Tuesday, August 14, 2018

"Azealia Banks exposing Elon Musk for tweeting while on Acid.. while she was waiting for Grimes at her home ... whewwww lord"

Oops, almost forgot:

First up, Business Insider:
Rapper Azealia Banks claims she was at Elon Musk’s house over the weekend as he was ’scrounging for investors’
Now, this time I mean it, Helen, Knighty and I really gotta go.
Note to self: acid tweeting no good.

"Here’s the Secret to My Recent Trading Prowess"

This is pretty funny. A recent string of headlines/posts from The Fly at iBankCoin:

August 9 
You Cannot Stop the Madness: Bought $NTNX
If you want the short version of how Fly is doing these days, look no further than my triple sized HUBS position and doubled sized TEAM and ZEN holdings. I don’t think I’ve done something this bold in quite some time. I am literally invincible, unable to lose money if I wanted to....

August 10 

August 13  
“The Fly” Is Invincible

August 14 
Here’s the Secret to My Recent Trading Prowess

Unfortunately for the narrative, for some time now I see the word 'invincible' (Aug. 9 post, 13 headline) and one of two things comes to mind:
1) Helen Reddy sings the line "I am invincible" followed by "I am woomaaan"
2) ...Monty Python Does Finance
Black Knight:     I am invincible! 
King Arthur:      You're a loony!  
Black Knight:  The Black Knights always triumph!
Neither of which, I am sure, is the connotation The Fly wants to suggest.

So, as we bid adieu to The Fly and wish him continued trading success, I will also exit, accompanied by Helen and the knight.

Funding Secured: "Chinese Tesla rival Nio files to raise $1.8 billion in US IPO"

Goldman (Asia) JPM and Morgan Stanley (left lead) are top of the bulge underwriters, I didn't look for bookrunners.
From TechCrunch:
Tesla may be looking to go private, but Chinese rival Nio is going the other way after it filed to raise $1.8 billion in an IPO on the New York Stock Exchange.

Nio was started in 2014, initially as NextCar, by Bin Li, an entrepreneur who founded online automotive services platform Bitauto. The company is backed by Chinese internet giants Baidu and Tencent among others, and it has developed two vehicles so far: the EP9 supercar and ES8.

The former is really a concept/racer car — it broke the electric vehicle speed record last year — but the ES8, pictured above, is a car designed for the masses which is priced at 448,000 RMB, or around $65,000.

Nio opened sales for the ES8 last year but it only began shipping in June. Thus, to date, it has fulfilled just 481 orders, although it claims that there are 17,000 customers who put down reservations waiting in the wings.

That means that, essentially, it is pre-revenue at this point.

The company reported revenue of $6.9 million as of the end of June — so one month of deliveries — with a total loss of $502 million for 2018 to date. Last year, Nio lost $759 million in 2017, that included no revenue and nearly $400 million spent on R&D.....MUCH MORE

Avoid the Middleman: "This app lets consumers sell their data directly to brands"

From AdAge:
Although it's early days, brands such as McDonald's, Staples and GM are paying cash and purchasing data direct from consumer, giving literal meaning toward the notion that "data is the new currency."
Between regulation such as GDPR and scandals like those plaguing Facebook, consumers are aware more than ever of the so-called value exchange when using online services. At the same time, they're also tuning in on how companies such as Cambridge Analytica are plundering their data without their consent.

To that end, Freckle IoT recently launched Killi, an app that makes explicit value of data by actually paying consumers with cash for sharing their data, location, or providing insight about what ads they'd like to see. Even more money is on the table if users scan the back of their driver's license with their phones, for example.

Killi has so far lined up McDonald's, GM, Danone and Staples as participating brands, it says.
"This is not something people in the industry should ignore," says Sargi Mann, exec VP and head of digital strategy and investments at Havas Media Group.

Ad Age reached out for a comment from the brands involved but did not get a response by press time.
"People are excited about this idea and the technology; it's something consumers have been requesting: 'How do I control my data?'" Mann adds. "Data privacy has huge momentum right now and innovations like Killi are certainly a big step … this can take off in a few hours, weeks or months."

As Mann points out, ad blocking was a consumer created solution for bad ads, and when it took off, it caught the entire industry off guard. The notion of consumers controlling which brands can or cannot access their data is perhaps the next evolution, she says.

"Consumers want control of their data and marketers need to be compliant with regulation, but there are zero tools for that," says Neil Sweeney, founder and CEO of Freckle IoT. "When the Cambridge Analytica news hit, everyone did '#DeleteFacebook,' but that was an emotional reaction."


Disrupting Surveillance Capitalism

A good overview of some of the techniques we've looked at over the years and following up on yesterday's "Potemkin AI: Many instances of 'artificial intelligence' are artificial displays of its power and potential", demystifying AI and showing how it is still pretty dumb—compared to what's coming.
From Logic Magazine:

Monkeywrenching the Machine
Silicon Valley’s surveillance-based business model relies heavily on machine learning. But with the right techniques, we can resist the enclosure of our lives for profit and disrupt the disruptors.
This piece is also available in audio from our friends at Curio.io.
Joseph Redmon, "YOLO: Real-Time Object Detection."
Machine learning is the practice of training algorithms to classify and predict in order to support decision-making. In recent years, it has skyrocketed in popularity and ubiquity. It's no stretch to say that most services we use now incorporate machine learning in one way or another. In its pervasiveness, machine learning is becoming infrastructural. And, like all infrastructure, once it matures it will become invisible.

Before that happens, we should develop a way to disrupt it.

A relatively nascent field called "adversarial machine learning" provides a starting point. Described as the intersection of cybersecurity and machine learning, this field studies how these algorithms can be systematically fooled, with or without knowledge of the algorithm itself—an ideal approach, since the specifics of many algorithms are trade secrets. And given the fact that the machine learning regime effectively makes all of us its workers—most of our online activity is in fact labor towards the improvement of these systems—we as individual users have an opportunity to inflict major sabotage.

Consider an early and now-ubiquitous application of machine learning: the everyday spam filter. The job of the spam filter is to categorize an email as either "spam"—junk—or "ham"—non-spam. The simplest case of adversarial machine learning in this context is constructing an email that is spam—a pitch for a pharmaceutical product, for example—but in such a way that the spam filter misclassifies it as ham, thus letting it through to the recipient.

There are a variety of strategies you might employ to accomplish this. A relatively simple one is swapping out the name of "Viagra" for something more obscure to a machine but equally readable to a human: "Vi@gr@", for example.

Today, most spam filters are resistant to this basic obfuscation attack. But we could consider more sophisticated approaches, such as writing a longer, professional-looking email that hints at the product without ever explicitly mentioning it. The hint may be strikingly obvious to a human, but incomprehensible to a spam filter.

A spam filter is less insidious than many other applications of machine learning, of course. But we can generalize from this example to develop techniques for disrupting other applications more worthy of sabotage.
Poisoning the Well
Most machine learning models are constructed according to the following general procedure:
  1. Collect training data.
  2. Run a machine learning algorithm, such as a neural network, over the training data to learn from it.
  3. Integrate the model into your service.
Many websites collect training data with embedded code that tracks what you do on the internet. This information is supposed to identify your preferences, habits, and other facets of your online and offline activity. The effectiveness of this data collection relies on the assumption that browsing habits are an honest portrayal of an individual.

A simple act of sabotage is to violate this assumption by generating "noise" while browsing. You can do this by opening random links, so that it's unclear which are the "true" sites you've visited—a process automated by Dan Schultz's Internet Noise project, available at makeinternetnoise.com. Because your data is not only used to make assumptions about you, but about other users with similar browsing patterns, you end up interfering with the algorithm's conclusions about an entire group of people.

Of course, the effectiveness of this tactic, like all others described here, increases when more people are using it. As the CIA's Simple Sabotage Field Manual explains, "Acts of simple sabotage, multiplied by thousands of citizens, can be an effective weapon...[wasting] materials, manpower, and time. Occurring on a wide scale, simple sabotage will be a constant and tangible drag on...the enemy."

Attacks of this sort—where we corrupt the training data of these systems—are known as "poisoning" attacks.

The Pathological and the Perturbed
The other category of adversarial machine learning attacks are known as "evasion.” This strategy targets systems that have already been trained. Rather than trying to corrupt training data, it tries to generate pathological inputs that confuse the model, causing it to generate incorrect results.
The spam filter attack, where you trick an algorithm into seeing spam as ham, is an example of evasion. Another is "Hyperface," a collaboration between Hyphen Labs and Adam Harvey, a specially designed scarf engineered to fool facial recognition systems by exploiting the heuristics these systems use to identify faces. Similarly, in a recent study, researchers developed a pair of glasses that consistently cause a state-of-the-art facial recognition system to misclassify faces it would otherwise identify with absolute certainty....MORE

"Russia doubles its production of liquified natural gas from the Arctic as a second plant in the Yamal LNG is launched"

They've only just begun.
From The Barents Observer:

A historic shipment from Sabetta points at global advance of Arctic LNG 
Tanker «Pskov» on 9th August sailed out of the Gulf of Ob with about 170,000 tons of liquified natural gas on board. The historic shipment started in Sabetta, the seaport and terminal on the Yamal Peninsula, where LNG was loaded from Novatek’s second train of the Yamal LNG project.
Plant workers had pushed the button on the 12th of July. Natural gas started to pour into the pipes of the new plant and 8,5 days later it had turned liquified. By 9th August, about 250,000 tons had been produced, more than enough to fill up a LNG carrier.

The new plant was launched more than half a year ahead of schedule. It enables Novatek, the project operator, to double its Yamal LNG output from 5,5 million tons to 11 million tons per year.
The opening of the new plant - the second of a total of three - comes less than eight months after Novatek opened the first train. Since President Putin on 8th December 2017 came to attend the grand opening ceremony, Novatek and partners have produced 3,5 million tons of liquified natural gas on site. A total of 47 shipments have been made from the project terminal of Sabetta, several of them eastwards along the Northern Sea Route to asian buyers.

With the two plants in operation, the Yamal LNG will have a 3,5 percent share of the global LNG market. And far more is to come. According to company CEO Leonid Mikhelson, Novatek will by year 2030 produce up to 60 million tons of liquified natural gas, all of it from Arctic projects. The company is already with full steam developing its next projects, the Arctic LNG 2 and the Arctic LNG 3....

"Facebook’s message to media: 'We are not interested in talking to you about your traffic…That is the old world and there is no going back'”

From NiemanLab, Aug. 13:

That firehose isn’t opening up again anytime soon.
The Australian — the Murdoch-owned national paper — has an interesting (and aggressively paywalled) scoop about Facebook today, based on comments Campbell Brown, the company’s global head of news partnerships, allegedly made during a meeting with Australian media executives in Sydney last week.

Here are the quotes attributed to Brown in the story:
“Mark [Zuckerberg] doesn’t care about publishers but is giving me a lot of leeway and concessions to make these changes,” Ms Brown said.
“We will help you revitalise journalism … in a few years the ­reverse looks like I’ll be holding your hands with your dying ­business like in a hospice.”
I should note that Brown denied making the comments to The Australian (“These quotes are simply not accurate and don’t reflect the discussion we had in the meeting”); I should also note that The Australian has five people in the meeting corroborating them.

Much of the attention given to this story by Media Twitter has focused on the “doesn’t care about publishers” bit and the work-with-us-or-die implication of the second quote. But the story has an attached illustration that includes an alleged Brown quote that didn’t make it into the final story, and in some ways that’s really the most important one:
“We are not interested in talking to you about your traffic and referrals any more. That is the old world and there is no going back.”
That’s the big reversal here, given that “traffic and referrals” were roughly 99 percent of what Facebook had to offer publishers over the past half-decade or so. It was that firehose of eyeballs that led to new editorial strategies designed for share-friendly content, as well as the thought that maybe digital advertising could pay the bills after all.

Facebook has spent most of the last year reducing the amount of traffic it sends publishers, first through unspoken tweaks in 2017 and then with a series of announced changes in early 2018.... 

Insurance: "NOAA lowers 2018 Atlantic hurricane forecast, as El Nino chances rise"

From Artemis. Aug. 11:
The U.S. National Oceanic & Atmospheric Administration (NOAA) is the latest to reduce its forecast for the numbers of storms and hurricanes that will occur during the 2018 Atlantic hurricane season, as its Climate Prediction Center raises the likelihood of a below-normal Atlantic hurricane season to 60%.

Back in May when NOAA’s Climate Prediction Center first forecast activity levels for the 2018 Atlantic hurricane season it had given a 25% chance of a below-average level of storms forming.
At that time NOAA was calling for between 10 to 416 named storms, 5 to 9 hurricanes and 1 to 4 major hurricanes during the season.

Now, with this latest update NOAA has reduced all of the numbers, now calling for 9 to 13 named storms, 4 to 7 hurricanes and 0 to 2 major hurricanes during the entire 2018 hurricane season.
“Conditions in the ocean and the atmosphere are conspiring to produce a less active Atlantic hurricane season than initially predicted in May,” NOAA explained.

“There are still more storms to come – the hurricane season is far from being over. We urge continued preparedness and vigilance,” added Gerry Bell, Ph.D., lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center.

With the new forecast figures, NOAA now not only gives a much higher probability of a below-average hurricane season for the Atlantic in 2018, but it also says that the chance of a near-normal season is now at 30%, while the chance of an above-normal season has dropped from 35% to just 10%.

So far this season we’ve seen four named tropical storms, two of which reached hurricane strength. NOAA notes that an average hurricane season produces 12 named storms, of which six become hurricanes, including three major hurricanes....MORE
 We'll be back with the IRI ENSO 'Quick Look' later today.

Monday, August 13, 2018

"In the Tesla drama, Saudi Arabia reminds Silicon Valley of its weight" (TSLA; OIL)

From recode:

Not only are the Saudis are a viable pool of cash for cash-seekers, they are building considerable leverage in Silicon Valley deal-making.
The Saudi Arabian government cannot make any Silicon Valley hotshot do anything. But they can make it awfully appetizing.

The news that the Saudi government had essentially convinced Elon Musk to weigh taking Tesla private served as another reminder that Riyadh is an ascendant, underrated power player in Silicon Valley finance. If Musk and the Saudis manage to take the $60 billion company off the public markets, it will embolden a sovereign wealth fund that, despite its charm offensive in recent years, is still working to secure its footing in America’s old-guard money world.

The Saudis have not been quiet about their ambitions to play with the big boys in Silicon Valley over the last three years. The country’s $3.5 billion investment in Uber was not a splash but the opening of a gusher, an unsaid hello from Saudi Arabia to U.S. companies that it is a willing investor if they will help move the Saudis off their dependence on oil.

Soon after came Saudi-sized checks into the $100 billion SoftBank Vision Fund, the most ambitious investing project in Silicon Valley today. America’s jet-setting class toasted the country last October at what has become a new stop on the high-finance conference calendar. And, of course, there was this year’s visit by Mohammed bin Salman, the country’s emissary to Silicon Valley, who was greeted with glitz and glam at America’s most prominent corporations.

Don’t be surprised if the Saudi sovereign wealth fund soon opens an office in San Francisco or on Sand Hill Road.

These Saudi moves haven’t been universally embraced....MORE

Potemkin AI: Many instances of 'artificial intelligence' are artificial displays of its power and potential

One of the problems with artificial intelligence and its presentation to society is the image of omnipresence that many of its detractors ascribe to what is currently a not-so-advanced technology.
That image is also presented by proponents as a means to cow citizens—see China's totalitarian internal propaganda—into a version of Martin Seligman's learned helplessness. Resistance is futile, might as well just curl up in a ball, etc.

I don't have a lot of time for Howard Zinn's approach to history but one of his ideas seems to bear on this point:
“If those in charge of our society - politicians, corporate executives, and owners of press and television - can dominate our ideas, they will be secure in their power. They will not need soldiers patrolling the streets. We will control ourselves.”
If you think you are always being out-thought by folks with access to all-powerful A.I. you will comport yourself differently than if you don't think the stuff is omnipotent.

From Real Life Magazine, August 6:

Potemkin AI
Jathan Sadowski 
In 1770, the Hungarian inventor Wolfgang von Kempelen unveiled the Mechanical Turk, a chess-playing contraption that “consisted of a wooden cabinet behind which was seated a life-size figure of a man, made of carved wood, wearing an ermine-trimmed robe, loose trousers and a turban — the traditional costume of an Oriental sorcerer,” according to journalist Tom Standage. The chess-playing robot was toured around Europe and America, and exhibition matches were staged with such famous opponents as Napoleon Bonaparte. All the while, Kempelen maintained that the automaton operated by its own accord.

To prove there was no trickery, he opened the cabinet before every exhibition and showed spectators the dense tangle of gears, wheels, and levers. But Kempelen had actually created an elaborate illusion, not a robot. Inside was a human chess master who used magnets and levers to operate the Mechanical Turk and hid behind the fake machinery when Kempelen opened the cabinet. In other words, the complex mechanical system that Kempelen showed people was meant to distract their attention from how the automaton really worked: human labor. Kempelen sold the idea of an intelligent machine, but what people witnessed was just human effort disguised by clever engineering.

In the 1730s, a French inventor named Jacques de Vaucanson a copper-pated cyborg called La Canard Digérateur, or the Digesting Duck. It was the size of a living duck, walked like a duck, and quacked like a duck. But its real trick, which amazed and baffled audiences, was that it could shit like a duck. The automaton “ate food out of the exhibitor’s hand, swallowed it, digested it, and excreted it, all before an audience,” as journalist Gaby Wood described it in an article for the Guardian.
Vaucanson claimed that he had built a “chemical laboratory” in the duck’s stomach to decompose the food before expelling it from the mechanical butt. While Vaucanson was an expert engineer — the duck was an intricate piece of machinery — like a good magician he did not reveal how the duck worked. After his death, the secret was uncovered: There was no innovative chemical technology inside the duck, rather two containers, one for the food and one for preloaded excrement. (Strangely, the Digesting Duck and Mechanical Turk were both destroyed by museum fires around the same time in the mid-19th century.)

Kempelen and Vaucanson would fit very well into Silicon Valley today. They could make mysterious machines and wondrous claims to the public about what they could do. Vaucanson literally snuck shit into his technological system and called it innovation. And Kempelen’s Mechanical Turk was a forerunner of today’s systems of artificial intelligence, not because it managed to play a game well, as with IBM’s Deep Blue or Google’s AlphaGo, but because many AI systems are, in large part, also technical illusions designed to fool the public. Whether it’s content moderation for social media or image recognition for police surveillance, claims abound about the effectiveness of AI-powered analytics, when, in reality, the cognitive labor comes from an office building full of (low-waged) workers.

We can call this way of building and presenting such systems — whether analog automatons or digital software — Potemkin AI. There is a long list of services that purport to be powered by sophisticated software, but actually rely on humans acting like robots. Autonomous vehicles use remote-driving and human drivers disguised as seats to hide their Potemkin AI. App developers for email-based services like personalized ads, price comparisons, and automated travel-itinerary planners use humans to read private emails. A service that converted voicemails into text, SpinVox, was accused of using humans and not machines to transcribe audio. Facebook’s much vaunted personal assistant, M, relied on humans — until, that is, it shut down the service this year to focus on other AI projects. The list of Potemkin AI continues to grow with every cycle of VC investment.

The term Potemkin derives from the name of a Russian minister who built fake villages to impress Empress Catherine II and disguise the true state of things. Potemkin tech, then, constructs a façade that not only hides what’s going on but deceives potential customers and the general public alike. Rather than the Wizard of Oz telling us to pay no attention to the man behind the curtain, we have programmers telling us to pay no attention to the humans behind the platform.

When the inner workings of a technology are obscured, it’s often labeled a “black box,” a term derived from engineering diagrams where you can see the inputs and outputs but not what happens in between. An algorithm, for example, might effectively be black-boxed because the technical details are described using dense jargon decipherable by only a small group of experts. Accusations of willful obscurantism are often reserved for postmodernism, but as a recent paper on “troubling trends in machine learning scholarship” points out, research and applications in this field are rife with ambiguous details, shaky claims, and deceptive obfuscation. Being baffled by abstruse critical theory is one thing, but not being able to discern how an AI makes medical diagnoses is much more consequential.

Algorithms might also be black-boxed through the force of law by the tech companies who claim them as trade secrets. In The Black Box Society, Frank Pasquale details how many of the algorithms that govern information and finance —the circulation of data and dollars — are shrouded in opacity. Algorithms are often described as a type of recipes. Just as Coca Cola keeps their formula a tightly guarded secret, so too do tech companies fiercely protect their “secret sauce.” Again, it’s one thing to enjoy a beverage we can’t reverse-engineer, but quite another to take on faith proprietary software that makes sentencing decisions in criminal cases.

Potemkin AI is related to black boxing, but it pushes obfuscation into deception. The Mechanical Turk, like many of the much-discussed AI systems today, was not just a black box that hides its inner workings from prying eyes. After all, Kempelen literally opened his automaton’s cabinet and purported to explain how what looked to be a complex machine worked. Except that he was lying. Similarly, marketing about AI systems deploy technical buzzwords work as though they were a magician’s incantations: Smart! Intelligent! Automated! Cognitive computing! Deep learning! Abracadabra! Alakazam!

See also July's "The rise of 'pseudo-AI': how tech firms quietly use humans to do bots' work".

And previously from Mr. Sadowski and Professor Frank Pasquale a mini-tour de force:
The Spectrum of Control: A Social Theory of The Smart City

In Which FT Alphaville Pokes At One Of The Most Profound Questions In Finance

Expected future returns—and getting your fair share, or better yet, more than your fair share—is pretty much the raison d'être for all the words and pixels and neuronal sparks on this blog and anywhere else the topic is business/finance/investment, and, as the rabbinic sage Hillel said in a very different context, "All the rest is commentary".

Here is the problem, last seen in 2015's "Mutual Funds In the Venture Capital Business: 'Eye-Popping Valuations'":
Maximizing expected future returns.
One of our favorite topics, along with agricultural commodities and production, materials science, really, really fast computers, advanced manufacturing technology, energy and Dogbert's schemes for world domination. 

One of the most profound facts of investing is that the growth is in the new companies.*
Not small companies, new ones.
So the question is: How to capture that growth?
And while you're at it, maybe mitigate some of the risk inherent in new ventures?...
We'll come back to that asterisk but first, FT Alphaville.
And just a heads up: our concern here is not buybacks but getting companies public while there is still some growth left in the things. For buybacks,  the answer is pretty straightforward, go back to the pre-1982 rules on share repurchases:
...II. Overview of Current Rule 10b-18
A. Rule 10b-18 as a "Safe Harbor"
In 1982, the Commission adopted Rule 10b-18,4 which provides that an issuer will not be deemed to have violated Sections 9(a)(2) and 10(b) of the Exchange Act, and Rule 10b-5 under the Exchange Act, solely by reason of the manner, timing, price, or volume of its repurchases, if the issuer repurchases its common stock in the market in accordance with the safe harbor conditions.5 Rule 10b-18's safe harbor conditions are designed to minimize the market impact of the issuer's repurchases, thereby allowing the market to establish a security's price based on independent market forces without undue influence by the issuer....
Here Alphaville looks at both topics, the changing characteristics of the IPO biz and the astonishing metrics of the repurchase racket:

The slow death of public markets
Last Wednesday Bernstein dedicated its Global Quantitative Strategy note to buybacks. Tucked in the note's final paragraph is, you know, no big deal, just a hint of concern about the future of capitalism:
Also, is there a society-level worry here if these incentives and the scale of buybacks are distorting the allocation of capital? There is probably something in this, we do worry about how management incentives are set. We will leave that topic for future research.
We are tired of hearing that there is nothing inherently wrong with buybacks. There's also nothing inherently wrong with tequila, but take too much of it at the wrong time, and you're probably making bad life choices.

In the last week both Bernstein and Goldman Sachs have predicted that buybacks in the US will either reach or exceed $1t in 2018. Investors have been eager to explain that this capital is not disappearing. It is merely rotating out of equities and into other assets. But this is just an accurate restatement of the problem: public markets are shrinking.

The pace at which companies are buying back stock from their shareholders this year does make our eyes water a bit. Since January, US corporations have authorised 80 per cent more buybacks than the year prior, totalling $754bn so far.

US companies are flush with cash, thanks both to blockbuster earnings growth and new tax incentives to repatriate capital from abroad. Traditionally, a buyback is a sign that a company's executives have greater confidence in future growth than its shareholders. According to Bernstein, companies that repurchase stock usually outperform by 3.4 per cent, but in 2018 they're underperforming by 2.7 per cent. All that tequila this year seems to be more a sign of despair than good cheer. Companies don't seem to have enough good ideas or confidence for all the cash they have on hand.

But this is a bigger story than what's happened in 2018. For years, companies have been both skimming the supply of shares off the top through repurchases, and restraining it at the bottom by issuing fewer shares altogether. Bernstein looks at a metric it calls “net issuance”: equity issuance — buybacks. The gap is largest in the United States, where net issuance currently sits at the lowest level since April 2009:...
...But Bernstein also finds that net issuance is unprecedentedly negative — buybacks exceed issuance — in Europe, the United Kingdom and Japan:
The stock of listed equities in the world has never shrunk at such a rate... We have not seen anything like this in 25 years.
We're seeing the move away from public-market equity capital in new companies, too. In June WilmerHale, a law firm in the US, published its annual IPO Report. Both the annual number of IPOs and their total dollar volume, the report shows, have never reached the heights of the late 1990s — and that's not for lack of available capital in the world. The median offering size hasn't really changed since 2000; companies tend to raise about $100m when they go public.

But: companies are now waiting about twice as long to go public. And they're raising about twice as much money in private capital markets before they do:
When Spotify listed on the NYSE earlier this year Daniel Ek, the CEO, published a letter that basically said “Meh.” He wasn't ringing any bells or doing interviews, he explained, he was just going to keep doing his thing, because Spotify was not raising capital. We're not calling Mr Ek out on this. He was just saying something in plain English that's been true for years.... 

That 2015 asterisk goes to some additional comments on getting at the growth:
...For portfolio investors the situation is even worse than for the overall economy.
You miss all the growth of private companies.

On the one hand private companies are often fine businesses which the owners have no desire to share and on the other hand the universe of private companies is where you find the younger, smaller, more dynamic and thus faster growing entities.

These two attributes are what private equity and venture capital, each in its own way, attempt to capture. ...
See also the intro to 2014's:

Barron's Cover: Tech Stocks--The Bubble Is In the Private Market
There are two things that have changed over the last couple decades in valuing soon-to-be-public companies:
1) Long gestations to accrue every bit of hyper-growth from successful business to the private owners.
2) Late round valuation bumpers, a tactic we first saw in Kleiner, Perkins deals, note below....

"The world's largest maker of bitcoin mining chips is reportedly hoping to raise $18 billion in what could be one of the largest IPOs in history"

As mentioned a couple weeks ago, these numbers don't seem to add up.

From Business Insider, August 10:
  • Cryptocurrency mining chip maker Bitmain hopes to raise $18 billion for an IPO in the coming months, according to documents obtained by CoinDesk.
  • If the company raised $18 billion at a market capitalization of $40 to $50 billion, that could make it the largest IPO in history.
  • In June, Bloomberg reported that Bitmain was planning to go public to further its pursuits in producing hardware for artificial intelligence technology.
The world's largest producer of cryptocurrency mining chips, Bitmain, is planning to file for an initial public offering in September, according to documents obtained by CoinDesk.
According to the documents, CoinDesk reports Bitmain's proposed public offering could end up being the largest in history: The company reportedly hopes to raise $18 billion IPO on the Hong Kong Stock Exchange at a market capitalization of $40 to $50 billion.

While Bitmain's primary industry has been producing integrated circuit chips used to algorithmically "mine" cryptocurrencies like bitcoin, the company recently began to manufacture chip hardware for the artificial intelligence industry.

Bitmain is headed up by 32-year-old Jihan Wu, who founded the Beijing-based company only five years ago with the vision that digital currencies would be the de facto money of the future.

In June, Bloomberg reported that Wu was considering taking his company public and that Wu plans to position Bitmain as a ruthless competitor in the circuit chip industry....MORE
July 30 
"Bitcoin Miner BitMain Says It Earned $1.1 Billion In Q1 2018; Plans IPO"
November 2017 
Did Anyone Do Even a Minimal Check on the Sensationalist Bitcoin Electrical Consumption Story?
November 2017 
"Why the Biggest Bitcoin Mines Are in China"
August 2017 
China’s Bitmain dominates bitcoin mining. Now it wants to cash in on artificial intelligence

Gold, Silver Looking At Two-Year Lows

Ditto for platinum which has its own set of diesel vehicle problems.
We've referred to gold's "stately decline" and have an ultimate price target of $875 but now's the time to look at the Commitment of Traders reports for a possible pause.

While we place less weight on the CoT's than many analysts, they can be helpful to point up short term trend changes, simply because over time the commercials have to be right or they go out of business and the game ends for everyone.

Here's gold via FinViz:

Note that the commercial hedgers have been pulling in their shorts since January and are approaching a net flat position.
This doesn't mean an immediate explosive move to the upside, just that being short is getting more dangerous until the commercials move any inventory they've been accumulating.

From Reutes via Kitco:

PRECIOUS-Gold hits 17-month low as investors seek refuge in dollar
Speculators raised net gold shorts to record -CFTC
* GRAPHIC-2018 asset returns:
* Weak rand supports platinum production in South Africa

(Updates throughout, changes dateline from LONDON)

By Zandi Shabalala

LONDON, Aug 13 (Reuters) - Gold prices hit 17-month lows on Monday, losing out to U.S. Treasuries and a stronger dollar as investors sought refuge from a financial market rout triggered by a crashing Turkish lira.

Investors traditionally use gold as a means of preserving the value of their assets during times of political and economic uncertainty and inflation.

But it has this year failed to benefit as investors made a beeline for U.S. Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.

A higher U.S. currency also makes dollar-denominated assets more expensive for holders of other currencies, which subdues demand - a relationship used by funds to generate buy and sell signals from numerical models.

Spot gold had dropped 0.8 percent to $1,201.54 an ounce by 1053 GMT, its lowest since March 2017. U.S. gold futures were down 0.83 percent at $1,208.60 an ounce.

The lira has tumbled on worries over Turkish President Tayyip Erdogan's increasing control over the economy and deteriorating relations with the United States. "The safe-haven demand that has been triggered by the crisis in Turkey is going into the dollar rather than gold, which has been a trend going on for a while now," said Capital Economics analyst Simona Gambarini....MORE:
Front futures
Gold   $1204.00 down $15.00
Silver $15.10 down 20 cents
Platinum $809.60 down $20.00

And the silver chart:

This might be a good time to remind readers that it was the commercial's who crushed the Hunt brothers' silver play back in 1980. If interested see 2014's "On The Passing Of Nelson Bunker Hunt, Two Words".

"Nobel Prize Winner Joins Blockchain Startup To Fix Smart Contracts"

My first thought on seeing the headline was "Uh oh, LTCM had two Nobel Laureates" but I was jumping to conclusions and Professor Hart may be bridging the academia/finance gap.
From Forbes, August 1:
Long before blockchain was cool, Nobel Prize-winning economist Oliver Hart was into contracts. As far back as 1976, the doctor of economics from Princeton University had been exploring how corporations use contracts to interact, and what happens when things go wrong.

Over the years, Hart became fascinated by what he describes as the “fuzzy” areas of these agreements, where the anticipated potential outcomes break down, and arbitrators, or even judges are required to make sense of the chaos. The concept is called “contract incompleteness,” and in the age of blockchain, it is on the verge of exploding into more mainstream circles.

By June 2016, Hart and fellow economist Bengt Holmström of the Massachusetts Institute of Technology were just months away from winning the Nobel Prize for their work in “residual rights control,” a term they coined to describe who has control over an agreement when all anticipated eventualities break down. Then, modern technology finally caught up with him.

A distributed autonomous organization called The DAO, powered by little more than self-executing code called a smart contract, had dramatically imploded. A contract with a bit too much fuzziness was made to execute an order its authors never intended, sending $60 million worth of the ethereum cryptocurrency to a hacker’s wallet.

While a simple tweak to the underlying agreement could have prevented the loss, the ethereum blockchain was designed to be immutable, no one had residual rights of control, and there was no single authority to charge back such illicit gains. The resulting wave of financial destruction culminated in the contentious separation of ethereum into two competing blockchains.

The original blockchain with the hacked funds still in the hacker’s wallet, now called ethereum classic, is currently valued at $1.6 billion. The other blockchain, where the users agreed to return the illicit gains to their original owners, simply called ethereum, is now valued at $42.7 billion.

From the ashes of The DAO collapse, a boutique industry of smart contract consulting firms emerged to help ensure smart contracts are as airtight as possible before they go live. And as of today, Hart officially joined one of those consulting startups, blockchain economics, governance and design firm Prysm Group, as its first senior adviser.

“Instead of just looking at the contract itself, what’s written there, it’s also useful to think about what procedures are put in place for dealing with what isn’t there,” said Hart, who will be paid for his work with Prysm Group on a case-by-case basis. “How you communicate with the other party, how you might resolve disputes.”

At his new position Hart will review incentive structures designed by the Prysm Group team to help ensure the client’s desired outcome is achieved. While this is the first time the Harvard professor has worked directly with a blockchain startup, his expertise in the field of contract incompleteness has previously resulted in his serving as an expert witness in cases involving the Department of Justice and Uber.

The key to Hart’s work lies in the incentive structures put in place around the agreement. On the most basic level, he believes that changing ownership of an asset is the simplest way to ensure the peaceful resolution of a contract dispute. So, at the most extreme level, if two companies are in a dispute, one company buying the other guarantees the ownership of residual rights of control....MUCH MORE

Capital Markets: "Turkey Drives Risk-Off, but Pressure Abating"

From Marc to Market:
The failure of Turkey to grab the bull by the horns, so to speak, and come to grips with the situation saw the dollar soar above TRY7.23(from TRY6.43 at the end of last week) and to ZAR15.55 (from ZAR14.09). The Mexican peso, the strongest currency this year, and which has been partially protected by prospects of a new NAFTA agreement has suffered as well. The dollar finished last week near MXN18.91, having advanced by more than 1% for the second sessions, surged above MXN19.37 today.

The risk-off moment is evident in the European periphery, where Italy's 10-year benchmark has been lifted above 3%. Spanish, Portugal and nearly all European yields are rising, but Germany. The US benchmark yield is a basis point lower.

The MSCI Emerging Markets index gapped lower and is off 1.75%. It has come within a quarter of a percentage point of the June low which was the lowest level since July 2017. The gap in the MSCI Asia Pacific Index was a little larger, and the stability seems more fragile. The low for the year was set in early July is less than 0.5% away. Of note, Chinese and India markets have fared among the best, with their major indices losing less than 0.5%. The dollar rose to almost CNY6.8850 today. The year's high was set on August 3 just shy of CNY6.90.

The measures announced by the Turkish government seem woefully inadequate. Required reserves were cut, which may have freed up around TRY10 bln and eased some collateral rules and boost the among of lira that can be borrowed against euro and dollars. There appear to be some de facto capital controls, such as restrictions on fx swaps, but broad capital controls were rejected. Efforts to crack down on social media seems little more than a distraction.

Even the triple-A rated Australia was not immune to the pressures, though bonds were firm. The local equity market lost about 0.4%, though saw gains in utilities, information technology, and energy. The Australian dollar is the weakest of the major currencies, nursing a 0.5% loss (~$0.7265). The yen is the strongest of the majors, rising almost 0.4% against the greenback. The dollar approached the JPY110 area, where 1 $1 bln expiring option is struck, before recovering in the European morning toward JPY110.50.

European equities are lower, but the pace is modest.. ...

Sunday, August 12, 2018

Shipping: "The Global Container Shipping Industry since the Hanjin Collapse"

From Wolf Street, August 11:

Overcapacity reigns as companies splurge on the largest ships, consolidation rages, no one wants to back off.
In August 2016, Hanjin Shipping Co., at the time the world’s seventh largest container carrier, sought bankruptcy protection. It was the largest bankruptcy in shipping industry history. On February 2, 2017, the Seoul Bankruptcy Court declared that Hanjin Shipping would be liquidated, as restructuring its debts would be “prohibitively expensive.” But just how big was this debt load?

Hanjin Shipping had originally admitted to the equivalent of $5 billion in debts. Once the bankruptcy court got to work, there were nearly weekly announcements that more debt had been found, tucked away in nooks and crannies of the once glistening edifice. In the end, it was determined that Hanjin, when it entered receivership, actually had $10.5 billion in debts.

Hanjin had been tripped up by, among other factors, a problem that plagues the container shipping industry: overcapacity. And despite Hanjin’s liquidation, that overcapacity is getting a whole lot worse.

As of June 2018, all of the top 13 container carriers bar one had added capacity compared to a year earlier. The lone contrarian was Hyundai Merchant Marine (HMM), which is presently exiting the Transatlantic market altogether and as such is eliminating capacity. But the other 12 big container carriers more than made up for it. Here are some standouts:

Zimm Integrated Shipping Services (Israel) increased its capacity by 24.5%.

Orient Overseas Container Line (Hong Kong) added 18.4%.

CMA-CGM (France) added 16.3%. It also ordered from two state-owned Chinese shipyards nine 22,000-TEU (Twenty-foot Equivalent Unit) container carriers that will be the world’s largest when deliveries start next year. Here is a current record holder at 18,000-TEU. Note the tiny 40-foot containers stacked on top (image via CMA-CGM):...

COSCO, a state-owned product of China’s “command economy,” added 12.4%.

Maersk Line, the largest carrier by capacity, ahead of COSCO, added 10.8% in capacity.

ONE (Ocean Network Express), a brand-new company formed from the container divisions of Japan’s top three shipping companies (Mitsui-O.S.K., Nippon Yusen Kaisha and K-Line) added 7.9%, despite many promises to the contrary.

Including HMM, the average capacity increase for these 13 already huge shipping companies was 8.5%. Including all companies, big and small, container carrying capacity worldwide increased by a 9.3% year on year.

As a result, despite surging transportation inflation worldwide, the China Containerized Freight Index (CCFI), which tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world, at 821 on Friday, has not fully recovered from its brutal collapse that bottomed out at 636 in April 2016. Before the collapse, it had ranged consistently above 1,000 and periodically above 1,100:
Note that just like the Baltic Dry Index, the CCFI is not a measure of trade volume, but a measure of how expensive (or cheap) it is to ship goods by sea around the world.

Only part of the collapse of the containerized freight rates in 2015 and 2016 was due to overcapacity. Another major factor was the plunge of the price of oil, and therefore of bunker, the fuel for these giant container ships.

With the CCFI well below 1,000 since 2015, while bunker prices have been rising since 2016 along with the costs of emission compliance, profits are being eroded, and momentous changes are sweeping through the industry.

Above mentioned ONE can be considered one of the poster children for this “brave new world”: it started operations on April 1, 2018 (the beginning of the fiscal year in Japan), and during its first quarter of existence has already managed to lose $120 million.

Japanese shipping companies have a time-honored tradition of ignoring losses until they become too large to be ignored, and then there’s always a big scandal followed by an emergency bailout, merger or takeover. So a measly $120 million in losses in a single quarter is of no concern to them.
AP Moller-Maersk, the parent company of Maersk Line, bought Hamburg Süd from Dr Oetker KG of Germany for €4.3 billion. In 2013 Hamburg Süd had attempted a merger with Germany’s other shipping giant, Hapag-Lloyd, but Dr Oetker KG pulled out when a satisfactory financial package could not be agreed upon.

Hapag-Lloyd then merged with perpetually troubled Gulf carrier United Arab Shipping Company (UASC), resulting in a curious ownership situation. Due to previous mergers and share swaps, the largest shareholder of the “new” Hapag-Lloyd is Chile’s Grupo Luksic (20.7%), followed by three that each own 14%: Kuehne + Nagel AG (Germany, run through a shell company in Switzerland); the City of Hamburg; and Qatar’s national wealth fund, QIA. Saudi Arabia’s Public Investment Fund owns 10%. The rest is free float....

Our last comment on the German carrier, July 9:
Hapag-Lloyd had gone through so many mergers and divestitures that I'm not even sure what they own any more although they are still the number five or six container shipper and through 'The Alliance' with Japan's ONE and China's Yang Ming can move a box pretty much anywhere in the world.

But that's something CMA CGM can already do, on their own or through The Ocean Alliance. so there must be some other reason for the approach, maybe efficiencies that could be wrung out of a combination.
And previously on Hanjin:

Shipping: What the Heck Happened to Hanjin’s Ships and the Collapsed Freight Rates?
Shipping: Hanjin Re/Insurance Loss Could be $2 Billion Says Credit Suisse
Shipping: "Welcome to the Hanjin California"
"Hanjin Shipping Rebounds As Creditors Talk Of Funding Support Again"
Shipping: AP Moller-Maersk Break-up, Hanjin Breakdown
Shipping: "Following Hanjin’s Collapse, Heavily Indebted Yang Ming at Risk of Financial Trouble"

Put the Phone Down, Step Away From the Screen: "Chemists discover how blue light speeds blindness"

Via PhysOrg, August 8:

Blue light from digital devices and the sun transforms vital molecules in the eye's retina into cell killers, according to optical chemistry research at The University of Toledo.
The process outlined in the study, which was recently published in the journal Scientific Reports, leads to age-related macular degeneration, a leading cause of blindness in the United States.

"We are being exposed to blue light continuously, and the eye's cornea and lens cannot block or reflect it," Dr. Ajith Karunarathne, assistant professor in the UT Department of Chemistry and Biochemistry, said. "It's no secret that blue light harms our vision by damaging the eye's retina. Our experiments explain how this happens, and we hope this leads to therapies that slow macular degeneration, such as a new kind of eye drop."

Macular degeneration, an incurable eye disease that results in significant vision loss starting on average in a person's 50s or 60s, is the death of photoreceptor cells in the retina. Those cells need molecules called retinal to sense light and trigger a cascade of signaling to the brain.

"You need a continuous supply of retinal molecules if you want to see," Karunarathne said. "Photoreceptors are useless without retinal, which is produced in the eye."

Karunarathne's lab found that blue light exposure causes retinal to trigger reactions that generate poisonous chemical molecules in photoreceptor cells....MORE
And there I was, all concerned that the problem with blue light was that it messed with your sleep cycles.
That's the least of our worries.

The Little Red Book vs. the Big White Book (Mao v. Xi)

Ha! Great minds and all that.*
From the Oxford University Press blog,:
As part of our What Everyone Needs to Know series, we take a look at the famous writings of two of China’s predominant leaders.This article first appeared for The Times Literary Supplement (TLS) on 15 May 2018.

There are some similarities between former Chairman of the Communist Party of China Mao Zedong’s most famous book, Quotations from Chairman Mao Zedong (“The Little Red Book”) and current General Secretary Xi Jinping’s The Governance of China (“Big White Book”)—the second installment of which came out last year, each volume the same cream color and featuring the same photograph of the author. For example, even those in China uninterested in actually reading from the Little Red Book half a century ago would have found it politically useful to have a copy on hand and be able to claim familiarity with it—and the same goes for Xi’s Big White Book now. In addition, it is widely known that Mao’s writings were the works of many authors and there is little doubt that Xi’s ever-expanding corpus is also a collective creation.

There are, however, limits to this sometimes overstated comparison. For example, The Big White Book has not been put to nearly as many uses as the Little Red one. Only the latter was waved aloft at rallies and read aloud from in hospitals by true believers, convinced that its sacred words could make the deaf hear.

In addition, some outside China believed Mao’s short tome would offer guidance as they struggled to bring about radical change in their own countries. Today, there is increasing talk in some quarters of an exportable “China model.” Yet most foreign fans—a group that includes Mark Zuckerberg, who had a copy of Volume One on display on his desk in Silicon Valley when Lu Wei, then the chief Chinese censor, paid Facebook a visit a few years back—have so far contented themselves with claiming that Xi’s Big White Book matters simply because it offers insights into the author’s slogans, goals, and psyche.

The Little Red Book contains short sections from Mao’s writings, composed over the course of decades, while the speeches in The Big White Book were given during a short time span and appear either as lengthy excerpts or in their entirety. Mao had things to say about all the main Marxist concepts and criticized Confucianism as antithetical to his Party’s vision, while Xi ignores class struggle (neither this term nor the word “class” are listed in the Index of Volume One; instead one finds “Clash of Civilizations” and “Cloud-based Computing”). And he quotes Marx and Confucius together, as though the man Mao called a “feudal” philosopher and the German co-author of The Communist Manifesto belonged to the same philosophical school.

In China’s political system, those who end up leading do not take part in public campaigns in which they spell out what they believe and will do once in power. They attain the top spots first, then make statements about what they believe, give speeches about what they have done, and describe their goals. This means that dipping into Volume One of The Governance of China is a bit like working your way through a compilation of stump speeches. He claims that under his watch, China’s 2010 GDP will be doubled by 2020, and that the country will be a thoroughly “modern socialist” one by the middle of the century, when the People’s Republic of China turns 100....MORE
*From August 5's "China to require patriotism education for intellectuals " (and the rise of "Xi thought"):
What was old is new again. I read about this, back in the day they called it the Great Proletarian Cultural Revolution or something.....

....Now, if only Chairman Xi could package those thoughts into a little book, maybe put an eye-catching red cover on it... 
So, granted that it's the OUP/TLS vs Climateer Investing, and despite the fact they were 2 1/2 months earlier, not having seen the TLS piece I shall still claim credit for (almost) simultaneous invention.

"...Since 2006, Private Equity Has Produced Only S&P 500 Returns While Reaping $400+ Billion in Fees"

The discussion of hydraulic models of the economy in this morning's "If The FT's Izabella Kaminska Doesn't Start Posting To Alphaville...." reminded me of William Banzai's take on the Phillips model but with bonus receptacles and fee siphons:


Genius squared.from a post on GE's Mark I nuclear reactor at ZeroHedge!

which in turn reminded me of a story from Naked Capitalism that was in the queue:

August 7, 2018
Oxford Professor Phalippou: Since 2006, Private Equity Has Produced Only S&P 500 Returns While Reaping $400+ Billion in Fees
The premise that private equity delivers returns better than that of public stocks has fallen apart as more and more money has chased a not-comparably-expanding universe of deals. Private equity as a share of the global equity markets has more than doubled since the early 2000s. Despite private equity funds having record levels of “dry powder,” meaning committed but unspent cash, more and more investors are throwing money at the strategy out of desperation to achieve higher returns.

We’ve also pointed out that fiduciaries like CalPERS have continued to be fanatically loyal to private equity even when its own metrics have said private equity isn’t earning enough in the way of returns over the last ten years to justify its extra risks.

Recent work by Oxford professor Ludovic Phalippou, one on the few academics not beholden to the private equity, paints an even grimmer picture of how the private equity industry has performed since 2006. As described in the Financial Times, Phalippou ascertained, using what he describes as conservative (meaning private equity industry favoring) assumptions, that the private equity industry only matched the S&P 500 benchmark. This is particularly damning, since as we have described repeatedly in past posts, the use of the S&P 500 is flattering to private equity by virtue of its average company size being much larger than typical private equity portfolio company sizes, hence you’d expect a higher growth rate. And for newbies, do not forget that the rule of thumb is that private equity should outperform the relevant public equity benchmark by 300 basis points (3%).
From the Financial Times:
US private equity managers have extracted $400bn in fees and expenses from investors since 2006 but on average they failed to beat the returns from an S&P 500 tracker fund, according to a new analysis.
The findings are an analysis by Oxford Saïd Business School based on the Burgiss database…
Ludovic Phalippou, a Saïd finance professor, said the funds launched in those 10 years have, on average, performed in line with the S&P 500, the main US equity benchmark. This delivered annualised returns, including dividends, of 8.6 per cent between January 2006 and the end of March 2018.
Nine out of 10 of these private equity funds also beat the 8 per cent annual return “hurdle” that allows their managers to claim performance fees, which amounted to an estimated $200bn.
A further $200bn was paid in management and other expenses, but there was less certainty over this data. The estimate could be conservative…
In fact, if you read Phalippou’s blog post, which gives a more detailed description of his analysis, he did indeed bend over backwards to be fair, and arguably more than fair to private equity managers. However, part of being “fair” meant using PME, which means “public market equivalent,” which is widely acknowledged to be the most accurate way to compare private equity returns to public market returns. It’s no accident that the private equity industry on a widespread basis instead uses IRR, or “internal rate of return” which is flattering. From his site:
Burgiss is perceived as one of the most comprehensive and accurate database of private equity fund cash flows….

Fact and matter is that for many years, people kept on saying that PE funds outperformed the S&P 500 by 3-4% p.a. and that was great (see a related blog). Over the last 10-12 years the S&P 500 has been doing well and now people tend to use other indices as benchmarks (e.g. MSCI world); this still has little to do with the type of companies helped by PE funds but MSCI world has the advantage of having low returns over the last decade.

To keep it simple and focused, let’s keep it to the tradition and compute PMEs with the S&P 500....

So Today Would Be Schrödinger's 131st Birthday

Last year Google gave him a doodle:

This year's doodle is the Mexican comic/actor/screenwriter Cantinflas.

Back to Schrödinger.
The Independent rounded up some jokes:
  • Schrödinger's cat walks into a bar. And doesn't. 
  • The Google Doodle today both is and isn't about Schrödinger's cat. 
  • Curiosity may or may not have killed Schrodingers' cat
  • There ought to be a range of Schrodinger’s Cat Food. Half the price but a 50-50 chance of the tin being empty. 
  • Baa baa Schrödinger's sheep, have you any wool? Yes sir, no sir, three bags simultaneously full and empty 
  • It's not every day you get to make weak jokes about Schrodinger on Twitter. And at the same time, it IS.
  • Schrödinger's cat simultaneously has 3 million, 0 and an annoying 301 views on YouTube. (@UltimateHurl) 
  • Every time I hear a joke about Schrödinger's cat a little part of me dies and simultaneously doesn't die. (@GeorgeGavin1)
  • Wanted: Schrodinger's cat. Dead and alive. 
If those aren't funny enough for you we still have Heisenberg's birthday coming up.
Get ready for some big uncertainty yucks.

If The FT's Izabella Kaminska Doesn't Start Posting To Alphaville....

We will be forced to take drastic measures.
I'm thinking of reposting older pieces. e.g. pre-Vox.com explainer journalism. As a taste, here's a tutorial on flows and stocks:

The Parable Of Water
FT Alphaville:

Presenting an economic journey in felt, looking at whether the system’s ails have more to do with an abundance of goods than a shortage of credit because of the system’s technological advances and efficiencies. Move ahead to slide 20 for a snapshot of where we *think* we are today.
  • For water, read goods.
  • For receptacles, read money.
  • For receptacle production, read bonds.
  • For receptacle loans, read credit.
  • For ultimate receptacle authority, read government/central bank.
1) The water source.

Whilst the water flows, those who live nearest or those who have exclusive access to the water source are richest.

2) The water source stops.

When the water stops flowing all are equally unhappy. No one has an advantage.

3) Stores of water – receptacles – are invented.

While the water flows, those closest or with exclusive access are still richest.

4) Receptacles have value.

When the water stops flowing — in a scarcity environment — the man with the receptacles becomes richest and most powerful. He obtains his power and riches from having everything at a time when others have nothing.

5) Receptacles, receptacles, receptacles…

Those who live close to the water source, copy him and make their own receptacles. While the water flows, everyone near the source is equally happy.

6) My kingdom for a receptacle…

When the water stops, those with receptacles have an advantage over those who don’t. Those with the most receptacles (including our original receptacle man) are the richest and most powerful.

7) The receptacle business

When everyone’s receptacles run dry, only the man with the most receptacles is left in a position of power through his ownership of water. While the water has true value, the receptacles also develop value in their own right. Those with empty receptacles believe they are better off than those with no receptacles, since they can store water if and when it comes back. Those with surplus receptacles or the ability to create receptacles, meanwhile, induce demand for their own receptacles....
...MUCH MORE (you won't believe what happens next, #12 will shock you!)

In the above she joins a long line of modeler's including William Phillips (he of the curve) and Irving Fisher:

"The computer model that once explained the British economy (and the new one that explains the world)"
Liquidity: Irving Fisher's Hydraulic Computer
Like Phillips, Irving Fisher Was a Plumber: Hydraulic Models of the Economy

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.
Here's the latest from RT, August 12:

‘Ask your grandads’: Russian defense minister warns Germany against ‘strength & unity’ strategy 
The Russian defense minister has reminded his German counterpart that approaching Moscow from a “position of unity and strength” is not the wisest idea, citing the bitter history of WWII that should’ve made Berlin more prudent.
“We are open for dialogue. We are ready for a normal cooperation, but not at all from a position of strength,” Sergey Shoigu told Rossiya 24 TV station. “I certainly hope that the time when we could be talked to, as someone once said, as a second- or third-class country has now irretrievably passed.”

Referring to the original question from the host, Yevgeniy Popov, who noted the recent call by the German Defense Minister, Ursula von der Leyen, to engage in dialogue with Moscow only from a “position of unity and strength,” Shoigu reminded his counterpart that, while Russia seeks peace, it will not tolerate being coerced.
“After everything Germany has done to our country, I think, they should not talk on the issue for another two hundred years,” Shoigu said. “Ask your grandparents about their experience of talking to Russia from the position of strength. They will probably be able to tell you.”
Shoigu explained that NATO, including Germany, cannot come to grips with the reality of seeing Russia return to the world stage as an independent actor with a strong and powerful military force....MORE
*Talking smack:
The art of telling another person off, belittling them or calling their momma fat, while in the heat of competition.
"Man, your mamma so fat she got her own zip code!"

Saturday, August 11, 2018

This Could Be A Big Deal: Norway's Yara and the Australian Nitrogen Economy

Over the years we've visited Yara quite a few times.
First as Norwegian polymath Kristian Birkeland's baby, Norsk Hydro; then as the world's largest nitrogen wrangler, mainly for fertilizer but also a hundred other uses; and most recently as a leader, competing with Rolls-Royce, in the race to design and deploy autonomous ships. Now this.

From the journal Science, July 12, 2018:
SYDNEY, BRISBANE, AND MELBOURNE, AUSTRALIA—The ancient, arid landscapes of Australia are fertile ground for new growth, says Douglas MacFarlane, a chemist at Monash University in suburban Melbourne: vast forests of windmills and solar panels. More sunlight per square meter strikes the country than just about any other, and powerful winds buffet its south and west coasts. All told, Australia boasts a renewable energy potential of 25,000 gigawatts, one of the highest in the world and about four times the planet's installed electricity production capacity. Yet with a small population and few ways to store or export the energy, its renewable bounty is largely untapped.

That's where MacFarlane comes in. For the past 4 years, he has been working on a fuel cell that can convert renewable electricity into a carbon-free fuel: ammonia. Fuel cells typically use the energy stored in chemical bonds to make electricity; MacFarlane's operates in reverse. In his third-floor laboratory, he shows off one of the devices, about the size of a hockey puck and clad in stainless steel. Two plastic tubes on its backside feed it nitrogen gas and water, and a power cord supplies electricity. Through a third tube on its front, it silently exhales gaseous ammonia, all without the heat, pressure, and carbon emissions normally needed to make the chemical. "This is breathing nitrogen in and breathing ammonia out," MacFarlane says, beaming like a proud father.

Companies around the world already produce $60 billion worth of ammonia every year, primarily as fertilizer, and MacFarlane's gizmo may allow them to make it more efficiently and cleanly. But he has ambitions to do much more than help farmers. By converting renewable electricity into an energy-rich gas that can easily be cooled and squeezed into a liquid fuel, MacFarlane's fuel cell effectively bottles sunshine and wind, turning them into a commodity that can be shipped anywhere in the world and converted back into electricity or hydrogen gas to power fuel cell vehicles. The gas bubbling out of the fuel cell is colorless, but environmentally, MacFarlane says, ammonia is as green as can be. "Liquid ammonia is liquid energy," he says. "It's the sustainable technology we need."

Ammonia—one nitrogen atom bonded to three hydrogen atoms—may not seem like an ideal fuel: The chemical, used in household cleaners, smells foul and is toxic. But its energy density by volume is nearly double that of liquid hydrogen—its primary competitor as a green alternative fuel—and it is easier to ship and distribute. "You can store it, ship it, burn it, and convert it back into hydrogen and nitrogen," says Tim Hughes, an energy storage researcher with manufacturing giant Siemens in Oxford, U.K. "In many ways, it's ideal."

Researchers around the globe are chasing the same vision of an "ammonia economy," and Australia is positioning itself to lead it. "It's just beginning," says Alan Finkel, Australia's chief scientist who is based in Canberra. Federal politicians have yet to offer any major legislation in support of renewable ammonia, Finkel says, perhaps understandable in a country long wedded to exporting coal and natural gas. But last year, the Australian Renewable Energy Agency declared that creating an export economy for renewables is one of its priorities. This year, the agency announced AU$20 million in initial funds to support renewable export technologies, including shipping ammonia.
Yara is taking a first step toward greening that process with a pilot plant, set to open in 2019, that will sit next to the existing Pilbara factory. Instead of relying on natural gas to make H2, the new add-on will feed power from a 2.5-megawatt solar array into a bank of electrolyzers, which split water into H2 and O2. The facility will still rely on the Haber-Bosch reaction to combine the hydrogen with nitrogen to make ammonia. But the solar-powered hydrogen source cuts total CO2 emissions from the process roughly in half....MUCH MORE
Combined with the corn that fixes its own nitrogen, "Can We Grow One of the World's Largest Food Crops Without Fertilizer?" it appears there are big doings in the nitrogen biz.

A few of our Birkeland/Norsk Hydro/Yara posts:

That Time A Dozen Norwegians Stopped the Nazis From Developing the Atom Bomb and Possibly Saved Europe

The $100M Synthetic Biology Bet From Bayer and Ginko Bioworks (YAR:Oslo; CF)

Shipping: He May Not Have Received His Nobel Prizes But The World's First Fully Electric Autonomous Container Ship Will Be Called the Birkeland

"China may have to resume U.S. soybean purchases in weeks"

Ditto for oil.
From Reuters, August 7:
China may have to start buying U.S. soybeans again in coming weeks despite the trade war between the two countries as other regions cannot supply enough soybeans to meet China’s needs, Hamburg-based oilseeds analysts Oil World said on Tuesday.

In July, China imposed import tariffs on a list of U.S. goods, including soybeans, as part of the trade dispute with the United States. China is the world’s largest soybean importer and has been seeking alternative supplies, especially in South America, where supplies available for export are down. 

“China has to resume purchases of U.S. soybeans,” Oil World said in its latest newsletter. “The South American supply shortage will make it necessary for China, in our opinion, to import 15 million tonnes of U.S. soybeans in October 2018/March 2019, even if the current trade war is not resolved.”...MORE
Following yesterday's USDA WASDE report beans are cheaper than they were four days ago.
Via FinViz futures (also on blogroll at right):