Kind of old thread. Sorry, no girly ice skaters butts in this post. I'll try to spice this thread up in later posts. Today's post might only interest me but here it goes.
Today's reports coming out of China are revealing the opacity of Chinese business accounting and reporting.
A 2020 law called the Holding Foreign Companies Accountable Act may be behind the sharp decline in a handful of U.S-traded Chinese stocks.
www.cnbc.com
First up, Yum Brands. A conglomerate that trades on the New York Stock Exchange, which holds some familiar US fast food chains, Kentucky Fried Chicken and Pizza Hut. Three years ago -- three years -- Congress passed the Holding Foreign Companies Accountable Act which requires foreign companies that list on US exchanges to allow review of financial audits by watchdog groups such as the Public Accounting Oversight Board (PCOB).
What is that group?
PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws. In other words, they watch the auditors. There are only a few auditing groups and their own history is shady. Not only that, but the audit is only as good as the information provided. There is a conflict of interest between auditing firms and the companies they audit. A company might shop around if they don't like the reports coming from their auditor, So, it is not unknown to see auditors look the other way and hold their nose when a particularly corrupt bit of accounting is passed beneath their nose. Hence, groups like PCAOP, who in essence audit the audits.
What does this have to do with Yum brands? Yum Brands is a Chinese company that lists on the New York Stock exchange. They have not complied with the requirement to allow PCAOP to review their audited reports. They, along with four other companies are the first to report quarterly earnings this year and the act requires them to do so. No Chinese firm listed on NYSE indicate they will comply. They will not comply because the Chinese government is blocking them from complying. They will be delisted if they fail to comply and shares are tumbling in Chinese stocks as we speak.
This is not proof of corruption but that dead possum is stinking to high heaven, which is a good indication. What are they hiding? Maybe they are hiding losses but why would ALL Chinese companies be blocked? The answer most likely is officials in Beijing are funneling money into some of those companies and selling NYSE shares to wash their dirty money. The US is the gold standard for currency. Laundering money is easy if nobody can see what you are doing.
This isn't just about yachts and prostitutes. It's about corrupt foreign influence in the US. It's the kind of money that put Trump in office and pays for advertising Tucker Carlson's Faux News shows.
The next story
LME Halts Nickel Trading After Unprecedented 250% Spike
So, there is this war going on that some might have heard about. Ukraine?
Ukraine is one of the world's largest source of nickel. Nickel is used to make stainless steel, so it's kind of important in the making of just about every appliance and machine made anywhere. Batteries, etc. Nickel is increasing in price because there is a supply issue. Back in September a trader known as "Big Shot" bought a massive futures contract at the current price, betting the price will go down. He would then buy nickel at the expected lower price and cash in his future contract at the higher price and pocket the difference. The war is causing prices to rise and other trading companies have been buying up nickel, knowing that Big Shot would have to cover his bet by buying more nickel to cover the required margin that he agreed to when he bought. Price of nickel has gone up 250%. BS will lose billions if he cashed out. He's caught in what is called a short squeeze. He's required to buy nickel but can't because there is a worldwide shortage right now. He refused to honor his contract and the London Metals Stock exchange shut down trading in nickel until this issue is settled.
Who is Big Shot? He is Chinese entrepreneur Xiang Guangda a tycoon with connections in the Chinese government. The deal he's trying to cook up: he swaps a lower grade of nickel than the metal he's obligated to buy for refined nickel held in Bejing's metal reserve. Uses that to cover his margins and possibly close his position without major losses.
Isn't it a wonderful thing to have connections in an authoritarian government the size of China's. Why would the Chinese government do this? Probably in part because they want to return the nickel market to an orderly one. But wait, there is more.
Who are the London Metals Stock Exchange? They are a 150 year old trading group based in London and owned by Hong Kong Exchanges and Clearing , a Chinese company. The shenanigans going on with Big Shot's bet isn't about saving him, it's about saving four or five "brokers" who stand to lose big time if BS's deal defaults. Reports don't say who these people are. My guess is its scions or family of Chinese officials. Regardless, this stinks like week old road kill.
This all gets back to the costs of dealing with authoritarian regimes. Those guys have so much power they just do what they want regardless of rules, regulations, appearances or corrupt practices. Somewhere in the story about the nickel futures debacle is dirty money. Maybe one day we'll know. Right now, no reporter can touch that part of the story. Because, you know, authoritarian regimes don't allow reporters freedom to do their jobs.
www.npr.org
exbulletin.com
