Frankfurt
(
Alliance News
) - Hackers tried to extort money from the
European Central Bank
(ECB) after they stole about 20,000 email addresses from one of the bank's databases, it said Thursday.
The hacking of the bank's distribution lists for journalists and those participating in events organized by the
Frankfurt
-based bank emerged after it was contacted by someone asking for money for the return of the addresses.
"The theft came to light after an anonymous email was sent to the
ECB seeking financial compensation for the data," the bank said in a
statement....MORE
Journalist's contact info? Ummm... good luck with all that.
Gladstone Land is the other publicly traded vehicle. There a a few private partnerships that let in outsiders.
In February 2011 I noted:
...We've been following this trend for the last three years and have been asked when will it top?
One sign will be when Optima Fund Management brings their American Farmland Company public, still a few years away....
Optima have not yet made the move, and have been correct to keep the cash flow and cap gains to themselves but I have a feeling we are getting close.
From Agrimoney:
Farmland Partners has sights on $100m of farmland
Farmland Partners revealed a $100m shopping list of US farms
as its unveiled plans to raise cash from a further share sale, only three months
after raising some $50m at its stockmarket flotation.
The farmland investment group said its staff had "identified,
and are in various stages of reviewing" more than 10 potential farm purchases,
covering a total of 20,000 acres, and with an estimated aggregate price of
$100m.
"We have engaged in preliminary discussions with some of the
owners and commenced the due diligence process on certain of these farms," the group
said.
However, it said that it did not expect to seal a deal until
the completion of an offering of 3.71m shares, with the option to underwriters
to sell a further 557,620.
Warchest
That would make the offering larger, in share terms, than
the group's initial public offering of 3.80m shares completed in April, at
which it raised $48.0m, net of costs.
It forecast net proceeds of $54.4m from the latest offer,
assuming underwriters exercise the opportunity to sell the extra shares.
Although that sums falls well short of the price needed to
acquire all the land in its sights, Farmland Partners said that it was to
borrow a further $30.0m from state-backed Farmer Mac Mortgage Securities, and
had extra firepower from selling partnership interests.
This scheme allows farmland owners to defer the crystallisation
of capital gains on land sales.
'Economies of scale'
Farmland Partners has announced four farm acquisitions since
its April flotation, taking its portfolio from 7,300 acres to nearly 25,000
acres, and expanding out of Midwest row crop land....
Nothing new as far as the inputs to model but laid out in a smart, straightforward fashion.
From Crossing Wall Street:
The Gold Model Revisited
Four years ago, I wrote a post discussing my thoughts on how to build a model for the price of gold. That post received by far the most attention of anything I’ve written. I still get emails about it today.
Over time, I’ve thought more about this issue, and I’ve altered my
thinking somewhat. I also want to clarify some points from my original
post. Instead of writing an addendum to it, though, I thought it would
be clearer to rewrite the whole thing. What follows is the updated
version.
******************************************************************
One of the most controversial topics in investing is the price of
gold. Fifteen years ago, gold dropped as low as $252 per ounce. The
yellow metal then enjoyed a furious rally as it soared above $1,920 per
ounce, easily outpacing the major stock-market indexes. Over the last
three years, however, it has sunk back down to $1,300.
Like Linus in the pumpkin patch waiting for the Great Pumpkin,
many gold bugs hold out hope. They claim that any day now, gold will
resume its march upward to $2,000, then $5,000 and then $10,000 per
ounce. But my question is, “How can anyone reasonably calculate what the
value of gold is?”
For stocks, we have all sorts of ratios. Sure, those ratios can be
off, but at least they’re something. With gold, we have nothing. No
assets or liabilities. Not even a dividend. After all, gold is just a
rock (OK, OK, an element). How can we even begin to analyze
gold’s value? There’s an old joke that the price of gold is understood
by exactly two people in the entire world. They both work for the Bank
of England, and they disagree.
In this post, I want to put forth a possible model for evaluating the
price of gold. The purpose of the model isn’t to say where gold will go
but to look at the underlying factors that drive the price of the
precious metal. Let me caution you that as with any model, this one has
its flaws, but that doesn’t mean it isn’t useful. More importantly, I’ll
explain why our model makes theoretical sense, rather than just mashing
up numbers and seeing what correlates.
The key to understanding the gold market is understanding that it’s
not really about gold at all. Instead, it’s about currencies, and in our
case that means the U.S. dollar. Properly understood, gold is really
the anti-currency. It serves a valuable purpose in that it keeps all the
other currencies honest—or exposes their dishonesty.
This may sound odd, but every major currency has an interest rate
tied to it. It doesn’t matter if it’s the euro, the pound or the yen. In
essence, that interest rate is what the currency is all about.
Before I get to my model, we need to take a slight detour and discuss a fascinating paradox known as Gibson’s Paradox.
This is one the most puzzling topics in economics. Gibson’s Paradox is
the observation that interest rates tend to follow the general price
level and not the rate of inflation. That’s very strange, because it
seems obvious that as inflation rises, interest rates ought to keep up.
Similarly, as inflation falls back, rates should move back as well. But
historically, that hasn’t been the case. Instead, interest rates have
risen as prices have gone up, and only fallen when there’s been
deflation.
This paradox has totally baffled economists for years. Yet it really
does exist. John Maynard Keynes called it “one of the most completely
established empirical facts in the whole field of quantitative
economics.” Milton Friedman and Anna Schwartz said that “the Gibsonian
Paradox remains an empirical phenomenon without a theoretical
explanation.”
Even many of today’s prominent economists have tried to tackle Gibson’s Paradox. In 1977, Robert Shiller and Jeremy Siegel wrote a paper on the topic. In 1988 Robert Barsky and none other than Larry Summers took on the paradox in their paper “Gibson’s Paradox and the Gold Standard.”
It’s this paper that I want to focus on. (By the way, in this paper the
authors thank future econo-bloggers Greg Mankiw and Brad DeLong.)
Summers and Barsky agree that the Gibson Paradox does indeed exist.
They also say that it’s not connected with nominal interest rates but
with real (meaning after-inflation) interest rates. The catch is that
the paradox only works under a gold standard. Absent that standard, the
Gibson Paradox fades away....MORE
An image from the NASA Mars rover shows rocks on the surface of the planet.
The United Arab Emirates has jumped into the international space race at a full sprint, announcing plans on Wednesday to create a space program and send an unmanned probe to Mars by 2021.
"The UAE Mars probe represents the Islamic world’s entry into the era
of space exploration," UAE President Sheikh Khalifa bin Zayed Al Nahyan
said, according to Reuters. "We will prove that we are capable of delivering new scientific contributions to humanity."
The proposed space program is the latest costly project for the country, which has one of the top 10 GDP per capita income in the world. It previously constructed the world's tallest skyscraper and recently announced plans to create a climate-controlled city.
In the statement announcing
the space program, officials said they are seeking to foster growth in
the country's technology sectors and diversify its economy. According to
the National,
the UAE has already invested 20 billion dirhams (approximately $5.9
billion) in space technology, and plans to launch the Mars probe in 2021
in tandem with its 50th anniversary....MORE
See also the WaPo: U.A.E. plans Arab world’s first mission to Mars
...The oil-rich Gulf state is never short on hubris. It's home to the next iterations of global museums like the Louvre and the Guggenheim in Abu Dhabi and the world's tallest building and busiest airport for international travelers
in Dubai. The royal family in Abu Dhabi has even plowed national wealth
into owning and improving the reigning English soccer champions,
Manchester City....MORE
Senvest also explains the rationale behind adding YRC Worldwide as a core position in its latest letter
Richard
Mashaal and Brian Gonick’s Rima Senvest Management LLC beat the market
in June, gaining 3.7% against the S&P 500 (INDEXSP:.INX)’s 2.1%,
putting it up 10.6% through June versus 7.1% for the S&P 500 over
the same period. The hedge fund’s June gains made up for its losses the previous month and put it back on track to maintain its 20.7% annualized returns since inception in 1997. The star Canadian hedge fund returned a whopping 80% in 2013.
Senvest explains its investment in YRC Worldwide
In this month’s investor letter Mashaal and Gonick gave a more detailed explanation of why they added less-than-truckload (LTL) trucking company YRC Worldwide, Inc. (NASDAQ:YRCW)
as a new core holding. They initially took a short-term position on
YRCW at the beginning of the year because a combination of labor union
negotiations and debt refinancing were depressing its stock price....MORE
Here's the March 31, 2014 13F via NASDAQ:
RIMA SENVEST MANAGEMENT, L.L.C
110 EAST 55TH STREET, NEW YORK, New York, 10022, (514) 281-8082
Adrienne at GC seems unhappy with this latest bit of management mysticism.
From Going Concern:
Beyond the typical grunt and senior grunt titles -- associate,
manager, partner -- there are a group of people employed within public
accounting firms whose sole job it is to get quoted in the New York Times,
push mythical work/life balance arrangements, make sure the firm has
enough "other" people so as not to appear to be racist or sexist or
homophobic, and manage sugary sweet social media accounts. So far, we
haven't seen a Chief Happiness Officer pop up yet but as it's starting
to catch on in Corporate America, don't be all that surprised if one
shows up at your firm in a couple years. From New Republic:
Happiness isn’t something you find, or work toward—it’s
something you buy and have delivered. Or at least that’s the premise of
one of the newest jobs over in the C-suite. Now, alongside the CEO,
CFO, and their ilk, we have the CHO, or chief happiness officer. As the
name clearly suggests, the CHO is responsible for the contentment of
individual employees, sort of like an h.r. manager, but on steroids; the
theory goes that happy workers are productive workers, so happiness
turns out to be in the company’s best interest. Perhaps unsurprisingly,
many CHOs reside in Silicon Valley—both at
start-ups and more blue chip tech companies. But it’s starting to
spread: Southern restaurant company Hopjacks created the position in
2012 and the Quality of Life Foundation, an education nonprofit, created
one in 2010.
This is really supposed to be management's job, best achieved by
creating a work environment that doesn't feel like an episode of Oz but
hey, whatever.
Delivering Happiness, according to CEO and CHO Jenn Lim,
devotes its time to measuring the contentment of clients and to laboring
to improve their working conditions. So how exactly does one create
joy? “We take a snapshot of all the employees, and basically identify
their happiness levels,” Lim says. “And using [the Happy Business Index], we can see, what are the key points of unhappiness?”...MORE
Agriculture, being the base of pretty much every civilization since 8,000 B.C., probably bears watching.
Here's corn over the last few years via FinViz:
From Agrimoney:
DuPont highlights threat from crop price falls
DuPont restated its long-term faith in the agriculture
market despite acknowledging the threat to prospects from the tumble in crop
prices, particularly of corn, a key earner for its seeds business.
The chemicals-to-healthcare conglomerate, whose agriculture
assets include seeds company Pioneer, is "closely watching the development of
[US] corn and soybean crops, and the impact on commodity prices", said Jim
Borel, executive vice-president of DuPont's agriculture division.
"Another strong harvest in North America, if realised, will continue
to pressure overall economics for corn and soybean farmers.
"If the current supply dynamics persist and corn planted
area remains under pressure, it will temper short-term growth rates for the agriculture
segment, particularly in our seed business."
'We comprehended the
trend'
Elle Kullman, the DuPont chairman and chief executive, said
that the group had already taken action in response to soft corn seed sales behind
a drop of 11.2% to $836m in agriculture sector operating profits in the
April-to-June quarter, as announced separately on Tuesday and heralded in a
profits warning last month.
"If you take a look at the restructuring charge that we
announced in the second quarter, you will see an ag component on that, so obviously
we comprehended the trend and are taking steps," she told investors.
DuPont announced a $263m pre-tax group restructuring charge
for the quarter, of which $48m were attributed to the agriculture division.
'Committed to
continued investment'
Nonetheless, Mr Borel said that DuPont retained faith in the
agriculture sector, and the support to the sector's prospects for a growing
world population and increasing consumer prosperity....MORE
The depression of the '30's actually began in the '20's with the collapse of grain prices. Here's wheat from way back when:
From The Guardian: The rise of data and the death of politics Tech pioneers in the US are advocating a new data-based approach to
governance – 'algorithmic regulation'. But if technology provides the
answers to society's problems, what happens to governments?
Government by social
network? US president Barack Obama with Facebook founder Mark
Zuckerberg.
Photograph: Mandel Ngan/AFP/Getty Images
...In this context, Google's latest plan
to push its Android operating system on to smart watches, smart cars,
smart thermostats and, one suspects, smart everything, looks rather
ominous. In the near future, Google will be the middleman standing
between you and your fridge, you and your car, you and your rubbish bin,
allowing the National Security Agency to satisfy its data addiction in
bulk and via a single window.
This "smartification" of everyday
life follows a familiar pattern: there's primary data – a list of what's
in your smart fridge and your bin – and metadata – a log of how often
you open either of these things or when they communicate with one
another. Both produce interesting insights: cue smart mattresses – one
recent model promises to track respiration and heart rates and how much
you move during the night – and smart utensils that provide nutritional advice.
In
addition to making our lives more efficient, this smart world also
presents us with an exciting political choice. If so much of our
everyday behaviour is already captured, analysed and nudged, why stick
with unempirical approaches to regulation? Why rely on laws when one has
sensors and feedback mechanisms? If policy interventions are to be – to
use the buzzwords of the day – "evidence-based" and "results-oriented,"
technology is here to help.
This new type of governance has a name: algorithmic regulation. In as
much as Silicon Valley has a political programme, this is it. Tim
O'Reilly, an influential technology publisher, venture capitalist and
ideas man (he is to blame for popularising the term "web 2.0") has been
its most enthusiastic promoter. In a recent essay that lays out his
reasoning, O'Reilly makes an intriguing case for the virtues of
algorithmic regulation – a case that deserves close scrutiny both for
what it promises policymakers and the simplistic assumptions it makes
about politics, democracy and power.
To see algorithmic regulation
at work, look no further than the spam filter in your email. Instead of
confining itself to a narrow definition of spam, the email filter has
its users teach it. Even Google can't write rules to cover all the
ingenious innovations of professional spammers. What it can do, though,
is teach the system what makes a good rule and spot when it's time to
find another rule for finding a good rule – and so on. An algorithm can
do this, but it's the constant real-time feedback from its users that
allows the system to counter threats never envisioned by its designers.
And it's not just spam: your bank uses similar methods to spot
credit-card fraud....MUCH MORE
Are the sky-high valuations that have put companies like Uber and
Airbnb constantly in the headlines proof of their staying power? Not
necessarily, says Derek Lidow (Twitter: @DerekLidow), author of Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas into Successful Enterprises, who teaches entrepreneurship, innovation and creativity at Princeton.
In this opinion piece, Lidow, who was the founder and former CEO
of iSuppli Corporation, offers a four-part test for how companies can
evolve from “top draft picks” to “wily veterans.”
Uber recently set a record when it was valued at $17 billion. The transportation start-up both disrupts and leverages the incumbent infrastructure of taxis and town cars. Airbnb, the home room rental start-up, was recently valued at $10 billion,
giving it a greater worth than most of its larger traditional hotel
rivals. Sky-high valuations have become commonplace. The question is:
Are these companies really worth it?
Some start-ups hit upon the right idea at the right time — though
almost all must iterate several times before they perfect their
offering. Some get the imprimatur of a savvy investor with a strong
track record. Others catch the fancy of the media. Each of these can
boost a firm’s valuation; but none is a guarantor of ultimate long-term
success.
The most critical factors to assess in a start-up and its
long term potential for success are what stage it has reached on the
journey, and whether its leaders are likely to navigate each of the
remaining transitions successfully.
As an entrepreneur, investor, and professor of entrepreneurship, I
have learned that every start-up must traverse four distinct stages as
it matures. No stage can be skipped and each has its own leadership and
strategy imperatives. The most critical factors to assess in a start-up
and its long term potential for success are what stage it has reached on
the journey, and whether its leaders are likely to navigate each of the
remaining transitions successfully. Few entrepreneurs have the natural
gifts to excel at all four stages; they can, however, learn how to
master them either through personal development or by supplementing
their skills through other members of their team.
These four stages must each be navigated in turn as a company evolves
from what the founders think to what they know. Stage One is customer
validation. The entire focus is to find a customer willing to try your
minimum viable product or service. Stage Two is operational validation.
In this stage, your strategy focuses on execution to satisfy that
customer and find more people willing to try the product. You begin to
understand who will buy your product, on what terms and what it will
take to deliver it. Stage Three is financial validation, when you
discover if your business can survive in the hurly-burly of a
competitive market place. Your strategy focuses on scaling. Stage Four
is self-sustainability. At this stage, the strategy focuses on
innovation as you introduce new products to attract new customers. Your
business demonstrates that it is viable beyond the original concept....MORE
We aren't looking for that big a drop ($875) but we're betting sooner rather than later.
From CNBC, July 15, 2014:
When Yoni Jacobs' book "Gold Bubble: Profiting from Gold's Impending Collapse"
was published in April 2012, gold was trading around $1,650 per ounce.
Now gold is below $1,300. But Jacobs, the chief investment strategist at
Chart Prophet Capital, doesn't think the gold plunge is over just yet.
"The long-term target is still $700, which sounded a lot more ridiculous a few years ago" Jacobs said on Tuesday's "Futures Now."
"If you look at the long-term chart, you'll see that
we reached $800, around $700 in the late '70s, in the '80s bubble of
gold. In the 2008 recession, gold bottomed right around $680, which is
around $700. So there's a clearly defined trend line there," he said.
Gold suffered two tough days on Monday and Tuesday, as the metal lost $40 over the course of two sessions.
Still, Jacobs doesn't think it will be a straight path down.
"Obviously, nothing falls dramatically that fast. It has to take some pauses on the way down," he said.
Currently, he sees support levels at $1,000 and
$1,200, and notes that gold could bounce higher from there. But over the
long-term, the picture is clear....MORE
The August contract is trading at $1307.3, up a buck.
Undocumented iOS functions allow monitoring of personal data, expert says
Apple has endowed iPhones with undocumented functions that allow
unauthorized people in privileged positions to wirelessly connect and
harvest pictures, text messages, and other sensitive data without
entering a password or PIN, a forensic scientist warned over the
weekend.
Jonathan Zdziarski, an iOS jailbreaker and forensic expert, told attendees of the Hope X conference that
he can't be sure Apple engineers enabled the mechanisms with the
intention of accommodating surveillance by the National Security Agency
and law enforcement groups. Still, he said some of the services serve
little or no purpose other than to make huge amounts of data available
to anyone who has access to a computer, alarm clock, or other device
that has ever been paired with a targeted device.
Zdziarski said the service that raises the most concern is known as
com.apple.mobile.file_relay. It dishes out a staggering amount of
data—including account data for e-mail, Twitter, iCloud, and other
services, a full copy of the address book including deleted entries, the
user cache folder, logs of geographic positions, and a complete dump of
the user photo album—all without requiring a backup password to be
entered. He said two other services dubbed com.apple.pcapd and
com.apple.mobile.house_arrest may have legitimate uses for app
developers or support people but can also be used to spy on users by
government agencies or even jilted ex-lovers. The Pcapd service, for
instance, allows people to wirelessly monitor all network traffic
traveling into and out of the device, even when it's not running in a
special developer or support mode. House_arrest, meanwhile, allows the
copying of sensitive files and documents from Twitter, Facebook, and
many other applications.
"Apple really needs to step up and explain what these services are
doing," Zdziarski told Ars by phone on Monday. "I can't come up with a
better word than 'backdoor' to describe file relay, but I'm willing to
listen to whatever other explanation Apple has. At the end of the day,
though, there's a lot of insecure stuff running on the phone giving up a
lot of data that should never be given up. Apple really needs to fix
that."...MORE
The problem with centralized funding schemes boils down to who hands out the funding.
In the arts world you end up with cliques shoveling money to their in-clique buddies.
In the social-thought-leader world you end up with a daisy-chain of crony foundation folks funding crony NGO pals.
If you think it's any different with science you haven't spent enough time observing academics in their natural habitat.
It was ever thus when people hand out other people's money because you run into the same problem you encounter with representational democracy: the people who are attracted to the job are precisely those who are pathologically hooked on power and are thus eminently corruptible.
Fortunately, I'll be long dead before the worst of the ill-effects take root.
Go get 'em, kids.
This is a guest post by
Arun Majumdar, former founding director of ARPA-E and undersecretary of
energy (acting), US department of energy; Jay Precourt Professor,
Stanford University (starting August 1, 2014); Vice President for
Energy, Google (until July 31, 2014), in which he argues that a public
endowment dedicated to transformational technology is essential for
safeguarding the interests of our children and grandchildren in the
future.
You can watch a livestream of today’s speakers, including Arun Majumdar, at the Mission-Oriented Finance Conference here.
We routinely use our smart phones without realizing the research and
development that produced it: the transistor, integrated circuits,
wireless communication, the laser and optical communication, the
internet, the Unix operating system, and so on. None of these existed
during World War II. But four decades of post-war research created the
foundation for today’s products (as Mariana Mazzucato has shown in her book The Entrepreneurial State).
Can we learn any principles about research and how it should be funded as a result of this example?
Here are some observations.
Basic and applied research should not be separated.
Basic research, which tries to understand “how nature works”, is
often inseparable from applied research, which is focused on “can we do
something useful with it.” There isn’t one-way traffic between basic to
applied, but rather a feedback loop in which applied research generates
questions that stimulates basic research, and the cycle keeps on going.
Both basic and applied research take time to mature.
The first paper on the protocols used in today’s internet was
published by Kahn and Cerf in 1974 and they were implemented on the
ARPAnet in 1983, nine years later. It took another 9-10 years of
persistent funding and advocacy for it to become the internet.
Transformative technologies for which industries do not even exist at
the early stages often take 15-20 years for new industries to be
created.
R&D is not a straight line
While the development of the smart phone may seem obvious to some,
its historical path was far from it. The first transistor was a point
contact transistor made of germanium, which no one uses today. The idea
of a field-effect transistor, the workhorse of the integrated circuit,
and silicon as the material of choice, came much later. Did Kahn and
Cerf ever think the internet would develop to take on the shape and form
it is has today? I seriously doubt it. There is plenty of serendipity
involved and the paths to successful technologies and products contain
many twists and turns. Some humility regarding the ability to predict
the direct business impact of research is much needed....MORE
And from Salon:
Let’s nationalize Amazon and Google: Publicly funded technology built Big Tech They're huge and ruthless and define our lives. They're close to
monopolies. Let's make them public utilities
They’re
huge, they’re ruthless, and they touch every aspect of our daily lives.
Corporations like Amazon and Google keep expanding their reach and
their power. Despite a history of abuses, so far the Justice Department
has declined to take antitrust actions against them. But there’s another
solution.
Is it time to manage and regulate these companies as public utilities?
That argument’s already been made about broadband access. In her book “Captive Justice,” law professor Susan Crawford
argues that “high-speed wired Internet access is as basic to
innovation, economic growth, social communication, and the country’s
competitiveness as electricity was a century ago.”
Broadband as a
public utility? If not for corporate corruption of our political
process, that would seem like an obvious solution. Instead, our nation’s
wireless access is the slowest and costliest in the world.
But
why stop there? Policymakers have traditionally considered three
elements when evaluating the need for a public utility: production,
transmission, and distribution. Broadband is transmission. What about
production and distribution?
The Big Tech mega-corporations have developed what Al Gore calls the “Stalker Economy,”
manipulating and monitoring as they go. But consider: They were created
with publicly funded technologies, and prospered as the result of
indulgent policies and lax oversight. They’ve achieved monopoly or
near-monopoly status, are spying on us to an extent that’s unprecedented
in human history, and have the potential to alter each and every one of
our economic, political, social and cultural transactions.
In fact, they’re already doing it.
Public utilities? It’s a thought experiment worth conducting.
Big Tech was created with publicly developed technology.
No
matter how they spin it, these corporations were not created in garages
or by inventive entrepreneurs. The core technology behind them is the
Internet, a publicly funded platform for which they pay no users’ fee.
In fact, they do everything they can to avoid paying their taxes.
Big Tech’s use of public technology means that it operates in a
technological “commons,” which they are using solely for its own gain,
without regard for the public interest. Meanwhile the United States
government devotes considerable taxpayer resource to protecting them –
from patent infringement, cyberterrorism and other external threats.
Big Tech’s services have become a necessity in modern society.
Businesses
would be unable to participate in modern society without access to the
services companies like Amazon, Google and Facebook provide. These
services have become public marketplaces.
For individuals, these
entities have become the public square where social interactions take
place, as well as the marketplace where they purchase goods.
They’re at or near monopoly status – and moving fast.
Google has 80 percent of the search market in the United States, and an even larger share of key overseas markets. Google’s browsers have now surpassed Microsoft’s in usage across all devices. It has monopoly-like influence over online news, as William Baker
noted in the Nation. Its YouTube subsidiary dominates the U.S.
online-video market, with nearly double the views of its closest
competitor. (Roughly 83 percent of the Americans who watched a video online in April went to YouTube.)...MORE
Salon is owned by the publicly traded Salon Media Group.
Finally, a lot of folks who would regurgitate the term 'military-industrial complex' at the drop of a lobbyist's hat haven't read the rest of the speech it came from:
...Akin
to, and largely responsible for the sweeping changes in our
industrial-military posture, has been the technological revolution
during recent decades.
In this revolution, research has become central; it also becomes more
formalized, complex, and costly. A steadily increasing share is
conducted for, by, or at the direction of, the Federal government.
Today,
the solitary inventor, tinkering in his shop, has been overshadowed by
task forces of scientists in laboratories and testing fields. In the
same fashion, the free university, historically the fountainhead of
free ideas and scientific discovery, has experienced a revolution in
the conduct of research. Partly because of the huge costs involved, a
government contract becomes virtually a substitute for intellectual
curiosity. For every old blackboard there are now hundreds of new
electronic computers.
The
prospect of domination of the nation's scholars by Federal employment,
project allocations, and the power of money is ever present--and is
gravely to be regarded.
Yet, in holding scientific research and discovery in respect, as we
should, we must also be alert to the equal and opposite danger that
public policy could itself become the captive of a
scientific-technological elite....
We're seeing some of the indications* one would expect as gold approaches a bottom but no surge in bankruptcies or "strategic" mergers yet.
If we are going to be right on our 15-month call from last year, $875 by the end of Q3 2014 we need the disarray to arrive pretty soon.
This may be why the first lesson in Junior Analyst class is: "If you're going to set a price target, for God's sake don't set a date".
Kitco spot $1306.70-1307.70.
From Kitco:
Mining Industry Feeling The Crunch As Mining Show Staples Suspended Indefinitely
As the gold mining industry continues to navigate through difficult
waters, mining investors will have to do without a few key conferences
as the Metals and Minerals Invest Conference circuit has been suspended
indefinitely.
Both the San Francisco and New York conferences were suspended July
16 as Euromoney Institutional Investor Plc acquired Summit
Professional Networks, the parent company which hosted the shows.
Euromoney did however announce that they would keep the Mining Indaba
conference in South Africa on the conference circuit. Mining Indaba is
considered one of the largest mining investor conferences in the world.
A veteran of the conference circuit, Brent Cook, editor of
Exploration Insights, was surprised to see both the New York and San
Francisco shows suspended.
They’ve been around for awhile and were considered the best
conferences out there,” he told Kitco News over a telephone interview.
“I guess it does reflect on where the mining industry is at right now.”...MORE
Big, slow-growth, safe: These are a few of the adjectives frequently attached to some or all of the market’s biggest stocks. Lately, you can add outperforming.
The S&P 100, the index of the market’s truly giant stocks such as Apple (AAPL) and Exxon Mobil (XOM), is showing signs of life versus the plain-vanilla S&P 500.
The attached chart from Bank of America Merrill Lynch technicians
Stephen Suttmeier and Jue Xiong show how these giant stocks are
breaking resistance versus their merely large peers lately, having
punched through the 200-day moving average.
“Sustaining the break above the 200-day moving average and relative
chart resistance at the October 2013 low and April 2014 peak for the OEX
vs. SPX ratio would confirm a bottom for mega caps relative to large
caps,” Suttmeier and Xiong write.
“OEX” is the S&P 100. SPX refers to the S&P 500.
For funds, watch iShares S&P 100 ETF (OEF) or Vanguard Megacap ETF (MGC) versus the broad market....MORE
He may not even be allowed to set foot in the Staples Center parking lot
on game nights, but Donald Sterling is motivated by a much higher
force: spite. Strong, powerful spite....MORE
They've lost me on the Argentina reference, I figured Mrs. Sterling would somehow be pari passu with the earlier Mrs.' Sterlings but that wasn't the case. The tags on the story appear to be clues:
So you’re a cat, and you’ve decided you need to update your profile pic. Don’t panic! Just follow these simple DOs and DON’Ts, and you will be well on your way to a high-quality cat selfie that your friends will absolutely love....
Tropical Depression #2 doesn't look to develop but behind it are some potential mischief makers.
From Wunderblog:
...ELSEWHERE in the Atlantic, there are 2 Tropical Waves over the far
eastern Tropical Atlantic that have brought along more ‘moisture laden
air’ (versus dry, Saharan air). In addition, there are now several
somewhat stronger appearing Tropical waves upstream over Africa (only 2
are shown in Fig 9) that will reach the Atlantic later this week and
early next week, with one of these systems having a significantly higher
potential for development next week.
Fig
8: Aside from TD#2, only 2 significant Tropical Waves are present over
the eastern most Atlantic, and they are entangled in the African
Monsoonal TROF and/or ITCZ.
Fig
9: Tropical Waves over Africa have become somewhat stronger over the
past week, with the easternmost one in the above image showing a
mid-level 'turning' on imagery loops.
In the meantime, however, no new tropical cyclone formation is expected during the remainder of the week....
Cameron and Tyler Winklevoss, the Internet entrepreneurs
perhaps best known for their associations with Facebook and Bitcoin,
are the latest techies to leap into the art world. This week, the twins’
Winklevoss Capital announced an investment round in Paddle8, a New York-based art auction house known for their high-profile charity events including a recent Faberge Egg auction. Paddle8 has flirted publicly with the use of Bitcoins for art transactions in the past and is one of the more tech-savvy of the online auction
houses looking for a piece of the international market. Winklevoss
Capital declined to discuss the specifics of the investment but said it
was their first in the art or auction arenas....MORE
...After being introduced by an existing investor, Julka
said, “we talked about how there has been so much conversation about art
as an asset class, and while some people think of Bitcoin as a currency
other think of it as an asset class. There’s a lot of commonality about
how Bitcoin is thought of, and as we spoke with them it became clear
they could be very helpful both in terms of global expansion and company
building.”
By email, Tyler Winklevoss wrote to Fast Company that “The art market
is global and like many global markets it currently feels the pain,
inefficiencies, and high-costs of our current payment systems. Bitcoin
rethinks the way we transfer value. It is borderless, frictionless, and
instant and should be able to bring these qualities to art transactions
just like any other transaction.”...
Is anyone out there working on an innovation that can shrink a power
inverter from cooler-sized down to tablet-sized? An inverter is a device
that converts direct current, from sources like solar panels or
batteries, into alternating current to be used in homes. Google has a brand new contest, called the Little Box Challenge, that is offering $1 million to a team that can make a powerful inverter as tiny as possible....MORE
As Carnegie Mellon Financial Engineering prof. Dogbert explains, we are dealing with aggregates here:
This, however, leads to a whole new set of problems that come from physically* bundling the gals into the Collateralized Cow Obligation wrapper.
They ask questions like "Does this CCO make my butt look fat" and seriously, how can you answer that without incriminating yourself?
For this reason some practitioners prefer to stick with synthetic livestock, not to be confused with....ummm..., where was I?
Our main finding is that, on average, [rural Indian]
households earn negative returns on their investments in cows and
buffaloes if labor is valued at market wages: we estimate average returns of negative 64% and negative 39% for cows and buffaloes respectively.
If we value the household’s own labor at zero, estimated average
returns increase, to negative 6% for cows and positive 13% for
buffaloes… if cows and buffaloes earn such low, even negative, economic
returns, why would rural Indian households continue to invest in them?
That, from Anagol, Etang and Karlan, led to a host of speculation
about various economic and cultural factors which might explain India’s
ability to slide past the “central tenets of capitalism”… h/t’s to the Onion all round.
Which is fine. India does have a religious, cultural, and political affinity with the cow — see the hindu nationalistRSS in 1952 or the just completed elections for a snapshot — and the lack of financial inclusion over here, something the RBI is working on, might add to the rationality of owning a negative yielding cow. (Gold too for that matter)
BUT whether those are sufficient explanations for the
willingness to hold such negative returning assets (and the suspicion
had to be they weren’t, and not just because buffaloes also came up
negative) may be an oversimplified question. Because, well, the whole “cows disprove central tenet of capitalism” call seems a touch overdone....MUCH MORE
*Fortunately the Reserve Bank of India takes a very liberal view of dematerialized assets, with many purveyors offering 'demats' served up with a soupçon of quasi-mysticism:
"Dematerialising physical shares
can be a horrible experience. It can take anywhere between three months
to three years," warns Kartik Jhaveri, director, Transcend India....
Having the Holy Roman Empire postal monopoly worked out pretty well for the Thurn und Taxis fam who Wikipedia describe as "well known as owners of breweries and builders of many castles."
From Simon Taylor's blog:
Economics students learn early in their microeconomics course that there is a desirable market condition called perfect competition,
which consists of large numbers of more or less identical firms
competing aggressively to meet the customer’s wants. The competition is
so fierce that no firm has any ability to charge a price above the
absolute minimum needed to stay in business. So the customer is assured
of a low price and the economy makes efficient use of resources, since
only the most cost effective companies can survive.
They then learn about how bad monopoly is. That is the
opposite type of market in which there is a single supplier who
naturally charges whatever the market will bear and has little incentive
to be cost efficient or to be attentive to customer needs. A market
with monopoly will be inefficient (*), will charge customers more than
in perfect competition and probably won’t be innovative or offer a
decent service.
The problem with this picture is that very few actual industries are
like either case. Perfect competition is a fiction, an “ideal type”. The
nearest we get to it is in agriculture and some other basic
commodities, where the product is identical and firms have no market
power or ability to add any sort of value or service that would merit a
higher price. Many markets are competitive but with only a few
companies, and the product is usually slightly differentiated.
Take coffee shops. There are plenty of choices for a customer in
Cambridge looking for a coffee. There are the three big chains (Costa,
Nero and Starbucks) plus various independents. All offer broadly the
same product (though for my taste the brown milk that you get in Costa
or Starbucks barely rates the name coffee) but they each have subtle
differences in ambience, style, service and location. They compete on
these features, not on price, but their products are broadly priced the
same, which suggests some degree of restraint from competition.
That type of market is called monopolistic competition in
economics textbooks because the product or service is not identical and
each firm has some degree of influence over demand. Innovation is
encouraged in that type of market because a small enhancement can cause
customers to switch. But other customers are loyal or just conservative,
which means that the coffee shops aren’t relentlessly trying to retain
every single customer each day, which is the miserable fate of a company
in a perfectly competitive market.
Pure monopoly in the sense of a single supplier is rare except in the natural monopolies of
network utilities, where there is a strong cost argument for a single
electricity transmission wire or water pipe. Competition would be
wasteful and no new entrant would expect to make money. So these
industries are inevitably monopolistic and are usually regulated as
such.
But quasi-monopolies, in the sense of a dominant supplier, are quite
common. And the goal of many businesses is precisely to try to establish
such a position. Peter Thiel, the co-founder of Paypal and an early investor in Facebook, taught a course on start-ups at Stanford University in 2012 and this blog provides some notes on the course (it’s written by Blake Masters, Thiel’s co-author of the new book Zero to One
so the notes are likely to be a reliable guide to what Theil said). One
thing that struck me was his argument that successful capitalism and
monopoly are not opposites, as the textbook view of economics might
suggest. On the contrary, he argues that a start up should be intending
to find or build a monopoly or at least dominant position that it can
completely own. Unless a start up has that ambition or potential it’s
not worth investing in or working for.
So monopoly is both the goal of a dynamic business and an outcome
that reflects success. Perfect competition is neither a good guide to
what most business looks like, nor a desirable goal that any business
should accept.
Successful examples of quasi-monopolies would include Google,
Facebook, LinkedIn and for a while Apple and Microsoft. None of these is
or was a 100% monopolist, though Microsoft came very close with the
dominance of Windows for a while. And none of them has an unassailable
position, because technological change makes new disruptive entrants a
possibility, which is why so few companies keep their monopoly position....MORE
The main concern is the 1.1 gallons of water it takes to grow each almond.
As to the rest of it, hell, who cares?
From MotherJones:
Take almonds and just…wait, why add water? Lecic/Shutterstock
Almonds
are a precious foodstuff: a crunchy jolt of complete protein, healthful
fats, vitamins and minerals, and deliciousness. Given their rather
intense ecological footprint—see here—we
should probably consider them a delicacy, a special treat. That's why I
think it's deeply weird to pulverize away their crunch, drown them in
water, and send them out to the world in a gazillion little cartons.
What's the point of almond milk, exactly?
Evidently, I'm out of step with the times on this one. "Plant-based
milk" behemoth White Wave reports that its first-quarter sales of almond
milk were up 50 percent from the same period in 2013. In an earnings
call with investors in May, reported by FoodNavigator,
CEO Greg Engles revealed that almond milk now makes up about two-thirds
of the plant-based milk market in the United States, easily trumping
soy milk (30 percent) and rice and coconut milks (most of the rest).
Dairy is still king, of course, comprising 90 percent of the "milk"
market. But as our consumption of it dwindles—down from 0.9 cups per
person per day in 1970 to about 0.6 in 2010, according to the US Department of Agriculture—plant-based alternatives are gaining ground. Bloomberg Businessweek
reports that sales of alternative milks hit $1.4 billion in 2013 and
are expected to hit $1.7 billion by 2016, with almond milk leading that
growth.
Now, I get why people are switching away from dairy milk. Industrial-scale dairy production is a pretty nasty business,
and large swaths of adults can't digest lactose, a sugar found in fresh
dairy milk. Meanwhile, milk has become knit into our dietary culture,
particularly at breakfast, where we cling to a generations-old tradition
of drenching cereal in milk. Almond milk and other substitutes offer a
way to maintain this practice while rejecting dairy. (Almond milk has
been crushing once-ubiquitous soy milk, perhaps partly because of hotly contestedfears that it creates hormonal imbalances.)
All that aside, almond milk strikes me as an abuse of a great
foodstuff. Plain almonds are a nutritional powerhouse. Let's compare a
standard serving (one ounce, about a handful) to the 48-ounce bottle of
Califia Farms almond milk that a house guest recently left behind in my
fridge....MORE
That’s what a Hong Kong investor has agreed to pay for a firm that two years ago had trouble paying its rent
Integrated Whale Media Investments of Hong Kong is now the majority owner of Forbes Media, valuing the company at a whopping $475 million.
What the buyers get is a dwindling print magazine, digital growth, and the Forbes brand, which has been seriously diluted in the last four years. It’s hard to imagine an American investor paying half the price.
Fortunately for the Forbes family (and for Bono), the brand apparently still has outsized allure for rich people in Asia. The $475 million valuation, if it’s accurate, is an enormous number for a company that projected late last year that it would take in $21 million in earnings before interest, taxes, depreciation, and amortization in 2013, according to a pitchbook obtained by Ken Doctor. Ebitda doesn’t include the cost of servicing debt, and Forbes’ is large enough that it went into technical default in 2011. It also had trouble paying its rent in 2012.
Its business fortunes have turned since then, but that has come at the expense of Forbes’ journalistic credibility.
It may be hard to recall now, but Forbes was a journalistic force not so long ago. Now it has a boss whosays things like “content marketing just might be the full employment act for journalists.”
Four years ago, Forbes acqui-hired Lewis DVorkin and installed him as chief product officer. DVorkin implemented the model he had pioneered at True/Slant, where writers get paid by the traffic they bring, particularly repeat visitors.
This model allows Forbes to have a far larger stable of writers than it could ever employ under more traditional models of work that are subject to things like minimum wage laws. It’s sharecropper journalism. Writers effectively are tenants on Forbes.com, and Forbes gets a big cut of what they bring in. Or it gets everything: The median Forbes writer gets zip.
Forbes has just 40 staff reporters, but it churns out 400 pieces of content a day thanks to its 1,200 contributors. Four hundred of those are “paid freelance contributors,” who must write at least five times a month and interact with commenters. Sixty of them make more than $45,000 a year from Forbes, which means 85 percent of them make less than that. Throw in the unpaid contributors and that moves to 95 percent....MORE
In case you haven't heard, America's favorite magazine to carry in public has pulled a Willy Wonka and opened up part of their robust archive
to the general public. Now you can finally join the ranks of your
friends whose grandparents gave them the complete New Yorker on CD-ROM
and see what all the fuss is about. But where to begin?
To
help make sense of the overwhelming collection, the Digg editorial team
has put together a selection of personal favorites. Of course we highly
suggest reading as much of the New Yorker archive as possible, but if
you're strapped for time and/or looking for some place to start, you
can't go wrong with these:
Part
intellectual history, part biography, Louis Menand's article about
Lionel Trilling gave me my first real introduction to one of our most
significant (and arguably last) public intellectuals. It's a piece about
what happens when leading a life of the mind makes you famous. — Anna Dubenko
Adam
Higginbotham's look into New York City's most complex window-washing
rig pulls you in with whimsy, carefully walks you through a history of
the trade, and leaves you with a true appreciation of window cleaners.
It's a great example of what reporting a story into the ground can
produce. — Steve Rousseau
S&P500 1973.63 down 4.59, DJIA 17,051.73 down 48.45, SPY 197.34 Down 0.37 (AH down another 0.23)
From Options 1:
Posted 11:00 AM ET – Last Thursday, the market declined when the US and Europe imposed new economic sanctions against Russia. Hours later, a commercial jetliner was shot down by Ukrainian rebels and the situation deteriorated. There is little doubt that the weapons and training were provided by Putin and we can expect additional economic sanctions against Russia.
The bid to the market is strong and stocks rebounded Friday.
If not for the political turmoil (Ukraine and Gaza), the market would be making new all-time highs.
Earning season has started off on a strong note. Profits are up almost 7% and revenues are up 3.5%. Healthcare got a boost from UNH and HMOs have been strong. Cyclicals benefited from Alcoa’s strong number and growth in China is back on track (7.5%). Banks prepared for bad news and the results were better than feared. The financial sector has been moving higher. Intel set the tone for tech and Google also made a nice move after earnings.
We need tech to tread water after recent gains.
Apple and Microsoft will post results after the close Tuesday. This is going to be a very busy week for earnings. The recent jobs recovery should be confirmed in statements made by CEOs. Guidance for Q3 needs to be positive if the market is going to extend this rally....MORE
As the hype-n-tout about this season's El Nino begins to fade* the hurricane forecasts are going to have to be changed to reflect the increased risk of cyclone formation.
(see NOAA)
The largest change is in decreased wind shear which allows more storms to spin up. There are additional teleconnections that affect steering winds and even some hypothesized changes in sea surface temps. See below.
And today's blurb, from Reuters:
An
area of low pressure located east of the Lesser Antilles now has a
high, or 70 percent, chance of becoming a tropical cyclone during the
next 48 hours, the U.S. National Hurricane Center (NHC) said in its
latest advisory on Monday.
"Only a small increase in
organization of shower activity would result in the formation of a
tropical depression as the system moves westward to west-northwestward
at 15 to 20 miles per hour during the next day or two," the Miami-based
weather forecasters said.
The primary explanation for the decline in hurricane frequency
during El Niño years is due to the increased
wind shear in the environment.
In El Niño years, the wind patterns are
aligned in such a way that the vertical
wind shear is increased over the
Caribbean and Atlantic. The increased wind shear helps to prevent tropical
disturbances from developing into
hurricanes. In the eastern Pacific,
the wind patterns are altered in such a way to reduce the wind shear in the
atmosphere, contributing to more storms.
Bitcoin turned money into something
completely virtual. Using a worldwide network of machines and the power
of pure mathematics, it put currency in the hands of computer
programmers, free from the rules and regulations of big government and
big banks. But J. Chris Anderson wants to do something even more
radical.
Anderson
is starting a new digital currency project tentatively dubbed Document
Coin. It’s a bit of an odd duck, but it’s intriguing, and Anderson is
worth listening to. He’s the co-founder and chief software architect of Couchbase, a kind of new-age database with some serious cred among Silicon Valley developers.
Instead of using pure mathematics to prevent things like the same
person spending the same money twice, Document Coin will rely on personal reputation
to keep all transactions in order. And each unit of currency created
using Document Coin could have different values in different situations.
If you use a coin in one place, it might be worth more than if you use
it in another. The goal, Anderson says, is to get people to completely
rethink the entire idea of money.
Unlike with bitcoin, anyone will be able to create a new Document Coin anytime they want.
Unlike with bitcoin—which keeps its currency scarce by rewarding it
only to those who participate in what amounts to a race to solve complex
cryptographic puzzles—anyone will be able to create a new Document Coin
anytime they want. The value of each coin will be completely
subjective, depending on who creates the coin and why. “For example, the
coin my disco singer friend created and gave me at my barbeque might be
what gets me past the rope at the club,” Anderson says. A coin minted
by tech pundit Tim O’Reilly might be highly prized in Silicon Valley
circles, but of little interest to musicians. “It’s a bit like a
combination of a social network with baseball trading.”
Ultimately, he hopes to get developers thinking about the social
implications of crypto-currencies, and to get people to question the
idea that everything needs to have a set, numeric value. “If bitcoin is
the toy version of what we’ll all be using the future, then I want to
build the crazy art project version of the future,” he says. Document
Coin’s usefulness as a real currency is limited, but Anderson does hope
people will eventually want to use it. “If you build something, you
don’t want to be disappointed if it succeeds,” he says. “You need to
build things that you would be happy to see take off.”
To that, end, Anderson is working on getting the technology right.
The idea is that each new Document Coin will be a cryptographically
unique token that contains two parts: a set of encrypted data that only
the owner of the coin can see, and a set of public data about the coin.
“I could show you that I have a Tim O’Reilly coin without showing you
exactly which one,” he says....MORE
July, 2014 White Paper
Julie Koeninger Farmland is a real asset that combines solid investment
fundamentals with the potential for attractive cash yields, inflation
hedging, and consistent returns from biological growth. Furthermore,
farmland total returns tend to be uncorrelated with financial asset
returns, offering genuine portfolio diversification for institutional
investors. While institutional ownership within the asset class has
grown steadily over the past few years, it still accounts for less than
1%1 of total global agricultural land ownership, presenting
significant opportunity for sustainable yield enhancement through
targeted farmland investment in certain regions.
The pages that follow present an overview of the key
characteristics and potential risks of farmland investing, consider the
routes for implementation, and make the case for a diversified,
cross-regional approach to the asset class.
Farmland Investments Defined
Farmland investments consist of direct investments in rural land
along with crop and livestock assets that produce food, fiber, and
energy. Farmland investments focus on the productive capacity of the
land base, and returns are based on the biological growth of crops and
livestock, as well as appreciation of land and related assets. By their
nature, farmland investments are long-term illiquid investments in real
assets.
Investments are grouped into three general categories:
1.Row crop investments include annual crops such as corn, soybeans, cotton, wheat, and rice.
2.Permanent crop investments include perennial crops such as
fruit and nut crops, which have both pre-productive and mature periods.
Pre-productive or “greenfield” investments where trees or vines are
planted on bare ground have a “J-curve” return profile. Some mature
permanent crops, like almonds, peak in productivity and then decline, so
orchard age is an important factor in estimating productivity and
value.
3.Livestock investments include land leased to local operators for grazing or direct livestock ownership and operation.
Institutional farmland investing typically focuses on globally competitive agricultural sectors including:
■Corn, soy, wheat, rice, and other bulk commodity row crops that can be produced most efficiently at scale.
■Relatively storable permanent crops such as nut crops or wine grapes.
■Large-scale livestock production, including dairy and beef cattle operations.
Efficient global producers, such as U.S. corn, soybean, and nut crop,
New Zealand dairy, and Australian beef producers, benefit from
participation in export markets, and receive a globally determined price
for their output.
Management Style: Leasing vs. Direct Operation
In many regions of the U.S. and some other parts of the developed
world, row crop properties can be leased to high- quality local farm
operators at fixed or variable rents that provide attractive yields to
the investor. These farmers leverage the scale and productivity of their
operations by owning some land, but also leasing land from investors in
order to maximize their return on investment. In other geographies
lacking a robust farmland rental market, particularly in developing
regions, a lack of leasing demand from qualified farmers makes direct
operation the best approach to maximize returns. In direct operation,
the farmland investment manager employs a farm manager to operate the
farm. While direct operation involves a higher risk/return profile
because the investor assumes both price and yield risk, it is often the
preferred management style for permanent crops and livestock as it
ensures that the long-term asset is well-managed and value is
maintained.
Property Management
Like most real estate investments, farmland investment requires
specialized property-level management. While more intensive property
management is required for direct operations, property managers also
provide critical oversight of tenants operating leased farms. Property
management may be vertically integrated with investment management or
outsourced to third-party providers. Outsourcing allows the investment
manager to hire the property manager best suited to manage each type of
investment in each region and can be more cost effective as the fund
manager need not invest in property management infrastructure in
multiple locations. Utilizing a third-party property manager enhances
transparency, as it allows for a true separation of fund- and
property-level expenses.
Investment Vehicles
Investors can participate in the farmland asset class through direct
investments or through the use of a specialist farmland investment
manager, that may offer funds, co-investments, or separately managed
accounts. For most investors, developing a well-diversified portfolio of
direct investments is prohibitively complex and time-consuming.
Investing in farmland through a farmland investment manager can provide
the benefits of diversification, experience, and scale. Closed-end funds
have a fixed term with some potential for extension, but are generally
illiquid for the term. As with private equity, fund terms can vary
widely. Open-ended funds and publicly-traded REITs provide more
liquidity, but valuation at entry and exit can be an issue in open-ended
funds, and the performance of public REITs can be influenced by capital
market trends and other factors apart from the underlying farmland
investment. Co- investments and managed accounts often require a larger
minimum investment, but offer investors a greater measure of control.
Sources of Return
Returns typically consist of current income from annual lease
payments or from annual crop or livestock sales, plus land and related
asset appreciation. Appreciation reflects the income-producing
capability of the investment based on anticipated future crop/livestock
prices and yields. While soil quality and climate/water availability are
relatively fixed determinants of a property’s potential yield,
technological and management improvements can be brought to bear on
individual properties to enhance yields and returns to investors.
Capital improvements such as irrigation, laser leveling, and drainage
can increase current income as well as future value, as improvements
that permanently increase productivity are eventually capitalized into
land values.
The timing of cash flow distributions from farmland investments is
dependent on both the investment vehicle and the actual investments in
the portfolio and how they are managed (leased vs. direct operation).
Cash flow available to distribute will depend on the relative proportion
of developmental (pre-productive) properties and cash-flowing
properties in the portfolio. Lease payments are typically received
before the farmer enters the field, while revenue from direct operations
is received as crops are sold over time. A leased U.S. row crop
property may produce a relatively consistent annual income return of
3-5%, depending on its quality and location, while some directly-
operated permanent crop properties can produce double-digit annual
income returns, but with significant variability due to annual
fluctuations in price and yield. Closed-end funds typically distribute
cash flow net of working capital reserves and cannot reinvest income in
additional properties, while evergreen funds and separate accounts may
choose to reinvest a portion of income and realized gains. A REIT must
distribute at least 90% of its taxable ordinary income to shareholders
annually in the form of dividends.
How Farmland Fits in an Institutional Portfolio
Farmland has historically generated attractive returns, with
excellent capital preservation and portfolio diversification at a low to
moderate level of volatility. Some institutional investors allocate to
farmland in the context of a diversified real asset portfolio that may
include investments in real estate, infrastructure, forestry, and
farmland. Others may include farmland in private equity or other
illiquid asset categories. The exhibit below shows the 20-year realized
correlation of U.S. farmland to other asset classes. While exhibiting
low correlation to financial assets like stocks and bonds, farmland
investments can provide a bond-like current income stream from lease
payments or more variable income from direct operations, along with the
potential for capital appreciation. In addition, through thoughtful
portfolio construction, the risk/return profile of a farmland allocation
can be varied to meet different risk/return preferences.2 Portfolio Diversification
Farmland portfolios can be structured as a balanced mix of row crops,
permanent crops, and livestock or can be focused on a particular
strategy/sector or other variations across the spectrum from
fully-diversified to targeted investments. Portfolios may include
ongoing farming operations or developmental “greenfield” or timber
conversion strategy investments. As described above, leased row crops
offer the lowest risk/return profile because the farmer takes on the
price and yield risk, paying the investor a modest bond-like rate of
return before beginning to farm each year. Participating or crop share
leases allow both the farmer and investor to participate in some portion
of annual upside/ downside. Directly operated permanent crops and
livestock can provide higher returns, but the investor is exposed to
both price and yield risk, thus increasing return volatility and
potential for operating loss. Mixing low-risk leased investments with
higher-risk directly operated strategies (including
developmental/conversion properties) can provide current cash flow along
with upside potential. Focused portfolios invested in a single sector
such as leased row crops or livestock may fit a specific investor
objective such as a desire for stable but modest returns (leased row
crops), or an interest in higher income and appreciation potential
(livestock and permanent crops), but more diversified strategies can
help mitigate non-systematic risk.
Geographic diversification is also related to strategy choice. For
example, globally competitive dairy and beef production might dictate
investment in New Zealand and Australia, while leased row cropland is
the norm in the U.S., but not necessarily in other geographies. In some
regions, mixed-use properties that may include crops, livestock, and
timber offer value-oriented opportunities relative to pure single
strategy investments. Investing in emerging countries can provide
greater upside potential, but at higher risk levels than developed
country investments. Portfolios can be tailored to desired levels of
diversification, but relative value and opportunity across sectors and
geographies should be considered as well.
Investment Performance
Historical returns to direct farmland investments have been
relatively high over the past two decades and particularly over the past
decade as farmland investing has gradually gained popularity among
institutional investors. Initially a long-term investment utilized by a
small number of insurance companies and large pension plan investors,
farmland investing has become more mainstream due to a convergence of
factors: favorable supply/demand fundamentals, globally low investment
yields in traditional “safe” assets like bonds, and increasing investor
interest in diversifying real assets capable of providing an inflation
hedge.
The National Council of Real Estate Fiduciaries (NCREIF) reports
nominal annualized time-weighted total returns of 12.5% for its Farmland
Index over the past 20 years and 17.5% over the past 10 years. On
average, over the 20-year period, income has provided at least 50% of
Farmland Index returns. Over both time periods, farmland, as represented
by the Farmland Index, has generated higher returns than equity
indices, with less volatility. It should be noted that this reduced
volatility reflects in part the fact that farmland investments are not
daily valued, but are typically appraised annually.3 The
Farmland Index reflects the investment performance of a large pool of
individual agricultural properties acquired in the private market for
investment purposes only, and held in a fiduciary environment for the
benefit of tax-exempt institutional investors, primarily pension funds.
It includes property-level returns to U.S. farm properties only and is
net of property management fees, but gross of fund-level fees. Given its
tax-exempt, property-level focus, only the effect of property taxes is
included in the Farmland Index. Despite its shortcomings as a benchmark
for global agricultural investments funds, the NCREIF Farmland Index
does provide evidence of trends in investment-quality farmland
performance and is currently the only available index of its kind.
Supply-Demand Fundamentals
Given the strong performance of farmland in recent years, the
question as to why today is a good time to invest is a reasonable one.
The answer depends on global macroeconomic forces, but also on the
specific global strategies employed and locations targeted for investing
in farmland today....
From Agrimoney:
