Monday, May 25, 2015

Memorial Day 2015

Fort Snelling National Cemetary
"...that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion--that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth." 
-Abraham Lincoln at Gettysburg, November 19, 1863

Sunday, May 24, 2015

Evans-Pritchard: "HSBC fears world recession with no lifeboats left"

Duh.
As mentioned in our intro to 2013's "Bracing for the Next U.S. Recession":
The big fear for policymakers is a recession happening before they have stopped fighting the last war.
With interest rates at the zero-lower-bound a deflationary depression would leave them with only one real option-print money. A buyers strike on U.S. debt would force the full Monty of monetization.
Back in 2008 when things were at their bleakest we linked to a couple Federal Reserve papers that laid out the "unconventional" measures. More after the jump....
From The Telegraph:
The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as economy falters 
The world economy is disturbingly close to stall speed. The United Nations has cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.
We are not yet in the danger zone but this pace is only slightly above the 2.5pc rate that used to be regarded as a recession for the international system as a whole.
It leaves a thin safety buffer against any economic shock - most potently if China abandons its crawling dollar peg and resorts to 'beggar-thy-neighbour' policies, transmitting a further deflationary shock across the global economy.
The longer this soggy patch drags on, the greater the risk that the six-year old global recovery will sputter out. While expansions do not die of old age, they do become more vulnerable to all kinds of pathologies.
A sweep of historic data by Warwick University found compelling evidence that economies are more likely to stall as they age, what is known as "positive duration dependence". The business cycle becomes stretched. Inventories build up and companies defer spending, tipping over at a certain point into a self-feeding downturn.

Stephen King from HSCB warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.

"The world economy is sailing across the ocean without any lifeboats to use in case of emergency," he said.
In a grim report - "The World Economy's Titanic Problem" - he says the US Federal Reserve has had to cut rates by over 500 basis points to right the ship in each of the recessions since the early 1970s. "That kind of traditional stimulus is now completely ruled out. Meanwhile, budget deficits are still uncomfortably large," he said....MORE

"Who owns London’s most expensive mansion?"

From The New Yorker:
House of Secrets
http://www.newyorker.com/wp-content/uploads/2015/06/150601_r26572-870.jpg
Witanhurst, London’s largest private house, was built between 1913 and 1920 on an eleven-acre plot in Highgate, a wealthy hilltop neighborhood north of the city center. First owned by Arthur Crosfield, an English soap magnate, the mansion was designed in the Queen Anne style and contained twenty-five bedrooms, a seventy-foot-long ballroom, and a glass rotunda; the views from its gardens, over Hampstead Heath and across the capital, were among the loveliest in London. For decades, parties at Witanhurst attracted potentates and royals—including, in 1951, Elizabeth, the future Queen.
In May, 2008, I toured Witanhurst with a real-estate agent. There had been no parties there for half a century, and the house had not been occupied regularly since the seventies. The interiors were ravaged: water had leaked through holes in the roof, and, upstairs, the brittle floorboards cracked under our footsteps. The scale of the building lent it a vestigial grandeur, but it felt desolate and Ozymandian. A few weeks later, Witanhurst was sold for fifty million pounds, to a shell company named Safran Holdings Limited, registered in the British Virgin Islands. No further information about the buyers was forthcoming.

In June, 2010, the local council approved plans to redevelop the house and five and a half acres of grounds, maintaining Witanhurst as a “family home.” It was the culmination of a long battle with other Highgate residents, who did not welcome such an ambitious project. Since then, Witanhurst’s old service wing has been demolished and replaced with the so-called Orangery—a three-story Georgian villa designed for “everyday family accommodation.” And beneath the forecourt, in front of the main house, the new owners have built what amounts to an underground village—a basement of more than forty thousand square feet. (The largest residential property in Manhattan is said to be a fifty-one-thousand-square-foot mansion, on East Seventy-first Street between Madison and Fifth, owned by Jeffrey Epstein.)

This basement, which is connected to the Orangery, includes a seventy-foot-long swimming pool, a cinema with a mezzanine, massage rooms, a sauna, a gym, staff quarters, and parking spaces for twenty-five cars. In late 2013, the local council approved plans for a second basement, beneath the gatehouse, which will connect that building to both the main house and the Orangery. Earlier this year, the owners also sought planning permission to extend an underground “servants’ passage.”

When the refurbishment is complete, Witanhurst will have about ninety thousand square feet of interior space, making it the second-largest mansion in the city, after Buckingham Palace. It will likely become the most expensive house in London. In 2006, the Qatari royal family bought Dudley House, on Park Lane, for about forty million pounds; after a renovation, its estimated resale value is two hundred and fifty million pounds. Real-estate agents expect that the completed Witanhurst will be worth three hundred million pounds—about four hundred and fifty million dollars.

If a vast and lavishly appointed house in Manhattan—a palace nearly double the size of the White House—were being redeveloped on the edge of Central Park, New Yorkers would want to know who lived there. Londoners are equally inquisitive, and concerted efforts have been made to uncover the identity of Witanhurst’s owners. Shortly after the house was sold, it became known—from local gossip and publicly accessible planning documents—that Witanhurst belonged to a family from Russia. Several newspapers speculated that the owner was Yelena Baturina, Russia’s richest woman, and the wife of Yury Luzhkov, then the mayor of Moscow. (Luzhkov and Baturina reportedly enriched themselves while he was in office, before Luzhkov clashed with the Russian government; she now lives in London.) Baturina denied owning Witanhurst, and in 2011 she sued the London Sunday Times for publishing an article titled “BUNKER BILLIONAIRESS DIGS DEEP.”

The Baturina lawsuit and the continued secrecy surrounding Witanhurst have intensified the guessing game. Generally, the names of homeowners in Britain are listed in the Land Registry, which can be read for a small fee. But listings for properties owned by offshore companies do not disclose individual beneficiaries. In the British Virgin Islands, records reveal merely the name of the “registered agent” of Safran Holdings—Equity Trust Limited, a local agency that holds several such positions and is connected to the company by name only—and the company’s post-office box, on the island of Tortola.

A recent investigation by the Financial Times found that more than a hundred billion pounds’ worth of real estate in England and Wales is owned by offshore companies. London properties account for two-thirds of that amount. Charles Moore, a former editor of the Telegraph, says that London’s property market has become “a form of legalized international money laundering.” For Highgate residents, however, worries about the lack of transparency in the purchase of Witanhurst have come second to a more English concern. People irritated by the construction noise and the traffic that have blighted their normally quiet neighborhood have no owner to complain to—only managers.

It might have been expected that the identity of Witanhurst’s owners would slip out, given the volume and the scale of work at the site, and the number of contractors involved. (Last year, I met a craftsman who said that he was on one of six teams of carpenters working there.) But few employees are told the owners’ names. Senior contractors who have dealings with the family or their agents have been required to sign confidentiality agreements. Guards protect the property, and cameras monitor the grounds. A woman who knows the owners advised me to “choose another story.” Stephen Lindsay, one of the real-estate agents who sold the house, spoke to me only after I agreed to leave my phone and bag in another room. He then put the family’s lawyer on speakerphone and announced that he would take the secret of Witanhurst’s ownership “to the grave.”

Witanhurst has always been an attractive place to park new money. In 1814, Joseph Crosfield, a twenty-one-year-old chemist, started a soap-and-candles business in Warrington, in the industrial northwest of England. The company was passed down to his son, George, and then to his grandson Arthur. By then, the company—now named Crosfield & Sons—was worth a fortune.
Arthur was no mere businessman: he was the 1905 amateur golf champion of France and a musician who composed many pieces for piano. In 1906, he won the parliamentary seat of Warrington, becoming a Liberal M.P. for four years. He eventually married Domini Elliadi, a fine tennis player who was the daughter of a Greek merchant. (She competed at Wimbledon and once won the Swiss ladies’ title.) In 1911, Arthur sold the family business. With the proceeds, he bought Parkfield, an elegant eighteenth-century house in Highgate.
Highgate had only recently been subsumed by London’s late-Victorian sprawl. Before then, the village of Highgate had abutted the Bishop of London’s hunting grounds to the north and Hampstead Heath to the southwest, and was situated on the main road from London to the North of England. (The notorious highwayman Dick Turpin hid out in a pub, The Flask, which faces Witanhurst.) Because of its elevation and its handsome views, Highgate became a favored place for rich families from London to build summer retreats....MUCH MORE

Swiss Mis(take?): Goats, Skiing, Chocolate and The Tallest Hotel In The World

From Drexel University's The Smart Set:

The Tower
In a spa town in the Swiss Alps, you'll find snow-capped mountains, chocolate, goats... and soon, the tallest hotel in the world.
THE TOWER
In a spa town in the Swiss Alps, you'll find snow-capped mountains, chocolate, goats... and soon, the tallest hotel in the world.
BY BERND BRUNNER
For as long as I can remember, I’ve been fascinated by skyscrapers. A poster with the skyline of Manhattan graced the wall of my childhood bedroom. And I belong to the slowly disappearing group of people who have gazed upon New York not only from the Empire State Building and the Rockefeller Center, but from the viewing platform of the vanished World Trade Center too.

Now a spectacular new project is underway in Switzerland that immediately drew my attention: a skyscraper in the middle of the mountains. The location is the village of Vals, in the canton of Graubünden. Even in multilingual Switzerland, Graubünden is remarkable: with native speakers of Swiss German, Italian, and Romansh, it is the country’s only trilingual canton. This spot in a beautiful arm of the Anterior Rhine valley is home to about 1,000 people. Approximately the same number of sheep are said to live there as well, but perhaps that’s just a rumor. The planned building will be 80 stories tall and soar 1,250 feet into the sky. That’s 23 feet higher than the Federation Tower in Moscow – which currently qualifies as Europe’s tallest building – and exactly as tall as the Empire State Building minus the antenna. However, a building now planned for St. Petersburg will come in at over 1,312 feet, reclaiming the top spot for Russia. Of course, all these structures are small potatoes compared to the world’s tallest building, which boasts 2,722 feet and is located in Dubai.


The Vals tower was designed by Thom Mayne, the principal architect of Morphosis. Mayne co-founded the firm in Los Angeles in 1972. He has taught at various Ivy League universities and at UCLA, and won the Pritzker Prize for architecture in 2005. Morphosis beat out seven other competitors for the Vals project.
As planned, “7132” – named for the town’s postal code – will be an unusually slender structure. Measuring just 101 feet long and 59 meters wide, it will stretch into the heavens like a transparent needle. A rendering of the finished building depicts a delicate, ethereal tower so barely visible against the sky that it almost appears to merge with the clouds. It’s likely that the style of illustration was chosen to make the building appear less dramatic than it will actually be in real life. In any case, it’s clear that the reflective, ultra-skinny tower will pose a real challenge for birds.

“7132” will house a hotel and about 100 luxury apartments that will command dizzying prices. Word has it that a double room will cost at least 590 Swiss francs (or $617). Some accommodations will stretch over the entire floor, providing guests with a 360-degree view. There will be a spa, gym, ballroom, library and gallery. The experience is meant to evoke the glory days of early Swiss tourism, with the legendary Badrutt’s Palace Hotel in St. Moritz. The tower will be the tallest hotel in the world – beating out the current record holder, the JW Marriott Marquis Hotel in Dubai, by 85 feet. And it is supposed to be one of the world’s five best hotels as well....MUCH MORE

Friday, May 22, 2015

The U.S. House Of Representatives Just Passed An Asteroid Mining Bill

From the Washington Post's The Switch blog:
For as long as we've existed, humans have looked up at the stars — and wondered. What is up there? Who is out there?

Now, to that list of questions we can add: And CAN I HAVE IT?

The United States has already shown its penchant for claiming ownership of space-based things. There are not one, not two, but six U.S. flags on the moon, in case any of you other nations start getting ideas. (Never mind that the flags have all faded to a stateless white by now.)

So it only makes sense that American lawmakers would seek to guarantee property rights for U.S. space corporations. Under the SPACE Act, which just passed the House, businesses that do asteroid mining will be able to keep whatever they dig up:
Any asteroid resources obtained in outer space are the property of the entity that obtained such resources, which shall be entitled to all property rights thereto, consistent with applicable provisions of Federal law.
This is how we know commercial space exploration is serious. The opportunity here is so vast that businesses are demanding federal protections for huge, floating objects they haven't even surveyed yet.
But it's actually important that we're talking about this now, because we don't want to wind up in a situation where multiple companies are fighting for the same patch of rock without having a way to resolve it. There are two key questions at stake: Who should regulate commercial space activity? And what rules should apply?

By default, the relevant authority could wind up being the Federal Aviation Administration....MORE
Mining.com has more.

Previously on the Space Cadet channel:

Dec. 9, 2014
"The Price of Gold in the Year 2160" 
Sept. 27, 2014 
"The companies vying to turn asteroids into filling stations"
May 14, 2014
Jan. 22, 2013
Here Comes Another Asteroid Mining, 3D Printing, Robotic, Start-up
Dec. 27, 2012
Asteroid Mining: "A Start-Up Sees a Gold Rush Among the Stars"
April 22, 2012
Feb 6, 2012
Oct. 21, 2011
We've been following these plans at a distance, so to speak.

A compilation image of mining equipment in space

For Sale: Long Island House Previously Owned By Zelda and F. Scott Fitzgerald

From Curbed:

F. Scott and Zelda Fitzgerald's Prohibition-Era Long Island Pad Asks $3.8M
Location: Great Neck, New York
Price: $3,888,888

It's not East or West Egg, nowhere near the same league as Gatsby's gilded mansion, but this Mediterranean home in Great Neck can lay claim to something a lot more substantial than the fictional millionaire's backstory. F. Scott and Zelda Fitzgerald called this stately 7-bed, 7-bath home from the fall of 1922 to April 1924 (Zelda nicknamed it her ""nifty little Babbitt house," a Sinclair Lewis reference poking fun at the bourgeois). Young and a bit reckless, cash-strapped yet renting a Rolls, the couple caroused as the early short stories that presaged The Great Gatsby sprung forth from a small office above the garage, inspired by the social behaviors and lavishness of Prohibition-era Long Island. Though Fitzgerald, flush from the success of This Side of Paradise, was living beyond his means, the Long Island move was meant as a money saver: their $300-a-month rent (roughly $4,000 today) was a lot cheaper than their previous stay in a Manhattan hotel suite....MORE
Proof that I make mistakes:
June 3, 2013
Our Last F. Scott Fitzgerald/Great Gatsby Post: "Living on $500,000 a Year"

"If you want people to believe your research, write it in Baskerville font?"

From Chris Blattman:
We have entered a new, unexpected landscape. Truth is not typeface dependent, but a typeface can subtly influence us to believe that a sentence is true. Could it swing an election? Induce us to buy a new dinette set? Change some of our most deeply held and cherished beliefs? Indeed, we may be at the mercy of typefaces in ways that we are only dimly beginning to recognize. An effect — subtle, almost indiscernible, but irrefutablythere. (“Mommy, Mommy, the typeface made me do it.”)

For every thousand respondents to the Times quiz, nearly five more people agreed with Deutsch’s statement when written in Baskerville’s typeface than they did when they read it in Helvetica. A typeface that nudges (to use the vernacular of experimental psychology) us to uncritical belief?...
...MORE

Reinsurance: Warren Buffett Is Pissed That You Kids Are Playing In His Sandbox (BRK)

For the first time in years we didn't present the liveblogs of BRK's annual meeting a few weeks ago.
It seems that everyone is doing it and frankly Warren's schtick is best appreciated in the portion size one would allow any insurance salesman from Omaha.

Who's piled up $72.3 Billion.

From Artemis:

Buffett bemoans reinsurance becoming a “fashionable asset class”
Warren Buffett is none too happy that reinsurance has become what he termed a “fashionable asset class”, as the fact that investors are increasingly attracted to the space has damaged his insurance and reinsurance businesses returns.

At the Berkshire Hathaway annual meeting held this weekend, Buffett discussed the difficulties that even his insurance and reinsurance empire has in the current, softened and competitive reinsurance market environment.

Competition on price has hit both of his main reinsurance companies, General Re and Berkshire Hathaway Reinsurance Group, with first-quarter results showing a pull-back on premiums written as the firms constrain themselves on underwriting of catastrophe risks.

General Re’s premiums written in property declined 16% in Q1 and the reinsurer actually fell to an underwriting loss, partly due to the impact of competition and falling prices, but also claims rates and currency effects.

“Insurance industry capacity to write business remains high and price competition for most property/casualty markets persists,” the Q1 earnings statement explains.

“We continue to decline business when we believe prices are inadequate. However, we remain prepared to write more business when appropriate prices can be attained relative to the risks assumed.”

Berkshire Hathaway Reinsurance, meanwhile, continues to constrain its capacity and volume for many property & casualty lines and especially for property catastrophe reinsurance underwriting.

“Rates, in our view, are generally inadequate,” the firm explained. “However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.”

So Berkshire clearly stands ready to increase its reinsurance underwriting if and when pricing rebounds or the firm can find the opportunities that it finds attractive and well-priced.

During the Berkshire Hathaway annual meeting shareholders, analysts and journalists get to ask Warren Buffett questions about the business, its investments and what might be coming in the future.

On reinsurance in particular Buffett was fairly negative and clearly showed that his firm is cognisant that it faces a threat from new entrants with lower-cost capital, including insurance-linked securities (ILS).
Reinsurance is “a business whose prospects have turned for the worse,” Buffett commented, adding that there’s “not much we can do about it.”...MORE
A couple of our BRK posts that may be of interest:
Insurance: "CEO FORUM: Gen Re's Tad Montross on model dependency" (BRK.A)
"Re/insurance. The engine of Berkshire Hathaway: Warren Buffett" (BRK) Plus a Special Bonus!

Insuring the Apocalypse: Warren Buffett on Global Warming (BRK.B)
In addition to See's Candies where cocoa would be a global warming canary in the coal mine, Mr. Buffett's Berkshire Hathaway owns a major property/casualty insurer, GEICO and the reinsurer of last resort, GenRe.

The utility operation owns the largest fleet of windmills in the U.S. while his railroad, Burlington Northern, is the largest hauler of coal in the country and the largest transporter of oil out of the Bakken field. There are a couple other tie-ins to climate that we've looked at over the years, some links below....

...Of the reinsurers Munich Re is the first to blame climate change for their weather related claims with industry #2 Swiss Re often following suit. The smaller Hannover Re doesn't do this. Zurich Re, along with the rest of the industry, is less vocal. Buffet's Re operations rank #3 in the world and is much better managed than Munich and Zurich so he often ends up taking risk off their hands or even lending them money.

Insuring weather over the last decade has been extremely profitable as premiums charged have been high-although declining as hedge funds and other non-traditional funders "want to get me some of that action"-and payouts on claims have been very agreeable....
And many more.

Thursday, May 21, 2015

Finance Behemoths Don't Like Volatility And Want To Regulate It Away

Volatility is great if you are halfway good at what you are doing.
On the other hand, incumbents love to use regulation to entrench their position vis-à-vis more nimble but less richly financed upstarts.

From the Washington Examiner:

Finance execs call for new regulatory tools to fight bubbles

A group of highly influential financial executives have expressed support for giving their regulators new authority to take preemptive action against potential speculative bubbles.

In a statement coordinated by the World Economic Forum, the Swiss nonprofit that coordinates the annual meeting of business leaders and politicians at Davos, 15 CEOs and other executives of top financial firms such as HSBC and BlackRock called on regulators to embrace "macroprudential" regulations.

Such rules are aimed specifically at preventing asset prices from rising out of line with economic fundamentals and risking a market crash, as happened with the U.S. housing market in 2007 and 2008. Macroprudential regulations are thought of as distinct from rules and oversight that apply to specific banks or other firms. 
While the proper use of macroprudential tools is a topic of ongoing consideration among U.S. regulators, the executives write that they have concluded that such tools are necessary "to help achieve the right balance between financial stability and economic growth."

"Macroprudential policies could support financial market stability and thus long-term investors' ability to provide risk capital to the real economy," Swiss Reinsurance Company CEO Michel Liès wrote.

The authors also acknowledged that "it is important to continue to monitor the possible unintended consequences of these regulations." The problem facing regulators is that it is difficult to distinguish bubbles from normal market movements, and that acting on the basis of limited information could harm innovation and growth....MORE

Which Came First, The Chicken Shortage or the Egg Shortage?

From Bloomberg: 

Are We Headed for an Egg Shortage?
Joe Greco, who’s been churning out cookies and cakes for 27 years, usually uses about 600 pounds of liquid eggs a week at his bakery near Chicago. Now, his freezer has seven times that amount because Greco worries that record prices are about to go even higher.

The cost of breaker eggs -- those cracked and sold in liquid form for use by wholesale bakers and restaurants such as McDonald’s Corp. -- have more than doubled in the past three weeks. The culprit behind the surge: the worst-ever American outbreak of the bird flu virus.

More than 33.5 million chickens, turkeys and other birds have been affected. Iowa, the top U.S. egg producer, was hardest hit, losing 40 percent of its laying hens. The disease prompted the government to forecast the first annual drop in egg production since 2008. Greco is concerned his 4,200-pound (1,900-kilogram) stash of liquid eggs won’t protect him from higher costs, and that he’ll have to start buying eggs still in shells to crack by hand.

“As soon as I heard about the bird flu, I knew this was going to happen,” said Greco, 47, who owns Palermo Bakery in Norridge, Illinois, near Chicago’s O’Hare Airport. He’s been racing to buy extra supplies over the past month and saw prices for the pails of liquid eggs he buys jump 28 percent last week. “After the Fourth of July, there might be another nightmare, so I’m still shopping around to see if there are better prices.”

Highly pathogenic avian influenza spread rapidly through parts of the Midwest in the past two months, and Iowa lost about 23 million hens. Post Holdings Inc. has warned that bird flu will hurt fiscal 2015 earnings at its food-service unit, while countries in the Middle East and Asia have placed restrictions on shipments of U.S. poultry.

Falling Output
The U.S. Department of Agriculture on Tuesday said that domestic egg production will drop this year, reversing an April forecast for an increase. Bird flu will also limit turkey supplies, though they’re still expected to climb from 2014. Total annual poultry and egg output is valued at about $48 billion....MORE
Previously in the ellipsoid series, in addition to posts on half the Imperial Russian Fabergé  eggs we have:

Mix Butter, Onions, Cheese and Eggs. Add Electricity...
For some reason, this post from Freakonomics got me thinking about the Chicago Butter and Egg board, the Butter, Cheese, and Egg Exchange of New York and Title 7, Ch. 1, § 13–1 U.S. Code*:...
The Chinese Egg Derivatives Roll Out
"Chart of the Day: Real Egg Prices, 1890-2011"
 What came first Egg or Chicken? Solution Through Granger Causality

and quite a few more.

Finally, here's King Oliver's Creole Jazz Band featuring Bessie Smith and Louis Armstrong.

Deflation: 3D Printed Houses For $5000

From ZeroHedge:

Chinese Firm Reveals World's First 3D-Printed Five Story Apartment Building
While China's stock market continues levitating at an ever more amusing pace, this is happening at the expense of China's far more important housing market, which sadly for three-quarters of China's population (in the US 75% of household assets are in financial products, in China: in real estate) continues to deflate at a rate faster than US housing in the aftermath of Lehman. And for better or worse, Chinese home prices are likely set to drop even more, and not due to something as arcane as glitches in fiscal or monetary policy, but something far more tangible: technological advances, and specifically - 3D printed houses.

Meet WinSun: the Chinese company has been documented to print 10 complete houses in 24 hours, using a proprietary 3D printer that uses a mixture of ground construction and industrial waste, such as glass and tailings, around a base of quick-drying cement mixed with a special hardening agent. But while this in itself is impressive, the punchline is the cost: the houses can be produced for under $5,000, which means that if adopted widely, 3D printing can lead to a collapse in prices of new home construction across China, which while good for new buyers could be catastrophic for the economy and the banking sector where nearly $30 trillion in commercial loans are collateralized almost entirely by China's overinflated housing sector.
Not content with building single-family houses (and WinSun's own office), WinSun recently made history when it demonstrated the world's first entirely 3D-printed five-story apartment building and a 1,100 square metre (11,840 square foot) villa, complete with decorative elements inside and out, on display at Suzhou Industrial Park....MORE

Big Money: Uber Guts Carnegie Mellon Robotics Lab To Hire Autonomous Car Developers

Raising money at a $600 illion zillion fafillion valuation allows you to buy pretty much anything.
The way this is going to pan out is: you won't be able to own the vehicle but its use will be mandated. The car is autonomous but the people aren't.
Mark my words.

From The Verge:
This January, as much of the world was getting over its post-holiday hangovers, people began disappearing from Carnegie Mellon University's robotics center. At first it was only a few individuals, mostly software developers. Then it became an entire team, and eventually the group included the center's director.
They weren't going far.

Just around the corner, Uber had set up shop in a renovated building that used to be a chocolate factory. Most people at CMU's National Robotics Engineering Center (NREC) didn't even know it yet, but in a building that shared the very same parking lot, the ride-hailing company had embarked on a multi-year project to replace human drivers with computers. And to do that, they'd need all the help they could get. So Uber got to work snapping up some of the company's most talented staffers.

"They took all the guys that were working on vehicle autonomy — basically whole groups, whole teams of developers, commercialization specialists, all the guys that find grants and who were bringing the intellectual property," recalls a person who was there during the departures. "These guys, they took everybody."
All told, Uber snatched up about 50 people from Carnegie Mellon, including many from its highest ranks. That's an unusually high number of people to leave at once, and accounted for about a third of the staff NREC had at the end of last year....MUCH MORE

Uh Oh: An Energy Company Is The #1 Crowdfunded Co. In CNBC’s Crowdfinance 50 Index

From Forbes:
Although oil prices have been trending upwards in recent weeks, many producers are still cautious and have cut back on exploration and drilling operations until prices rebound further. And yet it is an energy company, Ascenergy, that is currently ranked #1 on CNBC’s Crowdfinance 50 Index and has raised more than $3.5 million with another $2 million committed. This three-year-old energy startup has secured more financing than companies that operate in such hot areas as technology, healthcare or organic food.

Serial entrepreneur and founder and CEO of Ascenergy, Joey Gabaldon, tells us how he did it:
On choosing crowdfunding as a financing mechanism: We started with a “friends and family” offering in 2013 and raised about $900,000. Then we chose crowdfunding because it can be a very fast route to market without the expenses associated with other methods of fundraising. Most broker-dealers, for example, charge considerable upfront fees, monthly fees and success fees, while many crowdfunding sites charge nominal monthly fees from $100 to $300.

When selecting sites, we spoke with several other entrepreneurs, attended crowdfunding workshops and conferences and spent about a month reviewing more than 100 sites to find the three that we decided to work with. We started in July 2014 with Equitynet and Crowdfunder and then added Fundable.

We chose these sites because they are among the leaders in the crowdfunding industry. Crowdfunder has some excellent features to create a social buzz across their network, such as linking current investors to the offering. This provides transparency and “social proof” of the validity of the offering. They also periodically send newsletters on highly rated, vetted companies. Equitynet has other strengths, such as multiple ways to sort deals based on popularity, location, industry and funding traction. They also have a good business plan feature that helps investors vet the company....MORE

The Last Word On The Sharing Economy: Actually, The Emperor Has Some Very Nice Clothes, It's The Crowd That Has To Go Naked

Wow, just wow.
I am, he said modestly, reasonably au courant with most of the issues and still am dumbstruck by this mini tour de force.
From FT Alphaville:

The sharing economy will go medieval on you
In Paris this week, at the Ouishare Fest, the great and the good from Europe’s sharing economy have been delving deep into what it means to be running a collaborative business model within a capitalist framework. Are the two even compatible? Or is there a fundamental conflict at the heart of an industry that preaches collaboration but, due to being radically commercialised by venture capital money from Silicon Valley, also needs to profiteer from the goodwill of others if it’s to remain viable?

For the most part it’s a hypocrisy the community is trying to address. The $1bn elephant in the room — the fact some aspects of the sharing economy are becoming the very thing they set out not to be — has basically become too enormous to ignore.

It all comes down to how these web 3.0 businesses are structured. Most models focus either on leveraging networks of existing resources, capital and volunteers then charging rents for platform use or on forging platform monopolies that lock-in users so that their data can then be monetised.

For now, the uncomfortable truth is that the sharing economy is a rent-extraction business of the highest middle-man order.

The other (increasingly less) secret dirty truth, as Jeremiah Owyang, industry analyst at Crowd Companies noted in his speech at the festival on Wednesday, is that for the most part the sharing economy is owned by Silicon Valley’s 1 per cent.

While it’s definitely no secret that venture capital has been flooding into the sector, the numbers as Owyang puts it, already far outweigh the sums that flowed into the web 2.0 social media boom at this stage.
Owyang’s analysis calculates that $12.7bn has now been invested in 232 sharing economy start-ups, over the course of 653 funding events, with an average value of $10m per event. Average funding per start-up is estimated to be $54.75m. He adds that most of the money has been raised in the last year or two meaning we’re only at the beginning of what is usually a five year cycle — at the end of which VCs will want their money back.

The big unicorns in this space, car-riding apps Uber and Lyft, and room-renting site AirBnB, skew the data a lot, but even when these are removed we’re left with an average total funding of $35.9m.

Accordingly, Owyang says, if these companies are to save face, they should follow public listing strategies like those deployed by the online craft platform Etsy, which also happens to be a B corporation. Etsy offered its providers and partners with an early opportunity to buy up to five per cent of discounted stock.
As Owyang has observed in blog posts:
“This was a smart move for the company, as it fosters one of the highest form of loyalty with its community: shared destiny. As Etsy performs well in the market, creators who purchased the shares benefit as well. Those creatives have already seen a 39% increase in the value of those shares since the IPO.”
But Owyang is also optimistic that capitalism will find a solution to much of the dichotomy at the heart of the space. With time, he notes, competition will force companies to improve on worker and user rights. And it’s unclear for how long being an asset-light operation will remain an advantage, especially if and when incumbents step up their game.

The view from Indy Johar, social venture specialist and founder of Project00, however, was more nuanced. Many of these companies, Johar notes, are entirely new species of corporations. If not for their intrinsic monopolistic nature and ability to”lock-in” users, many might have no value at all....MUCH MORE
http://cysion.be/blog/wp-content/uploads/2012/05/DSC_0026.jpg
Old school rent extraction device

Wednesday, May 20, 2015

That Time A Princess Dueled A Countess Over A Floral Arrangement....Topless

From io9:
When we think of historical duels, we may tend to imagine two men handsomely dressed wielding pistols or swords over some offense to one party’s honor. One particular duel, however, presents a very different picture of honor battles. Not only was it between two women; it was between two women fighting topless.

Atlas Obscura has been running a series of short videos about unusual duels, and the first video in the series offers a brief account of an 1892 duel between two Viennese noblewomen, Princess Pauline von Metternich and Countess Anastasia Kielmannsegg.

The rivalry between “Princess Paulina” and the Countess Kielmannsegg was apparently so well known that it was documented in the Vienna society pages of the British women’s magazine The Lady’s Realm. In one issue, the magazine reported, “The Countess Anastasia, who is Russian by birth, is very ambitious, and has a great talent for arranging entertainments of all kinds, and during the mourning of the Princess Paulina she has come more to the front than ever and has been most indefatigable. She is young enough to be the daughter of her rival in good works, and, like her, is possessed of an untiring energy.”

In the summer of 1892, Princess Pauline was the Honorary President of the Vienna Musical and Theatrical Exhibition and Countess Kielmannsegg was the President of the Ladies’ Committe of the Exhibition, and the two clashed over some of the arrangements for the Exhibition. (Several sources claim it had something to do with the floral arrangements.) Heated words were exchanged, and the two women agreed to settle their differences with a duel.

Robert Baldick, in his book The Duel: A History of Duelling, explains that women sometimes had male champions fight on their behalf in duels. However, in late 19th century Europe, there was a movement toward encouraging “new women” to fight for themselves. (He cites the example of Séverine, a female journalist who had a colleague fight for her in a duel to defend an article she had written. She was censured by the Paris League for the Emancipation of Women.) Gisèle d’Estoc (who herself supposedly dueled with another woman, actress Emma Rouër, and inspired Emile Bayard’s lithograph “Une Affaire d’Honneur” [NSFW]) said that a woman who employed a male champion was committing a “deed of inferiority.”...MORE incl. video.

"Why Is Oil Price So Stubbornly High, Asks Goldman Sachs"

July WTI $58.84 up 85 cents.
From Barron's Asia Stocks to Watch:
Goldman Sachs has a problem with the oil rally.

In a morning note, the oil bear tried to explain why we are seeing a recent rally even though its fundamentals are bad. Analysts Damien Courvalin and Jeffrey Currie talked about seasonality and the dollar:
Calling the timing for prices to decline is challenging as we approach a period of seasonally stronger demand and potential China SPR fill. Further, the oil rally has occurred along with other macro reversals such as a rising Euro and a surprisingly large intraday inverse correlation between oil and the dollar since early April.
So the recent oil rally is driven by the dollar. On Tuesday, WTI fell 3.65% to $57.26 while the dollar index rose 1.13% to 95.29 after the European Central Bank‘s Benoit Coeure said that asset purchases would be accelerated in May and June before the Europeans go on vacation.

But Goldman Sachs believes that the price of oil will go back to the first-quarter low of $48 per barrel (Brent) by this fall. Goldman has found that U.S. shale gas production cost has now fallen to $60 per barrel. As long as WTI remains near $60 per barrel, there is incentive for US producers to ramp up production and venture capital to pump money into the industry:...MORE
OilPrice's story starts with the headline:
Goldman Sachs Predicting $45 Oil By October

"Silicon Valley Is a Big Fat Lie"

Comparing the geniuses of old Silicon Valley, for example (ca. 1993), Nvidia, "Nvidia Wants to Be the Brains Of Your Autonomous Car (NVID)", who make the chips that will go into the world's fastest supercomputer with the list of names currently on offer:
Bitly, Borkly, Barnly, Molestly, Strinkingly, Happily, Crappily, Maply, Morply, Dottly, Dootly, Godly, Angrily.
And you almost want to cry. See also after the jump.

From Gentlemen's Quarterly:
We're forever thankful to Silicon Valley for giving us the iPhone, omnipotent search engines, and swipe-simple hookups. But now that America's most vaunted industry has also become its most self-satisfied, Silicon Valley is veering toward fall-of-Rome territory. Which is why it needs to blow up these seven myths about itself before it's too late

I think my life is better because of my iPhone. Yours probably is, too. I'm grateful to live in a time when I can see my baby cousins or experience any album ever without getting out of bed. I'm grateful that I will literally never be lost again, so long as my phone has battery. And I'm grateful that there are so many people so much smarter than I am who devise things like this, which are magical for the first week they show up, then a given in my life a week later.

We live in an era of technical ability that would have nauseated our ancestors with wonder, and so much of it comes from one very small place in California. But all these unimpeachable humanoid upgrades—the smartphones, the Google-gifted knowledge—are increasingly the exception, rather than the rule, of Silicon Valley's output. What was once a land of upstarts and rebels is now being led by the money-hungry and the unspirited. Which is why we have a start-up that mails your dog curated treats and an app that says "Yo." The brightest minds in tech just lately seem more concerned with silly business ideas and innocuous "disruption," all for the shot at an immense payday. And when our country's smartest people are working on the dumbest things, we all lose out.

That gap between the Silicon Valley that enriches the world and the Silicon Valley that wastes itself on the trivial is widening daily. And one of the biggest contributing factors is that the Valley has lost touch with reality by subscribing to its own self-congratulatory mythmaking. That these beliefs are mostly baseless, or at least egotistically distorted, is a problem—not just for Silicon Valley but for the rest of us. Which is why we're here to help the Valley tear down its own myths—these seven in particular.

Myth #1: Silicon Valley Is the Universe's Only True Meritocracy
Everyone in Silicon Valley has convinced himself he's helped create a free-market paradise, the software successor to Jefferson's brotherhood of noble yeomen. "Silicon Valley has this way of finding greatness and supporting it," said a member of Greylock Partners, a major venture-capital firm with over $2 billion under management. "It values meritocracy more than anyplace else." After complaints of the start-up economy's profound whiteness reached mainstream discussion just last year, companies like Apple, Facebook, and Twitter reluctantly released internal diversity reports. The results were as homogenized as expected: At Twitter, 79 percent of the leadership is male and 72 percent of it is white. At Facebook, senior positions are 77 percent male and 74 percent white. Twitter—a company whose early success can be directly attributed to the pioneering downloads of black smartphone users—hosts an entirely white board of directors. It's a pounding indictment of Silicon Valley's corporate psyche that Mark Zuckerberg—a bourgeois white kid from suburban New York who attended Harvard—is considered the Horatio Alger 2.0 paragon. When Paul Graham, the then head of the massive start-up incubator Y Combinator, told The New York Times that he could "be tricked by anyone who looks like Mark Zuckerberg," he wasn't just talking about Zuck's youth.

If there's any reassuring news, it's not that tech's diversity crisis is getting better, but that in the face of so much dismal news, people are becoming angry enough and brave enough to admit that the state of things is not good. Silicon Valley loves data, after all, and with data readily demonstrating tech's overwhelming white-guy problem, even the true believers in meritocracy see the circumstances as they actually are.

Earlier this year, Ellen Pao became the most mentioned name in Silicon Valley as her gender-discrimination suit against her former employer, Kleiner Perkins Caufield & Byers, played out in court. Although the jury sided with the legendary VC firm, the Pao case was a watershed moment, bringing sunlight and national scrutiny to the issue of unchecked Valley sexism. For every defeated Ellen Pao, we can hope there are a hundred other female technology workers who feel new courage to speak up against wrongdoing, and a thousand male co-workers and employers who'll reconsider their boys'-club bullshit. But they've got their work cut out for them.

Myth #2: Silicon Valley Is Bringing Us Closer Together
Facebook's stated mission, it reminds us ceaselessly, is to "connect the whole world"—a sappy global village philosophy that dovetails nicely with data mining and targeting ads. As a verb, connect pulls a lot of freight for start-ups every day. There are companies to connect you to other companies, connect you to your neighbors, connect you to the grocery store, and connect you to your increasingly fat ass. There are apps to connect you to your own family.

But the marketing line that most precisely captures the Valley's social attitude isn't Facebook's—it's GrubHub's. A recent tag for the food-delivery firm reads "Everything great about eating, combined with everything great about not talking to people." A New York subway ad for Seamless (which merged with GrubHub) reads "Your favorite part of having a smartphone is never having to call anyone."

The real undercurrent of start-up strategizing isn't socialization—rather, it's the opposite: Social anxiety is the primary economic force in California today. The tech economy is pushed forward not by a desire to meet new people but by a desire to avoid human contact at all costs—unless it's to-your-doorstep on demand. Uber excuses you from the subway, Seamless obviates a phone call, and Tinder lets you navigate the faces you might've met at a bar if you'd had the motivation to leave your apartment. Uber and Lyft have brought thousands of new people from our communities into our lives—but only as our chauffeurs. The brightest and buzziest apps aren't about connecting me to you, but rather about never forcing us to acknowledge that anyone else exists in real life as anything but the help.

What new human contact these start-ups actually do foster is barely human contact at all—everything is mediated through an algorithm, a button, a swipe, or a GPS beacon. The Uber is here, we'll say, pointing at a person in a car. A TaskRabbit might help you set up your furniture, a person synonymous with the corporate brand. Even apps like Instagram, meant to be used between pals, have turned into a sluice box for likes and affirmation. When even our genuine friendships are being quantified, what hope can we possibly have for treating labor as more than a pack of pixels?

Myth #3: Younger Is Smarter, Safer, and Inarguably Better
Silicon Valley speaks constantly of "the Next Mark Zuckerberg," by which people mean "the Next Almighty Child-God." Mark Zuckerberg was, of course, only 19 years old when he flipped the switch on TheFacebook.com in his Harvard dorm. That's impressive! Only a few years later, he became the world's youngest billionaire....MORE
Silicon Valley's Stupid Name Problem, Visualized

Is there a potato conspiracy in Turkey?

Not sure how to trade this, outside of shipping physical.
From Al Monitor's Turkey Pulse:


A vendor sells potatoes and other vegetables to a customer in an open market in central Ankara, Feb. 5, 2014. (photo by REUTERS/Umit Bektas)
Potatoes are not to be taken lightly. In the 1840s, the history of a nation was swayed when disease ravaged Ireland’s potato crops and the resulting famine reduced the country’s population by some 25%, as a million people perished and at least another million emigrated during the seven years now known as the Great Famine, the Potato Famine or Gorta Mor in Irish.

In 1996, I was among journalists who accompanied Turkey’s parliament speaker on a visit to Ireland. Irish officials spoke with gratitude about the three grain and potato-laden ships the Ottomans sent to Ireland in 1847 as the Great Famine plagued the country. During the visit, a plaque of gratitude for the Ottomans was placed on the historic town hall building in Drogheda, where the aid ships had arrived.

Turkish potatoes, which helped relieve the Irish famine, are now feeding people in war-torn neighboring countries. Turkey’s potato exports rose to 300,000 tons in 2013 as the demand from Syria and Iraq soared. Exports to the two countries are still continuing today.

The reason for the potato’s appeal in times of war and famine lies in its nutritive value as a rich energy source. The potato helps relieve fatigue, meets the body’s water requirements, detoxifies blood from the chemical residues of air pollution, radiation and pesticides, and helps cell renewal.

But amid the increase in exports, the potato output in Turkey declined, sending prices skyrocketing on the domestic market. The origin of Turkey’s potato crisis lies in the overproduction in 2012, Semsi Bayraktar, head of the Turkish Agricultural Chambers Union, explained in an interview with Al-Monitor.

Bayraktar said potato production hit a five-year high of 4,795,000 tons in 2012, well above Turkey’s annual consumption of some 4 million tons, sending prices as low as 0.3 Turkish lira per kilo (about 15 cents at the time). Loads of crops were left unsold and then used to make fodder. Reeling from huge financial losses, many farmers abandoned potato cultivation the following year, bringing the 2013 produce down to 3,948,000 tons. In the meantime, exports began to increase, driven mainly by Syrian and Iraqi demand, which led to a shortage and climbing prices on the domestic market.

The prices fluctuated between 1 and 3 Turkish lira in 2013, hit 4 and then retreated to 2 to 3 lira in 2014 before climbing to 5 lira last month.

Bayraktar said he expected the prices to fall in the coming weeks. “The produce had fallen in 2013 after potato plantations shrank following marketing problems the previous year. In 2014, adverse weather conditions kept the produce at 4,166,000 tons. Then in January 2015, frost hit the fields. So, the decrease in the crop has been pushing the prices up over the past two years. But now the new harvest season has arrived. The prices will begin to fall by themselves. Allowing potato imports at this time will harm producers,” Bayraktar said.

The government has blamed the rising prices on hoarding, but this alone cannot explain the shortage....MORE

UPDATED--World's Largest Solar Co's Stock Suspended After 47% Plunge

Update below.
Original post:

Score one for the Financial Times.

March 25, 2015
Stock Manipulation In the World's Largest Solar Company 
Alternate headline: "How to Do Business Journalism."
Seriously.
If the writers were US based, this reporting would be up for a Pulitzer....
March 26, 2015
Follow-up To "Stock Manipulation In the World's Largest Solar Company"

"...Hanergy: stock manipulation claims are mere 'innuendo'..."
...The FT story, being the FT, actually left open the complex-chaotic system possibility of  something akin to spontaneous chaotic granular mixing:*
....The FT examined 140m individual trades from top listed companies in Hong Kong to explore the soaring share price of what until last year was a little known small-cap solar company. 

Nothing within the data explains why the HTF surge happens. But analysts, who examined the FT findings, as well as the raw data, laid out three possible scenarios: market manipulation by an unknown trader, an algorithmic trading program is at play, or it occurs randomly....
* "There are several types of instabilities in fluid mechanics that lead to spontaneous chaotic mixing and intricate patterns. Classical examples include the Kelvin–Helmholtz instability1, 2 in shear layers, the instability of Taylor–Couette flow between rotating cylinders3, 4 and the Rayleigh-Bénard instability in thermal convection5. More recently, a variety of two- and three-dimensional chaotic mixing phenomena have been observed in other geometries6, 7, 8, 9...."
-Nature,  Nature 397, 675-678 (25 February 1999)
May 20, 2015
Hanergy shares suspended after 47% plunge
 
Shares in Hanergy Thin Film Power plunged 47 per cent before they were suspended in Hong Kong after the Chinese solar equipment supplier’s chairman missed the company’s annual meeting.

After a vicious reversal of a share price surge which had made chairman Li Hejun one of the richest men in China, HTF’s shares were halted on Wednesday at HK$3.91, having opened at HK$7.32. The suspension was requested by Hanergy pending an announcement. No other information was given.
HTF’s public relations company confirmed that Mr Li, who is the group’s majority shareholder, did not attend Wednesday’s annual meeting in Hong Kong, although other senior executives, including Frank Dai Mingfang, chief executive, and Eddie Lam, finance director, were present.

David Webb, a corporate governance activist in Hong Kong, said it was unusual, but not unknown, for chairmen to miss AGMs. “It’s a positive thing if a chairman does attend given he probably has the deciding vote on the date of the AGM in the first place,” he said.

TL Chow, an external spokesman for Hanergy, confirmed Mr Li did not attend, adding: “He had something to do”....MUCH MORE
Update:
FT Alphaville, naturally enough, has a post on Hanergy which I had not gotten to when posting the above:
 (confession: yes, I sometimes read the paper before the flagship blog)
“He had something to do”
in which Dan McCrum points to an earlier article which is spongeworthy worth a reiteration:
Breakneck growth of Hanergy raises questions - FT.com

Tuesday, May 19, 2015

Used Cigarette Butts Offer Energy Storage Solution/Dengue Fever Control

From Science Daily:
Date:
May 15, 2015
Source:
ResearchSEA
Summary:
Scientists have developed a new way to store energy that also offers a solution to a growing environmental problem. 
 
In addition to their energy storing potential, cigarette butts may one day be used to control dengue fever. Researchers found that female mosquitoes actually prefer laying eggs in an environment that contains cigarette butts over a butt-free environment. What's more, the researchers observed that exposure to cigarette-butt waste has "detrimental effects on the [fertility] and longevity of [mosquito] offspring." Credit: © vvoe / Fotolia
 
Scientists in South Korea have developed a new way to store energy that also offers a solution to a growing environmental problem.

Reporting their findings in the IOP Publishing journal Nanotechnology, the research team successfully converted used cigarette butts into a high performing material that could be integrated into computers, handheld devices, electric vehicles and wind turbines to store energy.

According to the study, this material outperforms commercially available carbon, graphene and carbon nanotubes. It may someday be used to coat the electrodes of supercapacitors: electrochemical components that can store extremely large amounts of electrical energy.

"Our study has shown that used cigarette filters can be transformed into a high performing carbon-based material using a simple one step process, which simultaneously offers a green solution for meeting the energy demands of society," says co-author Professor Jongheop Yi of Seoul National University....MORE

Commodity Carnage On Dollar strength

In oil the new most active, July, WTI is down $2.17 at $58.07, a three week low while front month Brent is down $2.06 at $64.21.
The spot dollar index is only up 1.08% at 95.35 while gold is down 20 bucks (1.63%) at $1207.60.

From ZeroHedge:
The surge in the USDollar and "good" housing data has created carnage in commodities. Silver, crude, copper, and gold are all getting hammered this morning as the S&P is unchanged as moar Q€ was trumped by hawkish "good" data...
Crude in particular has broken convincingly below the $59.50 support level...

Electricity: "China developing fast reactors that will be cheaper than coal"

For some of my friends that sounds like the start of a "Good news/Bad news" joke.
From Next Big Future:
China has a long range plan to develop nuclear power that is cheaper than coal. China will develop its own commercial scale fast reactor in 2023 with a more advanced version in 2030. They will then scale up production as part of a build up to around 400 gigawatts of nuclear power by 2050. This would be four times more than the nuclear power currently in the USA.
China will build a lot more hydro power, wind power and solar power but there are limitations based on running out of rivers to dam and how much solar and wind can be integrated into the electrical grid.






...MUCH MORE

How To Join The 1%

The IRS says 2012 top 1% income was $434,682. Piketty's pal Prof. Saez says $394,000.
If you're going to work you might as well shoot for the top 1% of the top 1%, around $10.5 mil per year for 2015.
From The Economist:
A book on the persistence of elites is an unexpected guide to getting a good job

MANAGEMENT consultants, investment banks and big law firms are the Holy Trinity of white-collar careers. They recruit up to a third of the graduates of the world’s best universities. They offer starting salaries in excess of $100,000 and a chance of making many multiples of that. They also provide a ladder to even better things. McKinsey says more than 440 of its alumni run businesses with annual revenues of at least $1 billion. The top ranks of governments and central banks are sprinkled with Goldman Sachs veterans.

Technology firms, though they are catching up fast, have nothing like the same grip on the global elite.
Which raises a pressing question: how do you maximise your chances of joining such elite professional-services firms? Lauren Rivera of Northwestern University’s Kellogg School of Management has spent a decade studying how these firms recruit. The result, “Pedigree: How Elite Students Get Elite Jobs”, is an academic book with the requisite references to gender theory and Marxist concepts of inequality. But read it carefully and it becomes something far more useful—a guide on how to join the global elite.

The bad news is that by far the best way to get into the tiny group of elite firms is to be studying at the tiny group of elite universities—Ivy League colleges in America (where Ms Rivera did her fieldwork) or Oxford and Cambridge in England. The firms spend millions of dollars love-bombing these institutions with recruiting events: students can spend the recruitment season wining and dining at their expense. However, as Ms Rivera notes, firms reject the vast majority of elite students they interview: so even the most pedigreed need to learn how to game the system.

The most important tip is to look at who is doing the recruiting. Whether in consulting, investment banking or the law, firms use revenue-generating staff rather than human-resources people to decide who has the right stuff. The interviewers are trying to juggle their day jobs with their recruiting duties: they seldom spend more than a minute or so reviewing each application form. In the interview room they behave predictably: they follow a set script, starting with some ice-breaking chit-chat, then asking you about yourself, then setting a work-related problem. That makes them desperate for relief from the tedium. Be vivacious. Hang on their every word. And flatter their self-image as “the best of the best” and the most jet-lagged of the jet-lagged.

The most important quality recruiters are looking for is “fit”: for all their supposedly rigorous testing of candidates, they would sooner choose an easy-going person with a second-class mind than a Mark Zuckerberg-type genius who rubs people up the wrong way. ...MUCH MORE

Largest Public Employee Pension Plan Seems Lost (plus a primer on timber investing) CalPERS

Talk about zigging when they should zag. Although not as egregious as the October 2008 move we noted in "Calpers Sells Stock Amid Rout to Raise Cash for Obligations" with the comment "This is hedge fund behavior, selling your most liquid investments to prop up the illiquid."

CalPERS' adventures in alt-land, even disregarding the bribery/corruption scandals, have been disastrous. From being Goldman's muppet in the long-only commodity investor racket to the raw-land-at-the-peak-of-the-cycle to the Stuyvesant Town/Peter Cooper Village debacle, you'd almost think it had to be deliberate.

Yeah, we're familiar with their action.

From FT Alphaville:

Is Calpers missing the forest for the trees?
The California Public Employees’ Retirement System, which manages more than $300bn on behalf of current and future retirees, is thinking about selling much of its timber assets, according to the Wall Street Journal.
Specifically, it has offered to sell about 300,000 acres in Louisiana — about 16 per cent of its total forestry holdings — and if this goes well, Calpers could then sell another 1,000,000 or so acres in east Texas, which would cut the total portfolio by around 80 per cent.

The puns practically write themselves:
– Calpers makes like a tree and leaves.
– Sacramento pension fund goes Lumber Liquidators.
– Bear shits on the woods.

According to the Journal’s anonymous sources, the biggest problem has been low returns. Much of Calpers’s timber assets were acquired during the housing bubble, when forest prices were high in the expectation of robust demand for wood to build homes. In the past five years, Calpers’s returns on timber have been negative.

(Okay, one more pun: if an illiquid asset is marked down without anyone around to trade it, did the owner actually lose money? Calpers’s holdings are currently worth more than all of the timberland transactions that occurred in 2014, according to the Journal.)

Besides the puns, there are other grounds for mocking Calpers’s latest decision. This is the same pension that stopped investing in hedge funds in part because it was unusually bad at picking active managers. As it happens, Pensions & Investments reported as recently as December 2013 that Calpers’s managers were considering plans to add to their forestry portfolio before, apparently, changing their minds. The latest rumours probably tell us more about Calpers’s ability to invest responsibly on behalf of its beneficiaries than about the appeal of timberland as an asset class.

Seriously though, all of this presents as good as an opportunity as any to ponder what pension funds are for and how they ought to invest....MUCH MORE
We have hundreds of posts on CalPERS, here's a Google search of our little blog:
site:climateerinvest.blogspot.com CalPERS
We also have quite a bit on timber as an asset, beginning with a quote lifted from the long-haul insurance company asset managers:

"The only quarter a timber investor should be interested in is the next quarter century"

Previously in the Paul Bunyan series:
"A Fine Time for Timber" (WY)
There are a half-dozen ways to invest in timberland, the REIT's being one of them. Unfortunately for non-institutional investors there are no pure play portfolio investments and neither the ETF's (CUT; WOOD) nor the REIT's are perfect proxies for timber. POPE Resources is set up as a Master Limited Partnership with a higher correlation to timberland. A couple of London traded vehicles, Phaunos Timber and Cambium Global Timberland Limited also have higher correlation to timberland.

If you can do direct investments the Timberland Management Organizations (TIMO's) will get you even more correlation with Forestland Group (3.5 MM acres) Campbell Resources (3.1 MM acres)  and Hancock Timber Resources Group ( 6.5MM under management) being the largest.
"Investing in Timber and Farmland" 

Grantham, Mayo, Van Otterloo: "A Farmland Investment Primer"

And many more, use the search blog box keyword 'Timber', if interested.

Monday, May 18, 2015

"...Goldman Sachs Concerned About Revolving Door Ethics ... "

From Economic Policy Journal:
...when the government-crony Wall Street revolving door is working against the bankster firm.
A trader points me to a Bloomberg article, reporting on the GS concern:
The New York Federal Reserve’s lead supervisor of Goldman Sachs Group Inc. has quit for a job advising other financial firms, triggering concerns within the Wall Street bank that some of its business secrets might not stay so secret.
After learning last month that the examiner, Lance Auer, was joining the financial services practice of PwC, Goldman Sachs asked the firm whether he faced any restrictions on working for other banks, said two people familiar with the discussion. Auer, Goldman Sachs pointed out, had gleaned insights into operations and risk-management strategies that could be useful to competitors, the people said.
Goldman Sachs’s anxiety is a new twist on the debate over the revolving door where the usual complaint is that Wall Street benefits from hiring government insiders....Auer, who is scheduled to start at PwC in June, was stationed inside Goldman Sachs’s headquarters.
This is how it usually works. Ben White at Politico reported in 2013:
 Goldman Sachs...will soon have top-level executives with the ear of the CEO who once occupied senior jobs in the White House and United States Treasury.... Jake Siewert, managing director and head of corporate communications at Goldman Sachs..., who served as counselor to Treasury Secretary Timothy Geithner and in multiple roles including press secretary under President Bill Clinton, has quietly helped revolutionize the way the famously secretive Goldman Sachs interacts with the public....MORE

Noble Nuts: "Almond, hazelnut prices to rise - but not peanut values"

I used an innocuous headline to follow "Noble Nuts:". I'm sure gentle reader could find others.
From Agrimoney:
It is time to stock up on marzipan?

The nut market has divided between peanuts, of which supplies are ample and prices depressed, and tree nuts, of which the reverse is true – particularly for hazelnuts and almonds - according to Singapore-based agricultural commodities trader Olam International.
And it will need either an improvement in weather or seed varieties to change the situation.
'Under serious pressure'
For peanuts, the "the market is really oversupplied", said A Shekhar, the Olam finance director, noting a jump of 25% to 5.21bn pounds in production in the US alone last year, where output is expected to grow further this year, to 5.78bn pounds, boosted by extra sowings as farmers switch from other crops.
 "It has taken cotton, corn acreage.
"If you look at the farming economics today, cotton producers are roughly losing Sing$14 ($10.60) an acre, corn producers are about breakeven, peanut unirrigated producers are making up Sing$78 per acre, and irrigated peanut producers are making about Sing$220 per acre," Mr Shekhar said.
Besides changes to the US farm support regime, the economics reflect "the launch of a fairly revolutionary variety" which has "dramatically increased productivity".
With Argentine peanut production, and Chinese sowings, also higher, "peanut prices are under serious pressure".
Peanut prices, which in the US are trading at 22.5 cents a pound, are "in a down cycle", he said.
'Lifetime-high prices'
However, for the so-called "noble" tree nuts, prices have been soaring, making cashews, at Sing$3.70 ($2.80) a pound, a relatively cheap option.
For hazelnuts, "we are seeing lifetime-high prices", Mr Shekhar said, underlining the dent to output last year in Turkey, the top producing country", from frost....MORE
The Ferrero patriarch, Pietro, famously used hazelnuts to 'cut' the more expensive chocolate in the progenitor to today's Nutella.

Barron’s Best 100 Hedge Funds: 2015 List

From Barron's Penta:
Indexing may be in style, but old-fashioned stockpickers rule our list.

Equities dominated Barron’s Penta top 100 hedge fund rankings for the second straight year on the back of a record-breaking bull market now well into its seventh year. Once again, Larry Robbins’ Glenview Offshore Opportunity fund claimed the No. 1 spot, with an impressive three-year annualized gain of 57%.
Even with the recent gyrations in equity markets, stockpicker Robbins is bullish.

“The market continues to show favorable conditions, including valuations that remain attractive, excessive corporate cash balances, and underlevered balance sheets,” says Robbins. What’s more, he sees corporate executives and boards more open to share repurchases, capital improvements, and acquisitions.

Two other positives: Robbins expects the economy to grow at a solid rate and sees systemic risk ratcheted down by central bank and regulatory policies.

Accordingly, he continues to find opportunities, noting that 40% of his top 20 performers last year were new to his portfolio. For example, he established a 14% stake in the country’s largest operator of animal hospitals -- VCA (ticker: WOOF). He sees the industry as defensive, and the shares cheap at 14.5 times 2015 earnings, and expects top-line expansion of 5% to 6% for the business after several years of dormant growth following the financial crisis. VCA is now in the midst of a $400 million share buyback; the company is making more acquisitions, and the stock has soared from $32 to $53 since Robbins moved in just two quarters ago.

The stellar returns of Robbins and others on our Best 100 list stand out in a year when oil prices plummeted, the U.S. dollar surged, the Federal Reserve kept bond investors on edge, and the Cold War suddenly heated up in Ukraine. Such challenges proved difficult for many funds. Many high-caliber firms didn’t qualify for our list this year, including Ray Dalio’s Bridgewater Associates, David Einhorn’s Greenlight Capital, Chase Coleman’s Tiger Global, and Paul Singer’s Elliott Management.

Another measure of the challenging environment: the closure of some venerable fund names, including Dan Arbess’ Perella Weinberg Xerion fund, which had specialized in distressed credit and special situations, and Brevan Howard’s commodity fund. Several macro funds also shut down, including Josh Berkowitz’s Woodbine Capital Advisors, Keith Anderson’s Anderson Global Macro, and Kingsguard Advisors. And Everest Capital shuttered six of its seven funds after being smacked by the Swiss franc. Industry data analyst HFR reported that in all, 864 funds closed in 2014, a slight decrease from 904 the year before. 

The Barron’s Penta survey underscores the great disparities in recent hedge fund performance, a source of controversy to investors who pay top dollar and pushed industry assets past the $3 trillion mark by at least one tally last year. According to BarclayHedge, the average hedge fund returned 7.36% annualized over the three years ended in 2014 (our benchmark); the average for our Best 100 exceeded 21%, net of fees, about a percentage point better the average return of the Standard & Poor's 500.

The good news for investors is that the average hedge fund management fee declined to 1.51% from 1.54% last year, while performance fees dropped to 17.8% from 18.2%, says HFR.

Like Robbins, almost half of our best performers invested in stocks. Many are great long-term investors who don’t trade frequently, and others, such as Nelson Peltz’s Trian Partners (No. 87), William Ackman’s Pershing Square (No. 54), and Robbins, use their equity stakes to lobby for corporate changes. 

Our No. 2 this year is a stockpicker, Richard Mashaal of Senvest Partners, who registered an annualized gain of 44% on the strength of selections like DepoMed (DEPO), which makes pain-management drugs; videogame maker Take-Two Interactive Software (TTWO), publisher of Grand Theft Auto; and Howard Hughes (HHC), a real estate developer whose portfolio includes the South Street Seaport in New York. 

Michael Masters $768 million Marlin fund claimed the third spot by focusing primarily on long equity positions, registering three-year annualized returns of 41.63%....MUCH MORE