Exerpted from Chapter 29, "Travel as an Education for Investors" of Gerald M. Loeb's The Battle For Investment Survival, Simon & Schuster, 1935.
...If there is an effective hedge against calamity, it
is a combination of geographic diversification, retention of capital in
mobile form and the keeping in personal touch with active businesses,
both at home and in other centers.
One must keep personally alert, active and in the swim. Retired
businessmen, in my opinion haven't much chance. One must not tie up all
one's assets in one's home town or in a form that is not liquid and
subject to easy shifts. There are far too many people who have a small
business in their home city, their own house in the same city, and if
they own any securities, some shares perhaps of the local utility
company.
In addition their friends and connections are all in a radius of 10 to 15 miles.
My real thought is that one's greatest assets are his mental competence to do something useful and his connections.
Therefore establish some emergency connections away from home.
Establish a fund or funds away from home as well, both as a "calamity
hoard" and as an aid to keeping your foreign interests alive....
...One ought to be able to move to several parts of this country and
the world, and have enough friends to be happy and get a helping hand
to start, and have ready at hand enough funds for a grubstake grubstake
to start.
Ask yourself how many widely separated places you could go to and make a successful new start in life....
Considering what was going on in Germany at the time, and about to engulf all of Europe, it was pretty good advice.
Following on the news of the EC's Google fine I think we'll continue looking at monopoly power and antitrust for one more post.
"I think it's wrong that only one company makes the game Monopoly"
-comedian Steven Wright
Our second visit to the Precursor blog this week:
Submitted by Scott Cleland on Fri, 2017-06-16 18:46
In proposing to buy WholeFoods for $14b, Amazon has surprisingly invited unwelcome serious antitrust investigation into, and public discussion about, Amazon’s core conflicted retail/MarketPlace business model and the many alleged predatory, discriminatory, and unfair standard Amazon business practices, that Amazon commits, not only in the grocery business segment, but in all other retail segments.
In stating “the parties expect to close the transaction in the second half of 2017,” that means Amazon expects no serious antitrust investigation of whether the transaction “substantially lessens competition,” and thus no “second request” from antitrust authorities requesting more information and questions to answer.
If a “second request” comes, which is likely, there is no way the companies can continue to “expect” the deal will be approved in 2017. That’s because such an investigative process effectively does not have any deadline for the reviewing authority, DOJ or the FTC, to either: approve, approved with conditions, or challenge the deal.
The facts and analysis that follows will show why it is quite clear that the reviewing antitrust authority will want to be thorough and not cursory in its formal review of this Amazon-WholeFoods transaction.
The combination of: the likely multiple alleged anticompetitive behaviors; the likely number of complaints and complainants; the online-offline complexity of investigating the complaints; the importance of this case as an online-offline antitrust merger precedent; the exceptional size, scope, reach, speed and non-transparency of Amazon’s online business; and the expected high-public profile of this transaction; all would auger for the reviewing authority to err on the side of caution and investigate the transaction fully.
Let me be clear here about what I am saying and not saying.
First, what’s obvious here is that the transaction will attract a lot of concern in private and publicly in multiple dimensions. That’s precisely because of the many serious implications this “Everything Store” proposed transaction will have for the future of competition in many markets, which in turn will delay Amazon’s transaction timetable.
Second, I doubt there will be any serious traditional horizontal concern about combining Amazon’s small shares of the offline grocery business -- depending on how the grocery market is defined here.
Third, most of the antitrust concern will come with the exceptional market power that Amazon wields online, combined with the under-appreciated conflict in its business model where half of its retail revenues come directly from consumer-customers, and the other half of its retail revenues come from its MarketPlace offering where Amazon is the mall and gatekeeper for around 15 of its top 20 grocery competitor-customers, that have had to capitulate to Amazon’s market power and operate on Amazon Marketplace in order to reach all their offline customers online.
In layman’s terms, the problem Amazon’s retail intermediary model causes competitors is that it simultaneously is a direct retail competitor overall, at the same time it is the dominant online broker that has disintermediated its competitors from their customers when they are in the online world, and in that broker role, they are routinely criticized as not being an “honest broker” or as being a “non-neutral platform,” that routinely self-deals anti-competitively, because Amazon has market power to extract it with impunity, and no antitrust or regulatory accountability to speak of – to prevent it....MUCH MORE
I have three copies, including one of the Simon & Schuster 1935 printings.
The short little original was updated and expanded in the 'sixties and
printed again in 2007, this time by Wiley with a forward by Ken Fisher
who is currently managing $35 billion at Fisher Investments.
If you haven't read the book this is the edition you should have.
For the rest of the month I am going to excerpt snippets from this timeless classic.
The book is written as a series of three and four page chapters, almost in the form of notes from a friend.
Today, the Fisher forward and part of the introduction:
"To a 1935 reader...nothing was more terrifying than the prospect of buy-and-hold..."
"Loeb's preferred strategy of continual in-and-out, concentrated,
'speculation' seemed radical, fresh and far safer than buy-and-hold."
"Loeb recommended swapping...eerily like churning...he specifically recommended against letting money ride in the market."
"That may not be sound advice today"
Remember,
the forward was written in mid-2007, as it turned out selling your
losers on single-digit percentage drops was the only way to save
yourself, if long, from October 2007 through March 2009.
Buy-and-hold meant dead-and-gone.
"Long before the Efficient Market Hypothesis Loeb argued that markets were pretty efficient"
Introduction
An
earner who earns more than he can spend is automatically an investor.
Storing present purchasing power for use in the future is investing, no
matter in what form it's put away. Money itself, government bonds, bank deposits, real estate, commodities, diamonds, gold.
In fact, attempting to offset inflation, the rising cost of living or
the devaluation of the dollar, however it's labled, has become the
number one investment consideration...
...Diversification is necessary for the beginner, on the other hand the really great fortunes were made by concentration.
You see why the book is timeless. Those lines could have been written yesterday.
Loeb was very focused on preserving purchasing power which could again become the paramount issue facing investors.
He was also a pro's pro, at the market professionally from 1921 and at age 30 was made partner at E.F. Hutton.
He became vice-Chairman when the partnership incorporated in 1962.
Loeb was also accused by the SEC, on New Years Day 1938, of rigging
Auburn Automobile Co. stock in cahoots with another Hutton partner and
an NYSE floor broker.
He resigned from Hutton,
the SEC dropped the charges, he came back to Hutton and went on to
become what Forbes mag. called "The most quoted man on Wall Street.
[I bet you won't find that story at Wikipedia -ed]
The contemporaneous Time magazine article is a pretty good read. For example:
...Gerald Loeb is a reasonably rich man with a farm in Redding, Conn., and a mind far more liberal and articulate than most of his fellow brokers.
In Wall Street he is noted because he writes E. F. Hutton & Co.'s
market letters and because he espouses an unorthodox theory whose
kernel is that investment as generally practiced is not as safe as
intelligent speculation. This conception is unlikely to endear him to
SEC interrogators but thus far has pleased his clients. In hectic
September, 1929, just before ''the crash," Broker Loeb's market letter
declared: "We see no reason to do anything but stand on the sidelines."...
Tomorrow we'll have the rest of the intro. and some snips from the first few chapters....
Tell me of this 'Power Nap Function' you speak of.
Are we now able to compress time?
More importantly, will I have to close the office door or will I appear to be working?
From MacRumors:
A new patent filed by Apple in 2015, and published today by the United
States Patent and Trademark Office, shines some light on what the
company could be working on in regards to sleep tracking technology and
its recent acquisition of Beddit. Called "Adjusting alarms based on sleep onset latency,"
the new patent describes in detail a system that could receive data
from devices like an iPhone, Apple Watch, or a Beddit-like flat,
flexible sensor, and intelligently track user behavior to help them get
their best night sleep possible (via AppleInsider).
The patent explains that most people have typical bedtime habits
recurring every night, such as going to the bathroom, shutting blinds,
taking a shower, etc. These "sleep ritual activities" directly affect
each person's "sleep onset latency," or the amount of time it takes you
to fall asleep after first lying down and attempting to go to sleep. The
problem with most modern alarm apps is that they can't understand a
restless night's sleep, or a lengthy sleep onset latency period, and
Apple's new patent tries to address these issues.
The first step is for the sensors to determine your sleep ritual
activities, and Apple's patent has a few ways to go about doing that.
One is by using sound data, so when the device detects someone brushing
their teeth, taking a shower, "or any other activity that generates an
identifiable or unique sound," the sleep tracking system can start
accumulating data for that night's sleep because it knows you're about
to try to rest. Other tips related to sleep rituals for Apple's sleep
tracking system include user movement, light/dark levels in a room, and
even app usage....MORE
Gerald Loeb thrived in the
securities business by adopting the ticker-tape machine, and his skill
at tracking actionable price trends made him a reliable source of
information to customers. (UCLA Anderson School of Management)
Across nearly five decades in the 20th century, Gerald M. Loeb
prospered in the world of Wall Street. So what made Loeb really stand
apart?
Perhaps it was Loeb's ability and desire to articulate exactly what
it takes to win in the bond and stock markets. Loeb's gift to investors
ultimately came in the form of a book, "The Battle for Investment Survival."
Loeb writes with brutal honesty.
"Nothing is more difficult, I truly believe, than consistently and
fairly profiting in Wall Street," he wrote at the start of Chapter 1. "I
know of nothing harder to learn. Schools and textbooks supply only a
good theoretical background."
Most individuals lose money on Wall Street because they don't prepare
thoroughly, Loeb noted, or they don't spend enough time finding a
professional who has mastered the skill of market timing.
Loeb wanted people to take matters into their own hands. That is,
don't be sold something on Wall Street. Do your own research and find
something to buy.
Don't simply trust an AAA rating for a bond or a very high price in a
stock, because those are just snapshots of a security's value in a
moment of time. Instead, look for high-quality merchandise on the market
with a true potential to rise in value.
"If you know what you want and why you want it and when you want it,
you'll generally pay a lot less for it than you will if you buy
something that somebody else persuades you to buy," Loeb, who eventually
rose to the role of chairman of the Manhattan brokerage E.F. Hutton,
was quoted as saying in "The Wizard of Wall Street" by Ralph Martin.
No Short Cuts
Through "The Battle for Investment Survival," Loeb tells readers to
take no short cuts. Watch a stock carefully, understand its price
behavior, and find correlations between its price cycles and how it
relates to the company's underlying fundamentals. Be patient, wait for
all the proverbial stars to align, then strike big.
Last, but not least, recognize your mistakes early and exit a losing position quickly.
How influential is "The Battle for Investment Survival" since it came
out in 1935? So much so that the San Francisco native also oversaw 10
revised editions of his book over the next 30 years.
The book deeply moved William O'Neil, a successful broker during the
1960s who formed an equity research firm that has served hundreds of
institutional investors. O'Neil, who later founded IBD in 1984, once met
with Loeb (1899-1974) to ask if he always stuck with the rule of
selling a stock if it fell 10% below the purchase price. Loeb replied
that he much preferred to be out of such a position well before such a
loss. Without question, the first job in stock investing is preserving
capital.
"I think meeting Loeb made a big impact on Bill O'Neil," Bryan
Anderson, market strategist at Austin-based Beck Capital Management,
told IBD. Anderson also worked for William O'Neil + Co. as an in-house
equities portfolio manager from 1993 to 2000. "Loeb had great personal
qualities. He valued honesty. He valued flexibility of thinking and
being unbiased. You see that throughout the book."
Concentrate on your best investments. "Diversification
is a necessity for the beginner. On the other hand, the really great
fortunes were made by concentration," Loeb wrote in a foreword to the
1965 edition. "The greater your experience, the greater your capability
for running risks, and the greater your ability to chart your course
yourself, the less you need to diversify."
Take profits often; lock in gains frequently. "Many
'long-pull' traders ignore a sign of a change of trend because they feel
it is temporary. Often they are right, but eventually they are wrong,
and usually at great cost. The short-term method requires the closing of
the trade for a reason, and if later the situation changes, then one
can re-establish the position," Loeb wrote.
A stock can plunge even if the market is doing fine. In
the postscript section of his book, Loeb notes that from 1960 to 1964,
the Standard & Poor's average of 425 industrial stocks rose, but
seven leading electronics companies within the average underperformed.
Among those seven, Loeb added a simple line graph of Transitron
Electronic falling from 60 to 4.63 over the same time frame, a 92%
plunge.
Even within a single industry, performance among companies can vary greatly. Loeb
showed how Chrysler emerged as a big market winner, rising from 11.50
in 1961 to 50 by 1964 as new management led to outstanding growth in car
sales, earnings and cash dividends. But rival American Motors, "which
had prospered mightily in the 1957-59 period, due to its success with
compact cars, saw the demand shift and was adversely affected," Loeb
wrote. From 1960 to 1964, AMC shares sank from a peak of 23.50 to 15.
Build your position as a stock rises in price, not falls. "I believe in pyramiding, not averaging," Loeb wrote.
Financially Responsible
Loeb was born in July 1899 in San Francisco. His father sold a
successful wine merchandising business in New Orleans and moved to the
West Coast to start anew. Loeb's mother came from a wealthy family in
which Loeb's grandfather struck it big in silver in Nevada, then
invested his winnings in real estate in the Bay Area.
The 1906 San Francisco earthquake all but shattered the family's
wealth. Two years later, Loeb's father and grandfather died just two
weeks apart. Loeb's mother, now widowed, moved into a boardinghouse to
raise Loeb and his younger brother.
Loeb learned to take financial responsibility at an early age. When
Loeb was just 10, his mother took them on a trip to Europe and let young
Gerald handle the hiring of a taxi, paying the hotel bill and tipping
waiters on the steam ship across the Atlantic.
"She always wanted me to be boss of my own money, even at the
earliest age," Loeb said. "For me, this freedom of experience . . . was
the beginning of my financial education."
At age 11, Loeb contracted polio. Forced to spend much of his days in
bed, Loeb devoured books. The physical handicap did not prevent Loeb
from finishing high school, but he quit a plan to study architecture.
An inheritance from his father sparked a lifelong passion in securities investing.
At age 21 and with $13,000 in hand (roughly $221,000 in today's
dollars), Loeb made two bond investments. The first purchase, a 15-year
S.W. Straus Real Estate bond that offered 6% interest, was illiquid and
market prices were arbitrary. The stated value of the real estate tied
to the loans was highly questionable. Loeb sensed something was amiss
and redeemed the bond for a small loss within a year. Later, the bond
crashed to zero value after the issuers no longer could offset the big
losses with the money received from bond sales.
For his second purchase, he called upon his father's friend, a senior
partner at a top brokerage in San Francisco, who recommended a
high-quality British bond, payable either in sterling or dollars at the
customer's option. Unlike the first bond, which paid a handsome
commission to the seller, this bond gave the broker only $2.50 to $5 in
commission. In the process, Loeb also learned how the broker sent the
order to New York via telegraph, bought the bond on the floor, had the
cashier ensure that it was authentic, and finally got it mailed to the
new owner.
A year later, Loeb saw the value of the bond rise and took his
profit. He decided that he would do business the same way by acting in
the customer's best interest.
One day during his first job as a bond salesman, Loeb got a verbal
lashing for refusing to follow bosses' orders to sell low-quality bonds
to a physician client that would have given the broker the biggest
commission. He quit the same day. Loeb immediately got a job at a
respectable brokerage, learning every aspect of the business by
assisting the bond salesman, the statistician and the stock trader.
Becoming A Reliable Source
Loeb thrived in the securities business by adopting the ticker-tape
machine, a sophisticated new technology at the time. Loeb not only
learned much about tracking actionable price trends, but also became a
reliable source of information to his customers. Trust among his
customers was so great that they gave him discretionary power to buy
stocks without client approval, then allocate the shares to accounts
accordingly.
"He was giving people honest information," Anderson said. "Others were giving customers old information."
To further promote knowledge about business and the markets, Loeb
launched an annual competition in 1957 to recognize excellence in
financial journalism. He cared about the impact it could have to the
public understanding of financial markets. The University of Connecticut
acted as the initial steward of the awards. But in 1973, just a year
before his death, Loeb decided to ask Harold Williams, a corporate
lawyer who served as dean of UCLA's business school at the time, to
become the new home of the prizes.
Williams, who served as commissioner of the Securities & Exchange
Commission, says Loeb was aware of his past speeches on the issues of
corporate governance and the role of board directors. "He felt my views
were hospitable," Williams told IBD....MORE
How the FAA Killed Uber for Planes Flight-sharing helped fill seats on small, private trips and cut costs. But regulators stopped it.
Private flight has long been a luxury limited largely to the über-rich
or super dedicated. Unless you have the deep pockets or connections to
buy or rent your own small plane, plus a pay for a pilot, fuel costs,
insurance, and hangar fees, you will be stuck in the chicken coop of
crammed commercial flights with the rest of us peasants for all your
flying needs.
But what if it didn't have to be that way? What if you could purchase
an empty seat on a private flight that was going where you needed to go
anyway for a majorly discounted price? This was, for a glorious and
brief period of time, made possible by a promising new crop of startups
dedicated to bringing flight-sharing to the masses.
Dubbed "the Uber of the skies," startups like Flytenow and AirPooler
aimed to connect pilots whose private flights were not yet filled to
passengers eager to reach their destinations without suffering the
horrors of commercial air travel. Founded in 2013, the services were a
great win-win for both parties: Pilots no longer had to simply eat the
cost of empty seats on each trip, and passengers got to enjoy the thrill
of small-scale flight for a very affordable price. For the first time,
it seemed like consumers would have a real inexpensive alternative to
the hell of economy class travel.
That is, until the Federal Aviation Administration (FAA) caught wind of all this innovation and decided to quash it once and for all. In a sneaky bid to shut down this kind of arrangement, the FAA decided to expansively interpret its own definition of a "common carriage"
operator so that non-commercial small-scale pilots using these services
would be legally put on the same level as the big boy commercial
flights—with the same expensive regulatory and licensing requirements.
The European Commission has fined Google
€2.42 billion ($2.7bn), a record amount, for breaching its antitrust
rules. It deemed the company has abused its power as the world’s leading
search engine, by manipulating results to favor its own online Shopping
platform.
Google must end the practice within 90 days “or face penalty payments
of up to 5% of the average daily worldwide turnover” of Alphabet, its
parent company. That would total around $14m according to the company’s
most recent financial reports.
European commissioner for competition Margrethe Vestager acknowledged
in a statement that, “Google has come up with many innovative products
and services that have made a difference to our lives. That’s a good
thing.
“But Google’s strategy for its comparison shopping service wasn’t
just about attracting customers by making its product better than those
of its rivals,” she added. “Instead, Google abused its market dominance
as a search engine by promoting its own comparison shopping service in
its search results, and demoting those of competitors.
“What Google has done is illegal under EU antitrust rules. It denied
other companies the chance to compete on the merits and to innovate. And
most importantly, it denied European consumers a genuine choice of
services and the full benefits of innovation.”,,,.MORE
The European Commission Decision on Online Shopping: The Other Side of the Story
When you shop online, you want to find the products you’re looking for quickly and easily. And merchants want to promote those same products. That's why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.
We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections. While some comparison shopping sites naturally want Google to show them more prominently, our data show that people usually prefer links that take them directly to the products they want, not to websites where they have to repeat their searches.
We think our current shopping results are useful and are a much-improved version of the text-only ads we showed a decade ago. Showing ads that include pictures, ratings, and prices benefits us, our advertisers, and most of all, our users. And we show them only when your feedback tells us they are relevant. Thousands of European merchants use these ads to compete with larger companies like Amazon and eBay....MORE
New book by Andrew McAfee and Erik Brynjolfsson surveys tech’s challenges for business.
How
do ongoing advances in technology affect business management? That’s
the question the prolific writing duo of Erik Brynjolfsson and Andrew
McAfee pose in their new book, “Machine, Platform, Crowd: Harnessing our
Digital Future,” being published on June 27 by W.W. Norton.
Brynjolfsson, the Schussel Family Professor of Management Science at the MIT Sloan School of Management and director of
the MIT Initiative on the Digital Economy, and McAfee, co-director of
the MIT Initiative on the Digital Economy and a principal research
scientist at MIT Sloan, also collaborated in 2014 on “The
Second Machine Age,” another exploration of the changes digital
innovation is bringing to the workplace. McAfee recently talked to MIT News about “Machine, Platform, Crowd.”
Q: What is your new book about?
A: “Machine, Platform, Crowd” is the answer to a
question: How should I think differently about running my organization
in this era of crazy technological progress? We need to rethink the
balance between the work that we ask human minds to do in organizations,
and the work we give to machines. We need to rethink whether you have a
product orientation or a platform orientation. And we need to rethink
the core of an organization, if there are literally these hundreds of
millions of strangers out there across the internet who you can tap
into.
Q: What’s different now compared to past moments of technological change?
A: Within the past five years, 10 years easily, at
least two really fundamental things have happened. First of all,
artifical intelligence started meeting its expectations and even
exceeding them. We weren’t expecting that, and it’s pretty remarkable.
The machines are much more capable. The second thing is, in the era of
the smartphone, we have gone from a globe that was pretty disconnected,
to having that same human population for the first time deeply
interconnected through powerful devices, which are each about as
powerful as all the computers collectively on campus when I was an
undergraduate at MIT in the ’80s. Those are both legitimately new
things.
Q: I know you’ve mentioned the rise of machines that
can win at the game of Go as one instance of these advances. What are
some of your favorite examples of machines, platforms, and crowds at
work now?
A: Go is my favorite example of the power of
machines, because it was so unanticipated that we would have a digital
Go champion in 2016 or 2017. The insiders thought if that ever happened
it would happen much, much farther out in the future.
In our section on products and platforms, we talk about companies
like ClassPass, which is trying to build a purely digital platform; they
don’t own any assets, but they’re trying to provide a virtual, very
broad gym membership, or exercise membership [by offering rates for an
array of memberships]. So they’re putting a platform over the industry
of spinning, yoga, pilates, kickboxing, things like that. And if you had
asked me just a little while ago for an industry that would not be
greatly affected by the digital transformation, I might have said group
exercise: You get in the gym with other people and sweat and have a
workout. But after working on the book, I think that the exercise
industry is going to be changed a lot by platforms.
Finally, we came across a very interesting company called Quantopia
that is trying to be essentially a crowdsourced quantitative trading
hedge fund. That may sound ludicrous, except, as the founder of the
company has said, it is extremely unlikely that all the world’s top
algorithmic traders are employed by the [relative] handful of companies
that have dominated this industry. So to test that theory, they’ve been
holding contests for algorithmic trading. It turns out, lo and behold,
most of the people who win those contests are not insiders in the
finance industry and have never even worked in finance. It tells me that
if you can tap into the crowd and find the right brains, all over the
world, and get them involved in what you’re doing, the results are
potentially tremendous....MORE
We like Mr. Loeb's thinking and we like FinBiz journos (they give us some of our best ideas).
From UCLA's Anderson School of Management:
The Gerald Loeb Awards were established
in 1957 by the late Gerald Loeb, a founding partner of E.F. Hutton. His
intention was to encourage reporting on business and finance that would
inform and protect the private investor and the general public. As the
most prestigious honor in business journalism, distinguished journalists
and outlets nationwide submit entries to the competition.
UCLA Anderson has been presenting The
Gerald Loeb Awards since 1973 and the awards use a two-tier judging
process comprising a preliminary round and final round. The awards
banquet and celebration is held in New York City every June and is
attended by the country's top business and financial publishers,
editors, journalists, producers and celebrities. The Gerald Loeb Awards
is a 501(3)(c) non-profit organization that operates primarily from
sponsorship and private support....
2017 Gerald Loeb Award Finalists, Career Achievement Honorees and
Date of Awards Banquet in New York City Announced by UCLA Anderson
Lifetime Achievement Award goes to Walt Mossberg of The Verge and Recode
Nicholas Varchaver of Fortune to receive Lawrence Minard Editor Award
60th Anniversary banquet and celebration to be held on June 27 in New York City
LOS ANGELES, May 18, 2017 /PRNewswire/ -- Judy D. Olian,
chairman of the G. and R. Loeb Foundation Inc. and dean of UCLA
Anderson School of Management, has announced the finalists of the 60th
Anniversary Gerald Loeb Awards for Distinguished Business and Financial
Journalism. She also revealed the recipients of the Lifetime Achievement
Award and the Lawrence Minard Editor Award.
The2017 Lifetime Achievement Awardrecipient isWalt Mossberg, executive
editor at The Verge and Editor-at-Large for Recode. This annual award
recognizes an individual whose career exemplifies the consistent,
superior insight and professional skills necessary to further the
understanding of business, financial and economic issues....MORE, including finalists in all categories.
The helium shortage is always coming, to date we don't have many substitutes for the element, but the arrival of the crisis keeps getting delayed.
From Chemical & Engineering News web date 22.6.17:
This Air Liquide helium liquefier, shown under construction, is now idle in Qatar.
Qatar blockade cuts 30% of global supply and threatens price increases for scientific instrument users
he blockade of Qatar that started on June 5 has shut down the source of 30% of the world’s helium, threatening another round of shortages and price increases for scientific instrument users.
Helium is used to cool nuclear
magnetic resonance magnets and as a carrier gas for gas chromatography
and mass spectrometry. The element is also used in medical imaging and
electronics manufacturing, as well as to float dirigibles.
Supply limitations and
maintenance projects in the U.S. and overseas led to a quadrupling of
helium prices and even scientific instrument shutdowns between 2011 and
2013. Some helium users may be better positioned to cope this time because they installed recycling equipment during the most recent shortage.
Qatar halted helium production
after the blockade severed helium’s main route out of the country: by
truck through Saudi Arabia to the Port of Jebel Ali in Dubai, United
Arab Emirates. Saudi Arabia and several other Middle Eastern countries
initiated the blockade when they cut diplomatic ties over Qatar’s
support of extremist Islamic groups and ties to Iran.
Shipments take about a month to
arrive at their destination, points out Phil Kornbluth, a consultant who
previously ran Matheson Tri-Gas’s helium operations.
That buffer of helium in
transit, along with helium that left Qatar’s Port of Hamad on June 19,
means customers may start to feel the blockade’s effects in July,
Kornbluth says....MORE
We've been tracking the helium biz for a while. 2012 Helium prices balloon as supplies run out
Every couple years we run a story similar to this. Because of the
physics and chemistry helium is one of the few irreplaceable elements.
But...and that's a big but...if you want to make the big money go for
the isotope, Helium 3 rather than straight up He, you'll make a fortune
in the electricity biz. 2012 "... America’s Helium Crisis"
“Chances are you’ve heard little or nothing from your constituents about
helium over the past 15 years,”
-Walter Nelson, director of helium
sourcing at Air Products and Chemicals
Voodoo Manufacturing has a factory in Brooklyn consisting of 160 3-D printers.
It raised $5 million from General Catalyst to add robots to the factory, and hopes to eliminate most human laborers.
Clients include Nickelodeon, Microsoft, Mattel, Lowe's and Yoplait.
Self-driving cars have captivated the world. Now, a Brooklyn-based start-up called Voodoo Manufacturing
wants to bring the same autonomy and safety to manufacturing, with a
factory that makes 3-D prints of any imaginable design, staffed almost
entirely by robots.
Customers upload a design file
to Voodoo's site. The start-up then manufactures their desired items in
batches from one to 10,000 units per order. Voodoo's factory runs 160
different 3-D printers today, rather than using injection molding
machines you'd find in a conventional factory.
Most recently, Voodoo began
developing robots to run the 3-D printers with little to no human
oversight, said CEO and co-founder Max Friefeld.
The robots, which Voodoo assembles from
available sensors, arms, grippers and other components, can take a
plate out of a printer, put a new one in, then restart it to begin the
next job.
These tasks used to be done by people.
The company's proprietary
software controls the way the robots work in conjunction with the
printers, and keeps orders running on time.
"At a high level, our goal is to automate the machine-tending portion of
our factory, and get to 80 percent utilization of all the hardware
here," Friefeld said. "With a really lean team, we could operate around
the clock, with maybe one person working the night shift."...MORE, including video.
See also 'Lights Out' manufacturing and 'dark factories'.
As Wikipedia notes:
FANUC, the Japanese robotics company, has been operating a "lights out" factory for robots since 2001.[5]
Robots are building other robots at a rate of about 50 per 24-hour
shift and can run unsupervised for as long as 30 days at a time. "Not
only is it lights-out," says Fanuc vice president Gary Zywiol, "we turn
off the air conditioning and heat too."
On Friday the State of Illinois will be downgraded to junk status, the first state in the U.S. to achieve this debt rating.
That's the least of their problems.
Here is one day of crime news from the Chicago Sun-Times for Monday June 26, 2017.
Monday. Not the weekend.
Monday.
25-year-old man shot in Homan SquareA 25-year-old man was shot Monday night in the Homan Square neighborhood on the West Side.
About 10 p.m., he was walking in the 3700 block of West Flournoy when he heard shots and felt pain, accor...
23-year-old man fatally shot in Back of the YardsA 23-year-old man was shot to death Monday night in the Back of the Yards neighborhood on the South Side.
Police responded about 10:10 p.m. to a call of a person shot in the 5400 block of South Bi...
13-year-old boy shot, critically wounded in Washington HeightsA
13-year-old boy was critically wounded in a shooting Saturday evening
in the Washington Heights neighborhood on the Far South Side.
About 7:35 p.m., he was in the backyard of a home in the 1000 ...
Police: Man fatally shot in Austin drive-byA man was fatally shot Monday night in the West Side Austin neighborhood, Chicago Police said.
About 7:55 p.m., a 27 to 28-year-old man was in a parked car in the 4800 block of West Gladys when an...
Police: 29-year-old man fatally shot during Avalon Park robberyA
29-year-old man was shot to death during a robbery Monday afternoon in
the Avalon Park neighborhood on the South Side, according to Chicago
Police.
He was shot during the commission of a robbery...
Police: 26-year-old man shot dead in South ChicagoA 26-year-old man was shot dead Monday evening in the South Chicago neighborhood, according to Chicago Police.
About 6:30 p.m., the man was arguing with someone in the 7900 block of South Ridgelan...
No injuries reported in Naperville electrical fireNo one was injured in a west suburban Naperville building fire Saturday afternoon.
Twenty-four firefighters and 10 pieces of fire apparatus responded about 1:24 p.m. to the 100 block of Ambassador...
Appeal means trial delayed indefinitely for widow of Fox Lake officerThe
trial is delayed indefinitely for the wife of a former Fox Lake Police
lieutenant, who killed himself and made it look like it was related to
his duties.
On Monday, prosecutors filed a certifi...
Police searching for man who stole jewelry from Mount Prospect homePolice
are continuing to investigate a Monday home invasion in northwest
suburban Mount Prospect where a man stole jewelry from inside.
About 10 a.m, officers responded to a home invasion in the 8...
Man hits his friend with pillowcase full of canned goods, stabs himA
Chicago man was charged Thursday with hitting a man he knew with a
pillowcase filled with canned goods and stabbing him last week in north
suburban Evanston.
Around 6:55 p.m. Tuesday, officers a...
Man charged with smashing at least 15 vehicles with ax in BerwynA
west suburban man who went on a rampage, damaging at least 15 vehicles
with an ax Saturday night, finally surrendered to police after a vehicle
pursuit left him cornered in an alley.
Just after ...
CPD touts mobile ballistics lab loan, cultural awareness trainingThe
Chicago Police Department on Monday showcased a mobile ballistics lab
that allows technicians quick access to crime scenes and the ability to
determine if shell casings left behind match those ...
Man shot in East Garfield ParkA man was shot Monday afternoon in the East Garfield Park neighborhood on the West Side.
The shooting happened about 1:15 p.m. in the 3000 block of West Arthington, according to Chicago Police.
T...
Family of man killed by girl with machete files suit against Wal-MartThe
family of a north suburban Uber driver, allegedly killed by a
16-year-old girl with a machete last month, has filed a lawsuit against
Wal-Mart for letting her leave the store without paying for...
Two wounded in Austin drive-by shootingTwo men were wounded in a drive-by shooting Monday afternoon in the West Side Austin neighborhood.
They were standing outside in the 4900 block of West Adams at 12:41 p.m. when a dark vehicle appr...
Police: Man tried to rob Batavia gas stationA man tried to rob a gas station Sunday morning in west suburban Batavia.
The man entered the Shell station at 108 N. Batavia Ave. just after 7 a.m. while the employee was in the back room, accord...
Man shot in thigh in South ShoreA
man was shot Monday morning in the South Shore neighborhood.
The 26-year-old victim was in the 2500 block of East 78th Street at
10:39 a.m. when someone got out of a dark SUV with a semi-automat...
Death of Palatine woman found in Avondale gangway ruled homicideThe death of a 43-year-old woman in March in the Northwest Side Avondale neighborhood has been ruled a homicide.
Joanna A. Stawiarska was found in a gangway at 7:50 a.m. March 17 in the 2900 block...
Finance Committee orders Ohio street underpass closed overnightDowntown
Ald. Brendan Reilly (42nd) on Monday convinced his colleagues to
“order” the Chicago Park District to close the Ohio Street underpass
between midnight and 5 a.m. from April through October...
Man beaten to death in home in Calumet ParkA
man was beaten to death last week in south suburban Calumet Park.
The victim, a black man in his 50s, was found at 4:11 a.m. Thursday in a
home in the 12700 block of South Throop St. in Calumet ...
Man shot in buttocks in Little VillageA man was shot Monday morning in the Little Village neighborhood on the Southwest Side.
The 44-year-old victim was shot in the buttocks in the 2800 block of South Springfield at 6:36 a.m., accordi...
‘Pharma Bro’ defies advice to keep quiet before fraud trialNEW
YORK — “Pharma Bro” just won’t keep his mouth shut.
Even with his federal securities fraud trial set to begin Monday, Martin
Shkreli has blatantly defied his attorneys’ advice to lay low. The ...
2 charged after fight with off-duty CPD officers in River NorthTwo
men have been charged after they got into a fight with two off-duty
Chicago Police officers early Friday outside a River North nightclub.
Elijah Murphy, 21, faces one felony count each of aggr...
13-year-old boy wounded in West Town drive-by shootingA 13-year-old boy was wounded in a West Town neighborhood drive-by shooting early Monday.
About 12:35 a.m., the boy was walking in the 1800 block of West Maypole when a black vehicle drove by and ...
Man shot, critically wounded in LawndaleA man was shot and critically wounded early Monday in the Lawndale neighborhood on the West Side.
About 12:40 a.m., the 34-year-old was on a front porch in the 700 block of South Karlov when he go...
2 shot in Brighton ParkTwo men were shot late Sunday in the Brighton Park neighborhood on the Southwest Side.
The men, ages 21 and 23, were standing outside about 10:20 p.m. on the sidewalk in the 4400 block of South Ri...
Year to Date
Shot & Killed: 300
Shot & Wounded: 1415
Total Shot: 1715
Total Homicides: 323
The United States Secretary of State said on Sunday that
the list of 13 demands imposed on Qatar would be "very difficult" to
meet, in an official statement discussing the ongoing blockade.
Rex Tillerson said that the demands , issued by Saudi
Arabia, the United Arab Emirates (UAE), Bahrain and Egypt, were being
considered and called for a "lowering of rhetoric".
"While some of the elements will be very difficult for
Qatar to meet, there are significant areas which provide a basis for
ongoing dialogue leading to resolution," Tillerson said in a statement.
"A productive next step would be for each of the countries to sit together and continue this conversation."
Tillerson had called for a specific list of "reasonable" demands earlier in the week.
"We understand a list of demands has been prepared and
coordinated by the Saudis, Emiratis, Egyptians and Bahrainis," US
Secretary of State Rex Tillerson said.
"We hope the list ... will soon be presented to Qatar and will be reasonable and actionable."
The president of Iran also gave his opinions on the blockade on Sunday, saying that it was "not acceptable" for them.
"We believe that if there are disagreements among countries
of the region, pressure, intimidation, and sanction are not good ways
for settle the disagreements," President Rouhani said...MORE
We do not recommend attempts at trading the yield curve for most portfolios. As we've said elsewhere, if your mandate says you have to have bond exposure, buy a TIPS ETF or some 5-years.
However, with the boilerplate out of the way, these guys seem to have some interesting ideas.
In a rising rate environment, conventional wisdom says to shorten duration in bond portfolios.
Even
as rates rise in general, the influence of central banks and
expectations for inflation can create short term movements in the yield
curve that can be exploited using systematic style premia.
Value,
momentum, carry, and an explicit measure of the bond risk premium all
produce strong absolute and risk-adjusted returns for timing duration.
Since
these methods are reasonably diversified to each other, combining
factors using either a mixed or integrated approach can mitigate
short-term underperformance in any given factor leading to more robust
duration timing.
In past research commentaries, we have demonstrated that the current level of interest rates is much more important than the future change in interest rates when it comes to long-term bond index returns[1].
That
said, short-term changes in rates may present an opportunity for
investors to enhance return or mitigate risk. Specifically, by timing
our duration exposure, we can try to increase duration during periods of
falling rates and decrease duration during periods of rising rates.
In timing our duration exposure, we are effectively trying to time the bond risk premium
(“BRP”). The BRP is the expected extra return earned from holding
longer-duration government bonds over shorter-term government bonds.
In
theory, if investors are risk neutral, the return an investor receives
from holding a current long-duration bond to maturity should be
equivalent to the expected return of rolling 1-period bonds over the
same horizon. For example, if we buy a 10-year bond today, our return
should be equal to the return we would expect from annually rolling
1-year bond positions over the next 10 years.
Risk averse
investors will require a premium for the uncertainty associated with
rolling over the short-term bonds at uncertain future interest rates.
In
an effort to time the BRP, we explore the tried-and-true style premia:
value, carry, and momentum. We also seek to explicitly measure BRP and
use it as a timing mechanism.
To test these methods, we will
create long/short portfolios that trade a 10-year constant maturity U.S.
Treasury index and a 3-month constant maturity U.S. Treasury index.
While we do not expect most investors to implement these strategies in a
long/short fashion, a positive return in the strategy will imply
successful duration timing. Therefore, instead of implementing these
strategies directly, we can use them to inform how much duration risk we
should take (e.g. if a strategy is long a 10-year index and short a
3-month index, it implies a long-duration position and would inform us
to extend duration risk within our long-only portfolio). In evaluating
these results as a potential overlay, the average profit, volatility,
and Sharpe ratio can be thought of as alpha, tracking error, and
information ratio, respectively.
As a general warning, we should be cognizant of the fact that we know long duration
was the right trade to make over the last three decades. As such,
hindsight bias can play a big role in this sort of research, as we may
be subtly biased towards approaches that are naturally long duration.
In effort to combat this effect, we will attempt to stick to standard
academic measures of value, carry, and momentum within this space (see,
for example, Ilmanen (1997)[2]).
Timing with Value
Following
the standard approach in most academic literature, we will use “real
yield” as our proxy of bond valuation. To estimate real yield, we will
use the current 10-year rate minus a survey-based estimate for 10-year
inflation (from the Philadelphia Federal Reserve’s Survey of
Professional Forecasters)[3].
If
the real yield is positive (negative), we will go long (short) the
10-year and short (long) the 3-month. We will hold the portfolio for 1
year (using 12 overlapping portfolios).
It is worth noting that the value model has been predominately long
duration for the first 25 years of the sample period. While real yield
may make an appropriate cross-sectional value measure, it’s
applicability as a time-series value measure is questionable given the
lack of trades made by this strategy....MORE
Who’s up and who’s down in our exclusive list of top hedge funds. Quants dominate overall, but a value manager ranks No. 1.
The winner of Barron’s Penta’s 2017 ranking of the Top 100 Hedge Funds doesn’t tick a lot of the boxes for the typical big investor. There’s one mark, however, that would catch any investor’s eye: performance.
Amid wildly erratic hedge fund results, our victor, Madrid-based Alantra Asset Management’s $390 million EQMC Europe Development Capital fund (Class A), posted a 26% annualized return net of expenses from 2014 through 2016. In contrast, the average hedge fund’s annualized three-year return didn’t quite reach 3% in that time, according to BarclayHedge’s return database. EQMC’s gains were nearly three times those of the surging Standard & Poor’s 500 index. To learn more about Alantra and EQMC’s strategy, read our profile of and interview with Alantra CEO Jacobo Llanza and the fund’s overseer, Francisco de Juan. (See related story, “The Winner’s Picks.”)
Alantra and its hedge fund stand out from the hedge fund crowd in a lot of ways. The small fund doesn’t sell stocks short, use leverage, or employ confrontational tactics to get its way. It borrows heavily from private equity’s tool kit to work with managements to improve results.
Another distinction: The asset manager and its key fund take an active, fundamental approach in an era when quantitative investing is booming among leading hedge funds. Barron’s Penta’s champ a year ago, Hong Kong–based Parametrica Asset Management, guided by Xiongwei Ju, who holds a doctorate in finance, uses an equity market-neutral strategy based on statistical arbitrage across many global markets. Parametrica finished at No. 5 this year.
Other quant-based firms whose various funds again excelled this year include a Donald Trump favorite, Robert Mercer’s Renaissance Technologies (Nos. 6 and 24); math-and-science talents John Overdeck and David Siegel’s Two Sigma Investments (No. 11); quant pioneer David Shaw’s D.E. Shaw Group (Nos. 18 and 32); and Ken Griffin’s Citadel (Nos. 30 and 37).
Reflecting the difficulty of generating consistent returns in recent markets, a record 61 firms on the Barron’s Penta Top 100 list this year didn’t rank a year ago. In one of many cases of rapidly changing fortunes, a fund we monitor, Mudrick Distressed Opportunity, posted an impressive 39% gain in 2016, following a 26% drop in 2015, preventing it from making our ranking, which is based on three-year returns.
Despite some spectacular 2016 returns like our No. 2 finisher Mangrove Partners’ 51% gain, hedge fund performance continues to disappoint. The average return of the 100 funds on 2017’s list is 11.78%, versus nearly 17% a year ago.
The low and volatile returns are having an adverse effect on clients. Pension funds and financial institutions are seeking incremental returns to meet their own obligations; many funds simply aren’t delivering them. Among the big institutional investors to announce that they would curtail hedge fund investments last year were MetLife, American International Group, and the New Jersey State Investment Council. That makes it harder for hedge funds to refill their coffers. “It will continue to be difficult for fund managers to raise capital, and keeping what you’ve got will be tough,” says Amy Bensted, head of hedge fund products at Preqin, a London-based alternative-asset research firm.....MORE
Penta Top 100 Hedge Funds
Alantra Asset Management’s EQMC Decelopment Capital fund, based in Madrid, took top honors in a tough year in which quantitative funds provided the most consistency.
