Small Batch Artisanal High Fructose Corn Syrup

Combining a couple trains of thought (links below) we come to this from Bon Appétit:

Make Your Own High-Fructose Corn Syrup with Artist Maya Weinstein

Mix 10 cups of Yellow Dent #2 corn extract with one drop sulfuric acid, one teaspoon Alpha-Amylase, one teaspoon Glucose-Amylase, and one teaspoon Xylose, strain through a cheesecloth, and heat. Then, once the slurry has reached 140 degrees, add Glucose Isomerase, bring to a boil, let cool, and enjoy!

Sound appetizing? That’s the recipe for small-batch, artisanal High-Fructose Corn Syrup that artist and designer Maya Weinstein, 32, came up with after months of research, recipe testing, and ingredient sourcing for her DIY HFCS kit, her thesis project for her M.F.A. in Design and Technology at Parsons The New School for Design.

High-Fructose Corn Syrup is the bogeyman hiding under the bed of the modern diet. It’s not all that different from table sugar, but thanks to tax laws and the economics of giant ag companies, it’s cheaper than almost any other sweetener. Fairly or not, it’s gotten pegged as a major offender in America’s wave of obesity. And even though you can find it in almost every product on the market, from soda pop to whole wheat bread, you can’t just buy HFCS by itself. Anywhere.

Everything you need to make your own HFCS.

Which is why Weinstein decided to make it herself. She visited the BA Test Kitchen yesterday to show us the end result, a one-of-a-kind (for the time being) DIY HFCS Kit, the first of what Weinstein hopes will be a series of “citizen food science” kits that let people make industrial ingredients in their home kitchens. But even just figuring out a recipe for HFCS is harder than it sounds, especially considering some of the more obscure biochemical catalysts involved.

“I emailed corn refinery associations, I cold-called some people, and got no information,” she said, but had a breakthrough after watching the 2007 documentary King Corn and reaching out to its creators, who mixed up their own batch of HFCS in the movie. Once she had a basic recipe, though, the next step was getting her hands on the ingredients.

A $50 bottle of Glucose Isomerase.

The key to turning normal corn syrup (made up mostly of glucose) into HFCS (made up mostly of, you guessed it, fructose) is the last ingredient to go into the mix, Glucose Isomerase. Not at all coincidentally, that was also the hardest to find. The tiny bottle than Weinstein brought with her to the test kitchen cost $50 by itself, and had to be ordered from Hampton Research, a professional research lab supply company. And these catalysts are the reason that Weinstein can’t add “organic” to the “small-batch artisanal” tag on her project: even if you used organic corn, most of the catalysts are genetically modified in a lab (the glucose isomerase, for instance, was made from the Streptomyces rubignosus bacterium)....MORE

Here's Maya's website.

The excesses of the artisanal movement supply one part of the amalgam:

Sometime after the dotcom bubble burst one of my senior partners came back from Seattle and announced
"I have seen the future".

Since this is the type of information I, and pretty much all of humanity, would be willing to pay, for he had my complete and laser-focused attention.

Until he continued "We will all be selling each other overpriced cups of coffee".
His meta-analysis was correct although a few years later he was forced to add the non-artisinal "Swapping overpriced real estate back-and-forth for big gains" into the mix.

Today's "Testing Small-batch Artisanal Portfolio Construction With Cliff Asness and Grantham, Mayo's James Montier" was preceded by last summer's ""Ye Olde Artisanal Stock Pickery & Son" (or "Equity investing as a luxury good") which is definitely worth a read.

And both the artisanal finance posts were inspired by the now deceased partner's observation and some of the stuff that has dropped out of the feedreaders over the years:

"The Economics of Artisanal Chocolate" (Here at Zero-bound Chocolates, We Believe...)
I'm in the Wrong Business Part 625: "$20 for a bottle of water? Your water sommelier will bring the menu right away"
Is the Future of Food Artisanal?
The Future Will be Artisanal Everything (HAIN; AHFP)
Artisanal Pencil Sharpener Considers Career Change
Questions America Wants Answered: “Should I dilute the laudanum before rubbing it on the gums of my caterwauling baby?”
Speak of the Artisinal Devil: "Hain Delivers Strong 4Q – Analyst Blog" (HAIN)
The World is Going Artisanal-- Caffeine: The Magazine

While the other and far less amusing bit-o-the-tapestry was:
"Are Alzheimer's and diabetes the same disease?" (and high fructose corn syrup does a cameo)

Not exactly Bayeaux is it?
Plus I mixed my train/thread/amalgam metaphors. Sorry.

Time For Soybeans to Follow Corn Price Weakness: Brazil's Plans Mean Record Glut

From Bloomberg:
Brazil Corn-to-Soy Switch Foreshadows Record Glut: Commodities

The crash in corn prices is spilling over into soybeans. As a result, Brazil will grow more of the higher-value oilseed, helping push global markets into a record glut and replacing the U.S. as the top producer.

Soybean farmers in the largest exporting nation plan to sow a second crop in a Jamaica-sized area in the off-season rather than rotate to corn, as they traditionally do, after corn lost 42 percent in a year. That’s enough to produce a record surplus of the legume used in everything from tofu to salad dressing and sold in Japanese restaurants as edamame beans.

A group of farming companies including Vanguarda Agro SA (VAGR3) are planning to make the switch for the May-to-June harvest for the first time rather than lose more money in the off-season on corn. Vanguarda’s third-quarter loss was its biggest in a year.

“Growers should continue to face a hard time to make any profit from their corn crops in 2014,” Vanguarda Chief Executive Officer Arlindo Moura said by phone from Sao Paulo.

Farmers in Mato Grosso state who produce about a 10th of the world’s soybeans will plant them again on about 1 million hectares (2.5 million acres) of 3 million previously sowed with corn for the May-to-June harvest, Carlos Favaro, head of growers group Aprosoja, said in an interview.

That would add as much as 3 million metric tons -- more than Japan’s annual imports -- to the record 88 million the U.S. Department of Agriculture expects for the full growing season, according to Favaro.

Global Surplus
The shift should take pressure from corn prices and add it to soybeans. Soybeans for January delivery rose 0.7 percent to close at $13.295 a bushel at 1:15 p.m. on the Chicago Board of Trade. Corn gained 1.2 percent to $4.365 a bushel.

The extra output in Mato Grosso alone would be enough to raise a global surplus of the oilseed above the record 71.8 million tons from the 70.2 million-ton currently estimated by the USDA. USDA and Brazilian government forecasts so far haven’t taken into account any soybean planting for Mato Grosso’s off-season....MORE 

Back in 2011 we posted "How They Harvest Soybeans in Brazil" which gives some idea of the scale the Brazilians work on:

Northern Brazil:


Western Brazil:

More Mato Grosso:

Here the corn planters are following immediately behind the combines.

This is no till farming on steroids.

It appears the sleeping giant has awakened.
Brazil is now second only to the United States in soybean production.
They are third in corn production but distantly trailing the U.S. and China,

Natural Gas: EIA Weekly Supply/Demand Report

Today's top tick was $4.1990 which may hold until the NYMEX guys feel chilly next week.
$4.13 last UNCH.
One thing I failed to point out on yesterday's storage report, the report covered the week ended Nov. 29 i.e. before the ridiculously cold batch of air came down to visit. This week's temps will be reflected in next week's storage report.

First up FinViz on today's action:

We're going higher

And from the EIA, Dec. 5:
Natural Gas Weekly Update 
In the News:

Robust natural gas supply narrows spread between futures, spot prices
Colder weather helped raise the price of the front-month natural gas futures contract, which increased on eight consecutive trading days from November 19 to December 2, with the price reaching $3.988/million British thermal units (MMBtu), its highest level since June 5, 2013. Despite this rally in prices, futures prices for the rest of the month remained relatively low. There has also been a reduction in seasonal price variations, seen when comparing the differences between the natural gas front-month contract and day-ahead spot prices. The premium that the winter months futures contracts have over spot prices has diminished considerably in recent years....MORE 

...The U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook (STEO) forecasts that total dry natural gas production in the United States this winter (November 2013 to March 2014) will reach 67.4 billion cubic feet per day (Bcf/d), a 2% increase over last winter and 12% more than the winter of 2010-11. Additionally, working inventories reached their 2013 peak on November 8, and entered the withdrawal season with the fifth-highest annual level recorded by EIA. This is in keeping with a recent trend of high inventories at the start of the winter withdrawal season; stocks have exceeded 3.8 trillion cubic feet each fall since 2009....  

Prices/Demand/Supply:

Prices rose in most parts of the country, with the exception of the price decrease in the Northeast. As cold weather took hold in the western United States, prices at locations in that area increased. Below-zero temperatures hit the Rockies on Wednesday and prices at Opal in Wyoming increased 20 cents/ MMBtu to $4.18/MMBtu from Tuesday. Generally, prices in the western United States increased between 2 cents/MMBtu and 62 cents/MMBtu from last Wednesday. The Henry Hub price rose slightly from $3.79/MMBtu last Wednesday to $3.88/MMbtu yesterday....MUCH MORE

Testing Small-batch Artisanal Portfolio Construction With Cliff Asness and Grantham, Mayo's James Montier

As usual, apologies to Mr. Van Otterloo.
From FT Alphaville:

Smart beta-blocking

We are big fans of index tracking, particularly for those cash strapped and socially sensitive large pension funds, and we are far from alone: passive is massive for a reason.

But where there’s a fee there’s a way. As alternative investments suffer the slow zombification of poor performance, active managers have been trying to find a way into this passive game, prompting some elegant demolition.

First there was the list of Clifford Asness who, in a rant at the world’s refusal to be sensible (we sympathise), presented pet peeve number six:

If you deviate markedly from capitalisation weights, you are, by definition, an active manager making bets. Many fight this label. They call their deviations from market capitalisation—among other labels—smart beta, scientific investing, fundamental indexing, or risk parity…

You can believe your strategy works because you’re taking extra risk or because others make mistakes, but if it deviates from cap weighting, you don’t get to call it “passive” and, in turn, disparage “active” investing.

Then hot on his heels arrives the latest from James Montier of GMO, a weighty demolition of several forms of snake oil.

First up is the smart beta crowd, who have really just been taking bets on small companies and value stocks. As movement of the S&P500 is dominated by very large companies, doing things like equal weigh investing – putting the same amount into each of the 500 S&P companies, for instance – produces outperformance.

There are also things like minimum variance, maximum diversification, etc, but we won’t bother explaining them because, as Montier says:

The unifying trait of these approaches is that they build portfolios with indifference to price (i.e., they ignore market cap in portfolio construction). Such a process essentially guarantees there will be a value and a small cap tilt to the portfolio....MUCH MORE

And from CXO Advisory:

Measuring the Value Premium with Style ETFs

Do popular style-based exchange-traded funds (ETF) confirm the existence of a reliably exploitable value premium? To investigate, we compare the difference in returns (value minus growth) for each of the following three matched pairs of value-growth ETFs:

• iShares Russell 2000 (Smallcap) Growth Index (IWO)
• iShares Russell 2000 (Smallcap) Value Index (IWN)
• iShares Russell Midcap Growth Index (IWP)
• iShares Russell Midcap Value Index (IWS)
• iShares Russell 1000 (Largecap) Growth Index (IWF)
• iShares Russell 1000 (Largecap) Value Index (IWD)

Using monthly adjusted closing prices (incorporating dividends) for these ETFs during August 2001 (the earliest month available for IWP-IWS) through October 2013 (147 months), we find that:

The following table summarizes the average monthly value-minus-growth return spreads and standard deviations of monthly return spreads by capitalization category over the entire sample period, along with average returns for two equal subperiods. Over the entire sample period, the average return spreads are positive for all three pairs. However, averages are very small compared to monthly variabilities, weakening any conclusions. The large differences in average returns, including sign reversal, between the first and second halves of the sample period undermine belief in a value premium exploitable via style ETFs.
For a closer look at trend, we measure the value premium by month over the sample period.

The following chart plots monthly value-minus-growth returns by capitalization category across the entire sample period, along with associated linear best-fit trend lines. All three trend lines have negative slopes, suggesting that the value premium has weakened or even reversed over the sample period. It is possible that the introduction of style-based ETFs has made it easy for investors to pursue, and extinguish, any value-related abnormal returns. The sample period is very short for such trend analysis in terms of any underlying economic/market cycles....

...In summary, evidence from simple tests with available data (about 12 years) does not support a belief that investors can reliably capture a value premium via style-based ETFs.
Cautions regarding findings include:

• The criteria for constructing/rebalancing the ETFs may not be suited to exploit the value premium efficiently. For example, as pointed out by a reader, it may be that capturing the value premium depends on excluding financial stocks as done in many academic studies but not done in forming these ETFs (financial stocks tend to concentrate in the value ETFs).
• As noted, the sample period is very short for reliable measurement of a value premium that varies with some long economic or market cycle.

It appears I'll have to stick to the cheese and bourbon.
(GOOG search for "Small-batch Artisanal" = 1.4 million hits, some quite strange)

Stuff I Couldn't Do to Save My Life: Artsy-fartsy Edition

I can't paint like the photorealist masters:

Dan Witz - Big Mosh Pit 2007 - Oil and Mixed Media On Canvas 46 in. x 70 in

 Richard Estes-TITULO: XXXI TÉCNICA: Oil on canvas

...MORE

Dan Witz - Big Mosh Pit 2007 - Oil and Mixed Media On Canvas 46 in. x 70 in

As Foretold By the Prophecy: Barrick’s Next Chairman Weighs Return to Gold Hedging (ABX)

$1232.50 up 60 cents.
And down exactly $100.00 since the second post below, dated Sept. 23.

I know there will be whiff of snark in some quarters to the effect that Barrick's hedge marks the bottom, they couldn't trade there way out of a paper bag, etc.

I don't do snark very well. So to compensate I'll get hyper-sincere: I would look at every uptick as an opportunity to dump supply on the market.
And, maintaining the hyper-sincerity, Q4 of 2013 will see the largest 92 day production of gold in human history. I mean that sincerely.

From Bloomberg:

Four years after Barrick Gold Corp. (ABX) stopped hedging bullion sales, its next chairman, John Thornton, says the practice makes sense and is worth considering.

Thornton, a former Goldman Sachs Group Inc. president and currently Barrick’s co-chairman, spoke yesterday after the world’s biggest producer of the metal announced he would succeed Chairman Peter Munk next year.

Barrick spent at least $5.6 billion in 2009 to get out of fixed-price sales contracts as it bet on rising gold prices. The metal is heading for its first annual drop in 13 years, having declined 27 percent so far in 2013. That slump has helped to erode earnings and prompted gold producers to take at least $26 billion of writedowns this year,

“As an outsider, I always thought it made great sense to hedge,” Thornton told reporters at Barrick’s Toronto headquarters. “I can’t understand for the life of me why that wouldn’t be an active topic that you would be carefully following at all times.”

Once a strategy used by Barrick and other major gold producers such as AngloGold Ashanti Ltd., hedging fell out of favor in the past decade as companies found themselves locked into lower prices as gold rose. Producers de-hedged 8.16 million ounces in 2009, according to a report from London-based researcher GFMS Ltd. the following year.

Thornton is right to suggest hedging is useful, said John Goldsmith, a Toronto-based fund manager who helps manage about C$5.6 billion ($5.3 billion) at Montrusco Bolton Investment Inc.

Ballooning Costs
“The smart companies are going to be the ones that use put options or enter into forward contracts for a portion of their current year’s production to guarantee that production, to guarantee that cash flow,” Goldsmith said by phone....MORE 

Here's the prophecy from Cassandra Izabella:

Gold Miners: A Fool And His Money (GDX; GDXJ; GLD)

There have been quite a few commenters and pundits making wordy cases for gold miners recently and if they don't knock it off I'm going to start naming and shaming.
Here's pretty much all you need to know about the situation from Izabella Kaminska at FT Alphaville and she does it in under 500 words:

The gold producer wild card

BNP Paribas thinks gold is getting closer to the precipice.

How quickly it’s likely to be pushed over will be determined by the rate at which producers accelerate their hedging activity....MUCH MORE

See also a couple months prior to that November post:

UPDATED--Gold is Going Much Lower

Update: "JPMorgan Says "Buy Gold", Conspiracy Theorists Dazed, Confused".
Original post:
Comex gold settled at $1,332.50 on Friday, off $36.80 for the session. After the close it traded down to $1325.60.
From Izabella Kaminska at Dizzynomics:

All that glitters…

Gold goes up on non-taper, gold goes down on taper.
Is it really that simple?

Maybe.
Though I suspect that even without tapering it won’t stay supported for long. This is because QE has finally created the conditions necessary to reward equity investing more than they do gold investing.

And without the likes of India buying, there isn’t enough liquidity heading into the market to support new highs. And new highs are necessary if you can’t hedge your gold positions at a positive rate.

The more QE happens, the greater the chance of negative rates on traditional risk free assets. But gold is a useless alternative if it can’t be hedged at a positive rate (i.e in a contango).

Gold backwardation is a market condition that deprives the gold investor from the ability to replicate a positive yielding safe security out of gold....MORE

"Four Things to Know Before the Jobs Report"

From Real Time Economics:

For those of you prepping for Friday’s Labor Department report on November employment, here are four things to remember:

1. The job market is picking up, but let’s not get carried away: What we’ve seen for years now is slow, steady improvement. Economists polled by Dow Jones Newswires expect Friday’s report to show employers adding 180,000 jobs in November, close to October’s impressive 204,000 figure — which was the third straight month of encouraging payroll numbers. Unemployment is expected to fall to 7.2% after edging up to 7.3% in October due to government shutdown-related factors.

Clearly, the jobs picture is better than earlier this year: Job growth has averaged about 200,000 a month for the past three months; first-time jobless insurance claims — a measure of layoffs — are falling and around prerecession levels; and workers’ wages are now rising, hinting at competition between employers for workers, at least in some areas. Other reports have pointed to strong private-sector hiring and fewer unemployed people per job opening. But it’s important to place these improvements in context.

Since the economy started adding jobs three years ago, monthly job gains have averaged about 180,000, which is right around what we’re seeing now. There are still 11.3 million unemployed people, 8.1 million doing part-time work because they can’t find full-time employment and 4.1 million who’ve been jobless for six months or more. Participation in the labor market — people working or seeking work — is around 35-year lows. While the recession ended four and a half years ago, we’re still 1.5 million jobs short of what we had when the recession hit. And it’s not clear employers are in the hiring mood: A survey of CEOs by the Business Roundtable found executives were barely more willing to hire than a few months ago.

2. It’s not just about jobs — it’s about how much those jobs pay. The jobs recovery has been uneven, with many people locked outside of it. To give you a sense, over the past year, the economy has added just 55,000 manufacturing jobs, roughly 0.5% of the current total of about 12 million manufacturing jobs. By contrast, retail, professional-and-business-services (a category that includes temp workers) and leisure and hospitality (which includes restaurants and hotels) have added, respectively, 368,000, 644,000 and 444,000 jobs. In fact, there are more professional-and-business service jobs and more leisure and hospitality jobs now than there were before the recession....MORE

"How to plan the ultimate vacation to Switzerland, suicide tourism capital of the world"

This article is so cheery it almost makes you want to book that one way ticket.
Or not.
From the National Post:

Dignitas and Exit have head offices in Zurich, and will facilitate assisted suicide, but, if circumstances permit a side trip, try visiting a wintry Lac Léman.

“Death renders all equal,” wrote Claudian. How each one of us relates to death, however, is individual, and always changing — as we mature; as we contemplate life, and death, around us; and as society changes. In this special edition of the National Post, we present stories and columns looking at the different ways we see, and prepare for, the Great Equalizer. To read the complete series, click here. 

If you go
You can fly direct to Geneva from Montreal or Toronto on Air Canada, or if you want to get to the point, Swiss Air Lines International flies right into Zurich.

If you do take the leisurely route, the Hotel Victoria in Glion sur Montreux, overlooking Lac Léman and Montreux, has rooms starting from $220.

The village of Gruyères is not far, and you can have those meringues with double Gruyère cream all over the area. The fondue ain’t bad either. Be sure to scrape up the burnt cheese at the bottom when you’re done. The Swiss call that part “la religieuse” for a reason. chateau-gruyeres.ch/e/ and la-gruyere.ch... 

It’s an old saw that travel broadens the horizons, which makes it easy to overlook the fundament-shaking truth of it. A trip to Haiti can make you rethink your thoughts on foreign aid. Drop in on any given village in Greenland and you’ll realize the Arctic can be a fully functioning part of a society. And one trip to Addis Ababa and you’ll never refer to “Africa” as an undifferentiated whole again...MUCH MORE

HT: vbounded who has an interesting juxtaposition

McKinsey: "Reverse the curse: Maximizing the potential of resource-driven economies"

From McKinsey Global Insight:

Rising resource prices and expanded production have raised the number of countries where the resource sector represents a major share of the economy, from 58 in 1995 to 81 in 2011. That number will rise: to meet soaring demand for resources and replace rapidly depleting supply, the world should invest a total of up to $17 trillion in oil and gas and in minerals by 2030, double the historical rate. In 20 years, almost half of the world’s countries could depend on their resource endowments for growth.

Economies with natural-resource endowments have a huge opportunity to transform their prospects. But history suggests that they could all too easily squander the windfall.

To date, resource-driven countries have tended to underperform those without significant resources: almost 80 percent of the former have a per-capita income below the global average. Since 1995, more than half of these countries have failed to match the average growth rate of all countries. Only one-third have maintained growth beyond the resource boom. Recent McKinsey research lays out a new model that could help countries capture the coming resource windfall....MUCH MORE, including downloads.

 HT: MacroBusiness

"Is Walmart Defying Economic Gravity?" (WMT)

From Harvard Business School's Working Knowledge blog:

Walmart has been phenomenally successful, with operations larger than those of some countries. But can the Bentonville powerhouse sustain its half-a-trillion-dollar enterprise much longer?, asks Professor Jim Heskett. What do you think?

There is a body of research that seeks to relate economics to human biology. It's usually associated with the notion that the life cycles of businesses parallel stages of biological life: birth, rapid growth, maturity, and death. Companies are categorized as growth or value investments. Managers think of businesses in their portfolios as question marks (too early to tell), stars, cash cows, and dogs. Entrepreneurs "harvest" the spoils of startups once the rapid growth period is nearing its end. This work has presented evidence that there is a surprising amount of turnover among the largest business firms, characterized in the United States by the fact that only one company, General Electric, has survived in the Dow Jones Industrials index since its beginning.
We are reminded of the matter as Wal-Mart Stores, Inc. names a new CEO, Doug McMillon, who faces a number of very large challenges, including that of how to grow a nearly half-trillion-dollar organization charged with everything from bribery in its Mexican operation to discrimination in its labor policies, and blamed for low wages and reliance on indirect societal subsidies for its labor policies. Is it possible that Walmart is just too big to pursue its business model in the longer-term future?

This is not a trivial question. Walmart, as the world's largest private organization, has a bigger population than several United Nations member countries. Its revenue base is larger than many of the world's economies. And its borders extend far beyond the US.

Everyone has an opinion about Walmart. Mine is influenced by my only visit to Bentonville, Arkansas 20 years ago. Even then it was a big company. The Saturday morning management meeting I witnessed was attended by a thousand members of the Walmart "family"—employees, their families, and guests like me. Every effort was made to recognize individual effort. New products were introduced. Decisions under consideration were even discussed from the stage. The biggest display in the room was an electronic counter on the wall that every two seconds added up the savings delivered to Walmart's customers over the company's lifetime.

How you feel about Walmart's future may depend on how you feel about its policies and business model. Clearly, leadership has chosen to distribute the profits from its remarkable productivity increases to customers and, at least in the early years, owners and investors that largely included managers. More recently, the benefits have gone primarily to customers. Walmart's managers are not among the most highly paid, especially in light of the dedication, travel, and on-the-ground involvement expected of them. Investors do not regard the stock as a "growth" stock....MORE

The Wall Street Stupidity Index

From Fortune:

(Fortune)

The day Twitter went public not only was profitable in the fiscal sense, but also illuminated a metric that has heretofore been underappreciated by those attempting to comprehend and thereby profit from the laws that guide the market. We will call this potent new tool the Wall Street Stupidity Index.

HT: Above the Market

Somewhere in England A Village Is Missing Its Idiot: Seignorage Edition

The headline is a ripoff paraphrase of the title of David Feherty's book.

The situation with the British St. George and the Dragon coin is reminiscent of the Canadian Maple Leaf 1oz. silver bullion coin.
The Maple Leaf has a $5 (Cdn.naturellement) face value while throughout 2001 the spot price was under that figure, trading as low as $4.07 in November of that year.

Even allowing for the fact the coin is in high demand and trades at a premium this was the flip side of the capped gold price that Alphaville's Izabella Kaminska pointed out* in December 2012. In that case gold wasn't going higher which left only two directions for price moves, flat or down.

In the case of the Maple Leaf, no matter what happened to bullion prices it had that five buck face value limiting the downside.
Why these things happen in markets I've yet to figure out but here's another one.

From the Financial Times' Long Short blog:

How much would you pay for £20?

How much is a £20 coin worth? The Royal Mint seems to have created a risk-free arbitrage, thanks to its decision to sell the first silver £20 coin for £20, with free postage (hat tip to Elroy Dimson). It is legal tender, so there’s no risk of it being worth less than £20 (and it could always be paid into a bank account or swapped at the Bank of England if you feared it might be).

Yet, on ebay demand is such that the coins are selling for £30 or more – and some chancers are listing the coins for as much as £65, plus postage. Presumably these prices are being paid by collectors attracted by scarcity value. It certainly has nothing to do with the intrinsic value, as the silver content of the coins is worth only about £6.33....MORE

My question, and the reason for the title is why not go £10 face amount? Or £50? Or is £20 the optimum for extracting seignorage while limiting the expansion of M0/M1?

*She posted Capping the Gold Price 5 days before gold hit a major (and not seen since) intermediate  top-tick of $1715.
Pretty good timing.

One more oddity, I believe, i.e. I'm guessing, the Maple Leaf was the highest denomination legal tender until the St. George and the Dragon coin.
Update: I guessed wrong. The Canadian 1 1/2 ounce silver Polar Bear, minted since 2012, has an $8 face value.
I should know better than to guess about easily verifiable facts. Sorry.

Natural Gas: Extremely Large Drawdown From Storage Pops Futures Through Resistance

It wasn't very strong resistance at $4.049 so I wouldn't count on technicals to support should the weather forecast change but for right now, baby it's cold outside, from Denver to Chicago and down to Texas and looks to remain that way, 10 to 20 degrees below average in some locales.
And in my favorite dreamtime scenario all the cold air heads to 10282. (NYMEX zip code)
We'd be up another 10% on the day.
$4.11 last, up 15 cents.

First up, the CME:
Nat Gas inventories bullish 

Nat Gas prices are surging higher on a very bullish weekly inventory report just released. The net withdrawal of 162 BCF was well above the market consensus as well as most all of the individual projections. The spot Jan contract is now trading above the psychological $4/mmbtu level as well as the range resistance area of $4.049/mmbtu. The next stopping point is likely to be a test of the $4.10/mmbtu level an area reached for a few sessions in the middle of October. This was exactly what the bulls were hoping for as much colder than normal temperatures can still result in a very strong draw in inventories in spite of the robust US production levels.

With another round of cold temps on the way starting next week across most of the US prices should remain relatively supported for the foreseeable future. I am not sure the price surge will hold today without some of the weak longs taking some profit off of the table but overall the fundamentals are starting to line up with what the technicals have been saying for the last several weeks… a modest uptrend is in play.

Today's EIA report was bullish versus the market consensus and compared to the so called normal five year average and last year. The report showed a net withdrawal that was above the market consensus (162 versus 138), and greater than last year and the five year average net withdrawal for the same period. The 162 BCF withdrawal (about normal for this time of the year) was about 24 BCF above the market consensus calling for a withdrawal of around 138 BCF. The draw of 162 BCF was above my model forecast (115 BCF withdrawal) this week. The year over year inventory situation remains in a deficit position versus last year and has now moved back into a deficit position versus the so called normal five year average. The current inventory deficit came in at 104 BCF versus the normal five year average or about a negative 2.8 percent.

 This week's 162 BCF withdrawal compares to a 62 BCF withdrawal from inventory last year and a withdrawal for the five year average of 41 BCF for the same week....MUCH MORE

See also yesterday's "Natural Gas: Polar Air Sweeps Into U.S. Bringing Snow and Ice".

And here's the daily chart showing the line just above $4.00 where things got a bit congested recently, back in June and through May:

FinViz

ECB Sub-zero Rate Threat Leaves Money Funds Fearing Extinction

Sometimes I forget just how integral to the whole system the funds are.
From Reuters:

Europe's money market funds fear the twin threat of being charged to park cash at the European Central Bank and tougher regulation could push them to the brink of extinction.

The industry is worth around 850 billion euros, but the funds, which traditionally buy only top-rated, short-term debt, are finding life increasingly difficult as record low rates leave them struggling to make a profit.

The health of money market funds is also important for the region's governments and banks for which they are a reliable source of funding.
 
Almost 400 of the 1,555 funds that existed at the start of 2011 have closed, and with the ECB now flagging that its deposit rate could go below zero - effectively charging those who park cash - many of those remaining are fearing for their future.

Though funds do not park money at the ECB themselves, sub-zero rates would hurt because the yields on the government, corporate or bank bonds that make up the bulk of their portfolios are also be likely to become unprofitable.

"It could be the final nail in the coffin for money market funds," said Patrick Simeon a fund manager at money market giant Amundi in Paris....MORE

The Resource War No One Expects?

From the Daily Star October 6th:

We'll run out of cocoa in just SEVEN years!
 CHOCAHOLICS beware, there’s just seven years worth of the stuff left.

The world will officially run out on October 2, 2020.

Industry experts met in London last week to discuss the impending meltdown.

Confectionery giants revealed there are just not enough cocoa plantations across the globe to feed the demand.

They warned we would need the ­equivalent of another planet Earth to fill the gap needed to keep the chocolate ­industry going.

Prices are set to soar over the next few years as chocolate becomes harder to get hold of.

As a result many big-name ­companies are ­expected to fill bars that are smaller in size with more nuts and fruit because they are cheaper to produce.

Chocolate taster and expert Angus Kennedy said: “There will be a chocolate shortage and there isn’t a solution to the problem. Seven years is what we think we have left.

“Experts have worked out we need 2.3 globes to accommodate man’s needs for chocolate in terms of forestry and space.

“We need another Earth basically if we carry on at this rate. We are ­destroying the whole thing.

“The problem we’ve got is that much of the space that was used for cocoa ­plantations is no longer there.

“The Chinese love their cars and they have found that rubber makes more money than cocoa and at a much quicker pace....MORE

HT and headline: Mike the Mad Biologist

Declines in Raw Materials Seen Continuing

A very comprehensive overview of the current state of play
From Bloomberg:

Worst Raw-Material Slump Since ’08 Seen Deepening

The commodity slump that spurred bear markets in everything from gold to corn to sugar this year will deepen by the end of December as prices head for their first annual loss since 2008, if history is any guide.
The Standard & Poor’s GSCI Spot Index of 24 raw materials fell in December 83 percent of the time since 1971 when the benchmark gauge was posting losses for the year through November, data compiled by Bloomberg show. The average December loss was 3.9 percent, which if it happened this time would mean a 7.8 percent drop for the year.

Investors pulled a record $34.1 billion from commodity funds since the end of December, according to EPFR Global, which started tracking the flows in 2000. Ample rains boosted global crops, increased mine output spurred supply gluts in metals and the U.S. is extracting the most crude oil since 1989. Economic growth in China, the biggest user of everything from soybeans to zinc to cotton, is poised to slow for a third year in 2013, according to economist estimates compiled by Bloomberg.

“It’s likely that the trend will hold through the end of the year,” said Michael Cuggino, who manages about $11 billion of assets at Permanent Portfolio Family of Funds Inc. in San Francisco. “Investors see anemic or slowing economic growth in the world’s mature and emerging-market economies, while there’s more supply on hand. That translates to lower prices.”

2013 Losses
Fourteen members of the S&P GSCI are heading for annual losses, with grains and precious metals leading the declines. Corn tumbled 39 percent, on track for the biggest annual slump since the data begins in 1960. Gold is heading for the first yearly retreat since 2000 and silver is poised for the worst rout in three decades....MUCH MORE

Something For Tesla to Watch: Major Lithium Miners Joint Venture Exceptional Deposit (TSLA)

There is some disagreement whether  SQM in Chile or Talison in Australia will be the world's largest lithium producer in 2014. Either way:

"Will Tesla End Up Using All the World's 18650 Lithium-ion Batteries? (TSLA)"
Tesla Is Buying Batteries for How Many Cars? (TSLA)
Tesla Has Helped Bring Panasonic Back From the Dead (TSLA; 6752)
Tesla: Elon Musk's Robot Army (TSLA)
Elon Musk, Lithium and the 500,000 Vehicle per Year Giga Factory (TSLA)

Shareholders better hope TSLA has nailed down supply for the next few years as both Rockwood and Tianqi are among the top five or six producers prior to the JV.
The stock is at $142.65, up $3.70. We're still looking for $160.

Here's the press release via the Wall Street Journal:

   -- Provides ownership in the world's largest and richest spodumene source of 
      lithium 
 
   -- Strengthens further ROC's #1 position as a leading global integrated 
      producer of lithium compounds and chemicals 
 
   -- Delivers immediate and significant accretion to ROC's 2014 earnings per 
      share 
 
   -- Enables a partnership with Tianqi, China's leading lithium company 
PRINCETON, N.J.--(BUSINESS WIRE)--December 02, 2013-- 

Rockwood Holdings, Inc. (NYSE:ROC) announced today that it entered into a joint venture ("JV") with Chengdu Tianqi Industry Group ("Tianqi") giving Rockwood a 49% ownership interest and Tianqi a 51% interest in Talison Lithium Pty Ltd. This transaction is expected to close during the first quarter of 2014, following receipt of regulatory approvals.

At close, it is expected that Rockwood and Tianqi will contribute equity of $196 million and $204 million, respectively. In addition, Rockwood will also provide to the joint venture a two-year secured loan of up to $670 million at 8% interest. Rockwood will grant Tianqi a three-year call option to invest from 20% to 30% in the equity of Rockwood Lithium GmbH, the European arm of Rockwood's global lithium business, which will be valued at 14x the last twelve months Adjusted EBITDA.

Proceeds to the joint venture will be used to pay off existing debt and equity holders including Tianqi Group HK Co., Limited (a subsidiary of Tianqi) and Leader Investment Corporation (a subsidiary of China Investment Corporation). Rockwood is expected to fund its investment in the joint venture from cash on hand.

"With this acquisition, we have secured access to another significant lithium reserve, in addition to our current resources in the U.S. and Chile," said Seifi Ghasemi, Chairman and Chief Executive Officer. "Further, not only does this complement our core lithium business, but it also meets with all of our prior stated financial and strategic objectives for allocation of capital in a disciplined manner to enhance economic value for shareholders."

Lazard acted as Rockwood's financial advisor and Clifford Chance as legal advisor....MORE

We have a lot of posts on lithium, if interested use the Search Blog box.

Whitney Tilson on Shorting 3D Systems (DDD)

From ValueWalk:

The following is from an email Whitney Tilson sent to ValueWalk.

Ya can’t make this stuff up! From a friend who met with the CEO of 3D Systems Corporation (NYSE:DDD) (not some penny stock, but an $8 BILLION company):
Avi told me during a 1×1 that “his company is 50% technology, 20% innovation and 30% awesomeness.”

What is the appropriate discount rate to apply to “awesomeness”?

...MORE 

And from Barron's Tech Trader Daily Dec. 4:

3D Systems Reminds Tilson of Segway; Not Short Stratasys, the Better Business, He Argues

A short while ago I spoke with Whitney Tilson of hedge fund Kase Capital, who yesterday issued some damning remarks about 3-D printing stocks, and 3D Systems (DDD) in particular. This morning, Tilson presented his views on the matter, along with some other short-sale candidates, at a forum held by the Harvard Business School Club of New York. (Note that Tilson changed the name of his firm from T2 Partners after he split with his business partner.)

Tilson tells me he has about 2% of his $70 million in assets under management sold short in shares of 3-D printing stocks, or roughly $1.5 million, spread pretty much evenly across shares of 3D Systems, The ExOne Company (XONE), and VoxelJet (VJET). He is not shorting Stratasys (SSYS), as he believes it is “more of a real company,” by which he means that Stratasys has not engaged in as much M&A as 3-D systems and has focused more on managing its business by steady product development.

Tilson notes it is harder to short shares of XONE and VJET, as the shares are harder to borrow, and that given their smaller market caps — $812 million and $675 million, respectively, versus $8 billion for 3D Systems — the trade can turn against a short seller more easily. “A half-billion stock can turn into a $2.5 billion stock overnight.” Despite not making as much noise about ExOne and Voxeljet, Tilson argues the two are the “2nd- or 3rd-place companies, the kind of me-too outfits that tend to jump aboard” a hot sector. He thinks they are actually not as high quality as 3D Systems.

Tilson’s view is that the market, and the products, are certainly real, but that the stock multiple of 17 times trailing revenue for 3D Systems stock is unreasonable given what will be a small, slowly growing market for years to come. He compares the enthusiasm for the names to the enthusiasm for the Segway scooter, which was a good piece of technology, but has failed the most exuberant hopes for its success:

3-D printing has been around for decades and will continue to exist and grow. But I think there is zero chance there will be enough growth to justify DDD at 17 times revenue. It should trade at perhaps 1 to 2 times revenue. Just look at what the CEO of [contract manufacturer] Foxconn said. He was asked if he would be making 3-D printers for consumers anytime soon, and he said, No way, it’s a joke....

...MORE 

And TTD Dec. 3:
3D Systems: One of the Great Shorts in Market of Massive Stupidity, Says Tilson

He's right,

If you look at each company's recent acquisitions, Makerbot for DDD and Objet for SSYS, there's no comparison on who has the smarter long term strategy.
Now if only Stratasys would buy Arcam...

Why Do Koala's Sound Like Barry White? An Organ Unique in the Animal Kingdom

From ScienceDaily:

Koalas' Low-Pitched Voice Explained by Unique Organ

The pitch of male koalas' mating calls is about 20 times lower than it should be, given the Australian marsupial's relatively small size. Now, researchers reporting in the Cell Press journal Current Biology on December 2 have discovered their secret: koalas have a specialized sound-producing organ that has never before been seen in any other land-dwelling mammal. The key feature of this newly described organ is its location outside the voice box, what scientists call the larynx.

"We have discovered that koalas possess an extra pair of vocal folds that are located outside the larynx, where the oral and nasal cavities connect," says Benjamin Charlton of the University of Sussex. "We also demonstrated that koalas use these additional vocal folds to produce their extremely low-pitched mating calls."...MORE

HT: The Awl

Chalk Up Another One For Elon Musk: Space-X Delivers First Commercial Cargo

From io9:

SpaceX Just Made History. Again.

SpaceX scored a spectacular launch success last night when the maiden flight of their upgraded Falcon 9 rocket scorched the sky of the Florida Space Coast and successfully delivered a commercial space satellite to geostationary orbit for the first time ever – thereby revolutionizing the commercial space industry from this day forward.

Top Photo via SpaceX.

The third time was finally the charm as the Falcon 9 blasted off precisely on time at 5:41 p.m. EST from Launch Complex 40 at Cape Canaveral following a pair of launch scrubs last week on November 25th and Thanksgiving Day, November 28th, caused by technical problems with the first stage engine. The booster thundered off the pad and pierced the completely cloud-free evening sky soon after sunset as the blistering roar rumbled deafeningly all across the space coast viewing area....MORE

Natural Gas: Polar Air Sweeps Into U.S. Bringing Snow and Ice

On November 21 we posted the North American forecast temperature anomaly map for the first time in almost a year:

I know it's cryptic but what it meant was demand had just become more determinative of price than supply.
That was at $3.7250.
We followed up on the 25th with:

There was a reason we posted the temperature anomaly map last week, the first time since January 2013.
$3.77 settle, up 7 cents.... 

Now get this, the Arctic Oscillation is still in it's positive, warmer, phase. Here's the current index from NOAA's Climate Prediction Center:

And here is James Hansen, former head of NASA's Goddard lab explaining the AO:

"The degree to which Arctic air penetrates into middle latitudes is related to the AO index, which is defined by surface atmospheric pressure patterns. When the AO index is positive, surface pressure is low in the polar region. This helps the middle latitude jet stream to blow strongly and consistently from west to east, thus keeping cold Arctic air locked in the polar region. When the AO index is negative, there tends to be high pressure in the polar region, weaker zonal winds, and greater movement of frigid polar air into middle latitudes."

Nat gas front futures $3.96.
From Bloomberg:

A wave of polar air is sweeping into the U.S. with snow and ice, sending energy use soaring and threatening to damage crops and disrupt natural gas production.

Temperatures will plummet as the cold moves south, east and west from Canada. Readings in Chicago will tumble from today’s high of 57 degrees Fahrenheit (14 Celsius) to a low of 5 degrees next week, according to forecasts.

“It’s pretty impressive stuff; it’s going to set some records,” said Rob Carolan, owner of Hometown Forecast Services Inc. in Nashua, New Hampshire. “A lot of the country is going to be feeling the effects of the cold weather by Monday.”

Below-normal temperatures, especially in eastern and Midwestern cities, tend to increase energy consumption as more people heat homes and businesses. Arctic temperatures can also crimp gas production by creating freeze offs, in which ice forming in and around wells can disrupt output.

As of today, there probably won’t be widespread disruptions in natural gas production, said Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland.

“This is a very impressive air mass,” Rogers said in e-mail. “I’d lean against major damage at this time, but do agree the risk of some problems has increased this morning.”...MORE

The last time we did the AO thing:
Jan. 9, 2012
Dear Europe: Arctic Oscillation About to Go Negative, Try to Stay Warm
Jan. 30, 2012
Brrrr: Arctic Oscillation Goes Deeply Negative, Here Comes Winter
Which resulted in:
Feb. 14
Death toll rises to 600 in European cold snap

A total 824 deaths from freezing in February 2012
AonBenfield 11 page PDF

Serious business.

Macquarie: The Drop in Corn Values Is Enough to Depress Food Prices in 2014

I debated whether to use "deflation" in the headline but checked the OECD stat bank which lists the food component weighting of U.S. CPI at 8.6%. The impact of food alone only strips 0.82% off the current 1% headline inflation number i.e. still positive albeit barely.
If anyone should care to double check the weighting at the source here's the BLS.

From Agrimoney:

A slump in values of the likes of corn and soymeal will feed through into a fall in food prices for a third successive year in 2014, before a small recovery kicks in in 2015, Macquarie forecast.

The bank, launching its own food price index, said that food prices would fall by 9.6% next year, only marginally short of the 10.9% expected for 2013.

However, prices will return to growth in 2015, of 2.8%, with values rising across a range of agricultural commodities, with soymeal, wheat and cocoa notable among exceptions.

"The index entered the downside in 2012 and will stay in this overall bearish trend until 2015, when we expect both agricultural and soft [commodity] prices to recover," Macquarie said.

Corn to fall

The prospects for prices of feed ingredients, which Macquarie is using in its index as a proxy for meat values, look particularly poor for next year, with losses for corn and soymeal forecast at more than 20%.

"The animal feed components will again drive the index lower," said the bank, which is relying largely on futures, rather than physical, prices in compiling the index, called the MacPI.

However, staple grains, a segment including rice and wheat, will be the weakest performer in 2015.

"All commodity groups, except staple grains, should finally turn bullish by the end of 2015, with the animal feed and sugar components contributing the most to the MacPI recovery."...

...MORE

Everything You Ever Wanted To Know About Minimum Wage Arguments

Cardiff Garcia does the heavy lifting on what may be the most comprehensive linkfest of viewpoints I've ever seen. I actually started giggling there are so many links.
It was a manly giggle.

From FT Alphaville:

Should the US raise the minimum wage? (That’s not a hook. We actually don’t know.)

You can’t turn a virtual corner this week without tripping over a discussion about the US minimum wage.

The case in favour of raising it has been made by Arindrajit Dube, Paul Krugman, Ed Luce, and Kevin Drum. Arguing against have been Tyler Cowen, Scott Winship, and Adam Ozimek.

...MUCH, MUCH MORE

"EIA analysis: big draw in crude oil inventories"

WTI $97.27 up $1.23, Brent $111.89 down $0.73.

From Platts:

Analysis of U.S. EIA data: U.S. crude oil stocks dip 5.6 million barrels, marking first drop in 11 weeks
U.S. crude oil stocks dropped 5.6 million barrels the week ended November 29 to 385.8 million barrels on a bump-up in refinery run rates, U.S. Energy Information Administration (EIA) data showed Wednesday.

The draw was the first reported by the EIA in 11 weeks, but was far lower than the 12.4 million-barrel decline in crude oil stocks reported late Tuesday by the American Petroleum Institute (API).

The draw narrowed the crude oil stock surplus to the five-year average to 11.7%, or about 40.4 million barrels, for the week ended November 29. The surplus had reached 13.3% the week ended November 22.

Analysts polled by Platts were anticipating a 1.25 million-barrel draw for the week ended November 29 as refiners were expected to be returning from maintenance periods.

Refiners did increase utilization rates, which rose to 92.4% of capacity, from 89.4% of capacity the week ended November 22. The increase was mainly from a ramp-up in U.S. Atlantic Coast (USAC) run rates, which rose 8.1 percentage points to 84.3% of capacity.

Oil Market Analyst Torbjorn Kjus of DNB Bank said the reason for the large stock draw was record-high crude oil for this time of the year, most likely due to exports of refined product to Europe and elsewhere, not domestic demand.

The surge in USAC run rates could be related to the likely end of maintenance at Phillips 66's 238,000 barrels per day (b/d) Bayway refinery in Linden, New Jersey. On November 22, sources said there was talk that the fluid catalytic cracker at the Bayway refinery was coming out of turnaround...MORE

Earlier today:
Saxo Head of Commodities: "Were you caught short on crude?" (and a look at WTI options volatility skew)
Oil: Libya Hopes to Restore Output, Iran and Iraq Threaten Price War, Market Shrugs Ahead Of U.S. Data

Dear Teamsters, United Auto Workers: Google Is Trying To Crush Your Unions and Your Members (GOOG)

The Google self-driving car will actually roll out as self-driving trucks on dedicated routes.
And they will be built by robots, not the UAW.
Oh dear, have I said too much?

From the New York Times:

Google Puts Money on Robots, Using the Man Behind Android

PALO ALTO, Calif. — In an out-of-the-way Google office, two life-size humanoid robots hang suspended in a corner. 

If Amazon can imagine delivering books by drones, is it too much to think that Google might be planning to one day have one of the robots hop off an automated Google Car and race to your doorstep to deliver a package? 

Google executives acknowledge that robotic vision is a “moonshot.” But it appears to be more realistic than Amazon’s proposed drone delivery service, which Jeff Bezos, Amazon’s chief executive, revealed in a television interview the evening before one of the biggest online shopping days of the year. 

Over the last half-year, Google has quietly acquired seven technology companies in an effort to create a new generation of robots. And the engineer heading the effort is Andy Rubin, the man who built Google’s Android software into the world’s dominant force in smartphones. 

The company is tight-lipped about its specific plans, but the scale of the investment, which has not been previously disclosed, indicates that this is no cute science project. 

At least for now, Google’s robotics effort is not something aimed at consumers. Instead, the company’s expected targets are in manufacturing — like electronics assembly, which is now largely manual — and competing with companies like Amazon in retailing, according to several people with specific knowledge of the project. 

A realistic case, according to several specialists, would be automating portions of an existing supply chain that stretches from a factory floor to the companies that ship and deliver goods to a consumer’s doorstep.

“The opportunity is massive,” said Andrew McAfee, a principal research scientist at the M.I.T. Center for Digital Business. “There are still people who walk around in factories and pick things up in distribution centers and work in the back rooms of grocery stores.” 

Google has recently started experimenting with package delivery in urban areas with its Google Shopping service, and it could try to automate portions of that system. The shopping service, available in a few locations like San Francisco, is already making home deliveries for companies like Target, Walgreens and American Eagle Outfitters. 

Perhaps someday, there will be automated delivery to the doorstep, which for now is dependent on humans.

“Like any moonshot, you have to think of time as a factor,” Mr. Rubin said. “We need enough runway and a 10-year vision.” 

Mr. Rubin, the 50-year-old Google executive in charge of the new effort, began his engineering career in robotics and has long had a well-known passion for building intelligent machines. Before joining Apple Computer, where he initially worked as a manufacturing engineer in the 1990s, he worked for the German manufacturing company Carl Zeiss as a robotics engineer. 

“I have a history of making my hobbies into a career,” Mr. Rubin said in a telephone interview. “This is the world’s greatest job. Being an engineer and a tinkerer, you start thinking about what you would want to build for yourself.” 

He used the example of a windshield wiper that has enough “intelligence” to operate when it rains, without human intervention, as a model for the kind of systems he is trying to create. That is consistent with a vision put forward by the Google co-founder Larry Page, who has argued that technology should be deployed wherever possible to free humans from drudgery and repetitive tasks. 

The veteran of a number of previous Silicon Valley start-up efforts and twice a chief executive, Mr. Rubin said he had pondered the possibility of a commercial effort in robotics for more than a decade. He has only recently come to think that a range of technologies have matured to the point where new kinds of automated systems can be commercialized. 

Earlier this year, Mr. Rubin stepped down as head of the company’s Android smartphone division. Since then he has convinced Google’s founders, Sergey Brin and Mr. Page, that the time is now right for such a venture, and they have opened Google’s checkbook to back him. He declined to say how much the company would spend....MORE

See also the Times' companion piece:
Shooting for a Moon Filled With Robots

Over the last half-year, Google has quietly acquired seven technology companies in an effort to create a new generation of robots. Below, a selection of Google’s acquisitions....

Here's how the Teamsters reacted to stress in 1934, the management guy heading for terra firma  died almost instantly of a crushed occipital lobe:

Saxo Head of Commodities: "Were you caught short on crude?" (and a look at WTI options volatility skew)

Well yes, yes we were, thanks for your asking.
From Saxo's Ole Hanson's Trading Floor blog:

Wednesday's jump in crude oil took many traders by surprise, not least Saxo Bank's Head of Commodity Strategy, Ole Hansen. WTI futures went from a six month low to a one month high to more than USD 97.50 per barrel. The spike was caused by news that another pipeline is due to come on line in January from Cushing in Oklahoma, which is the delivery hub for WTI. That will help alleviate bottlenecks that we've been seeing building up in recent months.

Ole says we've now got positive momentum right across the energy sector. We're also at the time of year when traders are keen on defending their profits and positions. He says that unless we get any adverse news over the next few days we could potentially see this trend continue into the new year.

Ole says that the fact we're now above the USD 93 to 96 range, USD 99.60 is "now in sight" as far as WTI is concerned. Brent, however, looks "toppish" right now and the August peak of USD113.30 could offer some resistance. Ole says he's not keen on Brent at current levels....

Also from Mr. Hanson:
WTI crude options point towards stability — calls in demand

Saxo's Chief Economist Steen Jakobsen and CEO Lars Seier Christensen also blog (infrequently) on the Trading Floor platform.

Chief Investment Officer of Buffett-owned General Reinsurance Blasts the Fed (BRK)

General Reinsurance is Berkshire Hathaway's reinsurance operation, owner of New England Asset Management ($63bil) and co-marketer with Cologne Re under the GenRe label
(plus a few other things that would be sizable in their own right).
It is a heavyweight.

From GuruFocus:

History Ignored, Again - General Re CIO John Gilbert

 John Gilbert CIO of General Re New England Asset Management in the recent December issue of Reflections blasted the Fed for their role in the biggest mess of the financial system that he has seen. He calls Twitter todays lottery winner and vaguely states emerging markets vulnerabilities when the Fed begins to taper. He compares Cisco (of 1999) and Twitter (of today) and the outcomes of irrational exuberance over a long period of time. There are great accompanying charts and the full PDF can be found below. I included a few excerpts that I found interesting.


"Lest one think it does not affect the U.S. and other developed market countries, recall the Asian crisis chronology. Thailand devalued its currency in the summer of 1997 and few outside of Thailand cared. But contracting Asian demand reduced demand for oil, and Russia (whose exports are 80% oil) defaulted in August of 1998. Risk spreads widened, and five weeks later, Long Term Capital Management was insolvent."



"It would seem fair if Twitter were to share. The company’s initial public offering was a staggering success, of course. Priced at $26, the stock closed its first day of trading at $45 per share. The company was thus endowed with a market capitalization of $25 billion. The company has no earnings, but who cares. Adding back non-cash charges to produce earnings before interest, taxes, depreciation and amortization, then adding back the financial value of non-cash employee compensation, the company can be regarded as profitable. Such a number for 2013 may approximate $50 million or so. The company is valued at 500 times such results, which exclude expenses that do have economic value. Correctly accounted, the company makes not a dime. But who cares when circumspection is the investment equivalent of tuberculosis."




"This is a major component of the downside to the Fed’s program. They have created a systemic risk in the world financial system for which they take little or no responsibility, because that which happens outside the U.S. is not their assignment. But as custodians of the reserve currency, it ends up that way."

(Full PDF)

The Last Word On Asness' Alpha, Buffet's Beta and The Failure of Commodity Quants (and how to turn hyperlinks into footnotes)

I was informed that the theses that took me three five posts to present was wrapped up by Matt Levine in one little package two days prior to my attempts.
And he does it better, backwards and in heels.
Plus, to get the alliteration in the headline I had to mix up the alpha and the beta.

From Bloomberg:

You Can Invest Just Like Warren Buffett, If You're a Quant Hedge Fund

The Internet has paid a lot of attention today to this National Bureau of Economic Research working paper called "Buffett's Alpha,"1 whose principal conclusions are:

1. You could build a robot that replicates Warren Buffett's stock-picking performance.

2. The ingredients of that robot are (1) 1.6x leverage, which is what Buffett runs at Berkshire Hathaway Inc.,2 and (2) a statistical factor-weighting investment approach that overweights what the authors call "high-quality" (growing, high-payout, profitable) companies with low betas.

3. AQR Capital Management LLC, the quantitative hedge fund that employs the paper's authors, can build such a robot with trivial ease, really by just pushing a button, it's no problem, watch, they will do it for you.

So that is interesting, I guess, if you like robots. It is also great advertising for AQR obviously, though they'd need to go match Buffett for the next 40 years before anyone would entirely believe in their robot-building skills. Actually it was initially somewhat puzzling to me that the venue for this is an academic paper written by three AQR affiliates, rather than a flashy launch of the AQR Buffett Replicator fund, but you can probably figure out why that is.3 Anyway, they seem to regard the Buffett-replicating exercise as trivial; it vindicates some of the quantitative signals that they like, but for them the point is not replicating Buffett but rather picking the signals that offer the best risk-adjusted returns.

So why write about Buffett at all? You'd sort of think that the goal of the research done at quantitative hedge funds is to find things that make money and then go do those things, and generally you'd be right in thinking that. (Sometimes it doesn't work.)

But there is another, subtler goal, which is to fit those things into a narrative about the world that is comprehensible by humans.4 "My computer told me to buy these 800 stocks and sell those 700 stocks, and historically my computer has been right 63.4 percent of the time" is a terrible story. Computers crash and go haywire and try to murder their creators. Statistical anomalies vanish. Signals work until they don't. Markets mean revert. Correlation without causation is suspect. Building a computer program to grind out gains in the markets using a complex of factor weightings sounds like the sort of over-complicated, short-term, zero-sum, high-frequency, incomprehensible financial engineering that landed us in various messes and that is not particularly in public favor these days....MORE

My secret weapon to take on Mr. Levine's footnote fetish? The Arc90 Labs hyperlink converter!
Unfortunately at the moment it only works on the reader's side of the conversation, the method for doing it from the writer's side is still to come. Still, quite cool.

Previously:
Buffett's Alpha or How To Generate Better Risk Adjusted Returns Than Anyone Else in the Biz (BRK)
AQR’s Asness on ‘Smart Beta’: ‘Call a Bet a Bet’
UPDATED--The Economist On How the Commodity Quants Lost It
Warren Buffet: The King of Leveraged Low Beta (BRK.B) 
How to Make Big Money in Small Markets: Commodities

Oil: Libya Hopes to Restore Output, Iran and Iraq Threaten Price War, Market Shrugs Ahead Of U.S. Data

Brent down 1/2% at $112.04, WTI up $1.13 at $97.17.
First up, Gulf Business:
OPEC Seen Keeping Oil Cap; Naimi Says Market in Best Shape

The current 30 million barrel-a-day target for the 12-nation group adequately matches demand, say officials.
Energy ministers from at least eight OPEC countries expect the group to keep its crude output target unchanged at a meeting today while Saudi Arabia’s Ali al-Naimi said the market is in the best possible condition.

The current 30 million barrel-a-day target for the 12-nation group adequately matches demand and is unlikely to change much in 2014, Suhail Mohammed Al Mazrouei, the oil minister for the United Arab Emirates, said shortly before closed-door talks began at about 10:30 a.m. local time in Vienna. Ministers from Qatar, Angola, Ecuador, Venezuela, Iraq, Algeria and Nigeria also said they expect the limit to be maintained.

Some analysts warn that excess supply, including U.S. shale oil and a potential resurgence in exports from Iran, Libya and Iraq, may push prices lower next year if production cuts aren’t made. Brent crude has settled above $100 a barrel for all but five days so far this year.

Al-Naimi said that 30 million isn’t too much for OPEC’s target. “No, no, is enough,” the Saudi minister said when asked about it. He later said “wait and see” when asked if the target would be rolled over today. He also said there’s no need for Saudi Arabia to cut its own production level. The kingdom is OPEC’s biggest oil exporter and produced 9.65 million barrels a day last month, according to a Bloomberg survey....MORE

And from Reuters, headline #1:
UPDATE 2-Libya hopes to restore full oil output in two weeks
and #2:

UPDATE 4-Brent slips towards $112; WTI boosted by pipeline news

Keystone XL pipeline may relieve Cushing supply bottleneck
* API data showed drop in U.S. stockpiles
* Iran, Iraq and Libya optimistic on oil output
* OPEC expected to leave production target unchanged
* Coming Up: U.S. EIA stockpiles due 1530 GMT (Updates lead, prices, quote, paragraphs 9 and 10) 
 
Brent crude oil slipped towards $112 a barrel on Wednesday, although the U.S. benchmark rose more than $1 to a five-week high as the oversupply outlook loosened.

U.S. crude oil was boosted by data from the American Petroleum Institute (API) showing a drop of 12.4 million barrels in domestic inventories. That snapped a 10-week streak of builds that had added nearly 36 million barrels.

This followed the news TransCanada Corp would begin operations at its Keystone XL pipeline on Jan. 3, allowing stockpiles of crude oil inventories at the Cushing, Oklahoma, oil hub to move to the U.S. Gulf Coast, where a large share of the country's refining capacity is concentrated.

"This is the start of a period of draws in U.S. crude stocks," said Bjarne Schieldrop, chief commodity analyst at SEB Bank.

Brent crude for January delivery was 54 cents lower at $112.08 a barrel at 1210 GMT, after settling $1.17 higher in the previous session. U.S. crude was up $1.16 at $97.20 per barrel, after ending up $2.22 on Tuesday.

An inventory report from the U.S. government Energy Information Administration (EIA) is due at 1530 GMT.

"Today all eyes are on the EIA to see if that (API) draw is reaffirmed," said Gareth Lewis-Davies, senior energy strategist at BNP Paribas.

A Reuters poll forecast a build of 300,000 barrels.

Weighing on Brent crude oil were comments from OPEC members Iran, Iraq and Libya.

Iran said it would lift oil production back to 4 million barrels a day once sanctions are lifted, and Iraq's oil minister said he saw no need for the country to trim oil output next year.

Libya's oil minister said he was "optimistic" that pressure on armed protesters to allow the resumption of production would see Libyan oil output restored to 1.5 million barrels a day later this month....MORE

Pakistan's The Dawn has more:
Iran, Iraq put Opec on notice of big increases