Tuesday, March 28, 2023

Did I Mention That The Auditor For Silicon Valley Bank Also Audits The Federal Reserve? (SIVB; SI; FED)

Signature too.

From the Board of Governors of the Federal Reserve System, March 24:

Federal Reserve Board releases annual audited financial statements

The Federal Reserve Board on Friday released the 2022 combined annual audited financial statements for the Reserve Banks. An independent public accounting firm engaged by the Board issued unqualified opinions, asserting that its audit found the financial statements for the Board and the Reserve Banks to be free of material misstatements in accordance with the applicable auditing standards. The Board released preliminary income and expense data earlier this year.

Additionally, the Board released individual statements for the 12 Federal Reserve Banks, the Board, and 3 limited liability companies (LLCs) related to lending facilities established to support the Federal Reserve's pandemic response. The audited financial statements provide information about the assets, liabilities, and earnings of the Federal Reserve Banks, the Board, and the LLCs as of December 31, 2022.....

.... The Board engaged KPMG LLP to audit the financial statements of the Reserve Banks and the LLCs in accordance with standards issued by the American Institute of Certified Public Accountants and the Public Company Accounting Oversight Board, and the audit of the Board's financial statements was also conducted in accordance with the Generally Accepted Government Auditing Standards. KPMG also conducted audits of internal controls over financial reporting for the 12 individual Reserve Banks and the Board....

....MUCH MORE

Previously:

Yes, The Rumors Are True: Silicon Valley Bank's Auditors Issued An "Unqualified" Opinion On The Bank's Financials Two Weeks Before It Failed (SIVB; OOPS)

KPMG also audits Citicorp and Wells Fargo. Now if you will excuse me I have to make enquiries about a couple other banks.

"‘'The Billionaire Bailout': FDIC Chair Says the Biggest Deposit Accounts at SVB Held $13 Billion"

From Common Dreams, March 28:

"The bailout really did protect billionaires from taking a modest haircut," one observer wrote in response to the FDIC chief.

In prepared testimony for a Senate Banking Committee hearing slated for Tuesday morning, the chair of the Federal Deposit Insurance Corporation reveals that the 10 largest deposit accounts at Silicon Valley Bank held a combined $13.3 billion, a detail that's likely to intensify criticism of federal regulators' intervention in the firm's recent collapse.

When SVB was spiraling earlier this month, the FDIC, Treasury Department, and Federal Reserve rushed in to backstop the financial system and make all depositors at the California bank whole, including those with accounts over $250,000—the total amount typically covered by FDIC insurance.

"At SVB, the depositors protected by the guarantee of uninsured depositors included not only small and mid-size business customers but also customers with very large account balances," FDIC chief Martin Gruenberg writes in his prepared testimony. "The ten largest deposit accounts at SVB held $13.3 billion, in the aggregate."

Gruenberg goes on to estimate that the FDIC's $125 billion Deposit Insurance Fund (DIF)—which is financed primarily by assessments on insured banks and "backed by the full faith and credit of the United States government"—took a $20 billion hit as a result of the SVB intervention.

According to Gruenberg, nearly 90%—$18 billion—of the DIF loss stemming from SVB is "attributable to the cost of covering uninsured deposits." He added that the DIF absorbed a roughly $1.6 billion cost to cover uninsured deposits at Signature Bank, which failed shortly after SVB....

....MUCH MORE

Did the depositors prudently purchase private deposit insurance for the amount over the $250K FDIC limit? If not, why not?

Shoulda been a bail-in.

Previously from Common Dreams:

And many more.

Capital Markets: "Firmer Rates and Higher Bank Stocks Give the Greenback Little Help"

 From Marc to Market:

Overview: 
Financial strains eased yesterday, and short-term yields jumped. The two-year US yield jumped 25 bp to pierce 4%. Yet, the dollar fell against most of the major currencies yesterday and is mostly softer today. Banking stress is ebbing. The Topix bank index snapped a three-day decline and jumped nearly 2% today to recoup the lion's share of its three-day decline. The Stoxx 600 index of EMU banks is extending yesterday's 1,7% advance. The AT1 ETF up about 0.25% after falling by more than 3.6% in the past three sessions. 

Most large bourses in the Asia Pacific region rose today, led by 1%+ gains in Hong Kong, the mainland shares that trade there, and South Korea's Kospi. China and Taiwanese markets were sold. Europe's Stoxx 600 has edged a little higher, while US futures are a bit softer. Benchmark 10-year yields are 6-10 bp higher in Europe and the US 10-year yield is up a little near 3.54%. Gold is trading lower for the third consecutive session. It traded above $2000 before reversing lower ahead of the weekend and slipped to almost $1944 yesterday. It is trading quietly, mostly above $1950 today. May WTI is extending its recent gains and near $73.50, it is at its best level in two weeks. Chinese demand and some supply disruptions have underpinned crude. The 20-day moving average is around $73.35 and it has not closed above the moving average since March 6. That said, the $74.65 area is the next important chart area....

And deeper into the daily missive:

....Before the weekend, the Fed funds futures market had discounted about a 1-in-4 chance of a 25 bp hike at the next FOMC meeting on May 3. Yesterday, there was a 2.7% jump in the KBW bank index, and nearly as large a rally in Charles Schwab shares, which was the subject of pre-weekend jitters, and almost a 5% rally in Deutsche Bank shares, which had fallen by more than 12% in the previous three sessions. The futures market now sees the chances of a hike in May as a little better than a 50/50 proposition. There is no FOMC meeting in August, so the implied yield of 4.75% of the August contract implies a quarter-point cut by early Q3. On March 8, the implied yield was 5.67%. Similarly, the swap market continues to discount a 25 bp cut by the Bank of Canada at its July 12 meeting. At the end of last week, the market has discounted 40 bp of cuts by then....

....MUCH MORE

"Bulgaria refuses to send weapons to Ukraine, joins Hungary and Austria’s neutrality stance"

Bulgaria is an interesting case.
Although not vehemently anti- or pro-Russia you get some hints that there is a lot going on in the Bulgar psyche.

A Soviet-era sculpture that Izabella Kaminska used as the graphics teaser image for a post at The Blind Spot:

That image reminded me that the Sovs. were into intaglio and relief—both bas and high.

Which of course reminded me of some other relief, in this case comic:

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3SuPiITZGv68krcnCS9dqNjGDOp25IPVsr2N73UWhMDEUBPq_fzqCWivAEDba_9ukhb_muGdh-TO7pDOaA08fgn0RBfnodK42Qakg-Ry6UapHHMMOfHxjtqUqGc-AwgGPDHogU1uneZZh/s1187/Bulgarian_WW2_Monument.jpg

That's the monument in Sofia Bulgaria, to the Soviet soldiers who defeated the Nazis.

Of course that isn't how it looked when it was unveiled, as far as I know Santa doesn't carry a submachine gun, but in 2011 some Bulgarian pranksters decided the statue needed a makeover.

If memory serves, it only lasted one day before the authorities started taking the paint off but it offers a slightly askew insight into Bulgaria.

Here's ReMix News with the headline story, March 27:

For the time being, Bulgaria will not send any military equipment to Ukraine

After Austria and Hungary, Bulgaria has also joined the minority group of European Union countries that refuse to send weapons to Ukraine, news and opinion portal Mandiner reports.

Bulgaria has declared that it will not take part in the EU’s joint ammunition purchase program, nor will it supply fighter jets or tanks to Ukraine, Euronews reports. Bulgarian President Rumen Radev is under enormous pressure from opposition parties, but he has said he stands by his position.

“Bulgaria does not support and is not involved in the joint procurement of ammunition for Ukraine.
However, we will support efforts to restore peace. As long as the interim government is in power, Bulgaria will not make its fighter aircraft, anti-aircraft missile systems, tanks and other equipment available to Ukraine,” said Radev.

At the end of January, Hungarian Defense Minister Kristóf Szalay-Bobrovniczky and his Austrian counterpart, Klaudia Tanner, said in Budapest that neither country will offer any kind of military assistance to Ukraine in order to “prevent further escalation.”

Although many of its Western allies accuse Hungary of siding with Russia in the war based on its firm stance of not sending weapons to Ukraine, last December Prime Minister Viktor Orbán said that his government is simply on the side of the Hungarians....

....MUCH MORE

HT: ZH

Monday, March 27, 2023

"Chicago to Launch Its First Air Taxi Route In 2025"

From ExtremeTech, March 27:

The city will leverage eVTOL aircraft to turn a 30-60 minute trip into a 10-minute one. 

If you’re heading to O’Hare International Airport from downtown Chicago, you might be able to skip traffic by taking an “air taxi” instead—provided that your jaunt can wait a couple of years. United Airlines announced Thursday that it will launch Chicago’s first commercial air taxi route in 2025, leveraging electric vertical takeoff and landing (eVTOL) aircraft to transport people between hotspots.

Beginning in 2025, residents and tourists can hop onto an Archer Aviation “Midnight” eVTOL from Vertiport Chicago to O’Hare International Airport and vice versa. Vertiport Chicago, the continent’s largest eVTOL takeoff and landing facility, is conveniently located near several medical, shopping, and recreation amenities, making it an ideal hub for the city’s new transportation option. A flight between the two takeoff and landing points will take about 10 minutes, compared with 35 minutes of driving (in light traffic) and an hour of public transit use....

....MUCH MORE

"Fallen 'Crypto King' Who Owes Millions to Investors Was Kidnapped and Tortured"

I'm thinking he had it easy compared to the advisor who was kidnapped and tortured by a bunch of German retirees. Or the stockbroker who was kidnapped and tortured by a client dressed in a Santa suit.

From Yahoo Finance, March 27:

A self-styled "Crypto King" who allegedly fleeced investors out of millions was kidnapped and tortured, according to explosive court documents.

Aiden Pleterski led a lavish lifestyle and owned McLaren sports cars and a Lamborghini — and even rented a plush waterfront home for $45,000 a month.

He had promised his investors healthy returns of 7%, but it all came crashing down and he ended up filing for bankruptcy.

It's believed Pleterski, who was 23 when his company went under, was abducted by disgruntled creditors.

Testimony from his father Dragan reveals:

One person that Pleterski was allowed to contact was a man called Sandeep Gupta, his landlord.

Gupta recalled receiving multiple calls late at night from Pleterski, in which he said:

Gupta told him that this would be impossible to arrange — and while he was determined not to pay any money, he wanted to engineer the situation so he didn't come to harm. On a different phone, he began to call 911.

Over the following days, the landlord worked with officers in an attempt to set up a sting meeting and ensure that Pleterski could be brought to safety.

He was later released on the understanding that he would get the cash to his kidnappers as soon as possible — and was warned that interacting with law enforcement would make his situation much, much worse.....

....MUCH MORE

The dentist:

....In a July '07 post "FBI: Goldman Sachs threat not of 'high credibility' (Off-topic)" I asked:

...2) Does anyone remember the story of the dentist who put on a Santa Claus suit, kidnapped his stockbroker and tortured him for three days with a cattle-prod, all the while screaming the names of the lousy deals the broker had put him in?

When I ask this question at parties I get funny looks and solitude.
If you have any details please email....
I received some confirmations from folks who recognized the story but no citations. If you've got the cite, drop us a line.

A quick Google search turns up a reference I don't recall, dated December 21 2000:
YES VIRGINIA, THERE IS A SANTA CLAUS

Ah! Thank you, Miss or Mr. Anonymous: Pittsburgh Post-Gazette Jan. 4,1984
Now back to those German pensioners...   

German pensioners ‘kidnap and torture their investment adviser’

A group of well-to-do pensioners who lost their savings in the credit crunch staged an arthritic revenge attack and held their terrified financial adviser to ransom, prosecutors said yesterday.

The alleged kidnapping is the latest example of what is being dubbed “silver crime” — the violent backlash of pensioners who feel cheated by the world.

“As I was letting myself into my front door I was assaulted from behind and hit hard,” the financial adviser James Amburn, a 56-year-old German-American, said. “Then they bound me with masking tape until I looked like a mummy. I thought I was a dead man.”

He was freed by 40 heavily armed policemen from the counter-terrorist unit last Saturday. The frightened consultant was in his underwear, his body lacerated by wounds allegedly inflicted by angry pensioners.

It appears that two couples had entrusted Mr Amburn’s investment company with €2.4 million (£2 million), which he ploughed into Florida’s boom-and-bust property market. The properties became forfeit during the sub-prime mortgage crisis but the couples wanted their money back.

After being bundled into the boot of an Audi in the west German town of Speyer, Mr Amburn was driven southwards to Chieming, close to the Austrian border, where one of the couples Roland K, and his wife, Sieglinde, 79, had a holiday home.

The financial adviser claims he was held there in a cellar for four days almost naked, fed soup twice a day and beaten. Another couple, Gerhard F, 63, and his wife, Iris, 66, both retired doctors, allegedly helped to torture the prisoner....MORE

See also: 

The Spirit Of Enron Lives On In The Hearts Of Electricity Traders Everywhere

From Bloomberg, March 23:

Some of the UK’s biggest energy companies have received £525 million from a practice that regulators say drives prices higher.
On the morning of Dec. 12, as plunging temperatures left poorer Britons struggling to heat their homes, traders for Vitol Group’s VPI Power Ltd. abruptly served notice that one of the London area’s largest power stations would begin turning off just after midday.

This change of plans left Britain’s power grid at risk of running low on electricity. But the traders had another offer on the table: They’d keep running their plant for as much as £6,000 ($7,340) per megawatt-hour, four times more than the regular market rate. With little choice, the grid operator paid up, an £11 million tab that was ultimately passed to UK consumers, many of whom are already contending with prices that have more than doubled in the last two years.

Traders at firms including Vitol’s VPI, Uniper SE and SSE Plc have frequently announced they would cut off electricity capacity — sometimes with just a few hours’ notice — ahead of the busiest evening periods. At the same time, they offered power from their plants in a special side market where they charged higher prices to meet the shortfalls they helped create. Traders dramatically increased their use of this practice — and the prices they charged — as the lifting of Covid restrictions and then Russia’s war in Ukraine brought turmoil to the UK electricity market, a Bloomberg News investigation has found. Current rules do not prohibit such off-on maneuvers.

An analysis of more than 100 million market records shows that firms rang up more than £525 million in inflated revenue using this practice between 2018 and 2022. Nearly 90% of that amount came in just the last two years. Plants controlled by VPI and Uniper together accounted for £321 million of the total.

The data analysis can’t account for why, on any individual occasion, a company acted in this way — and whether there were circumstances involved other than the pursuit of revenue. But in interviews, 13 current and former traders said that off-and-then-on-again supply-gaming is a widespread tactic that’s aimed at maximizing profit. A source familiar with VPI’s move on Dec. 12 said the firm raised its price in response to tight market conditions.

“Something is broken here,” said Fred Smith, the managing director of H&E Smith Ltd., a glazed tile manufacturer in the northern English city of Stoke-on-Trent. The firm has struggled with a 150% jump in its power costs as energy inflation hammers the UK economy. Around the time of VPI’s big payday in December, Smith was asking his 20 employees to take a week off work after Christmas to save on operating costs....

....MUCH MORE

From "The Trouble With Cap-and-Trade" :
....And this from a former Goldman Sachs trader:

The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.
—New York Times, May 8, 2002

For the much more egregious Enron in California story:
March 2008
California's cap-and-trade won't work
Here at Climateer Investing the comparison between California electricity deregulation and carbon trading seemed self-evident, based, if for no other reason, on the fact that the pals and alumni of Enron are the ones pushing the trade. Now the media is picking up on where the trade part of cap-and-trade is going. The LA Times gets it....

September 2007
Blackout: Enron and the California Power Crisis (Transcript)
August 2009
Enron:The Musical (ENE)
February 2011
Enron Lives! Were Texas Utilities Gaming the System to Gouge Customers?

And finally a visit to the big daddy of market manipulations, corners and squeezes, Professor Craig Pirrong—you may know him as The Streetwise Professor—has a snappy little paper linked in our "How to Manipulate Non-storable Commodities Markets.

Capital Markets: "Calmer Markets to Start the New Week"

From Marc Chandler at Bannockburn Global Finance:

Overview: There did not appear to be any negative surprises over the weekend, and this is helping calm investors' nerves at the start of the new week. Deutsche Bank shares have recovered most of the pre-weekend loss in the German market, and Stoxx bank index is posting a gain for the first time in four sessions. The AT1 ETF is slightly softer. In Japan, the Topix bank index slipped around 0.5%, its fourth decline in the past five sessions. Asia Pacific equities were mixed. China, Hong Kong, Taiwan, and South Korean markets fell, while Japan, Australia, and India rose. Europe's Stoxx 600 is up nearly 1% after losing about 1.5% in the previous two sessions. US equity futures are trading with a firmer bias. Benchmark 10-year yields are jumping back. The 10-year US Treasury is seven basis points higher near 3.45%, while European yield are mostly 6-10 bp higher, and the peripheral premium is smaller. 

The US dollar is mostly lower in subdued turnover. The Swiss franc and sterling are leading the G10 currencies higher. The New Zealand dollar, Japanese yen, and Norwegian krone are softer. Emerging market currencies are mixed. The Mexican peso continues to recover from the risk-off losses and after the Russian rouble is the strongest among the emerging market currencies today. The South African rand leads the decliners with a nearly 0.9% pullback. Rising rates has tarnished gold. After briefly trading above $2000 before the weekend it has been sold to about $1853 today and looks poised to test last week's lows near $1935. A push beyond that would weaken the technical outlook. May WTI is trading quietly as it straddles the $70 area.

Asia Pacific
While identifying China as one of the "green shoots" in the world economy, the IMF's Managing Director Georgieva urged Beijing to strengthen consumption. The IMF forecast China to grow by about 5.2% this year, which would account for around a third of the world's growth. Conventional thinking has long criticized China for under-consumption. Georgieva argued that shifting away from investment and toward consumption is more durable, less reliant on debt, and will help address climate change....

Sunday, March 26, 2023

As Ford Asks To Be Considered A Start Up, Elon Musk Says Twitter Is An "Inverse Startup"

From the New York Times, March 26, 2023, 1:33 p.m. ET:

Elon Musk Values Twitter at $20 Billion
The billionaire bought the social media company for $44 billion in October and took it private. 

SAN FRANCISCO — Elon Musk said Twitter is now worth about $20 billion, according to an email he sent the company’s employees on Friday, a significant drop from the $44 billion that he paid to buy the social network in October.

The email, which was viewed by The New York Times, was sent to employees to announce a new stock compensation program. In it, Mr. Musk warned workers that Twitter remained in a precarious financial position and, at one point, had been four months away from running out of money. He said “radical changes” at the company, including mass layoffs and cost cutting, were necessary to avoid bankruptcy and streamline operations.

“Twitter is being reshaped rapidly,” Mr. Musk wrote, adding that the company could be thought of as “an inverse start-up.”

Twitter’s value has declined as Mr. Musk has dramatically overhauled the company. In October, Mr. Musk took Twitter private, which means it is no longer obligated to provide transparency about its finances. But the billionaire has indicated publicly that the company lost revenue as advertisers fled the platform after his takeover, and suggested that Twitter was in danger of bankruptcy.

The $20 billion figure values Twitter slightly higher than Snap, the parent company of Snapchat, which has recently struggled with an advertising slump and predicted its revenue would fall. Snap, which has a market capitalization of about $18 billion, has about 375 million daily active users, compared with Twitter’s 237.8 million in the company’s final public disclosure before it went private.

Mr. Musk did not respond to a request for comment and an email to Twitter’s communications department was returned with a poop emoji. The company’s new valuation was earlier reported by The Information....

....MORE

The Ford story, immediately below: ""Ford says EV unit losing billions, should be seen as startup" (F)"

"Ford says EV unit losing billions, should be seen as startup" (F)

Apparently it is not as easy as it looks.

From the Associated Press, March

Ford Motor Co.’s electric vehicle business has lost $3 billion before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology.

The figures were released Thursday as Ford rolled out a new way of reporting financial results. The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units.

Company officials said the electric vehicle unit, called “Ford Model e,” will be profitable before taxes by late 2026 with an 8% pretax profit margin. But they wouldn’t say exactly when it’s expected to start making money.

Chief Financial Officer John Lawler said Model e should be viewed as a startup company within Ford.

“As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share,” he said....

....MUCH MORE

Ford does have ambitious goals but they may also have to contend with a worldwide slowdown/recession.  

OnlyFans Economics

Yes, I was looking at Twitter today.

MUCH MORE (thread)

Uh Oh: "Jim Cramer has just said that Deutsche Bank, $DB, is fine."

And as was said regarding beer and the 2010 malting barley crisis: " Damit ist eine Katastrophe vorprogrammiert.". (It's a recipe for disaster)

WARNING: Irony Ahead

It is rather impressive.

Jim Rogers: «Commodities are the only attractively valued asset class»

This is the piece at NZZ I was going for before getting sidetracked by the risk of the shadow banking system ending everything. 

Two quick points on Mr Rogers and commodities: 1) he has been early, sometimes very early in his calls and 2) he seems to treat commodities as an investment class when they are actually a class of "trading" instruments. Except for farmland, which he has advocated owning and which because of its hybrid nature, income producer and (sometimes) inflation hedge seems more of a "long ain't wrong" asset.

From Neue Zürcher Zeitung's TheMarket.ch, March 21:

Deutsche Version

After the collapse of Silicon Valley Bank and Signature Bank, financial markets have become very jittery again. Stress is also surfacing in Europe: In Switzerland, over the weekend, Credit Suisse was taken over by larger rival UBS, in order to stabilize fragile markets.

Despite these stress signals, legendary investor Jim Rogers is not worried about the very near term, «central bankers are scared after the collapse of Silicon Valley Bank, so things will be okay for a while». For the moment, the Fed will probably pause with rate hikes. Longer-term, however, he is convinced that inflation will come back with a vengeance, which will cause a painful bear market.

In an in-depth interview with The Market, which has been edited for clarity, Jim Rogers gives his view on the global economy, says which asset classes are still attractively valued and explains why there is no longer a sound currency anywhere in the world – not even the Swiss franc.

What is your assessment of the global economy and financial markets?

We had a big crisis in 2008 and to fight it, for several years governments printed, borrowed and spent money like never before. So, the world economy for a few years has been strong and continues to be somewhat strong because governments keep spending money. And it’s not over yet. We probably won’t have many more interest rate hikes, as central bankers are scared after the collapse of Silicon Valley Bank, so things will be okay for a while. However, when inflation comes back central banks will have to raise interest rates again and then markets will collapse.

Is the Fed done with interest rate hikes in this cycle?

No, I think for the moment they are done. However, when inflation comes back – and it will come back – further interest rates hikes will be necessary. In the 1970s we had such a big inflation problem that the Fed had to increase interest rates to the highest level in history. In the 1980s yields on United States Treasury bills rose to over 21%. And it worked! The president got re-elected, the economy went into recession but inflation come down.

Isn’t the stress in the banking sector a signal that monetary policy has become too tight?

It’s a signal that some market participants were overextended and yes, there will be more problems like that at a later stage. Right now, things will calm down, as Washington is terrified and the Fed probably won’t raise interest rates much further or not at all. But inflation will come back and interest rates will start moving higher again and then we will have a serious bear market....

....MUCH MORE

A question we posed introducing another TheMarket.ch interview in January: "Has the world seen the high water mark for inflation in this decade? In this century? "  

"ECB warns that shadow banking could trigger next financial crisis"

I've forgotten how big the shadow banking ecosystem is but it's very large.

From the Ireland's Business Post, March 26:

Irish domiciled funds in growing shadow banking sector now account for over $4.2trn in assets 

The shadow banking sector is the “soft spot in the financial system” and could trigger the next financial crisis, the vice-president of the European Central Bank (ECB) has warned.

In the aftermath of the rescue of Credit Suisse last week, Luis de Guindos told the Business Post that he believed the European banking sector was “sound and resilient”, but the non-bank sector “could be a source of problems for the whole financial system”.

The non-bank sector involves firms which are engaged in bank-like activities, but are neither registered nor regulated as banks. These include the likes of funds, insurance firms, venture capitalists and currency exchanges. It is also commonly known as the “shadow banking” or “market-based finance” sector.

In an exclusive interview with the Business Post, De Guindos warned that firms in this sector had taken “a lot of risks” during the period of low interest rates which could now be exposed by rate rises, and could affect the wider financial system.

De Guindos said he did not think the recent turmoil in the US or Europe had exposed fresh systemic weaknesses in the European banking sector. However, he expressed concern about what may happen in the non-bank sector, which he said had grown to become a substantial part of the European financial system in the last decade.

“In the case of Credit Suisse and the American banks, there were specific and idiosyncratic factors. Our main concern in terms of financial stability is the situation of the non-banks. This has been the case for some years, and it is the soft spot in the financial system,” De Guindos told the Business Post....

....MORE

Raising the question: How exposed to the shadow bankers was Credit Suisse? And who else has big exposure?

On the first question, Myret Zaki, who has looked at shadow banking a few times, seems to think the answer is "A fair amount.":

L’arbre Credit Suisse cache la forêt du «shadow banking»

And a few years ago:

https://themarket.ch/meinung/how-the-shadow-banking-system-became-the-reference-market-ld.2399 

And a few days ago:

The Cost of Ignoring the Shadow Banking System

"Italy bans insect flour from its pasta despite the eco buzz"

"Flour" is apparently the way in to the human diet for the bug pushers. 

From The Times/Sunday Times, March 24:

The growing use in cooking of flour made from crickets, locusts and insect larvae has met fierce opposition in Italy, where the government is to ban its use in pizza and pasta and segregate it on supermarket shelves.

In a sign of fear that insects might be associated with Italian cuisine, three government ministers called a press conference in Rome to announce four decrees aimed at a crackdown. “It’s fundamental that these flours are not confused with food made in Italy,” Francesco Lollobrigida, the agriculture minister, said.

Packed with vitamins, proteins and minerals, flour made from crickets is increasingly seen as an ecological way to obtain nutrients, and the market is forecast to reach $3.5 billion by 2029. The EU has already authorised foods made from crickets, locusts and the darkling beetle larva. In January mealworm larvae was added to the list....

....MORE

For now I'll be consuming bugs only after they've been eaten by a chicken. And maybe the odd gnat or mosquito.

Questions Americans Want Answered: "What is Secessio Plebis?"

We've posted on the power of the General Strike and the risks it poses to finance and investing.* Here are the historical antecedents.

An overview from History Defined:

In Rome, citizens had multiple rights, but that did not mean there were no challenges for the ruling class. The plebeians (commoners) were part of the general body of free Roman citizens, but they were not patricians.

Both classes of citizens in Rome were hereditary, and thanks to these commoners, Rome’s government ended up creating laws and a government that reflected the needs of all of its citizens.

What was the tool that they used so successfully? It was a secession. But what did it mean, and what role did it play in the history of Rome?

A secessio plebis or withdrawal of the commoners was an informal exercise of power by its plebeian citizens. The plebeian citizens would leave the city, leaving all the shops and workshops non-operational. The concept is similar to what we know today as a general strike.

Any commercial transactions would largely cease, leaving its patrician citizens without resources. There was strength in numbers since the plebeian citizens were the vast majority of Rome’s population and the primary source of food production and other critical resources.

There were multiple secessions throughout Roman history, most of which were related to specific grievances against the ruling class. Let’s explore the five successions and the results of each one....

....MUCH MORE
*January 2021: Logistics: "Shutting It All Down: The Power of General Strikes in U.S. History"
For the last month I've been pondering the optimal bet should a general strike interrupt transport into major urban centers.

December 2020:  Urban Complexity and Fragility

Sometimes people forget where their food comes from and who it is they should thank for their daily sustenance.

One of the things a risk manager is tasked with is catastrophizing possible futures and developing plans to either mitigate or hopefully, profit from the worst case scenario. Most of our readers are familiar with the more dramatic scenarios: Tokyo earthquake at magnitude 8.5 - 9.5. An electromagnetic pulse, whether caused by a coronal mass ejection or an airburst of a nuclear weapon, an underwater landslide on the order of the Storegga slide creating a megatsunami, etc. These are the better known risks.

But one of the more mundane risks is something like a general strike.

Here's a map used to make the political point that land doesn't vote, people vote:


What the map also does is highlight the places, cities, that would be most at risk if the whole system came to a halt.

How long would it take for the food supply to run out in New York City or San Francisco or Atlanta or Philadelphia?

Here's the American Trucking Association with some answers:...

 

Saturday, March 25, 2023

"Kanye West Claims He “Likes Jewish People Again” Thanks To Jonah Hill and 21 Jump Street"

Great. Just 'effin' great. Here I was, ready to give Adidas a lowball offer on their $500 mil. inventory of Yeezy shoes and this happens.

From Vanity Fair, March 25:

The magic of the movies?

Disgraced former shoe salesman and rapper Kanye West has kept mum on social media since his business world fell apart late last year. That ended late Friday night/early Saturday morning when the College Dropout artist, who legally changed his name to Ye in late 2021, popped onto Instagram to declare that he liked Jewish people again. 

Before you can say “uh, okay,” the man whose antisemitic comments and follow-up taunts to Adidas forced the company to drop his line of athletic wear explained what caused his change of heart: Jonah Hill’s performance in the 2012 comedy 21 Jump Street

Though West is a chronic deleter of social media posts, let’s take a look at this beauty while we still can. Like the Torah itself, it’s worth scrutinizing this line by line. (The image is taken from the British DVD/Blu-ray cover for some reason; note the 15 rating from the British Film Classification Office.) ....

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The Times of Israel also has the story but drops the "People" and the "-ish" from their headline. Also a more accepting "Says" rather than "Claims":

Kanye West says he likes Jews again after watching movie with Jonah Hill

Does King Charles III Have Someone To Pamper The Royal Bottom?

A twofer. First up, the New York Post, September 13, 2022

King Charles’ outrageous list of daily demands revealed
From pampered prince to coddled king.

Although he was just named Britain’s ruling monarch last weekend, Charles III has been living like a king his whole life.

King Charles was reportedly nicknamed the “pampered prince” by his staff at Clarence House, where he lived with his wife Queen Consort Camilla from 2003 until he recently took the throne.

Details of the former Prince of Wales’ lavish requests were revealed in the 2015 Amazon Prime documentary “Serving the Royals: Inside the Firm.”

Paul Burrell, who served as a butler to Queen Elizabeth and Princess Diana, revealed the precise directions the king’s staff are given to care for him, from ironing his shoelaces to putting toothpaste on his toothbrush.

“His pajamas are pressed every morning, his shoelaces are pressed flat with an iron, the bath plug has to be in a certain position, and the water temperature has to be just tepid,” in a bathtub filled “only half full,” Burrell said.  

The king even “has his valets squeeze one inch of toothpaste onto his toothbrush every morning.”

After getting ready, King Charles’ strict morning routine is continued with his breakfast.

“Prince Charles has a healthier option. He’d have homemade bread, a bowl of fresh fruit, fresh fruit juices,” said chef Graham Newbould, a former member of the royal staff.

“Wherever the prince goes in the world, the breakfast box goes with him. He has six different types of honey, some special mueslis, his dried fruit and anything that’s a bit special that he is a bit fussy about.”....

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And the reason for the query in the headline, from Messy Nessy Chic, March 17:

The Toilet Duty Dukes and Duchesses of England

https://www.messynessychic.com/wp-content/uploads/2016/10/toilethumor.jpg

Those precious moments of alone time in the bathroom are priceless to many of us, and yet strangely enough, it was one of the few luxuries the King and Queen of England could not afford. Until as recently as the 20th century, the British monarchy appointed what was known as the “Groom of the Stool”, a courtier responsible for assisting them in the performance of “bodily functions of excretion and ablution”. And this wasn’t the role of any ordinary household servant. The appointment was offered to Dukes and Duchesses, Earls and Lords, Count and Viscounts– even future Prime Ministers of England, who willingly took a job that more or less entailed wiping the King’s bottom…

Above left: John Stuart, Prime Minister of Britain and Groom of Stole to George III; Right: Lionel Sackville, 1st Duke of Dorset, Groom to George I.

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In some areas of the U.S. a human stool is known as a "dookie" but I'm not sure of the etymology. Probably not derived from 'Duke'.

See also: the album by Green Day, ref. #3

"The Computer That Will Change Everything"

Until the next computer that will change everything. That said, this is a major milestone.

From Chicago Magazine, January 31:

Eight years in the making, Aurora, a powerful new machine at Argonne National Laboratory, could help solve some of the most pressing questions of our time. Welcome to the new era of supercomputing.

If you’re the type of person who ever contemplates what more you could have done with your life, I have some advice: Don’t talk to Rick Stevens. Just 15 minutes into a conversation with him, I already feel like an idiot. Outwardly, I’m making direct eye contact, taking notes, putting my fingers to my lips to signal I’m hanging on his every word; inwardly, I’m thinking about how many hours I’ve spent on YouTube rewatching clips from The Sopranos.

Stevens is the associate laboratory director for computing, environment, and life sciences at Argonne National Laboratory in southwest suburban Lemont. The title wordily obscures his accomplishments. Stevens, who started computer programming at age 14, has been at Argonne (the country’s first national laboratory, established in 1946 and jointly operated by the U.S. Department of Energy and the University of Chicago) since 1982, when he was still an undergrad at Michigan State. After he joined Argonne, he got a doctorate in computer science at Northwestern. Over the past 40 years, he’s been a key figure in Argonne’s significant advancements in supercomputing.

On a sunny day in November, I’m sitting in Stevens’s office to learn more about the Aurora supercomputer, Argonne’s next big leap in computational speed and power. The lab has been laboring over supercomputers for nearly its entire history, in a constant state of conceptualizing, formulating, fundraising, designing, constructing, testing, and operating. But in a decades-long span of inexorable innovation, Aurora is a unique milestone. When the machine is fully constructed and operational — Argonne officials are hoping for early spring — it will be one of the first supercomputers in the world to operate at exascale, a new and unprecedented stage of computing.

And this is why I came to talk to Stevens. He’s over six feet tall, with fantastic long brown hair hanging past his shoulders, and a wide frame, like he could have played football. On the day I meet him, he’s wearing glasses, Birkenstock sandals with socks, flowy black yoga pants, and a loose-fitting sweatshirt.

The first question I ask him: What’s the impact Aurora will have on our everyday life?

“What’s the impact?” Stevens replies, rhetorically and exhaustedly. “Well, you can get a hint of it, maybe, from the impact that supercomputing has had on the world in the last 20 years. Everything we know about large-scale climate comes from climate simulations on supercomputers. What we know about the human genome comes from massive data analysis on big computers. Everything that’s happening in AI right now is happening on large-scale computers. Just the idea that you could build a system that might be able to drive a car is a result of huge amounts of computing. Our ability to design reactors, our ability to come up with new batteries — all that is a result of computing.”

You know, just the climate, the human genome, nuclear power, robots.

“The exascale machine is the latest version of that,” Stevens continues, “and an exascale machine is a million times faster than the machines we had at the turn of the century.”

Still, how could we witness a “million times faster” empirically? How would we be able to see that materially in our everyday lives? I didn’t want to repeat my initial question, so I ask it in the form of a follow-up: Exascale computing is going to perform functions that we can’t execute now, right?

“Yeah, it’s a million times faster,” Stevens answers, another way of saying, Duh!

Then he does something no one I’ve ever interviewed has done before: He explains to me how I should write my story.

“The gee-whiz reporting on these machines is not super enlightening,” Stevens says. “Reporters like to do it because people have gotten so used to the idea that ‘I have a phone and it talks to a giant cloud and there’s thousands of processors in there,’ and that’s true. The industry has built it over the last 15 years or so. We build these scientific machines because they’re focused on problems in science, whereas clouds are, you know, powering Twitter and Facebook and Discord servers and all kinds of random stuff, fake news and all that.”

Stevens rolls his eyes repeatedly as he delivers this spiel, a wall of thick books about astrophysics and advanced computer science behind him. Then, like the sorcerer in Fantasia conjuring powers beyond the ken of mere mortals, he becomes impassioned.

“You don’t design an airplane without supercomputers. You don’t design an airplane engine without supercomputers. You don’t design a car anymore without a supercomputer. You don’t even design the mixtures in gasoline without a supercomputer. You can probably try to name something, almost anything of value, and it is going to have its roots in some kind of high-end computing simulation or data analysis system.”

I was starting to see what Stevens meant when he dismissed most stories about computers. But because I probably appeared to have the intellect of a small child, he tells me outright: “The real story is you’ve got a community of people that have been working on advancing high-performance computing for decades. And it powers the whole economy.”....

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Harvard's own Improbable Research has a Luxuriant Flowing Hair Club for scientists but when I went to check to see if Professor Stevens was a member, well, sadly, the site is being moved and won't be available for a while:

The LFHCfS is getting a shampoo and set while we are moving web hosts.

Please come back soon!