Trump World clings to conspiracy theory from ‘hoax artist’ that secret supercomputer changed votes

Published on November 8, 2020

By Sarah K. Burris RAW STORY

Steve Bannon (Photo: Screen capture)

Supporters of President Donald Trump have discovered a new conspiracy theory they are grabbing onto as a means of justifying why they think the 2020 election was “rigged.”

The Daily Beast reported Sunday that a “deep-state supercomputer named ‘Hammer’ and a computer program named ‘Scorecard’ were used to change the ballot count”

While the U.S. Cybersecurity and Infrastructure Security Agency said that the claim was “nonsense,” Trump World conspiracy theories don’t typically recognize the authority of the American intelligence world, considering it part of the “deep state” that would have ushered in the conspiracy against Trump.

Thus far, ex-Trump adviser Steve Bannon, ex-NYPD commissioner Bernie Kerik, ex-Trump campaign adviser George Papadopoulos, right-wing firebrand John Cardillo, and Newsmax’s Emerald Robinson have all latched onto the conspiracy theory.

According to the scheme, a former intelligence contractor (and self-proclaimed whistleblower) named Dennis Montgomery said that the computer and program were used to change votes.

“He’s a genius, and he loves America,” said birther movement leader Thomas McInerney, during Bannon’s podcast. “He’s the programmer that made all this happen, and he’s on our side.”

It’s unclear why a self-proclaimed Trump supporter would confess to using such a supercomputer to change votes for Biden, but Mr. Montgomery hasn’t addressed the media. He has retained right-wing lawyer Larry Klayman, who previously worked for George Zimmerman, Jerome Corsi and the Bundy family.

“To be clear, Larry Klayman is a moron. He has never won a case in court in his life,” Roger Stone said in 2017. “He is a lightweight. He is a legal know-nothing.”

Klayman was suspended from practicing law for 90 days in June.

“What Trump allies tend to leave out, however, is that Montgomery has a long history of making outlandish claims that fail to come true,” reported the Beast. “As an intelligence contractor at the height of the War on Terror, Montgomery was behind what’s been called ‘one of the most elaborate and dangerous hoaxes in American history,’ churning out allegedly fictitious data that once prompted the Bush administration to consider shooting down airplanes.”

Michael Flynn’s lawyer Sidney Powell is on board with the conspiracy as well, saying Friday to Lou Dobbs on Fox Business that things “need to be investigated,” including the conspiracy that “three percent of the vote total was changed.” She repeated the conspiracy theory on Fox News without a fact-check from the host.

After 9/11 Montgomery was given $20 million by the U.S. government for a program he said would detect messages to al Queda sleeper cells in broadcasts from Qatar’s al Jazeera. Dec. 2003, Montgomery said that he detected al Queda hijackers ready to hijack plans from Europe and Mexico into the U.S. Flights were blocked and the George W. Bush White House even thought about shooting down planes. None of it was real. It ultimately became known as the greatest hoax in American history.

In 2013 he resurfaced as a friend of disgraced former Sheriff Joe Arpaio. He told Arpaio that his computer program “Hammer” could prove that a federal judge was colluding against him with former President Barack Obama’s Justice Department. Montgomery was last heard of when he was facing charges from Nevada for writing bad checks to casinos totaling about $1.8 million.

Read the full report from the Daily Beast.

REMINDS ME OF THIS CLASSIC

Billion Dollar Brain (1967) HD Trailer

It's Harry Palmer's Wits Against The World's Deadliest Mind! Secret agent Harry Palmer (Michael Caine, Get Carter) is blackmailed into working for MI5 again on his wildest - and most dangerous - assignment yet. An insane oil billionaire, intent on destroying Communism by starting a new world war, is close to achieving his goal with the help of the world's largest, and most powerful, computer. Harry is the only man who may be able to stop him; but as he races from London to Finland to Latvia to Texas and back, he must determine who of his supposed allies is the one he can actually trust, a sexy Russian agent, Soviet colonel or an American mercenary. Legendary filmmaker Ken Russell (Altered States) directed this third and final film in the great Harry Palmer series. The wonderful supporting cast includes Karl Malden, Ed Begley and Francoise

Dr. Jill Biden to become the only first first lady in history to work outside the White House: report

November 8, 2020
By Sarah Toce

Dr. Jill Biden (Photo: By Crush Rush/Shutterstock)

Dr. Jill Biden, a full-time English professor at Northern Virginia Community College, will become the first presidential spouse to commute from her job at the White House to another full-time day job where she has taught for 10 years.

“If we get to the White House, I’m gonna continue to teach,” Dr. Biden said this past August on CBS Sunday Morning. “It’s important, and I want people to value teachers and know their contributions, and lift up the profession.”

President-elect Joe Biden’s acceptance speech alluded to his wife’s dedication to education. “For America’s educators, this is a great day: You’re going to have one of your own in the White House,” he said.

A spokesperson for the future first lady, Michael LaRosa, confirmed the news on Sunday.


“Dr. Biden is focused on building her team and developing her priorities focused on education, military families and veterans, and cancer,” Mr. LaRosa said.

Televangelist (MANICALLY) laughs off Joe Biden winning the presidential election, and it’s all very uncomfortable

Last Updated: Nov. 8, 2020 

Kenneth Copeland

 @RIGHTWINGWATCH VIA TWITTER

This just might put the fear of God in you.

Kenneth Copeland, a televangelist and devoted Donald Trump backer, let his feelings about the results of the presidential election be known in a most bizarre way during one of his prayer services.

Two words pretty much sum it up: Ha ha.

Social media ate it up, with the clip being viewed more than 5 million times. George Takei, of “Star Trek” fame, captured the gist of the reaction on Twitter TWTR, -1.35% :

This isn’t the first time Copeland’s made a splash on the internet.

Last year, he was confronted by an “Inside Edition” reporter over his use of donations to fund his private jet. He previously said he couldn’t fly commercial because “You can’t manage that today, in this dope-filled world, get in a long tube with a bunch of demons.”

Here’s the full interview from last year:

Thai Police Block Protesters Seeking Royal Reforms
ASIA & PACIFIC Reuters Nov 8, 2020

Anti-government protesters attend a mass rally to call for the ouster of Prime Minister Prayuth Chan-ocha's government and reforms in the monarchy in Bangkok, Thailand, on Nov. 8, 2020. (Athit Perawongmetha/Reuters)

\BANGKOK—Despite a burst of water cannon and a police blockade, thousands of Thai protesters marched to the Grand Palace in Bangkok on Sunday to demand curbs to King Maha Vajiralongkorn’s powers and the removal of the government.

Police used the water cannon for only the second time in months of largely peaceful protests to demand greater democracy and the departure of Prime Minister Prayuth Chan-ocha, a former junta leader.

“When the king truly cherishes democracy, all people will find happiness,” the protesters said in a statement read a few dozen yards for the walls of the palace, where they were stopped by police lines.

“When you hear all the flattering praise from the people, you must also hear fearless criticisms and suggestions all the same,” said the statement, signed “with power of equal human dignity” by “people.”

The Royal Palace was not available for comment. It has not commented since the start of the protests.

But the king said a week ago that the protesters were still loved and that Thailand was a land of compromise, as he greeted thousands of well-wishers near the very spot that the demonstrators reached on Sunday

.

Anti-government protesters attend a mass rally to call for the ouster of Prime Minister Prayuth Chan-ocha’s government and reforms in the monarchy in Bangkok, Thailand, Nov. 8, 2020. (Athit Perawongmetha/Reuters)

Reuters journalists estimated more than 10,000 protesters marched from Democracy Monument in central Bangkok. Police put the number at 7,000.

“Reform or revolution,” read one placard.

Police spokesman Kissana Phathanacharoen said water cannon had been fired only as a warning. The Bangkok authority’s emergency unit said one police officer and four protesters were hurt during the brief confrontation outside the palace, where police had set a barricade of buses and barbed wire.

“We no longer want the monarch to interfere in politics,” Jutatip Sirikhan, one of the protest leaders, told Reuters.

‘Please, King’

One 25-year-old protester, who gave his name only as Keng, said “Please, king, please listen to the people. People are unhappy because you let the military have full power and approved their coups. We want the reform.”

The protesters brought boxes stuffed with letters for the king and left them near the palace with police agreement.

Protests since July have increasingly called for reforms to the powerful monarchy, breaking a long-standing taboo against criticizing the institution—which can be punished by up to 15 years in prison.

The protesters say the monarchy has helped enable decades of military domination of Thailand, most recently by approving the premiership of Prayuth, who seized power in a 2014 coup and kept it after disputed elections last year.

The protesters seek to put the king more clearly under the constitution, reversing changes he made shortly after taking the throne as well as moves he made to take personal control of the palace fortune and some army units.

Several dozen royalists earlier held a counter-protest at Democracy Monument, wearing yellow shirts in the color of the king and waving Thai flags. Many held up pictures of the king and his late father, King Bhumibol Adulyadej.

“I want to protect the monarchy and the king,” said Chutima Liamthong, 58. “The monarchy is the identity of Thailand. We cannot stand without the monarchy,” she said.

Monarchists see the student-led protesters’ demands for reforms to the institution as a way of getting rid it of entirely, although protesters deny that is their goal.

By Jiraporn Kuhakan and Patpicha Tanakasempipat

Britain's GCHQ to wage cyber war on anti-vaccine propaganda: The Times

(Reuters) - Britain’s GCHQ has begun an offensive cyber-operation to tackle anti-vaccine propaganda being spread online by hostile states, The Times reported.

This latest move by GCHQ, which gathers communications from around the world to identify and disrupt threats to Britain, is an attempt to counter disinformation activities linked to Russia, the report said.

The British government considers tackling false information about immunization as a high priority as the prospect of a reliable vaccine against the coronavirus draws closer, the Times said.

A vaccine is seen as the world’s best bet for beating the COVID-19 pandemic that has led to more than 1.2 million deaths, roiled economies and disrupted billions of lives.

GCHQ is Britain’s main eavesdropping agency and has a close relationship with the U.S. National Security Agency, as well as the eavesdropping agencies of Australia, Canada and New Zealand in an intelligence alliance known as the “Five Eyes”.

“GCHQ has been told to take out antivaxers online and on social media,” the Times said, citing a source.

The report said the focus of the operation is taking down hostile state-linked content and disrupting the communications of the cyberactors responsible.

Reporting by Rebekah Mathew in Bengaluru; Editing by Daniel Wallis

GCHQ

Intelligence and Security Organisation

Government Communications Headquarters, commonly known as GCHQ, is an intelli…

• 
  Wikipedia

• Founded: Nov. 1, 1919
• Headquarters: Cheltenham, England
• Subsidiary: National Cyber Security Centre
• Minister responsible: Dominic Raab, Secretary of State for Foreign and Commonwealth Affairs
• Agency executive: Jeremy Fleming, Director of GCHQ

Bolsonaro's support falls in some of Brazil's main cities: polls

SAO PAULO (Reuters) - Brazilian President Jair Bolsonaro’s support has fallen in some of Brazil’s biggest cities, surveys said on Sunday, suggesting a previous bump may be short-lived as the country still grapples with a brutal coronavirus outbreak.

Previous polls have seen the far-right former army captain’s support rise, despite what is widely seen as his poor handling of an epidemic that has now killed more than 160,000 Brazilians.

Polls on Sunday suggested that support may be waning.

According to a Datafolha poll, undertaken at the start of November and published in the Folha de S.Paulo newspaper, his support in Sao Paulo fell to 25% from 29%, while in Belo Horizonte it fell to 35% from 40%, compared with a previous poll taken Sept. 21-22. The margin of error was 3 percentage points, it said.

In Recife and Rio de Janeiro, his support was more stable, the polls showed.

Meanwhile, a separated compilation of data by pollster Ibope, collated by the G1 website, showed on Sunday that Bolsonaro’s support has fallen in seven state capitals.

The largest drops in support occurred in the cities of Salvador and Rio Branco, in which Bolsonaro’s popularity fell by 7 percentage points.

While Bolsonaro has been criticized by health experts for minimizing the severity of the coronavirus and opposing lockdowns in order to keep the economy going, his popularity has been bolstered by a 322 billion reais ($58 billion) payments program, analysts say.

Prayers of gratitude for election of 'daughter of India' Harris as U.S. Vice President

]

By Sudarshan Varadhan

CHENNAI, India (Reuters) - Indians burst firecrackers on Sunday and offered prayers of gratitude over the election of Kamala Harris as the next U.S. vice president, declaring it a proud moment for Indian-Americans.

Harris, born to an Indian mother and a Jamaican father, both of whom immigrated to the United States to study, made history by becoming the first woman to win election to the post.

At her ancestral village in southern India, about 14,000 km (8,700 miles) from Washington D.C., children clutched posters of Harris as people gathered at a Hindu temple to thank the gods for the victory that she and President-elect Joe Biden won.

Priests at the temple in Thulasendrapuram village bathed the local deity in milk and prayed. Women drew murals in the courtyard and musicians played traditional music.

“A woman hailing from this small village now holds one of highest positions in U.S. It’s a proud moment,” said R Kamaraj, a government minister in the southern state of Tamil Nadu who joined the celebrations.

Harris identifies herself as a Black American but she has also spoken about her Indian heritage during the campaign. In her victory speech on Saturday night, Harris said her late mother Shyamala Gopalan was the “woman most responsible for my presence here.”

Sonia Gandhi, the Italian-born head of the main opposition Congress party described Harris as a daughter of India in a letter to the vice-president elect, inviting her to visit.

“We hope we will have the opportunity soon to welcome you to India, where you will be warmly hailed not just as a much admired leader of a great democracy, but also as a beloved daughter.”

Harris, who visited her village when she was 5, has often recalled walks with her maternal grandfather on the beaches of the southern city of Chennai during annual trips from the U.S.

Those conversations with her grandfather, who was among millions of people who joined India’s independence movement, left a profound impact, Harris said in a 2018 speech.

She has been in close touch with her family in India and her uncle said he planned to attend the inauguration in January.

“It’s great (the victory). It was needed and it was good. And the next four years will be good,” G. Balachandran, a leading defence scholar, told Reuters partner ANI at his home in New Delhi, where like millions of people worldwide, he watched every turn and twist of the election.

“I knew she was going to win. So, I was not tense, except I wanted the final results to come in so that I could go and sleep,” he said.

In Mumbai, people shot off fireworks and a group of artists painted a portrait of Biden and Harris.

Dozens of prominent Indians and Americans of Indian origin took to social media to congratulate Harris, including actors Priyanka Chopra Jonas and Mindy Kaling.

Kaling tweeted images of Harris and wrote “Crying and holding my daughter, ‘look baby, she looks like us’.” 

VIDEO/PHOTOS 

https://www.reuters.com/article/us-usa-election-india-harris/prayers-of-gratitude-for-election-of-daughter-of-india-harris-as-u-s-vice-president-idUSKBN27O0CL

Estonian far-right coalition partner says U.S. election rigged, Biden corrupt

By Reuters Staff

VILNIUS (Reuters) - Leaders of a far-right party in Estonia’s government coalition on Sunday denounced the U.S. election result as rigged and called president-elect Joe Biden “corrupt”, sparking a political crisis as other coalition partners condemned the comments.

FILE PHOTO: Estonia's Finance Minister Martin Helme of far-right EKRE Party reacts after the swearing-in of the incoming coalition government in Tallinn, Estonia April 29, 2019. REUTERS/Ints Kalnins

Racism, sexism, Nazi economics: Estonia's far right in ...

https://www.theguardian.com/world/2019/may/21/racism-sexism-nazi...

2019-05-21 · The party’s father-and-son leaders, Mart and Martin Helme, took the key posts of interior and finance minister respectively and celebrated by flashing a white-power symbol at their swearing-i

Estonia, a NATO and European Union member, relies on backing from the United States for its security from Russia.

“In my opinion, there is no question at all that these (U.S.) elections are rigged,” said Martin Helme, head of the populist far-right Ekre party who is also the finance minister, according to local news portal Delfi.

“Joe Biden and Hunter Biden are corrupt types,” added his father Mart Helme, who is the interior minister.

U.S. President Donald Trump, whom Biden beat in the elections this week, has accused Biden and his son Hunter of unethical business practices in China and Ukraine. No evidence has been verified to support the allegations, and Biden has called them false and discredited.

The Helmes’ comments were deemed “crazy” by Estonia’s Foreign Minister Urmas Reinsalu, who condemned it along with Prime Minister Juri Ratas and President Kersti Kaljulaid.

“I am sad and embarrassed”, Kaljulaid said in a statement, adding that the politicians “have damaged our relations with our allies and have sown doubt on the Estonian democratic elections”.

Ratas is dependent on the support of the Ekre party, which holds 19 seats in Estonia’s 101-member parliament and has five ministerial portfolios out of fifteen.

The outspoken Helmes have caused a lot of political turmoil in the administration’s 1.5 years in power.

In Dec 2019, Estonia apologised to Finland after Mart Helme mocked Finland’s new prime minister -- the world’s youngest-serving government leader -- as “a sales girl” and questioned her ability to run the Nordic country.

Reporting By Andrius Sytas; Editing by Chizu Nomiyama

Huge, 'Impossible' Crystals in Denmark Have Finally Been Explained by Scientists

The Danish Island Fur. (Nicolas Thibault)

DAVID NIELD

As geological puzzles go, it's a pretty good one. In the global greenhouse conditions of the early Eocene (56-48 million years ago), how did huge numbers of giant glendonite crystals manage to form?

These rare calcium carbonate crystals - that need temperatures lower than 4 degrees Celsius to form - are composed from the mineral ikaite and found in their tens of millions on the Danish islands of Fur and Mors. They have been dated to 56-54 million years ago.

"Why we find glendonites from a hot period, when temperatures averaged above 35 degrees, has long been a mystery," says geologist Nicolas Thibault, from the University of Copenhagen in Denmark. "It shouldn't be possible."

After a detailed chemical analysis of glendonite samples by Thibault and an international team of researchers, using a technique called clumped isotope thermometry to trace temperatures back millions of years, we may have an answer: the Eocene was perhaps not as uniformly warm as previously thought.

The idea of colder Eocene spells has been put forward previously, but the evidence has been inconclusive so far. The new chemical breakdown helps researchers argue the case for cooler conditions, with models suggesting the glendonites formed in waters below 5 degrees Celsius (41 degrees Fahrenheit) at a depth of around 300 metres (984 feet).

Sedimentary layers of ash on the island of Fur point to the possibility that volcanic eruptions may well have been responsible for these chillier episodes in the Eocene, localised around specific regions, which would help to explain the cooler waters and the rock record.

"There were probably a large number of volcanic eruptions in Greenland, Iceland and Ireland during this period," says Thibault.

"These released sulphuric acid droplets into the stratosphere, which could have remained there for years, shading the planet from the sun and reflecting sunlight away."

"This helps to explain how regionally cold areas were possible, which is what affected the climate in early Eocene Denmark."

The new study backs the hypothesis that colder Eocene periods are more likely than the alternative – which is that the science is wrong about the sort of temperatures that ikaite-based rock is able to form at.

Next, the team wants to see similar investigations carried out to see how widespread the cooling discovered in the Danish Basin actually was. Other geological records – including those from the Arctic – suggest this dip in temperature wasn't happening all over the globe through the Eocene.

As with any discovery about our climate past, the study is going to help scientists map out our climate future.

We may not have the sky blotted out by volcanic ash anytime soon, but a quickly changing climate is something we are going through – just like parts of the world were more than 50 million years ago, long before humans arrived on the scene.

"Our study helps solve a mystery about glendonites, as well as demonstrating that cooler episodes are possible during otherwise warmer climates," says Thibault.

"The same can be said for today, as we wise up to the possibility of abrupt climate change."

The research has been published in Nature Communications.

16 OCTOBER 2020

Why China Stepped On The Ant Group (Part 1): To Stop A Bubble

George Calhoun Contributor
Markets


(FILES) This file photo taken on October 13, 2020 shows the Ant Group headquarters in Hangzhou, in ... [+] AFP VIA GETTY IMAGES

The most shocking, financial-market-impacting event this week was… No, not the electoral chaos in the United States (widely expected, priced in, a little turbulence smoothly ridden out).

It was the news that the Chinese government decided they had to step on an ant… specifically, on Ant – that is, the Ant Group (formerly known as Ant Financial Services). Days before Ant’s huge scheduled public offering in Shanghai and Hong Kong, Chinese regulators (acting probably at the direction of Xi Jinping himself) summoned the company’s founder Jack Ma (China’s richest man, by the way) to Beijing for a bit of re-education.

As the Chinese press put it, “regulatory interviews” were conducted.


“The regulators provided no further details, but the Chinese word used to describe the interview — yuetan — generally indicates a dressing down by authorities.

Ant said, “Views regarding the health and stability of the financial sector were exchanged.”

It may have involved rather more than an exchange of views. The next day, the government summarily canceled Ant’s $37 Bn offering – which would have been the largest IPO of all time – and a long-anticipated milestone in China’s rise towards global parity in technology and finance. What happened?

The full story here has three chapters:

1. The market dynamics surrounding the offering itself

2. The dangerous business model that created the risk of a financial cataclysm, both for the company and for the entire Chinese financial system

3. The inevitable impact on Ant’s valuation (had the offering gone forward) – which would have driven a likely collapse of the shares following the IPO

This column focuses on the first of these factors: the IPO Fiasco, and the immediate concerns that led to its abrupt cancellation.

Who/What is Ant?

It is likely that many Americans still have not heard of Ant, nor would recognize its logo. That will change soon.

ANT LOGO

Ant is a high-tech Chinese financial supermarket launched just 6 years ago. It has probably grown bigger, faster, than any company in history. It is adorned with superlatives:


the world’s most highly valued Financial Technology company
the world’s largest money market fund
the world’s largest mobile and online financial payments company
More payment transactions processed than Mastercard & Visa



Ant, Visa, Mastercard, Annual Payment Transactions CHART BY AUTHOR

More valuable than any bank in the world (or would have been…)



Ant vs the Big American Banks – Market Value CHART BY AUTHOR

Ant has been called “a powerful symbol of the potential of China’s financial markets.” Just last month The Economist wrote: 

“More important than its size is what Ant represents. It matters globally in a way that no other Chinese financial institution does.”

As for Jack Ma, he is a celebrity entrepreneur in China comparable to Elon Musk or Bill Gates or Warren Buffett, or all three together. Considering China’s aspirations to achieve technological parity with the West, Ma is a national front-man – on a par even with Xi Jinping himself:

“It is hard to overstate the importance in China of Mr. Ma and his two companies. They have become synonymous to innovation. The media in China calls the country’s rising tech sector, ‘The era of Ma.’”

The Offering Fiasco
With all this as context – Ant’s IPO was much more than a stock offering. It was to be a statement, and a symbol, of China’s rise, “the crowning glory of a homegrown financial technology” – and at the same time, a geopolitical rebuke to American politicians and regulators who have been threatening to close U.S. stock exchanges to some Chinese companies (covered in a previous column). It was a Declaration of Independence of sorts:

“Its listing in Shanghai was intended to show that China no longer needs US capital markets to finance its world-class corporations.”

Ant was said to represent the future of banking, insurance, investment – the future of consumer finance in all its aspects, from mutual funds and money market accounts to digital currency and credit scoring – indeed, so futuristic was its business model that the idea of a mere bank seemed suddenly obsolescent and at risk. Even Western giants like Citibank and JP Morgan suddenly looked like dinosaurs, vulnerable to the new species of companies like Ant, armed with Fintech. Ant was poised to surpass them all in market value. The aura of success was palpable. Investors were already giddy. Ant shares rose 50% in the grey market in the run-up to the offering itself.

But the Ant phenomenon loomed much larger than these numbers show. The IPO itself was shaping up as a catalyst for a much larger financial earthquake. The offering was oversubscribed 870 times – $2.8 trillion of orders just from retail investors in mainland China. There would almost certainly have been an enormous “pop” in the share price following the offering. Even the sober-and-superior Wall Street Journal goggled at the size of the Ant IPO order book: “It exceeds the value of all the stocks listed on the exchanges of Germany.”

That was the state of affairs as of Friday Oct 30.

On the following Tuesday, “the most lucrative coming out party in history” was abruptly postponed, perhaps canceled. Retail investors were “shell-shocked.” Dozens of “elite” foreign investors who got in earlier were expecting an $8 Bn pay-off – which didn’t happen. The investment bankers (the usual suspects, including Goldman, JP Morgan, Morgan Stanley) were out $400 million in fees.

The event became yet another Ant superlative – the biggest IPO by far ever to be withdrawn.
Why?

Of course the frenzy over the possible offering was mirrored in a new frenzy of theories about what-just-happened. 

Punishment?

A common explanation was that the Chinese government had simply decided to discipline Ant, “to cut Jack Ma down to size.” Ant “was becoming a monster.” Ma was “arrogant.” His stinging public criticism aimed at China’s regulators triggered Beijing’s wrath. Indeed, speaking at a Shanghai conference a week earlier, Ma was extraordinarily blunt. He spoke of the Chinese financial establishment as a “club for the elderly.” He accused the big Chinese banks of having a “pawnshop mentality” – out-of-date and non-tech-savvy. (He had said on another occasion that he would like to make them “feel unwell.”) His broad view of the regulatory framework was scathing:

“We cannot regulate the future with yesterday’s means,” the 56-year-old Ant co-founder said at the forum. “There’s no systemic financial risks in China because there’s no financial system in China. The risks are a lack of systems.”

This could not have gone down well with the incumbents and the bureaucrats.

But does this explanation really make sense?

There is a high cost for abrupt and heavy-handed intervention in ostensibly free markets.

“Predictable regulation helps to underpin confidence in markets and the economy. Unexpected changes, especially if politically-driven, are usually damaging.” [The Financial Times]

China is trying to establish a world-class financial system. Moves that evoke memories of a Mandarin past – hostile, peremptory and perhaps predatory – would seem to undermine this effort.

“The turn of events is not just painful for Ant. It reflects poorly on China’s regulators. The last-minute halt of Ant’s listing highlights the opacity of the Chinese political system and the risks that can trip up even its most successful companies.” [The Economist]
“The ripple effects of the cancelled IPO are many — and mostly worrying. ‘The message is that no big private businessman will be tolerated on the mainland.’” [said a Hong Kong University professor]

Why would China risk impairing its strategic program for the sake of disciplining an outspoken businessman (who also happens to have built the most successful business that the country has ever produced)?

But the fact that this theory doesn’t make sense (to an outsider) doesn’t mean it isn’t true. Beijing has committed a string of such blunders recently. (Consider the Hong Kong takeover, or Beijing’s hostage diplomacy related to Huawei.) Old habits of authoritarian offense-taking persist, one supposes.

The Enmity of Vested Interests

Another theory is that the big established Chinese banks — the very “pawnbrokers” Ma denounced – want to clip his wings for business reasons, and force Ant to play by their rules, and live with the same constraints. Ant is competing aggressively, and successfully, taking business from powerful incumbents, who have lobbied hard to rein him in. In fact, in the market’s view – which is always future-oriented – Ma and Ant had already won. “Jack Ma Inc.” – which includes both the Alibaba Group BABA +4.2% (the Chinese version of Amazon AMZN -0.3%, to use a very short-hand description) and the Ant Group – has far surpassed the value of the traditional Chinese banking giants.

Jack Ma Inc. vs the Establishment CHART BY AUTHOR

This explanation makes some sense too — and some nonsense. At the very least, the regulatory response seems too violent. The normal way to rein in a company like Ant, slowly and without shocking the markets, is to impose gradual new regulations (e.g., higher capital reserves, or line-of-business restrictions) or new taxes. With plenty of discussion, and time for all parties to adjust. The Financial Times points this out:

“The draft regulations, by themselves, do not explain why the IPO was suspended. In normal cases, Beijing’s regulators consult with key industry players and, when a consensus is reached, announce the new rules. That way the market impact is minimised.”

The suddenness, and the forcefulness, of this move is not the typical behavior of a bureaucratic estate, even an unfriendly one. Unless…

Panic Over A Mega-Bubble

I think there is an element of panic in this move, as though the regulators suddenly realized that a serious crisis might be imminent. The awareness of the need for swift, even violent action was brought about (I think) by the extraordinary frenzy of anticipation surrounding the offering, the trillions of dollars of buy-side interest from small investors, which meant that
a valuation bubble in Ant’s shares was about to inflate – with 870 times greater demand for the Ant shares than supply, this was very likely  the millions of investors who wanted in on this deal were loading up with debt to purchase their shares – up to 95% leverage – exposing them to great losses when…  those small investors would be the ones who bought into the backend of the upwards price spiral, paying the highest prices with borrowed money

the flaws in the company’s business model became clear to the market, driving a severe downward re-valuation – triggering massive margin calls and huge losses

This scenario is not imaginary. This summer, the Shanghai STAR Market IPO for China’s leading chip maker (SMIC) was also oversubscribed. The company nearly tripled in value on the first day of trading – only to fall back as its business realities began to sink in. The losers were largely retail investors who bought into the excitement of the new listing. 

SMIC Rise and Fall CHART BY AUTHOR

This pattern is common in China today.

“Orders for some share sales have been thousands of times the stock on offer, and some stocks have surged as much as 10-fold on their first day. In another sign of exuberance, some Shanghai prices are far removed from those of the same shares listed elsewhere. [At the height of the frenzy] SMIC’s Shanghai stock price was roughly three times its Hong Kong stock price.”

I think that the Chinese authorities suddenly realized that this same scenario was likely to develop out of the Ant offering. Market dislocations, excessive leverage, extreme price spikes, big losses for small investors. The Ant IPO was to have been 6 times the size of SMIC’s IPO. But that was just the tip of the iceberg – remember that the nearly $3 trillion of retail demand was stacked up behind the opening, ready to explode into the stock, and blow prices upwards. Remember that this was more than “the value of all the stocks listed on the exchanges of Germany.” In fact, the investor demand for Ant shares was 7 times greater than the total value of the companies traded on the Nasdaq-like Star exchange in Shanghai. 

Comparison of Ant Investor Demand with the Market Cap of the entire STAR Market and the Shanghai ... [+] CHART BY AUTHOR

The prospect of much broader market instability loomed. This is what suddenly panicked the bosses in Beijing.

As to what it was about Ant’s business that triggered their concern... that is the subject of the next installment.


George Calhoun's new book is Price & Value: A Guide to Equity Market Valuation Metrics (Springer 2020). Prof. Calhoun can be contacted at gcalhoun@stevens.edu

Founder & Director of the Quantitative Finance Program and Hanlon Financial Systems Center at the Stevens Institute of Technology (New Jersey) and Advisory Board Member at Hanlon Investment Management