Tuesday, August 20, 2019

The BABA Investor Call.......Trade War?...What Trade War?

As I've been doing every quarter since the BABA IPO back in September of 2014, I've taken the time to listen to Thursday morning's investor call, review the presentation and read the press release and 6K for this financial dumpster fire.  For me, like driving past a bad car accident on the freeway, it's difficult and painful to see, but for some reason, I can't bring myself to look away.

The relevant links to same are listed directly below for your own personal amusement and/or self-abuse.

PRESS RELEASE
https://www.alibabagroup.com/en/news/press_pdf/p190815.pdf

PRESENTATION
https://www.alibabagroup.com/en/ir/presentations/pre190815.pdf

WEBCAST
https://edge.media-server.com/mmc/p/8fyipmop

CALL TRANSCRIPT
https://finance.yahoo.com/news/alibaba-group-holding-limited-baba-163122944.html

SEC Filing - 6K
https://www.sec.gov/Archives/edgar/data/1577552/000110465919046150/a19-17229_1ex99d1.htm

SEC Filing - 20F
https://www.sec.gov/Archives/edgar/data/1577552/000104746919003492/a2238953z20-f.htm

I must say, that before we dive headlong into this looking glass, that I feel I do some of my most introspective work from the deck/cabin of a sailboat, where I wrote/researched/pondered much what I wrote over the weekend.  The serenity and peace of being on the water cleanses and soothes me as I force myself to delve into this maelstrom of accounting rule abuse.  Here are a few  pictures from the weekend....




















For those of you new to this "Alibaba Investor Call" reality show, the format for these quarterly extravaganzas is generally the same.  They open up with a motivational speech by Joe Tsai, describing the nearly boundless, macro opportunities that are just waiting to jump into the lap of every US investor, if they are just bold enough and wise enough to get aboard this unstoppable Chinese Communist express train to riches.

Next Daniel Zhang stumbles and bumbles through some brand new made up metrics for a few minutes and Maggie spends some time going through the fake financial statements.

The call ends with a few analysts displaying their adoration for management genius, extolling their virtues and asking some irrelevant "if you were a tree...what kind of tree would you be?" questions.

In this particular call:

Eddie Leung - Bank of America Merrill Lynch asked about "user engagement in less developed markets" and "synergies"

Piyush Mubayi - Goldman Sachs asked about the "Internet of Things" and "5G"

Alicia Yap Citigroup asked about the T-Mall Flagship store 2.0 upgrade and "monetization"

Grace Chen - Morgan Stanley  asked about "Margin Performance"  (Maggie said it was fine)

Binnie Wong - HSBC asked about the "strong top line growth"

Gregory Zhao - Barclays Capital  asked about monetization in lower tier cities, efficiencies and priorities.

Jerry Liu - UBS  apparently believes he works for Alibaba since he discussed "our investments that we've done so far this year " and he is  "wondering if there's more monitization we can continue to do to continue this trend".  I, for one, think that it's wonderful that Jerry is so helpful.  He's a part of the team.  "Great quarter guys!

Now, if you have no financial background, have a love of buzzwords and can't tell a "Balance Sheet" from "Balance Shit" these quarterly calls are for you!  The above questions were actually a poorly disguised trailer-load-of-irrelevant-flaming-financial-turd-softballs of misdirection aimed at all of the starry-eyed China bulls looking to buy the dip, but, in today's Topsy-Turvy financial world,  this is what Alibaba's, and dare I say, securities "analysis" in general, has become.

I'm sure that the questions flying at Eddie, Piyush, Alicia, Grace, Binnie. Greg and Jerry during the inevitable Congressional hearings will be a bit more pointed than those they chose to lob at Alibaba management, but I digress.  It is what it is.....

What Wasn't discussed in the Investor Call?

I actually think this is much more important than the info in the call.  Here we go.

1.) Alibaba's "Core" Revenue (despite reporting 42% YOY combined growth) is probably in decline

Alibaba has been "buying" and consolidating revenue increases for years.  Since there were no new acquisitions in the quarter, as described in the 6/30/19 6-K, we can assume that significant revenue increases are due to continued "step acquisitions" as described in the 20-F.  When we examine Footnote 4 of the that document we see that there is a long list of these step acquisitions where a significant measure of Revenue wasn't available or allowed to be reported in the June, 2018 Quarter 20-F.  Now that the company has completed additional "steps" they are able to include/consolidate this revenue.  Of course, the actual consolidated revenues are no longer disclosed or described for these businesses in the filings.

Note that there is also a US$1.1 Billion dollar "other" investment which might be a lucrative source of increased reported revenue.  Unfortunately, we just can't tell.

Again, BABA Management and accountants, and for that matter, every entity controlled by the Chinese Communist Party, all have a long history of liberal use of accounting methods, misrepresentation and improper application of accounting/disclosure rules to goose revenue over the years.  Although we can't tell for certain, by design, since there is no disclosure of the revenue impact for the current quarter for any of these step acquisitions during the prior year, we would suspect that based on the amount of US Shareholder Capital deployed to accomplish these insider driven boondoggles that it must be substantial.

https://www.sec.gov/Archives/edgar/data/1577552/000104746919003492/a2238953z20-f.htm

Moreover, nearly every third party (Non-CPC published) metric, whether it be new car sales, electricity usage, retail spending, etc. is contracting (check any Western source).   Alibaba is apparently, according to their numbers, impervious to an economic slow down, trade war, recession or any economic trade winds whatsoever.  It defies logic that BABA is somehow generating organic double-digit YOY growth anywhere near what they are claiming without their typical use of accounting Shenanigans.

2.) Operating Margins and Income from Operations are actually on the decline as well

As any senior financial person knows, producing quarterly statements in a struggling organization is an iterative process.  It goes something like this:

1.) The Accounting department produces the "first pass" numbers and presents them to management.
2.) Management's reaction is that "we can't show those numbers to anyone" go back and find a way to fix them.
3.) The accounting department scours the relevant accounting literature and regulations and solicits advice from their public accounts as to what they might be able to get away with, fully intending to stretch the limits of both the meaning of the rules and the spirit of the profession.
4.) Eventually, they come up with some sort of scheme generally involving the capitalization of expenditures that should have been expensed, thus deferring the expenses to future accounting periods and boosting current period profits.
5.) Depending on how aggressive the effort and how gutless the public accounting firm, the accounting team can come up with some miraculous profit/margin improvements quite quickly.
6.) Remember, for a financial professional, success is not dependent on how reasonable the adjustments are, but more so on the ability of the professional to defend it and explain it under oath with a straight face. 

Here's what the Alibaba accounting team did this quarter.  There are two things we can identify with relative certainty:

The first is the use of an older (2016) FASB Accounting Standard Update that they must have just stumbled across.

Press Release: (pg.23)

(1) We adopted ASU 2016-02, “Leases (Topic 842)” beginning in the first quarter of fiscal year 2020 using the modified retrospective method and no adjustments are made to the comparative periods. Adoption of the standard resulted in the recognition of operating lease right-of-use assets of approximately RMB24.9 billion and operating lease liabilities of approximately RMB19.4 billion on the consolidated balance sheet as of April 1, 2019. Operating lease right-of-use assets are included in non-current prepayments, receivables and other assets, and operating lease liabilities are included in current accrued expenses, accounts payable and other liabilities and other non-current liabilities on the consolidated balance sheets. 

The net impact of adopting this accounting change is to increase "Non-Current Prepayments, Receivables and Other Assets" by $3.64 Billion with an associated improvement of $803 Million to Income from Operations in the current quarter.  They don't exactly spell it out, do they?  Actually, I'm surprised they disclosed anything at all.

As an aside, and just as interesting, according to the footnote, they booked the lease "Asset" entirely as long term, but the payment of the lease obligation is mostly "current"....so the payment is due this year, but the most of the value of these "assets" is to be amortized over a period of years.

The second accounting gimmick can be defined as a "generally more aggressive improvement in accounting department attitude".  i.e.) Coming up with creative ways to prevent expenses from hitting the bottom line.  Thanks to the miracle of double entry bookkeeping, when you prevent expenses from hitting profits, either asset values must increase (most popular) or liabilities must be understated (less popular...because the people you owe the money to, generally catch on and complain vociferously).  Otherwise, without either effort (pumped asset values or missed liabilities) the books don't "balance".

Somehow the Alibaba accounting department, I'm sure championed by Maggie, implemented some sort of a plan to prevent the expenditure of money they've pissed away from hitting the bottom line.  My guess is that there was a systemic push by Maggie, in each and every one of the now 1,300 consolidated operating entities, to try to determine which expenditures just might benefit future periods and therefore could be capitalized rather than expensed.  Somehow, the Alibaba accounting department managed to book an increase in both long term and current "Prepayments, Receivables and Other" by $4.532 Billion in just six months, after the figure had been relatively rock-solid at about US$11 Billion for more than a year.  Note that the ASU 2016-02, “Leases (Topic 842)” adjustment accounts for US$3.64 Billion of this "improvement" alone The rest, my friends, a total of $15.956 Billion now, is a hell of a lot of prepaid postage and office supplies.







Actually, perhaps Grace Chen may have realized how implausible it might have been for margins and operating income to double as a percent of revenue in one quarter for an enterprise the size of Alibaba, so she asked about it in the Q&A.  Here's her question and Maggie's response.

Grace Chen -- Morgan Stanley -- Analyst
Thank you. Thank you very much for taking my call. In this call, it's very encouraging to see Alibaba's strong margin performance, so it would be great if management could elaborate a bit more about what efforts management has done to help improve the margin performance, especially in core commerce and digital media and entertainment, and where we're going to see the strong margin performance will continue in the following quarters. Congratulations. Thank you.
Maggie Wu -- Chief Financial Officer
Thank you, Grace, for the question. Let me elaborate on what we have done to bring out operating efficiency. First of all, the revenue growth is very strong. That's obviously coming from -- driven by user growth, and also, all of our efforts on user experience enhancement have paid off. Now, when you look at the costs and expenditures, we started late last year emphasizing on all of the efficiency of this spending, not only on the marketing, but also on the headcount (Author's Note: Headcount increased by 1,748 people from the last quarter), the accountants, et cetera. So, we do have specific measures to the team to review and measure the ROI of this spending. That's No. 1.
No. 2 is that we have seen so much synergy coming out of not only Alibaba Group, but also a synergy with our sister company. So, things like marketing spending -- we're targeting another 200-300 million of potential users -- consumers -- coming to our platform. So, this is also the target of Ant Financial, and this is where we can work together. They are good at acquiring consumers in the lower-tier cities, and Taobao is good at retaining these consumers so that we don't have to spend it twice. It's a very effective way of doing the marketing on the core users. I hope that helps.
Oh, DME -- you see the negative margins get narrowed, so, 65% negative margin from last year and 35%. Actually, there was a one-off last year, which was the World Cup spending, so if you take that out, last year's negative EBITA margin would have been somewhere around 42%, but still down by a lot. I think the DME negative margin narrowing is mainly coming from our discipline on the spending, particularly in the content spending.
Based on the accounting shenanigans I described above, when I heard Maggie's response, the unprecedented level of lameness actually convulsed me.  My gag reflex kicked in and I did everything I could to keep from puking on my laptop.  
Let's be clear, Maggie is the Chief Financial Officer of this mess.  She is either the most incompetent, clueless financial person in history (doubtful) or, more probably, the criminal mastermind of this poorly constructed and relatively obvious financial fraud.
Deploying our patented Dick Fuld Banker Speak Translator (BST) here's how Maggie really meant to answer Grace's question if she were fully transparent:
Maggie Wu -- Chief Financial Officer
Thank you, Grace, for the question. Yes, it's true, our margins have improved at an unbelievable pace through this last quarter.  We are brilliant accounting professionals to be sure. The improvement is due primarily from our analysis of all the money we've wasted building software, marketing, kickbacks and dumb-ass projects that just don't work, probably never will and are not yet being used by anybody.  Since it's so cutting edge, we've determined that, even though it's "useless shit" (technical term) right now, we've capitalized all of the costs, payroll and kickbacks associated with these projects because, by definition, if these payments don't benefit the business in the current quarter, they will surely benefit the business sometime in the future.  In any event, we are amortizing the cost of all of these tiny, immaterial projects scattered over our 1,300 consolidating operating entities (so PWC can't possibly figure this out) over 5 years rather than expense these costs in the current period, as we had been incorrectly doing in prior quarters.  Lucky we caught it!  Also, Joe told me that I had to "hit the number or else my next vacation will be in Xinjiang" so we came up with this cockamamie crock of steaming turds of an accounting change, ran it by PWC, increased their fees and just hope that dumb-ass US Investors don't catch on to what we're doing.  Anyway, I'm safe in China so if that ungrateful bastard Jay Clayton has any problem with what we're doing, after all of the fees we paid him at Sullivan & Cromwell, he and his SEC and that pain int the ass FBI can stick their subpoenas "where the sun don't shine".  

Next question? 
That said, as described in the schedule below, when we compare the June, 2019 to the March 2019 and the June, 2018 quarters, reversing the accounting adjustment for the Capitalized leases and the unreasonable increases in "Prepayments, Receivables and Other" costs of unknown origin, which were likely capitalized rather than expensed, we can conclude that Alibaba is actually making very little money from operations.  "Income from Operations" is reduced to roughly 3% of Revenue and there's a good chance, based on the continued, expected lack of veracity of their filings, even this figure is probably still overstated.

















3.) The "Gravy Train" to Communist Party Insiders Continues
It's not often you see a business loan hundreds of millions of dollars of US Shareholder money to a Chinese Communist Party member, but incredibly, Alibaba has done it not once, but twice.  The first time was the Simon Xie debacle, where, after running afoul of the SEC for making a direct loan to Simon, BABA restructured the loan and purchased US$1.1 Billion of wealth management products to be pledged as collateral for an unnamed Chinese bank to make the loan to Simon in order to purchase a controlling interest in Wasu Media (Which Alibaba also has an undeterminable ownership position through another partnership controlled by Jack Ma and Yuzhu Shi) is described on pages 42 & 202 of the 2019 20-F.  This is of course, ongoing with Alibaba advancing Simon additional money to pay interest on the outstanding loan.  To be frank, that's never a good sign.      
The most recent US$ 730 Million dollar loan (@6.85:1) to a Chinese Communist Party member occurred just a few months ago in March of this year.  The transaction is described below in footnote 4(k) of the 20F.

(k)  STO Express Co., Ltd. ("STO Express")
    STO Express, a company that is listed on the Shenzhen Stock Exchange, is one of the leading express delivery services companies in the PRC. In March 2019, the Company made a loan to the controlling shareholder of STO Express with a principal amount of RMB5.0 billion for a term of three years. The controlling shareholder of STO Express has pledged a portion of its equity interest in STO Express in relation to the loan. The loan is accounted for at amortized cost and is recorded under investment securities (Note 11) on the consolidated balance sheets.
    In addition, the Company entered into a share purchase agreement to acquire a 49% equity interest in an investment vehicle to be established by the controlling shareholder, which will hold a 29.9% equity interest in STO Express for a cash consideration of RMB4.7 billion. The completion of this transaction is subject to customary closing conditions.

Here's the current chart for STO (below).  The company currently has a market cap of RMB 34 Billion (US$ 4.85 Billion)  Although the filing is silent on who this RMB 5 Billion loan is made to, the primary suspect would be De Jun Chen , Chairman and General manager of STO.  According to Bloomberg he's been on the job as Chairman for two and a half years.  My guess would be that he's also a well connected Communist Party Member (Again, presuming that the only way to accumulate wealth in China is through the Party) and MarketScreener reports his net worth to be roughly US$2.1 Billion with virtually all of it tied up in STO.



Here's what we know about Mr. Chen...


As with so many things endemic to these Chinese businesses, there's a certain level of uncomfortable weirdness associated with this enterprise, for example, they've established odd regional, global shipping offices, in seemingly random places like......






































That's right....VEGAS (and Peoria) BABY!

As far as I can tell, these are the only US locations.  There are no US Locations listed on the STO.cn website.  I tried to check for US locations on the STOExpress.us site over a period of a few days, but the website was always down.  Totally understandable....these things happen all the time at FedEX and UPS and since STO probably runs on BABA cloud servers we can also probably expect some access interruption, our computers to be occasionally infected or our identities to be stolen from time to time.....but again, I digress.


When this deal was first announced, oddly enough, the press release didn't mention anything about the RMB 5 Billion (US$730 Million @6.85:1) loan to a Communist Party Member to fund the purchase.  The Reuters headline simply read:

"Alibaba invests $693 million for stake in Chinese courier STO Express"

https://www.reuters.com/article/us-sto-alibaba/alibaba-invests-693-million-for-stake-in-chinese-courier-sto-express-idUSKBN1QS0D8

So here's what we really have:

Alibaba took $730 million of US Shareholder Money and loaned it to a CPC Member, so he could create a brand new unnamed ShellCo, which will hold/acquire a 29.9% stake in STO.  Further, Alibaba agreed to buy 49% of this brand new entity for RMB 4.7 Billion (US$686 Million)

If we do the math, when this transaction is completed, Alibaba will have paid US$686 Million for a 14.65% minority stake (29.9% x 49%) in STO which is currently worth $711 Million today.....not too bad, except that they've also allegedly "invested" $730 million in the loan (terms undisclosed) to Mr. Chen.  Moreover, if we examine the chart above, we note that the value of STO Express was roughly a third less than it is now just a few months ago (i.e. it was worth US$470 Million before the Alibaba investment was announced and Chinese shareholders assigned the "CPC Stamp of Approval Premium" to the company).      

Even if we can somehow get past the diversion of funds to a CPC Member, the odd structure of this deal and the misrepresentation and missing details in the press release, what makes this even worse is the probability that this is yet another weird, fake CPC business, shipping fentanyl and synthetic opioids around the globe, laundering money and somehow facilitating the never ending CPC dollar grab and financial asset purchases. 

I might also ask, if Alibaba management was truly intent on buying a 14% stake in a goofy, hot-mess of a fake company like this, why would they go through all of this intrigue and these odd structural mechanics?  Why not just call a broker and buy the shares on the exchange over the next three years?  Unless, perhaps, they are setting this up to record yet another series of step acquisition "valuation gains" like they did with Alibaba Pictures, Alibaba Health, Wasu Media, Cainiao, etc. etc...to continue to goose the bottom line with fake asset valuation income...

Gotta keep the enthusiasm and the Ponzi going!

4.) Share Based Compenstion

Even though they are cooking the books, and fully understand that the business is no longer profitable/viable as currently constituted at this scale, they continue to award massive Share-Based Compensation (kickbacks to party members).  US$1.036 Billion this quarter.  Roughly 1/3rd of "fake" Net income.

Incredible.

5.) Ant Financial

Here's the sole note regarding the Ant Financial Royalty fees and Service Arrangement from page 12 of the press release:

"Royalty fees and software technology service fees under our profit sharing arrangement with Ant Financial amounted to RMB1,627 million (US$237 million) in the quarter ended June 30, 2019, compared to RMB910 million in the same quarter of 2018." 

Yes indeed.  That's all there is.  I'm just going to cut and past a modified note I had from a prior post since the disclosure situation hasn't changed, I particularly liked my wording when I wrote this.  Perhaps you may not have read it or remembered its relevancy. 

"I think the Ant Financial reporting and relationship is great!  A gigantic monopoly, with a self described market value of $150 Billion has finally made a little bit of money in a quarter!...after years of apparently undercharging its 1 billion+ customers.  Even though Alipay/Ant is joined at the hip with Alibaba (and US Shareholders by default) there has never been any meaningful, verifiable financial information disclosed for this beast.  

If Ant actually charged a meaningful arms length "escrow service fee" (e.g. 1% of US$ 700 Billion = US$ 7 Billion/yr.)  on Alibaba transactions it would render the business model unsustainable immediately.

Could it be that these escrow payment schemes are simply the tools of "earnings management" and indeed a "state secret" as the CPC would have us believe, or is it more likely that this business is, more probably, yet another cesspool of CPC money, stolen from Chinese citizens soon to be used to facilitate the destruction of US Dollar hegemony?"  


6.) The Hong Kong secondary listing wasn't mentioned.  

Alibaba Management had accomplished the 8:1 share split as described in the filings, but there was no mention of a time table or plans to list the stock in Hong Kong during the investor call.  I guess we are to assume that everything is just fine and dandy and on schedule....full speed ahead.  What could possibly go wrong??






























Summary:

I think Mark Baum (Steve Carell) said it best.....Alibaba is "dog shit wrapped in cat shit...."



Friday, June 28, 2019

How an Ineffective Bill becomes an Ineffective Law...

As you might suspect, one of my favorite leading indicators for something about to go "off the rails" is a sudden rush of ill-conceived, ineffective legislation put forward by our lawmakers who are told by their constituents, lobbyists, staff and advisers that they "MUST to do something" ....even though they have only a peripheral, shallow understanding of the issues at hand.  Thus we end up with proposals like we've seen over the last few weeks.

As always, I know you are pressed for time, so feel free to simply read the "RED" highlighted text for the bottom line analysis.

As of this writing, we've' received, from various lawmaker camps, not one (1), not two (2) but three (3) shallow, off-center, attempts at legislative fixes that will accomplish very little, other than to take everyone's eye off the real issues at hand regarding CPC sponsored fraud in US Markets.  Whenever lawmakers rush to get special interest sponsored, bipartisan legislation on the floor, you can bet that something's fishy.

They are (Links below):

1.) Marco Rubio's Bill, the EQUITABLE ACT; or Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (Marco's missing the "U" but you get the idea)
https://www.rubio.senate.gov/public/_cache/files/c2630968-1e66-44d4-bebf-458a86188e7b/2A963878FD61C08209B01D9DA41D1FDB.equitable-act-legislative-text.pdf

   
2.) Carolyn Maloney (NY), came up with HR 2513, the ‘‘Corporate Transparency Act of 2019"
https://www.congress.gov/116/bills/hr2513/BILLS-116hr2513ih.pdf


3.) Mark Warner (VA) sponsored a Bill entitled, get ready for it.....the ILLICIT CASH ACT:
Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act.
https://www.warner.senate.gov/public/index.cfm/2019/6/warner-cotton-jones-rounds-unveil-draft-legislation

No need to read them in their entirety unless you are a glutton for punishment.  I've listed the bullet points for each below:

1.) The EQUITABLE ACT:

  1. Amends the Sarbanes-Oxley Act to require the (PCAOB) Public Company Accounting Oversight Board to maintain a list of certain foreign issuers. 
  2. The "list" will name all entities which are required to file an "audit report" where the report is NOT able to be inspected/verified because of actions by a foreign government/body.  
  3. The "list" will identify the public accounting firm responsible for the audit/certification and their country/jurisdiction. 
  4. The PCAOB will prepare/update the list "at least annually".
  5. For the "list", each foreign issuer will be required to disclose to the PCAOB the "percentage of shares" beneficially owned by a "government entity".    
  6. For the "list", each foreign issuer would be required to disclose whether the "government entity" interest considered a "controlling interest".
  7. For the "list", the name of any official of the Chinese Communist Party who is a member of the board of directors of the issuer or related entity.
  8. The SEC will issue regulations within nine (9) months of enactment and will be in force on that date.  
  9. Will establish Broker/Dealer disclosure rules which notify the purchaser of the foreign issuer's securities that it has not issued an acceptable audit report.
  10. New issues which don't meet the EQUITABLE "list" requirements will not be allowed to list on exchanges.
  11. Existing issues currently trading on applicable exchanges will have until 2025 to comply.
  12. Applicable Exchanges will have 90 days to respond and will be required to implement SEC required regulations within one year of enactment. 

Isn't that AWESOME!  After the EQUITABLE ACT passes, we are going to get a list of potential accounting problems!  After ten (10) years of letting this junk (600+ listings, US$2.3 Trillion in Market Cap as of last Spring, with roughly 200 listings already having "gone dark") on our Exchanges, with virtually no disclosure requirements or enforce-ability, we are waiting five more years to do something about it.  From my perspective, this proposal is like asking a bank robber to "sign a guest book" right after he pistol-whips the teller, shoots the guard and runs off with the money, so we can make a fainthearted effort to extradite him sometime in 2025.    

2.) HR 2513, the ‘‘Corporate Transparency Act of 2019" 

  1. HR 2513 requires that any Corporation or LLC formed in the United States be required to report all beneficial owners identifying information to FINCEN (Financial Crimes Enforcement Network of the Department of the Treasury.)
  2. FINCEN will be required to establish a process to update the information on the "list" at least annually. 
  3. The Department of the Treasury will develop an enforcement process for beneficial owners who fail to report.  
  4. The Department of the Treasury will be responsible for enforcement for willful violation with Civil penalties of up to $10,000 as well as Criminal Penalties up to 3 years in prison.
  5. The penalties will not apply to minors, agents, nominees, intermediaries, custodians, lawyers, or anyone acting on behalf of another person or beneficial owner.
  6. The penalties will also not apply to: Broker/Dealers, Banks, Credit Unions, Exchanges, Advisers, Insurance Companies, Investment Companies, Accounting Firm, Charities, etc. as defined.  (pg. 20-22)
  7. Maximum, initial amount of funding for the program is $40 million for the DOJ & FinCen.
  8. Not later than 5 years after the date of enactment of this Act, the Comptroller General of the United States shall conduct a study and submit to the Congress a report assessing the effectiveness of incorporation practices implemented under this Act and the amendments.
HR 2513 is even MORE AWESOME!  Now we have a second list of misrepresented, bad information, which only applies to US beneficial owners (Caymans/BVI/Cyprus/HK/etc. Corporations and LLCs are exempted) with no penalties whatsoever assigned to the folks (Bankers/Brokers/Dealers/Attorneys/Agents, etc.) who are supposed to be responsible for complying with anti-money laundering "know your customer" laws when they are setting up these corporations/entities.  The relatively tiny penalties only apply to the "beneficial owners" (who are probably safe in China).  Our lawmakers apparently intend is to put these lists in place and follow up in five (5) years to see how we did.  Unfortunately, in five (5) years, the Western Financial System will be nothing but a fond memory unless we actually DO SOMETHING to prevent its destruction.  To carry on with my "bank robber" analogy above, HR 2513, the ‘‘Corporate Transparency Act of 2019"  would effectively legalize the role of the "getaway car driver" and allow him/her to keep his/her cut from the heist. 


3.) Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act

  1. Establish federal reporting requirements mandating that all beneficial ownership information be maintained in a comprehensive federal database, accessible by federal and local law enforcement.
  2. Help recruit and retain top talent at the Financial Crimes Enforcement Network (FinCEN) by putting employees on a pay scale comparable to that of federal financial regulators.
  3. Create a hub of financial expert investigators at FinCEN to investigate potential AML-CFT activity in collaboration with federal government agencies.
  4. Create a team of FinCEN technology experts to further the development of new and essential technologies that can assist financial institutions and the federal government in their efforts to combat money laundering.
  5. Facilitate communications between the Treasury and financial institutions by establishing a Treasury financial institution liaison to seek and receive comments regarding AML-CFT rules, regulations, and examinations.
  6. Require the Department of Justice (DOJ) to provide the Treasury Department with metrics on the usefulness of AML-CFT data from financial institutions for law enforcement purposes, as well as data on the past and current trends identified by DOJ in the AML-CFT landscape.
  7. Require law enforcement to coordinate with financial regulators to provide periodic feedback to financial institutions on their suspicious activity reports.
  8. Prioritize the protection of personally identifying information while establishing a clear path for financial institutions to share AML-CFT information for the purposes of identifying suspicious activity.
  9. Prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce records in a manner that establishes their authenticity and reliability for evidentiary purposes, and compelling them to comply with subpoenas. This legislation would also authorize contempt sanctions for banks that fail to comply.
  10. Ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of “coins and currency” to include digital currency.

Since the "ILLICIT CASH ACT" is the most recent of these "panic bills" to be promoted, we see a lot duplication of effort as well as similar naivety as to what's really going on.  Our government will be hiring more people and expanding "list development" at a break-neck pace.  We further note an increase in the use of buzzwords as well as some tough sounding language regarding "petty cash" sanctions applied to foreign banks as a cost of doing business if they fail to comply (US Banks are apparently Exempted?  I wasn't clear on this.)  In any case, the "fine the banks" for criminal activity doesn't seem to be working very well here in America, so I'm not sure why we might think that a fine or two might put the fear of God in VTB,  Caymans or Chinese Banks.


If we want to develop a "list" of potential "perps" quickly, all we need to do is pass legislation that puts a mandatory 5 year minimum Federal Prison sentence on "helpers" unless they report the suspect and enter required contact info on a FinCen website within 60 days of enactment of the law.  After all, it's not like the "helpers" don't know who the "perps" are.   

We'd have our list of targets immediately.  Once they are on the list, the Treasury could freeze their assets and bank accounts until they figure out what's going on.  (FYI - The IRS already knows exactly how to do this.)  As far as a list of foreign banks chronically laundering money, the Treasury has plenty of firepower to shut these beasts down already. (Section 311 of the Patriot Act) No need to, yet again, reinvent the wheel.  For emphasis, we have plenty of "laws" and "lists" all we need to do is use them.

The video below does a nice job of describing the sophistication of this legislative process.  I remember watching it with my kids and I've got fond memories of it.....if you've already seen School House Rock - I'm just a Bill feel free to skip ahead.



For those of you who have never been involved in the legislative process, the slightly embellished, directionally accurate portrayal of the types of preliminary meetings, which are a mainstay of the our political landscape, as illustrated in the (BST) Dick Fuld Banker Speak Translation (tm)  dialogue below, should shed some light on how a "an ineffective, ill-conceived bill becomes an ineffective, ill-conceived law" in America today.


The Negotiation

The first thing that legislators do when trying to solve a perceived problem is to gather the best and brightest experts in the topics and respective fields to be addressed, as well as the stakeholders (and their lobbyists) and other interested parties (PACs) together in a secret location (usually a really nice place/island/resort provided gratis by the stakeholders) so they can gather their thoughts in solitude and forge the legislative metal of a profitable solution for every stakeholder involved.

The following is a hypothetical meeting that may or may not have taken place sometime over the last few months, at a really nice place, sponsored by an imaginary group named something like the Americans for Equitable Off Shore Banking PAC.

Mr. Rubio: "Well...I''m really glad that you all could make it today.  First, I'd like to thank the various industry groups and PACs who've graciously hosted us and provided heartfelt support for our agenda today.  Now, since we're pressed for time, we've got a round of golf, a pig roast and a limbo contest later this afternoon, I'd like to get right to it.  So...what can we do to prevent all of the fraudulent Chinese stock IPOs going forward and how can we get these companies to comply with US Accounting and Exchange Rules at some point in the not too distant future?"

Ms. Maloney:  "I'd like to add that we should also try to get to the bottom of these millions of freshly set up, anonymous shell companies and eventually figure out who owns these entities and why...ummm....unless it's anyone in this room of course....(chuckle...chuckle)"

Mr. Warner: "Absolutely agreed....I'd also like to chime in and state emphatically that it's really important that we create all sorts of new lists and buzzwords and nebulous cross-agency and public/private partnerships so we can convince American voters that we are totally on top of this.....so who wants to start?" 

Citi Banker: "Well, I'll go first if I may, just thinking outside the box here....don't hold me to this.... but what about criminal penalties, personal liability and mandatory sentences for any banker, lawyer, accountant or anyone acting as an agent assisting foreign interests in setting up shell corporations or bank accounts without proper disclosure i.e.) FARA, FBAR and AML reporting?....that might do the trick?"

JP Morgan Banker:  "Hey, along those same lines, why don't we permanently bar senior managers from the industry as well as include personal liability and jail time if this stuff goes on during their watch....you know, subject them to penalties under the "known or should have known" theory.....if your staff is participating in money laundering you just look three levels up the org chart and the guys are toast....no questions asked.  I'm sure Jamie has some dead wood he can throw under the bus....done deal!"

Wells Fargo Banker:  "I agree...this is some serious shit.  It's not like we're charging a bunch of our sucker customers for insurance products they never agreed to buy....this is actually big.  I'm thinking that if these foreign listings go bust on our watch, for any reason, that we should be fined an automatic 5x the highest market cap achieved by these dogs as restitution to the shareholders.  Clawbacks....yeah.. that's the ticket!  That should teach us a lesson.  It would cost us tens of billions, but we deserve it for marketing this junk to widows, orphans and pensioners. 

Goldman Banker: "That's all well and good, but until you start giving our CEO's jail time this just won't stop.  I'm thinking that we extend SARBOX to our CEO's and require them, under penalty of personal criminal liability to sign off on any Foreign IPO on US Exchanges.  Automatic jail time if they go bust....they really should know better.  If we put that law in there, we probably won't be doing too many of them anymore....so it won't be that much work."

Bank of America Banker: "You know, with all of these foreign banks and entities laundering money, I was thinking.....now hear me out....if we suspect there's a problem, why don't we just shut them down and freeze their US assets.....I mean....we all have lists of these bad actors already.  Why don't we just stop the transactions until we're satisfied that the transactions are for legitimate business purposes? ....am I wrong?"    

NYSE Representative:  "I know this sounds crazy, but what if we just make the filing and reporting requirements for foreign companies that same as US Domestic Companies?  Instead of filing those goofy 20-F's and 6-K's whenever they want, why don't we make them file 10-K's & 10-Q's just like US Listings?  ...and further.....since they all seem to just go dark and run off with the money.....why don't we require that they post a bond payable (or Cash) from a US Bank of a material amount, just in case these things go sideways.....no bond?....no IPO?  That should protect shareholders!....what do you think?"

Mr. Rubio:  "Holy Cats guys.....I love the enthusiasm but there's no need to dive on this grenade.  We are all on the same team here.....you guys are systemically important to America....we need you!  ....and we, as lawmakers need your support!  Besides, we really don't want to actually solve this problem....that would totally disrupt your revenue streams and we can't have that.  All we need to do is convince the dufus American voters that we are trying to solve the problem....it's not our fault....it's the Communists fault!...yeah....that's the ticket.....we can sell that.....no need to get all serious.....let's all take a chill pill."

Ms. Maloney: "Totally agree.....I was actually going to write in some legal protections for you guys in my bill....again, the goal here is to make everyone think that we are doing something about this. Remember, we're a team.....we've got your back."

Mr. Warner: "Ditto for me guys....all we need you to do is to complete some paperwork and maintain some lists.  We'll handle the rest.  The final drafts of our bills will be ready for your review next week.  We'll get them to you and await your input.  Don't worry....when this blows up the bail outs are ready to go!  Steady as she goes."

PAC Representative: "I think I speak for all of your constituents when I say that you folks are doing a wonderful service for America.  So, just to be clear, we should send the checks to the usual offshore accounts?  Do you need any checks made payable to 'cash'?.... I know you folks have expenses...."

Rubio, Maloney & Warner (roughly in unison): "Whatever you want to do is fine with us....again, we're on the same team.  God Bless America!"

So steady as she goes, yet more silly bills and legislation being presented that not only prevent a problem from being addressed, but provide rock solid legal protections for those "helpers" at the trough, who are intimately involved in and profit handsomely from its perpetuation.

Keep in mind this framework applies to just about all of our legislation....healthcare, defense spending, education, banking, etc.  All of the legislation is designed by the "helpers" in exchange for campaign contributions and support.  Could you imagine if Corporate America (openly) operated this way?  What if CEO's and Purchase managers (openly) accepted "contributions" from domestic and foreign operatives in order to get them to play ball?

I'm thinking that it's just about time to rename our country from America to Americonflict-of-interest.

Once again, we can indeed confirm that America has, by far, the best government money can buy....


Some Data....

So why is this coordinated shortfall of proper legislative and corrective/enforcement action so important and potentially destructive?  Let's take a look at some data that my readers and I have been discussing.  Again, if this were just "petty theft", a few million dollars here or there, like it has been for decades, I wouldn't bother taking the time to write about it.  Unfortunately, we've reached the tipping point where fraud, specifically, perpetrated by the Chinese Communist Party has become systemically relevant, and as I've described in prior posts, will be putting the Western Financial System at risk at some point.

First, let's discuss some private, subscription only data out there which provides asset ownership information.  There are several good information platforms out there. Since this was sent to me by a reader, I won't disclose the trade name of the information provider, but suffice it to say that it's a name that anyone in the business would recognize.

Methodology:  The goal was to run a query to locate and describe, via "tree functions", the association of various global businesses with SAFE (China's State Administration of Foreign Exchange) as an investor.  i.e.) SAFE invests in Company A, which owns Company B, which owns Company C, etc.  Through these daisy chains we can make an educated guess as to which "end businesses" might be substantially influenced by SAFE and the CPC.

The following table illustrates the type of data that came up in the initial SAFE query.  Through the "tree" relationships we determine that the Company (Colum 1), has an immediate Parent Company (Colum 2) and an Ultimate Corporate Parent (Colum 3).  The query is intended to show the relationship between individual Companies which have an Ultimate Parent as a US listed Company or a Caymans domicile.

.........abbreviated due to space limitations....


Query Results:

  • The results of this Query described 2,869 SAFE Investments scattered around the globe.  Of that sample, there were 1,146 distinct records which represent SAFE Investments in US and US related (Off-shore/Caymans or off-shore subsidiaries) businesses where the ultimate corporate parent is a US entity.  
  • Of these 1,146 businesses, the "Ultimate Corporate Parent" of 945 (82%) of them were distributed among just three entities.  They are, in order, The AES Corporation - NYSE-AES (376 investments) a large energy company.  Blackstone - NYSE-BX (315 investments) a large Real Estate/Alternative Asset Management Company and finally Alibaba (BABA) (254 investments).            
  • Honorable mentions go to Cheniere Energy, Inc. AMEX:LNG (43 investments) and
    AirBnB (19 investments)
  • The winner of the goofiest SAFE investment award is: Alpine Ridge Apartments, LLC (located in Flagstaff, AZ), which is owned by Bascom Arizona Ventures, LLC (located in Los Angeles, CA) whose sister companies are Oaktree Capital Group Holdings GP, LLC, and China Investment Corporation (Beijing, CN) whose ultimate corporate parent is Oaktree Capital Group Holdings, L.P. (Los Angeles, CA).  I guess my question is:  Why would the Chinese government want to own an off campus college apartment complex in Flagstaff?  It's also interesting that their website Alpineridge.com is down....perhaps they are fully rented and don't need a website? 

Bloomberg info is not-surprisingly sparse as well....

https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=226838379

  • Further, when we more closely examine the 2,869 global SAFE/CPC investments we see that in 263 of them, that VTB Bank (our favorite sanctioned Russian bank) (LSE:VTBR) (See Treasury Sanction list)appears as the ultimate parent.  I might ask, if VTB is involved in all of these investments, and they are directly funding CPC activity overseas, is there a material difference in the outcome if VTB funds CPC investment in the Sudan, Iran or Iraq, etc. while the CPC uses "clean" funds and ownership structures to invest in Western Assets?  Shouldn't this be considered all one big corrupt cesspool?  If VTB is funding everything but Western asset acquisitions.....how can you separate it?  
  • Even though VTB is prohibited from doing business in the US we see one really odd listing on the SAFE query, must be a mistake....why in the world would SAFE/CPC investment find its way to a dumpy, little, nondescript, management company located at 713 Yonkers Avenue, Yonkers, NY?  According to Bloomberg, the immediate corporate parent "Gals Garant" is a wholly owned subsidiary of Gals-Invest OOO, 35 Str. 4, Ul.tatarskaya B. Moscow, 115184 Russia.  So now we have the CPC/SAFE in partnership with a sanctioned Russian Bank and a Russian General contractor "investing" in the enterprise below.  Doesn't anyone find this strange?


  • Again, staying with the theme of "what in the world is going on here?"  When we examine the SAFE investments where Alibaba (BABA) or Ant Financial is the Ultimate Parent, in conjunction with the 20-F's, at no time in the disclosures within the filings, does Alibaba management mention that they are the recipient of SAFE funding.  You'd think that if Alibaba would actually be operating as a Chinese SOE that the extent of state financial involvement should be prominently disclosed.
  • Moreover, Blackstone's 10-K was silent as to any mention of SAFE, Chinese investments, amounts or carrying values, preferring to, presumably bury the amounts in "Asia" funds/Investments.  From my point of view, don't you think it would be relevant if a significant amount of Blackstone's business was funded and supported by the Chinese Communist Party?  I'd suggest that the specifics, amounts and details would/should require disclosure and have a bearing on investors risk perception.
   
















Blackstone (BX) Most recent 10-K
https://www.sec.gov/Archives/edgar/data/1393818/000119312519061011/d663205d10k.htm

  • I might also ask the same questions about AES.  Why is their most recent 10-K silent about any involvement whatsoever in CPC/SAFE partnerships and investments?  Again, I would think that this be a material disclosure that should be included in the financial statements.  

















The AES Corporation (AES) most recent 10-K
https://www.sec.gov/ix?doc=/Archives/edgar/data/874761/000087476119000012/a2018form10-k.htm

As an aside, per the TSLA 10-K, our good friend Elan Musk also has failed to disclose anything regarding the cost of the Shanghai Gigafactory that the CPC is building for TESLA, other than on page 46:

"We expect much of the investment in Gigafactory Shanghai to be provided through local debt financing, supported by limited direct capital expenditures by us. "

So the Chinese government is "buying" Tesla, America's high-tech "Crown Jewel", a Gigafactory, and the financial statements and 10-K are silent on the terms.  I'm sure CFIUS and the SEC are fine with all of this.  "Funding Secured!"

https://www.sec.gov/Archives/edgar/data/1318605/000156459019003165/tsla-10k_20181231.htm



More Data....

A very bright and talented friend of mine and avid follower of my work @Abresler recently took some time to parse through the American Enterprise Institute's China Investment database and came up with yet another interesting data-set illustrating CPC Capital shenanigans.

Of course, very little of it matched the information filed by SAFE in the data described above, but lets take a look at it nevertheless.

Methodology:

Alex dumped the CSV data out onto a website which allows us to parse and sort it with just about any software we feel comfortable with.  Since I'm not a programmer and the number of records was manageable, I used Excel.  Here's the data.

https://gist.githubusercontent.com/abresler/0f82312cd43021887d2998c3fe99fabd/raw/23fadd28e8c23ecc6521fa9b80f1d698fa1f0b2e/aei_fdi.csv

 And a sample of the abbreviated header data for US Investments....




The AEI data is taken from various sources, primarily from press releases I would imagine.  The data includes investments made from 2005 through the present and would probably include deals that were never consummated (i.e. CFIUS stopped the MoneyGram Acquisition)

Query Results:
  • According to the data, since 2005, the CPC has made/announced 3,302 global investments for a total value of $2.322 Trillion. 304 of them (9% in number) have been made in the United States, for a total of $254 Billion (11% in value). 
  • Investments made by Alibaba totaled ten (10) as compared to the 254 SAFE investments made, where Alibaba was the ultimate corporate parent, as described above.
  • According to the data, there were two (2) Investments in AES, rather than the 376 investments as listed in the SAFE data.
  • According to the data, there were twenty-seven (27) Blackstone Investments listed, rather then 315 investments listed in the SAFE data.
  • Finally, there are only two VTB Bank relationships reported, compared to the 254 separate VTB/China relationships reported as part of the SAFE data above.
I guess the question I'd have to ask is "Why are the CPC press releases so different from the detail provided by an investor data service?  Why do they fail to disclose presumably sizable financial relationships with Alibaba, AES, Blackstone and VTB Bank?" 
   

More Data from Alex.....

There's been a lot written about how Chinese Investors have taken over certain real estate markets around the world, Manhattan, San Francisco, Vancouver, Sydney, Hong Kong, etc. all come to mind.

Alex has been pulling data on NYC real estate transactions for years and here's what he's come up with.

https://asbcllc.com/asbc_projects/project_accumulator/analysis/historic_sales/annual_sponsor_sales_by_classification/index.html



















Methodology:

The above chart illustrates the ratio of "Asian" and "Shell-Co" purchases of Manhattan real estate by year since 2003.  When we parse the above data some things jump out at us:

  • Beginning after the GFC, purchases by "Anglo" buyers decreased dramatically when compared to the Asian and Shell-Co purchases.  Asian and Shell-Co purchases increased from roughly half of the purchases in 2010 to 3/4ths of the purchases by 2016.
  • Transactions peaked in 2016 and are on the decline. 
Since I always like to personalize a story to illustrate what's going on here, I'll take a minute to talk about one (1) actual transaction.  Like many of these transactions, this particular transaction absolutely jumped out of the data at me.  I'll keep the actual names and addresses a secret here, since I wouldn't want to breach anyone's privacy (although everything I've posted is either public record or provided by the buyers themselves on-line).  I'll  again stress, that nobody here has done anything illegal per se.  Just like the last financial crisis, everything that's happened in this particular transaction is a perfectly legal, clever microcosm/misuse of the system specifically designed (by our lawmakers and "helpers") and intended to produce a potentially catastrophic series of horrific macro results.  This transaction, as well as tens of thousands of others, similar in structure, scattered throughout Western real estate markets, are likely one of the many CPC vehicles that will cause the eventual destruction of the Western Financial System and the resulting restructuring of global reserve currency mechanics. 

Let's meet our contestants, shall we?

First, we have a wonderful young man I'll refer to as "Mr. Wang"....



























In 2012 Mr. Wang was working as an Intern at Tencent in Guangzhou, China.  There is a gap in his resume until 2014 (presumably for some CPC training) until he showed up in New York as an Intern working for Google and as a Teaching Assistant at Columbia, while he worked on his Masters Degree there.  In 2015 he took a job as a "data engineer" at Facebook/Instagram.  Per his LinkedIn account he was/is:

"Tech Lead on Instagram Search. Focused on indexing/retrieval/candidate ranking.  Played some fun projects in Instagram, including Following Hashtags and IGTV."

He sounds like a really nice young man.  Presumably, while he was at Columbia, he met a very nice young lady (below) I'll refer to as Ms. Chung.



Ms. Chung had a similar career path as Mr. Wang in that she was working in China as an Intern until 2013 when she somehow made her way to NYC, was accepted by Columbia, got her Master of Arts degree and in 2016 landed a job as a data scientist at the NYC office of Feedzai, a Portuguese company specializing, oddly enough, in using "big data" to assist banks and financial institutions in detecting financial fraud.   (Bloomberg - Feedzai)

Anyway, to continue the story, Mr. Wang and Ms. Chung must have totally hit it off because just a few weeks ago they teamed up to buy a $1,395,000 condo located at 150 Rivington, NYC....this place is the bomb.  Even though they've only been in the workforce (and America) for a couple of years, they had enough money saved up (even with those gigantic tuition bills) to buy this awesome pad.  They must be doing really well.











Oooppsss.....perhaps I misspoke.  I just took a peak at the mortgage filing for these two and it looks like they couldn't quite afford the place without some additional financing.  As luck would have it, since they were probably unable to afford such a great place after only a few years in the workforce, one of our favorite banks, Wells Fargo stepped in and again, even though these two wonderful folks had only had full time jobs in America for a few years, and are still Chinese citizens, Wells Fargo was generous enough to approve Mr. Wang and Ms. Chung for a $1,107,200 Jumbo Mortgage.  Never let it be said that, when significant fees are involved, that Wells Fargo couldn't step up to the plate and get a transaction done, especially when they can package up the mortgage (and others like it) in a wonderful MBS tranche, slap a AAA rating on it and and sell it to pension/mutual funds, no matter what the metrics and underwriting might indicate. 

So to sum up Mr. Wang and Ms. Chung's activities over the last few years, they are either:

1.) Two wonderful, young Chinese people experiencing the American dream, landing great jobs and reaching for the stars as they enjoy their freedom, the fruits of their efforts and a taste of democracy in the Big Apple...."Everybody Have Fun Tonight!".  Hopefully, they will live happily ever after!



....or:

2.) They are actually highly trained, loyal and motivated CPC stealth operatives, who were strategically placed in the West to fulfill a mission, like hundreds of thousands, or perhaps millions of their colleagues, whose assignment is to acquire US dollar assets, waiting patiently, under-cover, for a command from the Politburo to sell the assets, "come back home" and bring/transfer their dollars/euros/pounds/yen back to the CPC with them.


The Macro Impact of Battalions of Wangs and Chungs....and Some Friendly Bankers

So now that we've confirmed that Wells Fargo is probably one of the more aggressive, accomodative lenders out there, based solely on the above Jumbo Loan to two wonderful, young, energetic, (alleged) CPC members, let's take a look at the mortgage transaction volume they do in NYC.  According to the New York City Office of the Register, through their 26 new York metro branches, Wells Fargo has filed 13,036 Mortgage transactions. (501 transactions per branch in the last year).  Lots of work indeed!

 
Now lets compare Wells Fargo's workload to the Bank of China's effort.  We see (running the same query) that the Bank of China, through their three little teensey-weensey generally un-staffed offices in Midtown, Flushing and Chinatown (The Chinatown Office doesn't even have a sign on the street) have somehow managed to file 1,624 Mortgage transactions in the last year (541 per branch) .  The CPC is clearly mastering the concepts of "asset light" and "doing more with less" 















A Few of the Big Bank of China Deals in just the Last Year:

So let's see what the Bank of China has been financing....it looks like they are doing a lot more than just handling single family residential.

The Alexander - Queens NY - $252,543,607 Mortgage - 12/12/2018



565 Broome Street - $196,374,473 - 6/7/2019




640 & 650 W 5th & 6 W 52nd - $500,000,000 - 6/7/2019  (Note: in this deal they threw in the 2 story Sara Jessica Parker shoe store over on West 52nd...probably needed it to round up the the half billion collateral value ......nice!)



339 W 5th & 474 7th - $45,000,000


200 W 72nd Street - $37,295,197 - 8/20/2018

























195 W 66th Street, NY - $140,560,000 - 4/12/2019
























200 5th Ave, NY - $600,000,000 - 11/30/2018



So it looks like The Bank of China, out of their three little tiny offices, Bryant Park, Flushing and Chinatown have written $1.771 Billion in mortgages in the last few months.  As I had mentioned, the Chinatown office doesn't even have a street sign...it's a couple of desks, some phones and a SWIFT Account: SWIFT:BKCHUS33CTX
























By way of comparison, during the same period, out of the 13,000+ mortgage records filed, Wells Fargo, one of the more aggressive "we can get you financed" operations in NYC, only did a handful of deals over $10 Million.  Almost all were residential, single unit mortgages.  Wells must have a much different business model....ya think?

For those of you who have never been to a US branch of the Bank of China (or for that matter, ICBC, China Construction Bank or the Agricultural Bank of China, it doesn't matter, they are all the same) as I mentioned, it's a couple of desks, some computers and a SWIFT account.  There is (usually) no FDIC insurance, so if your deposits are somehow "lost" they just tell you...."ahhh....poof!...it's gone!....next in line please!"  For your reference and amusement and to familiarize you with CPC banking, I've posted below, what I'm told is some behind the scenes footage of the Bank of China, NYC Chinatown branch, operation:




So What Do We Really Have Here?

Let's recap:

1.) We have three ineffective, ill-conceived Bills (The EQUITABLE Act, The Corporate Transparency Act and the ILLICIT CASH Act) sponsored by special interests and presented to Congress which will not only do nothing to protect America from the destruction caused by anonymous capital flow, but will actually protect the "helpers" from any sort of legal liability for their borderline treasonous acts.

2.) We've established that the CPC/SAFE is intimately involved in establishing corporate beach-heads through Financial Asset Acquisitions in the United States.  Three public companies, Alibaba (BABA), AES (AES) and Blackstone (BX) are apparently, intimately involved in financing these businesses, yet, none of this is disclosed in their filings.  I'd think that some subpoenas or at least a few SEC interrogatories might be in order here.

3.) VTB, a Russian SOE Bank, embroiled and implicated in the Michael Cohen "Russian Project" and sanctioned by the US Treasury continues to participate in and indirectly finance a significant number (254 documented) of SAFE investments/transactions.  Again, you'd think the Treasury might be interested in this. 

4.) We've identified and discussed the tip of the iceberg for CPC global real estate investment focusing on real estate purchases by Chinese nationals and Shell-Cos in Manhattan.  The CPC has adopted a similar game plan in the Bay Area, Vancouver, Toronto, Sydney, Melbourne, etc. 

5.)  We've discussed the three teeny-tiny Bank of China NYC Branches, which all, for some reason need individual SWIFT Access, so they can transfer US Dollars anywhere on the planet at a moments' notice.  These itsy-bitsy, stealth branches, with a handful of employees, have somehow placed more NYC area mortgages ($1.7 Billion) in the last few months than Wells Fargo has done through their 26, heavily staffed, full service branches over the same period.  Again, another China Miracle!   

6.) We've also discussed how the CPC/Chinese government is "buying" Tesla, our US high-tech-Crown-Jewel, a Gigafactory, and the financial statements and 10-K are silent on the terms.  You'd think investors (and CFIUS) would want some answers.

7.) One more tidbit I thought I'd mention....today CALPERS, America's largest Pension fund is now being directed by Ben Meng, a really nice guy, but presumably a Chinese Communist Party member (Again, anyone who is even moderately successful on the mainland is a party member by default....it's a prerequisite for employment).  So Ben will have final say on the deployment of CALPERS $358 Billion.  The 2018 Asset Allocation of 26% foreign stocks and 24% US Stocks will now be managed by Ben, with an already stated directive of moving into more private equity and alternative strategies.....let's hope he's not working with SAFE and VTB as any of his "alternatives".  Even though Ben had worked at SAFE for three years as deputy Chief Investment Officer, like most US politicians, I'm sure that in his new role he will absolutely set aside any conflict of interest he might have with either SAFE or VTB and not let these relationships, or the possibility of his family members being held at a Xinjiang re-education camp, have any impact on his decision making.

7.) Ok....one more tidbit...sorry,..I hate to rattle on.....just in case you haven't read this anywhere.  Mitch McConnell's daughter-in-law (Elaine's daughter) is Angela Chao, an executive director at the Bank of China.  Again, I'm sure there's no conflict there either.  The family holidays (Chinese New Year) must be a blast at the McConnell mansion.  I've been wrangling for an invitation for some Kentucky dim-sum for years with no success.  Anyway, this seems like yet another totally legit, above board, completely isolated, walled off relationship to me.  




It's totally normal for a handsome, worldly, Senate Majority Leader from Kentucky to have a communist party member (again by default) as a daughter in law....I can only guess that it must have been the twinkle in his eye and his cool Savoir-faire, Brad Pitt-like, sexy demeanor that first attracted Elaine, and the the entire Communist Party to his camp.  I must say, if I were a Chinese Communist woman, I'd certainly find Mitch absolutely adorable.


Ok....all kidding aside....

So why is all of this important?  Here's the bullet point version:

1.) In China, only CPC members have significant money.
2.) CPC members are zealots, dedicated to their cause, to the death if necessary. 
3.) There are 90 million party members. 
4.) If half of them, each, individually deploy $500,000 in Western "risk assets" that's $22.5 Trillion sitting in Real Estate, stocks, bonds, Shell-co passive entities or anything their little hearts desire.

SO....WHAT HAPPENS IF/WHEN THEY SELL?

Am I the only one who sees these incredible coincidences here?  Isn't it starting to become obvious, even to the most head-in-the-sand, pro China global trade advocates that something is amiss?  Isn't it odd that the world's "second biggest economy" won't allow its currency to be used anywhere but on the mainland?  Isn't it strange that every one of their financial statements and NBS releases have glaring, ludicrous, laughable misrepresentations in them?  Isn't it incredible that they've deployed indentured/slave labor for decades to make cheap, knock off sneakers, clothes, phones, electronics to the tune of a $25 Trillion (plus) cumulative trade/investment surplus and no economist or Central Banker has ever wondered why there's only $3 Trillion of FOREX on the PBOC balance sheet?  Nobody has thought to ask...."Hey, Xi....where's all the f&%$ing Western Money??!!!"

Nobody asks about how the Tibetans or the Uyghurs are doing?  American business, for decades, has accepted IP theft as a cost of doing business, so as not to disrupt the dream or even the remote possibility that "some day" China will actually open its' markets?  Lawmakers, business people and bankers, to protect their own self interests, have designed an incredible global system of anonymous "capitalist" liquidity which the CPC has mastered and is about to use to its permanent, irreversible advantage as the ultimate WFD (Weapon of Financial Destruction).  It's indeed ironic that we never found the WMD's that we were absolutely, positively sure were there in Iraq, yet we can't seem to see the WFD's that are lurking everywhere, in every nook and cranny of every banker's, lawyer's and accountant's office around America today.  It's always difficult to seek truth when you are paid not to look for it....

"When we hang the capitalists, they will sell us the rope...." (Lenin....Vladimir...not John)

My fear, as I've said, is that we are far too late to stop what's about to happen to us.  Frankly, I don't know where to start.  I'm hard pressed to believe that there are enough investigators, subpoenas, judges and courts to figure this mess out in time and keep this tsunami from resetting US Asset Values, the exchange rate of the US Dollar and consequently, its position as the dominant global reserve currency.

The CPC is (collectively) a group of tough, brilliant strategists playing the long game.  Conversely, our Western  leadership has long been mired in "transactional" mode for years.  We ask for, or even demand "this"....in hopes that we eventually might get "that".  As negotiations progress, it looks like it's going to work, we're optimistic.... then it doesn't....and we start over.  Our negotiators are always, perpetually, "90% there" on a deal.  After a decade of this failed, strategic futility, we are, unfortunately, still exactly where we are, have been, and will always be.  We're on a road to nowhere without a map.

Every day I become more convinced that our leadership doesn't see, nor will they ever see this coming.  I've had the Democratic Presidential debates running in the background as I had been typing this and, though the issues I've described herein are, by far, the greatest threat to Western Civilization, they don't appear to be on anyone's radar.  Our candidates for the "leader of the free world" seem to be much more enamored with criticizing each other and "appealing to a demographic" than they are with saving our country from the CPC.  They/we are lambs to the slaughter.

Decades from now our great grand children, before being tucked into bed at their re-education camps, will be reading text books describing exactly how the great American dream, the beautiful experiment of democracy, government by the people, for the people, etc. suddenly imploded, falling prey to the ultimate financial shell game of Chinese Communism, solely as a result of Western leaderships' greed, avarice, incompetence and lack of  vision.  Unfortunately, if our leadership doesn't take decisive, bold action soon, rather than having "meetings", fundraisers, campaigns and team building sessions designed to support special interests, get elected and preserve the status quo....those textbooks will be written in Mandarin.


       

Other Reading:

EQUITABLE ACT
https://www.rubio.senate.gov/public/_cache/files/c2630968-1e66-44d4-bebf-458a86188e7b/2A963878FD61C08209B01D9DA41D1FDB.equitable-act-legislative-text.pdf

Warner AML Bill
Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act
https://www.warner.senate.gov/public/index.cfm/2019/6/warner-cotton-jones-rounds-unveil-draft-legislation

ILLICIT CASH ACT
https://www.scribd.com/document/412943793/ILLICIT-CASH-Act-Summary-and-Section-By-Section-060719

Washington Post - imaginary conflict between Washington and Wall Street
https://www.washingtonpost.com/opinions/2019/06/06/washington-presses-wall-street-solve-its-china-problem/?utm_term=.c2231ad22843

How a Bill becomes a law....
https://www.youtube.com/watch?v=FBpdxEMelR0


VTB Bank, Russian State Owned Bank, Treasury Sanctions, etc.
https://www.treasury.gov/press-center/press-releases/pages/jl2590.aspx

VTB to Finance Trump Tower Moscow
https://www.newsweek.com/bank-allegedly-planned-finance-trump-tower-moscow-purchased-leading-russian-1355045

Bank Fines since the GFC
https://www.marketwatch.com/story/banks-have-been-fined-a-staggering-243-billion-since-the-financial-crisis-2018-02-20

CHINA INVESTMENT DATA - @AEI
https://gist.githubusercontent.com/abresler/60e955f205bc4b58ef40c56a47d5697b/raw/64a9a69e891ca3a6f1eac99c13a958410908c2a3/rhodium_dfi_data.csv


Technical Analysis of how non-FDIC insured banks work
Bank of China....behind the scenes depositor footage....
https://youtu.be/NmFo-LKHGY0
Long Version - 1:42
https://youtu.be/OtpwAg0KTeA

Alchemy/Carlyle - Bank of the Ozarks $100 million Financing - with one condo going for $25 Million.
https://therealdeal.com/2019/05/09/anonymous-buyer-picks-up-sponsor-unit-at-alchemys-ues-condo-for-26m/

CPC Flags as far as the eye can see in San Francisco
https://twitter.com/i/status/1144374314080202753