Markets/Econ
11 Hours With Sam Bankman-Fried: Inside the Bahamian Penthouse After FTX’s Fall
That still doesn’t explain why the money was gone. “Where did the $8 billion go?” I ask.
To answer, Bankman-Fried creates a new tab on the spreadsheet and starts typing. He lists Alameda and FTX’s biggest cash flows. One of the biggest expenses is paying a net $2.5 billion to Binance, a rival, to buy out its investment in FTX. He also lists $250 million for real estate, $1.5 billion for expenses, $4 billion for venture capital investments, $1.5 billion for acquisitions and $1 billion labeled “fuckups.” Even accounting for both firms’ profits, and all the venture capital money raised by FTX, it tallies to negative $6.5 billion.
FTX’s Collapse Was a Crime, Not an Accident
The scale and complexity of Bankman-Fried’s fraud and theft appear to rival those of Ponzi schemer Bernie Madoff and Malaysian embezzler Jho Low. Whether consciously or through malign ineptitude, the fraud also echoes much larger corporate scandals such as Worldcom and, particularly, Enron.
The principals in all of those scandals wound up either sentenced to prison or on the run from the law. Sam Bankman-Fried clearly deserves to share their fate.
The New Geopolitics of Global Finance
the global pattern of surpluses and deficits today has some parallels with the pattern in 2007, the time of “peak” globalization. Both periods were marked by large, concurrent surpluses in emerging Asia—notably China—and the oil exporters, and deficits in the US, the UK and (much of) Europe.**
But there is an important difference between now and then: the big autocratic surplus countries are not adding to their formal foreign exchange reserves.
Rents Falling Faster than "Seasonality Alone"
My suspicion is rent increases will slow further over the coming months as the pace of household formation slows, and more supply comes on the market. Housing economist Tom Lawler recently wrote: "An actual decline in rents next year would be a reasonable base case". This is important for monetary policy.
It is time to revisit the 2 per cent inflation target—I have no doubt that inflation target inflation is coming.
The New Conglomerates—A history and assessment of Brookfield Asset Management.
Lael Brainard on monetary policy
To keep inflation at 2%, the Fed needs to keep growth in demand at roughly 3.5%/year in the long run. Since 2019, nominal demand has risen by a total of about 8% more than the growth rate consistent with the Fed’s 2% inflation target, and PCE inflation has also overshot its target by roughly 8% over the past three years. Thus almost all of the excess inflation is demand side.
So how does Brainard reach the opposite conclusion? She links to a figure showing growth in real spending, which she uses as an indicator of aggregate demand. It isn’t. It is nominal spending that represents demand, not real spending. In 2008, Zimbabwe saw an astronomical increase in nominal spending, even as real GDP declined. By Brainard’s criterion, there was no problem with excess demand in Zimbabwe, as real spending was falling at the time.
An Operation Twist for Treasury Market Stability
The Fed (and other central banks), should thus think about communicating an Operation Twist of sorts. It will need to be relatively flexible (er, vague), given its uncertain where along the yield curve the “break” might occur in the event it does. But the Fed can commit to leaving QT on autopilot while also stepping in to specific segments of the market as necessary to contain any fire sale dynamics like those seen at the long end of the gilt market. This retains everything the BoE did right, while potentially limiting any downside impact on the credibility of the Fed’s hawkish crusade against inflation.
A forgotten banking scandal suggests FTX is the tip of the crypto iceberg—Comparing FTX to BCCI in the 80s.
"Why Won't Energy Companies Drill?"
Low valuations encourage companies to favor returning capital to shareholders over increasing drilling, despite strong single-well returns. Here’s why: The E&P sector trades at 0.8x its net-debt adjusted PV-10 per share.
Bitcoin’s last stand—the ECB is not a fan.
Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised.
Foreign
Courage in the Streets of China—Celebrating a brief revolt for human dignity against banal, nihilistic, authoritarian technocracy.
It’s hard to understate how unprecedented this scale and openness of revolt is in today’s China. This is without doubt the largest wave of protest seen in the country since 1989, and will viewed by the government as an existential challenge.
China’s Underestimated Leader—RIP Jiang Zemin
Ukraine War: Seems Like Old Times
All of it is awfully familiar. I told my interlocutors that in the period between 9/11 and the start of the Iraq War, conservatives like me were so gung-ho for war that we did not want to hear from anybody who questioned its wisdom. The Right excommunicated conservatives like Patrick Buchanan and Bob Novak, both of whom objected to the plans for war. Our collective refusal to listen to them, and to despise them for their treason to the cause (remember "unpatriotic conservatives"?), helped lead the United States, and the Middle East, into catastrophe.
John Mearsheimer: We’re playing Russian roulette
Bleakly, Mearsheimer now believes that the opportunity for peace has been lost, and that there is no realistic deal that could be reached in Ukraine. Russia will not surrender the gains made in Eastern Ukraine, while the West cannot tolerate their continued occupation; meanwhile, a neutral Ukraine is also impossible, as the only power capable of guaranteeing that neutrality is the US, which would of course be intolerable to Russia. As he puts it, succinctly: “There are no realistic options. We’re screwed.”
Issei Sagawa, Japanese cannibal who walked free, dies at 73—C’mon Japan
But on his arrival, he was ruled sane by Japanese authorities, who decided Sagawa’s only problem was a “character anomaly” and that he did not require hospitalization.
Domestic/Culture
How Hospice Became A For-Profit Hustle
For-profit providers made up thirty per cent of the field at the start of this century. Today, they represent more than seventy per cent, and between 2011 and 2019, research shows, the number of hospices owned by private-equity firms tripled. The aggregate Medicare margins of for-profit providers are three times that of their nonprofit counterparts.
What’s Behind the Exploding Prices of Pro Sports Franchises?—Teams were once considered poor, unpredictable investments. Today they’re among the most coveted assets in the world. What changed?
David Mamet’s excommunication was a warning that something nasty was brewing in our discourse. This new Puritanism has been brutal on the creative soul of this nation (and possibly Mr. Mamet’s work) but it is especially a pity that it sidelined Mamet, an American prophet with a profound mastery of the rhythms of American speech and thought. Are there two plays more in touch with the viscera of the American obsession than American Buffalo (1975) or Glengarry Glen Ross (1983)?
Biglaw's Latest Cancel-Culture Controversy—Is expressing support for the SCOTUS decision in Dobbs now a firing offense?
House Democrats Can Release Trump’s Tax Returns. But Should They?
The law is clear that the House Ways and Means Committee can now make Trump’s tax returns public if a majority of the committee members vote to do so.
Building Fast and Slow Part II - The World Trade Center
In an attempt to ensure this would be the first and last time the Port Authority would take on a money-losing transit project, Tobin included in the agreement a provision that the Port Authority couldn’t subsidize any future mass transit rail projects unless all its existing bonds had been repaid. (In 1973, when the governors of New York and New Jersey jointly tried to rescind this agreement, the Port Authority bondholders filed suit, and the case eventually reached the Supreme Court. When the court found for the bondholders, it resulted in the cancellation of a proposed PATH extension)
Strange coincidences: Are they fluke events or acts of God?
Jung defined synchronicity as “the coincidence in time of two or more causally unrelated events which have the same meaning.”
One of Jung’s most iconic synchronistic stories concerned a patient who he felt had become so stuck in her own rationality that it interfered with her ability to understand her own and emotional life.
One day, the patient was recounting a dream in which she'd received a golden scarab. Just then, Jung heard a gentle tapping at the window. He opened the window and a scarab-like beetle flew into the room. Jung plucked the insect out of the air and presented it to his patient. “Here is your scarab,” he said.
Health
Is weakness the new smoking? Muscle strength tied to biological age, study shows
Epidemiologic data from a 20-year prospective study of a large human cohort of initially cancer-free participants revealed that exercise prior to cancer initiation had a modest impact on cancer incidence in low metastatic stages but significantly reduced the likelihood of highly metastatic cancer.
Regenerating The Thymus: Profile Of Greg Fahy
Between 2015 and 2017, the TRIIM trial tracked the results of growth hormone and steroid injections in ten men between the ages of 51 and 65. The result was a two-to-three year reduction in the men’s apparent ages. In most cases, their kidney functions improved, and some of the men’s hair became darker too. Fahy admits to having no conclusive proof that these effects were due to thymus regeneration, but there were no indications of any alternative explanations. In his 2019 paper on the study, he described the test as the “first known proof of extended human lifespan from a currently available therapy.”