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Incompetence and fear - long term effects vol.1

: money, September 26 2021

Couple of days ago I stumbled on an incredible article in the "Fortune" magazine, called Chipmakers to carmakers: Time to get out of the semiconductor Stone Age. Going with the flow, current one is not in the tech-section for obvious reasons - this is not an engineering problem. It is not even a money-related one. It is the pure incompetence, narrow mindedness and fear of the mid- and high-management that led to it.

Dozens of chips found in everything from electronic brake systems to airbag control units tend to rely on obsolete technology often well over a decade old. These employ comparatively simple transistors that can be anywhere from 45 nanometers to as much as 90 nanometers in size
For decades, ... yes decades, car manufacturers refuse to adapt their way of vehicle production to the new realities and use ancient electronics with the excuse of "reliability". When COVID struck, the sales plummeted sharp and the chip factories switched their production to a more modern ones. Now (and since late 2020), the VW/BMW/Daimler alike scream in pain
“Because of a 50-cent chip, we are unable to build a car that sells for $50000” said Murat Aksel, head of procurement for Volkswagen Group
Dear car industry ladies and gentlemen - this is bull shit!

1. Who let this happen?
Your own managers. Look at them! Did anyone dare to relay the information to the board, that the company is using obsolete tech and millions would be needed to replace or restructure the lines? No. And this was the job of your managers. They hid this, fearing messenger will be shot and lose the quarterly bonus. Do you think engineers did not try, on numerous times, to raise the question? Oh, you think not? Well guess who hid this too. Now you suffer losses because of them. Would you cut their bonuses or fire them? (Unlikely, so nothing will change - meaning it is all your own fault. Now and for the future.) Imagine someone, who just graduated, and due to some incredible luck (connections), landed as a mid-level manager or another person, who worked his whole life to go up the ladder to the higher management. How do you think such person would tell the ones above "we are doing it wrong and we need to change fast". His professional career will end in the blink of an eye. Or, in case of incompetence, he/she is just not getting it. I can say this fairly straight and with certainty, seeing what goes on in the IT industry for the past 2 decades. I have observed this fearful behavior so many times, I don't even get mad anymore.

2. Why this change is so difficult.
It is not just replacing one medieval transistor with a modern one. It is draining the whole swamp and making a nice lake on its place. As the article properly mentions:
“The new technologies are not pin-to-pin compatible, it’s not plug and play,” Salvatori (president of Qualcomm Europe) said. “You have to redesign the circuit, build a new board that might have to be recertified; maybe there’s some impact on the mechanical side that then could affect the car’s chassis.

3. How to overcome this?
By some vague statistic, modern cars use between 300 and 1500 "chip" elements. This is really a mind-boggling number! As a person who knows what he is talking about, when it comes to processor power I can guarantee you, with 100% certainty, that in any existing car, in this very moment, there is no such computational load, that can overburden a process from mid-2000s. The first Xeon (64bit Core microarchitecture), codename "Woodcrest", 65nm, came out in 2006. This is considered also "ancient" nowadays (also discontinued by Intel), but incredibly advanced, compared to what is used in the cars. There is nothing, and I repeat, NOTHING, this baby cannot handle, even the dubious "autonomous driving features". I am not talking about the multimedia - there is a special part about this, just below. I am sure, in this moment someone will jump with the usual "what about reliability". Well - use 2 CPUs, hell, use 4! In different areas of the car. With a proper software any level of redundancy can be achieved. Plus you will have just a few points of failure. Not 1000. Another will jump with the "but the price of such CPUs will be times-higher than what we currently pay". Really? A quick search for Intel Xeon 5110 1.6 GHz shows 4.05Euro. Let's calculate the very optimistic 0.5Euro/per/chip * 1000chips = 500Euro. I am not saying they should replace all of them, but a drastic ~90% reduction should definitely be possible. For comparison - most of the modern CPUs have 14nm (and lower) lithography and are hundreds of times more powerful than the example I gave. Third will come with "but these cannot work in extreme conditions". Well that's the point - they will not have to. Use standardized sensors, not micro-controllers or chips. Will you tell me there are no such sensors? I mean WW2 tech, not something that cost hundreds of dollars. I said also "a proper software" - this is crucial. Going the cheapest way possible (...heavy "Boeing"-coughing) is hardly the way.
“I’ll make them as many Intel 16 [nanometer] chips as they want,” Intel chief executive Pat Gelsinger

4. Car multimedia rip-off
Critical vehicle computations and the multimedia part should be separate systems. This is clear as daylight. So the point of "this old CPUs cannot handle someone watching Netflix on the car-screen" is nonsense. Going to the multimedia-scam part - just open any car-configurator and check how much they will charge you for the tablet-thing that shows map data and plays music. $2000, eeh? Car manufacturers, for more than a decade, are selling us the 200-dollars-maximum-tablet (calling it multimedia-navigation-entertainment system), with at least 1000% profit margin. Because F-you, that's why. What would you do? Go somewhere else? There is no excuse when you charge $50K+ for an average-consumer vehicle.
To wrap it up - neither chips cost that much, nor they should have such great impact over the cost of a car. It is all a cartel-like customer treatment, wrong management decisions and greed.

Ultra-hypocrisy on the stock exchange

: money, January 30 2021

I want you to look at the picture and let the data sink a bit in your head. This is what happens when small people unite and beat the hedge fund vultures in their own game. 2 funds went almost bankrupt and some Robinhood-Reddit-users went wealthy overnight.
I.LIKE.IT!

Investor Michael Burry, who made a fortune on the 2008 subprime mortgage crisis, said in a now-deleted tweet on Tuesday that trading in GameStop is “unnatural, insane, and dangerous” and there should be “legal and regulatory repercussions.”
I will not go into the mechanics of the hustle - you are wise people and can google it yourself, but wanted to stress on the following: Nobody did anything illegal! But now there is a huge outcry from most of the Wall Street sharks, who are using the same shady practices in their ever-greed, that the government should crush the new competition. We will soon see a picture of some hedge fund CEO against the word "hypocrite" in the dictionary.
What is worse - if some of this funds really fail, guess who will bail it out (and with whose money). What is even worse is that the social media overlords reacted in an instant, to shut down the major means of communication and organization of the so-called "degenerates" - so much for the Freedom of Speech I guess.
Facebook Inc took down a popular Wall Street discussion group, Robinhood Stock Traders, in a move that its founder on Thursday described as backlash for conversations buoying shares of GameStop Corp and other companies this week.
So much for the Free Market also:
"We are actively monitoring social media chatter and will halt stock if we match chatter with unusual activity in stocks," NASDAQ CEO Adena Friedman announced on Wednesday morning. Speaking to CNBC, Friedman demanded regulators intervene to stop the “manipulation” that’s seen amateur investors completely leave one of America’s top hedge funds, Melvin Capital, teetering on the edge of bankruptcy.
So it is OK when casual people lose their money (most of of the time caused by the same type of "fixtures"), but when a big corporation gambles and gets destroyed, then "we have a problem and intervene". People are not stupid and, having long and bitter experience with their own government, are already preparing for the counter-attack:
...some WallStreetBets users predicted an impending regulatory crackdown, especially given the astronomical donations Wall Street gave to Joe Biden and the Democratic Party in the runup to last year’s election.
This "shitstorm" (I am sorry - I have no other words for it) is just the next (probably millionth) sign how flawed, hypocritical and corrupt the whole system is. Not just Wall Street, not just The Big Corpo-Social-Media-Censors, not just the rigged freely-elected politicians, but the sum of all moving parts. Denying, they play together against the average people, is no longer naivety - it is stupidity. If the professors in the Economics University I visited (back in early 2000), knew this will happen, they would have ripped and ate their own books (and probably turn to other field of study like potato farming or so...).

FinCEN Aftermath

: money, December 14 2020

As expected, the biggest money-laundering scandal to date ended up with no consequences to anyone. 3 months later, my best guess is, that FinCEN are using every resource to tie-up the leak, find and punish the whistle-blowers, rather than doing their actual job of hunting bad people. Curiously, last week (11 Dec 2020), the US Senate passed the "National Defense Authorization Act (NDAA)", which actually includes some measure for fighting back. After quick check, I saw that this bill is voted annually and primarily targets the military expenditures and their handling ... which the current president, Mr.Trump, threatens to veto, because (...yeah, it gets even better...) it also shield social media companies from liability for content that users post on their platform. Apparently some sly congressmen tucked way in the back of it, the minuscule regulation against the so called "shell companies".

Definition:
Shell companies are companies without active business operations or significant assets. They can be set up by business people for both legitimate and illegitimate purposes. Illegitimate purposes for registering a shell company include hiding particulars of ownership from the law enforcement, laundering unaccounted money and avoiding tax.
What changes?
FinCEN has to report to the Treasury Department when they detect foul play.
FinCEN has to improve its tech capabilities ("why our ITs are just 3...oh wait, all the good ones make 6-digits in California").
The Justice Department would have to file yearly reports on why does it give "free pass" to the banks.
And the main one: the companies have to disclose who owns and/or profits from them. This was first proposed in 2008, but in US there is a perfectly legal form of bribing, called "lobbying", which crushed any previous attempts.
At present, anonymous shell companies can be set up with less disclosure than what is required to get a library card. These companies can be used to hide wealth or launder the proceeds of crime through legitimate assets.
Before you get too excited and wonder if the world finally starts getting changed for good, let me bring you back to the harsh reality - there is a back door. If your company has more than 20 employees and $5 million in annual sales (yes, "sales", not "profit"), it is an exempt from the law. Thus making a seemingly good bill, just the next "door in the field". $5mil is a pocket change for the big players. They will not even notice if such amount is missing from the account. Circumventing the new rule will be a child play for any accountant, who can think and breathe at the same time.

FinCEN leaks Blitz

: money, September 22 2020

Do you remember how in April 2016 ~215K offshore accounts leaked in Internet ... and nothing happened? Yeah, nothing - no imprisoned people, no investigations, no penalties. I am talking about the normal things that will happen to you, almost immediately, if you cheat with $1.3 billion. Well, you can mark my words now - nothing will happen again, as we are heading for the biggest leak to date. And this time we are talking about $2 trillion.
The good guys from the BuzzFeedNews.com received an incredible trove of documents and analyzed it for us. I am writing this, hoping it is not all "fake news". Here are the main articles, and I think there will be more in the upcoming days:
Dirty money pours into the world's most powerful banks
We Got Our Hands On Thousands Of Secret Documents. Let's Break Them Down.
Billions in dirty money rolled through Deutsche Bank.

The BuzzFeed's articles are pretty big, I do not expect many people will read them thoroughly, but I did. As the title shows, you will get the main points and my thoughts on what we have so far. Future updates may follow. Let's go!

FinCEN is an agency, within the US Treasury Department. Its main task is to fight money laundering. When banks operate, they are obliged to file "suspicious activity reports" (SARs). This does not take away the responsibility of the banks to shut down such activities. Banks have their own systems and statistical methods to identify financial crimes, and, as you can imagine, unless tampered with, they are very effective. Money laundry is a big problem. When the dirty money hit the normal economy, all things, metrics and principles become twisted. Suddenly the house prices rise with 15% YOY and things become more and more unreachable for the average Joe.
So FinCEN receives the reports, but claims it has no capacity (lack of employees, political pressure) to analyze them all. BuzzFeed received 2100 SARs with information dating back to 1999, but primarily 2011-2017. They gathered a bunch of journalists, tried some automatic analysis, realized it's not going to work, as the SARs are just random mess of data, and then sat down, pulled out the data and structured it by hand.

Last year (supp.2019), banks and other financial institutions filed more than 2 million SARs. Government investigators who combat money laundering told BuzzFeed News that the sheer volume of SARs made it impossible to pay close attention to them all.

The documents are secret - the procedure is part of some gov-to-bank agreement and neither banks, nor the authorities admit they have such. Nobody wants to lose customers, of course! Government also presses the investigators to stand down. Hurting major players may hurt the economy...and the cycle closes.
Ok, hold on a second! If in 2000 SARs you see $2 SUSPICIOUS TRILLION, what will come out if you go through all 2mil SARs? Who are the bad boys? Below are just the major players:
Institution # SARs Amount Flagged
Deutsche Bank 982 $1.3 trillion
Bank of New York Mellon 325 $64 billion
Standard Chartered 232 $166 billion
JPMorgan Chase 107 $514 billion
Barclays 104 $21 billion
HSBC 73 $4.4 billion
Bank of China 35 $1.3 billion

And the largest SARs - again a small snippet:
Aug 2014 JPMorgan Chase $335 billion
Aug 2014 Deutsche Bank $111 billion
Oct 2013 Deutsche Bank $94 billion
Apr 2016 JPMorgan Chase $81 billion
Aug 2014 JPMorgan Chase $76 billion
Apr 2014 Deutsche Bank $74 billion
May 2013 Standard Chartered $68 billion

Who transferred money? Mafia (mostly russian), terrorist, drug dealers, fraudsters - basically everyone who had enough dirty money to be able to sustain the heavy bank fees and possible bribes. Aren't the CEOs afraid this will get them to jail? No, there was not a single big fish on the hook. Not even charges. Banks even calculated what amount they will pay in a possible lawsuit "agreement" beforehand. They just played "stupid", because they knew they will get away with it. And the penalties are nothing, compared to the gains.
"the largest money laundering operations occur with the cooperation of the financial institutions, or at least some officers within those institutions. The lack of money laundering enforcement had nothing to do with a lack of evidence of suspicious transactions, but a lack of interest by political and law enforcement leadership.
Michael German, a former FBI special agent
For the people with really short memory - JPMorgan Chase and Citigroup (SARs from Citibank) basically caused THE BIG market crash in 2008 and was bailed-out with $25B each(!); Bank of America Corp (SARs from Bank of America) got $15B; Deutsche Bank got $12B in 2008, $2B in 2011 from ECB and a couple of billion from the German taxpayer every year since.

BuzzFeed journalists focus on Deutsche Bank, because of the insane cash flow from their russian offices and the interesting facts around their CEO - Christian Sewing (2018-to-date), who was head of the bank's audit division during the events. He had such an amazing career development, it is just worth googling alone - will not spoil it for you.
Some other interesting topics:
- The collection does not include any SARs about Trump's finances. I am pretty sure journalists put a lot of extra effort on digging something, but they got "only" a former Trump's campaigner and a Pacific casino, run by his former employee.
- Russian laundromat - UK-based company lends money to another, guaranteed by Russian or Moldovan companies, then it gets sued in Moldova, then the russian companies "have to transfer" money to the UK-based bank
- $10 billion mirror trading scheme - buy shares in Russia and sell the stock to one of the European shell companies you own (via Deutschebank)
- DBank hires Deloitte auditors - "independent check" shows "all green" in Moscow's office (guess who was Managing the Risk in DB at that time)
Deloitte also found that the bank's transaction monitoring software had issued 108 alerts about the mirror trading companies between 2011 and 2015. Nonetheless, during that time Deutsche kept the transactions moving.

- Currently all banks deny any allegations and claim their anti-fraud procedures are top-notch. Deutschebank's official said this information is nothing new, it is already shared with the authorities and DB has paid all "agreements".
- In 2012, HSBC was fined $2B for making shady business with countries like Sudan and Myanmar (apparently banned in US). SARs show that almost nothing changed afterwards. I guess that nowadays "minus $2B" is almost nothing for a big bank.

All things considered, I believe we are having just a glimpse at the tip of the iceberg. No prosecution will follow. No CEOs will go to jail. The story will be slowly buried and forgotten. I remember the time when the movie villain demanded "3 million dollars!" or he destroys the world...boy things changed!