Category Archives: Economy and Meltdown

“No Collusion Happening Here” – Trader Decodes ‘FX Cartel’ Chats As Criminal Trial Begins

More than a year after three London-based FX traders were extradited to the US to stand trial in a New York courtroom as part of the infamous “cartel” case – wherein traders from some of the world’s largest currency dealers allegedly conspired to rig benchmark exchange rates – proceedings have finally begun. The federal trial is expected to take two weeks, but as the prosecution began laying out its case, which reportedly relies on testimony from Matthew Gardiner – a former UBS and Barclays trader and cartel member who cut a deal to avoid jail time in exchange for his testimony – transcripts from the infamous cartel chat, where most of the alleged wrong doing took place have shed light on the brazenness of these traders, who used “coded” language to try and mask their attempts to influence the euro-dollar exchange rate to the benefit of their trading books.


The former employers of all three accused traders have already agreed to massive fines to resolve criminal and civil charges stemming from the scandal, meaning that these criminal trials are essentially the last loose string in the US government’s push to ensure that FX markets remain manipulation-free. According to Bloomberg, the chat records shared with the jury indicated that the cartel traders continued with their allegedly illegal behavior even after they started to suspect that regulators had caught on.

Back in 2012, former JPMorgan Chase & Co. trader Richard Usher mocked regulators in a chat with Gardiner, former Citigroup trader Rohan Ramchandani and Christopher Ashton, previously head of spot FX trading at Barclays.

“For compliance purpose no collusion going on here hahahaha…”

Gardiner spent most of Monday’s session parsing on behalf of the jury the day-long chats and telephone call transcripts that were littered with Cockney rhyming slang and obscure references to “Star Wars” and BBC kids’ shows. Most of the illicit activity was intended to manipulate exchange rates ahead of the daily currency fix – the window when data providers take a snapshot of exchange rates to serve as a daily benchmark. There are several different “fix” time, the 4 pm London Time fix is the most widely used. Gardiner had previously said that the cartel had a “gentlemen’s agreement” not to trade in a way that would hurt other members’ positions.

Explaining one chat, Gardiner told jurors that one of the other traders had an open position totaling 625 million euros ($724 million), or, in their lingo, a monkey (500 million euros) and half a chimp (125 million euros).

Defense lawyers, who questioned the ex-trader’s credibility during opening arguments, will get their chance to cross-examine Gardiner Tuesday.

The traders discussed their interests and open positions in the online chats before key price benchmarks were set in London, Gardiner said. In some cases, they would tag-team trades in an effort to move prices in the same direction, or hold off if their bets might trigger a loss for others.

On occasion, the stars would align and all the traders would have customer orders pointing in the same direction – a rare occurrence that was frequently celebrated.

Ramchandani in 2008 chat message:

“It’s awesome I think we’re both helping each other out” Usher: “Best day for as long as I can remember” “And I owe it all to you” Ramchandani: “I’m having best week ever too.”

When Ashton was told by Barclays’ compliance team that he couldn’t participate in the multibank chats anymore, he left the chatroom in August 2012, eliciting humorous commentary from his colleagues.

Usher noted the occasion, saying:

“wow man down”

Defense attorneys will seek to paint Gardiner as a “flawed” witness who essentially bought his freedom by selling out his one-time compadres. Meanwhile, in the same courtroom, a criminal trial related to Libor rate-rigging is winding down, more than half-a-decade after news of that scandal initially broke.

GE’s Looming Dividend Cut

Via Political Calculations,

It’s been several months since we last considered the deteriorating situation for the future of dividends at General Electric (NYSE: GE), where we wrote that either GE or its dividend, and quite possibly both, were set to shrink.

Four months and one CEO later, and that statement holds even more true today, where we believe that it is no longer a question of “if”, but of “when” and “by how much”.

On 12 October 2018, GE announced it would delay the release of its fourth quarter financial statements until the end of the month to allow the company’s new CEO, Larry Culp, to complete his “initial business reviews and site visits”.

At the same time, we’re coming up on the one year anniversary of when GE’s then new CEO, John Flannery, slashed its quarterly dividend in half, from $0.24 per share to $0.12 per share, so it’s a good time to look at what’s changed for investors, which we can do by looking at just one number: the company’s market capitalization.

When GE declared its last quarterly dividend of $0.24 per share on 7 September 2017, GE’s market cap was nearly $208 billion. Exactly one year later, when declaring its fourth quarter dividend payment for 2018, GE’s market cap was $108 billion, which is pretty close to where it stands today, just over a month later. That missing $100 billion goes a long way toward explaining why GE now has a new CEO.

That decline also gives us an indication of how much GE’s new manager may be looking to cut the company’s dividend. The following chart shows the relationship between GE’s market cap and its aggregate dividend payouts for each quarter since 12 June 2009.

Given the historical relationship captured in the chart, at GE’s current day market cap of $108 billion, we would anticipate a 35-40% reduction in the size of the company’s dividends, from $0.12 per share to about $0.07 per share, which for all practical purposes, is already baked into the company’s average share price over the five weeks. Culp could announce this change today and there would be minimal impact to the company’s stock price.

But, that 35-40% lower dividend payment is for a General Electric that still has its health care division, which it has been planning to spin off. Without it, GE will need to cut its dividend by more than that percentage, because it won’t have the revenues, earnings, and cash flow that it provides to the company to sustain a dividend reduced by only 35-40% from today’s level.

We think then that it’s very likely that once the new CEO’s review of the company’s operating and financial situation is complete, GE will suspend its dividend altogether. The change would help preserve what has been the company’s increasingly distressed cash flow, which some analysts have indicated is not sufficient to cover both GE’s current quarterly dividend of $0.12 per share and its operating requirements.

Other analysts believe that GE’s dividend is safe. Based on the information we have today, we are not in that camp.

Who Will Benefit The Most From Sears’ Collapse?

While the closure of hundreds of Sears stores will drive a new stake through the heart of the CMBS market, potentially renewing calls for CMBX BBB- as being the “big short” trade, not everyone will be a loser. And, according to new analysts by Morgan Stanley, Best Buy, Off-price, and Old Navy could be the greatest beneficiaries from the Sears Chapter 11 filing, based on on geographical overlap, hypothetical comp lift assuming full liquidation, and historical trends.

According to MS’ analysis, while SHLD’s market share is dwindling, the bank estimates ~$2.8b in Apparel sales, ~$2.7b in Appliance sales, ~$2b in Consumer Electronics sales, and ~$0.6b in Home Improvement sales up for grabs, with one caveat: “if liquidation sales occur as proposed, competitors will likely face a near term headwind, before having an opportunity to capture SHLD’s former market share in the following 12 months.”

Additionally, the analysis by analyst Simeon Gumtan notes the dynamic nature of the situation, as store closures could range from the incremental 142 closures proposed today, to a full scale shutdown.

We are not updating our store overlap analysis but based on our previous analysis, mall-centric retailers JCP, M, and Old Navy have the highest store overlap across all companies we looked at. Beyond these mallcentric retailers, BBY and TGT have the next greatest proximities.

Within Hardline/Broadline Retail, BBY stands to potentially benefit the most from SHLD’s Chapter 11 filing. This is based on high physical store overlap and potential comp lift assuming full liquidation. Geographically, BBY, along with TGT, has the highest overlap of stores using a ¼ mile, ½ mile, and 1 mile radius. Expanding the radius to 2 miles, TGT, BBY, HD, and WMT all have 60%+ overlap  each. In terms of comp, BBY could experience the highest benefit (~70 bps) from gains in appliances and consumer electronics. The next biggest beneficiaries are HD and LOW who could see a ~30-40 bps lift to comps by capturing sales in appliance and home improvement categories.

Separately, WMT and TGT would experience a negligible benefit from incremental apparel sales as the SHLD’s market share in the category has fallen to only 1% (~$2.8b). Given such small market share, dollar gains should be modest and spread across many competitors.

In estimating potential market share gains by company, MS calculates that BBY would be the biggest winner in consumer electronics and appliances, HD/LOW in appliances and home improvement, and Off-price in apparel could see the greatest sales lift.

Meanwhile, history suggests Off-price retailers and Old Navy are best positioned to benefit from SHLD store closures: JCP and M have the highest percentage of stores within a ¼ mile, ½ mile, and 1 mile radius to a Sears store.

However, department stores, including JCP, KSS, and M, have historically been unable to grow apparel revenue despite numerous, ongoing SHLD store closures and $3.8b in SHLD lost apparel sales since 2012.

As a result, Morgan Stanley concludes that Sears’ Chapter 11 filing and corresponding store closures will boost apparel revenue for ROST, BURL, TJX and Old Navy.

Saudi Arabia Considers Itself Untouchable Due To Oil And Money

Authored by Mike Krieger via Liberty Blitzkrieg blog,

The roots of that lobby’s rise to prominence in Washington lie in the aftermath of the terrorist attacks of September 11, 2001. As you may remember, with 15 of those 19 suicidal hijackers being citizens of Saudi Arabia, it was hardly surprising that American public opinion had soured on the Kingdom. In response, the worried Saudi royals spent around $100 million over the next decade to improve such public perceptions and retain their influence in the U.S. capital. That lobbying facelift proved a success until, in 2015, relations soured with the Obama administration over the Iran nuclear deal. Once Donald Trump won the presidency, however, the Saudis saw an unparalleled opportunity and launched the equivalent of a full-court press, an aggressive campaign to woo the newly elected president and the Republican-led Congress, which, of course, cost real money.

As a result, the growth of Saudi lobbying operations would prove extraordinary. In 2016, according to FARA records, they reported spending just under $10 million on lobbying firms; in 2017, that number had nearly tripled to $27.3 million. And that’s just a baseline figure for a far larger operation to buy influence in Washington, since it doesn’t include considerable sums given to elite universities or think tanks like the Arab Gulf States Institute, the Middle East Institute, and the Center for Strategic and International Studies (to mention just a few of them).

– From the must read piece: The Saudi Lobby Juggernaut

It appears Saudi Arabia’s preparing to spin a tale about the murder of Jamal Khashoggi for the purpose of providing Donald Trump with cover to pretend nothing happened and get back to business as usual. Apparently, the Saudis plan to claim he was killed by rogue agents in a botched interrogation. No word about why it took them two weeks to admit this, why they blatantly lied about him leaving consulate and whether or not the body was hacked into pieces with a bone saw.

It’s been clear from the beginning that Trump would like this to go away as quickly as possible in order to keep the money flowing to defense contractors, as you can see from the clip below.

I found that statement illuminating because it reminded me of something CNN’s Wolf Blitzer said to Rand Paul back in 2016.

Donald Trump and CNN don’t agree that often, but on this issue they’re on the exact same page. This is telling and highlights the increasingly obvious fact the Saudis believe they can get away with anything they want as long as they keep oil priced in dollars and money flowing into the coffers of our country’s incomprehensibly corrupt status quo.

The Saudis have had U.S. leaders by the balls for many decades — a historical reality birthed by the petrodollar — but the monarchy’s untouchable position became more explicit after the terrorist attacks of September 11, 2001. Despite deep Saudis ties to this mass murder of American civilians, the royal family faced zero consequences. Instead, the U.S. government just went ahead and started invading other countries to advance imperial ambitions.

While many of you are intimately familiar with the key role of the petrodollar in U.S. Saudi relations, you may not be as familiar with how the Saudis systematically throw money around U.S. power centers to ensure “thought leaders” dutifully toe the Saudi line. Naturally, the swamp of fawning parasites otherwise known as Washington D.C. is a core recipient of such largess. One of the more high profile examples of such payoffs was the $140,000 per month contract the Saudis had with the now defunct Podesta Group, founded by Hillary Clinton’s 2016 campaign chair John Podesta and his brother Tony.

Of course, that’s just the tip of the iceberg. Yesterday, Glenn Greenwald noted how the Washington Post (where the murdered Jamal Khashoggi published articles) had Saudi lobbyists writing opinion pieces for the paper. Specifically, we learned:

Carter Eskew is a former top-level adviser to Al Gore’s 2000 presidential campaign and a Founder and Managing Director of Glover Park Group which, according to the Post’s own reporting, is one of the Saudi regime’s largest lobbyists. Glover Park, says the Post, has “remained silent amid growing public outrage over reports that Khashoggi was killed inside the Saudi Consulate.” Indeed, as the New York Times reported this week, Eskew’s firm, “which was started by former Clinton administration officials,” is the second-most active lobbying firm for the Saudi regime, “being paid $150,000 a month.”

In addition to his work as a Managing Director in one of the Saudi regime’s most devoted lobbying firms, Eskew is also a Contributing Opinion Writer at the Washington Post.

There’s more:

Given all the moral decrees and shaming campaigns the Post has issued over the past ten days, how can they possibly justify their ongoing relationship with Eskew as his firm lobbies for the Saudi regime and he attends the regime’s P.R.-building event?

That question is even more compelling when it comes to Ed Rogers, the long-time GOP operative who is currently an Opinion Writer for the Washington Post. In addition to his work for Hiatt on the Post’s Op-Ed page, Rogers himself is receives substantial financial rewards for his work as an agent of the Saudi regime. Just two months ago, the lobbying firm of which he’s the Chairman, BGR Group (headed by former RNC Chairman and GOP Mississippi Governor Haley Barbour), signed a new contract that includes “assist[ing] the Saudis in communicating priority issues regarding US-Saudi relations to American audiences including the media and policy communities.”

According to the firm’s own press release, “BGR chairman Ed Rogers” – also an Opinion Writer for the Washington Post – “handles the Saudi work.”

Democracy doesn’t die in darkness, but with Saudi lobbyists shamelessly writing opinion pieces for major newspapers.

(*Note: Following the publication of the Intercept article referenced above, both lobbying firms in which Washington Post writers are partners, Glover Park and BGR, have ended their contracts with Saudi Arabia.)

Moreover, there seems to be a direct correlation between the number of civilians killed in Yemen and the amount of money the Saudis throw around D.C. As a must read article in Tom Dispatch noted: “In 2016, according to FARA records, they reported spending just under $10 million on lobbying firms; in 2017, that number had nearly tripled to $27.3 million.”

This is one way foreign governments bribe U.S. politicians.
Send money to lobbyists, lobbyists send money to politicians.
Utter disgrace.

— Michael Krieger (@LibertyBlitz) October 8, 2018

Moving along, the Saudis are adept at spreading their money around, with Hollywood’s another key target. As Forbes noted earlier this year:

Saudi Arabia’s $230 billion sovereign wealth vehicle, the Public Investment Fund, is on track to invest hundreds of millions in Hollywood as the first new screens go up in the Kingdom. Its hallmark purchase is a soon-to-close $400 million deal for an estimated 7% in Endeavor, the sprawling entertainment conglomerate that includes powerful talent agency WME, several live event brands and a burgeoning production business.

Side note: WME, also known as William Morris Endeavor, was co-founded by Ari Emanuel (Rahm Emanuel’s brother).

Beyond D.C. and Hollywood, we all know how Silicon Valley oligarchs swarmed to pucker up to MBS when he came stateside on is propaganda tour earlier this year.

None of this stopped endless Saudi fawning by U.S. politicians, media, Hollywood, Wall Street, tech oligarchs, etc.
Our “elites” are depraved.

— Michael Krieger (@LibertyBlitz) October 11, 2018

Meanwhile, don’t think for a moment that the titans of Wall Street would be left out.

We all want someone to look at us the same way that Jamie Dimon and Mohammad Bin Salman Al Saud look at each other.

— Rudolf E. Havenstein Remembers (@RudyHavenstein) October 8, 2018

Many of you have already seen these photos, but the point is to hammer home that US. power players are, generally speaking, utterly depraved and entirely void of any sort of ethical framework whatsoever. While many have been forced to back out of the upcoming Saudi conference for public relations reasons, all of them, including Trump, just want this thing to go away so they can get back to business.

SCOOP-Companies that have pulled out of next weeks Saudi investment conference following the Khashoggi murder tell @FoxBusiness they will maintain biz ties to the country and its royal family for the simple reason that there’s too much money at stake

— Charles Gasparino (@CGasparino) October 15, 2018

There is literally zero as in zero chance this murder/interrogation was not cleared by the crown prince. As in zero. To suggest otherwise is to willingly believe in absolute intentional nonsense. Watch the reactions of politicians & alleged leaders & it will be so obvious

— Patrick Skinner (@SkinnerPm) October 15, 2018

The Saudis think oil and money make them untouchable. Perhaps they’re right. For now.

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4Chan Sparks Mass Triggering With NPC Meme; Twitter Responds With Ban Hammer

The “weaponized autists” at 4Chan have done it again, because they can; a new meme suggesting that liberals are soulless idiots who can’t think for themselves has gone viral. The concept compares Democrats to “nonplayable characters,” or NPCs – the recurring characters in video games with repetitive lines and limited knowledge. Lack of an “inner voice” is a dead giveaway that someone may be an NPC.

The NPC meme essentially meant to ridicule the post-election perpetual outrage culture in which liberals simply parrot the latest talking points from their favorite pundits, who do their thinking for them. 

The 4chan version is a simple greyed out, expressionless face known as “NPC Wojak” – which has triggered the left so hard that Twitter conducted a mass-banning campaign for accounts promoting the meme, and the New York Times wrote an entire article trying to figure it out. 

The Times writes of the Twitter bans:  

Over the weekend, Twitter responded by suspending about 1,500 accounts associated with the NPC trolling campaign. The accounts violated Twitter’s rules against “intentionally misleading election-related content,” according to a person familiar with the company’s enforcement process. The person, who would speak only anonymously, was not authorized to discuss the decision. –NYT

There is precisely zero evidence that the accounts were spreading “intentionally misleading election-related content,” so we’re just going to have to take Twitter’s word for it. 

This NPC meme is gold. 😂😂😂

— 🇺🇸👍Phataken (@Phataken) October 12, 2018


According to KnowYourMeme, the NPC meme was created in 2016 after an anonymous 4chan user made a threat titled “are you an NPC?” to the /v/ video games board. 

On September 5th, 2018, several threads were submitted to 4chan discussing people who did not have an “inner-voice.” In the comments sections, many described those who do not have an internal monologue as “NPCs.” On September 7th, a grey-colored variation of Wojak began appearing in threads about NPCs (shown below). KnowYourMeme

The triggering begins

After the meme began to spread, Twitter user @brightabyss accused those who “refer to living humans being as NPCs” as being “facist”” 

If you sincerely refer to living human beings as NPCs you are a fascist, an enemy of to your own species, and basically a complete shitbag person. Dehumanization is not some cool trend of thought by Caucasian as fuck grad students, it’s the capitalist erasure of ethics.

— ◉ (@brightabyss) September 14, 2018

And according to KnowYourMeme, “On September 15th, Twitter user @DreddByDawn tweeted that NPC was “dog whistle” used by “fascists.” The same day, Twitter user @Sharessan accused a centrist of being a “fascist in denial” after labeling them an NPC. Meanwhile, Twitter user @stackflow33 tweeted a screenshot of the tweets along with the message “What the fuck is even going on anymore? Lmao.””

Fascists adopt dog whistles so quickly that as soon as one becomes recognizable to the public (like SJW) they’ve moved on, it’s not coincidence, it’s plausible deniability. “NPC” is explicitly meant to dehumanize, they’ll take advantage of lack of recognition as long as they can

— Appropriating Mummy 🎃💀👻 (@DreddByDawn) September 15, 2018

Angry NPCs Twitter users continued their opposition to the meme, telling users to “report and block” anyone using the “dehumanizing” NPC meme.

PSA: there’s a new type of bot in town.

They will have a avatar similar to this one and have NPC in their name.

They are providing misinformation and pretending to be Democrats or progressives.

Report and block.

— Storm #MobTheVote (@StormResist) October 14, 2018

Once the meme reached critical mass, it was only a matter of time before Silicon Valley did something about it: 

The NPC meme hit Silicon Valley so hard that they’re planning on banning it.

— Faceberg (@thefaceberg) September 26, 2018

And before they’re totally scrubbed from the internet, here are a few NPC memes that slipped through the cracks:

— Hobbes (@hobbes_618) October 14, 2018

NPCs are even getting ready for Halloween: