Tuesday, July 16, 2019

"Baltic Dry Index Hits 5-1/2 Year High"

Following on last week's Ningbo report that world container rates across all types was up 2.3%, here are the bulkers
From Reuters via gCaptain:
The Baltic Exchange’s main sea freight index hit a five-and-a-half-year high on Monday on the back of strong demand for capesize vessels shipping iron ore.

* The Baltic index, which tracks rates for ships ferrying dry bulk commodities, rose 3.4%, or 63 points, to 1,928, its highest since January 2014. The index has tripled since February.

* The index rose 7.2% last week for a fourth straight week, mainly driven by strong demand for vessels that ship iron ore from Brazil.

* A restart of Vale SA’s Brucutu mine in Brazil in June, which was shut in early February after a tailings dam burst killing more than 240 people, has prompted increased demand from the country....

Shipping: Denmark Passes Germany In Total Tonnage Under Flag

From World Maritime News:

Denmark Now Has the World’s Fifth Largest Merchant Fleet
Denmark has again improved its place on the list of the world’s largest shipping nations, surpassing the United States to claim the fifth place.
The milestone comes just a year and a half after Denmark surpassed Germany on the sixth spot.
Measured by the number of merchant ships sailing under a country’s flag, the list is spearheaded by Greece, whose fleet measures 300.4 million in total deadweight tonnage. Greece is followed by Singapore, China and Japan in the top four spots.

With 83.8 million of total deadweight tonnage, Danish shipping companies exported DKK 188 billion (USD 28.4 billion) last year, making shipping one of the country’s largest export industries. Reaching fifth place on the list shows that the Danish shipping strategy has worked, according to Anne H. Steffensen, the CEO of Danish Shipowners’ Association....

"Turkish vessel discovers gas reserves near Cyprus – Turkish Cypriot press"

Lifted in toto from Ahval News July 15 (the source may be problematic more below):
Turkey’s drill ship “Fatih” has found its first gas reserves in the potentially hydrocarbon rich area around the island of Cyprus, Turkish Cypriot newspaper Kıbrıs Postası reported on Monday.
The Fatih is the first Turkish surveying vessel to begin drilling in the seas around the island. The second, “Yavuz”, began drilling operations in July.

A Greek Cypriot newspaper, Fileleftheros, reported earlier this week that the Fatih had struck gas reserves of up to 170 billion cubic metres in the waters off Paphos in Greek Cypriot-controlled southwest Cyprus.

Kıbrıs Postası quoted a diplomatic source as saying the story was credible.

“It’s true that Turkey found something”, the newspaper quoted its “high level” source as saying. The source said a formal announcement would have to be made by the Turkish Petroleum Corporation.
Turkey says parts of the exclusive economic zone (EEZ) set out by the Republic of Cyprus lies on its continental shelf, and opposes other drilling by the republic since it says this infringes on the rights of Turkish Cypriots.

The European Union considers Turkey’s drilling activities illegal, and has been discussing measures including sanctions to level at the country in response.

The EU is expected to announce plans for sanctions against Turkey on Monday.
This is the first time we've linked to Ahval and we're doing it as a test.
Here are a couple reports on their biases:

Deutsche Welle et al's Qantara.de 
Dissident Turkish journalists have taken refuge with foreign information platforms. The latest of these, in Arabic, has some rather dubious supporters however

Arab Weekly:
Ahval, an independent news source on Turkey, makes debut

Meanwhile in Brussels (AP):
EU slaps sanctions on Turkey over gas drilling off Cyprus

"China's growth has ground down to a 27-year low, and its economy probably can't go on like this"

From Business Insider:
  • China's GDP for the second quarter grew at its slowest rate since the global financial crisis in 2008, 6.2%.
  • This weak print is the result of a combination of factors — China's trade war with the US, deleveraging, and structural weakness in China's banking system.
  • And while some economic data started trending more positively in June, the weak GDP print is a sign that policymakers will soon have to be more aggressive about stabilizing the economy.
China's GDP grew at 6.2% in the second quarter, its slowest growth rate since 1992. And while there was some positive economic news in the month of June — the last month of the quarter — this GDP print means that soon policymakers will have to act in order to keep the economy growing, according to analysts.

In short, Q2 was bad. And there's a chance Q3 will be less bad, but it's not a signal that China's economy is stabilizing yet. For the past few months policymakers have been engaging in targeted easing. Instead of just spraying credit everywhere, they've tried to get it where it's needed most — to households and to the struggling private sector, for example.

Analysts have been saying for some time now that those measures aren't enough to blunt the force of the trade war and China's own domestic issues working against growth though. And despite a few bright-ish spots in June's data, that still stands.

Here's a rundown of a few happier June data points, some of which — according to analyst Wei Yao over at Societe Generale — simply don't make much sense....MORE

Monday, July 15, 2019

"Morgan Stanley forecasts 30 per cent DROP in lithium prices by 2025"

That's the FT's Neil Hume flagging a story on Friday:
We haven't done anything with lithium in ages, when making the decision on battery metals in the spring of 2016 we went with cobalt rather than lithium:
Why the CIA Reads The Financial Times (and you should too) Tesla and Cobalt
May 26, 2016
A couple weeks ago we posted a seemingly innocuous piece with a boring headline: "'Freeport Sinks On Sale of Africa Copper Mine To Chinese' (FCX; LUN.TO)".

I figured there were at best two thousand people in the whole world who knew or cared about the back story and real import of what was going on so I'd just drop it as an Easter egg for the cognoscenti and other assorted electric vehicle/conflict mineral/African warlord/Elon Musk/extractive industry/Génocidaire hunter/U.S. political corruption watchers to find.

Well now that cat's out of the bag.

Big kudos to the FT's Henry Sanderson for recognizing one hell of a story and a small request for the Financial Times: Can you tell us what the old ENRC is up to these days?

From The Financial Times, May 25:
China plays long game on cobalt and electric batteries...


It was a good decision. and pretty good timing.
And as tends to happen the price increase brought out new supply on the one hand and substitution effects by end users on the other.
Always, Always, Always remember:  
One of the first persons we quoted on the expected real return from commodities was Dylan Grice, then at Société Générale:
Société Générale's Dylan Grice-"Commodities: ‘Their Expected Long-Run Real Return is 0%’"
Anyhoo, there are no futures in lithium, although the LME has been threatening to roll some out since 2017, so if MS is right the investment vehicles available are boiler room Contracts-for-Difference (Yikes!!) or the miners. The two biggest are Albemarle and Sociedad Quimica Y Minera de Chile:
January 2018
Lithium: Here Comes the Supply Surge

And a couple weeks later:
Lithium: After Four Years of Negotiating, SQM and Regulator Reach Agreement On Increased Production (SQM; ALB)

The two stocks haven't done so well since those January 2018 posts:

SQM Sociedad Quimica y Minera de Chile S.A. weekly Stock Chart
ALB Albemarle Corporation weekly Stock Chart

Equities Fun Fact: Three Stocks Have Accounted For 970 of the last 1,000 DJIA Points

That's from Wall Street on Parade who have a more conspiratorial headline than is our wont.
We haven't yet commented on the S&P closing above 3,000 and the Dow Joneses closing over 27,000 because I didn't know what to say. Despite calling for three grand (and more) on the S&P for over two years, getting ridiculously bullish on stocks in the weeks leading up to the Christmas Eve bottom (triple leveraged ETFs, options on S&P futures), and preaching the yield curve is not yet important, despite all that, something doesn't feel right about Friday's action.

We've mentioned, for years, how NYSE specialists set up false appearances in the market. Here's a 2009 version:
Manipulating the Dow Jones Industrial Average
Back in the bad old days, the specialists* in the Dirty Thirty would move their own books around to their personal benefit but from time to time would coordinate their efforts.

The classic move would be to position for a decline while giving the impression to the investing public that "Hey, the water's fine, come on in".

They would do this by shorting the lower priced DJIA components while maintaining the higher priced stock, or even taking those up a bit.

When the trap was sprung, those higher priced stocks would be collapsed, triggering stop loss limit orders to feed the fear, and nary a specialist bid in sight. As the ticker spread the story to the country, the sell orders would come pouring in and accelerate the down move. Then the margin calls would go out, literally stripping stock from the accounts of the unwary....
That was posted three days before the market bottom in March 2009 with this final note:
...If these were the bad old days, and one were looking for the opposite move, up rather than down, then one would look for a way to paint a negative picture, perhaps by taking a high priced stock down while the lower priced issues were firming up.

That's how they used to do it in the old days*....
It's part of the Grassy Knoll theory of investing. And when I mention it it's only half tongue-in-cheek.

And here' Wall Street on Parade, not tongue-in-cheek:

Charts Suggest the Dow Index Is Being Painted to Get “New Highs” in the Market
What we need today is a real life character like Vinny Gambini in the movie My Cousin Vinny to take over the questioning for the U.S. Senate Banking Committee – like Ferdinand Pecora did in the early 1930s to root out the systemic frauds in the stock market of that era. Gambini would haul the heads of equities trading for each of the major Wall Street banks and their Dark Pools to a hearing, put them under oath, and grill them about the highly suspicious trading activity that is going on in today’s markets.
Let’s start with what happened yesterday. In the face of punk earnings forecasts for the rest of this year and a growing global economic slowdown, the Dow Jones Industrial Average hit a historic milestone, closing above 27,000 for the first time. But the rising tide didn’t lift all boats: eight of the Dow’s 30 stock components closed in the red. Those stocks were Chevron, Verizon, McDonald’s, Apple, Travelers, Johnson and Johnson, Pfizer, and Merck.
There was something else that raises suspicious red flags to veteran chart watchers. A big spurt in some of the Dow stock components magically occurred in the final 15 minutes of trading, like some mystical, invisible hand had decided to levitate these share prices before the closing bell.
To the thinking of Wall Street veterans who are still capable of human intelligence, as opposed to relying solely on algorithms and artificial intelligence software, when there is an unnatural spike in prices toward the end of the day and it occurs on abnormal trading volume, it’s not likely an intervention by the Gods of the market but far more likely that someone (or a cartel that we see so frequently these days) is painting the tape.
Here’s how Investopedia defines “Painting the Tape”:
“Painting the tape is a form of market manipulation whereby market players attempt to influence the price of a security by buying and selling it among themselves to create the appearance of substantial trading activity…Manipulators may paint the tape near the market’s close in an attempt to boost a stock’s price substantially at market close. Closing prices are widely reported in the media and are closely watched by investors.”
It only takes a handful of high-priced stocks to really move the needle in the Dow. That’s because it’s a price-weighted index of just 30 stocks. As Mark DeCambre at Dow Jones’ MarketWatch reported yesterday after the market closed, just three stocks in the Dow have been responsible for 970 points of that 1,000-point move in the Dow since its 26,000 milestone on January 17, 2018. Visa accounted for 390 points; Microsoft accounted for 324 points and McDonald’s accounted for 256 points. That’s not exactly what one would call a broad-based rally.
The share price of both Microsoft and Visa spiked in the final 15 minutes of trading yesterday on unusually heavy volume compared to the rest of the day. (See charts below.) And the same thing happened in Verizon and WalMart, also components of the Dow....MORE
I don't know about the conspiracy but I do know something about the action still does't feel right.
By-the-bye, our bull market top-tick target remains 3,300 on the S&P 500 (3,010.71 last) so there is still enough upside to warrant riding the bubble but something odd is going on right now.

Capital Markets: Your Love Is Lifting Me Higher
Just a Reminder: Riding the Bubble Can Be Very Profitable

And in Société Générale's Albert Edwards: "There Is An Earthquake Happening In Government Bonds":
Second quibble: Whether you are using the 3 mo./5 yr; the 3mo./ 10 yr. the 2's/10's whatever, the period after the inversion can give you stupendous equity returns so we are faced with the decision whether-or-not to play a dangerous little game, riding the bubble knowing full well it is a bubble or retiring to the sidelines.
We'll have more on the time lags between yield curves going inverted and equity downturns and recessions later this summer but for now one of our favorite economists with one of our favorite stories.

"China pig herd falls 25.8% in June, sow herd down 26.7% - agriculture ministry"

Three from Reuters:
China’s pig herd shrank 25.8% in June compared with the same month a year earlier, while the sow herd contracted 26.7%, the Ministry of Agriculture and Rural Affairs said on Monday.
The huge drop in numbers comes amid a severe epidemic of African swine fever (ASF), deadly to pigs but not harmful to humans, that has swept through the world’s top pork producer over the last year....MORE
So the number of pigs are down big resulting in some weirdness:

China's first-half pork output falls amid disease outbreak
China’s pork output fell by less than expected in the first half as the country tackles a devastating disease outbreak, although official data showed conflicting figures on the size of the decline in the hog herd. 

China produced 24.7 million tonnes of pork in the first six months of 2019, down 5.5% from a year earlier, according to figures from the National Bureau of Statistics, amid a severe epidemic of African swine fever.

China’s hog herd - the world’s largest - declined 15% from a year ago to 347.61 million head, the bureau said, as pigs died from the virus and farmers held back from restocking.
But figures from the Ministry of Agriculture and Rural Affairs on the same day said the herd had shrunk 25.8% in June from a year earlier, with the number of sows down 26.7%. The ministry does not publish total number of pigs.

Analysts were surprised at the fall in pork output, which showed the pace of decline little changed from 5.2 percent in the first quarter, even as swine fever has spread to every province in China....MORE
But whether the government is cooking the books or not, as we've been pointing out in regards to soybeans, dead pigs don't eat:
Cargill shuts animal-feed mills in China as fatal hog disease spreads

"Largest Landowners In The U.S. - Land Report 100"

From The Land Report:

Land Report 100
No. 1 John Malone
2,200,000 acres
In addition to its focus on the productivity and profitability of its cattle operations, Malone’s SILVER SPUR RANCHES makes the preservation of historic structures and time-tested traditions a priority as well. One of the many examples of this takes place on New Mexico’s BELL RANCH, an historic land grant that dates back to 1824. In 2010, Malone acquired the Bell from the heirs of William Lane, who had reassembled 290,100 acres of the original Pablo Montoya grant. Two years later in 2012, a chuck wagon rolled out of Bell Ranch headquarters and the crew spent the next four weeks preparing grub for Bell cowboys during spring works. The wooden-wheeled wagon was pulled by a pair of Bell Quarter Horses. “We’ve been so fortunate that Silver Spur has bought the Bell Ranch and has allowed us to maintain some of these old traditions and bring some of them back,” said Kris Wilson, the Bell manager who resurrected the tradition. 

1. John Malone
2. Ted Turner
3. Emmerson Family [Up 3,566 Acres]
4. Reed Family [Up 359,232 Acres]
5. Stan Kroenke
6. Irving Family [Up 1,644 Acres]
7. Brad Kelley
8. Singleton Family
9. Peter Buck [Up 125,000 Acres]
10. King Ranch Heirs
11. Pingree Heirs
12. Wilks Brothers
13. Briscoe Heirs
14. Lykes Heirs
15. Hamer Family
16. O’Connor Heirs
17. Thomas Peterffy [Up 20,000 Acres]
18. Ford Family [Down 203,000 Acres]
19. Martin Family
20. Stimson Family

Throughout the year The Land Report highlights different members of the 100. The most recent, sponsored by Land Leader:
O’Connor Heirs: 2018 Land Report 100 sponsored by LandLeader
587,800 acres
Hamer Family: 2018 Land Report 100 sponsored by LandLeader
600,000 acres
Additionally Land Leader has a slide show version of the list. 

We've been tracking these folks for a decade, here are some related posts

Yet Again The FT's Izabella Kaminska Will Probably Not Be Going to This Year's Andreessen-Horowitz Christmas Party (but will make it in vaudeville)

This is the third time we've predicted that Ms Kaminska probably wouldn't get an invite, the first being in 2016's "Insurance: The FT's Izabella Kaminska Will Probably Not Be Going to This Year's Andreessen-Horowitz Christmas Party." when A16Z was really pitching big data in the insurance biz and Izabella was writing pieces with headlines like "Breaking insurance models with big data".
We introduced the insurance post with a bit of backstory:
Last year, when Ms. Kaminska was pointing out* that Andreessen-Horowitz investee 21inc. ($116 mil from A-H, Khosla et al) seemed to be another solution-in-search-of-a-problem company, I was reasonably sure she wouldn't be invited to the 2015 party.

Now this latest pretty much rules out her attending the 2016 get-together as well....
and it was the 21 Inc. reference that brings patient yet wary reader to this point.
FT Alphaville had a couple posts in 2015 looking at 21 Inc.:
 Sept. 23
21 (grams of digital coke)

May 19 
21 Inc and the plan to kill the free internet
where Izabella essentialy evicerated them like a Canadian fishing guide gutting a walleye.

I on the on the other hand, being a fan of Alinsky's Rule #5: "Ridicule is man's most potent weapon." and #13 "Pick the target, freeze it, personalize it, and polarize it.", and recognizing the folks involved in 21 Inc as bloviating blowhards, went straight to mocking  them rather than the company or its purported business, see:
 "Climateer Line of the Day: Uh Oh Andreessen Edition":

...Bitcoins are like “tulips you can send anywhere in the world in arbitrary quantities”.
-Andreessen Horowitz partner Balaji Srinivasan
Mr.Srinivasan may not be aware that, since ca. 1637 or so, tulips have not had the best connotation in the world of finance....
Or their spokesman:

As Far As Whores Go, Larry Summers Seems To Have Become....
...the Whore of Babble-on.

Seriously, what does this crap even mean:
“The 21 chip adds a whole new dimension to bitcoin’s potential utility. At first we will be struck by the presence of a technology like embedded mining; eventually we may be struck by its absence...."
...Mr. Summers has joined Andreessen-Horowitz's Balaji Srinivasan at overfunded ($116 mil) bitcoin startup 21 Inc....
So when I saw this in her July 12 post on one of the guests invited to FT Alphaville's Vaudeville (July 26, 7pm,Wilton's Music Hall, London some tickets still available):
Cryptokitties get duplicated at Vaudeville with Simon Denny
...Denny, in case you do not know, is the man who brought blockchain to the Serpentine (including installations on Blythe Masters, Vitalik Buterin and 21). He’s also the man who put Peter Thiel into a Lord of the Rings board game and an offline cryptokitty replica into a physical bubble, with the help of an art collective-turned-blockchain-map/urban-development company called FOAM....

I thought "I know that name" and lo and behold, in that same 2016 Climateer Investing post:
...I don't want to imply there is absolutely no there, there. I mean Warren Buffet isn't invested in IBM solely for the stock buybacks, but the way this plays out may not be what the software guys want....
Blockchain Art Exhibitions Explore the Bitcoin Technology’s Future
Simon Denny uses cultural references like computer cases to explore blockchain.
Simon Denny uses cultural references like computer cases to explore blockchain. Photo: Joerg Von Bruchhausen
Pokémon, postage stamps and the strategy board game Risk. Simon Denny uses everyday objects like these to illuminate how technology shapes the way we live and work. In his latest exhibition, the Berlin-based New Zealand artist explores blockchain, the little-understood technology underpinning the digital currency bitcoin.

Opening Thursday at New York’s Petzel Gallery, “Blockchain Future States” looks at competing views about how the technology should evolve. Large cutout images of the leaders of three leading blockchain companies—Digital Asset Holdings LLC, 21 Inc. and Ethereum—stand near globe-like structures meant to highlight how new currency systems could challenge traditional forms of statehood. A Risk board for each firm lays out the company’s strategy to create a new world order. A similar installation, “Blockchain Visionaries,” is at the Berlin Biennale until Sept. 18....
...“Blockchain Future States” sets out his observations. His Risk board for Digital Asset replaces countries with financial capitals—reflecting the fact that the firm, led by former J.P. Morgan Chase & Co. executive Blythe Masters, is creating a platform geared toward financial markets. The board for 21 Inc., which focuses more on bitcoin, eschews traditional geography for nationalist lands and technologist clouds, while Ethereum, an open software platform, is set in outer space....
Pretty good talent spotting, eh?
Previouly in the Izabella's Adventures on Sand Hill Road series:
Why the FT's Izabella Kaminska Won't Be Invited to the Andreessen-Horowitz Christmas Party, Redux
Izabella Kaminska, Marc Andreessen and Satan Walk Into a Bar...
How Do You Solve A Problem Like Kaminska: Andreessen-Horowitz Edition

An Apology To Our French Speaking Friends on the Day After Bastille Day

This is embarrassing.
I mislabeled a painting.
To note yesterday's holiday the blog went with one of Monet's Festival of 30 June 1878 paintings.
The date isn't the problem, I wanted a pic of the tri-color and despite it not representing a Bastille Day scene, thought that with the label folks would understand that we understood.
Claude Monet, Rue Montorgueil, Paris, Festival of 30 June 1878.

This morning I looked at the painting and wondered why it seemed so dark so I went to the website of the Musée d'Orsay and "ah crap". 
That's the Rue St. Denis, not the Rue Montorgueil and it hangs at the Musée des Beaux-Arts de Rouen
It's the fraternal twin of the pic I was going for:

Claude Monet,The Rue Montorgueil in Paris. Celebration of 30 June 1878,© RMN-Grand Palais (Musée d'Orsay) / Hervé Lewandowski
La rue Montorgueil à Paris. Fête du 30 juin 1878 
[The Rue Montorgueil in Paris. Celebration of June 30, 1878]

Which is at the Musée d'Orsay.
Someone should let the The Paris Review know as well.
However, the fact they got it wrong doesn't matter, we are responsible for our little corner of the internet.

You Trusted Me and I Failed You

When a journalist accidently misquotes a source

Regret the error.
I should maybe have just gone with the guy flying around above the crowd:

Sunday, July 14, 2019

"Delusions of competence: the near-death of Lloyd’s of London 1980-2002"

Between the exploding oil rig and the asbestos, the '90's were a rough decade. Throw in the odd satellite or two and the names and syndicates are still a bit shell shocked going on thirty years later.
See after the jump for more.
From the Economic History Society's Long Run blog:
Rapid structural change resulting from system collapse seems to be a less common phenomenon in insurance than in the history of other financial services. One notably exception is the crisis that rocked Lloyd’s of London, the world’s oldest continuous insurance market, in the late twentieth century.
Hitherto, explanations for the crisis have focused on catastrophic losses and problems of internal governance. My study argues that while these factors were important, they may not have resulted in institutional collapse had it not been for multiple delusions of competence among the various parties involved.

Lloyd’s was a self-governing market that comprised investors – known as ‘names’ – who put up their personal assets to back the insurance written on their behalf, and accepted unlimited individual liability for losses. Names were organised into syndicates led by an underwriter and a managing agency. Business could only be brought to syndicates by brokers licensed by Lloyd’s. Large broking firms owned most of the managing agencies and thereby controlled the syndicates, giving rise to serious conflicts of interest.

 In 1970, Lloyd’s resolved to expand capacity by lowering property qualifications for new names. As a result, the membership exploded from 6,000 to over 32,000 by 1988. Many new names were less well-heeled than their predecessors and largely ignorant of the insurance business. Despite a series of scandals involving underwriters siphoning off syndicate funds for their own personal use, the number of entrants kept rising thanks to double digit investment returns, the tax advantages of membership, and aggressive recruiting.

While capacity was increasing, underwriters competed vigorously to write ‘long-tail’ liability and catastrophe business in the form of excess loss (XL) reinsurance. Under these contracts, the reinsurer agreed to indemnify the reinsured in the event of the latter sustaining a loss in excess of a pre-determined figure. The reinsurer in turn usually ‘retroceded’ (laid off) some of the amount reinsured to another insurer.

Many Lloyd’s underwriters went into this market despite having little experience of the business. Some syndicates doing XL reinsurance retroceded to other XL syndicates, so that instead of the risks being dispersed, they circulated around the same market, becoming increasingly opaque and concentrated in a few syndicates. This became the infamous London Market Excess of Loss (LMX) spiral.

By 1990, over one quarter of business at Lloyd’s was XL reinsurance. The spiral offered brokers, underwriters and managing agents the opportunity to earn commission and fees on every reinsurance and retrocession written.

It also enabled underwriters to arbitrage the differential between the premiums they charged for the original insurance, and the lower premiums they paid for reinsurance and retrocessions. A later inquiry also showed that those writing at the top of the spiral accepted, out of ignorance or carelessness, premium rates that were far too low for the higher layers, in the belief that these were virtually risk-free....

Lloyd's never did completely recover and even now is struggling. See June 14's "Insurance: Lloyd's Risks Becoming Irrelevant".
May 1
Insurance/Shipping: "Lloyd’s of London Plots New Course as Storm Clouds Gather"
March 2018 
Re/insurance "Business as usual is not sustainable, says Lloyd’s Chairman"

Ningbo Containerized Freight Index Through 12 July 2019

Via Hellenic Shipping News:
In the week ending Jul-12, Ningbo Containerized Freight Index (NCFI) issued by Ningbo Shipping Exchange (NBSE) quotes 669.9 points, slightly up by 2.3% against last week....
....MORE (2 page PDF)

Equities: Where Does Performance Come From?

From FT Alphaville:
Alphaville knew it wouldn’t take long until our considerable influence, as influencers, filtered through to the real (ish) world of quantitative research.

So when a report titled “The Fyre Festival Stock Market: Capitalism without Capital” landed in our inboxes on Wednesday, citing Alphaville as a pivotal influence, we read it with the weary delight of someone who knows their own self-worth.

The note by Vincent Deluard of INTL FCStone takes on our view of the modern economy being a manicured mirage, and it applies to the stock market. In particular, the rise of businesses who owe their success to, well, nothing at all:
Here’s Deluard:
Simulations show that buying productive assets, such as labour and tangible capital, on the cheap was the most profitable strategy until 2014. This logic has reversed after the value of bonds with a negative yield soared in 2016: owning tangible capital is no longer an advantage when capital is free. The best-performing stocks are immaterial businesses with no tangible capital and few workers. Payment networks are more valuable than banks’ branches. Brick-and-mortar stores cannot compete with online marketplaces. Franchises are worth more than restaurants.
This observation, of course, is well known. Businesses with few employees (labour), or few assets (capital) have been driving stock market returns since the end of the eurozone crisis. Think companies like the cloud-computing kings, Beyond Meat, or even, erm, Tilray.
Qualifying this observation is easy; quantifying it is harder.

So Deluard has decided to take action. Using the Russell 3000 index as his base portfolio, he’s devised four portfolios which are weighted relative to where a business’s intrinsic value comes from.
It sounds complex, but the logic is quite simple. Value, Deluard writes, comes from three sources: labour, intangible capital and tangible capital. So he’s devised four portfolios: one for each source, and one for companies which don’t depend on any of the above.....

Happy Bastille Day to our Francophone friends.

Via The Paris Review:

Claude Monet, Rue Montorgueil, Paris, Festival of 30 June 1878.
Claude Monet, La rue Montorgueil à Paris. Fête du 30 juin 1878 
[The Rue Montorgueil in Paris. Celebration of June 30, 1878]

Lessons From The Price of Sugar (1784 - 2017)

From Winton, April 6, 2017:

The Sweet and Sour History of Sugar Prices
A recent report described a commodity trader buying up thousands of swimming pools’ worth of sugar, potentially moving the market.
Meanwhile, this month, a trade spat broke out between the US and Mexico. At the centre of the flare-up was sugar. Speculation and international politics have both been major factors in the tumultuous, millennium-spanning history of sugar’s trade on the world market. The following episodes in the history of sugar prices show how, for humanity’s sweet-tooth, pleasure and terrible suffering have often been intimately intertwined.
The Price of Sugar (1784 - 2017)
Sugar Prices
Swimming Pools of Sugar (2006-16)
Empty Olympic Sized Pool I Stock 145130493 Essentials Collection
Source: Ahl Baku, CC BY-SA 4.0
Between mid-2015 and mid-2016, the price of sugar doubled. A major beneficiary of this swing was Wilmar International. A palm-oil producer, the company has, according to one report, bought ‘more than 6 million tons of sugar…since 2015, enough to fill roughly 3,000 Olympic-size swimming pools at a cost of some $2.3 billion.’ Bad weather and a weak dollar helped boost the commodity's price. Swings like last year’s are not new to the world sugar markets. Following decades of relative calm, the last 15 years have seen major ups and downs in the price of sugar. Looking farther back, the fortunes of consumers worldwide have sloshed for centuries in the swimming pools of sugar traded on world markets every year.

Weather patterns and Brazil’s allocation of its sugar to ethanol production have been recurring factors over the last decade. In 2006, for instance, the sugar price passed 20¢/lb before rapidly falling. Observers of the Brazilian crop in particular called sugar futures the ‘Pop Rocks of the commodities world’ in that year. Then, in 2009-11, the price hit highs not seen since the early 1980s as adverse weather from India to Brazil delivered lower than expected supplies amid diminished stockpiles and the ongoing ethanol boom. Weather and changing sources of demand have not been the only important factors in sugar's long, bittersweet history, though. Just as crucial have been slave labour, war, and changing production techniques. 
The Queen of Cavities (1226-1790) Humanity’s love affair with sugar goes back over two millennia. Ancient Sanskrit texts offered sugary recipes. In the Early Middle Ages, Arabs spread the sugar cane plant across the Mediterranean. Soon, Crusaders brought it back to Britain, and the trickle of the plant, known for its medicinal qualities, slowly increased to the north. British elites adopted sugar, imported from Venice, as a luxurious addition to their banquets.

As early as 1226, Henry III is known to have made a request for three pounds of sugar. From then on, the quantities of sugar on royal tables only grew. A few centuries later, a German visitor noted how Queen Elizabeth I’s teeth were blackened from her sugary diet, ‘a defect the English seem subject to.’ By this time, sugar was an important vehicle for conspicuous consumption. A banquet thrown in honour of that queen of cavities featured sugary sculptures depicting everything from soldiers, castles and drummers to mermaids, unicorns, oysters and frogs.....MUCH MORE
In related news, July 10:

Starbucks wants you to suck down 3 days’ worth of sugar in one Tie-Dye Frappuccino


Saturday, July 13, 2019

"Rethinking the Knowledge Economy"

The author, Roberto Mangabeira Unger, was  Minister of Strategic Affairs in Lula da Silva government and unlike his former boss is not in prison. Unger hangs his hat at Harvard Law School and the Harvard Kennedy School of Government.
This piece is the short version of what is currently a 304 page book (PDF), available online at the good Professor's personal website.
From American Affairs Journal:
A new practice of production has emerged in all the major economies of the world. The simplest and most telling of its many names is the knowledge economy. It holds the promise of changing, to our benefit, some of the most deep-seated and universal regularities of economic life and of dramatically enhancing productivity and growth.

Its effects, however, have so far proved modest. Instead of spreading widely, it has remained restricted to vanguards of production, employing few workers. Entrepreneurial and technological elites control it. A handful of large global firms have reaped the lion’s share of the profits that it has yielded. It appears in every part of the production system; the habit of equating it with high-technology industry is unwarranted. In every sector of the economy, however, it remains a narrow fringe, excluding the vast majority of the labor force. Even though its products are used ever more widely, its revolutionary practices continue to be quarantined.

The true character and potential of the new practice of production remain disguised: by virtue of being insular, the knowledge economy is also undeveloped. The technologies with which it is most recently associated, such as robots and artificial intelligence, have riveted worldwide attention. Nevertheless, we have barely begun to grasp its significance for economic and social life or gained insight into its possible futures.

The established body of economic ideas is useful and even indispensable but also insufficient to an understanding of these problems. Received economic theory leaves us short of the insights that we need to guide the institutional and policy changes required to take us from the insular knowledge economy that we have to the inclusive one that we need. The effort to think through the agenda of an inclusive vanguardism prompts us to reassess the alternative futures of economics as well as the alternative futures of the economy.

Under Alvin Hansen’s old label of “secular stagnation,” many economists have proposed to explain in recent years the persistent slowdown of economic growth. The figures measuring the growth of productivity chart the dimension of this slowdown. Consider the well-studied example of the American economy. From 1947 to 1972 labor productivity, which roughly tracks total factor productivity, rose in the United States by an average of 2.8 percent a year; from 1972 to 1994 by 1.5 percent a year; from 1994 to 2005 by 2.8 percent a year; and from 2005 to the present by 1.4 percent a year. After a period of slow growth, productivity spiked in 1994–2005, and then fell back again.

The slowdown in the growth of productivity since 1972, interrupted only by the turn-of-the-century spike, has been attributed to many of the factors emphasized by Hansen in the 1930s: the decline of population growth, the inadequacy of aggregate demand, and a “savings glut”—an excess of savings over consumption. One factor, however, largely absent from the older discussion of secular stagnation, has now taken center stage: the supposedly more limited transformative effect of contemporary technologies, especially in communication and information, when compared to the technological innovations of a hundred years ago.

Consistent with this line of argument, we can explain the temporary rise in productivity growth in 1994–2005 as the result of a one-time phenomenon: the adoption of computers and other digital technologies by a wide range of mega, large, and medium-sized firms, such as Walmart, whose operations otherwise bear few traces of the now most advanced practice of production.

The effect of the discourse of secular stagnation has been to cast on the decline of economic growth in general and of productivity growth in particular an underserved halo of naturalness and necessity. There is no reason to believe that contemporary technologies are any less revolutionary in their potential than the mechanical innovations of a century ago; there is better reason to suppose that we have barely begun to tap their potential and, by tapping it, to encourage the innovations that they may inspire. The effects of technologies, however, are always mediated by the institutional and cultural setting in which they take place.

I conjecture that a major cause of economic stagnation in the period from the early 1970s to today has been the confinement of the knowledge economy to relatively insular vanguards rather than its economy-wide dissemination. There is nothing natural about this phenomenon: it presents a riddle requiring explanation. 

The Confinement of the Knowledge Economy: 
The Fact and the Riddle
Throughout the world the knowledge economy remains restricted to insular vanguards: advanced manufacturing, knowledge-intensive services (often associated with advanced manufacturing), and precision, scientific agriculture. Even as it has lost any exclusive association with industry, it has remained, in each sector, a fringe.

Its appearance solely as an insular vanguardism has now gone on for so long that we may be tempted to think of this quarantine as natural, as if it called for no further elucidation. There is, however, nothing natural about it. Mechanized manufacturing and industrial mass production rapidly influenced the transformation of every part of the economy, with the notable exception of traditional small business, which was inhibited by its limited scale from assimilating the scale-dependent technologies and procedures of mass production.

Unlike earlier advanced practices of production, the knowledge economy has no intrinsic bond to any particular sector of production. Its ability, supported by its characteristic technologies, to produce goods and services at almost any scale would open to it the world of small business, if that world did not remain largely inaccessible to it for other reasons. Yet its confinement to insular vanguards has stubbornly persisted.

Not only has the knowledge economy escaped a restriction to industry without avoiding insularity, it has also overcome an exclusive connection with the richest economies in the world without as a result moving toward an economy-wide presence in any of them. In the heyday of mass production, the axis of the international division of labor, as well as the core topic of analysis in theories of international commerce, was trade between capital-intensive and labor-intensive economies. The most advanced practice—industrial mass production—was headquartered in the richest economies, more primitive, labor-intensive production in the rest, the vast periphery of the developing world.

The emergence of the new advanced practice of production has coincided with a striking change in the world division of labor. The new productive vanguard has gained a foothold in all the major economies of the world: in the major developing countries (such as China, India, and Brazil) as well as in the richest economies. The advanced parts of these economies are, to a greater or lesser extent, in direct communion with one another, exchanging people, procedures, and ideas, as well as technologies and resources. Indeed, the network of these vanguards has a better claim than any other set of economic agents and forces to be regarded as the commanding force in the global economy. By comparison, international finance is a sideshow.

The worldwide presence of the knowledge economy, manifest in the changed international division of labor, only deepens the puzzle presented by its arrest within the fringes to which it is now confined. It is present in every major economy as well as in every part of each of them. Yet it remains the prerogative of an elite. In this circumstance forces related to the confinement of the knowledge economy work in concert to favor economic stagnation and aggravate economic inequality. Slowdown in the growth of productivity and deepening of economic inequality are the price for the insularity of the knowledge economy.

We must be careful not to mistake the insular knowledge economy for what I shall call pseudo-vanguardism: the existence of a wide range of firms that make use of the technologies we most often associate with the emergent vanguard—especially its information and communication technologies—without otherwise mastering and deploying the new most advanced practice of production.

The most common occasion for pseudo-vanguardism has been the adoption of digital technologies to manage complex information—for example the information with which a mega-retailer like Walmart must deal. By managing information more effectively, such businesses have been able to develop efficiency-enhancing and capital-sparing practices such as the “just-in-time” replenishment of inventory. Their large scale has given them a decisive advantage in dealing with the fixed cost of the required technological apparatus. Their successful use of that apparatus has in turn helped them grow yet larger, consolidating their market position. Yet none of these initiatives has converted such mega-firms into exponents of the know-ledge economy. Pseudo-vanguardism makes the knowledge-intensive advanced practice of production seem more widespread than it is.

The real knowledge economy remains stuck in a narrow circle. The incentives to accumulate profit and market power reinforce the narrowness. The large global firms that dominate the knowledge economy find ways to factor out parts of their process of production that can be routinized or even commodified. They assign these routinized parts to businesses staffed largely by semiskilled labor, working by the methods of conventional mass production, in parts of the world remote from headquarters. Some advanced firms are even “fabless,” ridding themselves to the greatest extent possible of the ownership of large productive units (factories) and of any commitment to the stable workforce that such units traditionally require.....

The Culture That Is Finland

From the Associated Press' Twitter feed:
Using Jakub Marian's Metal bands per capita map:


it's easy to see the thrasher part of the equation but I tend to associate the yarn gig with Norway's Slow TV.

"National Knitting Night":

was followed by the sequels
  • National Knitting Evening
  • National Knitting Morning
because, as Rune Moklebust, one of the the producers said:
"Well, it has to be unique -- not a copy of the last one,"
"So we have to push the boundaries for each show, I think."
We'll be back with 18 hours of salmon swimming upstream if I can find it.
First though, back to Finland.  As I learn about the country and its folkways I've also stopped at the Encyclopaedia Mettalum:

FinnTech: What To Do With Near-Indestructible Black Plastic
...I remember asking a Finnish woman why it sounded like people were laughing when they spoke Finnish, were they happy?
"Oh no" she said and then she stopped talking.

Someone, I can't recall who, mentioned that on public transportation Finns sit and stare at their shoes. It is considered very forward to stare at someone else's shoes.
I don't know as much about Finland as I do about Norway but here are some of our posts:

Thousands Of Migrants Flee Finland Hoping For A Better Life In Iraq

 "Embracing päntsdrunk, the Finnish way of drinking alone in your underwear"

The Finns used to dance the Tango but maybe not so much anymore. The only Finnish band I could name is an old-school Finnmetal band, Children Of Bodom described as:
"Melodic death metal meets virtuoso guitars: Children Of Bodom took the spirit of eighties heavy metal and thrash, and married it to a contemporary death metal framework"
or, as Encyclopaedia Mettalum thumbnails it:

Genre: Melodic Death/Power Metal 
Lyrical themes: Death, Hate, Lake Bodom, Anger, Antagonism 
Current label: Nuclear Blast

And then there was the time "Norway Invades Finland":

That's really all I've got. They fought the Soviets to a standstill in WWII, The famine that started in 1866 was the last natural great starving in Europe but nowhere near as bad as what Stalin and the communists did in the Holodomor, 150,000 vs 3.5 to 4 million. 
And the people sound like they're laughing when they talk, but they aren't.
Climateer Line of the Day: Great Name For A Korean Metal Band Edition

Friday, July 12, 2019

Emanuel Derman: "Trading Volatility"

Mr. Derman's IR mini-bio is below. Here's the one I usually use, last seen in:
Emanual Derman Answers Edge.org's Annual Question With: "No more time decay"
Yesterday we visited Edge.org to see historian of science George Dyson in "Oligarchia: 'The digital revolution isn’t over but has turned into something else'".
Today we visit Emanual Derman whom I once described, back when he was blogging at Reuters, thusly:
Mr. Derman is a blogger based in New York City.
He also teaches at Columbia.
Before that he was head of the quantitative strategies group in the equities division, and then head of quantitative risk strategies at Goldman Sachs
And before that he was a theoretical physicist.

I hate him....
Here is his personal homepage.

...Psst...I don't really hate him.
But do visit his homepage to see why one could.
From Inference Review, volume 4, issue 4, July 2019:

Emanuel Derman is a Professor of Professional Practice and Director of the Financial Engineering Program at Columbia University. 
The Black–Scholes model describes the value of a stock option as a function of the underlying stock price and its volatility. The model suggests an analogy between the random fluctuations of a stock price and a concept from physics, the Brownian motion of randomly diffusing particles. The analogy is not entirely new. More than 100 years ago, the French mathematician Louis Bachelier developed the theory of Brownian stock-price fluctuations to analyze stock options.1 The model has become the foundation for valuing options of all kinds. The Black–Scholes equation allows traders to treat volatility as an asset and trade it by buying or selling portfolios of options. An impalpable property of a financial system—volatility—has become concrete enough to be bought and sold. The result has been a transformation in mathematical finance and an explosion of new financial products. Although the Black–Scholes model is genuinely useful, it fails to capture the reality of the market’s behavior. This failure has triggered further ingenious extensions of the model.

These extensions, too, eventually fail. Markets and prices are social phenomena, not physical ones, and it is unlikely that there is an accurate predictive theory of human behavior.

Stocks and Options
A  call option on a stock is a contract between a buyer A and a seller, or counterparty, B, that gives A the right, but not the obligation, to purchase the stock for a specified price on some future date. If one share of a stock, S, is selling for $200 today, a call option with a strike of $250 and an expiration of one year, gives A the right to buy S one year from today for $250. A is long the option, and B short. If S trades in the market at $300, A can exercise the option, purchasing one share at $250 from B and selling it for $300, obtaining a payoff of $50. If S trades below $250, A need do nothing. A put option is the corresponding right to sell the stock on a future date for a specified price.
What is the rational price of a one-year call option on S? Before 1973, it seemed obvious that the current value of a call option should reflect the expected future price of its stock. Different people would have different expectations about that price. What was obvious turned out to be false. In 1973, Fischer Black, Myron Scholes, and Robert Merton demonstrated that if stock prices fluctuated randomly as described by the theory of Brownian motion, the future payoff of a stock option could be replicated by a portfolio comprising borrowed money and a fractional share of the stock.2 Suppose the solution to the Black–Scholes equation yields a value today of one dollar for the call option on S described above. The equation then also shows that this one-dollar call option can be replicated by investing one dollar, borrowing 15 dollars, and then using their sum to purchase 16 dollars’ worth of S. If the current stock price of S is $200, and if it fluctuates randomly, this portfolio will behave precisely like an option in the future, with one year to expiration and a strike of $250. The amount of money borrowed, and the amount of stock in the portfolio, must be continuously adjusted as the stock price changes. At expiration, the portfolio and the call option have the same payoff. The adjustments represent a manufacturing cost. The greater the volatility of the stock, the more rapidly the stock price changes, and the greater the manufacturing cost.

An option’s value does not depend on the expected future price of its stock....

We are fans.
Previous Dermanettes:
Emanuel Derman Reviews "The Age of Cryptocurrency"
Emanuel Derman, Tyler Cowen et al On "Why is Thomas Piketty's 700-page book a bestseller?"
"Derman, Rodrik and the nature of statistical models"
Emanuel Derman: "Money Changes Everything?" or Spinoza on Pain, Pleasure and Desire
Book Review: "Models.Behaving.Badly: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life "
"Emanuel Derman on Twitter, on volatility products"
The Financial Modelers' Manifesto

And on option pricing:

The Guy Who Discovered Black-Scholes Before Mssrs. Black and Scholes
Heckuva job, Brownian.
See also:
"Über die von der molekularkinetischen Theorie der Wärme geforderte Bewegung von in ruhenden Flüssigkeiten suspendierten Teilchen"
at Austria's Zentralbibliothek für Physik

Marian Smoluchowski 
(he missed it by that much) 
"Pricing the Future: Finance, Physics, and the 300-Year Journey to the Black-Scholes Equation "

Variables: σ = volatility of returns of the underlying asset/commodity; S = its spot (current) price; δ = rate of change; V = price of financial derivative; r = risk-free interest rate; t = time.

Climateer Quote of the Day: I May be a Wonk Edition

“In [Bachelier’s] paper we find the Chapman-Kolmogorov-Smoluchowski equation for continuous stochastic processes, the derivation of the Einstein-Wiener Brownian motion process and the recognition that this process is a solution of the partial differential equation for heat diffusion. The Einstein-Wiener process is the analogue, for continuous time and continuous random variables, of the discrete random walk process. … Most of this theory was later to be developed by the mathematicians who were transforming probability theory into a rigorous discipline, Levy, Kolmogorov, Borel, Khinchine, and Feller. Compared to these standards of rigor, Bachelier’s work was heuristic, and scorn for the heuristics led to an underestimation by contemporaries of the significance of the contributions.” (p. 3)
That's via a post at Brenda Jubin's blog on the literature of investing, Reading the Markets:
-Cootner, The Random Character of Stock Market Prices, II

Argentina, Debt and the (first) Collapse of Barings Bank

This was the one before the one caused by the weak little slimeball Nick Leeson.
A repost from September 2007:

New York Times Headlines-November, 1890:
LONDON, Nov. 16, 1890—Before the market opened yesterday, the Street was flooded with abounding rumors intended to create distrust and accomplishing all that was intended. For a long time the Stock Exchange district has been flooded with tales of dire distress in high financial quarters. Not one house, but many, rumor has declared to be in difficulties threatening disaster.

LONDON, Nov. 17. -- The Scotch banks will have a meeting to-day for the purpose of adding to the Barings' guarantee fund. The whole banking world has shown alacrity in subscribing, and when all the provincial and other subscriptions have arrived the total will be such a sum as will make the whole incident a brilliant triumph for the organizers of the fund.

LONDON, Nov. 17. -- At the banking house of Baring Brothers & Co. this morning everything was quiet and there were no internal or external signs of disturbance. The members of the firm stated that all their acceptances and other liabilities would be met as they fell due. They also said that the position of the firm, with the Bank of England at its back, was stronger now than ever before.

Brothers Embarrassment
NEWARK, Nov. 18. -- Monday morning the officials of the Howard Savings Institution in Newark observed that more depositors than usual were presenting themselves at the teller's counter to close their accounts. Yesterday morning when the bank doors were opened, a score or more of them awaited the arrival of the teller. The run increased as the day went along, and by the time the bank closed for the day $30,000 had been withdrawn.
The Collapse of Barings
...Only one Baring received a peerage principally because he was a banker: Edmund, otherwise known as Ned. The others had been politicians or public servants. Ned became Lord Revelstoke in 1885, when London was the undisputed financial capital of the world. Revelstoke father and son ran Barings for fifty years, and Ziegler describes them as a formidable pair.

`Both were intelligent and cultivated, self-confident to the point of arrogance. They were dignified in manner and imposing in appearance, men accustomed to demanding the deference of their inferiors, putting into that category the generality of mankind.' But Ned Baring also had a streak of recklessness inherited from his grandfather, and a gambler's instinct (his father won his Mayfair house at a game of cards). He was a generous man, and he could afford to be: his annual income was 100,000[pounds sterling], worth 6,100,000[pounds sterling] today.

Revelstoke's enthusiastic embrace of Victorian capitalism red in tooth and claw was best illustrated by the flotation of Guinness shares in 1886. So over-subscribed was the issue of 4.5 million [pounds sterling] of ordinary and preference shares that the price of 10[pounds sterling] ordinary shares rose to 16[pounds sterling] 10s when the market opened.

No fewer than one-third of these shares had been allocated by Baring Brothers to members of the family and their intimates; 800,000[pounds sterling]-worth was reserved for the bank itself; and another 800,000[pounds sterling]-worth was allocated to partners, their friends and close contacts in the City. The profit attributed to the house and the partners alone was in excess of 500,000[pounds sterling]. `Even among insiders who had benefited from the operation, there was a feeling that it had gone too far,' said Ziegler.

Revelstoke's Guinness triumph misled him. He came to believe that public confidence went so deep that Barings' name on a share issue was enough to guarantee its sale. Revelstoke took an enormous punt in Argentina, and it went badly wrong. Tom Baring, one of the partners in New York at the time, wrote: `Verily, "a great Nemesis overtook Croesus." The line has never been out of my mind since the Guinness success.'

What Revelstoke did was to underwrite a 2 million [pounds sterling] share issue by the Buenos Aires Water Supply and Drainage Company. That meant that Barings sent the money to Argentina before it had sold the shares, and the shares subsequently proved virtually impossible to sell.

Much of Barings' capital was tied up in South America, and since the continent was going to pieces, questions of confidence in the bank were raised. It was committed to paying bills amounting to millions of pounds, and there was not enough money to meet the debt. Moreover, interest rates were rising and money was tight. This was a classic recipe for a bank failure.

But this crisis was not about one bank. David Kynaston says it could have shaken international confidence in the City.

There was no getting away from the almost unthinkable consequences if Barings did go down: not only would the failure of the City's leading acceptance house inevitably bring down a host of other firms, including all the discount houses, but the very status of the bill on London would be threatened, and thus the preeminence of the City as an international financial centre.

Because the stakes were so high, Barings was bailed out in November 1890 by a consortium organised by the governor of the Bank of England, William Lidderdale. The consortium drew on money from the bank itself and from the government of the day. 
Once the government was committed, Rothschilds joined in, the rest of the City followed, and a fund finally amounting to 17,326,000[pounds sterling] - worth more than a billion pounds 100 years later - met Barings' commitments. But it had been a close-run thing. Ziegler believes that, had the governor of the Bank of England been less courageous, Barings would have failed.

Although it was the end of Lord Revelstoke's career and the partnership was wound up, the bank survived as Baring Brothers & Co. Ltd, with a paid-up capital of 1 million [pounds sterling]. 
Since the individual partners were responsible for all its debts, everything had to go: lands, houses, pictures, horses. Revelstoke's country estate at Membland in Devon (which had a special larder big enough for 2,000 head of game) and his Mayfair mansion at 37 Charles Street both had to be sold, along with the French furniture and objets d'art. Even the children's nanny went.
Another version:
...Barings' Nemesis arrived in the form of CH Sanford, an American quack who had come to London selling Florida Water, and who had transformed himself into a director of the finance house SB Hale. With Hales, he lured Barings into a joint finance of Buenos Aires Water and Drainage.
For $21m, payable in three installments, Hales bought the water works lease and building contracts from the Argentine government. Hales the formed Buenos Aires Water Supply and Drainage to run the works, fulfil the management and construction contracts and make the three payments. Perfect privatisation... 
Anyone else reminded of Enron's dip into the water biz. with Wessex becoming Azurix?

Here's Peerage.com on "Baring, John, second Baron Revelstoke 1863-1929, merchant banker".
Finally, my favorite sentences on Barings, anywhere, author unknown:
This was the opportune moment when the Barings resolved to put upon the market the Guinness's Stout Corporation securities. Guinness's XX. was a commodity known and appreciated by everybody in Great Britain and her colonies who had arrived at the years of discretion, and the shares were known to have for their basis one of the best properties in all the British dominions.
Think You Know Sovereign Debt? "Lending To The Borrower From Hell: Debt and Default in The Age Of Philip II, 1556-1598" (and a tiny treasure)

The Great Kalespiracy

Marketing that's right up there with the tinsel mob and the international parsley cartel.
From The Hustle:

We had a hunch: no one actually likes kale. So how'd it get so popular? It didn’t take long to find the Kale Queen herself, Oberon Sinclair. But she was just the tip of the iceberg...
Hot take here: kale sucks.
Actually, I’m convinced that, in fact, nobody actually likes kale. Or rather, no one naturally gravitated to it.
Ask anyone — even the biggest kale evangelists will immediately point to the various preparations of kale devised to make you forget you’re eating a shrub: baking, battering, dressing…
And, just when you start to chime in that if you cooked a car tire long enough it’d probably be edible, they hit you with the kicker — it’s just so good for you, they say.
But here’s the thing: Kale doesn’t even scratch the top 10 greens in terms of nutrient density.
Yet, sometime in the 2010s, we all woke up and thought, wait a minute — you mean we’re allowed to eat this garbage leaf? And then the world went hog-f*cking-wild.
So how did kale go from something we put under cantaloupe on buffet tables, to the cover of Bon Appetit, Beyonce’s sweatshirt, and my Midwestern mom’s crisper, seemingly overnight?
I started to turn over a few leaves. And I didn’t have to look far before I stumbled across the self-proclaimed Kale Queen herself: A woman by the name of Oberon Sinclair. And it turns out, that was just the tip of the iceberg.

Peak Kale
From 2011 to 2014, America’s interest in kale skyrocketed.
Kale-related search queries quadrupled, and the butch lettuce gained high-profile endorsements from food magazines (like Bon Appetit, which named 2012 ‘The Year of Kale’), celebrities (a la Beyonce’s KALE sweatshirt in her 2014 music video for “7/11”)  and of course, everyone’s favorite health ‘guru’, Dr. Oz.
By 2014, kale had officially been canonized in American pop culture, Whole Foods was selling 22k bunches per day in its stores, and small-time kale chip producers became multi-millionaires practically overnight.
When Dr. Oz and Bey talk, people listen. But how did kale enter the conversation in the first place? Who planted the seed?

The Kale Queen
“The story is really simple,” Ken Albala, director of food studies at the University of the Pacific told National Geographic. “One woman said, ‘I’ll get everyone to eat kale.”
According to sources from PAPER to The Independent, that woman was New York-based publicist and self-proclaimed kale evangelist, Oberon Sinclair.

In 2015, Sinclair began taking credit in multiple publications for rehabbing kale’s rep, telling MindBodyGreen that she used guerrilla marketing to “educate consumers” on kale’s benefits, “put it on chalkboards around Manhattan,” and convinced trendy restaurants like the Fat Radish (one of PR agency’s clients) to feature kale on their menus. “The ‘trend’ escalated from there,” she said.
What kind of cruciferous chalkboard vigilante are we dealing with?

If enough demand is created the next step is a kale plunderbund, see "The Sicilian Mafia and the International Lemon Cartel"

"Google as a landlord? A looming feudal nightmare"

Now there's a dream come true.

How else may I serve your Grace?
Yes my liege, dispatch Duck Duck Go.

From The Guardian:

To fight a housing crunch of their own creation, tech companies are planning company towns worthy of Gilded Age robber barons
Much contemporary criticism of Google focuses on the invisibility of the company’s vast monopoly power and the consequent indifference of both everyday consumers and government regulators. In ways that we rarely stop to acknowledge, much less understand, the tech giant’s digital domination shapes everything from the profitability of individual corporate enterprise to our consumption and communication practices.

Soon, however, as Google expands its geographic footprint beyond the digital world into physical urban spaces, the potential impacts of the company’s unchecked powers may become both obvious and intolerable. This year alone the tech giant will spend $13bn expanding in 24 US cities. In some places, the company will bring not just jobs but entire campuses with fully equipped offices, data centers, retail spaces and even residences.

Like industrial monopolies before it – from US Steel to the Pullman Company – Google is leveraging its significant influence to create entire urban economies dedicated to its own productivity and profitability. While this may sound like a recipe for economic boom, history suggests that the intimate intertwining of monopoly-driven corporate profit, governance and everyday life may undermine both democracy and individual autonomy. Already, much of Google’s geographic development has been shrouded in secrecy, making it nearly impossible for local communities to understand – and to oppose – the long-term impacts. Only through public records releases has the public learned that the US locations of Google’s expansion have been influenced by furtively secured tax breaks.
But are the jobs and financial investment that this behemoth company brings nonetheless worth it – especially for cities with stagnant economies? What’s the worst that could happen?
It’s hard to imagine, but the example of Google’s expansion in San Jose – where a profoundly undemocratic, feudal nightmare looms – may be instructive. Google has spent $380m on land for the development of a new company campus in this Silicon Valley hub. Rather than celebrate the company’s impending presence, savvy residents and watchdog groups have raised alarms that Google’s expansion will exacerbate the high cost of living and augment displacement and homelessness. Amplifying their fears is the reality that city’s negotiations with Google have essentially taken place behind closed doors through the company’s use of non-disclosure agreements.
But Google has assured the public that it also plans to address the local housing crisis that it helped to create by investing $1bn in the development of 20,000 new homes in the Bay Area – 5,000 of them in San Jose alone. The vast majority of this investment – $750m – will be used to “repurpose” Google’s land to develop homes for “all income levels”. The rest of the money will be used to incentivize developers to build affordable housing....MORE