Tuesday, March 19, 2019

IBD: "Stock Market Gives Up Big Gains, But Surging Chips Boost Nasdaq"

From Investor's Business Daily:
4:31 PM ET
The Nasdaq held up best as the key indexes pared big gains to finish mostly lower Tuesday amid renewed concerns about China-U.S. trade talks that Bloomberg reported.

The Nasdaq composite rose 0.1%, while the S&P 500 was a fraction lower and the Dow Jones Industrial Average edged down 0.1%. Small caps fared the worst, with the Russell 2000 down 0.6%. Preliminary data showed volume slightly lower on the NYSE and higher on the Nasdaq vs. Monday's totals.
The indexes had gapped up to big gains before the trade-talk report. However, the Wall Street Journal subsequently reported the U.S. and China are planning new talks next week on a trade deal. In other news, the Fed kicked off its two-day monetary policy meeting today.
Chips, managed care and internet retail stocks led the upside among sector gainers in today's stock market. Banks, truckers and other transportation groups underperformed.

Advanced Micro Devices (AMD) surged 12% in twice its normal trade after Alphabet's (GOOGL) Google confirmed a partnership for Google's new Stadia gaming service. The chip designer's shares are working on the right side of a base with a potential 34.24 buy point. Alphabet rose 1.2%.
Nvidia (NVDA) leapt 4% in above-average turnover. Late Monday, the graphics-chip maker unveiled new products and announced customer wins at a presentation in San Jose, Calif. The company also said Amazon (AMZN) will use Nvidia's T4 data-center chips. Amazon climbed 1%.

Chip ETFs Rally
The chip-stock strength fueled gains in related ETFs. IShares PHLX Semiconductor (SOXX) rose 1.3%, and VanEck Vectors Semiconductor (SMH) added 1.2%. The iShares and VanEck ETFs remain in buy range from respective handle entries at 189.33 and 106.37....

Also at IBD,1:34 PM ET:
Nasdaq Extends Gains As Advanced Micro, Nvidia, Micron Lead Another Chip Rally

We'll have more on NVIDIA tomorrow, in the meantime this was today's post:
"Nvidia bags Amazon Web Services in its latest data-center chip push"

"A Statement from the University of Pennsylvania Regarding the College Admissions Bribery Scandal"

Home of the Wharton School.
Via McSweeny's:
When we learned that at least 50 people participated in a massive college admissions scam, deploying fraudulent means to get their children into our nation’s elite universities, we were appalled, disgusted, and outraged that not a single one of them was using these deviant tactics to get into the University of Pennsylvania.

It is just despicable that these privileged, wealthy families, who already enjoy every advantage, would be so deceitful and unethical in their efforts to secure a coveted spot at Yale, Stanford, or Georgetown, but not at Penn, which — friendly reminder! — is an Ivy League school. It’s extremely exclusive. Very difficult to get into. Definitely harder than Georgetown and sometimes harder than Stanford; it sort of depends on the year....MORE
Meanwhile, at Sarah Lawrence (tuition and room: $69,000 p,a.):
...On March 11, 2019, the Diaspora Coalition, along with our allied peers, will occupy Westlands, make calls to the board, and present demands that describe not only our ideal vision for the school but also what we see as the only acceptable terms by which Sarah Lawrence can remain for the students and against hate. If the College does not accept these demands, it will no longer be hailed as a progressive institution but instead remembered for its inability to truly embody its self-proclaimed progressive ideology and support all students against an international rising tide of white supremacy and fascism....
Housing Accommodations and Accessibility
  1. Sarah Lawrence must commit to actualizing the value that housing is a human right.
    1. The College must provide winter housing to students at no charge. This housing must include a communal kitchen with dry goods from the food pantry available for all students.
    2. In the extreme case that housing cannot be provided to students during break due to housing probation, the school must provide a list of local low-cost, free, and/or accessible housing options for students.
  2. The College will designate housing with a minimum capacity for thirty students of color that is not contingent on the students expending any work or labor for the college. This housing option will be permanent and increase in space and size based on interest.
  3. All campus laundry rooms are to supply laundry detergent and softener on a consistent basis for all students, faculty and staff.
    Food Security and Accessibility
    1. Sarah Lawrence must commit to actualizing the value that no student go hungry.
      1. The College must commit to devising a food plan where every student has access to, at minimum, two meals a day, including weekends, school breaks, and days when the college is closed due to weather. When dining options are closed on campus, the College must provide free meals for students staying on campus, including vegetarian, gluten-free, vegan, halal, and kosher options.
      2. A commitment that no student goes hungry includes graduate students and students that live off-campus. The College will design meal plans for graduate and off-campus students based on need....

Roger that, softener in the laundry rooms.

So....which one is the parody?

Who's Up To Putting Facebook's Version Of Siri/Alexa In Their Home? (FB; GOOG; AMZN)

From Finance Daily, March 3:

Can Facebook Make A New Virtual Assistant Smarter Than Siri Or Alexa?
According to the Financial Times, Facebook is working on producing artificial intelligence (AI) chips for a virtual assistant to be smarter than Apple’s Siri or Amazon’s Alexa

Facebook is working with Intel, other tech giants and semiconductor makers to make this goal come true.

It’s goals in developing a more specialized and powerful AI chip is so that a digital assistant will have enough ‘common sense’ to communicate with a human on any subject as well as making it a practical tool in regards to controlling its social network; for instance in the area of monitoring videos and deciding what content should be allowed on its service.

Facebook has in the past been known to make its own hardware when necessary and is currently developing its own custom ‘application-specific integrated circuit’ (ASIC) chips which would be a particular kind of transmission protocol designed to specifically work with the company’s AI programs.

Yann LeCun, Facebook’s chief AI scientist and one of the pioneers of modern AI, says there is a need for more specialized AI chips to speed up tasks at lightening speed but with lower power consumption. He says that the company is doing anything and everything it can do in this area especially in monitoring videos flowing through their site in real time but that it will essentially require neural designs which are computer systems modeled on the human brain and nervous system.

In particular, the company is looking to new neural network architecture that will mimic aspects of human intelligence to make its systems more natural for users to interact with.  Especially systems that would operate on a ‘common sense’ level, particularly for digital assistants which would have background knowledge in order for users to be able to have discussions on any topic with them, says LeCun....MORE
And if you really trust FB; Data Center Knowledge is reporting:
Facebook to Sell Bandwidth on Its New Inter-Data Center Fiber Routes
The company hopes to monetize unused bandwidth while improving broadband penetration in rural America.... 
That's right, you can shoot all your information through the 'book's fat pipes.

"Aluminum manufacturing giant Norsk Hydro shut down by ransomware"

From TechCrunch:
Norsk Hydro, one of the largest global aluminum manufacturers, has confirmed its operations have been disrupted by a ransomware attack.

The Oslo, Norway-based company said in a brief statement that the attack, which began early Tuesday, has impacted “most business areas,” forcing the aluminum maker to switch to manual operations.

“Hydro is working to contain and neutralize the attack, but does not yet know the full extent of the situation,” the company said in a statement posted to Facebook. It’s understood that the ransomware disabled a key part of the company’s smelting operations.

Employees were told to “not connect any devices” to the company’s network. Norsk Hydro’s website was also down at the time of writing....MORE

"Nvidia bags Amazon Web Services in its latest data-center chip push"

Data centers, very important to NVIDIA's future. See after the jumps.
First up, MarketWatch:

Nvidia’s latest server chips have now been adopted by AWS and Google Cloud, executive says Alibaba should be next
Nvidia Corp. attempted to show progress for its newest chips Monday, as Chief Executive Jensen Huang kicked off the company’s annual hometown conference.

At the keynote address of the 2019 GTC Conference in San Jose, Calif., Huang detailed new developments for the Turing-based equipment that Nvidia NVDA, +3.52%  has rolled out in the past year. Most important was Nvidia’s announcement that Amazon.com Inc. AMZN, +1.48%  will now be using its T4 data-center chips, the biggest name that had not yet publicly signed on with Nvidia.
The Santa Clara, Calif.,-based chip maker said its T4 Tensor Core graphics processing units, or GPUs, would be deployed to Amazon Web Services through Elastic Compute Cloud G4 in the coming weeks. While other public cloud services have been chipping away at market share over the past few years, Amazon’s AWS still ranks as a global market-share leader in public cloud services.
“If you want to reach a lot of people, and you want to reach a lot of people fast, with the single largest compute engine on the planet, there’s one way of doing it,” Huang said in announcing the AWS deal as the keynote address stretched past two hours long.

Back in September, Nvidia announced that Alphabet Inc.’s  Google Cloud Platform would use T4 chips in its data centers. In addition to Google, Ian Buck, Nvidia’s general manager of accelerated computing, said in a briefing that Baidu Inc.  had adopted T4 chips for its data centers, and that Alibaba Group Holding Ltd.  also planned to announce adoption of T4 chips, with the last notable holdout being Microsoft Corp.’s  Azure cloud service.

Nvidia has been seeking to pull out of a rough ending to 2018, when the company cut its outlook twice for the year’s final quarter because of weakness in China sales and in data-center and gaming sales. Part of the issue has been slow adoption of the company’s newest Turing chips, and Monday’s keynote was used to lay out more plans and adoption of the new equipment....MORE
And from NVIDIA's blog:

GTC 2019: Huang Kicks Off GTC, Focuses on NVIDIA Datacenter Momentum, Blue Chip Partners
NVIDIA’s message was unmistakable as it kicked off the 10th annual GPU Technology Conference: it’s doubling-down on the datacenter.

Founder and CEO Jensen Huang delivered a sweeping opening keynote at San Jose State University, describing the company’s progress accelerating the sprawling datacenters that power the world’s most dynamic industries.

With a record GTC registered attendance of 9,000, he rolled out a spate of new technologies, detailed their broad adoption by industry leaders including Cisco, Dell, Hewlett-Packard Enterprise, and Lenovo, and highlighted how NVIDIA technologies are relied on by some of the world’s biggest names, including Accenture, Amazon, Charter Communications, Microsoft and Toyota.

“The accelerated computing approach that we pioneered is really taking off,” said Huang, who exactly a week ago announced the company’s $6.9 billion acquisition of Mellanox, a leader in high-performance computing interconnect technology. “If you take look at what we achieved last year, the momentum is absolutely clear.”

To be sure, Huang also detailed progress outside the data center, rolling out innovations targeting everything from robotics to pro graphics to the automotive industry.
NVIDIA’s message was unmistakable as it kicked off the 10th annual GPU Technology Conference: it’s doubling-down on the datacenter.
Founder and CEO Jensen Huang delivered a sweeping opening keynote at San Jose State University, describing the company’s progress accelerating the sprawling datacenters that power the world’s most dynamic industries.
With a record GTC registered attendance of 9,000, he rolled out a spate of new technologies, detailed their broad adoption by industry leaders including Cisco, Dell, Hewlett-Packard Enterprise, and Lenovo, and highlighted how NVIDIA technologies are relied on by some of the world’s biggest names, including Accenture, Amazon, Charter Communications, Microsoft and Toyota.
“The accelerated computing approach that we pioneered is really taking off,” said Huang, who exactly a week ago announced the company’s $6.9 billion acquisition of Mellanox, a leader in high-performance computing interconnect technology. “If you take look at what we achieved last year, the momentum is absolutely clear.”
To be sure, Huang also detailed progress outside the data center, rolling out innovations targeting everything from robotics to pro graphics to the automotive industry.

Developers, Developers, Developers
The recurring theme, however, was how NVIDIA’s ability to couple software and silicon delivers the advances in computing power needed to transform torrents of data into insights and intelligence.
“Accelerated computing is not just about the chips,” Huang said. “Accelerated computing is a collaboration, a codesign, a continuous optimization between the architecture of the chip, the systems, the algorithm and the application.”

As a result, the GPU developer ecosystem is growing fast, Huang said. The number of developers has grown to more than 1.2 million from 800,000 last year; there now are 125 GPU powered systems among the world’s 500 fastest supercomputers; and there are more than 600 applications powered by NVIDIA’s CUDA parallel computing platform.

Mellanox — whose interconnect technology helps power more than half  the world’s 500 fastest supercomputers — complement’s NVIDA’s strength in datacenters and high-performance computing, Huang said, explaining why NVIDIA agreed to buy the company earlier this month.
Mellanox CEO Eyal Waldman, who joined Huang on stage said: “We’re seeing a great growth in data, we’re seeing an exponential growth. The program-centric datacenter is changing into a data-centric datacenter, which means the data will flow and create the programs, rather than the programs creating the data.”....MUCH MORE, including video
AnandTech's liveblog was less rah-rah but, if possible, even geekier:
The NVIDIA GPU Tech Conference 2019 Keynote Live Blog (Starts at 2pm PT/21:00 UTC)

04:43PM EDT - Alright, we're finally seated for the keynote
04:43PM EDT - Kicking off a very busy week for tech events in California, my first stop for the week is NVIDIA's annual GPU Technology Conference in San Jose.
04:44PM EDT - As always, CEO Jensen Huang will be kicking off the show proper with a 2 hour keynote, no doubt making some new product announcements and setting the pace for the company for the next year.
04:44PM EDT - The biggest question that's no doubt on everyone's minds being what NVIDIA plans to do for 7nm, as that process node is quickly maturing.
04:44PM EDT - Hopefully we'll find out the answer to that and more, so be sure to check-in at 2pm Pacific to see what's next for NVIDIA....

From  December 27's "Nvidia Slips on RBC Price-Target Cut" (NVDA):
It might be time for NVIDIA to start thinking about buying some young upstart chip designers.

Starting in May  2015 with the stock bouncing around $21 we were pretty rah-rah on the deal, eventually leading off each post with something like this from May 2016:...

... What I'm saying is: We know this one fairly well and are starting, depending on R&D or acquisitions, starting to get interested again.
$127.01 last, down $6.09 (-4.58%)...

...What the analyst doesn't mention is the data center business which, if our crystal ball is showing the right picture, will really start ramping about a year from now.
Which reminds me, there's a company I should introduce to Mr. Huang.  
Since then the stock is up to $174 and instead of buying an upstart NVIDIA bought Mellanox, at the heart of the data center business.

NVDA NVIDIA Corporation daily Stock Chart  

Intel Quantum AI Breakthrough

We wouldn't use the word "breakthrough" in the headline except for the fact the writer of this piece, Tiernan Ray seems to think this is a big deal. Long-time readers may remember Mr. Ray from his days at Barron's where he ran the Tech Trader and Tech Trader Daily outposts and for his uncanny ability to get NVIDIA's CEO to answer questions.

From ZD Net, March 14:

Intel offers AI breakthrough in quantum computing
Intel's senior vice president and head of Mobileye, Amnon Shashua, on Wednesday unveiled new research done with colleagues at Hebrew University that both establishes important proof for capabilities of deep learning, and also offers a way forward for computing some commonly intractable problems in quantum physics.
We don't know why deep learning forms of neural networks achieve great success on many tasks; the discipline has a paucity of theory to explain its empirical successes. As Facebook's Yann LeCun has said, deep learning is like the steam engine, which preceded the underlying theory of thermodynamics by many years.   

But some deep thinkers have been plugging away at the matter of theory for several years now. 
On Wednesday, the group presented a proof of deep learning's superior ability to simulate the computations involved in quantum computing. According to these thinkers, the redundancy of information that happens in two of the most successful neural network types, convolutional neural nets, or CNNs, and recurrent neural networks, or RNNs, makes all the difference. 

Amnon Shashua, who is the president and chief executive of Mobileye, the autonomous driving technology company bought by chip giant Intel last year for $14.1 billion, presented the findings on Wednesday at a conference in Washington, D.C. hosted by The National Academy of Sciences called the Science of Deep Learning Conference

In addition to being a senior vice president at Intel, Shashua is a professor of computer science at the Hebrew University in Jerusalem, and the paper is co-authored with colleagues from there, Yoav Levine, the lead author, Or Sharir, and with Nadav Cohen of the Institute for Advanced Study in Princeton, New Jersey. 

The report, "Quantum Entanglement in Deep Learning Architectures," was published this week in the prestigious journal Physical Review Letters.  

The work amounts to both a proof of certain problems deep learning can excel at, and at the same time a proposal for a  promising way forward in quantum computing.  
The team of Amnon Shashua and colleagues created a "CAC," or, "convolutional arithmetic circuit," which replicates the re-use
of information in a traditional CNN, while making it work with the "Tensor Network" models commonly used in physics, Mobileye.
In quantum computing, the problem is somewhat the reverse of deep learning: lots of compelling theory, but as yet few working examples of the real thing. For many years, Shashua and his colleagues, and others, have pondered how to simulate quantum computing of the so-called many-body problem

Physicist Richard Mattuck has defined the many-body problem as "the study of the effects of interaction between bodies on the behaviour of a many-body system," where bodies have to do with electrons, atoms, molecules, or various other entities.

What Shashua and team found, and what they say they've proven, is that CNNs and RNNs are better than traditional machine learning approaches such as the "Restricted Boltzmann Machine," a neural network approach developed in the 1980s that has been a mainstay of physics research, especially quantum theory simulation...MORE

Elon Musk's OpenAI to Offer Securities

Well this is odd.
From OpenAI,

We’ve created OpenAI LP, a new “capped-profit” company that allows us to rapidly increase our investments in compute and talent while including checks and balances to actualize our mission.
Our mission is to ensure that artificial general intelligence (AGI) benefits all of humanity, primarily by attempting to build safe AGI and share the benefits with the world.

We’ve experienced firsthand that the most dramatic AI systems use the most computational power in addition to algorithmic innovations, and decided to scale much faster than we’d planned when starting OpenAI. We’ll need to invest billions of dollars in upcoming years into large-scale cloud compute, attracting and retaining talented people, and building AI supercomputers.

We want to increase our ability to raise capital while still serving our mission, and no pre-existing legal structure we know of strikes the right balance. Our solution is to create OpenAI LP as a hybrid of a for-profit and nonprofit—which we are calling a “capped-profit” company.

The fundamental idea of OpenAI LP is that investors and employees can get a capped return if we succeed at our mission, which allows us to raise investment capital and attract employees with startup-like equity. But any returns beyond that amount—and if we are successful, we expect to generate orders of magnitude more value than we’d owe to people who invest in or work at OpenAI LP—are owned by the original OpenAI Nonprofit entity.
Going forward (in this post and elsewhere), “OpenAI” refers to OpenAI LP (which now employs most of our staff), and the original entity is referred to as “OpenAI Nonprofit.”
The mission comes first We’ve designed OpenAI LP to put our overall mission—ensuring the creation and adoption of safe and beneficial AGI—ahead of generating returns for investors....

HT: TechCrunch who write:
...I candidly don’t understand this structure at all. For venture capitalists — and particularly early-stage investors — returns are driven by one, maybe two, and extremely rarely three startups in a portfolio (that would be Benchmark’s 2011 fund, which includes Uber, Snap, and WeWork). That one outlier investment may drive a majority of all fund returns. If OpenAI were to be that investment, how you could you possibly relinquish the remaining upside? Maybe you could prospectively sort of accept this, but how would you explain to LPs that “ah, yes, seven years ago we decided to give up that next 150x” or whatever....MORE 

"CBOE Abandons Bitcoin Futures"

From the Wall Street Journal, March 18:
Market launched with fanfare in 2017 will wind down once its last contract expires in June
The first U.S. exchange company to launch bitcoin futures has pulled the plug on them, the latest sign that mainstream financial firms are losing their enthusiasm for cryptocurrencies.

Cboe Global Markets Inc. said in a notice to traders last week that it “does not currently intend to list additional XBT futures contracts for trading.” XBT is the symbol for the bitcoin futures listed by Cboe.

Monthly futures contracts, such as XBT, expire every month and the exchange must keep listing new ones to keep the market going. Cboe’s move means that the bitcoin-futures market it launched in 2017 will wind down once its last contract expires in June.

Cboe “is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading,” the notice said. A spokesman for Cboe declined to comment beyond what the company said in the notice....MORE
$3,977.74, down $11.11last.

Monday, March 18, 2019

"A several thousand kilometer long fiber optic cable is to be laid along the Russian Arctic coast as part of the Armed Forces’ building of a new closed internet."

From The Barents Observer (still banned in Russia):

Russia’s new military internet to be supported by Arctic cable
The system could ultimately also be used as the basis for a bigger sovereign all-national web, military developers say.

The new system for exchange of digital information has been called the Multi-service Transport Network System (MTSS) and is under full development in the country. According to military officials, the first testing took place during the Zapad-2017, the great military exercise held in the western military district and Northern Fleet in September 2017.

Up 20 GB of information can be exchanged at a time between the military units. All of it is based on resources and communication systems developed in Russia and it includes mechanisms for monitoring, operational managed and function control, the press service of the Armed Forces informs.

It will significantly enhance the management efficiency of the military, officials say.

Arctic cable
According to newspaper Izvestia, several fiber optic cables will be built to support the new MTSS. That includes one major cable laid across the country’s Arctic coast from Vladivostok in the east to Murmansk and Severomorsk in the west.

The Armed Forces have already started preparing for the laying of the trans-Arctic cable, military officials told the newspaper.

The MTSS will be fully isolated from the World Wide Web and all information will be stored on servers controlled by the Ministry of Defense. Data centers are reportedly under development several places in the country...

Deeper into the story the writer mentions the Russian Defense Minister which reminded me of a fun quiz we had on the blog.
Here's the 2018 update:

Russia's Defense Minister Talks Smack* to Germany
 In February 2016 we posted a series of five headshots of defense ministers that had made the rounds on the internet the previous year, see if you can guess which one is Russian:

(from left to right): Sweden (Karin Enstrom), Norway (Ine Eriksen Søreide), Russia ( Sergey Shoigu), 
Netherlands (Jeanine Hennis-Plasschaert), Germany (Ursula von der Leyen)

Of the five, three have moved on with their political careers while the defense minister in the middle and the defense minister on the far right remain in the office....

Singapore’s Nutrition Innovation Raises $5m Seed Round for Low-Glycemic Index Sugar as List of Sugar Reduction Technology Startups Grows

Big, big, big addressable markets are always of interest. For our intro, here's a post from Dec. 28th:

"Economic impact of excess weight now exceeds $1.7 trillion, new Milken Institute report reveals"
I've mentioned the guy who pitched me on kidney dialysis company DaVita back in 2002; and some of the trades implied in Izabella Kaminska's 2016 - 2017 posts on sugar and even earlier: From our Oct. 2, 2012 post "Buffett Bets on the Boomers: End Stage Renal Disease (BRK.B; DVA)":
Around ten years ago a sharp young analyst gave me his five-minute kidneys and dialysis pitch. It made quite an impression on me, I remember it to this day. Unfortunately for him and his firm we were just coming off the Dotbomb crash and everything looked really cheap so I filed the idea under "stuff I'll get to".
Davita is up seven-fold since that day, $103.44 at the close. Fresenius, the largest in the industry is up ten-bagger in ten years, no lost decade there..
And last year:
CDC Report: 100 Million Americans Either Diabetic or On Their Way
There's an opportunity in here, somewhere. The direct costs of healthcare for diabetics has to be five grand a year per. That gives us a half-trillion dollar market to address. Plus, who really wants a countryside full of blind amputees on dialysis?
And the headline story from AgFunder, March 14:

In the face of obesity, diabetes, and other health epidemics, food makers are looking for healthier ingredients that won’t require consumers to compromise on taste.
Excessive sugar consumption is a pervasive health problem throughout the world. It leads to many life-threatening conditions including diabetes, obesity, and heart disease, which has now reached epidemic levels in some parts of the world. 

Nearly 40% of American adults are obese, according to CDC data, putting them at risk of heart disease, stroke, type 2 diabetes, and certain types of cancer, while over 100 million Americans have diabetes or prediabetes.

How did we get to this staggering, epidemic level of obesity and diabetes?
On average, Americans consume 126.4 grams of sugar per day, out-consuming any other country in the world according to The Diabetes Council. Germany and the Netherlands trail behind at roughly 102 grams per person on average, followed by Ireland, Australia, and Belgium and roughly 95 grams per person on average.

Despite these health risks and growing public awareness about overconsumption, many consumers can’t seem to swap out their favorite sugary snacks or drinks with healthier alternatives, driving many food product companies to look for solutions that cut caloric impact without sacrificing flavor.
Sugar is typically highly-refined and stripped of beneficial antioxidants and minerals, leaving it with a high glycemic index. Despite these downsides, food manufacturers have found it difficult to replace refined sugar with alternatives that pose fewer problems or that have lower caloric impacts. The natural sugar alternatives and replacements that are available can be expensive and may not mix well with existing product formulations.

Singapore’s Nutrition Innovation Raises $5m
Singapore startup Nutrition Innovation is hoping to tap what they estimate to be a $100 billion sugar market with a low-glycemic natural cane sugar product.
Nutrition Innovation’s patent-protected process retains the antioxidants and minerals that are naturally occurring in cane sugar, such as magnesium and calcium in a patented process that the company says produces Nucane as a fraction of the cost of refined sugar....MUCH MORE
...In 2016 the Financial Times had some of their writers and opinionators weigh in, so to speak, on the Government's proposed sugar tax.
To my eternal shame I decided the FT needed a little graphical jazzing up and perhaps went too far:

Michelangelo's David Comes Out Against Taxing Sugary Drinks 
Drink more sugar!

HT that the big guy was out there, Incidental Economist.

I was thinking of calling our tipster the Coincidental Economist because the same day they posted  (Mar. 19) the Financial Times' Comment section was having some of their journos weigh in on:...
Last seen in September 2017's "If You Want To Be Happy, Listen Up. Now! alternative title: The FT's Izabella Kaminska Is...":
...trying to destroy one of my upcoming "set it and forget it" trades.

In Case You Missed It: "U.S. natural gas production hit a new record high in 2018"

From the U.S. Energy Information Administration:
March 14

U.S. annual natural gas production
Source: U.S. Energy Information Administration, Monthly Crude Oil, 
Lease Condensate, and Natural Gas Production Report, Natural Gas Monthly

U.S. natural gas production grew by 10.0 billion cubic feet per day (Bcf/d) in 2018, an 11% increase from 2017. The growth was the largest annual increase in production on record, reaching a record high for the second consecutive year. U.S. natural gas production measured as gross withdrawals averaged 101.3 Bcf/d in 2018, the highest volume on record, according to EIA’s Monthly Crude Oil, Lease Condensate, and Natural Gas Production Report. U.S. natural gas production measured as marketed production and dry natural gas production also reached record highs at 89.6 Bcf/d and 83.4 Bcf/d, respectively.

U.S. natural gas gross withdrawals increased every month during 2018 except in June, ultimately reaching a record monthly high of 107.8 Bcf/d in December 2018. Marketed natural gas production and dry natural gas production also hit monthly record highs of 95.0 Bcf/d and 88.6 Bcf/d, respectively, in December 2018. Marketed production reflects gross withdrawals less natural gas used for repressuring wells, quantities vented or flared, and nonhydrocarbon gases removed in treating or processing operations. Dry natural gas is consumer-grade natural gas, or marketed production less extraction losses.
monthly U.S. natural gas exports
Source: U.S. Energy Information Administration, Natural Gas Monthly

As natural gas production increased, the volume of natural gas exports—both through pipelines and as liquefied natural gas (LNG)—increased for the fourth consecutive year, reaching 9.9 Bcf/d. Total natural gas exports grew 14% in 2018, and LNG exports grew by 53% to 3.0 Bcf/d. Both pipeline and LNG exports reached record monthly highs in December 2018 of 7.7 Bcf/d and 4.0 Bcf/d, respectively. The United States continued to export more natural gas than it imported in 2018, after being a net exporter in 2017 for the first time in nearly 60 years....

Six Internet Infrastructure Trends

From Digitopoly:
Today internet infrastructure encompasses root servers, broadband lines, routers, content delivery net-works, cloud storage and cellular towers. Broadly construed, these physical assets perform two related and essential services for the modern digital economy. Infrastructure acts as an intermediate input for the production of many services by firms and it acts as an intermediate input into the delivery of access and related services to the internet for households.

The improvements to infrastructure receive less heralding than a new and shiny app or device. Fewer financial analysts examine every imaginative aspect of clever business decisions. Nonetheless, improvements arrive apace, both motivated by and enabling advances in a plethora of new devices and platforms.

Today’s column will take a step back and marvel at the economic logic behind these long term changes. Let me issue apologies in advance for skirting past a ton of technical details. The column will try to make a complex economic topic digestible by focusing on “trends” in the recent past.

Trend 1. Value chains grew. A value chain is a set of activities that together produce an outcome that users purchase and consume. Most networks support a chain around a single output – e.g., the electrical grid produces and delivers electricity. In contrast, internet infrastructure supports several chains, so it is challenging to estimate the value of the markets it supports.

Broadband internet access to homes and businesses is one important value supported by infrastructure. Official GDP statistics in the Service Annual Survey, collected and archived by the US Census, show enormous levels and growth in access fees. In 2017, the last year in which data is available, payments for access in wireline forms contributed over $88.7 billion to GDP, growing more than 30% from 2012 (in nominal terms). Payments for access in wireless forms amounted to over $96.0 billion in 2017, growing more than 57% from 2012.

A related value chain exists for electronic commerce in the same years. It has many parts. Official GDP statistics find online advertising contributed $105.9 billion to GDP in 2017 among Internet Publishing and Broadcasting and Web Search Portals. That has grown 250%. Another part of this chain involves electronic retailing, which the Census puts at over $545 billion for electronic shopping and mail order houses. It grew 65%.

That is not every value chain linked to the internet, of course, but it is enough to illustrate that hundreds of billions of dollars depend on the infrastructure, and this activity has grown tremendously in recent experience. It also illustrates a difference with the speculation of the dot.com era. Today’s investments support valuable services that users regularly buy. Even if every over-optimistic entrepreneur disappeared tomorrow, there would still be a large amount of value affiliated with the internet.

Trend 2. Generativity thrived. Internet infrastructure supports too many products and services to list. Smart phones helped supported a boom in apps, and massive change in platforms. Video and streaming worked their way into every device, altering music and video services, not to mention online advertising. Broadband provides the best experience for streaming movies, and numerous over-the-top services have been proposed and some have been widely adopted by users.

These experiments arrived in fits and starts, and punctuated events with new rollouts and inventive new products. Some of this went mainstream and some stayed with cutting-edge users. There is not enough space to mention even a tiny fraction of them. There is, however, a simple but obvious point to stress: Those experiments and the increase in the value chain could not have happened without associated improvements in the operations of infrastructure. Users experienced more resolution in their video, less waiting time for rendering, and faster reactions in their applications.

Notably, household and businesses paid higher prices for faster access in their wireline and wireless services. That is why the value chains grew in size. Similarly, investments in infrastructure grew where the money flowed, especially where users paid for the improved experience.

Trend 3. Users increasingly received more data than they sent. Networking engineers today talk about ever increasing “asymmetric flows” in data. While the network flows were never perfectly symmetric, the engineers have a point. Blame the increasing popularity of streaming and video. Blame all those smart phones. Blame all the new addictive apps. Flows have steadily, almost inexorably, gotten more asymmetric each year....

"Some Peculiarities of Labor Markets: Is Antitrust an Answer?"

From Timothy Taylor, The Conversable Economist, March 15:
Labor markets are in some ways fundamentally different from markets for goods and services. A job is a relationship, but in general, the worker needs the relationship to begin and to last more than the employer does/ John Bates Clark , probably the most eminent American economist of his time, put it this way in his 1907 book, Essentials of Economic Theory
"In the making of the wages contract the individual laborer is at a disadvantage. He has something which he must sell and which his employer is not obliged to take, since he [that is, the employer] can reject single men with impunity. ... A period of idleness may increase this disability to any extent. The vender of anything which must be sold at once is like a starving man pawning his coat—he must take whatever is offered."
In the last few years, an idea has emerged that the same government agencies that are supposed to be concerned about monopoly power--that is, when dominant firms in an industry can take advantage of the lack of competition to raise the prices paid by consumers--should also be concerned about "monopsony" power--that is, when dominant firms in an industry can take advantage of the lack of competition to reduce the wages paid to workers. Eric A. Posner, Glen Weyl and Suresh Naidu offer a useful overview of this line of thought in "Antitrust Remedies for Labor Market Power," published in the Harvard Law Review. (132 Harv. L. Rev. 536, December 2018). My own sense is that their discussion of the power imbalance in labor markets is fully persuasive, but it also seems to me that antitrust is at most a very partial and incomplete way of addressing these issues. 
Here's a nice explanation from Posner, Weyl, and Naidu of why workers have reason to feel vulnerable to the monopsony power of employers in labor markets (footnotes omitted):
But there is reason to believe that labor markets are more vulnerable to monopsony than products markets are to monopoly, thanks to a different literature in economics. This literature, for which Professors Lloyd Shapley and Alvin Roth were awarded the Nobel Prize, emphasizes the importance of matching for labor markets.The key point is that in labor markets, unlike in product markets, the preferences of both sides of the market affect whether a transaction is desirable. 
Compare buying a car in the product market and searching for a job. Both are important, high-stakes choices that are taken with care. However, there is a crucial difference. In a car sale, only the buyer cares about the identity, nature, and features of the product in question — the car. The seller cares nothing about the buyer or (in most cases) what the buyer plans do with the car. In employment, the employer cares about the identity and characteristics of the employee and the employee cares about the identity and characteristics of the employer. Complexity runs in both directions rather than in one. Employers search for employees who are not just qualified, but also who possess skills and personality that are a good match to the culture and needs of that employer. At the same time, employees are looking for an employer with a workplace and working conditions that are a good match for their needs, preferences, and family situation. Only when these two sets of preferences and requirements “match” will a hire be made.....MORE
...To what extent might antitrust be a remedy for these kinds of issues? There are certainly situations where it seems appropriate. For example,  the authors discuss "the revelation that high-profile Silicon Valley tech firms, including Apple and Google, entered nopoaching agreements, in which they agreed not to hire each other’s employees. This type of horizontal agreement is a clear violation of the Sherman Act.... 
Labor markets are indeed profoundly different from markets in goods and services, and not just in terms of monopsony. 

"Chinese farmers need lifeline to ride out wave of US imports in trade war deal, agribusiness tycoon says"

The gentleman in question, Liu Yonghao is one of the big hitters of the Chinese agribusiness industry.
His company, New Hope Liuhe is the largest buyer of soybeans in China and Forbes puts his family net worth (his daughter runs the feed operation) at $8.4 billion. We last saw him in May 2018's "It appears China has stopped buying soybeans from the US altogether because of trade fight":
..."China Pig Feed King Says U.S. Trade War Will Hurt":
..."In case of a trade war, we are able to find other solutions," said Liu, who is also chairman of New Hope Liuhe, a publicly traded animal feed producer controlled by New Hope Group. “We have to raise pigs, and citizens have to eat pork.”...
And from the South China Morning Post, March 4:

New Hope Group chairman calls for central government subsidies to upgrade agriculture sector
The Chinese government needs to improve its fiscal and industry policies to protect domestic producers expected to be squeezed by higher imports of US agricultural products, according to agribusiness tycoon Liu Yonghao.
“More imports of soybeans and corn will help reduce the cost of raising livestock, but Chinese farmers, and the animal feed industry in China will definitely be under pressure,” Liu said on the sidelines of the Chinese People’s Political Consultative Conference on Sunday. “Agriculture in the United States is much more efficient than in China and they will have the upper hand.”
Liu, the 67-year-old billionaire chairman of China’s New Hope Group and a CPPCC member, runs the country’s biggest agriculture conglomerate. Each year, the company produces around 20 million tonnes of animal feed and processes 1.3 billion chickens and eight million pigs, according to its website.

His comments echo concerns about whether China can maintain a balanced farming structure to ensure food security as it prepares to buy more American farm products as part of concessions to end the country’s long-running trade war with the United States.
In a meeting late last month, Chinese Vice-Premier Liu He and US President Donald Trump agreed that China would buy an extra 10 million tonnes of US soybeans. China has also proposed buying an additional US$30 billion a year of US agricultural products including soybeans, corn and wheat, on top of pre-trade war levels, Bloomberg reported.

This was reflected in the central government’s first policy statement of the year, in which it called for greater and more diverse imports of agricultural products.

“More imports will bring both opportunities and challenges,” Liu said. “But in short term, the agriculture industry in China will be under relatively big pressure … We have no idea how this [more imports] will last, the government must have tried a lot to protect our own system.”
He said the government could offer farmers and companies more subsidies to help them upgrade production.

But subsidies are a vexed issue, with the  
World Trade Organisation ruling on Thursday
that China exceeded internationally agreed-upon standards for domestic support of rice and wheat farmers, allowing Chinese farmers to artificially deflate prices of the crops around the world....MORE
Nov. 2018
Pork: "Chinese-owned Smithfield to get cash from bailout program spurred by China's tariffs"

What Is Bloomberg up to with this ad?

What color is this?

That ad was prominently featured on a ZeroHedge page on Saturday.
From a 2018 post on this subject, "Bond Guru Martin Fridson Erroneously Refers To The Financial Times As "Salmon Colored"":
...Yes, I know the FT's website used to say the paper was a "distinctive shade of salmon pink." but that was just a less-than-perfect shorthand.
(shorthand was something journos used to do to take notes at high speed, I looked it up)

The "distinctive shade..." is no longer found via a cursory search (the statement on slavery is still there, the FT is against it) but here are the contenders via Color Hex.
Using the red/green/blue color codes, there are others formulas, follow the links if interested:

#ffa07a Color Hex Light Salmon


#ffe4c4 Color Hex Bisque 1


So you tell me

Regarding the less important part of Fridson's comment, "junk bond" or "high-yield" here's a 2013 post:...
Unfortunately my colorist ("I'm an autumn") is not available so I have the choice of puzzling over the RGB code or puzzling over varieties of Danish pastry on offer.
Well that was easy.

Life Insurers Get An Unexpected Boost: People Are Dying Earlier Than Expected

It's the old annuities vs life insurance see-saw: one is a bet you die sooner, one is a bet you'll live longer.
Lifted in toto from ZeroHedge:
Submitted by Eric Peters of One River Asset Management
“How would you like a new 4 Sharpe strategy?” asked the salesman. “Tell me more,” replied the portfolio manager. “You buy a swap from us that will continually sell weekly S&P 500 variance, but instead of that variance being measured based on the daily price change, it measures volatility multiple times each day.” Well that’s new. “Who’s buying this stuff?” asked the portfolio manager. “Everyone’s buying,” said the salesman. Just when you think we’d run out of innovative ways to profit from nothing happening, along comes something else.  

“If everyone is selling intraday variance, I think I’d rather buy it,” said the portfolio manager. “Oh, well, that’s great! With so many people selling, our trading desk is way too long. So we’re looking for ways to recycle this risk,” said the salesman. As people buy these variance swaps, and therefore sell intraday volatility, the issuing banks get long volatility. To hedge the risk, they sell intraday rallies, buy dips. Which dampens volatility. And their clients are all happy, unless of course there’s a flash crash. Or through an act of god, an overnight gap.

Math Nerds:
“The consensus was to be long dispersion,” said the trader, returning from an idea dinner. “It’s the trade that has profited from idiosyncratic stock movements for the past year even if the S&P 500 index has been flattish.” Long dispersion is a bet that the difference between the best and worst performing stocks will be wide. That’s the opposite of short correlation. Long correlation is a bet that all stocks move up and down in unison. “And the classic is that people now talk about long dispersion (short correlation) as a hedge against a flattish S&P 500.”

When Tides Turn:
“They are punishing our country for the neoliberal policies applied in the last 36yrs, which were a complete failure, especially in the last few years,” said Mexico’s President AMLO, the rating agencies cutting their outlooks to negative. “We had nothing to do with the government then, but we have to pay the consequences,” he continued, vowing to hold a referendum on whether past presidents should be put on trial for the neoliberal policies he says hollowed out state companies, allowed corruption to spiral and provoked deep social inequality.

Wait, What?
British insurer Legal & General profits jumped as annuity sales soared and changes to life expectancy boosted its bottom line. The rate of improvement in life expectancy slowed dramatically, as people die earlier than expected, allowing insurers to release reserves they hold to pay future pensions.
The CEO hinted there could be more to come as the company continues to adjust assumptions about how long customers might live. “There’s been a long discussion about whether this is a blip or a trend, and sadly it’s looking like a trend,” he said.

Sunday, March 17, 2019

"How Cerberus could be the kingmaker of a German superbank"

This piece was written before the banks came public on what had been one of the worst-kept secrets in finance, that yes they were moving toward a deal. A merger had been seen as the end game for at least two years and Cerberus' part in any tie-up was pretty much assumed in November 2017 when they announce they were buying a stake in Deutshe Bank as a complement to the 5% position in Commerzbank they bought in July, '17.
That said, this is a good backgrounder.

From Pitchbook:
March 13, 2019

"CMA CGM Partners with IKEA to Test Marine Biofuel On Board Containership"

My first thought on seeing the headline was that CMA CGM would be using waste meatball drippings from IKEA to upgrade from high-sulfur bunker fuel which got me thinking of land based conveyances and...
...then I got hungry.

From what I understand, the stories of cars converted to run on waste restaurant oil smelling like chips, fries,  frites etc and getting every dog in the neighborhood straining on their leashes are not true which seems a pity.

By gCaptain:
The logistics arm of retail giant IKEA has teamed up with French shipping group CMA CGM and others to test the use of sustainable marine bio-fuel oil on board a modern containership.

The first-its-kind-test was announced Tuesday by the GoodShipping Program, a not for profit initiative seeking to decarbonize the ocean freight industry. Participants involved include IKEA Transport & Logistics Services, CMA CGM and the Port of Rotterdam, as well as marine biofuel maker GoodFuels.

The test will commence with the bunkering of marine bio-fuel oil on a CMA CGM container vessel on March 19th at the Port of Rotterdam.

The GoodShipping program described the trial as a landmark test and major step towards decarbonization in ocean freight shipping.

The biofuel to be used has been developed by GoodFuels and can be used without any engine modifications. The fuel is completely derived from forest residues and waste oil products, and is expected to deliver 80-90% well-to-propeller CO2 reduction compared to fossil fuel equivalents and virtually eliminate sulphur oxide (SOx) emissions.

Participants in the program are hoping the trial can show the scalability and technical compliance of sustainable marine biofuel leading to the its wider commercial use within the maritime industry, establishing it as a viable option to curbing greenhouse gas and sulphur oxide emissions.

“The aim of our program has always been not only to reduce carbon emissions from shipping, but to show that the means to accelerate the energy transition are already available for the sector to grasp,” said Dirk Kronemeijer, CEO of The GoodShipping Program....MORE
For what it's worth biodiesel is a bit of a dead end at the moment both on an Energy-Return-On-Investment (EROI) basis and economics. The Holy Grails are catalysts that lower cost of production or bio-engineering to increase volume and lipid content of something like algae.
Not there yet however.

Find Someone To Love You Like This Pigeon Loved Nikola Tesla

From Cabinet Magazine:

Wings of Desire
Obscure object of desire. Although the fact that its subject perfectly matches the description of Tesla’s “beautiful bird” has led to claims that this photograph depicts the scientist’s beloved, it was in fact more likely one of a number of photos purchased by the inventor in 1938 to be used as part of a presentation outlining a mixture he had developed for a natural diet for the birds. Courtesy Nikola Tesla Museum, Belgrade.
Over the past twenty years or so, Nikola Tesla has become a folk-hero for the millennial tech-generation, who consider him the godfather of all visionary scientific mavericks, and thus a key precursor to their own “disruptive” aspirations. But during the twilight years of his life, Tesla was a much more withdrawn shadow of his former dynamic self, when he had been equal parts inventor and showman. At the end of the nineteenth century, during the battle for standardized electrical currents, Tesla found that his alternating current (AC) model put him in direct competition with his former boss, Thomas Edison, who favored direct current. Despite the fact that AC systems eventually emerged the winner, Edison’s standing continued to rise while Tesla was relegated to a footnote in history books, at least until the resuscitation of his reputation toward the end of the last century.

In 1934, near the end of Tesla’s working life, the Westinghouse Corporation—under whose sponsorship the inventor had conducted some of his most significant experiments with high-voltage generators, high-frequency communication, induction motors, radiography, and magnetic fields—agreed to pay his bills at the New Yorker hotel where he was staying in relative poverty. As his patents became less and less regular, and he turned to more reflective and speculative writings, the Serbian émigré would punctuate his day by walking to either the main branch of the New York Public Library, St. Patrick’s Cathedral, or Bryant Park in order to feed the pigeons. This habit, as it turned out, was more than a pleasant way to rest his rather restless mind. Indeed, this activity began to become more important to Tesla than his scientific meditations, or even his own official legacy (as his biographer at the time, John Jacob O’Neill, noted in some detail in a book entitled Prodigal Genius). 

In one anecdote, Tesla goes missing during a prestigious event assembled in his honor in 1917: the award of the Edison Medal at the Electrical Engineers Club (which, as it happened, overlooked Bryant Park). Since 1915, rumors had been circulating that both Tesla and Edison had sabotaged their own chances to receive the Nobel Prize in Physics by refusing to share the honor (a rumor vigorously denied by the Nobel Committee, but which was taken as fact by contemporary commentators). Whether or not the rumors were true, Tesla was not thrilled about the prospect of receiving a medal bearing the name of his former boss and subsequent rival, but was eventually convinced to suffer the ceremony....MORE

Venture Capitalists See The Window To Dump Their Losers Closing This Year

The venture capital crowd are desperate to get out of these deals and  as the equity markets were getting hammered in December you could hear a low moan rising from Sand Hill Road.

Here's a vignette from 2011, in a different context, but which could be repeated word for word re: the attitude of the VC's:
I'm reminded of a situation I watched back in the day. A trader sold a position to another firm a few minutes before a trading halt. The news was negative. The buyer D.K.'ed (Don't Know) the trade, meaning we'd still own the position, at which point the head of the firm got on the phone and told his counterpart "I don't want the shit, whyd'ya  think I sold it to you?"
From FT Alphaville:

GMO's Montier on the rise of the dual economy
In this week's instalment of The entire economy is Fyre Festival (TEEIFF), we bring you the latest from GMO’s resident Hawaiian-shirt fan James Montier, as he notes, with our emphasis:
. . . the US is witnessing the rise of the “dual economy” — where productivity growth is reasonable in some sectors, and totally absent in others. Even in the sectors with good productivity growth, real wages are lagging (wage suppression is occurring). All the employment growth we are seeing is coming from the low productivity sectors. On top of this, the paltry gains in income that are being made are all going to the top 10%. This is not what a booming economy should feel like.
To recap, a few weeks ago we made the argument that the rise of mystic job titles like “chief vision officer” — especially in the trendy start-up sphere — was indicative of corporates having lost their purpose. By that we meant that it used to be the purpose of corporates to make or provide stuff people wanted so much they were prepared to pay for it. This therefore loosely translated into a profit-generating operation.

In the modern corporate sphere the desire to make profits, however, has been replaced with the desire to achieve growth at any cost. Often this means the adoption of loss-leading strategies where products or services are given away for free or subsidised — because people are unlikely to want to pay for them — for the purpose of capturing customers.

This is justified by two notions. First, these products and services are so visionary and forward thinking that we the customers can't yet understand, or imagine, what they will mean to us. Hence, while we may not be prepared to pay for them today, one day in the future — perhaps once we have fully lost the skills to make our own food, drive, write lists or interact with people face-to-face — we will eventually be prepared to pay top dollar for them.

The second justification is that if you hook enough customers to your brand you will eventually be able to sell them something they will be prepared to pay for. What that thing is doesn't necessarily have to be determined yet, and may or may not be determined in countless corporate pivots that follow onwards.

This is why the mystic vision officer is so important. Establishing a vision of what tomorrow's needs may be, rather than what today's needs actually are, is essential to keeping the investment case alive. It has little to do with the practical realities of operating a profitable and successful business on the ground in the here and now.

And it's all very believable because this is exactly how a selection of today's most profitable technology stocks have made it.
The problem is, it's a strategy closely linked to monopoly and not one that every single corporate can make work.

Thus, the more we mistake and celebrate this sort of bullshitting as legitimate corporate enterprise, the greater the risk actually worthwhile corporations mimic the exercise, and in so doing become increasingly useless.
Bear that in mind as we return to Montier, who reminds us that the current recovery is still the slowest and weakest in postwar history (our emphasis):
Real earnings growth in the corporate sector has been below the rate of GDP growth even after the significant boost from the financial engineering known as buybacks. So investors have little to celebrate. Indeed, a breathtaking 25% to 30% of firms in the Russell 3000 are actually lossmaking! Yet the stock market remains well bid. In large part, this bid is sourced from the buybacks (and mergers) from USA Inc. itself. However, individual investors have returned to the “party” — never a good sign. Other portents of late-cycle capitulation include global fund managers throwing in the towel and buying into US equities.
And continues:...

Four of a Kind: Trying to Rein In The Audit Gangsters

From Suddeutsche Zeitung, February 22:

Four of a Kind
Corporations and governments around the world are dependent on four major auditing companies – and so far, every attempt to rein in the Big Four's power and influence has failed. It is an untenable situation.
When the police called Raphaël Halet, he was at the doctor's office; his back was acting up again. On the phone, a French official informed Halet that someone had broken into his home and stolen one of his cars. Could he please come immediately? Halet took off at once, never even thinking it might be a trap.
When he arrived at his house in the tiny village of Viviers in France's Lorraine region, there were several people waiting for him, including two police officers, a bailiff, a locksmith, a computer specialist and a representative of his employer, the Luxembourg branch of the international consulting firm PricewaterhouseCoopers (PwC). There hadn't been a break-in, nor had one of his cars been stolen; that had all been just a story to lure Halet back home. Once there, he was presented with a five-page warrant that had been issued the day before by a judge in Metz, France. It was a remarkable document. In it, the French government had taken the side of a billion-euro multinational corporation keen on finding and punishing a whistleblower within its ranks.

Raphaël Halet was that whistleblower, and the documents he leaked to a journalist formed the basis for the Luxembourg Leaks scandal that broke a few weeks before the house raid in Viviers. A consortium of European media, including the Süddeutsche Zeitung (SZ), analyzed the internal documents and published them in late 2014. Thanks to Halet, it was revealed that PwC had been a key accomplice in helping corporations avoid millions of euros in taxes by way of Luxembourg – with some of the methods used later being found illegal. PwC, for its part, claimed that it had always acted in accordance with the law. The scandal itself damaged Luxembourg's reputation as a financial hub and carried some political backlash for the country's former prime minister, Jean-Claude Juncker, who had just been elected president of the European Commission. Juncker is regarded as one of the architects of Luxembourg's tax avoidance scheme. But there was one party that didn't feel any backlash whatsoever: PwC.

In the search warrant, the judge had permitted investigators to copy Halet's emails, "including any email, and any part and attachment, addressed to or received from a journalist." Halet later told journalists at a meeting in Metz that the bailiff and the PwC representative had summoned him into his office, where they had him turn on his computer and sign into his email. The investigators were looking for emails to or from a single person: Edouard Perrin, a French investigative journalist. And they found what they were looking for: The whistleblower and the journalist were taken to court.
All this occured at the behest of a corporation with which most people are largely unfamiliar.

Whether by its acronym, PwC, or its full name, PricewaterhouseCoopers, the consulting firm doesn't offer any services that ordinary people would buy or use and many people know nothing about it, even though PwC has hundreds of branches around the world, 21 of them in Germany alone. Even people who have heard of PwC probably couldn't say exactly what the company does. Which is why most people aren't particularly concerned about it.

But they probably should be, as joint reporting by the SZ and the two German broadcasters NDR and WDR has shown. PwC is one of the most powerful companies in the world, especially when it's in lockstep with the other three big global consulting and auditing firms, KPMG, EY (formerly known as Ernst & Young) and Deloitte. Known together as the "Big Four," this quartet of companies generally flies under the radar of public awareness. They are faceless, but together they represent a sinister power with a global reach.

Even if clients get punished, their quiet accomplices escape unscathed 
In recent years, these four companies have repeatedly played key roles in a spate of major scandals, including some that have been investigated by the SZ, such as the Luxembourg Leaks and the Panama Papers. But even when the Big Four were accessories to partly illegal or at least illegitimate acts, they have always managed to walk away unscathed. Even when their clients are publicly denounced or pilloried, hardly anything ever sticks to the Big Four. One of the most internationally renowned experts on the Big Four is also one of their loudest critics: the British economics professor Prem Sikka. Rather than using the term Big Four, he refers to them as "the pinstripe mafia."

Its an evening in autumn 2018 and Sikka is just leaving PwC's London headquarters near the Embankment tube station. The building is an imposing structure of concrete and marble that sits on the bank of the River Thames. In Britain, the operations of the Big Four are more widely debated than they are in Germany – which is part of the reason the Labour Party commissioned Sikka to conduct a study on possible reforms of the Big Four. Indeed, that is the reason for Sikka's visit to PwC headquarters this evening. The visit, though, wasn't overly pleasant for either party, according to Sikka's account. The professor makes a point of referring to the Big Four by the pejorative nickname "pinstripe mafia" and he openly argues that they present a danger to democracy. "This mafia doesn't shoot people, but its activities are just as deadly," he wrote in a journal article several yeas ago. "They deprive millions of jobs, education, savings, pensions, security, food, healthcare, clean water and social infrastructure."

These are serious accusations. To understand them it is first necessary to explain what it is the Big Four actually do: PwC, KPMG, Ernst & Young and Deloitte offer consulting services to large corporations, banks and the super-rich in more than 180 countries. Together they have more than a million employees who advise clients on matters pertaining to tax structures, business strategy and a wide variety of other fields. Sometimes they prescribe sweeping restructuring, at others a reorientation, and at still others, they develop tax avoidance models. The Big Four earn the vast majority of their income through consulting fees.

In addition, the Big Four audit financial statements and balance sheets on behalf of their clients. These audit reports are presented to supervisory boards, investors and authorities and are supposed to show a company's financial health and indicate where improvements can be made. The Big Four have divided the international auditing market amongst themselves, at least when it comes to the largest companies; 99 of of the 100 companies listed on the Nasdaq 100 stock market index are Big Four clients.
In Germany, all of the companies listed on the blue-chip stock index DAX are audited by one of the Big Four; everyone from Adidas to Volkswagen, from BASF to Siemens. After all, to audit a global corporation, the auditor must itself be global.
Possessing such market leverage can be seductive. In Australia, authorities are investigating whether the Big Four engaged in illegal price fixing over public tenders. In Italy, KPMG, Deloitte, PwC and EY have been forced to pay more than 23 million euros ($26.2 million) on cartel charges. Yet viewed against the Big Four's global turnover – around 120 billion euros – such fines are a mere pittance....