Friday, August 28, 2015

"Oil Surges To $45 After Saudi Troops Invade Yemen"

Sure, let's put a little geopolitical risk premium back in the price.
Front WTI $45.00 up $2.44.
Brent up $1.79 at $49.35

We'll be exiting the dance floor ahead of the weekend.
Sometimes you get lucky.

From ZeroHedge:
For the 3rd day in a row, crude oil prices are spiking as the short squeeze morphs into a war premium. Heberler reports that Saudi ground troops have entered Northern Yemen and seized control of two areas in the Saada province. WTI is now above $45... 
As we noted previously, boots have been on the ground there (and tank tracks) since early July......But, as Haberler reports, forces seize control of two areas in Yemen’s Saada province in the first actual ground offensive by The Saudis...
Saudi Arabian ground troops have advanced into northern Yemen, in a bid to push back against Houthi Shia militia and forces loyal to ousted president Ali Abdullah Saleh, military and tribal sources said. This is Saudi Arabia's first ground offensive in Yemen since it launched an extensive military campaign in March targeting Houthi positions. The sources told Anadolu Agency that Saudi Arabian troops advanced into Saada province after Houthi militants recently stormed Saudi positions in the southern Saudi province of Jizan.... 

The Future Of Edible Electronics: 3D Printed Vegemite to Power LEDs


The list of 3D printable materials has gotten very long and diverse over recent years, and only seems to be increasing in length at a very steady rate. But among it are some very surprising (and sometimes even edible) materials, and one Dutch professor at the University of Wollongong in Australia has just added perhaps the strangest: Vegemite. Not only has Marc in het Panhuis successfully 3D printed this material, he has proved that the material is an ideal conductor of electricity. Could this be the future of edible electronics? 
Now for those of you who’ve never ventured down under, Vegemite is not only a more versatile ingredient than expected, it is also something of a cult product. It has shaped the breakfasts and lives of millions of Australians for decades, and is actually quite healthy. Full of B vitamins, it is made from left-over yeast extracts from the brewing industry, as well as a couple of other spices. It is also a rather well-known product with umami flavor and is eaten on everything in Australia, including just on toast with a bit of butter. 
Despite all the inventive Vegemite recipes out there, no one has ever tried to 3D print it, which is exactly what professor Marc in het Panhuis has now achieved. You might know this engineering expert for a number of other 3D printing innovations. Just recently, we reported on his involvement in a 4D printed valve. 
Evidently, one morning over breakfast, he guessed that Vegemite is a more versatile product than many believe. Designing a breadboard (for electronic circuit prototypes, not for bread), he 3D printed Vegemite on top of a slice of white bread with a custom 3D printer in the logo of his university. In his experience, Vegemite was actually a fantastic 3D printable material. 
As its qualities also suggest that Vegemite is capable of conducting electricity – containing water so and being very salty – that is something that also had to be tested. LED lights were therefore plugged into the UWO logo and powered up. And as you can see for yourself, it worked! ‘Even on bread we can put electricity through our Vegemite’, the professor declares. ‘This shows that we can 3-D print vegemite electronics and use it to power LEDs.’ And as he goes on to prove, it is still edible – just make sure to unhook all electronics....MORE
For more Anglospheric concentrated yeast extract news see 2013's Fracking In England: You Either Love It or Hate It:
WARNING: The 'reveal' at the end of the post is disgusting. 
Let's just say "Microbial injectate".

Natural Gas: EIA Supply/Demand Report

From the Energy Information Administration:

In the News:

Northeast production sets record high on Monday
Production in the Northeast reached a record high of 20.4 billion cubic feet (Bcf) on Monday, August 24, according to Bentek Energy data. In the last several years, growth in total U.S. natural gas production has been driven largely by production gains in theMarcellus and Utica shale plays. Marcellus, which spans Ohio, Pennsylvania, and West Virginia, is the most productive U.S. shale play, and alone accounted for 21% of total U.S. dry natural gas production in the first five months of 2015. During that period, total U.S. dry gas production grew 8% over 2014 levels for the same period, with increases in Marcellus production contributing more than half of that growth. The record high Northeast production on Monday may be attributed to the completion of maintenance in the area. 
The relatively large volumes of natural gas produced in the Northeast combined with constrained pipeline takeaway capacity have contributed to natural gas prices in that area that are below prices in other regions of the country. The price discount for prices at Transco’s Leidy line in Marcellus to the U.S. benchmark Henry Hub has averaged $1.48 per million British thermal units (MMBtu) since the start of the year. This price difference has contributed to the announcements from some producers that they will be slowing their drilling activity in the Marcellus and Utica until new pipeline takeaway capacity enters service....MORE
Prices/Demand/Supply:Prices vary slightly, but flat in many market locations. At the start of the report week, temperatures were generally above average in the East, South, and West, though below average in the Midwest and Rockies. Temperatures remained moderate in the central states and dropped some in most other regions, with the exception of the Northeast, which remained above average. The Henry Hub spot price began the report week at $2.73/MMBtu last Wednesday and settled yesterday down slightly at $2.72/MMBtu. Prices at other market locations also declined slightly. Spot prices at the Chicago Citygate decreased by 4¢ Wednesday-to-Wednesday, closing yesterday at $2.81/MMBtu. Prices at PG&E Citygate, serving Northern California, declined from $3.18/MMBtu last Wednesday to $3.12/MMBtu yesterday. Of note, the trading point Sumas, which is the primary border crossing for natural gas from Canada to Washington state, serving the Pacific Northwest, saw a rise from $2.07/MMBtu last Wednesday to $2.53/MMBtu yesterday because of supply constraints on the Canadian side. 
Northeast prices respond to increased power burn. In the Northeast, prices fluctuated during the report week in response to varying temperatures, with New York and New England seeing above average temperatures for part of the week. New England spot prices also responded to an increased demand for natural gas because of an outage at the Pilgrim-1 nuclear power station, near Plymouth, Massachusetts, which started on Saturday, August 22, and ended yesterday. Gas prices at the Algonquin Citygate, which serves Boston, started the report week at $2.62/MMBtu, decreased to $2.35/MMBtu for the weekend, then rose on Tuesday, because of above-average temperatures and increased power sector demand, to $3.29/MMBtu, and settled at $3.06/MMBtu yesterday. Similarly, at the Tennessee Zone 6 200L serving lower New England, prices fluctuated during the report week, starting last Wednesday at $2.53/MMBtu, increasing to $3.22/MMBtu on Tuesday, and settling yesterday at $3.02/MMBtu. At Transcontinental Pipeline's Zone 6, serving New York City, the spot price started the report week at $2.73/MMBtu and ended the report week yesterday at $2.66/MMBtu....

"Risk Control Funds May Be Driving Huge Market Swings"

Lifted in toto from Barron's Stocks to Watch, Aug. 27:
Stocks are surging, but many institutional investors hate the rally.
One top trader at an international firm told me he was liquidating his 401k into cash at the close. That’s how much he mistrusts the ferocity of this week’s move. 
A few days ago, one of my best sources, an institutional trader who mentored me when I was a wee lad, emailed to say this and it is worth repeating. 
He says that he believes “Risk Control Funds” are driving equity flows. He says these funds go by different names – risk parity, risk budgeting or risk control. Each operates a little bit differently, but each essentially does the same thing. When volatility spikes, they sell stocks and buy bonds or move to cash.
My source, who has run some of the biggest trading desks on the Street, equates this action with portfolio insurance that was popular before the 1987 crash. Portfolio insurance entailed shorting index futures against stocks to manage risk. As the market corrected, index futures were repeatedly sold at lower prices. The trading technique was blamed for the 1987 crash. 
I don’t want to raise the flag of the bearish past but this talk is starting to spread.
Stocks to Watch Homepage

Maybe the Social Sciences Aren't Really Science

For the last seven or eight years our watchword has been something akin to this idea from 2013's "The Next Time Someone Tells You Economics is a Science Remind Them of Mendeleev":
...Two other points to consider:1) The mere fact that economists use the tools of science (Maths) to do their work no more makes economics a science than bid and ask spreads make carbon trading "market based"....
From the New York Times:
Many Psychology Findings Not as Strong as Claimed, Study Says
The past several years have been bruising ones for the credibility of the social sciences. A star social psychologist was caught fabricating data, leading to more than 50 retracted papers. A top journal published a studysupporting the existence of ESP that was widely criticized. The journal Science pulled a political science paper on the effect of gay canvassers on voters’ behavior because of concerns about faked data. 
Now, a painstaking yearslong effort to reproduce 100 studies published in three leading psychology journals has found that more than half of the findings did not hold up when retested. The analysis was done by research psychologists, many of whom volunteered their time to double-check what they considered important work. Their conclusions, reported Thursday in the journal Science, have confirmed the worst fears of scientists who have long worried that the field needed a strong correction. 
The vetted studies were considered part of the core knowledge by which scientists understand the dynamics of personality, relationships, learning and memory. Therapists and educators rely on such findings to help guide decisions, and the fact that so many of the studies were called into question could sow doubt in the scientific underpinnings of their work. 
“I think we knew or suspected that the literature had problems, but to see it so clearly, on such a large scale — it’s unprecedented,” said Jelte Wicherts, an associate professor in the department of methodology and statistics at Tilburg University in the Netherlands. 
More than 60 of the studies did not hold up. Among them was one on free will. It found that participants who read a passage arguing that their behavior is predetermined were more likely than those who had not read the passage to cheat on a subsequent test....MORE
As noted in UPDATED--Tyler Cowen on Izabella Kaminska's "Counterintuitive Model of the Modern World":
...Combined with being at the market for pretty much my entire adult life, focusing on energy and ag, and thinking that Alan Sokal's "Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity" was hilarious, I end up with plenty of solitude at parties....
I tease my Sociology/Anthro/Psych friends with the Sokal paper.

Alan Sokal is a professor of mathematics at University College London and professor of physics at New York University. Back in 1996 he submitted "Trangressing the Boundaries..." to the journal  Social Text and got it accepted by said learned Journal. His paper argued that quantum gravity is a social and linguistic construct and was, of course, complete gibberish. The paper is among the most cited in the field with some 900 cites at last count. It's also created a cottage industry of critiques and commentary.

Good yuks at the expense of the humanities folks, right?


In August the peer-reviewed (which Social Text was not) Journal, Advances in Pure Mathematics, accepted for publication “Independent, Negative, Canonically Turing Arrows of Equations and Problems in Applied Formal PDE”.

The paper was computer generated and was, of course, gibberish.**
If the journal of an academic discipline can't figure this stuff out, how the heck am I supposed to?

"Satyajit Das: The illusion of liquidity"

From Forbes India:
The lack of trading liquidity may not cause the next financial crisis but it will increase volatility and accentuate losses 
Financial markets are currently concerned with the lack of trading liquidity despite the actions of central banks to maintain a seemingly unlimited supply of money. 
There are two types of financial liquidity: The first is funding or the supply of money, and the second relates to the ability to buy and sell financial assets readily and without high transaction costs. Central bank policies have simultaneously created an abundance of money and a contraction of trading liquidity. 
Trading liquidity is required where holders of securities, commodities and currencies wish to adjust holdings. This may be dictated by the need for cash, for example, when investors in a fund redeem their interest.   
Investors and fund managers frequently over-estimate liquidity. Only a few stocks, major currencies and some government securities trade consistently, and in large volumes. Other assets trade less, particularly where market conditions are unfavourable. Michael Milken, the creator of junk bonds, identified this tendency: “Liquidity is an illusion... it’s always there when you don’t need it, and rarely there when you do.” 
Today, trading indicators give the appearance of robust normality. But market turnover—the volume of trading relative to outstanding securities—in bonds and shares has fallen significantly. Government and corporate bond turnover has fallen by around 50 percent, in part reflecting the massive growth in issuance and outstandings.  
Investors are likely to have greater difficulty in selling their holdings, especially large ones. They are also exposed to greater price volatility. Increasingly, markets are characterised by low day-to-day volatility, but more frequent, large price changes. In October 2014, US government bonds rates moved by 0.40 percent in a few minutes. In early 2015, German government bond yields rose from near zero to 0.80 percent in a few days. Statistically, these should occur once in several billion years. 
There are several factors driving the problem. 
First, central bank policies of low rates and abundant liquidity have driven investors into riskier, less liquid assets in search of returns. Large purchases by central banks have created an artificial scarcity of low-risk securities. Investors have been forced to invest in longer-dated securities, corporate bonds and emerging market issues. In many cases, the issuer is of low, non-investment grade credit quality. They have purchased less actively traded shares or invested in smaller and often less-developed equity markets. Investors may not recognise that the additional return does not compensate for the additional risk of reduced trading liquidity. 
Second, with markets and prices increasingly driven by changes in official policy, investment horizons have become shorter, making additional claims on market liquidity. Many investors are purchasing assets they would normally shun for short-term gains on the assumption that they will be divest positions to a ‘greater fool’ before prices fall. This game of investment musical chairs relies on predicting when the music will stop, which most market participants are poor at....MORE
HT: Alpha Ideas

Thursday, August 27, 2015

"An honest guide to the San Francisco startup life"

Apparently San Francisco and Silicon valley are now being populated with (pretty good) wannabe standup comedians.
From The Next Web:
Stationed on the West Coast of the United States, flanked by the blue hues of the Pacific Ocean, is a city that’s home to some of the greatest companies in the world – 700 miles south of that is San Francisco. 
I moved to San Francisco two years ago to work for a startup called Padlet. I love it here. It’s like being in Hollywood, but with less-good-looking people. You have the celebs, you have the scandals, you have the media frenzy. My friends back home are full of questions: 
“Is it fun?” 
“You think I should look for a job there?” 
“How far is Vegas?” 
So, here is my experience. I hope it brings the readers closer to our little valley where we are building the future*. 
My day begins with a 30-minute commute to work. I take the subway. The subway system in SF is called the BART, short for Bay Area Rapid* Transit. I love the BART because it is always full of surprises. For example, yesterday, I was at the train station and bam! the train came on time. 
Many drive to work. Driving in SF is like a theme park ride — the cars move bumper to bumper, the terrain is alpine, and the people around you have the temper of 10-year-olds. 
Here is a pop-quiz — Which one’s an SF road and which one’s a roller-coaster?

Screen Shot 2015-08-27 at 10.56.18
Those with a death wish cycle to work. It is easy to spot a cyclist. If you see a guy with one side of his jeans rolled up to the shin, he is a moron; if you see a guy on a bicycle, he is a cyclist.

My office is in a neighbourhood called SoMa, short for South of Market. Many startup offices are in SoMa. The name is a tribute to the returns that investors in most of these startups will see in the long run. 
SoMa is a vibrant area with a variety of establishments like Starbucks, local coffeeshops, grab-and-go coffee kiosks, and coffee trucks. It’s a shame I don’t drink coffee. It’s not that I don’t like the beverage. I just prefer not to consume anything at temperatures that would liquify my alimentary canal.

Why is coffee in SF so hot? Are people welding metal with it? The one time I asked a barista (phrased more politely, of course), I was reproached,

“Good coffee needs to be brewed at 200°F for full flavor.”

Odd! Good bread needs to be baked at 400°F but I don’t see any bakeries selling me searing dough bricks.
My company shares its office with two other companies — Buildzoom and Flexport. Judging from their names, Buildzoom manufactures high precision microscopes and Flexport ships fluorine to dentists in China. We all have a common investor named YC. YC is the venture capital arm of the YMCA. They invest in a lot of companies every year, many that seem outrageous on paper. E.g. they invested in a company called Swapbox, which, I believe, is cloud storage for swingers....MORE

The Best And Worst Performing Commodities Of 2015

From ZeroHedge:
On Sunday we highlighted the rather shocking fact that commodities prices (as measured by Bloomberg’s commodity index) recently hit their lowest levels of the 21st century 
There are a number of factors that explain the plunge, not the least of which is slowing demand from China (as reinforced by this month’s beggar thy neighbor yuan deval which telegraphed Beijing’s worries about the domestic economy) and a global deflationary supply glut across the space exacerbated by easy access to capital markets (which allows otherwise insolvent producers to continue to drill, dig, and pump despite lackluster demand), and Saudi Arabia, which has embarked on an epic quest to bankrupt the US shale complex by keeping crude prices at multi-year lows. 
The effect has been to put enormous pressure on emerging economies - pressure which the yuan devaluation only exacerbated. 
Against this backdrop, we bring you the following graphic from Citi which breaks down the best and worst performing commodities both YTD and QTD
Additional color, from Citi:
Commodities have both reflected and promoted deflationary trends over the course of 2015. The main commodity indices – the BCOM and GSCI – are trading at or near the same level they were at prior to the so-called commodity super-cycle period of 2003-2008. Much of the lost value in individual commodities came not just over the course of 2015 but during the first month of the current quarter (see figures below). 
Perhaps the most critical factor has been commodity over-supply. And yes it is true that lower demand has played a role in a world with stagnating growth, especially in emerging markets. But high prices in the last decade prompted a frenzy of capex spending to unearth larger quantities of raw materials. As is more often than not the case in commodities markets, the result of over-investment was over-supply, which traditionally hovers over markets for years....

"Why We Can’t Get Over Ourselves"

Discerning reader may have detected a hint of triumphalism in today's oil postings.


Exposing the reasons we fail to understand the minds of others.
“You will become way less concerned with what other people think of you when you realize how seldom they do."
—David Foster Wallace, Infinite Jest”
You and I are members of one of the most social species on the planet. No human being succeeds in life alone. Getting along and getting ahead requires coordinating with others, either in cooperation as friends, spouses, teammates, and coworkers, or in competition as adversaries, opponents, or rivals. Arguably our brain’s greatest skill is its ability to think about the minds of others to understand them better. Our daily lives are guided by inferences about what others think, believe, feel, and want. This is your sixth sense at work.

 But over the past two decades in my research as a psychologist, my experiments and research from many other scientists demonstrate the ways in which our sixth sense works well, but not nearly as well as we might think. The truth is that you are likely to understand much less about the minds of your family members, friends, neighbors, coworkers, competitors, and fellow citizens than you would guess.

One of the biggest barriers to understanding others is excessive egocentrism. You can’t see into the mind of others because you can’t get over yourself. You can’t overcome your own experiences, beliefs, attitudes, emotions, knowledge, and visual perspective to recognize that others may view the world differently. Copernicus may have removed the Earth from the center of the universe, but every person on this planet is still at the center of his or her own universe.
Consider participating in what I think is one of the most liberating experiments ever conducted—the Barry Manilow experiment.
One consequence of being at the center of your own universe is that it’s easy to overestimate your importance in it, both for better and for worse. Consider a classic psychology experiment that asked married couples to report how much each of them was personally responsible for a variety of household activities. These included relatively desirable tasks, like cleaning the house, making breakfast, and resolving conflicts, but also undesirable actions, like messing up the house, irritating their spouse, and causing arguments. Husbands and wives were separated from each other and then asked to indicate, out of the total amount for each activity, what percentage they were personally responsible for. The researchers then simply added the spouses’ estimates together for each item. Logically, this sum cannot exceed 100 percent. If I claim that I make breakfast 80 percent of the time and my wife claims that she makes breakfast 60 percent of the time, then our kids are apparently eating breakfast 140 percent of the time. Not possible, even for the fattest families. But psychologically, if I can think of the times I made breakfast more easily than the times my wife made breakfast, then by extrapolation, there will be a lot of reportedly overstuffed families out there.

This is exactly what the results showed. The couples’ estimates, when added together, significantly exceeded 100 percent. Surely you’ve experienced this self-centeredness before. It’s even made its way into jokes. Here’s one: What’s a woman’s definition of barbecue? Answer: You bought the groceries, washed the lettuce, chopped the tomatoes, diced the onions, marinated the meat, and cleaned everything up, but he “made the dinner.”

Don’t get too smug. The really interesting result is that researchers find more consistent evidence for overclaiming, albeit to a lesser extent, for negative activities as well. In this experiment, spouses tended to claim more responsibility than is logically possible even for activities like causing arguments that occur between the two of you. Being self-centered also means being uniquely aware of your faults and shortcomings, knowing when you needled your spouse after a tough day at work or broke the dishes and scuttled them into the trash can before anyone else noticed. It’s harder to notice your spouse’s bad intentions or unhandy dish work....MORE

Chart du Jour

From FinViz:


"How to Destroy a City in Five Minutes"

From World Affairs Journal, August 25:

You don’t need a weapon of mass destruction to ruin a city. 
Well, maybe sometimes you do. You’re not getting rid of New York City without one. But some of the world’s cities are so vulnerable, so precariously perched above an abyss, that a single bloodthirsty nutjob with a rifle can bring it to its knees in a matter of minutes. 
Look at Tunisia’s resort city of Sousse on the Mediterranean. Two months ago, an ISIS-inspired nutcase named Seifeddine Rezgui strolled up the beach with a Kalashnikov in his hand and murdered 38 people, most of them tourists from Britain. 
The police shot him, of course. There was never going to be any other ending than that one. And before the police arrived, local Tunisians formed a protective human shield around Rezgui’s would-be foreign victims. “Kill us! Kill us, not these people!” shouted Mohamed Amine. According to survivor John Yeoman, hotel staff members charged the gunman and said, “We won’t let you through. You’ll have to go through us.” 
Tunisia’s hospitality and customer service are deservedly legendary, but that was truly above and beyond. It’s how Tunisia rolls, but in the end, it doesn’t matter. Tourists are not going back. 
A few still wander around here and there, but the locals are calling them ghosts. Who else lives in a ghost town but ghosts? 
Hotels are laying off workers. Shops are empty and many will have to be closed. The city is reeling with feelings of guilt and anxiety. Guilt because one of their own murdered guests, the gravest possible offense against the ancient Arab code of hospitality, and anxiety because—what now? How will the city survive? How will all the laid-off workers earn a living with their industry on its back? Sousse without tourists is like Hollywood without movies and Detroit without automobile manufacturing. 
Even Tunisia’s agriculture economy is crashing. Prices are down by 35 percent because the resorts don’t need to feed tourists anymore. 
Rezgui’s ghoulish attack was spectacularly successful, wasn’t it? A single act of violence and—boom. Just like that, it’s all over. 
Tunisians can still hang out in Sousse when they have some leisure time, but why should foreigners go there on holiday when they can go to Morocco instead? And if a couple of freakjobs shoot a bunch of tourists in Morocco, that country, too, could go into a tailspin. Why go there for a Mediterranean holiday when you could go to Spain, Malta, Corsica, or Croatia? Europeans who want to go farther afield can fly down to Key West, the Azores, or Bermuda....MORE 

"Oil Soars Over 8 pct as Deep Shorts Scramble for Cover"

Kids, don't try this at home.
Come do it for us instead.

Brent up 8.30% at $46.72
WTI up 8.65% at $41.94
XLE up 4.92% at $64.28
XOP up 6.52% at $36.03

Reuters (Update 10!) via CNBC:
* Oil whips higher in one of biggest gains since 2009
* Rising more than 8 pct, oil erases week of losses 
* Global stock markets climb as China shares recover 
* Short sellers race for exit after near-record position 
(Updates prices, context in paragraphs 8-9 and 13-16) 
NEW YORK, Aug 27 (Reuters) - Oil rocketed more than 8 percent higher on Thursday, posting its biggest one-day rally in years, as recovering equity markets and news of diminished crude supplies set off a short-covering surge by bearish traders. 
Snapping back fiercely from a deep two-month slump that reached 6-1/2 year lows this week, oil climbed as world stock markets rose on hopes Chinese government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased. 
The rally was aided by news of a force majeure on Nigerian oil exports declared by Shell and private data indicating more drawdowns in crude this week at Cushing, Oklahoma, traders said. A big upward revision in second quarter U.S. economic growth helped. 
More than reversing the past week's losses, front month Brent crude for October rose $3.32 to $46.46 a barrel, a 7.7 percent gain, by 12:33 EST (16:33 GMT), hitting a session high of $46.85. On Monday, the contract traded at a March 2009 low of $42.23. 
It is on track for the biggest one-day gain for the contract since late January, when Brent ripped off six-year lows to rise by nearly $10 in three days, the start of a recovery that stabilized prices through the second quarter. Brent hasn't risen by more than 8 percent in a day since the financial crisis. 
U.S. crude rose $3.32 or 8.5 percent to $41.92 per barrel, its biggest one-day percent gain since June 2012. It had hit a February 2009 low of $37.75 on Monday....MUCH MORE
Aug. 27
Good Moves In Oil, Petroleum Equities (XLE; XOP)
Aug. 26
Oil turns lower as gasoline futures drop nearly 5%
We are betting that Monday's $37.76 print was the low. (for a while)
Aug. 25
"Oil catches breath near six-and-a-half-year lows after falls"
Aug. 24
"Energy Stocks Approaching Fair Value (XLE; XOP)"
Aug. 23
"Oil Price Decline May Be Due For a (Brief) Pause"

Curbed Exclusive: San Francisco Manse Sells for $47.5M, Shatters All Local Records

From Curbed:
Once the most expensive home for sale in California at $65 million, Locksley Hall in Belvedere sold today for $47.5 million, just $1.5 million shy of its latest asking price of $49 million. The sale breaks the record for the highest reported single-family home sale in San Francisco proper by $12 million, and the highest reported sale in Belvedere by around $22 million. 
Curebd SF has more and all the lovely photos. >>

Société Générale's Albert Edwards On Flirting and Rejection

From FT Alphaville:

Equities soar. Have some Albert
One of the many lessons from equity investing during Japan’s Lost Decade is that in a secular bear market hope is a killer. In a secular bear market hope should only be flirted with briefly during cyclical upturns, but it must be ruthlessly rejected as the cycle turns. In a secular bear market being wedded to hope destroys portfolios as the bear slashes to ribbons the hard-fought gains of the previous bull market. Gains that have taken years to accumulate are gone in months. One key measure we monitor informs us conclusively: we are now in a bear market.
The ‘key measure’ SocGen strategist Albert Edwards is referring to here is one of six models developed by his quant-ist colleague, Andrew Lapthorne. And, in chart form, it looks like this:
You should probably contact SocGen directly for a full explanation of that...MORE

Société Générale's Albert Edwards Not His Usual Jolly Self 
Music For Albert Edwards. On A Cold Day. In February
Société Générale's Albert Edwards Descends Into A Nightmare World of Dream Demons and Market Depravity
Société Générale's Albert Edwards Is Not Dead
Nor is he restin'. Beautiful plumage though.
Société Générale's Albert Edwards Is Worried
Société Générale's Albert Edwards Is Bearish (and possibly suffering from a mental disorder)
Albert appears to have begun speaking in clichés which is one of the hallmarks of the mental disorder jargonaphasia, more below. Here's Mr. Edwards at CNBC, see how many clichés you can find:

Good Moves In Oil, Petroleum Equities (XLE; XOP)

The ETF for the major integrated oils, the XLE is up 3.44% at $63.37 while the Exploration and Production ETF, XOP, is up 5.62% at $35.72.
WTI is up 4.27% at $42.25.

After a year of typing "It's too early" it feels odd to write: We're going higher.
(for a while)

From Reuters:
Oil prices rise more than 4.5 percent as equities rally
Oil prices jumped more than 4.5 percent on Thursday after a rally in equity markets and an unexpected fall in U.S. crude inventories, but worries over the Chinese economy and a global oil glut kept the outlook uncertain.  
World stock markets rose as Chinese shares recovered on hopes that government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased.
Oil markets moved up from six-and-a-half-year lows reached earlier this week, but investors are still worried about huge fuel oversupply, which is depressing the price of crude for immediate delivery and filling stockpiles worldwide.  
"The trend is strong and down. However, do not be wrong-footed by a correction higher," PVM Oil Associates technical analyst Robin Bieber said. "Few markets head forever in one direction with no respite."  
Front-month Brent LCOc1, the global oil benchmark, was up $1.80 at $44.94 a barrel by 1255 GMT, having hit an intraday high of $45.12. U.S. crude CLc1, also known as West Texas Intermediate (WTI), was up $1.60 at $40.20 a barrel.  
Phillip Futures oil analyst Daniel Ang said he saw the rally as a pause in a downward trend, rather than a longer-term shift upwards. "We would not underestimate the current bearish momentum and still believe that it is possible to see prices break supports of $38 and $45 for WTI and Brent," Ang said. Standard Chartered cut its 2015 Brent forecast by $10 a barrel to $54, and slashed its 2016 forecast by $20 to $63....MORE
Oil turns lower as gasoline futures drop nearly 5%
We are betting that Monday's $37.76 print was the low. (for a while)
"Oil catches breath near six-and-a-half-year lows after falls"
"Energy Stocks Approaching Fair Value (XLE; XOP)"
"Oil Price Decline May Be Due For a (Brief) Pause"

"The Opposite of Cold Fusion" (10 million degrees Celsius)

From MetaFilter:
The online edition of Science magazine reports that the private and secretive company Tri Alpha Energy, has built a machine that forms a ball of superheated gas—at about 10 million degrees Celsius—and holds it steady for 5 milliseconds, calling the achievement "a significant step toward mastering nuclear fusion"
That's even warmer than Al Gore's estimate of the temperature of the earth's core:
"...two kilometers or so down in most places there are these incredibly hot rocks, ’cause the interior of the earth is extremely hot, several million degrees, and the crust of the earth is hot ”
-Al Gore talking to Conan O'Brien on the Tonight Show
Mr. Gore was brought in as a partner at Venture Capital firm Kleiner, Perkins, Caufield & Byers which is a major investor in geothermal tech company Altarock.

I’m guessing Mr. Gore was not brought in for his scientific expertise.

Smartphone-based 3D Replicators Now One Step Closer With Microsoft 3D Scanner App

I may have been guilty of premature whining with April's "Smartphone-Enabled 3D Replicators Are Still 3-5 Years Away, Caltech Professor Says":
I want my iPhone 3D replicator NOW! 
But no, it's always nanophotonic coherent imager tomorrow, never nanophotonic coherent imager today.*  
From Microsoft Research's The Firehose blog:

Microsoft Research project turns mobile phone into 3D scanner through MobileFusion
A new Microsoft Research project delivers high-quality 3D images in real time, using a regular mobile phone, with about the same effort it takes to snap a picture or capture a video.   
“What this system effectively allows us to do is to take something similar to a picture, but it’s a full 3D object,” said Peter Ondruska, a Ph.D. candidate at Oxford University who worked on the project while he was an intern at Microsoft Research.   
The researchers say the system, called MobileFusion, is better than other methods for 3D scanning with a mobile device because it doesn’t need any extra hardware, or even an Internet connection, to work. That means scientists in remote locations or hikers deep in the woods can capture their surroundings using a cellphone, without a Wi-Fi connection.  Head over to Inside Microsoft Research to find out more about MobileFusion....MORE
And via TechNet:

"Gundlach wears bond crown as Pimco, Janus stumble in market rout"

From Bloomberg via the Chicago Tribune:
Jeffrey Gundlach is the bond king, for now. 
Over the past month, a stretch that saw the upheaval of financial markets around the world, Gundlach has beaten rivals including Tad Rivelle, Bill Gross, Dan Fuss and the Pimco Total Return Fund team by a wide margin. Gundlach's $48.2 billion DoubleLine Total Return Bond Fund returned 0.7 percent in the period; all of these peers except Rivelle showed losses.   
Gundlach has prospered during the turmoil, as he has for much of the year, by betting that interest rates would stay low and by avoiding minefields such as emerging market currencies and energy bonds. The co-founder of DoubleLine Capital has repeatedly cast doubt on expectations that the Federal Reserve would raise interest rates this year because of weakness he sees in the U.S. economy....MORE

Wednesday, August 26, 2015

Not To Be Diacritical But...This is Nuts

From The Register:

Visitors no longer welcomed to Scotland's 'Penis Island'
Visitors disembarking at the ferry terminal on the Scottish Isle of Bute are sadly no longer greeted with a Gaelic sign reading: "Welcome to Rothesay – The doorway to the beauty of Penis Island", after the local council moved swiftly to correct a balls-up and add a missing accent.

According to The Scotsman, the sign had for nine years read "Fàilte gu Baile Bhòid – An doras gu bòidhchead Eilan Bhoid", until Gaelic-speaking visitor Coinneach Combe spotted a critical omitted grave accent on the final "Bhoid".

Accordingly, instead of reading "Eilan Bhòid" ("Isle of Bute"), innocent tourists were copping an eyeful of "Eilan Bhoid" ("Penis Island")....MORE

FDA Says "No Eggs, Not Mayo": VC-backed Hampton Creek's CEO Is Defiant

From the FDA's website:
...FDA’s modern regulatory functions began with the passage of the 1906 Pure Food and Drugs Act, a law a quarter-century in the making that prohibited interstate commerce in adulterated and misbranded food...
According to CrunchBase the seed round was Founders Fund and Khosla with a bunch of Silicon Valley names in B,C and D rounds.

Remember, you can't have silicon without the 'con'.

From Entrepreneur Magazine:

No Eggs, No Mayo: FDA Goes After Hampton Creek for Naming Its Vegan Spread 'Just Mayo' 

No Eggs, No Mayo: FDA Goes After Hampton Creek for Naming Its Vegan Spread 'Just Mayo'
Hampton Creek's stated mission is to produce healthy, sustainable and affordable food products.
According to the Food and Drug Administration, it's also misleading consumers by labeling its line of vegan spreads "Just Mayo."

The crux of the issue hinges on eggs. True mayo must contain them, the FDA stipulates. Hampton Creek's line of "Just Mayo" spreads does not, and thus the name is a misnomer at best, misleading at worst. The FDA is making it very clear it's not amused by Hampton Creek's antics, writing in an Aug. 12 warning letter to the company:
"Just" together with "Mayo" reinforces the impression that the products are real mayonnaise by suggesting that they are "all mayonnaise" or "nothing but" mayonnaise. However, your Just Mayo and Just Mayo Sriracha do not meet the definition of the standard for mayonnaise. According to the labels for these products, neither product contains eggs. Additionally, the products contain additional ingredients that are not permitted by the standard of identity for mayonnaise, such as modified food starch.
This is not the first time Hampton Creek has been the target of an egg-based lawsuit. Last year, Unilever (which owns the prominent mayonnaise brand Hellmann's) sued the company over false advertising and unfair competition arguing, essentially, what the FDA is laying down: no eggs, no mayonnaise....MORE
And from Inc.:
Hampton Creek CEO: No Plans to Change Name of 'Just Mayo' Despite FDA Warning

Silicon Valley's Favorite Futuristic Food Company, Hampton Creek, May Be A Bit Fraudy

Gasoline Glut To Hit Refiners: Wood Mackenzie (CRAK)

I knew it!
As soon as a refinery ETF rolls out...
From Oil & Gas Financial Journal:
Wood Mackenzie’s latest long-term oil products market forecast shows that a surplus of gasoline is expected to flood the market as early as 2017, which, combined with a deficit of middle distillate and fuel oil, will put significant pressure on refiners by the end of the decade.

The global research and consulting firm says this will mark a turning point for the refining industry, which is currently struggling to meet gasoline demand growth of approximately 420 thousand barrels per day (kb/d), thanks to refinery outages in Latin America and the delayed ramp-up of new facilities in the Middle East.
As a result, the oil products market has remained tight and refiners are enjoying healthy margins, aided by low oil prices, which have helped to reduce costs.

However, in the longer term, Wood Mackenzie says it expects global oil demand growth to slow, lowering gasoline demand, thanks to increasing efficiency and alternative fuel sources. In particular, there will be strong growth in liquefied petroleum gas (LPG) supply from natural gas liquids (NGLS) in North America and the Middle East, causing margins to bottom out at minimum sustainable levels for Europe and Asia by 2019.

Furthermore, the ramp-up of three new refineries in the Middle East (which together will add 1.2 million barrels per day (mb/d) in capacity), plus the stabilization of operations in Venezuela, could compound any prolonged period of oversupply....MORE

Oil turns lower as gasoline futures drop nearly 5%
The World Cries Out For A Pure Play Oil Refinery ETF; Market Vectors Responds (CRAK)
Why do I have this nagging suspicion that crack spreads are going to pull in? 

Oil turns lower as gasoline futures drop nearly 5%

We are betting that Monday's $37.76 print was the low. (for a while)
Front WTI $39.03 down 28 cents.
From MarketWatch:
Oil futures turned lower Wednesday despite a weekly decline in U.S. crude inventories, dragged down by a nearly 5% drop in gasoline futures, which were pressured by the restart of a key refinery and an unexpected increase in domestic stockpiles.

Investors also remained cautious amid volatile financial markets and continued uncertainty over China’s growth outlook, but oil had managed to find some support earlier Wednesday from.

October West Texas Intermediate crude CLV5, -0.71%  shed 18 cents, or 0.5%, to $39.13 a barrel on the New York Mercantile Exchange, after trading as high as $39.86. October Brent crude LCOV5, +0.14%  on London’s ICE Futures exchange fell 7 cents, or 0.2%, to $43.14 a barrel.
  Early Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell 5.5 million barrels for the week ended Aug. 21. Analysts polled by Platts had forecast a rise of 1.9 million barrels, but the American Petroleum Institute Tuesday said supplies dropped 7.3 million barrels, according to sources.
“It seems as though the market has been a few days ahead of the headlines, as data seems to be priced in to the market already,” said John Macaluso, an analyst at Tyche Capital Advisors. “Despite a large draw in oil inventories, production has remained flat at [the futures delivery hub of] Cushing Okla.”

A midday correction is “probable,” but “the low’s have yet to be tested and [we] expect further weakness through the week,” he said....MORE
"Oil catches breath near six-and-a-half-year lows after falls"
See also Monday's:
The World Cries Out For A Pure Play Oil Refinery ETF; Market Vectors Responds (CRAK)

"Oil catches breath near six-and-a-half-year lows after falls"

Following up on Sunday's "Oil Price Decline May Be Due For a (Brief) Pause" and Monday's "Energy Stocks Approaching Fair Value (XLE; XOP)".
October WTI $39.33 up 2 cents.
XOP $32.99
XLE $60.08

From Reuters, Update Eight:
* Supply glut and China 'hard landing' fears weigh* API shows draw in U.S. crude oil inventories
* Phillips 66, Wood River refinery cooling tower collapses
* Coming Up: EIA stocks data at 10:30 a.m. EST (1430 GMT) (Updates details, paragraphs 1, 12)
Oil stabilized on Wednesday after China moved to support the country's economy and stronger than expected U.S. durable goods data was released, but prices stayed near 6-1/2-year lows as a heavy supply glut kept market outlook bearish.
"Oil is catching its breath a bit and seeing if markets have been oversold or not," Capital Economics commodities economist Thomas Pugh said.

U.S. durable goods orders rose 2 percent in July, going against a 0.4 percent contraction forecast by the Reuters analyst consensus, U.S. government data said on Wednesday.

Brent LCOc1 was up 30 cents at $43.51 a barrel by 1300 GMT, and U.S. crude CLc1 was up 10 cents at $39.41 a barrel.

Oil has lost a third of its value since June on high U.S. production, record crude pumping in the Middle East and concern about falling demand in Asian economies.

On Monday, both crude oil benchmarks saw their lowest trades since early 2009, dropping as much as 6 percent in one session after heavy falls in equity markets.

"The trend remains down, but in an erratic phase where attempts to recover are being made," PVM Oil Associates director Robin Bieber said....MORE

Tuesday, August 25, 2015

BBC Funds Study That Finds People Can't Live Without the BBC

From Radio Times:

Two-thirds of viewers opposed to the licence fee changed their minds after just nine days without BBC services
"Being without the BBC was absolutely dreadful, just awful," said one man involved in the 'deprivation study'. "I just didn’t realised how much we watched it...”
More than two-thirds of those originally opposed to paying the £145.50 licence fee changed their minds after being cut off from BBC services for a nine-day period, according to a study commissioned by the corporation.

Seventy families across the country agreed to have their access to the BBC’s television, radio and online services suspended, as part of a “deprivation study” designed to test the reactions of those who said they would prefer not to pay the licence fee.

Of the seventy households, 48 had initially said that they would prefer either to pay no licence fee and have no BBC access, or pay a reduced licence fee. After nine days without any access to the corporation, however, 33 of the 48 families, or 69 per cent, declared that they were now happy to pay.

Mike O’Donnell, a retired sales manager, and his wife, Pat, were among the families who were initially opposed to paying for the BBC. “I just thought the licence fee was another tax, and not good value for money,” said Mr O’Donnell, who admits to being a fan of EastEnders and 5 Live. “But being without the BBC was absolutely dreadful, just awful. I just didn’t realised how much we watched it.”

Many of those who took part in the trial said that they became frustrated by having to watch adverts on commercial TV channels, and the O’Donnells were no different. “The adverts just drove me nuts,” said Mr O’Donnell. “I lost track of what I was watching.”

A perceived lack of quality from the BBC’s rivals was also a common complaint. Mr O’Donnell said: “The weather on ITV is Mickey Mouse. You can tell that the person who’s reading it doesn’t understand it. Whereas when you watch it on the BBC they clearly know what they’re talking about and put the script together from the research they’ve done. It’s quite a profound difference. I now think the BBC is incredibly good value. I’d probably willingly pay even more....MORE
The BBC commissioned the study to dig deeper into existing research that suggests that around 30 per cent of people are opposed to paying the licence fee. It would appear to confirm suspicions held at a high level in the corporation that many viewers do not realise how much they depend on the broadcaster’s output.

Wealth and Power: "Saudis Could Face An Open Revolt At Next OPEC Meeting"

The accompanying chart is a helpful reminder of just how large the gulf (eh?) between the richest and poorest members of OPEC actually is.
From OilPrice via SafeHaven:
OPEC next gathers December 4 in Vienna, just over a year since Saudi Oil Minister Ali Al-Naimi announced at the previous OPEC winter meeting the Saudi decision to let the oil market determine oil prices rather than to continue Saudi Arabia's role of guarantor of $100+/bbl oil.
Despite the intense financial and economic pain this decision has inflicted on Saudi Arabia, its fellow OPEC members, and other oil producers, the Saudis have given no indication they plan to alter course. In fact, Saudis have downplayed the impact of lower prices on their country, asserting that the kingdom has the financial wherewithal to withstand lower oil prices.

Presumably swayed by Saudi equanimity, financial markets do not see the Saudis abandoning their current policy before, during, or after the upcoming OPEC meeting. CME Brent oil futures project continuity: as of August 18, 2015, CME Brent futures projected the price remaining below $60/bbl until June 2017. A CNBC poll of oil traders, analysts, and major fund investors, aired on CNBC August 17, showed 95 percent believing the Saudis will not alter course.

Are the futures market, CNBC's oil traders, analysts, and major fund investors, and others, being lulled into an unjustified consensus?

The damage the Saudi decision has inflicted on Saudi Arabia itself provides reasons for the Saudis to change course.
Saudi Policy: OPEC-centric or Self-Serving?
Stresses within OPEC should add to the pressure on the Saudis to rethink their strategy. The Saudis sold their change to their fellow OPEC members as being in OPEC's general interest. They asserted that the their traditional method of stabilizing the oil market, production cuts, would not work since non-OPEC producers would increase output; second, that "market" forces would reduce investment and therefore increase prices in the medium and longer term and ultimately benefit all OPEC members; and third, that any Saudi increase in output was aimed at defending its market share, not reducing theirs.
As the first anniversary of the Saudi decision approaches, it would be reasonable for OPEC outsiders -- OPEC members, other than the Saudis and their Gulf Arab allies, Kuwait, UAE, and Qatar -- to interpret Saudi policy shift as designed to serve Saudi interests and those of its Gulf Arab allies rather than their interests and those of OPEC in general.

"Market" forces include many components. A key component -- perhaps the key component -- is a country's capability, at a minimum, to maintain output, and better yet, to increase output. Financial wherewithal is the foundation of this component. Saudi and Gulf Arab OPEC members' foreign currency reserves and sovereign wealth funds (SWF) comprise approximately 78 percent of total OPEC member holdings, $2.73 trillion of $3.05 trillion.

As the following table shows, their advantage is particularly large on a per capita basis. Of the non-Saudi, non-Gulf Arab ally OPEC members, only Libyan per capita resources exceed the average. (The UAE includes data for three SWF funds only: Abu Dhabi Investment Authority ($773 billion), Abu Dhabi Investment Council ($110 billion), and Investment Corporation of Dubai ($183 billion)).
Given the other budgetary demands on their oil revenues, $50/bbl or $60/bbl oil leaves these OPEC outsiders with little to invest in maintaining oil output, much less expanding output. Budgetary pressures and limited financial resources, for example, have forced the Iraqi government to request its foreign partners, BP in the Rumaila field and Exxon in the West Gurna-1 field, to reduce spending to cut 2015 investment by $500 million ($1.1 billion vs. $1.6 billion) and $1 billion ($2.5 billion to $3.5) respectively....MUCH MORE