Monday, July 28, 2014

Omidyar Unsure On Strategy For His $250m Media Venture

From Silicon Valley Watcher:
Former Rolling Stone writer Matt Taibbi will launch a satirical online magazine for First Look Media.

Pierre Omidyar, the co-founder of Ebay, has changed some of his plans and slowed the roll-out of his $250m First Look Media venture.
In a blog post, Omidyar wrote:
We have definitely rethought some of our original ideas and plans... rather than building one big flagship website, we’ve concluded that we will have greater positive impact if we test more ideas and grow them based on what we learn. We are unwavering in our desire to reach a mass audience, but the best way to do that may be through multiple experiments with existing digital communities rather than trying to draw a large audience to yet another omnibus site.
And rather than immediately launching a large collection of digital “magazines” based on strong, expert journalists with their own followings, as we imagined earlier, we’ll begin by building out the two we’ve started and then explore adding new ones as we learn.
...I believe deeply in the importance of the work of independent journalists — people like Glenn Greenwald, Laura Poitras, Jeremy Scahill and Matt Taibbi. Whatever direction our experiments lead us, we will continue to invest in our journalists and support their commitment to fearless, fact-based reporting...
I expect we’ll be in this planning, startup and experimental mode for at least the next few years as we explore how to become integrated into people’s lives in meaningful ways.
Nine Months in, First Look is Still Very Much a Startup - First Look Media

Foremski's Take: It is clear that Omidyar is unclear on the right strategy for creating a viable, self-sustaining media business. Nine months into the venture there is no baby to announce just a long, vague post about having a strong commitment to journalism, the greater good for society, and the marvelous opportunities that technology can bring. But there's nothing new, nothing concrete to announce....MORE
And from Capital New York:
Second look: Omidyar scales back site launch plans
First Look founder Pierre Omidyar clarified his media company's new direction in a blog post this morning. The takeaway: First Look Media, which originally planned to launch a stable of websites focused on different topics, now plans to launch only two.

"Rather than immediately launching a large collection of digital 'magazines' based on strong, expert journalists with their own followings, as we imagined earlier, we’ll begin by building out the two we’ve started and then explore adding new ones as we learn," Omidyar wrote.

Omidyar also wrote that he no longer plans to create a home page for all First Look Media content.
"Rather than building one big flagship website, we’ve concluded that we will have greater positive impact if we test more ideas and grow them...through multiple experiments with existing digital communities rather than trying to draw a large audience to yet another omnibus site," he wrote....MORE

"Holographic politicians could soon become a normal thing in the US"

From The Verge:
Earlier this year, India's prime minister Narendra Modi was campaigning for reelection and used a rather unusual method for being in many different places at once: he became a hologram. Not biologically, but with the help of a company called NChant3D that broadcast his nearly hour-long speech in 53 different locations. Now a US company called HologramUSA has the rights to use that technology in the US, and has just hired a lobbyist in Washington, DC to push the Democrats and Republicans into using holograms in the upcoming 2016 presidential election, reports Bloomberg BusinessWeek....

One Of Tesla's Autonomous Car Partners Is Coming Public (TSLA; MBLY)

This will be a bit of a 'Tesla Week' until TSLA reports on Thursday.
From SiliconBeat:

Tesla watchers eye Mobileye’s $500 million IPO
Mobileye, an Israeli company that’s at the forefront of developing active safety features for vehicles, is scheduled to IPO on the New York Stock Exchange this week. The company makes software and cameras that help cars avoid accidents, and you can watch the roadshow here. The company expects to price shares at $17 to $19 a share and raise roughly $500 million.

Tesla watchers, including Model S owners, are paying close attention to Mobileye on discussion forums and investor threads. The company’s prospectus lists Audi, BMW, GM, Mitsubishi, Tesla, Volvo and several other automakers as partners, and the Israeli press has reported that Mobileye and Tesla have teamed up on driverless cars.

“We can simply confirm that we have a business relationship with them,” said Simon Sproule, Tesla’s VP of Communications, in response to an email asking how to best characterize the relationship. “Nothing further to add.” (Thanks Simon!)

The company, which was founded in 1999, describes itself as a leading designer of software and related technologies for camera based “Advanced Driver Assistance Systems,” or ADAS, and estimates that its technology will be available in 160 car models from 18 OEMs worldwide by the end of 2014. Its camera-based ADAS technology includes lane departure warnings, collision warnings, pedestrian detection functions, and the first wave of autonomous driving technologies, including detection of curbs, construction zone obstructions, potholes and debris....MORE

100 Years Ago Today the War In the Balkans Began

Not to be confused with the Balkan Wars. (1912-1913)
In another week there would be no chance of that confusion as Britain jumps in.
From The Local-Austria:
100 years since Austria declared war on Serbia
Serbian infantry at Ada Ciganjila. Photo: Vojska Ada Ciganlija/Wikimedia

July 28 marks the 100th anniversary of the declaration of war by Austria on its neighbour Serbia. We look back at the start of the crisis that was to shape history.
News-hungry, patriotic crowds had been massing for hours outside newspaper offices in Vienna when emperor Franz Joseph's "To My Peoples!" proclamation of war against Serbia finally came on the evening of July 28, 1914.

A month after a Bosnian Serb revolutionary assassinated Franz Ferdinand, heir to the Austro-Hungarian throne, in Sarajevo, the uppity Serbs were going to get a long-deserved bloody nose.
Special editions were ripped out of newspaper sellers' hands, and in Vienna at least, nationalistic songs were sung late into the summer night, triumphant speeches were made and thousands thronged the streets.
"Maybe people didn't think it would be over by Christmas, but the feeling was that it would be done by mid-1915," historian and Austrian Military Museum (HGM) director Christian Ortner told AFP.
"But Vienna was playing a game of very high risks."

Instead of a short war - and one confined to the Balkans as Vienna thought - this was the start of World War I, four years of conflict drawing in all the great powers of the time and killing nine million soldiers.

A day after Austria-Hungary's declaration, Serbia's ally Russia began mobilising. On August 1, Germany declared war on Russia and two days later on France. On August 4, with Germany invading Belgium, Britain declared war on Germany....MORE
And from the Oxford University Press blog:
The month that changed the world: Tuesday, 28 July 1914
July 1914 was the month that changed the world. On 28 June 1914, Archduke Franz Ferdinand was assassinated, and just five weeks later the Great Powers of Europe were at war. But how did it all happen? Historian Gordon Martel, author of The Month That Changed The World: July 1914, is blogging regularly for us over the next few weeks, giving us a week-by-week and day-by-day account of the events that led up to the First World War.

Kaiser Wilhelm received a copy of the Serbian reply to the Austrian demands in the morning. Reading it over, he concluded that the Habsburg monarchy had achieved its aims and that the few points Serbia objected to could be settled by negotiation. Their submission represented a humiliating capitulation, and with it ‘every cause for war’ collapsed. A diplomatic solution to the crisis was now clearly within sight. Austria-Hungary would emerge triumphant: the Serbian reply represented ‘a great moral success for Vienna’.

In order to assure Austria’s success, to turn the ‘beautiful promises’ of the Serbs into facts, the Kaiser proposed that Belgrade should be taken and held hostage by Austria. ‘The Serbs,’ he pointed out, ‘are Orientals, and therefore liars, fakers and masters of evasion.’ An occupation of Belgrade would guarantee that the Serbs would carry out their promises while satisfying satisfying the honour of the Austro-Hungarian army. On this basis the Kaiser was willing to ‘mediate’ with Austria in order to preserve European peace.

In Vienna that morning the German ambassador was instructed to explain that Germany could not continue to reject every proposal for mediation. To do so was to risk being seen as the instigator of the war and being held responsible by the whole world for the conflagration that would follow. Berchtold began to worry that German support was about to evaporate. He responded by getting the emperor to agree to issue a declaration of war on Serbia just before noon. For the first time in history war was declared by the sending of a telegram....MORE
The bombardment of Belgrade by Austro-Hungarian monitor. By Horace Davis. Public domain via Wikimedia Commons

Grains: ANZ; ABN Amro See an End to the Selling

As foretold by the (slightly snarky) prophecy in Friday's "U.S. Corn Farmers Face a Cash Crunch":
Probably time for a little bounce when the Journal starts paying attention.
Corn in storage-Sept. contract-$3.59'6 down 1'6, new crop-December-$3.68'4 down 1'0....
Currently  367'0 up 4'0 for the Septembers, 375'6 up 4'0 for December.

From Agrimoney 18:39 UK, 25th Jul 2014:
Worst over for grains rout. Sugar prices to rise
ABN Amro forecast that the worst is over for the tumble in grain prices, and forecast a rise in sugar futures ahead despite the potential for a setback when fresh Brazil estimates are unveiled later this month.

The bank, in a quarterly update, forecast that Chicago corn and wheat futures will post their lowest average prices in 2014, at $4.00 a bushel and $5.50 a bushel respectively, weighed by strong world production prospects.

However, that implies only small limited declines in wheat futures to $5.25 a bushel as of the end of October, some 6% below the price of December futures on Friday.

For corn, the forecast price of $3.75 a bushel as of three months' time is a little above where corn futures were trading at on Friday....MORE
17:23 UK, 28th Jul 2014,
Corn and wheat prices offer 'sound value' - ANZ

See also:
Iowa State's Worst Case Corn Prices: $2.89 By 2017

"Natural gas injection season continues on pace for record refill"

From the EIA:

Today in Energy 
graph of weekly natural gas inventories and weekly natural gas injections, as explained in the article text
Source: U.S. Energy Information Administration, Weekly Natural Gas Storage Report
Note: STEO denotes EIA's Short-Term Energy Outlook

Nearly midway through the summer storage injection season, working natural gas in storage is on pace to meet EIA's expectations for a record overall build. The current Short-Term Energy Outlook projects a record build of close to 2,600 billion cubic feet (Bcf) from the beginning of April through the end of October, which would put inventories at 3,431 Bcf at the end of October.

Following an extremely cold winter, storage inventories at the end of the heating season were only 857 Bcf, the lowest level since 2003. Inventories were around 1,000 Bcf less than the five-year (2009-13) average. While the refill season began slowly in April, injections quickly ramped up in May and have substantially exceeded five-year average levels each week since then. For eight straight weeks, the weekly net injection was greater than 100 Bcf. In the 10 weeks between the week ending April 25 and the week ending July 4, net injections into storage inventories totaled 1.04 trillion cubic feet; this was the quickest trillion cubic foot increase since 2003. As a result, the gap between current storage and the five-year average narrowed substantially; currently, inventories are 683 Bcf below the five-year average.

Abundant domestic production and moderate demand for natural gas to generate electricity because of a relatively cool summer have led to this year's strong injections....MORE

Beware the Sweaty Equity Analyst: Anne Boleyn and A Sense of Impending Doom

From FT Alphaville:
Temporisation watch
That uneasy feeling when everything is going well. Is it deserved? Can it last? Should you cash in and go paint watercolours in that studio on the Pembrokeshire coast?

Strategists are not immune, with a summer bout of the temporaries upon us. Goldman is the latest, downgrading its view of stocks over the weekend but without really committing to it:
We also downgrade equities to neutral over 3 months. We are concerned that a sell-off in government bonds will lead to a temporary sell-off in equities in line with what we saw last summer, though the magnitude is likely to be smaller as the need for bond yields to correct is lower than it was back then. At the same time, on our forecasts the acceleration of economic growth is now largely behind us, with any further expansion being very small compared to what we have seen. We see an environment where growth is sustained around current levels as being positive for equities over the longer term, but would expect the pace of returns to slow down relative to the strong performance we have seen over the last couple of years....MORE including:
...Meanwhile BCA Research have been more explicit about the nagging feeling, after they were asked by a client “how do you know that you’re not coming up with analysis to justify what’s already occurred?”...
So equity analysts have a sense of impending doom.
WebMD is not much help with the symptomology:
WebMD Symptom Checker helps you find the most common symptom combinations and medical conditions related to sense of impending doom....
and 65 more. However The Ancient Standard (ancient history that doesn't suck) offers up a clue to what might be going on:
If you lived in Tudor England, you worried about the various illnesses that imagecould strike without warning. One of the most terrifying, however, was not the plague but the sweat. The English Sweating Sickness, as it was often known, was a disease that struck England several times in the years between 1485 and 1551. Outbreaks took place in 1485, 1507, 1528 and 1571. One outbreak which took place in 1502 is rumored to have taken the life of King Henry VIII’s older brother Arthur, paving the way for Henry to take the throne. An image of Arthur, Prince of Wales is seen here.

It brought with it a number of symptoms. Individuals who had contracted the sweat would often feel a sensation of impending doom or tragedy. They often felt severe pain in their necks, their backs and their arms. They often felt extremely tired and profound exhaustion was another one of the most common symptoms....MORE
Now we're getting somewhere. Armed with the knowledge that the Tudors were afflicted we find, at io9:
Why a "Sense of Impending Doom" Is an Actual Medical Symptom
Ever felt an unaccountable sense of fear and futility? Turns out you should have been even more terrified than you were. A "sense of impending doom" is an actual medical symptom for some very serious conditions.

The Sweats and Impending Doom
Europe had quite a few problems during the late Middle Ages. There were wars, independent brigands, religious revolutions, and, of course, many different kinds of plague. One disease, known as the Sweating Sickness, would take people from perfectly healthy to dead over the course of one day. It struck Anne Boleyn during the height of her courtship with Henry VIII, and if she hadn't survived it we would have had an entirely new history, and an entirely different sexy historical monarchy to make salacious tv series about. Its fatality alone would have made "the sweat" terrifying, but it was made almost supernatural by an eerie quirk. The first symptom anyone had was a strong sense of impending doom.

The sense of impending doom did not disappear into history the way the Sweating Sickness did. People who suffer from depression or anxiety often have it, of course, but it's also associated with ailments entirely separate from emotion. A sense of impending doom is a symptom of anything from cardiac arrest to a jellyfish sting. It's not conclusive in and of itself, but it is listed as one of the identifying features of multiple medical problems.

Modern Medicine and Impending Doom...MORE
Well there you go, keep an eye peeled for analysts claiming they were just running for the elevator.
Or smelling of nutmeg.

EIA Natural Gas Weekly Supply/Demand Report

Cooling Degree Days were way down for a big chunk of the country.
In early trade the September's are trading at $3.784 down 0.003. We continue to prefer the equities to the futures but the latter appear to be feeling for a bottom.
From the Energy Information Administration:
Natural Gas Weekly Update

for week ending July 23, 2014  |  Release Date:  July 24, 2014  |  Next Release: July 31, 2014 
...Nymex at 8-month low. Nymex prices declined this week, falling from $4.119/MMBtu last Wednesday to $3.762/MMBtu yesterday, their lowest level for the near-month contract since last November. The price of the 12-month strip (the 12 contracts between August 2014 and July 2015) fell from $4.159/MMBtu last Wednesday to $3.855/MMBtu yesterday. Weather forecasts are predicting continued mild weather over much of the country east of the Rockies, helping to put downward pressure on futures prices.

Supply increases and consumption decreases. Dry natural gas production increased by 0.3 Bcf/d, or 0.5%, from the previous week, to 68.6 Bcf/d. Dry production hit a record high on Monday of 69.1 Bcf, according to data from Bentek Energy. The record was confirmed by other industry analysts, with Genscape estimating that Lower 48 production climbed over 70 Bcf for the first time on Monday. Imports from Canada decreased 5.1% from last week. U.S. consumption fell 3.0%, mainly driven by a 5.6% decline in the power sector as most areas east of the Rockies experienced cooler-than-normal temperatures for much of the report week...MUCH MORE
Deviation between average and normal (°F)
7-Day Mean ending Jul 17, 2014
Mean Temperature Anomaly (F) 7-Day Mean ending Jul 17, 2014

Saturday, July 26, 2014

"The Record Quiet Hurricane Season of 1914: Could it Happen Again in 2014?"

From Wunderblog:
This year marks the 100th anniversary of the slowest Atlantic hurricane season on record--1914, which had no hurricanes and only one tropical storm. Is it possible that the 2014 hurricane season could match 1914 for the lowest activity ever recorded, with Hurricane Arthur ending up as our only named storm? I think that is highly unlikely, even though the atmospheric and oceanic conditions in the Atlantic are looking hostile for development for the coming two weeks.

A re-analysis of Atlantic tropical cyclones finds only one storm in 1914
In 2005, a reanalysis effort was made of all Atlantic tropical cyclones between 1911 - 1914, using historical weather maps, ship reports, and newspaper accounts. I talked to the leader of the reanalysis project, NHC's Dr. Chris Landsea, about the 1914 reanalysis. He told me, "We went into the re-analysis process for 1914 knowing that this was the quietest year on record, with only one tropical storm and no hurricanes. I thought for sure we'd find some storms that were missed, since so many of the other years we re-analyzed came up with new storms that were missed. But when we analyzed the data and looked for missing storms, we couldn't find any. The year 1914 remained with just one named storm--truly a remarkable year in the annals of the Atlantic hurricane database."

The only tropical storm of 1914 developed in the Bahamas on September 15--the latest formation date for an Atlantic season's first storm in the official HURDAT database, which goes back to 1851. The storm moved slowly northwestward and made landfall near the Florida/Georgia border on September 17. Two other systems were formally considered for inclusion into the hurricane database in 1914: a potential late-October tropical depression that was identified in the Western Caribbean, but was too weak to be considered a tropical storm; and a storm that brought gale-force winds on September 30 - October 1 to the coasts of Alabama, Mississippi, and the Florida Panhandle, but which was deemed to be an extratropical storm. The reanalysis effort found that the only other Atlantic hurricane season that did not produce any hurricanes was 1907.

Figure 1. Top: August - October 1914 departure from average of relative humidity at middle levels of the atmosphere (near the 700 mb pressure level, which is roughly 10,000 feet above the surface.) Bottom: August - October 1914 departure from average of sea level pressure. The August - October peak part of hurricane season in 1914 had a very dry atmosphere with a relative humidity 4 - 8% lower than average (yellow, orange and red colors), and was dominated by high pressure (1 - 2 mb higher than average.) Images plotted using the NOAA/ESRL 20th Century Reanalysis.
Reasons for the Exceptionally quiet hurricane season of 1914
1) El Niño. Not surprisingly, 1914 was an El Niño year, judging by the Southern Oscillation Index Archives from Australia's Bureau of Meteorology. It is well-know that during an El Niño event, an atmospheric circulation that brings strong upper-level west-to-east winds over the tropical Atlantic typically sets up, and these winds tend to create high wind shear, discouraging tropical storm formation.

2. Sea Surface Temperatures (SSTs.) Ocean temperatures in the Main Development Region (MDR) for Atlantic hurricanes, from the coast of Africa to Central America, between 10°N and 20°N, including the Caribbean, were -0.4°C (-0.7°F) from average during August - October 1914, according to the Hadley Centre SST data set (HadSST2). This ranks as the 12th coolest such departure from average since 1900, and this sort of temperature anomaly would have definitely tended to squelch tropical storm formation by limiting the amount of heat energy available to developing storms. The record coldest SST anomaly in the MDR since 1900 was -0.8°C during the 1913 hurricane season, which was a very quiet year with six named storms and four hurricanes, all of which were Category 1 hurricanes....


More On the Goldman Downgrade of Stocks, Bonds etc.

Following up on yesterday's "Goldman Sachs Just Downgraded Stocks".
S&P 500 1978.34, DJIA 16960.57, Naz 4449.56.
From ZeroHedge:

Two Weeks After Upgrading Stocks, Goldman Downgrades Stocks
Just two short weeks ago, when Goldman's head strategist David Kostin announced that on one hand the market's "stellar return borrowed heavily from the future" and "is now 30%-45% overvalued compared with the average since 1928", which "logically" led to Kostin's conclusion that "we lift our year-end 2014 S&P 500 price target to 2050 (from 1900) and 12-month target to 2075, reflecting prospective returns of 4% and 6%, respectively" we said "one can almost feel Kostin's humiliation at having to pen such moronic drivel."

Yesterday, in what was probably a case of moronic drivel penner's remorse, the same firm which just upgraded its S&P price target by 150 points two weeks ago, decided to... downgrade stocks. But only kinda, sorta and only for the next 3 months: Kostin is unwilling to go so far as to tell the whole truth so while he did downgrade stocks to Neutral through October, he is still Overweight equities over the next 12 months. In other words, sell in July but don't go away, and keep on buying over the next 12 months, or something.

To wit: "We downgrade to neutral over 3 months as a sell-off in bonds could lead to a temporary sell-off in equities. This makes the near-term risk/ reward less attractive despite our strong conviction that equities are the best positioned asset class over 12 months, where we remain overweight."

Curiously, his reported release moments after our latest warning on High Yield debt was far more harsh on an asset class that has already been beaten down since the most recent round of Fed warnings that there is a corporate bond bubble brewing. As a result, Goldman also downgraded corporate credit "to underweight over both 3 and 12 months. We think spreads will narrow slightly, but given already tight levels, rising government bond yields are likely to dominate the returns, especially for US IG credit where spreads are the lowest."

Uh, rising government bond yields where? Oh yes, he must be referring to the plunge in the 10 Year from 3% on January 1 to just shy of 2014 lows at under 2.5% today.

Maybe instead of being wrong for all the wrong reasons again (Goldman expected a tiny increase in the S&P 500 to 1900 at the beginning of the year on 3% GDP growth in Q1 - it got the opposite) Goldman can just tell us what its prop trading group is doing. Because while it was clear that GS is selling if it is advising its clients to buy, now that Goldman is both bullish and bearish at the same time, nobody has any idea how to fade the 200 West firm.

Here are the punchlines from the Goldman report:
We downgrade corporate credit to underweight over both 3 and 12 months. We continue to have a benign outlook for spreads and expect a slight further tightening over the coming year as monetary policy remains very accommodative and inflation and macro risks remain relatively low leading to a strong search for yield. However, spreads are now so tight that carry and further spread compression offer a relatively low offset against the rise we expect in the underlying government bond yield, especially for US investment grade credits. This tension between total return and spread return expectations have existed  for a while, but the latest developments have shifted the balance between these two forces far enough for us to prefer a credit underweight, given that our credit portfolio puts 60% weight on US investment grade.
And stocks:
We also downgrade equities to neutral over 3 months. We are concerned that a sell-off in government bonds will lead to a temporary sell-off in equities in line with what we saw last summer, though the magnitude is likely to be smaller as the need for bond yields to correct is lower than it was back then. At the same time, on our forecasts the acceleration of economic growth is now largely behind us, with any further expansion being very  small compared to what we have seen. We see an environment where growth is sustained around current levels as being positive for equities over the longer term, but would expect the pace of returns to slow down relative to the strong performance we have seen over the last couple of years. This suggests that the forgone return by lowering the equity exposure temporarily if equities continue their grind higher is likely to be lower than it has been. This is particularly true in the US where earnings and valuations are at high levels, and where data surprises are already very positive. Our MAP index of data surprises here is close to its highest levels over the last couple of years (Exhibit 2). Over the longer term we still see equities as the best positioned asset class, and remain overweight over 12 months. We would see any sell-off over the next few months as an opportunity to increase exposure again also on a short-term basis....

Barron's Cover: Is the Internet-of-Things Ready-to-Wear?

A major piece from Tech Trader Daily's Tiernan Ray at Barron's:
The Internet of Things is headed for your wrist: smart watches and fitness bands. Who wins, who loses in wearable technology. 

In a cluttered office in downtown San Francisco, a start-up called Switch Embassy is advancing what's known in technology circles as the Internet of Things. The cramped space overflows with swatches of fabric embroidered with conductive wiring, a veri woven circuit board that can be stitched into shirts, handbags, and gloves, and can transmit signals from a smartphone or even a server across the world. 

Prototypes line the walls: a stylish leather clutch that can light up with a soft pulsing grid of glowing LEDs to let a wearer know she's got a text message; a black cocktail dress that glows green in a periodic rhythm matching the wearer's heart rate detected by sensors inside the dress.

The inventions are a revelation: Someday, technology will be everywhere in our lives, including the clothes on our back. But for now, the Internet of Things, or the "IoT," as the tech world refers to it, is terribly prosaic. It has sprouted legions of supposedly smart watches and fitness bands from the likes of Samsung Electronics, Jawbone, Qualcomm, and Pebble. The results so far, however, have been underwhelming.
The stakes are high, nonetheless. 
Apple and Google, smart connected devices will be the next front in the battle of their respective "ecosystems" -- collections of computing devices and software -- for supremacy. 

For established computing-chip vendors Intel and Qualcomm, the IoT offers new realms to conquer, but also challenges the economics that have defined their businesses. 

For other chip vendors, such as sensor makers InvenSense and OmniVision Technologies, the IoT offers a million new uses for the cutting-edge technology they have developed.

For the makers of very simple computer chips, such as Texas Instruments (TXN) and Atmel (ATML), and for one-time mobile champs such as navigation pioneer Garmin (GRMN), the Internet of Things may offer something of a comeback after they lost the battle for smartphones and ts. 

And for a host of others -- smartwatch maker Pebble, fitness-band makers Fitbit and Jawbone -- the IoT could make or break their business models. 

To succeed, all of this connected stuff has to get much, much smarter, and it has to get much cheaper. Right now, wearables just don't have enough functionality to serve many people who have already paid for a smartphone packed with information. 

Richard Doherty, research director with tech-consulting firm the Envisioneering Group, likens the market to the early days of the PC, when no one could confidently predict success or failure. "When we ask consumers about their intent to buy a wearable, to a person they will tell you they're thrilled with the category," says Doherty. "There wasn't even this much support for the iPhone" at its birth. "But when you get into details -- how much it costs, what it actually does -- interest goes down quickly."

In fact, the situation feels like prior waves of euphoria that fizzled. "I can remember when there were watch wars between Texas Instruments, National Semiconductor, and Hewlett-Packard around 1980," says Doherty. "HP's $650 calculator watch only sold a few hundred units. TI and National Semi soon flooded the market with under-$50 models, dissipating the 'cool, new, look at me' factor. Killed the category."
As the table shows, today's wearables, mostly something that attaches to your wrist, are fraught with limitations. Some don't connect to a smartphone consistently. Some let you receive notifications of texts but don't allow you to answer them. 

A whole crop of wearable fitness devices, from Jawbone, Fitbit, Nike (NKE), Adidas (ADS.Germany), and French start-up Withings, which count your steps and in some cases measure your heart rate and sleep pattern, deliver results that may tell you something, but not necessarily enough to be truly meaningful for any health regimen. When Barron's tested Nike's FuelBand SE, for example, we achieved our personal best thanks to a four-hour session playing pool, a workout that included drinking beer and smoking cigarettes -- you know, because you walk around the table a lot. 

The same problem of low intelligence hangs over the connected home and connected cars, places already stuffed with devices that don't talk to one another, as Rochester, N.Y., artist Larry Moss recently learned. Moss outfitted his house with a thermostat from Google's Nest, digital locks from Schlage, and computer-controlled light switches. You can control each of them from your smartphone, he says, but the Nest won't act to adjust the climate in response to the locks being keyed open, for example, nor to lights being turned on.

DEAD ENDS LIKE THAT, or the limitations of wearables, may get better as the software improves. Smartwatches unveiled by Google (GOOGL) in June, from Samsung Electronics (5930.Korea), LG Electronics (66570.Korea), and Motorola, display a more sophisticated ability to relay alerts to the watch from calendar, text, and e-mail applications on your phone....MUCH MORE

"Naughty Nuns, Flatulent Monks, and Other Surprises of Sacred Medieval Manuscripts"

Last night I was getting all  medieval because of something Izabella Kaminska wrote at FT Alphaville:
The importance of patience and the danger of information overload
I was trying to come up with some very-patient-money long-term investment projects and kept coming back to the Cathedral builders of the high middle ages.

So on arrival this morning I asked the Google "What's new in medieval scholarship?"

In addition to "Financing Cathedral Building in the Middle Ages: The Generosity of the Faithful" and "Financing Cathedral Construction: The Political Economy of One Type of Social Overhead Capital" we find this article on marginalia at Collectors Weekly. I'll be back with more on long time-horizon investments next week.

the Breviary of Renaud and Marguerite de Bar, Metz ca. 1302-1305. (Verdun, Bibliothèque municipale, ms. 107, fol. ???.
Flipping through an illustrated manuscript from the 13th century, you’d be forgiven for thinking that Jesus loved a good fart joke. That’s because the margins of these handmade devotional books were filled with imagery depicting everything from scatological humor to mythical beasts to sexually explicit satire. Though we may still get a kick out of poop jokes, we aren’t used to seeing them visualized in such lurid detail, and certainly not in holy books. But in medieval Europe, before books were mass-produced and reading became a pastime for plebes, these lavish manuscripts were all the rage—if you could afford them. The educated elite hired artisans to craft these exquisitely detailed religious texts surrounded by all manner of illustrated commentary, known today as marginalia.

Kaitlin Manning, an associate at B & L Rootenberg Rare Books and Manuscripts, says part of the reason why modern viewers are so captivated by marginalia is because we expect this era to be so conservative. For example, few Monty Python fans realize that the comedy group’s silly animations are direct references to artwork in illuminated manuscripts. (Illuminated simply means decorated with gold or silver foil.) “I think it’s such a shock when you have this idea in your head of what medieval society was like,” says Manning, “and then you see these bizarre images that make you question your assumptions.” The wild mixture of illustrations is a challenge to our contemporary desire to compartmentalize topics like sex, religion, humor, and mythology.

Manning was first drawn to marginalia while studying at the Courtauld Institute in London, where she was able to work with some of the most significant illuminated-manuscript collections in the world, including those at the British Library. “I loved the idea that marginalia was such an overlooked part of the medieval experience,” says Manning, “so much that up until 20 or 30 years ago, scholars were completely uninterested and wrote it off as trivial or not meaning anything.”

Though the meaning of specific images is still hotly debated, scholars conjecture that marginalia allowed artists to highlight important passages (or insert text that was accidentally left out), to poke fun at the religious establishment, or to make pop-culture references medieval readers could relate to. We’ll probably never understand all the symbolism used in marginalia, but what have we learned about medieval life through these absurd images?

We recently spoke with Manning about the origins and hidden meanings behind this fantastic art form.
Top: Wild animals at war in the Breviary of Renaud and Marguerite de Bar, Metz ca. 1302-1305. (British Library, Yates Thompson 8, f. 294r.) Above: A typical page from the Rutland Psalter shows a variety of decorative marginalia. (British Library Royal MS 62925, f. 99v.)
Top: Wild animals at war in the Breviary of Renaud and Marguerite de Bar, Metz ca. 1302-1305. (British Library, Yates Thompson 8, f. 294r.) Above: A typical page from the Rutland Psalter shows a variety of decorative marginalia. (British Library Royal MS 62925, f. 99v.)
Collectors Weekly: How is marginalia defined? Kaitlin Manning: Generally speaking, marginalia simply means anything written or drawn into the margins of a book. In the medieval context, marginalia is understood to mean images that exist outside or on the edge of a page’s main program. But the term is also sometimes applied to other arts, like architecture. It can describe sculptural details that might seem grotesque or nonsensical to modern eyes. Gargoyles, for instance, could be thought of as a kind of marginalia.

The heyday of marginalia was between the 12th and 14th centuries, more or less. The printing press is said to have been invented in 1450, but that’s just a convenient estimate. Printing wasn’t widespread until the end of that century, and before the use of the press, books were made by hand from start to finish. Traditionally, it was the job of scribes in monasteries who would painstakingly copy and decorate each volume, either for the use of the church or for influential patrons. Although examples of marginalia can be found all over Europe, England and Northern France were particularly productive centers for this kind of art.

Two wild and crazy headless guys in the Summer volume of the Breviary of Renaud and Marguerite de Bar, Metz ca. 1302-1305. (Verdun, Bibliothèque municipale, MS 107, f. 99v.)
Two wild and crazy headless guys in the Summer volume of the Breviary of Renaud and Marguerite de Bar, Metz ca. 1302-1305. (Verdun, Bibliothèque municipale, MS 107, f. 99v.)

The prevailing view for most of the 19th and 20th centuries was that marginalia was nonsensical, unserious, profane, and had nothing to do with the sacred images it surrounded. It was only relatively recently, due to the work of scholars like Michael Camille and Lillian Randall, in particular, that marginalia became viewed as a genre worthy of study in and of itself. Camille has suggested that marginalia emerged from the tradition of the gloss, which is an explanatory note that helps elucidate difficult passages in the text. A gloss wasn’t a footnote; it was actually written into the margin, either in the original language of the book or in the vernacular....MUCH MORE

Friday, July 25, 2014



The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

Greenlight's Einhorn Apparently Not a Fan of Dolores O'Riordan

From ZeroHedge:

David Einhorn On The M&A Bubble And "Dreams" As An Investment Thesis
Yesterday, we were beyond amused when we reported that the market's response to rumors of Zillow's $2 billion take over of Trulia was not only to push Trulia stock higher by $500 million but send the market cap of incomeless, EBITDAless Zillow higher by $1 billion. It appears we are not the only ones fascinated by the market's reaction to every M&A announcement, which is to send not only the target but the acquiror stock soaring. One other such person is David Einhorn who laments precisely this bubblyness in his just released letter to investors, saying that "takeover season has returned and in a new twist, the buyers’ stock prices are also advancing in response to announced deals, enabling companies, including some of our shorts, to see gains as acquirers – even of other troubled companies."

He proceeds to give several examples of how his shorts have worked against him, a trend which as we reported first in 2012 will continue indefinitely under a centrally-planned regime in which the Fed is the Chief Risk Officer of the market, and where no price declines are allowed, and thus the need to hedge (which means that going long the most hated, vile, worthless companies will, sadly, by and large continue to be a winning strategy).

Still, with a return of 5.2% in Q2 and 7.1% YTD, at least Greenlight is only barely underperforming the market, something that 90% of his hedge fund peers can only dream about....MORE
"At Greenlight, dreams do not form the basis of investment theses."
Taking the contra position, The Cranberries:


"Goldman Sachs Just Downgraded Stocks"

It's still a bull market.
DJIA down 137.84 at 16945.96; S&P 500 1977.22 down 10.76
From Business Insider:
Goldman Sachs has downgraded stocks.

"We downgrade to neutral over 3 months as a sell-off in bonds could lead to a temporary sell-off in equities," write Goldman Sachs' portfolio strategy team led by Anders Nielsen. "This makes the near-term risk/ reward less attractive despite our strong conviction that equities are the best positioned asset class over 12 months, where we remain overweight."

Over the next three months, Goldman expects equities to return 1.8%, but over the next 12 months stocks still appear poised to return 10.5%....MORE

Bear Stearns CEO Ace Greenberg Has Died

In "Ace Greenberg: 'never make fun of a millionaire, never hit a cripple, and never have sex with an idiot.'" I retold the story of a friend who cleared through Bear Stearns and who was just tickled pink when, in the middle of one of our Friday-after-the-close schmoozefests, who should call but Alan Greenberg.

My friend was so happy that I was there to hear him chat with "Ace" that he put the call on speakerphone.
Whereupon Mr. G. cuts directly to the chase and shouts, "Where's my fucking $10 million dollars?"
My friend took the call off speaker and asked if I would excuse myself for a few minutes.

From the New York Times:

Alan C. Greenberg Is Dead at 86; Led Bear Stearns Through Its Rise and Fall
Alan C. Greenberg, a risk-chasing Wall Street titan who built Bear Stearns into a global investment banking powerhouse and presided over its collapse as America slid toward a calamitous recession in 2008, died on Friday in Manhattan. He was 86. 

The cause was complications of cancer, his son, Ted, said.

Mr. Greenberg’s nickname was “Ace,” and he kept a deck of cards on his desk, ready to deal. He was a champion bridge player, a magician who conjured coins with sleight of hand, a show-off who could whiz-bang a yo-yo, an adventurer who played pool with sharks and stalked game in Africa. 

He was a cigar-chomping capitalist in shirt sleeves: balding, muscular, poker-faced — some said icy — and he enforced strict regimens among employees: no loafing or small talk, no big salaries but commissions based on performance, and no long meetings. 

He loved the trading room, with its maelstrom of shouts, jangling phones, desks overflowing with paper and high-speed transaction displays. In his office he kept a photo of himself crouching over an African antelope he had slain with bow and arrow.

That buccaneer spirit propelled him over five decades from Bear Stearns’s stock room, where he began as a clerk in 1949, to trading floors, where he mastered moneymaking skills, and into the executive suite, where he became chief executive in 1978, chairman in 1985 and chairman of the executive committee in 2001.
Mr. Greenberg led Bear Stearns on one of Wall Street’s legendary roller-coaster rides, a climb to dizzying heights as one of the country’s biggest brokerages, and a breathtaking free fall into bankruptcy. Stuck with billions in all-but-worthless mortgage securities as its clients made a run on the bank, Bear Stearns was taken over by JPMorgan Chase in a $270 million fire sale sanctioned by the Federal Reserve.

The failure, the first among several brokerages, helped ignite Wall Street’s collapse, which dragged the nation into the worst credit crisis since the Great Depression. Bear shareholders, whose stock had traded at $170 in 2007, got $10 a share. Most of the firm’s 14,000 employees lost their jobs, and some their life savings. Thirty percent of the equity was held by employees, including many senior executives who were wiped out.

But Mr. Greenberg, who had cannily cashed in his stake over the years and had sold $50 million in Bear Stearns shares since 2007, emerged almost unscathed. And he signed a lucrative contract with JPMorgan to stay on as vice chairman emeritus and take 40 percent of trading commissions he generated. In early 2010, JPMorgan discontinued the Bear Stearns name....MORE

Millions Spent on Faulty Orbital Lizard Sex

From the Washington Post:

There is a lizard sex satellite floating in space and Russia no longer has it under control

Space lizards, out of control. (EPA/Luong Thai Linh)
At this very moment, a Russian satellite full of geckos -- (possibly) having sex -- is floating around in space -- and mission control has lost the ability to control it.

The Foton-M4 research satellite launched on July 19 with five geckos on board. The plan: To observe their mating activities in the zero-gravity conditions of Earth orbit. Several other earthly creatures, including plants and insects, were also placed on board for experiments.

But shortly after the satellite made its first few orbits, it stopped responding to commands from mission control. The equipment on board, however, is still sending scientific data back to earth, a spokesman for Russia's Institute of Biomedical Problems said....MORE

Headline credit:
I can picture the Daily Mail headline now: MILLIONS SPENT ON FAULTY ORBITAL LIZARD SEX. As it completely overlooks that the crew can still see into the biosatellite via camera feeds and instrumentation.
posted by Slackermagee at 9:40 AM on July 25  

Why Are So Many Political Heavyweights On the Board of Theranos?

First up, some background from the Seattle Times:

Stanford dropout Silicon Valley’s latest phenom
The latest tech phenom is a 30-year-old Stanford dropout whose hatred of needles helped lead her to start a company aimed to help people better understand their bodies.

Silicon Valley, much like baseball, has its share of phenoms, those up-and-comers who demonstrate extraordinary promise.

Meet the latest: Elizabeth Holmes.
Elizabeth Holmes, founder and CEO of Theranos
The 30-year-old Stanford dropout turned paper multibillionaire has worked for 11 years on her startup, which aims to give all of us better information about our bodies in a quest to revolutionize how we manage our health.

“If people can really begin to understand their bodies, that can help them change their lives,” she said during a recent interview at the Palo Alto, Calif., headquarters of Theranos, a mix of the words “therapy” and “diagnosis.”

Over the past year, Holmes has embraced a more public profile, recently snagging the cover of Fortune magazine in what bore all the hallmarks of a carefully orchestrated media push. Her board includes former Secretaries of State Henry Kissinger and George Shultz, former Defense Secretary Bill Perry, a couple of former U.S. senators, a Marine general. Oracle Chief Executive Larry Ellison is one of her investors.
Holmes’ drive to change the world has a familiar ring here. She may actually do it — or not. It’s always hard to know in Silicon Valley whether the hype matches the reality.

The tech industry has seen phenoms before. They are typically young, bold and single-minded with boundless ambition. Think Steve Jobs, Bill Gates, Jeff Bezos, Mark Zuckerberg.

What often distinguishes great leaders are qualities like determination and persistence, but something else too, said Bob Sutton, a Stanford engineering-school professor and co-author of “Scaling Up Excellence.”
“They believe they are destined to do something special,” he said.

In that respect, Holmes is cast from the same mold as Jobs et al. She launched the company, she told me, after “thinking about what is the greatest change I could make in the world.”

Holmes, who hates needles, zeroed in on blood tests as a starting point. If blood tests were easier, cheaper and more convenient — Theranos aims to put a lab within a mile of any city dweller — people could take multiple tests over time and see signs of a disease or condition before it’s too late, Holmes argues....MORE

And from USA Today:

Change Agents: Elizabeth Holmes wants your blood
Elizabeth Holmes is tall, smart and single. Well, maybe not truly single. "I guess you should say I'm married to Theranos," Holmes says with a laugh. Only she's not kidding.
For the past 11 years, Holmes, 30, has been laboring incessantly to build a company whose mission is to overhaul the nation's $60 billion blood taking and analysis business, literally one drop at a time.

The diagnostic-lab industry has long been dominated by names such as Quest Diagnostics and LabCorp, whose satellites many of us visit when our doctors want to run standard tests that typically require three or four vials of blood. But Theranos – a blend of "therapy" and "diagnosis" – has developed hardware and software that allows for many such tests to be completed with just a pinprick's worth of blood stored in a minute vial called a nanotainer.

The benefits of this breakthrough to Theranos could be riches; Holmes, who owns more than 50% of the stock in her company, has raised $400 million for a current valuation of $9 billion. But while Holmes is a billionaire on paper, nothing seems to interest her less....MORE
HT on both links, Economic Policy Journal:
WOW: The Female Mark Zuckerberg?

What is Henry Kissinger and Gang Up To Now?

Here's the Fortune story that started the media blitz.

"U.S. Corn Farmers Face a Cash Crunch"

Probably time for a little bounce when the Journal starts paying attention.
Corn in storage-Sept. contract-$3.59'6 down 1'6, new crop-December-$3.68'4 down 1'0.
From the Wall Street Journal:

Prices Have Fallen Nearly 30% in Past Three Months

Tumbling corn prices are sowing fears that many U.S. farmers will suffer their first losses in years and the agricultural economy could face its first sustained slump in a decade.
Corn prices have plunged nearly 30% in the past three months to their lowest point since 2010 as near-perfect weather in the Midwest fuels expectations of a second consecutive bumper harvest. Prices of other crops have fallen sharply as well, with soybeans trading near 2½-year lows and wheat near four-year lows.
Iowa farmer Doug Adams said he and his partner likely will try to renegotiate their rent on about 400 acres 
they added to their operation last year. Stephen Mally for The Wall Street Journal
The price-depressing glut of corn is benefiting companies that depend on grain for animal feed and other uses, including meatpackers, livestock farmers and ethanol producers. Shares of Tyson Foods Inc. TSN -1.23% have soared 47% in the past 12 months, while rival chicken processor Pilgrim's Pride Corp. PPC +0.19% has gained 95%. Shares of Archer Daniels Midland Co. ADM -0.81% , which processes grain into ethanol, corn syrup and other products, are up 34%.

Lower global grain prices are helping consumers as well, especially in countries where the cost of bread and other staples accounts for a large share of spending. A monthly food-price index published by the United Nations Food and Agriculture Organization declined for a third month in a row in June to the lowest since January, largely due to a marked drop in grain and vegetable-oil prices. 

The lower commodity costs could temper inflation in U.S. grocery aisles for cereal, cookies and other products containing grain and soy, though few packaged-food companies are likely to cut prices, analysts said.
But the slide in corn prices is expected to cut sharply into overall incomes in the U.S. Farm Belt because corn is the country's largest crop, grown on 350,000 farms and yielding about $60 billion in farmers' revenue last year.

Now 57% off its record high in 2012, corn is trading well below the $4-a-bushel threshold generally required for farmers to earn profits. That means many growers this year likely will fail to cover their costs for the first time since 2006, according to agricultural economists....MUCH MORE 
HT: The Big Picture's 10 Friday AM Reads

Among hundreds of posts:
Iowa State's Worst Case Corn Prices: $2.89 By 2017 

Betting Big on Russian Bonds

Even the Czar's bonds evenually paid off, a little.
From City AM:
Why ACPI is betting big on Russian bonds
Why ACPI is betting big on Russian bonds
Intense scrutiny from the international community and the threat of far-reaching sanctions do not undermine the fundamental strength of the Russian bond market.

That is the view of Daniel Moreno, head of emerging markets fixed income at London-based boutique ACPI Investment Managers.

While other managers have either cut their Russian exposure or warned over ‘absurdly cheap’ valuations, Moreno has increasingly added to his Russian holdings over the past six months.

‘There is one thing that is a clear negative and that is the political situation, meaning the geo-political situation. Russia is at the forefront of lots of discussions because of criticism and pressure from the United States and the EU, which are trying to push Russia into a corner.’

‘Even though it is particularly hard to analyse the outcomes, we are thinking this will be seeing a stabilisation within six months or so.’

Moreno assumed responsibility for the ACPI Emerging Markets Fixed Income Ucits fund in January. He took over from Alia Yousuf, who subsequently joined ING IM.

Under Moreno’s stewardship, the fund has returned 8.19% over the six months to the end of June 2014. This compares to a 7.6% rise by its benchmark, the LCI ML HY/JPM EMLI+/JPM EMBI+ (1:1:1).

He attributes a large portion of this outperformance to the returns generated by exposure to Russia over a turbulent period. ‘We hold assets that we believe have value and, back in January, Russian bonds didn’t have value.’...MORE

"Amazon Drops 12% on ‘Huge Loss’ Projection; Three Downgrades" (AMZN)

Following up on last night's "Legendary Patience of Amazon Investors Being Tested (the stock is down 9% afterhours) AMZN".
The stock is now down $40.15 (11.20%) at $318.46.

From Barron's Tech Trader Daily:
Shares of (AMZN) are down $41. 31, or almost 12%, at $317.30, in early trading, adding to last night’s losses, after the company missed Q2 profit expectations with a much-wider-than-expected net loss per share, and said losses will be even deeper this quarter.

Among the surprises of the quarter, beyond just the lower profit, were announced price cuts in Amazon’s cloud computing service, Amazon Web Services, or AWS. Continued price chopping in AWS is expected to be one of the main causes of the deeper projected losses going forward.

The stock has gotten three downgrades this morning, that I can see, from Raymond James‘s Aaron Kessler, CRT Capital‘s Neil Doshi, and B. Riley & Co.‘s Scott Tilghman.

Kessler, cutting his rating oto Market Perform from Outperform, and stripping away his $391 price target, writes that “While we maintain a positive long-term view on Amazon, we believe shares are likely to remain range-bound near-term given continued high levels of investment combined with slowing unit growth (especially international growth).”

Kessler raised his 2014 revenue forecast to $91.36 billion from $91.25 billion, but cut his profit estimate to a loss of 16 cents a share from a profit of 79 cents a share.
There are also plenty of price target cuts.

Cowen & Co.‘s John Blackledge, reiterating an Outperform rating, cuts his price target to $390 from $410, writing that “We remain constructive, but were disappointed by the lower-than-expected AWS growth.”

Still, Blackledge sees things to like...MORE

Goldman on Gold: "Target $1,050 an Ounce, But $1,200 is the Real ‘Floor’"

$1293.60 last, up $2.80.
From Barron's:
Goldman Sachs’ commodity strategists write this week that they remain doubters of gold’s 2014 rally, sticking to their prediction that the metal will reach $1,050 in price by the end of the year. To come true, it would mean a slump in gold’s price of 19% or greater from current levels. That’s pretty bearish.
But the GS’ strategists’ bearishness has a limit. In a note to clients this week, the strategists write that they expect the $1,200 level, or roughly 7% beneath Thursday’s prices, to function as “a good estimate of the floor price for gold.”

A price of $1,200, they write, is the 90th percentile of all-in sustaining costs in the gold-mining sector. Putting it more plainly, it’s the price below which more producers have to think about scaling back their gold output. Go appreciably below this level and the pressure builds. The result in that case should be lower output....MORE
And from Kitco, a story we'll be referring back to:

Mining Companies Need To Overhaul Business Models To Right Ship – Ernst & Young
According to Ernst & Young, the mining industry needs to revamp its business models if it wants to reverse a decade-long trend of decline in productivity.

In a mining report released Thursday, titled Productivity in mining: A case for broad transformation, EY notes mining companies chased production growth at the expense of productivity on a volume and cost basis.

“Companies caught in the race to capitalize on high commodity prices are now facing a number of business model challenges,” said Bruce Sprague, EY’s Canadian mining and metals leader. “Operation expansion and inefficient use of labor and equipment are all compromising productivity.”

Sprague added that there are no easy solutions; highlighting cost-cutting exercises, minimal process and technology improvements are not enough to circumvent the damage that has been done.

In the report, EY describes productivity as a gain that “should be measured as a form of optimization, i.e., the highest ratio of output to input, which could in fact mean achieving higher productivity with lower input.”
The report highlights labor productivity as a major piece to the decline, which they attribute in part to the increasing complexity of operations, but more so to inadequate skills brought on during the boom time.

Another issue is capital productivity, according to EY. Part of the list includes long lead times between investment and production, ineffective portfolio management, issues with capital allocation decision-making, resource nationalism, as well as others....MORE
Here's the EY press release and download site:
Business transformation needed to address mining productivity

EIA: U.S. Refiners Running At Record Levels

From the EIA's Today in Energy:

U.S. petroleum refineries running at record levels
graphic of weekly refinery inputs, as explained in the article text
Source: U.S. Energy Information Administration, Weekly Petroleum Status Report

U.S. refineries have been processing record volumes of oil recently. Refinery inputs hit a record-high 16.8 million barrels per day (bbl/d) in each of the past two weeks, exceeding the previous record from summer 2005. Refineries in the Midwest and Gulf Coast in particular pushed the total U.S. input volume upward, as these refiners' access to lower-cost crude oil, expansions of refining capacity, and increases in both domestic demand and exports contributed to higher refinery runs.

As discussed in This Week in Petroleum, refinery gross inputs in the Midwest have been higher than the five-year range since late April. Typically, Midwest drivers use more motor gasoline in the summer, and some of that has come from the Gulf Coast. However, recent and planned changes to pipeline infrastructure have altered both the type of products in the pipelines and direction of flow. These changes increase the incentive for Midwest refiners to boost their own gasoline production.

The Midwest's record-high runs of 3.8 million bbl/d for the week ending July 11 pushed the region's refinery utilization to 100.3%, the first time any of the Petroleum Administration for Defense Districts (PADDs) has exceeded 100% since EIA began publishing weekly PADD-level utilization in June 2010....MORE

AQR's Cliff Asness: "Be Realistic About 2.5% Real Returns"

From Alpha Architect:
Cliff Asness had a great interview with Steve Forbes back in April (a copy is here) that highlights the dilemma facing investors today: stocks and bonds are overpriced, so what do you do?


…Looking at stocks and bonds, are they both overpriced?
Asness on market valuations:
Yeah, they are…if you’re going to say, “what are the next 10 years going to look like?”…value has some power to forecast the next decade…right now my favorite measure of value…is Bob Shiller’s PE. It’s gotten very popular. I’ve been looking at it since the late 90s. And that’s about the 85th percentile expensive back to 1926, so only 15 percent of the time has it been more expensive. It’s occasionally been way more expensive, so percentiles…people can use them to be tricky. Statisticians have all kinds of tricks…We’re at 25 on the Shiller PE. The 100th percentile, hit in early 2000, was 45…I would not call this a bubble, I would just call this an expensive market.
Asness on real yields:
The real bond yield…that’s just the 10-year bond minus our best guess of what economists are forecasting for inflation. I say “our best guess,” because we have their actual guess for 20, 30 years, [but] databases don’t exist and we have to guess at what they were guessing before that, but that’s also about the 85th percentile. The difference between them is relatively normal. People focus on bonds because it feels much more measurable. And yields are [low]…[this is] not a commercial for bonds…85th isn’t so good.

Both [stocks and bonds] are very similar [at the 85th percentile]…For truly long term investors, I would not use this to time the market…I still think returns will be positive. So if you’re out of the market for the next 10 years, that’s not going to help, and I don’t think you’re going to get the exact timing right. But I would lower my expectations. Whether you’re a pension plan, or an individual with a sheet of paper trying to figure out, “how much do I need to retire?” if we are right that these higher than normal prices, [and] lower than normal yields, are going to lead to positive, but lower than normal returns, well, you have to use those.

We think a 60/40 portfolio of U.S. stocks and bonds has averaged about 5% over inflation historically. We think, even if valuations stay high -- and it could be worse if valuations fall, right? Regression to the mean. If those PEs come down, it could be worse -- but even if they stay high we think they…offer 2 to 3 percent over inflation...MORE
On April 22 the closing yield on the 10-year was 2.73%, today we're at 2.509%.
Today the S^P 500 looks to open at 1977.25 vs. 1,879.55 three months ago.

Thursday, July 24, 2014

Legendary Patience of Amazon Investors Being Tested (the stock is down 9% afterhours) AMZN

AH $323.95 down $34.66 (9.67%)
From City AM:

Amazon share price takes a dive as losses increase
More of the same from Amazon, as it continues its tradition of favouring growth over profits.
The e-commerce giant has just announced a loss of $126m, or $0.27 per share for the three months to the end of June, coming in significantly below Wall Street estimates of a $0.15 per share loss.

The second quarter has seen a significant widening of the company's losses compared to the same period last year, which were $7m, or $0.2 per share.

This is despite Amazon's revenues enjoying a rise of almost $4bn, climbing  to $19.3bn, from $15.7bn in the same period last year.

The revenue is exactly in line with what analysts were anticipating and constitutes an increase of 23 per cent year-on-year.

For the next quarter, Amazon's revenue guidance is between $19.7bn and $25bn,  again in-line with consensus estimates.

But are investors starting to get impatient?
The retailer's share price, which is often highly volatile in reaction to earnings reports given how little information the company releases about its strategic plans, has taken a dive on the latest results, down around six per cent in after hours trading.

As an indication of how explosive Amazon's stock is in the follow up to earnings, it averages a 9.5 per cent move either way, according to Bespoke....MORE
And from Barron's:
...Q3 Loss to Be Much Bigger than Q2