Unmasking the Men Behind Zero Hedge, Wall Street’s Renegade Blog


Bloomberg

The veil is lifted on a secretive website.

Brad Pitt as Tyler Durden in Fight Club, 1999. Source: 20th Century Fox Film Corp./Everett Collection

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Colin Lokey, also known as “Tyler Durden,” is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.)

After more than a year writing for the financial website Zero Hedge under the nom de doom of the cult classic’s anarchic hero, Lokey’s going public. In doing so, he’s answering a question that has bedeviled Wall Street since the site sprang up seven years ago: Just who is Tyler Durden, anyway?

The answer, it turns out, is three people. Following an acrimonious departure this month, in which two-thirds of the trio traded allegations of hypocrisy and mental instability, Lokey, 32, decided to unmask himself and his fellow Durdens.

Lokey said the other two men are Daniel Ivandjiiski, 37, the Bulgarian-born former analyst long reputed to be behind the site, and Tim Backshall, 45, a well-known credit derivatives strategist. (Bloomberg LP competes with Zero Hedge in providing financial news and information.)

In a telephone interview, Ivandjiiski confirmed that the men had been the only Tyler Durdens on the payroll since Lokey came aboard last year, but he criticized his former colleague’s decision to come forward.

He called Lokey’s parting gift a case of sour grapes. Backshall, meanwhile, declined to comment, referring questions to Ivandjiiski. A political science graduate with an MBA and a Southern twang, Lokey said he had a checkered past before joining Zero Hedge. Earlier this month, overwork landed him in a hospital because he felt a panic attack coming on, he said.

“Ultimately we wish Colin all the best, he’s clearly a troubled individual in many ways, and we are frankly disappointed that he’s decided to take his displeasure with the company in such a public manner,” Ivandjiiski said.

The Schism

Ivandjiiski worked for a hedge fund before being barred by the Financial Industry Regulatory Authority in 2008 for insider trading. He didn’t admit or deny wrongdoing, the agency said. Backshall is a familiar face on financial news networks who has been quoted by media outlets, including Bloomberg. His involvement with Zero Hedge, along with that of Lokey, hasn’t been widely known.

The schism between the men sheds light on a website popular among market professionals, one that mixes detailed financial analysis with sensational headlines such as “The Coming War Will Solve Our Unemployment & Growth Problem” and “Exposed—How Two Janet Yellen Phone Calls Saved The World.”

Since being founded in the depths of the financial crisis, Zero Hedge has grown from a blog to an Internet powerhouse. Often distrustful of the “establishment” and almost always bearish, it’s known for a pessimistic world view. Posts entitled “Stocks Are In a Far More Precarious State Than Was Ever Truly Believed Possible” and “America’s Entitled (And Doomed) Upper Middle Class” are not uncommon.

The site’s ethos is perhaps best summed up by the tagline at the top of its homepage, also borrowed from Fight Club: “On a long enough timeline the survival rate for everyone drops to zero.” A paean to populism, the 1999 film is filled with loathing for consumerism and the financial system. Brad Pitt portrays Tyler Durden as hell-bent on bringing down the corrupt system of the global elite—an attitude often reflected in Zero Hedge’s content.

With that in mind, the website has argued that “pseudonymous speech” is necessary amid an atmosphere of stifled public dissent—hence the “Tyler Durden” alias was born. In earlier years, Durden was joined by “Marla Singer,” another Fight Club character, as one of the site’s most prominent authors.

“It reminds me of a successful information operation where you mix in the propaganda stories along with other legitimate stories,” said Craig Pirrong, finance professor at the University of Houston. “There are some interesting things on it, and then there are the crazy things.”

Profit Motive

Despite holding itself out as a town crier for market angst, transcripts from Zero Hedge internal chat sessions provided by Lokey reveal a focus on Web traffic by the Durdens. Headlines are debated and a relentless publishing schedule maintained to keep readers sated. Lokey said the emphasis on profit—and what he considered political bias at the site—motivated him to quit.

He pointed to the wealth of the Durdens as a factor. Ivandjiiski has a multimillion-dollar mansion in Mahwah, N.J., and Backshall lives in a plush San Francisco suburb—not exactly reflections of Pitt’s anticapitalist icon. “What you are reading at Zero Hedge is nonsense. And you shouldn’t support it,” Lokey wrote in an e-mail. “Two guys who live a lifestyle you only dream of are pretending to speak for you.”

Lokey adds: “Durden lives in a castle. If you’ve seen Fight Club, you know how ironic that is.”

A former “director of contributor success” at website Seeking Alpha, Lokey said he joined Zero Hedge for $6,000 a month and received an annual bonus of $50,000, earning more than $100,000 last year. His salary helped pay the rent on a “very nice” condominium on South Carolina’s Hilton Head Island, he said. Despite the compensation, he contends that he left because he disagreed with the site’s editorial vision. “Reality checks are great. But Zero Hedge ceased to serve that public service years ago,” Lokey wrote. “They care what generates page views. Clicks. Money.”

Zero Hedge founder Ivandjiiski defended the site, adding that it’s designed to be a for-profit entity. “Ultimately, the website makes money, and it’s profitable, which is also why we’ve never had to seek outside funding or any outside money—our only revenue is from advertising, always has been since day one,” he said. “Obviously, every publisher’s mission is to maximize revenue and page views, and we think that we do it in a way that is appropriate.”

Outside the Bubble

Any website’s focus on traffic and revenue certainly isn’t unusual. But Lokey said he was irked by what he saw as the hypocrisy of Zero Hedge and how it runs counter to its antiestablishment image. In the chat transcripts, Ivandjiiski refers to America’s “silent majority” as “beastly,” while Backshall acknowledges life in the U.S. is bad “outside of my bubble.”

Ivandjiiski disagreed with the suggestion that personal worth or lifestyle precluded them from donning the mask of Durden (the character who quipped “the things you own end up owning you”) to deride the prevailing order. “We’ve never said that we are pro-socialist,” he said.

Lokey, who said he wrote much of the site’s political content, claimed there was pressure to frame issues in a way he felt was disingenuous. “I tried to inject as much truth as I could into my posts, but there’s no room for it. “Russia=good. Obama=idiot. Bashar al-Assad=benevolent leader. John Kerry= dunce. Vladimir Putin=greatest leader in the history of statecraft,” Lokey wrote, describing his take on the website’s politics. Ivandjiiski countered that Lokey could write “anything and everything he wanted directly without anyone writing over it.”

Working at Zero Hedge was also exhausting, Lokey said, and typically involved early morning starts and writing as many as 15 posts a day of as many as 1,500 words each. The work didn’t stop on the weekends, either. Text messages exchanged between Lokey and Ivandjiiski, screen shots of which were provided by the latter, paint the picture of a work environment that ranged from exhilarating to exasperating.

For instance, Lokey says he’s “scared to even ask for an hour off,” while Ivandjiiski replies that “if you ever need time off for whatever reason, never hesitate to just ask.” In February, Lokey says, “I love this company and this website,” and tells Ivandjiiski “you saved my life,” expressing thanks for the job.

By April 2—the day Lokey left Zero Hedge—their relationship had deteriorated significantly, according to the messages provided by Ivandjiiski.

“I can’t be a 24-hour cheerleader for Hezbollah, Moscow, Tehran, Beijing, and Trump anymore. It’ s wrong. Period. I know it gets you views now, but it will kill your brand over the long run,” Lokey texted Ivandjiiski. “This isn’t a revolution. It’s a joke.”

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Three EM’s Crumbling—– Brazil, Turkey And Malaysia


Contra Corner / Zero Hedge

As the great EM unwind continues unabated, we’ve noted that in some hard-hit countries, the terrible trio of falling commodity prices, decelerating Chinese demand, and looming Fed hike has been exacerbated by political turmoil.

In Brazil, for instance, President Dilma Rousseff’s approval rating is at 8% and voters are calling for her impeachment amid allegations of fiscal book cooking and corruption at Petrobras where she was chairwoman for seven years. This comes as the BRL looks set for further weakness and as the country grapples with stagflation and dual deficits.

In Turkey, President Recep Tayyip Erdogan has brought the country to the brink of civil war in an effort to nullify a strong showing at the ballot box by the pro-Kurdish HDP. In the process, he’s managed to put the lira under more pressure than it might already be under and indeed, the currency is putting in new lows against the dollar on almost daily basis.

Now, we turn to Malaysia where, as we documented exactly a week ago, the situation is tenuous at best and nearing a veritable meltdown at worst. As a reminder, here’s what happened last Friday:

With some Asian currencies already falling to levels last seen 17 years ago, some analysts fear that an Asian Financial Crisis 2.0 may be just around the corner. That rather dire prediction may have been validated on Friday when Malaysia’s ringgit registered its largest one-day loss in almost two decades. As FT notes, “sentiment towards Malaysia has been damped by a range of factors including sharp falls in global energy prices since the end of June. Malaysia is a major exporter of both oil and natural gas, with crude accounting for almost a third of government revenue.” The central bank meanwhile, “has opted to step back from intervening in the market in response to the falling renminbi, unleashing pent-up downward pressure on the ringgit.” That, apparently, marks a notable change in policy. “The most immediate challenge is the limited scope of Malaysia’s central bank to step in,” WSJ says, adding that “for weeks, it tried to stem the currency’s slide, digging into its foreign-exchange reserves to prop up the ringgit and warning banks from aggressively trading against its currency.”

As you can see from the following, Malaysia’s reserves are plunging in tandem with the ringgit’s collapse:

On Thursday, central bank governor Zeti Akhtar Aziz was out reiterating that Malaysia has no plans to introduce a currency peg. That echoes comments she made last week, and along with a promise from Prime Minister Najib Razak that capital controls are not in the cards, is meant to reassure the market, where some fear the country may resort to the same drastic measures it undertook 17 years ago. Here’s Citi:

The ringgit has traded to the weakest level vs. the US dollar since the 1998 Asian crisis, weakening by 30% even though BNM’s FX reserves have fallen $35bn over the past 12 months. On an effective exchange rate basis too, we estimate that the ringgit is just 1-2% from post-crisis lows. Together with the acceleration of the currency weakness in recent weeks and the unexpected jump in July CPI inflation to 3.3% – which we think is partly on account of the weaker currency – this has led investors to question how much further this move could extend.

The proximate cause of the pressure on the ringgit has been the weakness in energy commodity prices, the strength of the US dollar, relatively weaker FX reserve cover, and growing political uncertainty in Malaysia. The pressure is also magnified by the large participation of foreign investors in local markets. Foreign investors’ holdings of debt were $54bn (government bonds alone accounted for $43.2bn) and of equities were an estimated $98bn (on market-capitalization basis) at end-July. Reports of foreign investors trimming their exposure and of local corporates responding by increasing currency hedges have thus added to market concern about the ringgit.

Investors thus continue to look for a response from Malaysian policymakers. While we admit that heavy-handed measures are not warranted yet, the absence of policy intent even to restore confidence could further feed investors’ fear. Co-ordinated comments by Prime Minister Najib (who is also Finance Minister) and BNM Governor Zeti (highlighting still sufficient reserves, ruling out capital controls or a repeg) may have been such an attempt, although in these comments they did not suggest an intention to act to reverse or limit the pressure on the ringgit.


Malaysia’s reserves stood at $94.5 billion as of August 14 and Zeti was quick to remind reporters that the country had built up its reserves “precisely for reversals.” Reversals like this:

And lest anyone should think that there aren’t political considerations at play in Malaysia just as there are in Brazil and Turkey, note that PM Najib Razak is facing calls for a no-confidence vote amid allegations he embezzled some $700 million from the country’s development fund, charges which, when reported earlier this year by WSJ, caused the ringgit to fall to its lowest level against the dollar in a decade.

“A vote of non-confidence is necessary now because Najib has made BN members of parliament beholden to him by giving them lucrative posts in the government,” former PM Mahathir Mohamad (who once called George Soros a “moron” for helping to trigger the ringgit’s previous collapse) said in a blog post on Thursday. From Reuters:

Najib, under growing pressure over allegations of graft and financial mismanagement at debt-laden state fund 1Malaysia Development Bhd (1MDB), in August sacked his deputy, Muhyiddin Yassin, replaced the country’s attorney general and transferred officers involved in the 1MDB investigation.

Mahathir, Malaysia’s longest-serving prime minister, has become Najib’s fiercest critic and withdrew support for him last year after the ruling Barisan Nasional (BN) coalition’s poor showing in 2013 elections.

“A vote of non-confidence is necessary now because Najib has made BN members of Parliament beholden to him by giving them lucrative posts in the Government,” Mahathir said in a post published on his blog late on Thursday.

“Even those who had come to me complaining about Najib’s administration before, upon being given posts in his government, have now changed their stand.”

The 90-year-old, who was once Najib’s patron and remains highly influential in the country, has called for the prime minister to step down over the 1MDB furore.

For his part, Najib says no one should attempt to “hijack his leadership” as the PM post is for Malyasian voters to “give and take away.”

And while that may be true, this will do absolutely nothing to help the country’s already precarious situation and neither will persistently low crude prices, which is why when Citi asks (in the note cited above) “Malaysian ringgit, are we there yet?”, we would have to respond “no, probably not.”

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Bonus: Stocks unhappy, nearing bear market:

Bonus Bonus: In case anyone forgot


 http://www.zerohedge.com/news/2015-08-21/mal-asia-politcal-currency-crises-converge-stocks-head-bear-market

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“Colossal Defeat” For Obama As Australia Joins China’s Regional Bank


ZeroHedge

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Australia China

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Having attacked its “closest ally” UK for “constant accomodation” with China, we suspect President Obama will be greatly displeased at yet another close-ally’s decision to partner up with the Chinese-led Asian Infrastructure Investment Bank (AIIB). As The Australian reports, “make no mistake,” the decision by Australia’s Abbott government to sign on for negotiations to join China’s regional bank, foreshadowed by Tony Abbott at the weekend, “represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia.”

As The Australian’s Greg Sheridan writes Op-Ed,

The decision by the Abbott government to sign on for negotiations to join China’s regional bank, foreshadowed by Tony Abbott at the weekend, represents another defeat for Barack Obama’s diplomacy in Asia.

The Abbott government is right to make this decision. It had well-founded concerns about the vague and unsatisfactory governance arrangements of the institution when Beijing first invited Canberra to join.

Those arrangements have ­improved since then and Australia is only signing on to negotiate terms of accession.

If the terms are no good, Australia will ultimately walk away.

Canberra’s move follows similar decisions by Britain, Singapore, India and New Zealand.

Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia.

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The Obama administration didn’t want Australia to sign up for the China-led AIIB. The Abbott government rightly feels that it owes Obama nothing.

Obama went out of his way to embarrass the Prime Minister politically on climate change with a rogue speech at the G20 summit in Brisbane.

The speech had been billed as dealing with American leadership in Asia and instead was full of ­material designed to embarrass Abbott.

Since then, the Abbott government has felt absolutely zero subjective good will for Obama.

This is an outlook shared by many American allies.

It’s important to get all the distinctions right here.

The Abbott government operates foreign policy in Australia’s national interest.

That includes full fidelity to the American ­alliance and to supporting US strategic leadership.

But the Obama administration has neither the continuous presence, nor the tactical wherewithal nor the store of goodwill or personal relationships to carry Canberra, or other allies, on non-essential matters.

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The Obama administration has tried to convince both its friends and ­allies not to join the China Bank.

This was probably a bad call in itself, but, as so often with the Obama administration, it was a bad call badly implemented.

The characteristically bad implementation has helped shred Obama’s diplomatic credibility.

The Chinese have been the US’s best friends in Asia, diplomatically. Their territorial aggressiveness in the East and South China Seas has driven Asia to embrace America’s security role more tightly than ever.

The American military are now the best American diplomats in Asia by far.

Such prestige as the US enjoys in Asia these days rests disproportionately on the shoulders of the US military.

Obama has neglected and mistreated allies and as a result Washington has much less influence than previously.

The saga of the China Bank is almost a textbook case of the failure of Obama’s foreign policy.
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As we have detailed recently, Australia is in trouble economically and its pivot to China makes perfect self-preservation sense… as Sheridan notes:

Obama treats allies shabbily and as a result he loses influence with them and then seems perpetually surprised at this outcome.

The Asian professionals in Washington regard the Obama administration as particularly ineffective in Asia.

The consensus is that the Obama White House is insular, isolated, inward-looking, focused on the President’s personal image and ineffective in foreign policy.
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De-dollarization continues… As Simon Black recently concluded, now we can see words are turning into action…

Britain and Australia might be too polite to tell the US straight up– “Look, you have $18.1 trillion in official debt, you have $42 trillion in unfunded liabilities, and you’re kind of a dick. I’m dumping you.”

So instead they’re going with the “it’s not you, it’s me” approach.

But to anyone paying attention, it’s pretty obvious where this trend is going.

It won’t be long before other western nations jump on the anti-dollar bandwagon with action and not just words.
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Bottom line: this isn’t theory or conjecture anymore. Every shred of objective evidence suggests that the dollar’s dominance is coming to an end.

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Conscious Uncouplings – When enough is enough


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Things That Make You Go Hmmm… Like Conscious Uncouplings

Across the world, the number of people who say the economic situation in their country is “bad” is climbing – despite the much-vaunted recovery we all keep hearing about from politicians.

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It seems though, as Grant Williams explains in great detail, that the voice of the people is on the rise. This is a problem, because whilst the anti-EU bloc failed to get enough seats to derail the bureaucracy of Brussels, they did win enough to create some serious waves and make it far harder to railroad through policy the next time the wheels on the wagon start to wobble… and wobble it is.

The other interesting thing to come out of the EU elections is the sheer level of antipathy towards being one big, happy European family that rages right across the continent.

A desire to NOT be part of the greater whole is hardly something new or unexpected in Europe — far from it. A quick look at the map below will tell you all you need to know.

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The map shows all the currently active separatist movements in Europe, from the more widely known Basques and Catalans in Spain that both seek secession from Spain proper to the citizens of Venice, who want out of Italy (the word ballot actually originates from the Venetian word ballotta or “little ball”), and the Cornish Nationalist Party of Southwest England, who demand independence for Cornwall.

Shameless politicians who are willing to put aside technicalities such as the truth and a voting population that is tired of the status quo and looking for a change?

The conscious uncouplings may have only just begun.
Full Grant Williams Letter below…

How to rob a bank: William Black at TEDxUMKC


ZeroHedge

Bill Black On Robbing Banks (From The Inside): “The Weapon Of Choice Is Accounting”

William Black’s no-nonsense simplification of the fraud that we call a financial system is both addictive in its clarity and stunningly concerning in its scale. Having exposed Tim Geithner as perhaps the worst Treasury secretary ever, and that “banks have blood on their hands,” the following brief discussion of ‘how to rob a bank – from the inside’ is crucial to comprehend that nothing has changed and to make matters worse, after 2009’s ‘reforms’, “the weapon of choice remains accounting” as no one knows what it occurring behind the scenes of the banks

 

In the US, our regulators have publicly embraced a “too big to prosecute” doctrine. We are restraining, underfunding and dismantling regulatory oversight in the interests of short-term stability for the status quo. Which as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.

If you can steal with impunity, as soon as you devastate regulation, you devastate the ability to prosecute. And as soon as that happens, in our jargon, in criminology, you make it a criminogenic environment. It just means an environment where the incentives are so perverse that they are going to produce widespread crime. In this context, it is going to be widespread accounting control fraud. And we see how few ethical restraints remain in the most elite banks.

You are looking at an underlying economic dynamic where fraud is a sure thing that will make people fabulously wealthy and where you select by your hiring, by your promotion, and by your firing for the ethically worst people at these firms that are committing the frauds. And so you have one of the largest banks in the world, HSBC, being the key ally to the most violent Mexican drug cartel, where they actually did so much business together that the drug cartel designed special boxes to put the cash in that they were laundering that fit exactly into the teller windows so that there would be no delay. This is the efficiency principle of drug laundering.

So these banks figuratively have the blood of over a thousand people on their hands. They are willing to fund people that murder and torture and behead folks. And they are willing to do that year after year, despite warnings from the regulators that they are doing this. And the regulators are not willing to actually take serious action until there has been “true devastation.”

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David Einhorn “I Asked Bernanke Questions, And The Answers Were Frightening”


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Ben Bernanke may be gone from the helm of the world’s most centrally planned economy, but his ample cluelessness remains. David Einhorn, president of Greenlight Capital, better known for comparing QE to jelly donuts and who recently confirmed what we have been saying for a long time that the second dotcom bubble is here, spoke with Bloomberg TV covering a wide range of topics, but what caught our attention was his synopsis of a private dinner he had with Chairsatan-emeritus Ben Bernanke, on March 26.

What he found, in his own words, is disturbing.

 

“I got to ask [Bernanke] all these questions that had been on my mind for a very long period of time, right? And then on the other side, it was like sort of frightening because the answers weren’t any better than I thought that they might be. I asked several things. He started out by explaining that he was 100 percent sure that there’s not going to be hyperinflation. And not that I think that there’s going to be hyperinflation, but it’s like how do you get to 100 percent certainty of anything?”

 

It goes without saying that only fools are 100% certain of anything, which in fact explains pretty much everything.

So is it too late to cross off the final “conspiracy theory” of the tinfoil hat list: that the entire world is led by clueless Keynesian economist fools, whose adherence to perpetatuing the broken and insolvent status quo means that the only outcome possible after this final, all-in (luckily) bubble finally bursts, is either systemic collapse or world war?  Or do we actually have to live through it before we are proven right once more?

That’s ok, we are in no rush.

Curious for more? Here is the full transcript of the key part of the exchange between Bloomberg anchors Schatzker and Ruhle, and Einhorn.

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Is The US Military Preparing For The Collapse Of The Dollar?


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It almost happened in 2008… but as this excerpt from Casey Research’s Meltdown America documentary notes, it appears the US military is preparing for the potential collapse of the US dollar. As Scott Taylor warns, “…if the carrot (of credit worthiness) is fading, and the stick (of military threat) is weak, that empire is going to come down in a hurry…” which leaves a serial economic mis-manager only one option to ‘secure’ the empire.

 

To see what the consequences of economic mismanagement can be, and how stealthily disaster can creep up on you, watch the 30-minute documentary, Meltdown America. Witness the harrowing tales of three ordinary people who lived through a crisis, and how their experiences warn of the turmoil that could soon reach the US. Click here to watch it now.

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