Russia Unable To Fight Another War After Catastrophic Military Losses?
Larry C. Johnson | CEO and co-founder of BERG Associates, LLC, an international business-consulting firm with expertise combating terrorism and investigating money laundering, formerly Deputy Director in the U.S. State Department’s Office of Counter Terrorism (1989-1993, and CIA operations (1984-1989)
https://sonar21.com/russia-unable-to-fight-another-war-after-catastrophic-military-losses/
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Common Dreams
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https://theconservativetreehouse.com/blog/2022/04/28/biden-malfunctions/?utm_source=feedly&utm_medium=rss&utm_campaign=biden-malfunctions
10 comments:
I dunno but in my opinion the only way the West is going to back off is Russia is going to have to drop a nuke somewhere.
The whole premis for this war, is The West believes Putin won't use them. It looks more and more likely it will be in Western Ukraine if it is going to be anywhere as a non NATO country.
My guess is eventually China will be faced with the same choice. Once the right get in. China must be seriously thinking of marching into Taiwan before NATO gets a foothold in there ?
Yesterday China and Iran have agreed to increase military cooperation. In other words if Russia is too busy we'll step in and help.
Sounds crazy I know, but what other choice will Russia and China have if they want to survive ? What other choices do they have to get the West to back off ?
Or it might simply boil down to how you dealt with a bully at school in the playground. The Bully surrounded by his hangers on picking on you for no reason. You just walk up and stick the head on him and give him a Glasgow kiss. They scatter like skittles.
Then after school you go round to his house with a baseball bat and a brick. Throw the brick through the living room window and better the father with the bat when he runs out of the house.
World war 3.
What other choices do they have if the West won't stop. What choice will they have if every country signs up to NATO ?
How do the Western voters vote for anti war when every name on the ballot is for war ?
France is an interesting case. Jean-Luc Mélenchon was the anti war guy. The elections are still to take place on what the parliament will look like and Word on the street is the French in these elections will not give Macron a majority. Will end up with no real power.
Barclays suspends all its commodities funds…
https://mobile.twitter.com/wmiddelkoop/status/1519926863996538880?cxt=HHwWgMCy0cHb7pcqAAAA
Which was covered by a deep dive here in March- Is the Barclays ETN fiasco a “create-to-lend” story?
https://the-blindspot.com/is-the-barclays-etn-issue-a-create-to-lend-story/
In short, the fact the bank is no longer prepared to internalise long positions in these products means it can no longer shift the opposite position (in this case the short oil and short VIX positions) off its books, and is running up against risk limits in terms of how much it can directly internalise.
How much of this reflects stress at Barclays is a function of what those risk limits are, which is highly proprietary information. For now, the fallout will impact those who shorted the ETN, since the lack of creations is likely to widen the NAV/Price disconnect and make it impossible to buy back shares at fair value.
At the time, few commentators appreciated the scale of the bank-wide exposure that Barclays was carrying as a result of issuing these securities. Nor did they appreciate that this was likely an internal hedging issue gone awry.
The ETP issuer or principle market maker wants the ability to stabilise the NAV of the ETP to the price. In a conventional ETF they would either buy/accept underpriced units from the market and sell over priced underlying in exchange or buy/accept under priced underlying from the market and sell over priced units in exchange.
With ETNs, however, there is no underlying to deliver – the fair value of the underlying is usually derived from a formulation and anyone market making the product is usually obliged to deliver cash rather than securities, as priced by the index the ETN is tracking. This is because the underlying is effectively a total return swap based linked to the index the ETN is tracking.
More often than not the primary market maker is also the issuer, and the true “underlying” security that backs the product is a total mystery. It amounts to whatever hedge the ETN issuer feels can best manage the risk being incurred – that being the ability to redeem or create ETN units at a price that tracks the index they are supposed to be linked to.
Many hedge funds like to use ETNs or ETPs as shorting tools. Market makers and issuers like this because it allows for two-sided markets that help them better achieve price discovery and price stabilisation vis-a-vis NAV.
ETN issuers often satisfy this demand by creating stock specifically for hedge funds to sell short into the market.
Due to the permanent arbitrage mechanism that governs ETPs, however, if HF shorting sales depress the price of the units relative to the NAV, these shares are immediately bought back by the issuer.
That means that as far as the public picture is concerned the trade is a wash. There is no growth in overall outstanding shares. At least not officially.
The shares borrowed and sold short by the hedge fund exist in a sort of phantom realm – as liabilities of the hedge fund to the issuer, which in theory can be covered at any time because of the issuer’s obligation to deliver enough securities into the market to keep them tracking the index price.
The problem is that in a popular ETN this sort of phantom “over issuance” can get pretty sizable.
f we assume that the vast majority of the ETN securities Barclays issued but never registered amount to these sorts of shorted “phantom shares”, created under the auspices of a create-to-lend programme (and distributed largely to third party hedge funds), the question we should be asking is this: what is actually stopping Barclays from simply “creating” its way out of the problem?
The answer is no doubt some sort of limitation in Barclays’ own internal risk capacity or the rising cost of running hedges that can support liabilities on the long side of the trade. For example, if you’re offering exposure to the oil price via a TRS, you need to deliver that exposure through your own positions or hedges. That means both buying and funding those hedges – which in current market dynamics are getting pricey, especially for banks which service oil traders. This is due to a sudden dearth in hedging activity, which potentially also translates to a dearth of naturally offsetting flow for hedging structured products products with.
When it comes to hedging Vix products, meanwhile, large banks with sizable structured products divisions tend to generate organic volatility exposures via their day to day operations. Often times ETNs are issued to recycle some of that natural exposure into third party products that can act as de facto neutralizing offsets. If market dynamics impact the size and scope of those cheap natural hedges, an issuer might be reluctant to load up on expensive conventional hedges to offset them. It simply might not be economic to do so. Another possibility is that the scope of the natural hedge the bank thought it had was not as far ranging as originally calculated. In that case it may have underperformed to such a degree that no new exposures can be justified.
Which brings us to the following wording in the Barclays release:
This reflects a c.14 bps reduction from the estimated loss and a further c.15 bps reduction due to an increase in risk weighted assets in respect of short- term hedging arrangements designed to manage the risks to Barclays arising out of the rescission offer. The equivalent impact on BBPLC’s solo-consolidated CET1 ratio as at 31 March 2022 is expected to be a reduction of c.23 bps in respect of the estimated loss and c.23 bps in respect the hedging impact. The hedging impacts will reverse on conclusion of the rescission offer.
Would imply some sort of gross internal hedging miscalculation – probably resulting from an aggregated (or internalised) group exposure that was considered more of a hedge to these ETNs than it really was. The language of the filing implies that this oversight now seems to be being plugged with expensive short-term hedges which are keeping the legacy exposure from growing larger but which will not entirely be closed out until the losses are materialised via the completion of the rescission offer.
The rescission offer in this case is equivalent to an over-allotment style safety net used by stabilisation agents to cover the risk of the stock (which they have pre shorted stock ahead of an IPO) popping. In the conventional over allotment, the agent retains the right to buy the stock to cover the shorts at the issue price. His downside is thus capped as the right amounts to an option.
In a comparable move, Barclays is now allowing eligible purchasers (most likely hedge funds) who potentially shorted the stock (and are now being squeezed to high heaven because of the suspension of creations) to cover those shorts at the price they engaged into the positions at.
What’s clear is that this seems a preferable option to Barclays than creating the shares the market needs to settle these shorts organically.
One reason for that might be that it would take a lot more creations (and hence a lot more hedging cost for Barclays) to bring the securities back in line with NAV/price than simply buying out all the short positions at a break-even rate for the hedge funds and closing down the fund.
Relatedly, a much overlooked aspect to all of this is how it all fits into Barclays’ Delta-One trading activities. This is the department through which a lot of position aggregation – also known as internalisation – is likely to be conducted. While there’s very little public information about how delta-one operates, what we do know is that it tends to be a profit centre at many banks but also a key generator of risk.
According to an article by eFinancialCareers in May 2019:
Bloomberg claims that vestiges of the old structured capital markets business are now to be found in a Barclays business known as Delta-1 Strategic, run by Sadat Mannan, a structured capital markets veteran. Delta-1 Strategic may be generating up to 10% of Barclays’ stock trading revenues and could have made up to $252m in Europe in 2018, says Bloomberg.
Barclays isn’t commenting on the claims, but insiders tell us it’s not just Delta-1 strategic that has taken over some of the business of Barclays’ structured capital markets business, but the broader ‘Equity Solutions Group.’ This is said to be run by the likes of Manann, plus financing specialist David Lohius, leverage solutions and Delta One managing director Florian Huber, and head of the European equity finance business Mark Newton.
Sadat Mannan has has since moved on to Autonomy Capital Research having been seemingly embroiled in a series of exposés related to how ETP strategies often connect to dividend tax avoidance. But chances are very high that his former department at Barclays may have been involved in hedging activity for these sorts of ETN iPath products.
Hedge funds are getting special treatment they don't deserve. That helps them with risk.
There are groups of people out there who are allowed to make a lot of money for no other reason than they are awake and breathe.
We choose financial capitalism over industrial capitalism and wonder why China is winning.
This is brilliant by Col. Richard Black
The difference between Iraq and Ukraine
In context when you think of one being a small country the other a huge country.
https://mobile.twitter.com/apocalypseos/status/1519873227320807425?cxt=HHwWgsCqobmp1pcqAAAA
Wake me when Taiwan starts shelling the Chinese mainland.
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