Wednesday, June 20, 2018

GE’s 111-year run in the Dow comes to an end (GE; WAG)

From MarketWatch:

General Electric, a member of the blue-chip index when it started and since 1907 continuously, booted in favor of Walgreens
General Electric Co. is losing an important title it has held for more than a century: Dow Jones Industrial Average component.

GE GE, -1.85%   , which was part of the Dow Jones index DJIA, -1.15%  when it was started in 1896 and had been a part of the blue-chip portfolio continuously since 1907, is being replaced by Walgreens Boots Alliance Inc. WBA, +3.70%  , S&P Dow Jones Indices announced Tuesday afternoon.

“The U.S. economy has changed: Consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, explained in Tuesday’s announcement. “Today’s change to the DJIA will make the index a better measure of the economy and the stock market.”

GE has been removed from the index twice previously, but has been a constant presence since replacing Tennessee Coal & Iron in November 1907, the same month Oklahoma became the 46th state in the union. The other companies that were part of the index when GE entered in 1907, none of which are still members: Amalgamated Copper, American Car & Foundry, American Smelting & Refining, American Sugar, Colorado Fuel & Iron, National Lead, Peoples Gas, U.S. Rubber, U.S. Rubber 1st preferred, U.S. Steel and U.S. Steel preferred.

GE has fallen on hard times in recent years though, with a plunging stock price that broke an unwritten rule for the Dow: A component’s stock should not be worth less than 10% of the highest-priced stock in the index. GE closed at $12.95 a share Tuesday, which was less than 1/20 the price of a share of Boeing Co. BA, +1.28%  .

S&P Dow Jones Indices noted that GE’s plunging stock price factored into the decision as well...MORE
Also at MarketWatch:
What Walgreens stock replacing GE in the Dow Jones Industrial Average may mean

Tuesday, June 19, 2018

The 39 San Francisco high-rises at risk of collapse during a major quake, according to the U.S. Geological Survey

From Curbed San Francisco:

“Most of the structures, which were built between 1964 to 1994, are clustered around downtown, the Financial District, and SoMa” 
The U.S. Geological Survey released a gasp-inducing report regarding the structural security of dozens of San Francisco high-rises that could be in peril when the next major earthquake strikes.
New York Times reporter Thomas Fuller sifted through the USGS report to reveal the nearly 40 buildings in SF that could buckle following powerful earthquakes, like the one that hit San Francisco in 1906.

Most of the structures, which were built between 1964 to 1994, are clustered around downtown, the Financial District, and SoMa. The reason for concern: Many of the skyscrapers employed the use of a flawed technique that wasn’t remedied until after a major Southern California earthquake in the 1990s.

The faulty technique, known as welded steel moment-frame buildings, fuses together columns and beams rather than using the pricey and time-consuming bolts and rivets method, which was used in steel frame building in previous generations.

While the building code with said technique was rewritten following the Northridge quake, many of the buildings constructed using the welded steel moment-frame system have yet to be retrofitted.

According to the New York Times:
Engineers have known about a major defect in certain steel-frame buildings since 1994, when shaking from the Northridge earthquake in Los Angeles fractured critical joints in more than 60 buildings, bringing at least one very close to collapse. The building code was rewritten to eliminate the flawed technique....

"Pointy-Haired Bosses* are splashing AI about their organisations without a clue about why they're doing it,..."

From The Register, June 12:

Low AI rollout caused by dumb, fashion-victim management – Gartner
We're paraphrasing
Pointy-Haired Bosses* are splashing AI about their organisations without a clue about why they're doing it, says a senior Gartner analyst.

"As head of customer experience, the logic is: we have to deploy AI because everyone else is doing it. In fact, there's not a huge number of companies that are actually deploying AI," Jessica Ekholm told us.

Gartner estimates that only 4 per cent of CIOs polled in its most recent survey had invested and deployed AI, if you count chatbots as AI as Gartner does. Another 21 per cent of CIOs were experimenting with it.

The top use cases are around customer engagement, call centre support and digital marketing. That's 81 per cent of organisations giving the technology a steer.

Depressingly, the main motivator is saving money.

"To some extent saving costs has been the major proposition," confirmed Ekholm. "But to make it work there needs to be a business value proposition. The key point is the customer journey."
Two years ago Facebook and Microsoft kicked off a chatbot arms race, with Microsoft CEO Satya Nadella positioning "conversations as a platform" as the next era in human-computer interface.
"Bots are the new apps," the SatNad told developers at the 2016 Build conference. "People-to-people conversations, people-to-digital assistants, people-to-bots and even digital assistants-to-bots. That's the world you're going to get to see in the years to come."

Facebook thought so too, and pointed to its enormous consumer reach (of two billion users of Facebook, Instagram, WhatsApp and Messenger) to persuade businesses that it was the best channel through which to engage people. But Facebook's M messenger ran into trouble, with a reported 70 per cent failure rate. M was later repositioned as an experiment before being taken out the back and shot in January.

We did find one area where chatbots work well, and it's an interesting one....MORE

Tesla Down 23 Bucks (TSLA)

Sometimes you get lucky.

June 18

"Tesla short-sellers have been getting creamed, but they're still betting against Elon Musk anyway" (TSLA)

In pre-market trade the stock is down $2.87 (0.80%) at $355.30. Note the prices the stock stalled at on prior up-moves:

$347.24 down $23.59 (6.35%)
More to come.

Next on Humblebrag:

Stocks--I'm a genius! Housing--I'm a genius! Commercial real estate--yes, well, I suppose the evidence is overwhelming...

Sandia National Lab to Install First Petascale Supercomputer Powered by ARM Processors (Masayoshi Son smiles)

Softbank's chairman paid quite a bit to get his hands on the crown jewel of British high tech.
From Top500:
Sandia National Laboratories will soon be taking delivery of the world’s most powerful supercomputer using ARM processors. The system, known as Astra, is being built by Hewlett Packard Enterprise (HPE) and will deliver 2.3 petaflops of peak performance when it’s installed later this year. 
Astra rendering. Source: HPE

“Sandia National Laboratories has been an active partner in leveraging our Arm-based platform since its early design, and featuring it in the deployment of the world’s largest Arm-based supercomputer, is a historical moment not just for us, but for the industry as we race toward achieving exascale computing,” said Mike Vildibill, vice president, Advanced Technology Group, HPE

Astra will be based on HPE’s Apollo 70 system and will be comprised of 2,592 dual-socket nodes, containing 145,000 cores – by far the largest such system the company has delivered. If it was up and running today, it would easily make it into the upper fifth of the TOP500 list.

Each node will be equipped with two 28-core Cavium ThunderX2 processors running at 2.0 GHz. These aren’t the biggest or the fastest of Cavium’s newest ARM processor, but represents something of a sweet spot in price-performance. In aggregate, the compute nodes will draw 1.2 MW of power, which translates into a respectable energy efficiency for a 2.3-petaflop machine.

Local storage will be supplied by Apollo A4520 enclosures, providing 350 TB in the form of an all-flash Lustre appliance. Because of the relatively small capacity and high performance, it will primarily be used for operations needing extreme I/O bandwidth – things like burst buffering and file checkpointing.

Prior to the Astra announcement, most of the other action with regard to ARM-powered HPC was taking place in the United Kingdom. HPE had previously announced that three UK universities (Edinburgh, Leicester, and Bristol) had ordered Apollo 70 clusters, but each of these systems will be outfitted with just 64 nodes and will top out at a mere 74 teraflops. As far as computational capacity goes, the closest thing to Astra is Isambard, a 10,000-core Cray XC50 supercomputer using these same ThunderX2 processors. It’s set to be deployed at the Great Western 4 (GW4) Alliance, a research consortium of four UK universities (Bristol, Bath, Cardiff and Exeter).

Astra’s delivery is the first production deployment of the of the Department of Energy’s (DOE) National Nuclear Security Administration’s (NNSA) Vanguard Project. The project’s mission is to ensure a viable HPC ecosystem is established for ARM technology within the NNSA and the larger DOE community. Besides Sandia, a number of other national labs are involved in the project, including Lawrence Livermore, Oak Ridge, Argonne, and Los Alamos....

Keeping in mind the new Summit supercomputer at Oak Ridge turns over at 200 AI-tuned petaflops this latest 'puter is more about offering a different supercomputer architecture, what with the tech Cavium licenses from ARM.

"IBM builds world’s most powerful supercomputer to crack AI" (IBM; NVDA)

“What the f--- is happening to our business?’: As ad execs hit Cannes, New Yorker scribe Ken Auletta’s new book chronicles the industry’s various existential crises

From Business Insider, June 16:
As hundreds of high-powered advertising and media executives descend on Cannes this week for a flurry of meetings, marketing stunts, and boozy yacht parties, there's an undercurrent of deep uncertainly about the industry's future.

As well chronicled in New Yorker writer Ken Auletta's new book, "Frenemies: The Epic Disruption of the Ad Business (and Everything Else)," advertising faces a crisis at every turn. People are asking scary questions such: "Do ad agencies have a reason to exist?" "Is TV advertising — and interruptive advertising — nearly over?" "Do consumers hate us?"

Business Insider spoke with Auletta about his experience writing the book and his take on the state of affairs in adland.

Mike Shields: In your career, you're written a lot about media and tech. How much did you really know about the ins and outs of how the ad business really operates?
Ken Auletta: Not enough. One of the attractions of doing this book. Covering the media for a long time, if you adopt the Watergate mentality of follow the money, you say, my god, you've gotta look at advertising. There's the piggy bank for much of the media. And I don't just mean legacy media. I mean Facebook, Google, the internet.

The other reason I do what I do is visiting another planet, and finding the natives and how they operate. And for me I was visiting a new planet. The advertising-marketing planet. And so for me that intellectually was a challenge.

Shields: Was there anything that really surprised you in your reporting?
Auletta: Among the things that surprised me was how fast the disruption was happening. I was stunned by the idea that 20% of Americans use ad-blockers. And a third of Western Europeans have ad blockers on their cellphones. Those are huge numbers.

And [another surprise was] how the cellphone becomes a real impediment to advertising. It's such a personal instrument. It's like your wallet or your purse. You don't lend it to anyone. And suddenly people are pinging you. Before you read what you searched for, we want to divert you for 20 second or 25 seconds. It really is annoying. So people are really turned off by ads as an interruption. And that was a punch in the nose.

Obviously you watch television, and you kept getting bombarded. You're interrupted 19 minutes or so every hour.

Shields: Right. But TV was sort of built that way.
Auletta: The thing that makes it more annoying, even though it was built that way, is you can turn to Netflix, let's say, and you can watch what you want without commercial interruption, and you can watch as much of it as you want. It just accentuates your feeling of being interrupted....

Insurance: Property Casualty Looks to Be Extremely Profitable This Year (TRV; CB; ALL; AIG)

If the lowered hurricane forecasts come to pass* and the U.S. tornado numbers continues their decade low trend the P&C folks stand to make some serious coin on the weather related stuff.
Here are the tornado numbers season to date:

And the current sea surface temp anomalies via Environment Canada:

Current monthly precipitation anomaly forecast

Granted there a a couple big if's in the opening sentence. It's possible there could be an EF-5 tornado in downtown Oklahoma City next week but that's not really the way to bet.

And regarding hurricanes, despite the cooler than average sea surface temperature anomalies in the "main development zone" for the long-haul hurricanes that start their run off the coast of Africa and the slightly cool area east of the Yucatan peninsula, this is no guarantee for the height of the season come August-September.

And then there are the earthquakes....

Re/Insurance: "2018 hurricane forecasts reduced on lower Atlantic temperatures"

"Rotor sail helps Finnish ferry Viking Grace reduce fuel consumption"

Depending on how high the low-sulpher rules push the price of bunker fuel there might be a lot more of these coming.


Rotor sail helps Finnish ferry Viking Grace reduce fuel consumption

Passengers traveling on the Baltic sea on the Viking Grace vessel can now observe a 24 meter high spinning tube on deck. The structure is a rotary sail, a first of it's kind installed on a passenger ship.
The rotor sail is installed on the Grace is built by a Helsinki based company Norsepower. The cylinder shaped sail uses the wind as propulsion, and reduces the need for the main engine. Viking Grace deployed the sail on the 12th of April 2018.

Magnus effect
Use of the rotary sail takes advantage of the Magnus effect to fuel and emission savings. The pilot project hopes to save 300 tons of LNG fuel each year. Carbon dioxide emissions are reduced by 900 tons.

In addition to reduced strain on the environment, the rotary sail is a strong financial incentive. On the Grace the Norsepower sails are projected to yield the shipping company Viking Line with savings of 180,000 euros annually. Profits out of thin air.

Norsepower is also working together with Maersk shipping company. One of the company's oil tankers will get two 30 meter rotor sails later this year.

The sails are expected to result in fuel savings of up to 20 percent for the Maersk pilot vessel project, but the average savings are said to be around 10 percent on global shipping routes....
...MORE, including video

Monday, June 18, 2018

Tourists in San Francisco: "I'm Not Coming Back"

From the San Francisco Chronicle:

'Am I in the bad part of town?' Tourists shocked by what they see on San Francisco streets

It's something many San Franciscans see on a daily basis, outside their homes or offices and during their commutes. For better or for worse, locals are used to walking by crime scenes, have seen open injection drug use, and have witnessed mental health episodes firsthand.

But when a tourist lands at SFO, guidebook in hand, that reality can be shocking.

"Is this normal or am I in a 'bad part of town?' Just walked past numerous homeless off their faces, screaming and running all over the sidewalk near Twitter HQ and then a murder scene. Wife is scared to leave hotel now," wrote an Australian Reddit user Wednesday.

That person isn't alone. On Sunday, another tourist from Canada asked the San Francisco Reddit community, "Why is this city so terrifying?"

"I'd been there for probably less than a day, just wandering around the center, and already seen more than enough poverty and suffering to cause me wanting to leave desperately," wrote another visitor from London in 2017. "I saw many people talking to themselves, or to things that weren't there. Even in a Macy's, and there weren't any police officers to help them or do anything about it."

Anyone who has hosted friends or family from out of town may have had to field similar questions.
Just those three Reddit posts garnered more than 650 comments, many of which were helpful suggestions (other neighborhoods to explore, safety tips, and more).

But the city's own visitors' bureau is struggling to come up with a good explanation for horrified tourists....MORE
May 22
So, What's New In Silicon Valley?
From the San Francisco Chroicle
"Palo Alto pastor resigns after nasty tweets about city: 'An elitist sh-- den of hate"
Huh, same 'ol, same 'ol.

Feb 22
San Francisco: "UN expert decries homeless conditions in Bay Area as ‘cruel,’ ‘unacceptable’"
You may have seen the story.
The UN's special rapporteur on Adequate Housing has been jet-setting around, Mexico City, Mumbai, S.F., documenting what she sees:

“In Mexico City, I visited a low-income settlement that had been moved by the city onto empty land near a railway line,” [Farha] said. “They had no running water. They stole electricity.” The camp was noisy and dangerous. She noted that the camp in Mexico is virtually identical to those she visited in Oakland, including the Wood Street and 23rd Avenue encampments....
The above snip is from the East Bay Express reprinted in Curbed San Francisco.

Curbed has had one of the most impressive series on the situation of any major media.
There's the January 22 piece  we used for the headline which wraps up with:
After her trip to the Bay, Farha headed out to assess conditions in LA, an errand she told the East Bay Express she dreaded after observing encampments here.
Additionally they had coverage a week later with "How SF tourism industry deals with the homeless crisis":
“I actually think it’s the worst it’s ever been”

February 12's "San Francisco backs new law to intervene with severe homeless population":
“This is a public health issue and needs to be treated as such”

February 19's "Some SF streets filthier than world’s poorest slums, says UC Berkeley professor"
So kudos to Curbed.

Someone else who's been pointing out various aspects of the culture that is San Francisco is Elaine Ou who we linked to last summer in: San Francisco's Dirty Little Secret
And again in November's "Elaine Would Prefer That Amazon Not Move to San Francisco (AMZN)".

As I noted the first time we linked to the Curbed headliner:
It's a deliberate policy decision by the municipal and county government. More on that point next month....
Still not ready to do that but I thought we should update with the nod to Curbed. And earlier:

Bonhams Auctioneers Has Allegedly Installed Sprinklers To Douse Homeless Outside the Building
It seems they got the idea from the Archdiocese of San Francisco.
Now, the auctioneers may think they are offering the homeless a cool, refreshing shower but boy the optics are bad.

From Curbed San Francisco:   
SF Luxury Auction House Allegedly Turns Sprinklers on Homeless [Update] 
...Using a sprinkler system to remove homeless people from structures is not a new idea. In 2015, the San Francisco Roman Catholic Archdiocese got into hot water after it was discovered that they were using sprinklers to regularly douse people camping overnight in the doorways of St. Mary’s Cathedral.... 
When youv'e lost the Catholics...

Whoa: "In China, a picture of how warehouse jobs can vanish" Google Likes (GOOG; JD)

From Axios:, a Chinese e-commerce gargantuan, has built a big new Shanghai fulfillment center that can organize, pack and ship 200,000 orders a day. It employs four people — all of whom service the robots.

What's going on: Welcome to the creeping new age of automation. When the talk turns to Chinese big tech — rivals to Google, Amazon and the rest of Silicon Valley — the names usually cited are Alibaba, Baidu and Tencent. But scrappy JD, with a respectable $58 billion market cap, is investing aggressively to be added to the pantheon. 

Its secret sauce, executives said this week in Beijing and Shanghai, is logistics — its creation of China's first east-to-west, north-to-south package delivery business, able to deliver a purchase the same day almost anywhere in the nation, as long as it's ordered by 11 a.m.

But to get faster and more reliable, just as important is automation: From smart warehouses that process orders, to self-driving trucks and drones to deliver them, JD's research and development team is working on ways to eliminate costly workers.

Why it matters: This is the future. Like JD, its fierce e-commerce rival Alibaba has also built an entirely automated warehouse, showing how retail will probably be done in years to come everywhere including the U.S. and Europe.
  • JD says its objective is not to eliminate workers but to get faster and more reliable, and that it will shift its warehouse people to other jobs.
  • Its new mantra is "retail as a service," in which it will sell the efficient methods it's developed to other companies....

And from Reuters:

Google to invest $550 million in Chinese e-commerce giant

Meanwhile in China: To Pursue Underground Maglev Network
"After Losing China, Jeff Bezos Really Wants to Win in India" (AMZN)
Logistics: "The biggest company you may not know all that much about"

"Tesla short-sellers have been getting creamed, but they're still betting against Elon Musk anyway" (TSLA)

In pre-market trade the stock is down $2.87 (0.80%) at $355.30. Note the prices the stock stalled at on prior up-moves:

From CNBC:
  • Elon Musk insists Tesla does not need or want to raise equity or new lines of credit this year, but Goldman Sachs predicts it will need to raise $10 billion by 2020.
  • Tesla short-sellers say the company should, but can't, raise the capital it needs to pay off debts, fund operations and thrive in the long term.
  • Bears also believe the electric car maker is too risky for large investment banks to underwrite billions.
It's been a rough few weeks for investors betting against Tesla, one of the most-shortedstocks in the United States.

Tesla stock has rallied almost 17 percent since the company's early June annual shareholder meeting at which Chairman and CEO Elon Musk promised profitability in the third quarter. Shares kept trending higher this week, rising slightly after Tesla announced plans to lay off 9 percent of its workforce. Musk added $25 million worth of shares to his personal holdings.

Those with a positive outlook on the electric vehicle maker see Tesla's restructuring as a push for profitability. But the bears see the layoffs as yet another sign Tesla is in the middle of a cash crunch and believe it won't be able to raise the capital it needs to pay debts and fund operations.
Here's why:
Costly ambitions
Musk has maintained that Tesla does not need to raise equity or new lines of credit this year. But Goldman Sachs predicted Tesla will need to raise $10 billion by 2020 to keep going.

Darius Brawn, a hedge fund veteran who previously worked as a portfolio manager for SAC and Citadel, told CNBC he thinks $10 billion is a conservative estimate. He cites Tesla's plans to ramp up its Model 3 production, build new factories, make a new Roadster, Semi trucks and a Model Y vehicle, and to embark on large-scale production of its glass solar roof tiles.

Brawn, who has shorted Tesla personally, points out that it's highly unusual for a growth company to cut its planned investment spending, as Tesla did last quarter from $3.4 billion to under $3 billion.
Tesla's accounts payable stood at $2.6 billion as of March 31.

Without raising additional capital, Brawn said, the electric vehicle maker has enough cash to last for only a few quarters. He bases his estimates on its expected cash flow from operations, stated capital expenditure plans and credit agreements....
...MUCH MORE, including Chanos video.

Professor Damodaran on "User and Subscriber Businesses: The Good, the Bad and the Ugly!"

From Musings on Markets:
In a series of posts over the course of the last year, I argued that you can value users and subscribers at businesses, using first principles in valuation, and have used the approach to value Uber ridersAmazon Prime members and Spotify & Netflix subscribers. With each iteration, I have learned a few things about user value and ways of distinguishing between user bases that can create substantial value from user bases that not only are incapable of creating value but can actively destroy it. I was reminded of these principles this week, first as I wrote about Walmart's $16 billion bid for 77% of Flipkart, a deal at least partially motivated by shopper numbers, then again as I read a news story about MoviePass and the potential demise of its "too good to be true" model, and finally as I tripped over a LimeBike on my walk home. 
User Based Value
My attempt to build a user-based valuation model was triggered by a comment that I got on a valuation that I had done of Uber about a year ago on my blog. In that post, I approached Uber, as I would any other business, and valued it, based upon aggregated revenues, earnings and cash flows, discounted back at a company-wide cost of capital. I was taken to task for applying an old-economy valuation approach to a new-economy company and was told that that the companies of today derive their value from customers, users and subscribers. While my initial response was that you cannot pay dividends with users, I realized that there was a core truth to the critique and that companies are increasingly building their businesses around their members. 
Consequently, I went back to valuation first principles, where the value of any asset is a function of its cashflows, growth and risks, and adapted that approach to valuing a user or subscriber:
To get from the value of existing users to the value of an entire company, I incorporated the value effect of new users, bringing in the cost of acquiring a new user into the value:
I applied closure by consider all corporate costs that are not directly related to users or subscribers in a corporate cost drag, a drag because it reduces the value of the business:...

"Keep your hands on the f*cking wheel! New Tesla update like being taught to drive by your dad" (TSLA)

From The Register, June 14:

Plus: Brit driver claims Autopilot almost took car off the road
An update to Tesla's Autopilot software earlier this month has caused headaches for drivers of its electric cars – with one user alleging he was almost driven off the road by the robotic assistant.
The patch, 2018.21.9, contained a number of tweaks to address safety concerns with the Autopilot software, which Tesla trumpeted as the first step on the path to fully self-driving cars.

Users, unfortunately, have often bought into the dream a little too wholeheartedly and failed to read the small print. Drivers should keep their hands on the wheel and eyes on the road – because Autopilot isn't an actual autopilot. It's more of a jumped-up cruise control at this stage.

Due in part to some high-profile incidents caused by users relying a little heavily on their electronic buddy-under-the-hood, the new software now nags drivers every 30 seconds to keep their hands on the wheel.

Drivers have found this somewhat vexing, with one getting an explanation from His Muskiness himself:...MORE

Shipping’s 2020 Low Sulphur Fuel Regulation to Hit Airlines

Via gCaptain:
From the window of a jet plane, it can be hard to see ships crawling across the seas. Yet what’s burning in those engines thousands of feet below may determine the fate of airline profits in the next few years.

In about 18 months’ time, the world’s oil refineries are going to have to supply shipping companies with better-quality fuel to comply with international regulations agreed back in 2016 in a nondescript building on the banks of the River Thames in London.

While the regulators’ target was to lower sulfur emissions from ship fuel, it’s becoming increasingly clear there will be an accompanying — and significant — impact on the supply of jet fuel, the aviation industry’s single biggest expense. The trouble is, there’s profound disagreement about whether the result will be a glut or a shortage of the fuel.

“These rules are going to impact airlines,” said Mark Maclean, managing director at Commodities Trading Corporation Ltd., which advises on hedging strategies. “The impacts will not be isolated only within the shipping industry, these changes will affect the entire oil and middle-distillate complex,” the part of refining that includes jet fuel and diesel.

From Jan. 1, 2020, the world’s ships will need to consume fuels containing less sulfur under the 2016 rules set out by the International Maritime Organization, part of the United Nations.
Oil refineries are likely to face an initial demand surge from shippers for diesel-type products when the rules kick in. Diesel is critical in determining the cost of normally more-expensive jet fuel, so if that historic price relationship holds, then the aviation industry’s fuel bill could surge as well.

Refining Puzzle
How it plays out in practice hinges on the way refineries make jet fuel and — critically — how much flexibility they’ll have to adjust their output once the new rules enter into force.
Jet fuel is made in one simple refining process, meaning that if more crude gets distilled to make diesel, then there will be an unavoidable surge in jet fuel supplies too. Several traders say that could result in a surplus.

But not everybody agrees. For one thing, increased amounts of jet fuel will be blended into fuel oil to meet the more stringent sulfur specifications, according to Jan-Jacob Verschoor, a director at Oil Analytics and a chemical engineer by training who previously worked at Royal Dutch Shell Plc. Refineries will also have some flexibility to maximize diesel production to the detriment of jet fuel output, more than negating any ramp-up in overall crude processing, he said....MORE
June 14
Shipping: CEO of Third Largest Fleet Says "We're All Going to Go Bust"
June 11
Shipping: The New Low Sulpher Rules Will Have A Huge Impact On the Oil Business (shipping and world economy too)

CryptoKitty Trading Volume Collapses: Andreessen, Union Square and Climateer Hurt Worst


From Business Insider, June 16:

Top investors gambled $12 million on the blockchain equivalent of Beanie Babies. Now, sales are plummeting.
  • In March, investors including Andreessen Horowitz and Union Square Ventures gave a total of $12 million to CryptoKitties, a blockchain game for digital collectibles.
  • According to data from blockchain analytics sites, the number of CryptoKitties transactions are a fraction of what they were in December.
  • CryptoKitties cofounder Bryce Bladon says the livelihood of CryptoKitties can't simply be measured by the number of transactions that happen in a month, and that people's behaviors have changed as the price of processing a transaction has increased.
When investors gave $12 million to a startup called CryptoKitties in March, many raised their eyebrows at the news.

CryptoKitties, which describes its product as one of the world's first blockchain games, uses blockchain technology to collect and "breed" digital cats. Users can buy colorful, googly-eyed cats, some of which cost thousands of real-world dollars, to trade and "breed" more digital cat offspring.
It's a bit like blockchain-based Beanie Babies.

Like Beanie Babies, CryptoKitties are considered collectibles. Their novelty lies in the fact that owners can prove that they possess sole ownership of the Crypto Kitty they've purchased. In December, it was reported that one particular Crypto Kitty sold for around $155,000.

But it looks like CryptoKitties itself could be in danger of becoming a short-lived novelty.
According to data from blockchain analytics sites Bloxy and Diar, the number of CryptoKitties transactions has fallen drastically in the last 3 months.

The number of CryptoKitties transactions decreased in June by 98.4% compared to its peak of 80,500 transactions back in December 2017, according to data from Bloxy. The game is still among the most popular options for ethereum-related gaming, but public interest in buying and selling them seems to have waned significantly in recent months....MUCH MORE

April 14 
This Might Be Important: "New technology could wean the battery world off cobalt"
I've mentioned our general policy on publishing battery breakthroughs: Don't.
There are so many announcements of this material or that manufacturing process or this chemistry or that theoretical approach that if we posted them there would be no room for CryptoKitties (below).

April 14 
"How we made $100K trading CryptoKitties"
Not us, we're HODLers, this guy:... 

March 22
Matt Levine's Meow Culpa—CryptoKitties, An Exegesis
Following up on Thursday's "Matt Levine Writes About CryptoKitties..."
FT Alphaville's Matthew Klein directs our attention to Mr. Levine's Friday Bloomberg View column....

March 22 
Matt Levine Writes About CryptoKitties ("this column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners").
While we haven't heard Mr. Bloomberg explicitly state that he is in favor of CryptoKitties, it is difficult to see how he could argue with the comfort they bring as an antidote to the hurley-burley of daily life.*
Not to mention the "CryptoKitties as an asset class" angle....

*You can see the evolution of our thinking from November 2017's "Kittens On the Blockchain Is NOT the Future I Was Promised" to March 7's "The Blockchain Is Just Another Way To Make Art All About Money":
At least I'll always have my CryptoKitties. Besides being cute as can be, I was told:
CryptoKitties Sales Hit $12 Million, Could be Ethereum’s Killer App After Al
Through March 11's "Elaine Thinks About Signaling and Destroys My CryptoKitties Dreams":
Her piece was written a couple weeks ago i.e. at least two cryptocurrency price tumbles ago.
Think of a waveform, but not the smooth, soothing shape of a sinusoid. Rather think of a faux quasi-periodicity with just enough regularity to trigger a mirage of pattern recognition, just enough to suck you in, across the event horizon of speculation into the madness of Hunter S Thompson:...
"Still humping the American Dream, that vision of the Big Winner somehow emerging from the last minute pre—dawn chaos of a stale Vegas casino. Big strike in Silver City. Beat the dealer and go home rich. Why not? I stopped at the Money Wheel and dropped a dollar on Thomas Jefferson—a $2 bill, the straight Freak ticket, thinking as always that some idle instinct bet might carry the whole thing off. But no. Just another two bucks down the tube. You bastards! No. Calm down. Learn to enjoy losing.... 
 -Fear and Loathing in Las Vegas

Excuse me, I have to take a moment

"Marxism Has Cornered the Junk-Bond Market"

Some interesting statistics here.
From Bloomberg Prophets, in this case Jim Bianco, Feb. 25, 2017

Passive investing doesn't discriminate between individual winners and losers.
In 2016, analysts at Sanford C. Bernstein & Co. offered a powerful critique of passive investing.
In “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism,” they wrote that “a supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management.”

Hyperbole aside, the team led by Bernstein’s head of global quantitative and European equity strategy, Inigo Fraser-Jenkins, has a point. If capitalism is supposed to reward good ideas and punish bad ones, how does a binary passive investment of “in or out” that doesn’t discriminate between individual winners and losers accomplish this? Granted, passive investing has provided superior returns over active investing in recent years, but is it the best way to allocate capital resources? Although passive investing has not created any stress in the markets yet, the high-yield market is one area where there could be problems during volatile times.

Consider the chart below. The blue line shows the dollar value of daily high-yield cash bond trading. The green line shows the daily trading value of the roughly 25 exchange-traded funds that own high-yield securities. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF (HYG) and Barclay’s SPDR High Yield Bond ETF (JNK) account for about two-thirds of this total.

The red line in the bottom panel shows high-yield ETF dollar volume as a percentage of the cash market. ETF trading volume is currently at a new high at about 27 percent of the underlying cash market. This measure was under 2 percent after the financial crisis in 2009.
In other words, more than 25 percent of high-yield trading is ETF-related. For comparison, less than 6 percent of investment-grade trading is ETF-related. ETFs of other markets, such as small caps, domestic stocks, emerging markets or gold, make up less than 2 percent of their respective cash market. Because of high-yield ETFs’ unique size relative to the underlying cash market, junk bonds would be one place where passive investing could distort individual prices.

The next chart shows a 66-trading day rolling correlation between the option-adjusted spread, or OAS, for the major high-yield sectors and the one for the broad high-yield index. The black line shows the average of these 11 measures. Starting in late 2014, about the same time high-yield ETFs’ influence started to grow, the average correlation of the sectors to the high-yield market rose from less than 0.5 to above 0.8.
...To update Karl Marx’s famous dictum, “From each according to ETF flows, to each according to their index weighting.”

Sunday, June 17, 2018

Driverless Hotel Rooms: The End of Uber, Airbnb and Human Landlords

Expanding on some of the ideas in Friday's "Ogilvy & Mather UK Vice-Chair Rory Sutherland on Driverless Showers".

From Hackernoon:

How driverless vehicles can enable on demand accommodation for one night or 1000, and at rates 10x cheaper [sic] than your rent bill
“Good evening ladies and gentlemen, we’re about to begin our descent into Sydney. Please fasten your seatbelts and place your trays in the upright position. Local time is 8:42pm and a humid 27 degrees. Our flight crew wishes you a Happy New Year, and we hope you fly with us again in 2025.”
Screeech. You’ve landed. Time to relax those butt cheeks.

It was only this morning you booked this flight, and now you’re on the other side of the planet. Amazing. You’re nervous but excited to visit Australia for the first time. One week to explore the city and five weeks on a new design project. When that project match showed up in your feed you claimed it in two seconds. You’ve already earned 24,000 $design in the peerism economy.
Ping. “Need a room?”.
You hadn’t booked any accommodation yet. “Yes please”, you respond.
“Just out the front, number 420”.
You giggle, then follow the augmented directions leading to a sleek driverless hotel room. It’s about the size of a mini bus but without the seats, steering wheel and engine. A giant transparent panel stretching the length and height of the vehicle greets you on approach. The panel opens and you step inside.
Inside is everything you’d expected. On the left, a couch seat that folds into a queen-sized bed with the push of a button. To the right, a small kitchenette with electric stove, running water, sink, microwave and bar fridge. Behind that is the detachable bathroom module with toilet, shower and wash basin.
“Hi there, welcome home. Hungry?”
“I could go some pad thai and a beer thanks”, you respond.
“That’ll be here in 6 minutes. Want a quick tour of the city?”
“Nah early one tonight. Let’s checkout Bondi beach tomorrow”, you say.
Your room begins driving itself towards Bondi and a live map displays on one of the side panels. You sit back and relax with some Netflix on the other side panel. Exactly 6 minutes later, a drone lands on the roof and lowers your order through a compartment in the ceiling. If you need to order any package you simply ask the room and a drone arrives; it even does laundry!
“Arriving at Bondi Tower 7”.
You look up at a lego-like modular skyscraper reaching high above the moonlit clouds. Your room docks with an electric skate and is elevated thirty stories up before slotting into a window-facing position. One of the side panels opens smoothly to reveal a large adjoining living room module.
Extra modules are optional and can be requested ondemand: an extra bed, private gym, spa, snackbar, office and more. On various levels of the tower are cafes, restaurants, retail stores, entertainment areas, communal kitchens, laundromats, a gym and even a cinema. Luxury living at $30 per night.
You fall asleep as your driverless hotel room recharges itself ready to take you on an extensive tour of the city and beaches tomorrow. Your six week experience will be personalized to your precise ondemand preferences including invites to local communities, events and interest networks.

Crisis of Car Manufacturing

The image above is a screenshot of the thousands of new, unsold cars sitting at a dock in a town named Sheerness in the United Kingdom. This is one of hundreds of locations where new cars sit empty and unused. And while auto manufacturers typically keep a 60 day supply, US manufacturers hit a record high of over 4 million unsold vehicles in their inventory in 2016.

The issue of overproduction is a common crisis in Capitalism where more goods are produced than there are customers to consume them. In a free market this should result in prices dropping until the excess supply lowers to meet demand. But what typically happens is that manufacturers either artificially restrict supply or resort to simply destroying the unsold goods.

Vehicle manufacturing faces a unique challenge with oversupply because the production lines are very expensive to initially setup and very expensive to stop. When a vehicle production line is down it costs $22,000–50,000 per minute in lost revenue and wage costs. So you can bet that if a particular car model isn’t selling, they’ll continue to produce until the next year’s model.
The inevitable reality of ondemand self-driving cars poses a huge looming existential risk to the entire auto industry.
With nearly 1.3 billion vehicles on the planet and more than 94 million new cars rolling off the production lines each year, the auto industry looks rather similar to a runaway AI paperclip maximizer; consuming vast resources to sell thousands of various car models, which we then park idle for 95% of the time.

However if on demand driverless vehicles come to fruition then your $10 Uber ride suddenly becomes a sub-$1 ride anywhere in the city. At that point the appeal of owning a car will diminish for most of the population, thus creating a massive oversupply of unwanted human-driven vehicles.
Given the forecasts of 2 billion vehicles on the roads by 2040, and considering driverless vehicles need only be idle while recharging, we can roughly calculate that only 100 million on demand driverless vehicles will be required to replace all 2 billion human-driven vehicles.
In other words, when every auto manufacturer begins producing the high-demand self-driving cars it will take just one year to reach oversupply.

How and to where will auto manufacturers pivot to stay alive?*ZhAL4aIrPesLFfxOkb_Swg.png
One of many IDEO Automobility Moving Spaces concepts

Modular Driverless Rooms

The key concept to grasp with driverless cars is that they truly redefine all of our assumptions and preconceived notions. Combustion engines are replaced by two small electric motors, the dashboard and steering wheel are unnecessary, and safety features are redundant when the cars don’t crash.
Driverless vehicles are simply rooms sitting atop an all-electric drivetrain and rechargeable battery pack with a few extra visual, laser or radar sensors.
Tesla Powertrain

In a Tesla Model S there are only 18 moving parts compared to the 1500 in an average internal combustion engine vehicle. As such it’s predicted that by 2025 all new vehicles produced will be 100% electric and cost much less than the cheapest combustion engine vehicles sold today.
This opens endless possibilities to re-imagine vehicles as moving rooms able to cater to a vast array of human experiences and activities:
  • the driverless office
  • the driverless boardroom
  • the driverless gym
  • the driverless bedroom
  • the driverless bathroom
  • the driverless cafe
  • the driverless cinema
  • the driverless shop
These rooms need not be used in isolation either. They can be dynamic, modular and interconnected with other driverless rooms via an ondemand request. Tap a button or speak a request, and moments later you can have a bathroom or gym module drive itself to your location and autonomously connect to the office module you’re currently working from.....
If you enjoyed this, you’ll love my post on driverless van homes!

"How quickly could Canada build an atomic bomb?"

From The Ottawa Citizen, June 15:

We’ve got the uranium, the know-how and a sudden desire to be respected by our nearest neighbour
As U.S. president Donald Trump thumps Canada with an out-of-the-blue trade war, he is simultaneously cozying up to a nuclear-armed North Korea: Saluting their generals, flattering their dictator and even making them fake movie trailers.

For Canadians watching all this is, a natural question is: What if we got some nuclear weapons, too?
“Your world would change,” said Mitchell Reiss, a former director of policy planning at the United States Department of State.

The action would be so needlessly provocative that it would likely result in Canada’s immediate ejection from NATO.

A Canadian A-bomb would also violate a whole host of international agreements. As soon as word got out about a Canadian effort to build nuclear weapons, Ottawa could expect to see the evaporation of whole webs of alliances and trading partnerships.

A nuclear-armed Great White North “would change the national character and how the world views Canada,” said Reiss.

However, a Canadian bomb is indeed possible. Canada is among an elite fraternity of countries that do not possess nuclear weapons, but could build them relatively easily if they wanted to.
This has been true since at least the 1950s. Canada was a critical partner in the Manhattan Project, the U.S. effort to build an atomic bomb during the Second World War.

Canadian technology was also key to another country’s development of a nuclear bomb. In 1974, India detonated their first nuclear weapon using plutonium that was clandestinely made in a donated Canadian research reactor.

Nevertheless, Canada has a long history of eschewing atomic weapons for itself. The country has never tested an atomic bomb, nor considered acquiring a nuclear arsenal.

In a 1978 speech to the United Nations, then-Prime Minister Pierre Trudeau referred to Canada as the “first country in the world with the capability to produce nuclear weapons that chose not to do so.”
This isn’t to say that Canada hasn’t dabbled with nuclear weaponry. For a 20-year period during the Cold War, up to 200 U.S.-controlled warheads were stored at Canadian military bases for use in an all-out war with the Soviet Union.

However, the country has been entirely nuclear-free since 1984, when Canada returned the last batch of Genie nuclear-tipped missiles to the Americans. Ever since, Canada has pursued a policy of increasingly strict non-proliferation.

On the face of it, Canada has all the ingredients to become a nuclear-armed state: Ample uranium, plenty of engineering talent and a robust nuclear power sector. Ontario’s Bruce Nuclear Generating Station, in fact, is the world’s largest nuclear power plant....
NOTE: Just to be clear, all sources quoted in this story think a Canadian nuclear bomb is an unbelievably terrible idea that is bad for everyone in almost every way.
Previously from the Ottawa Citizen the best retraction/apology EVER:
“The Ottawa Citizen and Southam News wish to apologize for our apology to Mark Steyn, published October 22nd.
In correcting the incorrect statements about Mr. Steyn, published October 15th, we incorrectly published the incorrect correction.

We accept and regret that our original regrets were unacceptable, and we apologize to Mr. Steyn for any previous distress caused by our previous apology.”
HT: Jay Leno

"The Anatomy of Global Debt"

From Project Syndicate:
The IMF's new Global Debt Database is an impressive piece of work. And the numbers suggest that the so-called debt intensity of growth has increased: we seem to need higher levels of debt to support a given rate of economic than we did before.
LONDON – At the end of May, the International Monetary Fund launched its new Global Debt Database. For the first time, IMF statisticians have compiled a comprehensive set of calculations of both public and private debt, country by country, constructing a time series stretching back to the end of World War II. It is an impressive piece of work.

The headline figure is striking. Global debt has hit a new high of 225% of world GDP, exceeding the previous record of 213% in 2009. So, as the IMF points out, there has been no deleveraging at all at the global level since the 2007-2008 financial crisis. In some countries, the composition of debt changed, as public debt replaced private debt in the post-crisis recession, but that shift has now mostly stopped.

Are these large figures alarming? In aggregate terms, perhaps not. At a time when economic growth is robust almost everywhere, financial markets are relaxed about debt sustainability. Long-term interest rates remain remarkably low. But the numbers do tend to support the hypothesis that the so-called debt intensity of growth has increased: we seem to need higher levels of debt to support a given rate of economic growth than we did before.

Perhaps that is partly because the growth in income and wealth inequality in developed countries has distributed spending power to those with a propensity to spend less than their income. That trend has leveled off recently, but the implications are still with us. It also seems that productivity growth has slowed, so a given quantum of investment generates less output than it used to do.1

The IMF’s recommendation to governments is that they should fix the roof while the sun is shining: accumulate a fiscal surplus, or at least reduce deficits, in good times so that they are better prepared for the next downturn, which will surely come before too long. The current upturn is now quite mature. That puts the IMF on a collision course with the tax-cutting United States administration and now with Italy’s new government. If the Italians’ grandiose plans for a minimum income and more public investment are implemented, they might soon find themselves in difficult discussions with the Fund. The team that has been in Athens for the past few years might soon be booked on a flight to Rome.

But what are the implications if the growth in debt is principally in the private sector? That is a question for the financial stability authorities in each country....MORE

"Erdogan says Uber ("or Muber or whatever") 'finished' in Turkey"

From the Daily Mail:

Erdogan bans Uber: Turkish president bows to pressure from nation's 17,000 taxi drivers left furious by 'illegal' rival
  • Recep Tayyip Erdogan said the ride hailing app Uber is 'finished' in Turkey
  • His government agreed new rules expected to complicate Uber's operations 
  • Istanbul's yellow taxis drivers waged an intense campaign to have Uber banned
  • 'This thing emerged called Uber or Muber or whatever... but this issue is now finished'
President Recep Tayyip Erdogan said the ride hailing app Uber is 'finished' in Turkey, following intense pressure from Istanbul taxi drivers for the service to be banned.

Erdogan's comments, in a late night speech on Friday in Istanbul, came after the government agreed new rules that are expected to severely complicate Uber's operations in Turkey.

Drivers of Istanbul's yellow taxis have over the last months waged an intense campaign to have Uber banned, saying the company is eating into their business without having a proper legal basis for work.

'This thing emerged called Uber or Muber or whatever,' said Erdogan. 'But this issue is now finished. It's over now.'...MORE
Also in Turkey:
Erdogan: Turkey Plans to Accept 40Mln Tourists in 2018
Uber faces being banned in Turkey after President Recep Tayyip Erdogan said the ride hailing app was "finished" on Saturday following an intense lobbying campaign from Istanbul taxi drivers.

Read more at:

Piketty on Eurozone Reform

From Le blog de Thomas Piketty:

The Transferunion fantasy
While the political crisis deepens in Italy and in Spain, France and Germany are still demonstrably incapable of formulating precise and ambitious proposals for reforming Europe. All that is required however is for these four countries, who alone account for three quarters of the GDP and the population of the Euro zone, to agree on a common approach and the way to reform would be open. How can we explain such extraordinary inertia and why is it so serious?

In France, there is a tendency to lay the blame on other people. The official view is that our young and dynamic president has made innovative proposals for the reform of the Euro zone, its budget and its Parliament. But the unfortunate thing is that our neighbours are incapable of taking these into account and responding with the same Gallic audacity!

The problem with this superficial theory is that these notorious French proposals are quite simply non-existent. Nobody is capable of writing three simple sentences explaining which common taxes will fund this budget, who will be the members of the Euro zone Assembly who will exercise this new fiscal sovereignty, etc. If you want to make sure, just ask your favourite pro-Macron friend, or, if you do not have any – nobody is perfect – write to your favourite newspapers !

It is almost as if the revolutionaries in 1789, instead of setting up a National Assembly enabling all privileges to be abolished immediately and a new fiscal system to be set up, had only announced that it would be a good idea to pause to reflect on the setting up of a commission to consider a long-term plan to save the Ancien Régime. It is the difference between doing something and empty rhetoric....MORE
As noted in September 2017's "Le blog de Thomas Piketty — Re-thinking the capital code":
I may be mentally ill.

Since 2012 I can't see the "Le blog de..." formulation without losing it. Not that it happens all that often but when it does...See link below....
... Le Blog de Jean-Paul Sartre
From the New Yorker:
Saturday, 11 July, 1959: 2:07 A.M.
I am awake and alone at 2 A.M.
There must be a God. There cannot be a God.
I will start a blog....

Factors: "Size matters, if you control your junk" Asness et al

From the Journal of Financial Economics via ScienceDirect, June 15:
The size premium has been accused of having a weak historical record, being meager relative to other factors, varying significantly over time, weakening after its discovery, being concentrated among microcap stocks, residing predominantly in January, relying on price-based measures, and being weak internationally. We find, however, that these challenges disappear when controlling for the quality, or its inverse, junk, of a firm. A significant size premium emerges, which is stable through time, robust to specification, not concentrated in microcaps, more consistent across seasons, and evident for non-price-based measures of size, and these results hold in 30 different industries and 24 international equity markets. The resurrected size effect is on par with anomalies such as value and momentum in terms of economic significance and gives rise to new tests of, and challenges for, existing asset pricing theories.

Happy Father's Day: Despite What You May Have Read, Aldi Scotch Is Not 'Best in the World'


The headlines are everywhere.
And then there's Man of Many:

No, Aldi Whisky is Not the Best in the World
Yesterday, my inbox was inundated with a flurry of headlines proffering (and not for the first time) a bargain bottle of whisky from Aldi as the finest in the world, and my blood (again, not for the first time) boiled.

The headlines, oh the headlines: “ALDI OWN-LABEL WHISKIES NAMED BEST IN WORLD” (the capitals alone are enough to make a reasonable man wince), and “Aldi’s $17 Whisky Was Just Named the Best in the World“… These statements, while excellent clickbait fodder, are simply not true.

Now the last time we got wind of Aldi’s liquor receiving any accolade, it was for a rosé which won a flurry of medals and awards (some of spurious repute, others not). An initial idea, to have a professional sommelier rate it (and perhaps other wines from Aldi), turned into a full day of tasting just about every alcoholic product the German supermarket chain had on offer, which we (luckily) filmed (there was little chance of remembering much).

We also had a whisky expert come along for the ride, and a comedian, because why the hell not?

And there were some winners, too. A AU$7.99 bottle of Mosel proved to be delicious, as did a AU$12.99 shiraz from the Barossa. They also sell a bloody tasty champagne for a clean lobster, which tasted more like something for which you’d expect to pay thrice the price.
But they also sell a LOT of crap–which is fine, by the way, it’s cheap liquor. Nobody is expecting it to be Louis XIII–and this is why this continued track record for winning award upon award is so perplexing.

Until you take a closer look at two things: the awards they’re actually winning, and the nature of those awards.

I’ll start by drawing your attention to an article published by ELLE last year, lauding Aldi’s then-recent win of no less than five awards. While factual in nature, it casually glosses over the fact that the 2017 Melbourne International Spirits Competition, which it cites as its source for these awards, is not exactly the Walkleys of the liquor industry.

In fact, a quick glance at the results page and you’d be forgiven for thinking that the award categories themselves were casually created as the (paid for) entries came rolling in for obscure brands. There are wholly separate categories for Germany Gin of the Year, Germany Liqueur Distillery of the Year, Germany Rum of the Year and Germany Vodka of the Year, but not a single for Gin of the Year. Or Tequila of the Year. Or Even Scotch of the Year. Need I remind you that this is the MELBOURNE International Spirits Competition, a competition which received fewer than 190 entries, and nothing from any major distiller? There’s seemingly, and very conveniently, a specialty category for every single entry.

Including Australia Cream Liqueur of the Year.

Aldi’s Highland Black, the 8-year old blend which has once again been lauded as the GOAT by every digital outlet from here to the Hebrides, is a genuinely crap whisky. I know, because I have half a bottle sitting in the liquor cabinet–a rarity in the sense that nothing ever lasts longer than three days in there. Highland Black has now made it past the one-year mark.

Seriously, I drunkenly polished off a half-bottle of Midori over this last week.

Chock-a-block with de-flavoured spirit caramel E150a, which bestows the iconic “piss” colour endemic to all whiskies struggling to find any meaningful hue after their time spent in a third-fill cask, the look alone gives the impression of a crappy spirit. But it doesn’t stop there. Acetone and, in lesser amounts, isoamyl acetate (fake banana) dominate the nose–this, unfortunately, doesn’t much dissipate with air.

The front palate is harsh and slightly bitter, even. There is some attempt at incorporating a peated influence, but it tastes more like it’s been filtered through an ashtray from the pokies room at Rooty Hill RSL. There is some caramel and chocolate in there, but not quite enough to make a Fantale, let alone a 700mL bottle, taste palatable.

The finish is, unfortunately, quite long–normally a sign of quality I’ll admit, but here just a sad reminder of the liquid you’ve regrettably rolled around your tongue.

Which brings us to this week’s barrage of shoddy coverage, claiming that, somehow, this whisky is THE BEST IN THE WORLD....

And although Modern Drunkard has not yet weighed in, we do have Boozist firmly in Man of Many's corner:

Aldi whisky did not get named ‘Best in the World’ – sorry bargain boozers
have never tried the Aldi whisky that many are claiming won “Best in the World” and costs a mere $17. I can still state with 100% accuracy though that it was not declared “Best in the World.”
Yes, an Aldi whisky won a gold medal in a competition, two in fact. But this isn’t the Olympics. Gold doesn’t equal best. It’s not even the top honor. The highest award in the Scotch Whisky Masters is Master, and 20 brands were awarded Master.
Here’s a very short list of why the Aldi whisky isn’t the Best in the World:
  • Only Scotch whisky was judged
  • 93 different whiskies were awarded Gold
  • Entrants had to be available in Asia
The Spirits Business reports that there were an, “impressive number of entrants,” but fails to mention what that number is. That makes me think it might not have been all that impressive. There is also no way of knowing which brands opted not to enter. I can think of quite a few amazing whiskies that aren’t on the list.
I’m sure the Aldi whisky is good, and it’s probably a steal at $17. That doesn’t make it the “Best in the World” or even one of the best. Sadly you’ll never find out for yourself because it’s not available in the US.
Here’s the full list of Scotch Whisky Masters awards:...MUCH MORE
It's a very long list.