Monday, June 26, 2017

Qatar: U.S. Says Saudi/GCC Demands 'very difficult' to Meet:

From theNewArab:
The United States Secretary of State said on Sunday that the list of 13 demands imposed on Qatar would be "very difficult" to meet, in an official statement discussing the ongoing blockade.
Rex Tillerson said that the demands , issued by Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt, were being considered and called for a "lowering of rhetoric".

"While some of the elements will be very difficult for Qatar to meet, there are significant areas which provide a basis for ongoing dialogue leading to resolution," Tillerson said in a statement.

"A productive next step would be for each of the countries to sit together and continue this conversation."

Tillerson had called for a specific list of "reasonable" demands earlier in the week.
"We understand a list of demands has been prepared and coordinated by the Saudis, Emiratis, Egyptians and Bahrainis," US Secretary of State Rex Tillerson said.

"We hope the list ... will soon be presented to Qatar and will be reasonable and actionable."
The president of Iran also gave his opinions on the blockade on Sunday, saying that it was "not acceptable" for them.

"We believe that if there are disagreements among countries of the region, pressure, intimidation, and sanction are not good ways for settle the disagreements," President Rouhani said...MORE
Possibly related at theNewArab:

Rising Rate Environment: "Duration Timing with Style Premia"

We do not recommend attempts at trading the yield curve for most portfolios. As we've said elsewhere, if your mandate says you have to have bond exposure, buy a TIPS ETF or some 5-years.
However, with the boilerplate out of the way, these guys seem to have some interesting ideas.

From Flirting with Models:
This post is available as a PDF download here. 

  • In a rising rate environment, conventional wisdom says to shorten duration in bond portfolios.
  • Even as rates rise in general, the influence of central banks and expectations for inflation can create short term movements in the yield curve that can be exploited using systematic style premia.
  • Value, momentum, carry, and an explicit measure of the bond risk premium all produce strong absolute and risk-adjusted returns for timing duration.
  • Since these methods are reasonably diversified to each other, combining factors using either a mixed or integrated approach can mitigate short-term underperformance in any given factor leading to more robust duration timing.
In past research commentaries, we have demonstrated that the current level of interest rates is much more important than the future change in interest rates when it comes to long-term bond index returns[1].

That said, short-term changes in rates may present an opportunity for investors to enhance return or mitigate risk.  Specifically, by timing our duration exposure, we can try to increase duration during periods of falling rates and decrease duration during periods of rising rates.

In timing our duration exposure, we are effectively trying to time the bond risk premium (“BRP”).  The BRP is the expected extra return earned from holding longer-duration government bonds over shorter-term government bonds.

In theory, if investors are risk neutral, the return an investor receives from holding a current long-duration bond to maturity should be equivalent to the expected return of rolling 1-period bonds over the same horizon.  For example, if we buy a 10-year bond today, our return should be equal to the return we would expect from annually rolling 1-year bond positions over the next 10 years.
Risk averse investors will require a premium for the uncertainty associated with rolling over the short-term bonds at uncertain future interest rates.

In an effort to time the BRP, we explore the tried-and-true style premia: value, carry, and momentum.  We also seek to explicitly measure BRP and use it as a timing mechanism.

To test these methods, we will create long/short portfolios that trade a 10-year constant maturity U.S. Treasury index and a 3-month constant maturity U.S. Treasury index.  While we do not expect most investors to implement these strategies in a long/short fashion, a positive return in the strategy will imply successful duration timing.  Therefore, instead of implementing these strategies directly, we can use them to inform how much duration risk we should take (e.g. if a strategy is long a 10-year index and short a 3-month index, it implies a long-duration position and would inform us to extend duration risk within our long-only portfolio).  In evaluating these results as a potential overlay, the average profit, volatility, and Sharpe ratio can be thought of as alpha, tracking error, and information ratio, respectively.

As a general warning, we should be cognizant of the fact that we know long duration was the right trade to make over the last three decades.  As such, hindsight bias can play a big role in this sort of research, as we may be subtly biased towards approaches that are naturally long duration.  In effort to combat this effect, we will attempt to stick to standard academic measures of value, carry, and momentum within this space (see, for example, Ilmanen (1997)[2]). 

Timing with Value
Following the standard approach in most academic literature, we will use “real yield” as our proxy of bond valuation.  To estimate real yield, we will use the current 10-year rate minus a survey-based estimate for 10-year inflation (from the Philadelphia Federal Reserve’s Survey of Professional Forecasters)[3].

If the real yield is positive (negative), we will go long (short) the 10-year and short (long) the 3-month.  We will hold the portfolio for 1 year (using 12 overlapping portfolios).
It is worth noting that the value model has been predominately long duration for the first 25 years of the sample period.  While real yield may make an appropriate cross-sectional value measure, it’s applicability as a time-series value measure is questionable given the lack of trades made by this strategy....MORE

The Top 100 Hedge Funds

From Barron's Penta, June 17:

Who’s up and who’s down in our exclusive list of top hedge funds. Quants dominate overall, but a value manager ranks No. 1.
The winner of Barron’s Penta’s 2017 ranking of the Top 100 Hedge Funds doesn’t tick a lot of the boxes for the typical big investor. There’s one mark, however, that would catch any investor’s eye: performance.

Amid wildly erratic hedge fund results, our victor, Madrid-based Alantra Asset Management’s $390 million EQMC Europe Development Capital fund (Class A), posted a 26% annualized return net of expenses from 2014 through 2016. In contrast, the average hedge fund’s annualized three-year return didn’t quite reach 3% in that time, according to BarclayHedge’s return database. EQMC’s gains were nearly three times those of the surging Standard & Poor’s 500 index. To learn more about Alantra and EQMC’s strategy, read our profile of and interview with Alantra CEO Jacobo Llanza and the fund’s overseer, Francisco de Juan. (See related story, “The Winner’s Picks.”)

Alantra and its hedge fund stand out from the hedge fund crowd in a lot of ways. The small fund doesn’t sell stocks short, use leverage, or employ confrontational tactics to get its way. It borrows heavily from private equity’s tool kit to work with managements to improve results.

Another distinction: The asset manager and its key fund take an active, fundamental approach in an era when quantitative investing is booming among leading hedge funds. Barron’s Penta’s champ a year ago, Hong Kong–based Parametrica Asset Management, guided by Xiongwei Ju, who holds a doctorate in finance, uses an equity market-neutral strategy based on statistical arbitrage across many global markets. Parametrica finished at No. 5 this year.

Other quant-based firms whose various funds again excelled this year include a Donald Trump favorite, Robert Mercer’s Renaissance Technologies (Nos. 6 and 24); math-and-science talents John Overdeck and David Siegel’s Two Sigma Investments (No. 11); quant pioneer David Shaw’s D.E. Shaw Group (Nos. 18 and 32); and Ken Griffin’s Citadel (Nos. 30 and 37).

Reflecting the difficulty of generating consistent returns in recent markets, a record 61 firms on the Barron’s Penta Top 100 list this year didn’t rank a year ago. In one of many cases of rapidly changing fortunes, a fund we monitor, Mudrick Distressed Opportunity, posted an impressive 39% gain in 2016, following a 26% drop in 2015, preventing it from making our ranking, which is based on three-year returns.

Despite some spectacular 2016 returns like our No. 2 finisher Mangrove Partners’ 51% gain, hedge fund performance continues to disappoint. The average return of the 100 funds on 2017’s list is 11.78%, versus nearly 17% a year ago.

The low and volatile returns are having an adverse effect on clients. Pension funds and financial institutions are seeking incremental returns to meet their own obligations; many funds simply aren’t delivering them. Among the big institutional investors to announce that they would curtail hedge fund investments last year were MetLife, American International Group, and the New Jersey State Investment Council. That makes it harder for hedge funds to refill their coffers. “It will continue to be difficult for fund managers to raise capital, and keeping what you’ve got will be tough,” says Amy Bensted, head of hedge fund products at Preqin, a London-based alternative-asset research firm.....MORE
Penta Top 100 Hedge Funds

Alantra Asset Management’s EQMC Decelopment Capital fund, based in Madrid, took top honors in a tough year in which quantitative funds provided the most consistency.

Rank 2016 Rank 2015 Fund   Fund Assets (mil)  Fund Strategy 3-Yr Compound Annual Return 2016 Return Firm Name / Location  Firm Assets ($M) 
1 N.R. EQMC Europe Development Capital Class A $390 European Small-Cap Activist 26.21 26.39 Alantra Asset Management / Madrid 3,300
2 N.R. Mangrove Partners 682 Equity Long/Short 23.34 50.58 Mangrove Partners / New York 780
3 19 Segantii Asia-Pacific Equity Multi-Strategy 1,923 Asia Multistrategy 23.06 6.69 Segantii Capital Management / Hong Kong 1,923
4 71 Sherborne Investors 705 Activist / Event Driven 20.97 27.80 Sherborne Investors Management / New York 705
5 1 Parametrica Global Master 400 Equity Market Neutral 18.35 0.35 Parametrica Asset Management / Hong Kong 666
6 37 Renaissance Institutional Equities 14,935 Quantitative Equity Long-Bias 17.75 21.46 Renaissance Technologies / New York 38,800
7 N.R. Knight Vinke Institutional Partners International 860 Equity Long-Only Activist 17.68 46.18 Knight Vinke Asset Management / Monaco 860
8 N.R. Credence Global Class C 326 Relative Value Arbitrage 17.33 11.64 Splendor Capital Management / Hong Kong 407
9 N.R. Verde FIC FIM 434 Multistrategy 17.24 15.13 Verde Asset Management / Sao Paulo 9,600
10 27 ISAM Systematic (USD) 1,730 1 CTA 17.03 -12.17 ISAM / London 2,030

Charmin Introduces Uber For Toilets

From Thrillist: 

Charmin's New On-Demand Toilet Van Lets You Poop Anywhere

The tech world has brought us on-demand taxis, online food ordering services, an endless stream of movies, groceries delivered to your door, and companies that service your apartment as if it were a laundromat. So why hasn’t your need to poop been addressed? 

Because nature occasionally calls when you’re standing on the street nowhere near a clean toilet, Charmin -- the toilet paper company known for its happily defecating bears -- has been parading around a toilet van in New York City this week. Aptly hailed as “the Uber for Pooping,” the company’s project, Van-Go, is an “on demand private restroom” that promises to “bring you a better bathroom experience.” To use it, all you prairie-doggin’ folks have to do is visit and fill out a simple form. Then, a porcelain throne can be delivered directly to your location before you’re forced to resort to the gutter. 

As part of its pilot project, Charmin is drumming up enthusiasm with the help of Black-ish star Anthony Anderson, for some reason. Anderson has been shuttling around on Charmin’s van this week to get New Yorkers psyched about pooping. On Wednesday, the on-demand service was available in Columbus Circle, Herald Square, and Bryant Park. Today, it’s stationed in Lincoln Center, Union Square and the High Line. The vans are in service between 8am and 5pm, a.k.a. prime pooping hours. By the looks of it, Van-Go comes with replete with a helpful staff and a poop emoji mascot, which you're encouraged to hug. 

While seemingly frivolous and available only to people who have smartphones, the idea of an on-demand bathroom points to a more critical issue facing major cities: lack of readily available public toilets. Last year, Google announced the introduction of a toilet-finding app in India, meant to you know, find toilets when options are scant....MORE

"One Sign That Long-Missing Wage Acceleration Could Be Emerging"

We're late to posting this but it's probably important, if for nothing else than giving the Fed a rationale for going ahead with plans they've already made.

From Real Time Economics, June 1:

The labor force is shifting toward better-paying jobs, even as overall payroll growth eases
The era of stubbornly weak wage growth could be coming to an end as the economy slowly shifts toward better-paying jobs from low-wage work at restaurants and stores.

Since the U.S. started consistently adding jobs in 2010, employment in three low-­wage categories–leisure and hospitality, retail and temporary help—had grown at a faster rate than overall private-sector payrolls.

Until this year.

Growth in other private-sector industries has outpaced gains in the three largest low-wage categories since February. It’s the first time such a shift has occurred during the expansion. And it could be a precursor to better wage growth as stronger job gains in fields that pay above-average wages lift the broader pay measure.

Average hourly earnings for all private-sector workers have been growing at roughly a 2.5% rate since late 2015. The pace stayed mostly stuck even as the unemployment rate steadily fell, touching 4.4% in April, matching the lowest level recorded since 2001. Wage growth has been slightly weaker for nonsupervisory workers.

Typically, economists would expect falling unemployment to coincide with better wage gains. When the unemployment rate was 4.4% in May 2007, wages for nonsupervisory workers were growing better than 4% annually. The last time the unemployment rate was lower, in May 2001, wages were up 4% from a year earlier.

But a large share of the hiring has occurred in the lowest-wage fields. Hospitality, retail and temp employment account for more than one in three jobs added since the recession ended in mid-2009. Each of those jobs pay at least 25% less than the average hourly earnings of all U.S. workers in April, $26.19 an hour.

“Those jobs are viewed as commodities, where workers don’t need a lot of training,” said Lara Rhame, economist at FS Investments. “It’s hard to advocate for better wages when you can be replaced in 48 hours.”

In contrast, better-paying jobs are more likely to flow to workers with more training or education. That should lift worker productivity, she said, making easier for employers to justify raises....MORE
See also:
QE-Unwind may start in September

Sunday, June 25, 2017

'Quantum gambling' could make betting fairer for all involved

From Wired, June 20:

'Quantum gambling' is a combination of game theory and quantum mechanics

Gambling only works if the playing field is fair between the two parties. However, because of the nature of it, both have something to gain or lose.

Historically, it has been difficult to ensure fair play in gambling for this reason, without getting a third party to step in to oversee things. Now, it seems quantum mechanics promises a solution.

A team of researchers in China and Bristol has developed a way for two parties to play a gambling game fairly, without the need for any third party to step in, using quantum mechanics. The authors think this area of ‘quantum gambling’ could one day be used in casinos.

"The fairness of our protocol does not rely on the integrity of any participant, but relies on the assumption that both parties are rational and would like to choose a strategy to maximise their own gains," Xiaoqi Zhou, co-author of the paper, told WIRED.

The strategy the researchers developed is a mixture of game theory and quantum information processing, and it could be adapted for use in casinos or lotteries.

“Surprisingly, by drawing from the classical and quantum game theory, we have found a protocol which enables two parties to create an unbiased gambling machine themselves to perform a fair gambling without introducing any third party,” the authors wrote in their paper.

The idea rests on a theoretical machine that can be constructed by two parties, named Alice and Bob. It uses properties of quantum mechanics, called Heisenberg’s uncertainty principle and quantum superposition.

Heisenberg’s uncertainty principle means the act of observing a particle creates certain changes in its behaviour. Specifically, it means we cannot know both the momentum and position of a particle to the same degree of certainty at once.

Quantum superposition means a particle can be in a combination of two different states at once.
In the gambling machine example, Alice starts out with two boxes, each hosting a particle. She knows what state both particles are in but depending on what she chooses, the states might decay before they reach Bob.

Bob then receives box B, and he will win if he can work out the state box B is in either by observing the particle, or by asking for box A and working it out from there.
Alice does not want Bob to guess what is in the boxes, but the rules of quantum mechanics make it difficult to work out what is best to do.

The authors calculated, using a large amount of maths, that the best strategies for both parties would take them to what is called a Nash equilibrium point. This is a point where “no player has anything to gain by unilaterally changing his or her own strategy”....MORE
Also by the same writer at Wired:

QE-Unwind may start in September

Our intro to May 16's "Gavyn Davies: 'The consequences of shrinking the Fed’s balance sheet'":
This has the potential to be the most important econ/finance/market story of the second half of this year.... 
A no-brainer, and I'm just the person to say it.
From Wolf Street:

Rising Wages Scare the Fed: “We Need to Get on with This”  
QE-Unwind may start in September.
“We need to get on with this,” said Philadelphia Fed President Patrick Harker, a voting member of the policy-setting Federal Open Market Committee. He was talking about the Fed’s plan, detailed at the last meeting, to unwind QE. A possible moment to begin the process, he said, is the meeting in September.

His reasons: Complaints by his business contacts about rising wages.

Rising wages – regardless of what Fed Chair Yellen says publicly to soothe the nerves of the many underpaid workers – set off alarm bells at the Fed and push it into action. Not that all wages are rising. But average wages are rising faster than inflation, and in a number of sectors there are significant wage pressures. Businesses gripe. The Fed listens.

Harker told the Financial Times there was “very little slack” left in the labor market. “There is a rate [of unemployment] below which you are going to start to see a significant acceleration of wages.”
“You look at this labor market and you do have to question when we are going to start to see some increases in inflation,” he said. “We know from history that when that happens it happens pretty quickly.”

Hence, unwinding QE is on the table.

Bernanke explained in 2010 that QE was designed to create the “wealth effect,” where asset holders get wealthier (Part A) as asset prices are inflating, and thus they’d spend more and crank up the economy (Part B). Part A worked. Asset bubbles are now everywhere. Part B failed.

Now the question is when to reverse this wealth effect. There has apparently been unanimous agreement at the last meeting about the nuts and bolts of this plan. Initially, the Fed’s $4.5 trillion balance sheet will shed about $10 billion a month, which will rise over the next 12 months to $50 billion a month, and then continue at that level. This will amount to trimming the balance sheet by $600 billion a year.

The unwind could be launched “this year,” the FOMC statement said. Based on the FOMC meeting schedule, I mentioned at the time that this might happen “as soon as September.” Now Harker said it out loud.

The logic behind it? There will be four more FOMC meetings this year:
  • July 25-26 (no presser)
  • September 19-20 followed by Yellen’s press conference.
  • October/November 31-1 (no presser)
  • December 12-13 followed by Yellen’s press conference.

See also:
It Seems the Wealth Effect Isn't As Efficient as It Used To Be
June 22
Great Graphic: Selected GDP Performance and Policy Since 2008
May 25
"Fed Trial Balloon: JPM Warns Fed May Start Shrinking Balance Sheet In September"
May 25
Shrinking The Federal Reserve's Balance Sheet
So, reducing the Fed’s balance sheet at the same time they are raising interest rates.
And since this is uncharted territory we aren't quite sure how, exactly, the shrinkage will affect...stuff.
Should be interesting. 

Alphabet says Travis Kalanick knew one of Uber’s acquisitions had taken Alphabet files

Our thinking was that Uber was not just aware but was complicit. From May 19's Thrown Under The Autonomous Bus: "Uber Threatens to Fire Engineer at Center of Waymo Lawsuit":
The testimony thus far sure makes a prima facie case that Uber and Levandowski were in cahoots, that there was an actual conspiracy. If that proves to be the case this move is simply thieves falling out....
And March's Remember that time Uber's Kalanick said having autonomous was crucial to the company's very survival? (a deep dive):
Combine Kalanick's statements and the corporate culture he created with the fact the central figure in the Waymo lawsuit was in contact with Uber before he left the Alphabet company's autonomous efforts  and even a dull-witted paralegal could make a case for conspiracy,
And that would threaten Uber's existence....
Here's the latest, from Recode:
Uber has also been ordered to produce a key document in the case.

Alphabet is asking a judge to find Uber in contempt for failing to notify the court that former CEO Travis Kalanick was aware one of his top executives had proprietary Alphabet information in his possession and that he ordered its destruction. 

The executive, Anthony Levandowski, allegedly told Kalanick and two other employees in March 2016 that he had five discs containing Alphabet documents, several months before the ride-hail company acquired his startup, Otto.

Levandowski, who had previously led Alphabet’s self-driving car project, has been accused of stealing technology and taking it to Uber. 

Judge William Alsup recently ordered Uber to produce documents and correspondence related to the case, including information showing whether any evidence had been destroyed. On Wednesday, Alphabet cited a June 5 Uber court filing that shows Kalanick asked Levandowski to destroy the documents in question. Uber had to present the information by March of this year but didn’t report its findings until June.

Uber’s June 8 filing reads:
On or about March 11, 2016, Mr. Levandowski reported to Mr. Kalanick, Nina Qi and Cameron Poetzscher at Uber as well as Lior Ron that he had identified five discs in his possession containing Google information. Mr. Kalanick conveyed to Mr. Levandowski in response that Mr. Levandowski should not bring any Google information into Uber and that Uber did not want any Google information. Shortly thereafter, Mr. Levandowski communicated to Uber that he had destroyed the discs.
This was around the same time that Levandowski began consulting for Uber’s self-driving arm, as we reported.

The ride-hail company maintains that none of these documents made it to Uber and that Kalanick did not encourage Levandowski to bring the files to the company, a condition that was also included in his employee agreement. On May 30, Uber fired Levandowski, who pleaded the Fifth Amendment earlier in the case, for not complying with the court’s orders. 

Uber was also directed by the court to produce a report from Stroz Friedberg, a forensic firm that Uber had hired to conduct a due diligence report on Otto before the acquisition.....MORE
That Stroz Friedberg report was the one referenced as 'dirty laundry' a couple weeks ago:

Double Hit To Uber: Judge Alsup Denies Uber’s Request for Stay, Gives Waymo Fatherly Advice; Magistrate Judge Corley Approves Waymo Request to Peek at Dirty Laundry:
...The due diligence report “likely contains information that is responsive to many of the questions Mr. Levandowski refused to answer," Waymo argued in a court filing. "Indeed, the withheld report may be the only source of much of this information."

Corley reviewed the report privately and told lawyers at a May 25 hearing that it’s important to the case. Waymo argued that because the report was produced by a cyber-security firm and not by lawyers, attorney confidentiality doesn’t apply. The company also contended the document doesn’t qualify for privacy protection because it may reveal fraudulent or criminal wrongdoing.

“You can’t claim a privilege over huddling together about what to do with stolen documents,” Waymo’s attorney, Charles Verhoeven, argued at the hearing. “There is very clear evidence that stolen documents were known about and were retained and continued to be held. And that in and of itself is a crime.”

Attention Brainiacs (Not yet a brainiac? Become one in ten days): YCombinator's Paul Graham On How To Get Startup Ideas

A repost from 2012.

November 2012

The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself.

The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.

Why is it so important to work on a problem you have? Among other things, it ensures the problem really exists. It sounds obvious to say you should only work on problems that exist. And yet by far the most common mistake startups make is to solve problems no one has.

I made it myself. In 1995 I started a company to put art galleries online. But galleries didn't want to be online. It's not how the art business works. So why did I spend 6 months working on this stupid idea? Because I didn't pay attention to users. I invented a model of the world that didn't correspond to reality, and worked from that. I didn't notice my model was wrong until I tried to convince users to pay for what we'd built. Even then I took embarrassingly long to catch on. I was attached to my model of the world, and I'd spent a lot of time on the software. They had to want it!

Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn't merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.

At YC we call these "made-up" or "sitcom" startup ideas. Imagine one of the characters on a TV show was starting a startup. The writers would have to invent something for it to do. But coming up with good startup ideas is hard. It's not something you can do for the asking. So (unless they got amazingly lucky) the writers would come up with an idea that sounded plausible, but was actually bad.

For example, a social network for pet owners. It doesn't sound obviously mistaken. Millions of people have pets. Often they care a lot about their pets and spend a lot of money on them. Surely many of these people would like a site where they could talk to other pet owners. Not all of them perhaps, but if just 2 or 3 percent were regular visitors, you could have millions of users. You could serve them targeted offers, and maybe charge for premium features. [1]

The danger of an idea like this is that when you run it by your friends with pets, they don't say "I would never use this." They say "Yeah, maybe I could see using something like that." Even when the startup launches, it will sound plausible to a lot of people. They don't want to use it themselves, at least not right now, but they could imagine other people wanting it. Sum that reaction across the entire population, and you have zero users. [2]

When a startup launches, there have to be at least some users who really need what they're making—not just people who could see themselves using it one day, but who want it urgently. Usually this initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. Which means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type....MORE Previously:
Attention Brainiacs: Y Combinator on What They're Funding Now (not yet a brainiac? become one in ten days)
YCombinator's Paul Graham on "Startup = Growth"
"The Aha! Moments That Made Paul Graham's Y Combinator Possible"
"Frighteningly Ambitious Startup Ideas"
Venture Capital: Behind the Scenes at Y Combinator

"Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms"

The author is an analyst focused on communications with a particular interest in search. He worked at the U.S. Department of State and as a member of the United States Department of State Advisory Committee on International Communications and Information Policy. We've linked a couple times.

From the Precursor blog:
Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms

If one considers the evidence, it is evident that U.S. antitrust enforcers have enabled the current “new normal” of online winner-take-all platforms: Alphabet-Google in e-information, Amazon in e-commerce, Facebook in e-social, Uber in e-transportation services, Airbnb in e-accommodation services, and a “unicorn” queue of online winner-take-all platform wannabes.

Summary of Conclusions
U.S. antitrust officials should be alarmed by the extreme early concentration of a relatively young twenty-year old, U.S. online company marketplace.

Five online winner-take-all platforms -- Google, Amazon, Facebook, Uber and Airbnb -- already command ~80% of U.S. online companies’ revenue share and market capitalization.
And they are collectively capturing 82% of U.S. online companies’ revenue growth share, meaning they are growing more dominant not less.

Adding to the reality that their respective platform dominances are lasting, is the fact that these platforms are also dominating the consumer data collection and analysis that is essential to being able to compete, grow, and succeed going forward in online revenue growth and diversification, and to innovate to compete in artificial intelligence, machine learning, and targeted advertising. 
“If data is the new oil,” these winner-take-all platforms are extracting, organizing, and leveraging the most valuable and specific, potential, mass consumer data sets anywhere.

And as long as the DOJ and FTC continue to not consider privacy/data to be a non-price factor in antitrust enforcement, DOJ unwittingly will be the key enabler and protector of these online platforms’ data-driven, winner-take-all, market power maintenance and extension long-term.

Why U.S. Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms
If “competition is a click away,” how could today’s Internet ecosystem, become as winner-take-all online in the 21st century, as late 19th century America was when monopoly “trusts” in steel, oil, and railroads, precipitated the world’s seminal antitrust laws?

The public Internet obviously happened in 1994 and fundamentally changed how most markets and competition worked. However, U.S. antitrust enforcers obviously have not adapted antitrust enforcement to the new online market contexts, because if they had, we would not have America 1890’s redux.

It will be telling if the new Trump Administration antitrust team comes to acknowledge that all is not well in the U.S. antitrust universe, and that there are accelerating, serial, online winner-take-all, outcomes that are uncharacteristic of offline markets, and that would have been prevented in offline markets via normal antitrust enforcement.

At bottom, Trump Administration antitrust enforcers find themselves at an historic crossroads.
Are all these winner-take-all platforms “innocent” monopolies and winners on their own legal merits?

If yes, does the online marketplace inherently multiply “natural monopolies” that have no need to engage in anti-competitive behavior to foreclose competition or require antitrust enforcement, oversight or utility regulation?

If no, are these online winner-take-all platforms at least partially a result of U.S. antitrust non-enforcement and/or anti-competitive foreclosure behaviors warranting antitrust investigation and potentially antitrust enforcement action?

The evidence U.S. antitrust non-enforcement producing online winner-take-all platforms.
To start, why are these five companies considered online winner-take-all platforms?

Google Amazon, Facebook, and Uber are on this list because they each are roughly ten times bigger by revenues, users and inventory than their nearest competitor; and Airbnb is included also because its value is about eight times is nearest competitor HomeAway and its 2.3m room inventory is already more than the top three hotel chains combined, and separating more.

In addition, these five winner-take-all platforms command 77% of the total revenues, 82% of the total revenue growth, and 80% of the market capitalization, of the overall online market of online-based and founded companies. (These estimates use the Internet Association’s 39 members as the best proxy for this online market and excludes Microsoft here, because it did not originate online and it has no dominant online market positions or online network effects.)

The current “winner-take-all” term to describe these online platforms came from billionaire Sir Richard Branson and was captured in an excellent New Yorker piece by widely respected Silicon Valley blogger and venture capitalist, Om Malik.

What makes these online platforms winner-take-all?

Ironically, Alphabet-Google Chairman Eric Schmidt has provided some of the best explanations for this online winner-take-all platform phenomenon.

In 2011, Dr. Schmidt explained: “The fastest path to wealth is the construction of these digital platforms, in which a company becomes the center of activity and where other people depend on you.”

In 2012 he elaborated: “We believe that modern technology platforms, such as Google, Facebook, Amazon, and Apple are even more powerful than people realize. These platforms constitute a true paradigm shift, and what gives them power is their ability to grow – specifically their speed to scale. Almost nothing, short of a biological virus, can scale as quickly, efficiently or aggressively as these technology platforms, and this makes the people who build, control, and use them powerful too.” [Note: Apple is not an online-based company and hasn’t continued its growth.]
In 2013, Dr. Schmidt further explained: “Platforms are where the aggregated value occurs; the way the industry creates wealth is creating platforms.”

So specifically, what is the “juice” or “special sauce” that Google, Amazon, Facebook, Uber, and Airbnb all share that make them winner-take-all platforms?...

Soros Says U.K. Is Approaching ‘Tipping Point’ as Brexit Bites

Nice little currency ya got there, be a shame if anything happened to it.
Lifted in toto from Bloomberg:
Economic reality is catching up with the U.K., where it is becoming clear that leaving the European Union will lead to lower living standards, billionaire investor George Soros said.

“We are fast approaching the tipping point that characterizes all unsustainable economic developments,” Soros wrote in an article published Monday on the website of the Project Syndicate news organization. “The fact is that Brexit is a lose-lose proposition, harmful both to Britain and the European Union. It cannot be undone, but people can change their minds. Apparently, this is happening.”

Although the U.K. economy initially defied predictions of an immediate slowdown after the surprise Brexit vote, signs are now emerging that consumer spending is faltering as the weaker pound drives up prices. Economists in Bloomberg’s latest monthly survey see inflation reaching 3 percent by the end of the year.

Bank of England Governor Mark Carney, in a speech at London’s Mansion House on Tuesday, said domestic inflation pressures remain subdued and signaled he isn’t in a hurry to raise interest rates. In his first major comments in six weeks, he also said he wants to see how the economy responds to the “reality of Brexit negotiations.” The pound fell after the remarks.

Soros said Britain’s eventual exit from the EU will take at least five years to complete, during which the country will probably hold another election. “If all went well, the two parties may want to remarry even before they have divorced,” he wrote.

Saturday, June 24, 2017

The Men Who Brew Too Much: "Old Time Farm Crime: The Coffee Spies of the 1700s"

A repost from 2013.
From Modern Farmer:

Coffee. Java. Joe. Whatever you call it, that ubiquitous brew that jump-starts your 
morning was once at the center of international intrigue. It was spy versus spy with 
all the big European powers attempting to get their hands on coffee beans.
The history of coffee extends back at least 1,200 years to Abyssinia (known today as Ethiopia) where it’s believed the shrub was first cultivated. Legend holds that Kaldi, a 9th century goat herder, discovered the shrub’s power after seeing his flock become energetic when they nibbled on its berries. The story is apocryphal and doesn’t appear to have been written down until close to 700 years later. Regardless, coffee’s cultivation spread northeast from ancient Ethiopia to the Arabian Peninsula.

By the 1600s, coffee consumption was wildly popular in Europe, with coffee houses springing up in London, Paris, Amsterdam and elsewhere and becoming important cultural, political and financial centers that helped transform the continent.

And where there’s a potential for making money, and one-upping your rivals, there will surely be an attempt at cornering the market. At the time, the Arabs had coffee cultivation tied up and the Europeans wanted a piece of the action. It was up to their spies to try and get the high-powered plant into their hands and into the ground in their various colonies.

The Dutch were the first of the superpowers whose spies successfully stole a viable plant in 1616 from Mocha, the bustling port city and center of coffee trading in Yemen. Unfortunately, these spies’ names have been seemingly lost to history — easy to understand, since we are talking about secret missions here.
Luckily there are two swashbuckling undercover coffee agents from that we do know of, thanks to good old fashioned self-promotion. Captain Mathieu Gabriel de Clieu of France and Lieutenant Colonel Francisco de Melo Palheta of Portugal helped their nations achieve a foothold in the fight to become coffee producers.
First up, the Frenchman Mathieu Gabriel de Clieu. In 1723, de Clieu was a naval officer serving as captain of infantry at Martinique. While on leave in Paris, he was struck by the idea that his island home would be the perfect place to cultivate coffee. The French king, Louis XIV, had recently received a coffee plant from the Burgemeester of Amsterdam, and it was ensconced in the royal garden, now known as the Jardin des Plantes, in Paris.

There are two versions of how de Clieu gained possession of a coffee plant. The first involved a daring nighttime raid on the royal garden after de Clieu failed to receive the king’s permission to take a plant back to Martinique. The more reliable, but alas less romantic, version involves the intercession of a noblewoman who apparently had something on the royal physician, Pierre Chirac, and coerced him to swipe a cutting of the coveted plant for de Clieu.

Regardless of how the captain got his very valuable plant, the journey back to Martinique was an adventure in itself. According to de Clieu, in a letter to the Année Littéraire, a literary and scientific periodical, he was forced to share his “scanty ration” of water with the “coffee plant upon which my happiest hopes were founded and which was the source of my delight.”

He also had to fight off another passenger on the ship who, “basely jealous of the joy I was about to taste through being of service to my country, and being unable to get this coffee plant away from me, tore off a branch.”

On top of the lack of water and the jealous interloper, his ship was nearly captured by Tunisian pirates and was menaced by a violent storm. But de Clieu and his coffee plant eventually made it back to Martinique where he planted it on his estate....MORE
Tangentially related:
The Great British Tea Heist: Or How England Stole the Secret, Discovered a Fraud and Created the Modern World

Are Activist Investors Being Sabotaged by Their Brokers? (well duh, see Daniel Defoe)

From MoneyBeat, June 21:

Are Activists Being Sabotaged by Their Brokers?

Activist investors have tried hard to keep their trades secret and prevent others from piggybacking off their best ideas.

Now, an academic paper released online this week highlights a potential risk for them: brokers leaking their confidential trades.

The research suggests that brokers who execute trades on behalf of activist investors may be tipping off other clients about those trades, according to Marco Di Maggio, an assistant professor at Harvard Business School, and his three co-authors.

The authors analyzed a giant database of stock trades initiated by institutional investors from 1999 to 2014, which includes the identity of the broker executing each trade. They focused on trades that could be matched to the Securities and Exchange Commission’s 13-D forms. An investor must file one of these forms within 10 days of amassing a 5% or greater stake in a company. Often these filings are how the world finds out which company an activist is targeting.

In the 10-day period before a 13-D filing, the biggest clients of the activist’s broker are around 3% to 5% more likely to buy the target stock than in the 60 days after the filing, when everyone knows the activist has a stake, the authors found. That’s not true for smaller clients, who do less trading and are a less lucrative source of commissions for the broker. Such clients are slightly more likely to sell the target stock in the 10 days before the 13-D filing, indicating that they don’t know an activist is about to give the stock a bullish jolt.

“This strongly suggests that [the bigger clients] were made aware of the interest in that particular stock by the broker who executed the activist’s trades,” the paper says.
Brokers still play a big role in stocks trading, despite the rise of electronic trading. Last year, 42% of order flow from stock-picking hedge funds was handled by people rather than algorithms, according to New York-based research firm Tabb Group.
“As soon as there are humans involved, the potential for leakage is out there,” said Brennan Warble, head of Americas at Liquidnet, a New York-based company that runs an off-exchange “dark pool” for stocks trading.

In 2014, a Wall Street Journal investigation found that stocks targeted by activists rose an average of 3.2% more than the overall market in the 10 days before filings revealed the activist’s stake. That result — based on an analysis of of 975 announcements by leading activist investors since 2007 — suggests other traders are catching wind of the activists’ moves and piling into the same stock.

There are a couple possible explanations for why that’s happening. The activists themselves might be telling fellow hedge-fund managers in a coordinated campaign — a strategy some call “wolf pack activism.”

Or brokerage firms could be the source of the leaks. Veteran brokers suggest one possible scenario: the sales trader executing the activist’s order is overheard by his colleagues, who share the information with their preferred clients.

Prof. Di Maggio says the evidence points to leaky brokers....MORE
In addition to writing Robinson Crusoe, Moll Flanders, A Journal of the Plague Year and a ton of other stuff Defoe had in-depth experience of both business and politics. He was a promoter of the South Sea Company.

In 1719 he wrote Robinson Crusoe and The Anatomy of Exchange Alley in which he described stock-jobbing as:
...a trade founded in fraud, born of deceit, and nourished by trick, cheat, wheedle, forgeries, falsehoods, and all sorts of delusions; coining false news, this way good, this way bad; whispering imaginary terrors, frights hopes, expectations, and then preying upon the weakness of those whose imaginations they have wrought upon...
That may be the earliest warning in English against the intersection of fāke news and equities.

Not the European earliest however. The Dutch were all up in that at least thirty and probably a  hundred years prior:

From "Frontrun the Bank of England for Fun and Profit":
Hey, it worked with the ECB.*
From FT Alphaville:
Confusion and the BoE’s corporate bond buying scheme
... Re: Mr. Keohane's headline, I couldn't help thinking of De la Vega's 1688 book Confusion of Confusions regarding the trading of Dutch East India Company stock.
The analysis in The Confusion of Confusions :  Between Speculation and Eschatology is a good introduction.

As another review puts it:
...He shows us all the tricks of the trade such as front-running large orders and spoofing the market with fake news to achieve a more favorable trading price.
And then there is this from AFNS via 2012's "The World's First Stock Exchange (and first bear raid, first dividend, first equity derivatives...)":
(VOC) $64.98 (+$13.84) (+27.1%) Shares in the spice purveyor soared on word that the three sturdy galleons dispatched two years afore had been sighted off the coast of Cape Verde, returning from their dangerous voyage to the exotic Orient with their casks brimful of redolent cinnamon, cardamom, and mysteriously intoxicating curried powder.
Okay, that's actually America's Finest News Source.

Questions America Wants Answered: Why Is the Speed of Light So Slow?

Today's QAWA was down to a choice between this and Paul Murphy's query: "Should we try and revive Camp Alphaville next year?". Upon consideration that he had already received 40 responses, some quite emphatic, I decided to go with this.

From Real Clear Science:
In 2015, a team of Scottish scientists announced they had found a way to slow the speed of light. By sending photons through a special mask, the researchers altered their shape. In this malformed state, these infinitesimal particles of light traveled slower than normal photons.

The difference in speed was almost imperceptible, but the accomplishment itself was stunning! At 299,792,458 meters per second, the speed of light has stood as an unbreakable, unchangeable speed limit. No longer.

But why would anybody want to slow down the speed of light? After all, it's already slow enough!
As strange as that assertion may seem to humans accustomed to traveling a mere 70 miles per hour on the highway, it makes a lot of sense on a cosmic scale. Consider this: If the observable Universe was reduced to the size of planet Earth, traversing the Milky Way Galaxy would be roughly equivalent to walking three houses down the block to visit your neighbor. And yet, traveling at the cosmic speed limit of our smaller, Earth-size universe, that short jaunt would take 100,000 years!

This example showcases just how tediously slow exploring the galaxy would be for a ship traveling at the speed of light. Such a journey would span more than a hundred human generations!

Even if you don't consider humanity's self-centered wish for interstellar light-speed travel and instead think about photons dashing across our solar system, the speed of light still seems positively sluggish. As astrophysicist Brian Koberlein calculated, it takes 45 minutes for light from the Sun to reach Jupiter, and five hours for it to reach Pluto.

And of course, when gazing at the sky with the naked eye, we're viewing some stars as they were more than 4,000 years in the past -- that's how long it takes their light to reach us!
So now that we've ascertained that light is not fast but rather is excruciatingly slow, we can now turn to a more pressing and difficult matter: Why?...


At APNIC the question is "Why is the Internet So Slow":
Latency is a critical determinant of the quality of experience for many Internet applications. Google and Bing report that a few hundred milliseconds of additional latency in delivering search results causes significant reduction in search volume, and hence, revenue. In online gaming, tens of milliseconds make a huge difference, thus driving gaming companies to build specialized networks targeted at reducing latency.

Present efforts at reducing latency, nevertheless, fall far short of the lower bound dictated by the speed of light in vacuum[1]. What if the Internet worked at the speed of light? Ignoring the technical challenges and cost of designing for that goal for the moment, let us briefly think about its implications.

A speed-of-light Internet would not only dramatically enhance Web browsing and gaming as well as various forms of “tele-immersion”, but it could also potentially open the door for new, creative applications to emerge. Thus, we set out to understand and quantify the gap between the typical latencies we observe today and what is theoretically achievable.

Our largest set of measurements was performed between popular Web servers and PlanetLab nodes, a set of generally well-connected machines in academic and research institutions across the World[2]. We evaluated our measured latencies against the lower bound of c-latency; that is, the time needed to traverse the geodesic distance between the two endpoints at the speed of light in vacuum.

Our measurements reveal that the Internet is much, much slower than it could be: fetching just the HTML of the landing pages of popular websites is (in the median) ~37 times worse than c-latency. Note that this is typically tens of kilobytes of data, thus making bandwidth constraints largely irrelevant in this context.

Where does this huge slowdown come from?...

While at the Priceonomics longread they ask:

Is Every Speed Limit Too Low?

I Want it Now!

Possibly related:
The Business Of Instant Gratification Appears to Have Promise

 "As the Economy Gets Ever Better at Satisfying our Immediate, Self-serving Needs, Who is Minding the Future?"
"How To Break the Information Age Trance of 'Continuous Partial Attention'"
McKinsey: "Our gambling culture--The craving for immediate gratification has spread well beyond Wall Street."
"The Rise of the On-Demand Economy"
Consumer Apps: On-Demand Economy Jumps the Shark

"The Saudi-Qatar Spat - An Offer To Be Refused"

With yesterday's 2.53 point decline in the DJIA (twelve-hundredths of a percent) I found myself thinking of the market action in mid-July 1990, and had one of those "Hey, we may be seeing an invasion next week" moments, more after the jump.

From Moon of Alabama, June 23:
Today the Saudi ruler issued an ultimatum to Qatar that was written to be rejected. Such has happened before and one should not forget the lessons to be learned from it.

After the crown prince of the Austia-Hungary monarchy Archduke Franz Ferdinand, was shot and killed in Sarajevo the government of Austria waited three weeks to issue a 10 point ultimatum to Serbia which it held responsible for the incident. At least three of those points concerned the suppression of "propaganda against Austria-Hungary" and the Austrian Monarchy by private and state entities. It demanded a response within two days:
Sir Edward Grey, the British Foreign Secretary, commented that he had "never before seen one State address to another independent State a document of so formidable a character."
The Austrian ultimatum was an offer to be refused. But Serbia did not fall into that trap. It conceded on everything but two minor points. This was to no avail. The issues and plans Austria had were not about the assassination of [the disliked] Franz Ferdinand or the demands issued in the ultimatum. Two days later Austria-Hungary declared war against Serbia. Allies jumped to either side. World War I had started.

The now official demands by Saudi Arabia, the United Arab Emirates and some minor Gulf sheikdoms against Qatar have a similar smell to them. They are also "an offer to be refused."
The demands come late, three weeks after Saudi Arabia first accused Qatar of "supporting terrorism", three weeks after it closed the border and laid siege on the country.

(Qatar is surly "supporting terrorism". So is the U.S. - the U.S. Citizenship and Immigration Services just rejected an asylum request because the person in question has relations with the Free Syrian Army which the C&I-Service considers to be an "undesignated terrorist organization". The CIA built and supports the FSA. According to the U.S. government the U.S. government is a state sponsor of terrorism. But the biggest terrorist sponsor of all are and have been the Saudis.)

Spats between member of the Gulf Cooperation Council are usually mediated by the U.S. government. But without any official demands issued against Qatar there was nothing to mediate about. Three day ago U.S. Department of State finally issued a rather angry statement towards Saudi Arabia:
"We are mystified that the Gulf states have not released to the public, nor to the Qataris, the details about the claims that they are making toward Qatar," explained State Department spokesperson Heather Nauert on Tuesday.
"At this point, we are left with one simple question: Were the actions really about their concerns about Qatar's alleged support for terrorism, or were they about the long-simmering grievances between and among the GCC countries?" Nauert asked.
The real issue for Saudi Arabia is the support for the Muslim Brotherhood by Qatar. The MB provides an alternative model of Islamic government to the hereditary kingdoms of the Gulf sheiks. They are a danger to the Saudi ruling family. A second point are Qatar's relative good relations with Iran, the external enemy the Saudis (and Israeli) rulers need to keep their people in line....MORE
Here's a January 2013 post recounting that 1990 stock market action:

Raymond James' Jeff Saut: Best Stock Ideas for the Next 3 to 5 Years

I don't have the guts to make five year projections as:
a) right now naming names that far in advance seems like a cross between wishful thinking and necromancy.
b) I am ever alert for the opportunity to lose 25-50% of AUM and the most likely way for that to happen is a shootin' war: India-Pakistan; China-Japan; Israel-Iran or some combination of the above. Predicting we'll be war free for five years seems like a longshot.

2999.75 was the closing high for the DJIA on July 16, 1990.

On July 17 we had the exact same closing print and I pointed out to an old-timer “Hey we almost closed at 3000″.
His reply: “Yeah, but we didn’t, I’m going short”.

From the New York Times:

Dow Ends at 2,999.75 With a Rise of 19.55

The Dow Jones industrial average flirted yesterday with a close above 3,000, but it ended the day just shy of that benchmark. Stock market analysts contended nevertheless that the performance indicated that stock prices still seemed to be climbing, at least for a while longer.
Although it failed to close above the 3,000 barrier, the blue-chip index climbed to its third new high in three trading sessions, advancing 19.55 points, to 2,999.75, just 25-hundredths of a point short.
Analysts expressed strong confidence that the Dow, which traded above 3,000 at several points during the day, would soon close that high. How soon, they said, was difficult to say....MORE
That of course was the pre-Gulf war (I) high, sixteen days later Saddam invaded Kuwait.
Less than three months later the market had dropped 21% and I found myself saying "Hmmm".

So I leave it to others to be gutsy on specific names....

The last time we saw something similar in the Dow was in the Spring of 2011 when the closes were:
April 29  12,810
May 2     12,807
May 3     12,807
By September 2011 the market was down 13%.
Something to be aware of.

"Cracking the Biggest Art Heist in History"

We've been following this story for a while, some links below:

From Bloomberg, June 19:

For nearly three decades, detectives have sought to solve the theft of $500 million of artwork from the Isabella Stewart Gardner Museum in Boston. They think the end is near.
It’s still regarded as the greatest unsolved art heist of all time: $500 million of art—including works by Rembrandt, Vermeer, Degas, and Manet—plucked from the Isabella Stewart Gardner Museum in Boston on March 18, 1990, by two men posing as police.

The museum had offered a $5 million reward for the return of all 13 pieces in good condition. Last month, the bounty was suddenly and unexpectedly doubled to $10 million.

For such a long-unsolved case, the investigation is surprisingly active into the disappearance of the artworks, which include paintings, a Chinese vase and a 19th century finial of an eagle. Anthony Amore, the museum’s director of security, says he works on the case every day and is in “almost constant contact” with FBI investigators. Tipsters still call all the time, with leads that range from the vaguely interesting to the downright bizarre. Among them: a psychic who offered to contact the late Mrs. Gardner’s spirit, and a few self-styled sleuths who reckon the paintings can be found with metal dowsing rods.

Most of those go nowhere. Whether the works will ever be recovered, or if they still exist at all, is one of the great questions that has divided the art world.

“Those paintings are gone,” said Erin Thompson, professor of art crime at the John Jay College of Criminal Justice in New York. “Either because they were destroyed immediately after they were stolen, or because they’ve already been beaten up so badly by being moved around in the back of cars.”

But there is one outside detective respected by Amore—Arthur Brand, a Dutch private investigator—who believes not only are the artworks still intact, but also that he can bring them home. This year.
“It’s almost certain that the pieces still exist,” Brand told me. “We are following two leads that both go to the Netherlands, and we are now negotiating with certain people.”

Brand, 47, has become one of the world’s leading experts in international art crimes. A British newspaper once called him the “Indiana Jones of the art world” for his combination of crack negotiating skills and uncanny instincts for finding stolen art.

In the past few years, Brand has posed as the agent of a Texas oil millionaire to help Berlin police find two enormous bronze horses from the German Reichstag. He worked with Ukrainian militia members to secure the return of five stolen Dutch masters to the Westfries Museum in the Netherlands. He negotiated with two criminal gangs for the successful return of a Salvador Dali and a painting by Tamara de Lempicka, together valued at about $25 million, to the now-closed Scheringa Museum of Realist Art, also in the Netherlands.

Brand acts as something of a liaison between criminals and the police. Controversially, he’ll try to make deals that allow the culprits to go free, because he says his primary goal is saving the art from the trash heap.

“There are very few like him who understand the reality of this sort of crime,” Amore said.

Some of the pieces stolen from the Isabella Stewart Gardner Museum. From left: Degas’s La Sortie de Pesage, Rembrandt’s The Storm on the Sea of Galilee, and Vermeer’s The Concert.
Source: FBI

René Allonge, the chief art investigator with the Berlin State Office of Criminal Investigation, said his team had been searching for Hitler’s bronze horses since 2013. He contacted Brand at the end of 2014, met him in 2015, and they conducted the investigation and searches jointly, “as far as it was legally possible.” Ultimately, Brand played a crucial role in the discovery of the bronze horses, as well as other populist bronzes from the Nazi era, he said. “He succeeded in penetrating a very closed scene of collectors of high-quality Nazi devotionalia, where we finally found the sculptures that we were searching for,” Allonge wrote in an email.

Brand’s reward in some of these high-profile cases is often the glory and nothing more. Scheringa had originally offered a €250,000 bounty ($280,000) for the Dali and Lempicka, but the museum had shut down by the time they were recovered. Brand was paid an hourly fee and had his expenses reimbursed, though he declined to say by whom. For finding Hitler’s horses, he got no cash at all, just a lot of free publicity, he says.

“He’s not the guy to charge you for every hour he works,” said Ad Geerdink, director of the Westfries Museum, for which Brand recovered five old-master paintings from a militia group in Ukraine. “He knew that we are a small organization with not many resources, so the fee was very, very friendly.”
The biggest bonus Brand’s ever received for solving a case was about €25,000, he says. He adds that he’s investigating the Gardner case for the glory. “It’s the Holy Grail in the art world,” he said....MUCH MORE

HT: Ritholtz's Reads, June 21

At the museum "Thirteen Works: Explore the Gardner's Stolen Works"

May 2016
Risk: Stolen Gardner Museum Masterpieces Probably Destroyed
The author, James Ratcliffe, is director of recoveries & general counsel at the Art Loss Register, London  
August 2015
New Video May Show $500 Million Gardner Heist Perps
June 2011
What does Whitey Bulger know about the 1990 Gardner Museum art heist?

Possibly also of interest:
Duveen, The Greatest Salesman in the World: Isabella Stewart Gardner, Bernard Berenson and the Boston Connection Pt. IV

The courtyard of Mrs. Gardner's home, now the museum and site of the $500 million art theft