Citadel internalizer algo in action, we recommend you read the following article by Nanex" Eric Hunsader, who explains the entire process: "Retail Trades Disadvantaged by Direct Feeds  Internalizers buy at the direct feed price, sell to retail at the SIP feed price."