Wednesday, July 29, 2015

Well That Was A Pretty Good Call: Corn, Wheat and Soybeans

On July 22 the headline was "Red hot grains, hit resistance, cooling off"".

And here's the last few day's action via Inside Futures:
...MORE

Corn        379-2 down 6-2
Wheat      498-0 down 12-6
Soybeans 944-2 down 0-4
The guy who we linked to last week was Kimble Charting Solutions who we sometimes take to task for putting any emphasis on long term (beyond the price memory) trendlines but who certainly nailed the turn in all three grains.

"GE describes its vision of next generation robots" (GE)

Our second GE post in 24 hours, must be something in the zeitgeist.
Or something.
The stock is at $26.19 up nine cents but still 20.3% below the split adjusted price on the day the current CEO took over 13+ years ago.
From Next Big Future:
Gizmodo interviewed John Lizzi, Manager of the Distributed Intelligent Systems Laboratory at GE Global Research, about General Electric's approach to the future of robotics.

If you look at the practical applications of robotics, the vast majority of robots that you see today are in factories doing high precision, high speed work, such as sticking, placing, grinding, deburring, painting, that sort of thing. The first generation robots are extremely good for a lot of things, but they're not very aware of their environments; they're not adapted to work around humans. They're in cages, where they're separated from humans, and they're extremely expensive in terms of both the robots and the support equipment around them.

The new generation of robotics is riding a lot of trends, such as Moore's Law, so we can put more intelligence on the robot itself. The costs of computation and sensors are coming down. There's this whole movement around collaborative robotics with robots that are very easily taught, very cheap, and very able to work closely with humans, while employing new technology, such as SLAM (Simultaneous Localization And Mapping) for autonomous vehicles and similar applications. These are coming together and allow us to let the robots out of those cages and working in more dynamic, more unconstrained environments that I've mentioned.

Are we talking about a robotic apprentice that would be working alongside a more skilled human?

We see a range of different things. For example, there are applications around assembly. There are some tasks that humans are really good at and it will take some time to catch up with these. There's dexterity, manipulating small things, creative tasks in terms of assembly. We still want humans to do what they're better at, but there are others where robots could do a lot of work on things like going and grabbing parts, handing the person tools, transporting materials from one place to another. There's a lot of places where we can leverage the skills of both humans and robots.

You can also think of it as a contest of nonhuman skills. Imagine a larger robot that could give a human superhuman strength or imagine something large that GE makes that a human could use a robot to guide into place.

When we get to the more non-factory industry environments, such as power plants, you could have a robot being an apprentice to the human. The human and robot could start by working together and then over time the robot could start learning some things and that robot will start doing some of that more proactively, while the human focuses on other tasks....MORE

Mandatory retirement at GE is age 65 but Immelt may be leaving before he hits that marker in 2021.
At that time I may be willing to go back in for the first time since 1999.
In the nearer term the stock may catch a tailwind if it can clear the resistance around $27.50.
GE General Electric Company daily Stock Chart

The Next Great Reinsurance Opportunity: Cyber Attacks!

From Artemis:

Cyber catastrophe bonds & a public-private sector solution
The rising threat of cyber attacks to economies and businesses across the globe can be mitigated through public and private sector relationships, utilising the benefits of alternative risk transfer solutions such as catastrophe bonds, according to Z/Yen Group Limited.

Cyber risks are seen as one of the great opportunities for the insurance and reinsurance sector, as well as a great unknown and a key risk. Not only is the potential exposure enormous, so needing insurance and reinsurance capacity to cover it, but right now quantifying the risks is extremely difficult due to a lack of data and re/insurers risk accumulations and exposure concentrations.

The world today is reliant on electronic systems that operate global, and regional economies and, as international assets and business values continue to grow, the potential threat of property damage, business interruption and third-party liabilities as a result of cyber attacks, increases also.

The general opinion of many industry experts and analysts is not ‘if’ the next large cyber attack is going to happen, but ‘when,’ as the greater the volume of information and sensitive data that exists in the electronic landscape, the more it seems data is leaked, stolen, or misplaced.

It’s a vast, burgeoning risk that the insurance and reinsurance industry could help to protect against, but one that would require the support of the public sector, according to a recent report by Z/Yen Group Limited, published by Long Finance.

Cyber is seen as a catastrophic risk, thus requiring an approach akin to that taken to provide insurance, reinsurance and retrocession for large global natural disaster risks and other exposures such as terrorism or nuclear risks.

“If society wishes to bring insurance to bear on helping to manage cyber­-risk, then cyber­-catastrophe reinsurance needs to be available for property damage, business interruption, and third party liabilities in order to remove blockages to rapid take­-up of cyber insurance by businesses,” says the report, which despite focusing on the UK, is applicable to other nations.

The report argues the case for a public-private sector cyber catastrophe reinsurance scheme, which would act like a pool that was funded by the insurance, reinsurance and the insurance-linked securities (ILS) industry, but utilises the expertise and support of the public sector.

Interestingly, the study highlights the potential for cyber catastrophe bonds and explains how ILS structures could be used as a successful means of mitigating the potential impacts of cyber attacks.

The report says; “The scheme would in effect be a pool funded by the insurance industry, seeking its own further reinsurance and possibly issuing insurance linked securities such as a cyber-catastrophe bond for further cover.”

Continuing to provide a couple of examples of what the trigger might look like for such a catastrophe bond, as follows: “More than 10% of the nation’s computers unusable for more than 12 hours,” or, “a power loss of more than one hour for more than 15% of the nation.”...MUCH MORE

Tuesday, July 28, 2015

"Macroprudential policy: from Tiberius to Crockett and beyond - speech by Sir Jon Cunliffe"

I don't know who to thank for this.
I mean I wasn't lurking at the BoE or anything but it popped up in a reader.

From the Bank of England:
Historians still argue about the exact causes of the financial crash of AD 33 that rocked the Roman Empire.  The commentators of the day did not unfortunately have, let alone record, the vast amounts of data that we have become used to today.  But in a world still painfully extricating itself from the crash of 2008, the key features look eerily familiar, as a number of modern day commentators have observed.  An extension of credit across the empire, a sudden deleveraging, debtors failing and bank closures in a number of Roman provinces, the total drying up of liquidity in the financial system and widespread panic.
The remedies look familiar too.  The Emperor Tiberius was not able to rely on a modern independent central bank with the ability to print money to staunch the crisis.  But notwithstanding that immense shortcoming, Tiberius took effective action, injecting into the system a huge amount of liquidity stored in coin in his treasury, setting interest rates at zero for a three year period – an early example of forward guidance – and doubling loan to value requirements for property loans.  He also executed those he thought most responsible: though some might advocate that today, I think in that respect at least we have moved on from AD 33.
Systemic financial crises, as this episode shows, are not new.  The invention of credit and the development of banking and financial systems have been key to the improvement of human living standards throughout history.  But they bring with them the boom and bust extremes of the credit cycle, driven by greed and fear, and the risk of systemic crises which can badly damage the real economy.
As financial systems have developed and spread, public authorities, from Tiberius’ administration to the Financial Policy Committee (FPC) of the modern Bank of England today, have had to adapt both to deal with financial crises when they occur and to try to prevent them occurring in the first place.  It has often been an unequal struggle....MORE

"Michael Faraday Was the World's Most Badass Insurance Investigator"

From io9:
Michael Faraday, the guy famous for the Faraday cage, didn’t just spend his life tinkering with electricity. He was also an insurance investigator who, just occasionally, set stuff on fire in the courtroom if a jury didn’t believe him.

Even geniuses need to pay the rent, so though Michael Faraday is best known for uncovering the secrets of electromagnetism, he spent his day-to-day life as a gunslingerscientist for hire. One of his most famous employers was Imperial Insurance Company. They were being sued by a sugar processing plant. As we’ve seen before on io9, flour and sugar processing plants occasionally explode. All those tiny little particles form a kind of flammable cloud which can first burst into flames and carry those flames through an entire building in an instant.

The sugar factory, Severn and King, had suffered an explosion in 1819, and claimed that they were owed quite a bit of money from Imperial. Imperial claimed that Severn and King had quietly, without notifying them, updated their factory with a new sugar-heating system that heated up whale oil. That system, the insurance company claimed, is what probably started the explosion, and that system was why they weren’t obligated to pay.

Faraday was hired to show that the heating system was unsafe, and he did a good job. While he proved that the hot whale oil itself wasn’t a problem, the fumes that emanated from it were more flammable than the oil. In court, one of the jurors didn’t believe him, and was foolish enough to say so out loud. Faraday calmly took out a jar full of hot whale oil product and a lighter. Boom....MORE

Why Byron Wien's "Smartest Man In Europe" Says You Must Have Exposure To Biotech

In our July 2nd post, "Blackstone's Byron Wein On The Only Way to Make Serious Money" the linked Barron's article had a couple sentences that were definitely worth the price of  admission:
...But if you want to make real money investing, you will have to do it by picking stocks in technology and biotechnology, and I would emphasize the latter. 

“Most people still don’t recognize the gigantic implications of this phenomenon. Major breakthroughs are going to be taking place in cancer, heart disease, Alzheimer’s, diabetes, multiple sclerosis and other diseases. Picking the right companies can produce impressive returns in a difficult overall market environment. Right now there are literally hundreds of small companies working on significant products. Many of them will fail, but a few will change the world the way Google and Facebook did....
Mr. Wien is Vice Chairman of Blackstone Advisory Partners and is about as far from a wild-eyed speculator as you're likely to find. His friend sounds even more grounded, if that's possible.

Here's an example of what "The smartest man in Europe" is talking about, from Quartz:

The staggering success of Gilead’s hepatitis drugs, in one chart
When Gilead paid $11 billion for Pharmasset in 2011, it was seen as a risky move. Now, it’s clearly one of the biggest biotech steals in many years.

Gilead announced today another quarter of blockbuster sales for its extremely effective Hepatitis C drugs Sovaldi (the reason it acquired Pharmasset) and Harvoni, a once a day combination of Sovaldi with another drug. Sales rose 26% from a year ago to $8.24 billion, more than half of which came from those two drugs. Net income was $4.49 billion.

The rise of these drugs has been nothing short of meteoric. For the past two quarters, Harvoni alone has outsold AbbVie’s Humira, an anti-inflammatory drug that had been the world’s best seller for years. When you combine Sovaldi and Harvoni together, it’s not even close. They’re the top selling new drugs in the history of the industry:...MORE
 That just one disease with an estimated 29,718 acute cases in 2013.
(granted there are 2.7 million chronic infections, the majority of whom are baby boomer with the money to handle co-pays but still)

"Is Artificial Intelligence the Next Step in Advertising?"

Well yeah.

From the Guardian:
Ads that adapt to users reactions could represent the future for engagement with out-of-home campaigns
Artificial intelligence (AI) has rarely been out of the public eye in the past 12 months. Stephen Hawking’s grave warning, Channel 4 drama Humans and big screen outings Ex Machina and Terminator Genysis have all asked questions about the the potential of AI, and what it could mean for humans.
While for some the notion of AI represents a step into science fiction (or at least science future), there are iterations that have real world implications at this moment. This version of AI will probably not bring about downfall of humanity, but rather be used to shape how advertising is created and targeted.

A partnership of M&C Saatchi, Clear Channel and Posterscope, last week revealed what they dubbed “the world’s first ever artificially intelligent poster campaign”. David Cox, chief innovation officer of M&C Saatchi describes its significance: “It’s the first time a poster has been let loose to entirely write itself, based on what works, rather than just what a person thinks may work.”
 
The basic premise is that the poster, based around a fictional, rather nondescript coffee brand Bahio, can read the reactions of it’s audience and adapt itself accordingly. From its initial “gene pool” of pictures and copy, 22 ads are created in each generation, with the poster assessing the level of success of an ad. If successful, a particular ad will move onto the next gene pool and be part of the next generation. Those unsuccessful will be removed.

“It’s a Darwinian algorithm, it’ll evolve to be more and more effective” says Cox. “So we’re hoping to see fewer outcomes emerging over time.” As of 20 July, 1540 ads had been automatically generated over 70 generations. Initial results are showing that shorter copy was more popular, with heart images a particularly frequent occurrence during our viewing....MORE
Throw in a little virtual reality....as we noted in "Facebook, Oculus, And Businesses' Thirst For Virtual Reality":

One of the least talked about aspects is the use of VR in education. Because the mind has trouble distinguishing between virtual reality and the outside world you should be able to get people to believe almost anything you want them to accept, given enough repetition and an engaging story line. Whether the learner has deep understanding is pretty much immaterial.

Pearson, the edu/testing co. with the Financial Times and Economist attached will be moving in this direction.
Think deeply immersive multiplayer gaming as an example, then put on some virtual reality goggles.
Quite amazing. 

Goldman In Ventureland: How GS Became a Tech Investing Powerhouse

From Bloomberg Magazine:
“They weren’t coming just to get wasted,” says Mel Cavaricci—aka DJ Mel—recalling the crowd milling in front of his sound table at a party in March.

It was at the height of the annual South by Southwest (SXSW) conference, held in Austin, Texas. The event, which started as a music festival, more recently has become famous for propelling the likes of Twitter, Foursquare, Meerkat, and other fast-growing startups. Tech and media companies throw liquor-soaked bashes to celebrate themselves, promote products, and woo hard-to-hire software developers. Music service Spotify hosted a week-long concert series. MRY, a digital marketing firm, hosted a party featuring rapper Busta Rhymes and dancers with big Day-Glo sticks.

This year, Cavaricci had been hired to spin for a company he’d never seen around SXSW before: Goldman Sachs. The party was different from his usual gigs; it was hard for the deejay—a veteran of many SXSW raves—to figure out what to play. “From the looks of the crowd, they didn’t want to hear EDM,” he says. So instead of electronic dance music, he picked oldies. One in particular, Edwin Starr’s 1970s classic Easin’ In, seemed to fit: “There’s a man coming into town ... Like a cat that’s stalking its prey, he don’t wanna let it get away ....”

Goldman Sachs, arguably the most powerful bank in the world, quietly, without fanfare, is making a play to become one of the most influential investors in technology startups. According to research firm CB Insights, the Wall Street bank has participated in 132 fund-raising rounds in private technology companies since 2009, with 77 of those deals made in the past 2.5 years alone.

Its activities rival those of the top venture capital firms in Silicon Valley. Goldman has backed Uber Technologies, Pinterest, Dropbox, and 12 other so-called unicorns, that once-rare breed of startup valued at $1 billion or more. Goldman ranks in the top 10 of CB Insights’ unicorn backers—ahead of such Silicon Valley heavyweights as Peter Thiel’s Founders Fund and New Enterprise Associates. And unlike many of Silicon Valley’s top financiers, Goldman’s reach is truly global: It’s in startups ranging from an online pet store in China to a food delivery site headquartered in Germany, to a Korean app developer.

What’s driving Goldman into venture territory? This is where the action (and the big money) is. At last count, there were 119 startups valued at more than $1 billion—almost all created within the past few years. Consider Uber, whose private valuation in just six years has soared from zero to $50 billion based on reports that it’s trying to raise more money.

That kind of skyrocketing growth is hard for Wall Street veterans to resist. Blackstone co-founder Steve Schwarzman, 68, recently confessed that if he were 30 years younger, he’d move to California. “There’s so much disruption and so much amazing value creation,” he said at a conference in late May. Ruth Porat left her post as chief financial officer of Morgan Stanley earlier this year to become Google’s CFO. Sarah Friar, a Goldman alum, is now CFO of Square, the payments company started by Twitter co-founder Jack Dorsey. Ex–Goldman banker Anthony Noto is Twitter’s CFO.

Wall Street used to wait for startups to go public before investing in them. These days, however, entrepreneurs don’t need the public markets like they used to; private capital is plentiful. Uber has raised some $6 billion in equity and debt, and it hasn’t announced any plans to go public. “By the time you IPO as a company with a $60 billion market cap, you are really in the stratosphere,” says Joshua Spencer, manager of T. Rowe Price’s Global Technology Fund. “The opportunity to invest has passed; the explosive growth is often behind them.”

This market moves fast: When Airbnb raised money in April 2014, the company was valued at $10 billion; a year later, that valuation had more than doubled to $25 billion, when it raised another $1.5 billion. Included in the latest round were East Coast investors, most of whom would never have invested at such an early stage in the last tech boom: Fidelity Investments, T. Rowe Price, and Tiger Global Management—all now prolific operators in Silicon Valley.

For Goldman, however, this isn’t just about chasing returns. Startup investing isn’t a game changer for a firm with a $95 billion market cap and $860 billion in total assets on its balance sheet. “The return-on-equity impact isn’t going to be that intense,” says Jeffery Harte, an analyst who covers financial institutions at Sandler O’Neill & Partners. But, he says, “being on the cutting edge of technology has become more important then ever.”...MUCH MORE

Some Outfit Calling Itself "General Electric" Thinks It Can Do Batteries As Well As Tesla (GE; TSLA)

As I said in May's "HBR: "Tesla’s Not as Disruptive as You Might Think" (TSLA)":
I'll tell you what's not disruptive, it's Tesla's new battery, that's what.
There's a reason you haven't seen us gushing, the thing is just so...pedestrian.
More next week, for now, the Harvard Business Review where they don't use the "I'll tell you what...that's what" locution...
Because progress on battery technology has been so slow the chief differentiators among producers is manufacturing efficiency. That's something GE can do.
Even if Immelt is a loser who damn near destroyed the company.

From Reuters:
General Electric Co wants to be a "sizable" player in the market for systems that store energy to manage power volatility, a sector the company expects to quadruple to $6 billion by 2020, the head of GE's energy storage business told Reuters. 
Demand for industrial battery systems is being driven by increasing reliance on intermittent energy sources such as wind and solar power and the potential to add energy to the grid quickly when power needs spike.
This need has attracted a wide range of companies, including Elon Musk's Tesla Motors Inc, which said in April it plans to package batteries for use for utilities as well as homes and businesses.

"We believe in the space and its ability to grow," Jeff Wyatt, GE's general manager for energy storage, said in a recent interview. "We think we can be a sizable player within it, and that’s really what we’re intending to do."
GE over the past year has overhauled its approach to the energy storage market, as it saw weaker demand for the battery it developed.

Now Fairfield, Connecticut-based GE is repositioning itself as a one-stop shop for power producers seeking to install energy storage systems, offering inverters, control systems, software as well as financing options. 
Earlier this year, it scaled back production of its own Durathon industrial batteries, reducing its manufacturing workforce from 200 to 50 at the Schenectady, New York plant where the battery is made. The company is focused on improving Durathon's longevity, including managing its chemical degradation.

As part of its new energy storage package, GE is offering customers the option to install lithium-ion batteries made by other companies.

DAUNTING COSTS
Despite the allure of battery systems, experts say their expense is a major factor preventing power operators from using them more broadly.

American Electric Power Inc has not invested in a significant energy storage installation since 2010, because it is unclear whether the benefits outweigh the costs, said Tom Weaver, AEP's distribution planning manager. 
"Long term, energy storage is the answer to a lot of issues that need an answer, but the cost has to come down," said Weaver.

Since April, GE has struck two deals to supply energy storage projects with lithium ion batteries in California and Ontario, Canada, and Wyatt said the company intends to announce similar agreements this year. 
Wyatt is relaunching GE's storage business in a market that is highly-fragmented, with as many as 20 significant players vying for deals, including large energy rivals such as Siemens AG, ABB Ltd and AES Corp, according to Cosmin Laslau, senior analyst with Lux Research.

There are also as many as 10 major battery cell manufacturers not to mention the many startups chasing energy storage business, Laslau said.

"By no means is GE the only supplier to the industry at this scale," Laslau said. "But their strategy is much better than it used to be."

"COMPETITIVE OFFERING"
GE would consider acquisitions to propel its new strategy, Wyatt said, but GE is well-positioned on its own as it can utilize its established relationships in the energy industry....MORE
See also:
Gates, Pritzkers vs. Musk: "The $5 Billion Race to Build a Better Battery" (TSLA)
Checking In On The Gigafactory: Pacific Crest's Downgrade Of Tesla (TSLA)
"Quest to Mine Seawater for Lithium Advances" (TSLA)
"Boston-Power Aims to Rival Tesla With Gigawatt Battery Factories" (TSLA)

And a couple dozen others, use the 'Search Blog' box if interested.

This Sunday Reuters story was not well received by Tesla shareholders although truth be told the market crash in China probably had as much to do with Tesla's decline yesterday, anyhoo the stock has recovered $9.60 today, $262.61 last:
Chart forTesla Motors, Inc. (TSLA)

"UBS Exposes The 'Scary Reality' Of High Yield Energy"

I expect the more succinct term "Junk" may come back into vogue.

http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/07/20150727_HYENRG.jpg

From ZeroHedge:
To be sure, we’ve written plenty on the rough road ahead for HY energy.
The darkening outlook for the sector not only reflects a decisively bearish forecast for crude (see Morgan Stanley’s "far worse than 1986" call), but also the fact that time appears to be running out on the various lifelines that have kept heavily indebted producers afloat over the course of the crude downturn. 
For instance, the hedges which accounted for some 15% of Q1 revenues for nearly half of North American O&G companies are set to roll off which, along with persistently low commodity prices, should weigh heavily on banks’ reassessments of credit lines due in October. Meanwhile, investors’ appetite for HY issuance and equity offerings may soon wane as even the retail crowd gets wise to the fact that this is one dip that most assuredly should not be bought.
For an in depth review of the above, see the following:
Here with more on the coming carnage and why HY investors may be profoundly unaware of just what’s in store, is UBS.
*  *  *
From UBS
High yield: The scary reality
The current sell-off in US high yield bond market appears controlled based on the consistent but moderate declines in daily cash bond index prices, but underneath the hood several participants are characterizing the price action as carnage. At an index level the average HY bond has fallen about 2 points week-over-week, but index data is notoriously stale and lagging; there are numerous examples of issues down 5, 7 or 10 points on light volumes despite no direct exposure to commodity prices and no material firm specific news. In our view, recent market behavior has exposed several hidden fragilities in the market ecosystem.

First, too many investors were overweight heading into the sell-off, in particular in the energy complex. The plunge in oil and commodity prices following the Iran deal and Chinese demand fears has intensified the potential fundamental stress in resource related sectors, and this outcome was not anticipated by the consensus. Anecdotally we've heard several credit funds have raised cash balances, but there are two problems with this thesis: one, the rise is arguably structural as outflow risks rise in an environment of tighter monetary policy, rising credit risks and lackluster performance. Two, many of those who raised cash we believe added beta to continue producing above-benchmark returns and limit tracking error. This strategy fails in a decompression scenario where low quality and illiquid credit underperforms.

Second, the sensitivity of energy firms to oil prices is not linear anymore- at depressed levels what would be considered 'normal' levels of commodity price volatility can have outsized effects on fundamentals and market prices. Simply put, the risk symmetry in stressed sectors is to the downside for bondholders. The rub is central bank quantitative easing drove traditional investors seeking mid-to-high single digit yields out of investment grade/ crossover credit into high yield, loan and emerging market debt to satisfy yield bogeys. The problem, however, is some of the tourists underappreciate the exponential loss and mark-to-market functions for low quality high yield assets. As we have noted previously when the credit cycle turns annual triple C default rates can surge from 5% to 30% while average triple C prices can fall into the $40 - $50 range (versus $83 currently) - especially given expected recoveries average in the $20 - $25 context1. The scary reality is those investors in triple Cs are seeking high single digit returns when they are likely to end up with negative total returns over the next several years (if our view of the credit cycle proves correct)....
...MORE

Natural Gas: As Buyout Talks Swirl Around Chesapeake Carl Icahn Prays Its Not A Takeunder (CHK)

The last time I looked Mr. Icahn still held the stock he'd been accumulating since 2012, 73 million shares with the bulk at $23 so most any bid would be under his average price.

On the other hand, with 10.98% of the outstanding he may have something to say about any corporate doings.

The stock is up 5.66% to $8.84 on what looks like a reaction to this piece, or it might just be the 2% move in natural gas today, to $2.832.

CHK Chesapeake Energy Corporation daily Stock Chart
From Barron's Stocks to Watch:

Chesapeake Energy: ‘We Would Not Be Surprised to See an Entire Company Sale’
SunTrust Robinson Humprey’s Neal Dingmann and team upgraded Chesapeake Energy (CHK) to Buy from Neutral today, in part, because they see the potential for a sale of the struggling oil & gas company. They explain:
Chesapeake shares have fallen 48% since May as lower commodity prices along with relatively wide differentials have caused further liquidity/leverage concerns. However, we would not be surprised to see another asset sale with one or two of the company’s seven primary operating regions. Though we do not look at the nearly $7B in liquidity as an issue considering we have a projected outspend of less than $1.5B this year (even a much larger outspend would not provide any challenges), investors remain concerned in the current commodity environment. It appears

Chesapeake’s operating efficiencies are getting buried in the current troubled commodity environment even though EURs such as in the Utica have recently increased over 20%…MORE

Monday, July 27, 2015

Dilbert and Skill Vs. Luck in the Stock Market

I lied, big fat whopper.
It's not Dilbert, it's not even Dilbert's creator, Scott Adams, who is not nearly as touchy about his creation as the "I am not Spock" gentleman was about his.

That's a rather long, rambling, borderline incoherent introduction leading to Mr. Adams co-blogger Paul Worthington in the Top Tech vertical of the Adams empire:
Here comes a little company that is about to change the world with a small device that scans your food and tells you what is in it.

You might be saying this is no big deal. It is just another way for diet Nazis to obsess over something new.
But imagine being able to scan your food and have the device tell you it is unhealthy (in essence). How many parents would keep serving unhealthy food to their kids if they have an option? I think a food scanner changes the world (if it works.)

How?

Well, for starters, Warren Buffett’s investments in crap-foods will start to suffer. So your notions about skill versus luck in the stock market will dissolve at the same rate as the sales of Kraft and Coke....MORE
I feel bad about the outright fabrication in the headline so here's one of Mr. Adams' technology related strips.
From 1992 and via GoComics Dilbert Classics series:

Bb80781016c00133f844005056a9545d

And just so you know, when Leonard Nimoy died we changed the blog's motto to "Live Long and Prosper" for the week following his demise.

California Drought: We Are Adding Another Tool To The Kit

Because of methodology issues the familiar U.S. Drought Monitor map does not reflect the recent actual situation.
For example, the state of Texas has been essentially drought-free since May while the map is just now catching up:
Current U.S. Drought Monitor

NOTE: To view regional drought conditions, click on map above. State maps can be accessed from regional maps.

As El Nino continues to strengthen, the probabilities favor a dramatic and rapid change in California hydrology that the 'Monitor' map won't capture.
As another example, here's what the Drought Monitor commentary was for "The West" in the week ending July 21, 2015:
During the past week, average temperatures were below normal across much of the West with the exception of western portions of California and Oregon, eastern New Mexico, and Washington. During the weekend and into Monday, moisture associated with Hurricane Dolores triggered showers and thunderstorms across parts of southern California and western Arizona. Some locally heavy accumulations (two-to-four inches) and flash flooding were reported. Despite well-above-average precipitation during the past 90-days in parts of central and southern California, the Sierras, and portions of the Great Basin, the recent rains have not impacted the overall drought situation in these areas because significant precipitation deficits remain as well as agricultural and hydrological (low reservoirs, below normal streamflows) impacts. In the Pacific Northwest, precipitation has been below normal since the beginning of the Water-Year (Oct. 1). The trend has continued during the past 60-days leading to very low streamflows, dry soils, and increasing concern in the agricultural sector. In the Southwest, some improvements were made on this week’s map in areas of Severe Drought (D2) in west-central New Mexico as well as east-central and northern Arizona where long- and short-term drought indicators (precipitation, soil moisture, streamflows, and vegetative health) have shown improvement during the past year. However, according to the Natural Resource Conservation Service (NRCS), statewide reservoir storage remains below normal in both Arizona and New Mexico. According to the Salt River Project (SPR), the Salt River system reservoirs are currently 53% full while the Verde River system reservoirs are 52% full. In New Mexico, Elephant Butte (the state’s largest reservoir on the Rio Grande) is currently 27% of average – up 9% from the same time last year. Elsewhere, statewide reservoir storage is above average in Colorado, Idaho, Montana, and Wyoming.
You just don't get that from the map.
So in addition to the University of Nebraska-Lincoln map we will be adding the Palmer Drought Severity Index map from NOAA's Climate Prediction Center via the U.S. Drought Portal:
http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/regional_monitoring/palmer.gif
An adjunct, not a substitution.
The Palmer has its own short term issues but between the two of them we'll get closer to reality.
We'll have more as California gets nearer to mud season.

"Gallery: from nets to lasers, there’s a lot of new ways to take down drones"

The most sublime method is to go old school, just have your ghillie hand you the Purdey.
From The Ministry of Innovation:
As drones of all flavors become increasingly ubiquitous, it was only a matter of time before countermeasures began to pop up—and they have in spades, across a spectrum of prices and tactics. These range from the high-tech (lasers and RF interference) to something as basic as a handheld "net gun."

Still, as we reported earlier this year, a shotgun can also be a particularly effective way of downing a drone.
"While kinetic counter-measures are good for battlefields, they are less than ideal for domestic scenarios," Arthur Holland Michel, the co-director of the Center for the Study of the Drone at Bard College, told Ars by e-mail.

"If you use a laser to burn a hole through a quadcopter hovering over a city, you will now have a heavy flammable object falling from the sky, which is extremely dangerous," he said. "Some are turning to electronic countermeasures as a way of keeping drones away without having to shoot them down. One option for countering small drones is to use jamming systems. The Secret Service is experimenting with jamming systems that would interfere with the communication system of any small drone within a given area (say, the White House). Jamming systems are an appealing option, but they have their drawbacks: they can interfere with Wi-Fi and radio frequencies."

He also specifically mentioned a new startup company, called Drone Shield, which was deployed during this year's Boston Marathon....MORE

"Uber can't be stopped. So what happens next?"

From The Verge:
Last week New York City backed down from a plan to cap the explosive growth of Uber's vehicle fleet. The mayor's office declared the deal it reached to be a win-win for both sides, and warned Uber that an eventual cap is still a possibility if it doesn’t comply. But that threat seemed hollow given how abruptly the city had caved. Rather than highlighting a corporation brought to heel, the ending seemed to affirm Uber's enormous ability to shape the political process.
 "Even the mob can't stop Uber"
In the week leading up to the scuttled vote, Uber rolled out a tidal wave of attack ads, robocalls, influential allies, and an advanced get-out-the-vote campaign among its users. And in hundreds of cities, states, and countries around the globe, it's waging a similar campaign, with astonishing success. At this point it’s worth asking: if Uber can't be stopped, what does the future look like?
"Uber's goal is to replace private car ownership"
China would seem to have the best chance at reining in Uber. It’s a market that has stymied giants like Google and Facebook, and local technology firms often enjoy the tacit or explicit support of the government against foreign competitors. But Uber is braving these challenges. Its offices have been raided and equipment has been seized. Its two largest Chinese rivals merged, creating Didi Kuidai, which claims a 95 percent market share. But Uber is also growing incredibly quickly. It recently hit nearly 1 million rides a day in China alone, and says the country will soon be its largest market. Uber is moving to raise a $1 billion war chest so it can grow from 11 cities to 50 in China....MORE
It was only a couple months ago we posted "Big Money: Uber Guts Carnegie Mellon Robotics Lab To Hire Autonomous Car Developers" with the intro:
Raising money at a $600 illion zillion fafillion valuation allows you to buy pretty much anything.
The way this is going to pan out is: you won't be able to own the vehicle but its use will be mandated. The car is autonomous but the people aren't.
Mark my words.

Chinese Equities: Action Baby, Action!

Bright light city gonna set my soul
Gonna set my soul on fire
Got a whole lot of money that's ready to burn,
So get those stakes up higher...
A threefer from FT Alphaville:

Shanghai Comp — tin hats back on please [updated]
We hate to concentrate on the dives alone, but this is getting serious....MORE  

Putting that Shanghai Comp dive into context

And finally:
TANSTAAFL, China equities and the wider economy edition
Chinese equity markets have continued puking. Yes, they’re still up on a longer timeframe, but were off a sudden 8.5 per cent on Monday, the worst fall since 2007. The Shanghai Comp now looks like this:
As the FT said, the Shenzhen Composite sank 7 per cent, and the ChiNext start-up board dropped 7.4 per cent. Significantly, more than 1,700 stocks fell by the maximum daily amount of 10 per cent, while only 78 rose. Large caps like PetroChina, the country’s largest company by index weighting, lost 9.6 per cent. Xinhua has thus declared the “The return of debacle!”.

So a reminder of the constraints that China’s powers-that-be are labouring under seems more than appropriate. The point is that, as quoted below, “what just happened in the A-share market will likely have profound impact on China’s economy and financial system one way or another”.
From BofAML’s David Cui, pubbed this morning to his (serendipitous) credit and with our emphasis:

Leverage, inflated collateral & unclear risk responsibility


We estimate that margin outstanding, only from the seven channels that we can estimate reasonably, easily exceeds Rmb3.7tr. Assuming an average 1x leverage, it means that at least Rmb7.5tr market positions are being carried on margin, equivalent to some 13% of A-share’s market cap and 34% of its free float....MORE
 As to the intro, after reading today's "On This Day In Elvis History":
 July 27, 1975 Back in Memphis Elvis bought 14 Cadillac's.
I couldn't get Viva Las Vegas out of my head.

Sunday, July 26, 2015

"The make believe world of eurozone rules"

The Eurocrats really do think they are important.
From The Financial Times:

The disagreement between Germany and the ECJ is not about the law, but politics and economics 
50-euro notes
Whenever you are in a room with European officials and discuss the euro, there is usually somebody who raises his finger and says: “This is all well and good, but it is ‘against the rules’.” It then gets very quiet. “Against the rules” is a big thing in Europe. Most people do not really know what the rules are. But they do know that rules have to be followed.

The situation reminds me of a short story by Franz Kafka, Before the Law, where a man tries to seek entrance to a courthouse. A door keeper tells him that this is possible in principle, but not at the moment.
The man spends his entire life in front of the court waiting to be admitted. At the end of his life he was told that he could have gone through the door at any time. That man followed the wrong set of rules — rules of the mind, not of the law.

Rules of the mind is what we are dealing with in the European debate about the single currency. Many of these rules either do not exist, or they constitute some rather far-fetched interpretation of existing rules.
During the recent Greek crisis, I came across a completely new rule. I first heard it from Wolfgang Schäuble, the German finance minister. It says that countries are not allowed to default inside the eurozone. But a default was perfectly fine once they leave the euro, on the other hand. 

I later read that Otmar Issing, the former chief economist of the European Central Bank, used almost exactly the same phrase as Mr Schäuble in an Italian newspaper interview. If so many important people say it, then surely it must be true, mustn’t it?

Actually, as it turns out, there is no such rule. There is only Article 125 of the European Treaty on the Functioning of the European Union. Article 125 says that countries should not take on the debt of other countries. This is also known as the “no-bailout” clause — though that, as it turns out, is a rather loaded interpretation....MORE
Over the years I've wondered:  When EUrocrats dream, are they Capetian or Carolingian?
Capetian, methinks.

I've always liked the Carolingians better,
they seemed more human-

Charles II, the Bald
Louis II, the Stammerer
Charles, the Fat
Charles III, the Simple
Along the lines of the Brit's Aethelred II, the Unready
(my fav. royal nickname)

Anyhoo...

"Daimler reportedly will test self-driving trucks in Germany this year"

Following on May's story about Freightliner, "Autonomous, Self-Driving Trucks Are Here".
From VentureBeat:

Daimler reportedly will test self-driving trucks in Germany this year
German carmaker Daimler is planning to test self-driving trucks as early as this year, executive board member Wolfgang Bernhard told a German newspaper.

“We are positive that we will get approval for tests on German motorways within the next weeks,” Frankfurter Allgemeine Sonntagszeitung quoted him as saying. “Then we will start immediately.”
First tests of semi-autonomous trucks will take place in Daimler’s home state Baden-Wuerttemberg while the start of production is 2-3 years away, Bernhard, who is in charge of Daimler’s trucks business, told the paper.

“We are leaders in this technology and will stand up for ourselves,” Bernhard said, acknowledging that Apple, Google and other companies were trying to position themselves in the promising business of autonomous driving.

He said that Daimler was unfazed by moves of companies like Apple to poach Daimler employees. “That is a clear sign of recognition if Apple decides that your business – cars – are so important to them that they want to be part of it.”...MORE
"We will stand up for ourselves"?
Herr Doktor Bernhard sounds oddly defensive.

I'm In the Wrong Business, Part 927: The $400 College Textbook Is Here

What a sweet racket.

From Professor Perry who, during the Great Nastiness of aught-eight, I took to calling 'The Happy Economist' because of his then-relentless optimism:

The new era of the $400 college textbook, which is part of the unsustainable higher education bubble
http://www.aei.org/wp-content/uploads/2015/07/UMF.jpg
A new milestone must have been established recently – we’re now officially in a new era of the $400 new college textbook and the $300 used college textbook, see graphic above showing the top 15 most expensive textbooks at the University of Michigan-Flint based on a new unpublished report by Matthew Wolverton, an electronic resource management librarian at the Thompson Library (UM-Flint’s library). The graphic below shows the shows the most expensive college textbooks by discipline at UM-Flint, based on the average price of new textbooks for each discipline in winter 2015 semester. 
http://www.aei.org/wp-content/uploads/2015/07/textdept.jpg
For business students taking five classes per semester and paying an average of $250 per textbook, their textbook bill would be $2,500 per year and $10,000 over four years! Of course, those students would be taking courses in non-business disciplines where the average textbook price is lower, but even at an average price of $200 per new textbook, students could be facing costs as high as $8,000 over four years. And even though renting textbooks is a less expensive option compared to purchasing books, rental costs per semester are running above $200 per new book and well above $100 per used textbook (and as high as $180), see top graphic above. Even if students could rent used textbooks for all of their college classes at $100 per course (which is probably on the low side), that would still amount to $1,000 per year (for ten classes) and $4,000 over four years (for 40 classes)....MORE

Saturday, July 25, 2015

The Ownership Structure of The Economist

From Quartz:

Pearson wants to sell The Economist too, but has to deal with its baroque ownership structure
Days after its $1.3 billion sale of the Financial Times, Pearson is looking to sell off its portion of the Economist Group as it transitions to being a purely education-focused company, the FT itself reports (paywall). Even though there was a bit of drama with the sale of the FT–rival bidder Axel Springer reportedly didn’t find out it lost out to Nikkei until minutes before the deal was announced–it was a piece of cake compared to what a sale of The Economist would entail.

Any buyer would gain a premium and profitable company, but almost no control of it, and would have to contend with a potential veto from Baroness Bottomley of Nettlestone.

Pearson confirmed that it was in talks, noting, “There is no certainty that this process will lead to a transaction.” Pearson owned the FT outright, but it only owns half of the Economist Group, and owns that as part of an ownership and control scheme that can only be described as byzantine.

The other half is owned by a group of individual shareholders, which include scions of the Rothschild and Schroder banking dynasties, the Cadbury family, and the Agnelli family (which controls Fiat), who have been making noise about buying Pearson out for years.

John Elkann, the heir to the Agnelli fortune, is reportedly leading a buyout attempt by existing shareholders.
Pearson owns only “B” shares in the company, which gives it only six of 13 board seats and no real control. So if the buyer is not one of—or some consortium of—those individual shareholders (who own “A” shares), they’ll have to live with the idea of not having much in the way of economic and management control, in addition to a lack of editorial influence.

And that’s not the end of it. There’s also a separate group of “trust” shares, held by a group of four trustees, including the previously mentioned Baroness Bottomley of Nettlestone, Tim Clark, Lord O’Donnell, and Bryan Sanderson, which exist to guarantee ownership and editorial independence. Any transfer of “A” or “B” shares requires their approval. They’re wholly independent of the company’s board, and must approve the appointment of the group’s chairman and The Economist’s editor....MORE

So You Think You're Smart: The Last Person To Know Everything

Following up on the post immediately below, "Should the "Best and Brightest" Go Into Finance?".

From The Encyclopedia of Human Thermodynamics, Human Chemistry, and Human Physics:

Last person to know everythingThis is a featured page
In genius studies, the last person to know everything or the “last man to know everything” is a title or epitaph that has been attributed to a number of individuals over the years. The following page gives an overview of oft-cited names attributed with this title.

Books
At least three, Thomas Young, Joseph Leidy, and Athanasius Kircher, shown adjacent, have had books written about them, with the epitaph "last man to know everything" attributed or affixed to their name. [7]

Intellectual breaching point
Sometime between 1700 to 1900, predominately, people began to profess the view that the body of "known knowledge" had become so large that it was no longer possible for one person to know everything. To situate this postulate in the context of a date, French philosopher Pierre Levy argues, in his 1994 Collective Intelligence, that the publication of Frenchman Denis Diderdot and Jean d’Almbert’s Encyclopedie (1751-1772) marks “the end of an area in which a single human being was able to comprehend the totality of knowledge.”

Schiller, Humboldt brothers, Goethe
An intellectual roundtable: Friedrich Schiller (IQ=175), Wilhelm Humboldt, (IQ=175), Alexander Humboldt (IQ=185), a cited last person to know everything, and Johann Goethe (IQ=230), another well-cited last person to know everything, Jena 1797, discussing, in Goethe's own words, “all of nature from the perspectives of philosophy and science”. [36]

English mathematician-physicist Karl Pearson, in his science overhauling 1892 book Grammar of Science (the first book on Albert Einstein's "Olympia Academy" study group reading list) stated his view that naturalist Alexander Humboldt, pictured adjacent, was someone at the cusp of total knowledge possession (as was his associate Goethe, also pictured): [35]
“At the beginning of this century it was possible for an Alexander von Humboldt (1769-1859) (IQ=185) to take a survey of the entire domain of the extant science. Such a survey would be impossible for any scientist now, even if gifted with more than Humboldt’s powers. Scarcely any specialist of today is really master of all the work which has been done in his own comparatively small field. Facts and their classification have been accumulating at such a rate, that nobody seems to have leisure to recognize the relations of subgroups to the whole. It is as if individual workers in both Europe and America were bringing their stones to one great building and piling them on cementing them together without regard to any general plan or to their individual neighbor’s work.”
Humboldt is one of the cited "last persons to know everything" (below); a Cattell 1000 (top 100); was one of the first to propose that South America and Africa were both joined; in 1797, in Jena, with his brother Wilhelm (IQ=175), Friedrich Schiller (IQ=175), and Johann Goethe (IQ=230), the four discussed, in Goethe's own words, “all of nature from the perspectives of philosophy and science”.

Multiple cited all-knowers | Chronological
The following group of individuals, listed in chronological order by reaction end (death), gives a listing of the known referenced opinions on the matter of who considers who to be the last person to know everything, ranked by:
(a) prevalence of citations claiming that person was the last to know everything;
(b) age of the citation, e.g. Leibniz (1914) and Young (1921);
(c) a weighting factor addition for known established IQs,
AristotleAristotle 75(384-322BC) IQ_B \,=180
“Aristotle, described by some as the last man to know everything there was to know, wrote his classic books on rhetoric some 2300 years ago.” (1986) [30]

“His combined works constitute a virtual encyclopedia of Greek knowledge. It has been said that Aristotle was probably the last person to know everything there was to be known in his own time.” (2009) [4]

“Aristotle may have been the last person to know everything there was to be known in his own time.” (2009) [5]
Roger Bacon
Roger Bacon 75(1214-1294)
“Roger Bacon—the founder of English philosophy whose knowledge of chemistry and mathematics led him to recognize the value of deductive reasoning, establish a scientific method, and invent spectacles—who has been called the last man to know everything, the last man to bridge the two cultures.” (2003) [18]
Leonardo da VinciLeonardo da Vinci(1452-1519) IQ_C \,=180
 IQ_B \,=220
 IQ_{CB} \,=200
 IQ_O \,=210
“The last person to know everything was Leonardo da Vinci.” (1985) [12]

“Da Vinci, the last man to know everything, was overwhelmed by waves of depression, which left him shy and insecure.” (2004) [28]
...MORE

Here's the EOHT homepage.

If you still think you're smart here are some "Uncommonly Difficult IQ Tests"

"Should the "Best and Brightest" Go Into Finance?"

From Priceonomics:

"Finance literally bids rocket scientists away from the satellite industry."
-- Bank for International Settlements study, 2000
In the opening pages of American Psycho, a novel set in the finance boom in 1980s New York, a fictional investment banker raves, “I mean am I alone in thinking we're not making enough money?” 

From context, it’s clear that the character is indignant that his -- seemingly enormous -- paycheck isn’t higher. But, in a sense, financiers don’t “make” money. They just move it around. The sector makes most of its revenue through providing a service, not to their individual customers but to the economy. As Nell Irwin explained in The New York Times: “[Finance] exists to channel capital effectively from savers to investment. [...] Most of modern finance doesn’t exist as an end in itself, but to make the rest of the economy more efficient.”

Once upon a time, the finance sector was vilified in Western culture, for exactly this reason. (Also because, since Catholic doctrine banned money lending for interest, in Europe for centuries it was the nearly exclusive profession of Jews). Slowly, capitalism emerged, people realized the benefits of an efficient economy, and finance was lionized.

“While there have been dissenting views, today it is accepted that finance is not simply a by-product of the development process, but an engine propelling growth,” economists Stephen G. Cecchetti and Enisse Kharroubi wrote in a 2012 study. “This, in turn, was one of the key elements supporting arguments for financial deregulation. If finance is good for growth, shouldn’t we be working to eliminate barriers to further financial development?”
Investment banker, American icon (still from American Psycho, 2000)
But these researchers were skeptical, so they dove into the data. They suspected the relationship between financial development and overall economic growth was more nuanced: 
“Is [finance good for growth] regardless of the size and growth rate of the financial system? Or, like a person who eats too much, does a bloated financial system become a drag on the rest of the economy?”
They found very strong evidence that the finance sector can, in fact, get too big. Certain measures of size and rate of growth clearly negatively correlate with per-worker GDP.

The authors have recently published a follow-up study, outlining a plausible explanation for why this is. A big part of it has to do with competition for skilled labor: When a Finance Sector booms, it attracts a lot of smart, educated, and talented people. Some of these people, without the boom, would have otherwise started businesses of their own, or made technological discoveries. In one way or another, many of them would have contributed to the growth of the GDP.

Instead, as Kauffman Foundation economist Paul Kedrosky told NPR, during financial booms they get "yanked off into the financial sector never to be seen again.” ...MORE

Models and Modeling: Can Computers Make Deep Conceptual Insights Into the Way the World Works?

From Quanta Magazine's Quantized column:

The Rise of Computer-Aided Explanation
Computers can translate French and prove mathematical theorems. But can they make deep conceptual insights into the way the world works?
https://www.quantamagazine.org/wp-content/uploads/2015/07/CezanneVSComputer_1K.jpg 
Cezanne vs. the Computer
Imagine it’s the 1950s and you’re in charge of one of the world’s first electronic computers. A company approaches you and says: “We have 10 million words of French text that we’d like to translate into English. We could hire translators, but is there some way your computer could do the translation automatically?”

At this time, computers are still a novelty, and no one has ever done automated translation. But you decide to attempt it. You write a program that examines each sentence and tries to understand the grammatical structure. It looks for verbs, the nouns that go with the verbs, the adjectives modifying nouns, and so on. With the grammatical structure understood, your program converts the sentence structure into English and uses a French-English dictionary to translate individual words.

For several decades, most computer translation systems used ideas along these lines — long lists of rules expressing linguistic structure. But in the late 1980s, a team from IBM’s Thomas J. Watson Research Center in Yorktown Heights, N.Y., tried a radically different approach. They threw out almost everything we know about language — all the rules about verb tenses and noun placement — and instead created a statistical model.

They did this in a clever way. They got hold of a copy of the transcripts of the Canadian parliament from a collection known as Hansard. By Canadian law, Hansard is available in both English and French. They then used a computer to compare corresponding English and French text and spot relationships.

For instance, the computer might notice that sentences containing the French word bonjour tend to contain the English word hello in about the same position in the sentence. The computer didn’t know anything about either word — it started without a conventional grammar or dictionary. But it didn’t need those. Instead, it could use pure brute force to spot the correspondence between bonjour and hello.

By making such comparisons, the program built up a statistical model of how French and English sentences correspond. That model matched words and phrases in French to words and phrases in English. More precisely, the computer used Hansard to estimate the probability that an English word or phrase will be in a sentence, given that a particular French word or phrase is in the corresponding translation. It also used Hansard to estimate probabilities for the way words and phrases are shuffled around within translated sentences.

Using this statistical model, the computer could take a new French sentence — one it had never seen before — and figure out the most likely corresponding English sentence. And that would be the program’s translation.

When I first heard about this approach, it sounded ludicrous. This statistical model throws away nearly everything we know about language. There’s no concept of subjects, predicates or objects, none of what we usually think of as the structure of language. And the models don’t try to figure out anything about the meaning (whatever that is) of the sentence either.

Despite all this, the IBM team found this approach worked much better than systems based on sophisticated linguistic concepts. Indeed, their system was so successful that the best modern systems for language translation — systems like Google Translate — are based on similar ideas.

Statistical models are helpful for more than just computer translation. There are many problems involving language for which statistical models work better than those based on traditional linguistic ideas. For example, the best modern computer speech-recognition systems are based on statistical models of human language. And online search engines use statistical models to understand search queries and find the best responses.

Many traditionally trained linguists view these statistical models skeptically. Consider the following comments by the great linguist Noam Chomsky:
There’s a lot of work which tries to do sophisticated statistical analysis, … without any concern for the actual structure of language, as far as I’m aware that only achieves success in a very odd sense of success. … It interprets success as approximating unanalyzed data. … Well that’s a notion of success which is I think novel, I don’t know of anything like it in the history of science.
Chomsky compares the approach to a statistical model of insect behavior. Given enough video of swarming bees, for example, researchers might devise a statistical model that allows them to predict what the bees might do next. But in Chomsky’s opinion it doesn’t impart any true understanding of why the bees dance in the way that they do....MORE

Stephen Hawking To Do A Reddit Ask-Me-Anything Starting Monday

From the Mercury-News' tech blog, SiliconBeat:

Stephen Hawking will do a Reddit AMA starting Monday
Stephen Hawking, the renowned physicist and cosmologist, will host his first Ask-Me-Anything on Internet discussion site Reddit.

In an unusual twist, this AMA will last for just more than a week; most of Reddit’s question-and-answer sessions are about an hour. Redditors can submit questions starting Monday at 5 a.m. PT, and continue asking through Aug. 4. Hawking will respond to questions over the coming weeks. Hawking, 73, suffers from amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease, which has paralyzed him over the years. He communicates through an Intel computer-based system that responds when he moves his cheek; the extra time to respond to Redditors’ questions will be helpful.
The conversation will take place under the subreddit r/science.

Hawking is widely considered one of the most brilliant physicists to have ever lived, and his book “A Brief History of Time,” an exploration of black holes and other cosmological subjects, spurred heated scientific debate and became a national best seller for years. Reports say Hawking wants to focus the AMA on discussions around artificial intelligence, although likely the questions will vary dramatically — in both substance and tone — as they tend to on Reddit....MORE
May 12, 2012
Stephen Hawking in Zero Gravity

For his 65th birthday, Stephen Hawking took a ride in zero gravity. Photo: Associated Press