Tuesday, December 12, 2017

"ETF Disrupters Set Sights on Insurance Industry"

I had a friend who was deconstructing and reconstructing equity indexed annuities fifteen years ago; he was like a mad scientist with his formulas and all, and waaay too happy doing what seems like a rather mundane task.
And like many mad scientists he couldn't sell* the low-fee result to any of the big marketers (looking at you Allianz)

Here's Institutional Investor:
PowerShares’ co-founders are re-entering asset management, this time with the first exchange-traded fund lineup that will mimic annuities and bank structured products.

Bruce Bond and John Southard, who co-founded Invesco’s PowerShares, are returning to the exchange-traded fund industry with the first ETFs to offer benefits found only in bank structured products and annuities.

The ETFs, which have not yet been approved by the Securities and Exchange Commission, are so-called defined outcome products, which are rules-based and have pre-determined returns on the upside and capped losses on the downside.

Structured notes offered by banks and insurance company annuities provide similar benefits, but charge hefty fees and contractually lock up investor money. Bond and Southard’s new ETFs, which will be subadvised by Milliman Financial Risk Management, will be priced at under 1 percent, a fraction of the cost for similar insurance and bank products. The ETFs will all track the Standard & Poor’s 500 stock index....MUCH MORE
*Back in 2010 we had a mad scientist anecdote in "CME Group expands dairy complex with cheese futures" which I intro'd with:
Years ago I heard of a Chicago company that made a whey-based artificial cheese.

Apparently the operation was headed by a mad scientist type who had come up with the formula but had no marketing ability.

He was producing the stuff and not selling any, converting all the investors cash into this "analog" goop and storing it in Chicago area warehouses.

Then the Chernobyl reactor blew, the price of whey skyrocketed, I've no idea what the connection was, the company went broke and the receivers opened the warehouses to find tons of this 'cheeze', semi-molten in the summer heat.

That's what I thought of when I saw this story, tons of the stuff oozing out of bonded warehouses. No connection of course, just a visual....

It's All About the Protein: "Bakers, farmers struggle to make any dough on poor wheat crop"

Ahead of today's USDA report a look at what's up with wheat.
From Reuters:
Chicago’s iconic sandwiches - Italian beef heroes dripping with gravy, and hot dogs loaded with pickles and hot peppers - wouldn’t be such culinary institutions without the bread.

But this fall, bakers faced a crisis getting the right kind of bread to delis and sandwich shops locally and across the United States.

Gonnella Baking Co - which supplies the buns to Major League Baseball’s Wrigley Field - faced an unusual problem in October when flour from this year’s U.S. wheat harvest arrived at their factories containing low levels of protein.

That meant bakers couldn’t produce bread with the airy texture customers demand, setting off two weeks of tinkering with temperatures and the mixing process, and the eventual purchase of gluten as an additive. By the time the alchemy was done, Gonnella had thrown away more than $20,000 worth of substandard bread and buns, said president Ron Lucchesi.
“That really was a headache,” Lucchesi said.

The problem spans the $23 billion U.S. bread market and highlights a paradox in the global wheat trade. Despite a worldwide grains glut, high-protein hard wheat is scarce after two years of poor U.S. harvests. The shortage hurts bakers and millers who prize high-protein wheat, along with the farmers who grow it.

Wholesale bakers such as Grupo Bimbo, Flowers Foods Inc and Campbell Soup Co’s Pepperidge Farms are feeling the squeeze on margins, said Stephen Nicholson, senior grains and oilseeds analyst with Rabobank. All three companies have seen their stock prices fall over the last two years, a period when the benchmark S&P 500 index gained more than 26 percent.

Millers such as Archer Daniels Midland Co, Ardent Mills, General Mills Inc have been able to pass on much of their higher wheat costs in sales of flour to bakers, he added. But bakers have not been able to pass those costs to grocers, who have been unwilling to pay higher prices because of increased competition and price deflation.

 Global wheat inventories have risen to record-high levels due in part to heavy production from Russia. Meanwhile, U.S. per capita consumption of wheat flour in 2016 fell to its lowest level in nearly three decades, and U.S. farmers planted their smallest winter wheat crop in more than a century....MUCH MORE
"Wheat Nerds and Scientists Join Forces to Build a Better Bread"
Along the same lines—and focusing on Jones and the Bread lab but a bit more science-y— is October 2015's "The Bread We Eat Is Junk Food: Blame the Wheat".
Worth a look for nutrition wonks.

Monday, December 11, 2017

Climateer Line of the Day: Neurotransmitters and Facebook Edition

Via The Verge:
 "The short-term, dopamine-driven feedback loops we've created are destroying how society works.  No civil discourse, no cooperation; misinformation, mistruth. And it's not an American problem — this is not about Russians ads. This is a global problem."
—Former Facebook Vice President for Addicting Users, Chamath Palihapitiya
And the rest of the story:

Former Facebook exec says social media is ripping apart society
‘No civil discourse, no cooperation; misinformation, mistruth.’
Another former Facebook executive has spoken out about the harm the social network is doing to civil society around the world. Chamath Palihapitiya, who joined Facebook in 2007 and became its vice president for user growth, said he feels “tremendous guilt” about the company he helped make. “I think we have created tools that are ripping apart the social fabric of how society works,” he told an audience at Stanford Graduate School of Business, before recommending people take a “hard break” from social media. 

Palihapitiya’s criticisms were aimed not only at Facebook, but the wider online ecosystem. “The short-term, dopamine-driven feedback loops we’ve created are destroying how society works,” he said, referring to online interactions driven by “hearts, likes, thumbs-up.” “No civil discourse, no cooperation; misinformation, mistruth. And it’s not an American problem — this is not about Russians ads. This is a global problem.”...MUCH MORE, including video
"The Neurochemistry of Smartphone Addiction"
As stated in the introduction to last month's "Early Facebook investor compares the social network to Nazi propaganda, likens its workers to Goebbels and claims it is creating a climate of 'fear and anger'":
We visited Elevation Partners' Managing Director Roger McNamee on Sunday for a TL;DR version in: "Climateer Line of the Day: Bono's Guy Talks Regulating Facebook and Google".

In that piece I noted our point of attack has been the neurochemistry of deliberately trying to addict your users. The thinking being, this is where the giants are most vulnerable and is the argument most amenable to soundbite journalism/attention - grabbing/framing. Turnabout being fair play and all that....

Electric Vehicles: China, China Uber Alles...

They actually named the thing the Weltmeister? The World Master?

From Reuters:

Chinese electric car maker to put 'Weltmeister' on road next year
WM Motor Technology Co, one of a new breed of Chinese electric car companies, will use its company name “Weltmeister” as its brand and plans to start taking orders for its first product, a sport-utility vehicle, from April.

The Shanghai-based startup plans to start producing its first car at a new plant in Wenzhou during the second quarter of next year, Freeman Shen, WM Motor’s founder and chief executive, told Reuters ahead of a media event.

The exterior design for the SUV was presented at the event in Shanghai on Monday. WM Motor also unveiled a logo for the brand that will adorn its cars....MORE
Seriously, Worldmaster? Anyone else feel like a little Horst-Wessel-Lied? Too much? We'll go with Lili Marlene.
Here's the Wehrmacht choir version::

Market Structure: "Bitcoin Futures Tumble As Spot-Arbitrage Collapses"

From ZeroHedge:
Update: The Bitcoin Futures-Spot arb spread has collapsed to around $600 in the early evening trading (led by Futures selling more than spot buying)...
From a premium of over 13% last night, Futures now trade at just 4.5% above spot as the arb-spread tumbles.
On a side note, we se that the Bitcoin Trust premium to NAV has also collapsed in recent days from over 140% to around 10%...
...Something we would expect to close:
“Arbitrage will close that gap, but it will be days and weeks,” Cboe Chief Executive Officer Ed Tilly said on Bloomberg Television Monday, less than a day after launching the product.

“If you’re doing a cash-settled future, it’s just a bet,” said Aaron Brown, a former managing director at quant hedge fund AQR Capital Management who invests in the cryptocurrency and writes for Bloomberg Prophets.

“If that’s not related to any underlying physical transaction, the only people who want to do it are gamblers.”

The wide arb spread is “a big issue. It’s an illiquidity, it has to go away.” The price gap between bitcoin and bitcoin futures won’t last forever, said Dave Weisberger, CEO of CoinRoutes, a cryptocurrency data and order routing company.

“The futures will ping-pong between premium and discount,” he said. “I suspect at some point, potentially triggered by a negative event, it will flip. Markets go up and down, and bitcoin has been no different. It’s just been fast.”...

"Rush for Ruthenium Has Metal Soaring 375 Percent in 2017: Chart"

Following up on June's "The Cobalt Trade Worked Out, On To Ruthenium":


From Bloomberg Quint:

(Bloomberg) -- Demand for hard drives and for electrochemical applications has driven little-known ruthenium to the highest price in more than seven years. Soaring to $190 an ounce, according to Johnson Matthey Plc, it’s more than quadrupled this year, outperforming all major commodities -- and it may have more to run. “This rally has legs,” Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London, said by email. “There’s good industrial buying out there.”
So, one might be asking oneself, what's next, how do I find what moves after cobalt and ruthenium?
It's easy, you can do it at home.

First gather up your tools: some darts and a periodic table:

Oops, wrong periodic table.
Here's one from Science Notes:


Throw your darts, note where they land,  invest away and survive, thrive & save civilization!

Past success in not a guide for future civilization performance
The information provided in Climateer Group webinars and accompanying material is for informational purposes only.  It should not be considered civilizational or societal advice.  You should consult with a technologist or other qualified professional to determine what may be best for your individual needs. 
Climateer Group does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any survival decision without first consulting his or her own survival advisor and/or deity and conducting his or her own research and due diligence. 
To the maximum extent permitted by law, Climateer Group disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any deaths or other losses. 
Your mileage may vary, close cover before striking, not all civilizations thrive, good luck.

Fairness, Capuchin Monkeys and Wall Street

The speaker, Frans de Waal, is one of the heavyweights of the primate world. Actually, we all are among the heavyweights of the primate world but he's up there with Jane Goodall in the study of primates.
A quick hit via TED:

The Futures Ecosystem

From RCM Alternatives:

HT: Barry Ritholtz, The Big Picture

Crypto: The Intangibles that go into Valuation With a Look at Contango in the Market for Water from the Grotto of Massabielle in the Sanctuary of Our Lady of Lourdes, France

I believe I shall begin referring to the contango in Bitcoin futures as "The Learning Curve™".

Our headline is a sentence from a September, 2013 post "Are collectibles good long-term investments? "The Investment Performance of Emotional Assets", a rather rambling look at oddball things people pay money for (and which some, for better or worse, call asset classes).
It begins:
...On Monday we posted a short bit on collectibles, riffing off a Quartz piece:
Cars, coins and stamps are now more profitable luxuries than art, wine and jewelry (there's an ETF for that)

Which we got timestamped just before Izabella Kaminska had three FT Alphaville posts:
A classic car bubble?
The art of myth-making
The growing scarcity of scarce markets
Addressing respectively 1) the Knight Frank luxury investment index; 2) the intangibles that go into valuation with a look at contango in the market for water from the Grotto of Massabielle in the Sanctuary of Our Lady of Lourdes, France and 3) a meta-analysis of the attributes of markets in non-standardized goods.

She is such a show off.

So today we visit with Elroy Dimson, one of the few economists I've ever come across who has the market feel of a trader and the soul of a poet intellectual chops to be the Chairman of the Strategy Council for the Norwegian Government Pension Fund, you know, the big one.

In his spare time he is part of the hot new boy band Dimson, Marsh and Staunton who do the Global Investment Returns Yearbook for Credit Suisse....
Looking back I believe I was still suffering some sort of market PTSD, five years after the beginning of the grins-n-giggles phase of the 2008 unpleasantness. Or something.
Izabella's "Art of myth-making" post begins:
In this post, we consider the roles of narrative and myth in value creation.
We’ll start with the argument that a powerful enough narrative or myth can turn even abundant commodities into stores of value in their own right.
Case in point, this bottle of water from Lourdes:

This is a great example of how myth alone can turn a bottle of ordinary water — abundant in the part of France it comes from — into an object of value (and additional utility). Whether you consider the object valuable or not is dependent entirely on whether you are a believer in the underlying myth or not....MORE
That whole post is a quick primer on some of the psych features that go into the shape of the futures curve.

This short stroll down memory lane was prompted by Ms. Kaminska's most recent post, "Bitcoin contango" which links to a couple of earlier market structure posts and has at least two informed comments from the cheap seats.
Definitely worth a visit, if one is so inclined:

Ag Commodities Ahead of Tomorrow's USDA WASDE Report

From Blue Line Express at Inside Futures:

Corn, Beans, & Wheat Ahead of Tomorrows USDA Report
CORN (March)
Last Weeks Close: March corn futures finished Friday up 1 cent, trading in a range of 2 cents. Funds were estimated to have been buyers of 3,500 contracts. On the week, March corn futures finished 6 cents lower and traded in a 10-cent range for the week. Fridays commitment of traders report showed that funds hold a net short position of 160,519 contracts, this versus laws weeks -196,763; a reduction of 36,244. Keep in mind that this data is compiled through Tuesday. We saw the funds holding a record net short position of 230,556 in the middle of November, that position has decreased 70,037 or 30%.

Fundamentals: Tomorrows USDA report will likely be the highlight of the week in terms of new news coming across the wire that doesnt involve weather forecasts. The average analyst estimate for US corn carryout is at 2.478 billion bushels with estimates ranging from 2.394-2.517billion bushels. The average estimate for world ending stocks is 202.72mt with the range being 195.7-205mt. Once we get through the USDA report the attention will shift back to weather and crop development in South America.

Technicals: Corn has been range bound for the better part of the last three months which has presented some great opportunities for traders who recognized a sideways trend and werent sidetracked from the hope of a breakout. First technical resistance we will be watching this week comes in from 358-360 . On the support side of things, we are watching 348 -350. Until we get a fundamental catalyst to provide the market with a breakout or a breakdown we will continue to trade the range.

Bias: Neutral

Resistance: 358-360 ****, 369 -370 ***, 375****
Support: 348 -350**, 334-335 ***, 323-325 **

The grains are down from a quarter to three quarters percent. 

Saxo Bank's 'Outrageous Predictions' For 2018

From Saxobank: