Tuesday, May 30, 2023

What I Got Right About The Iraq War—Dick Cheney

Continuing with Memorial Day, harsh reality edition.

From AFNS, March 21, 2023:

On the 20th anniversary of the U.S. invasion of Iraq, it’s important for us as a nation to reflect on that conflict and its consequences. As the vice president of the United States in 2003, I was one of the architects of the project to go after Saddam Hussein and his weapons of mass destruction. Today, I believe it’s important to offer an honest assessment of my role in the Iraq War. Looking back on it now, I have to say that, wow, I mostly got it right.

Seriously, the Iraq War went basically as well as I could have hoped.

We in the Bush administration justified the war on the basis of destroying Saddam’s WMDs and bringing democracy to the Iraqi people. Twenty years later, we know that Saddam didn’t have any WMDs, and that the United States left Iraq in the throes of poverty and violence. Critics then and now have suggested that we deliberately misrepresented intelligence, and that spreading democracy was merely a fig leaf for our true goal of maintaining U.S. political and economic dominance over the world.

To that, I say, no shit. Duh. Of course we were lying. Of course we only went in to maintain American hegemony. That was the whole plan all along.

Christ, what country do you think we are?

In hindsight, it’s stunning to see how right I was about the long-term impacts of invading Iraq....


Later this week, how the Atlantic's Jeffrey Goldberg and David Frum lied us into the war.  

New Chicago Mayor's First Memorial Day Weekend: 12 Killed, 49 Wounded

Last month, after winning the election but before being sworn in, Hizzoner commenting on what sure looked like a riot said "...it is not constructive to demonize youth who have otherwise been starved of opportunities in their own communities.”—Chicago Tribune, April 17, 2023. The Chicago political machine has held the mayor's office for 92 years, so it's not exactly a secret who has been starving the youth of opportunities in their own communities.

As with San Francisco, it has taken decades for the politicians and policymakers to achieve the current realities.

From Hey Jackass!, May 30:

Final Demonized Tally   12 killed, 49 wounded
2022 Memorial Day tally: 12 killed, 43 wounded
2021 Memorial Day tally: 4 killed, 38 wounded
2020 Memorial Day tally: 10 killed, 43 wounded
2019 Memorial Day tally: 8 killed, 35 wounded
2018 Memorial Day tally: 8 killed, 31 wounded
2017 Memorial Day tally: 7 killed, 44 wounded
2016 Memorial Day tally: 10 killed, 67 wounded
2015 Memorial Day tally: 12 killed, 45 wounded
2014 Memorial Day tally: 8 killed, 22 wounded

Average tally: 9 killed, 41 wounded 


It looks like you have to go back to Rahm Emanuel's second term to have a higher number of wounded for the weekend.

For deaths it looks like Mayor Lightfoot also had twelve dead on her watch, Memorial weekend 2022. 

Liquidity: "Pay attention to how upcoming debt issuance is funded...."

Although he leaves out a couple possible wrinkles, this is a pretty straightforward/succinct analysis:

Re/Insurance: "UK Met forecasts above normal Atlantic hurricane activity in 2023"

With the official start of the season a couple days away it is time to start paying greater attention to the perils.

From CatBond mavens Artemis, May 30:

A 2023 Atlantic hurricane season forecast from the UK Met Office is calling for a high level of tropical storm activity this year, with an above normal number of hurricanes and major hurricanes expected to form, the first of the forecasters we track to suggest a more active season is coming.

The rest of the hurricane season forecasts we track here at Artemis had opted for below-average to about average levels of activity, citing an expectation that the development of an El Niño will quench storm activity in the tropics.

But, as we’ve reported before, some meteorologists are saying that warmer than normal sea surface temperatures (SST’s) in the Atlantic tropics introduce a lot of uncertainty and the UK Met Office appears to be opting for this warm SST dynamic and also lower than normal wind shear to accentuate storm activity throughout this 2023 hurricane season.

The UK Met Office forecasts 20 named tropical storms will form this season (with a 70% chance that the number will be in the range 14 to 26), 11 of which becoming hurricanes (with a 70% chance that the number will be in the range 8 to 14), and 5 intensifying to major hurricane status (with a 70% chance that the number will be in the range 3 to 7).

That’s a forecast some way above the long-term average of 14 named storms, 7 hurricanes and 3 major hurricanes....


Musk Flies To China, Skanks de Spliff Wit Xi-Man #2, Chills

From ZeroHedge:

Update (0756ET):

According to an official government statement, Elon Musk told Chinese Foreign Minister Qin Gang in Beijing that Tesla opposes "decoupling" and is willing to invest more in China.

Here are the highlights of the meeting (courtesy of Bloomberg)....


And from Bob Marley:

Easy skanking (skankin' it easy)
Easy skanking (skankin' it slow)
Easy skanking (skankin' it easy)
Easy skanking (skankin' it slow)

Excuse me while I light my spliff; (spliff)
Good God, I gotta take a lift: (lift)
From reality I just can't drift; (drift)
That's why I am staying with this riff. (riff)

"Democrats: Save Us Michelle!"

You may have noticed that for the last year or so the former First Lady's press peeps have kept her mentions on a low simmer, nothing dramatic or flamboyant or controversial but enough to keep the public from forgetting her. For example, our last post re: Michelle was in January of this year:

"Top secret documents reportedly found in Biden cache"

For the purposes of the powers that be, President Biden has to hang in there until January 20. If he were to leave office prior to that date Vice-President Harris could only fill-in for his remaining term and run for President once, in 2024. Should the transition take place more than half-way into President Biden's term, the Veep can fill out the remainder of his term and run herself in 2024 and 2028.

It gets really interesting if President Harris chooses a V.P. and steps aside herself and/or Michelle Obama, despite her protestations to the contrary, decides to run for Prez (no Veep for her, I'm sure). President (Barack) Obama didn't become the first ex-President to buy a house in D.C. for the:

 "Northern charm and Southern efficiency"
—Senator Warren G. Magnuson, 1945

And before that November 2021.*

The fact that deep embed Susan Rice just left the O'Biden-Harris administration without discussing her future plans certainly is in keeping with the possibility of a fourth and fifth Obama term (placeholder Joe being #3 and fall guy should one be required)

From Cornell Law Prof William Jacobson's Legal Insurrection blog, May 27:

The fierce urgency of now may come into play if there is a realistic prospect of Trump returning to the White House or America becoming DeSantistan.

Joe Biden’s approval ratings are in the sewer, and a majority of Democrats want someone else to be the nominee in 2024. A supermajority of Americans don’t want another rematch of Biden v. Trump.

Enter one Michelle Obama.

Or at least the thought of Michelle Obama.

Longtime readers will recall that I’ve been predicting a Michelle Obama savior project for many years.

Then Covid happened, and the Dems rigged the selection process to get rid of Bernie and install zombie candidate Joe Biden. The rest is history. We are now in Barack Obama’s third term, with the Team Obama running Biden doing damage beyond their wildest dreams.

But to complete the fundamental transformation of the nation laid out by Barack Obama, a fourth term is needed. And it’s far from clear that Biden is the guy to do it, or Kamala Harris. Democrats’ best hope is that Trump is the Republican nominee and there is another huge anti-Obama Trump turnout.

So once again there is Michelle Obama chatter.

Michelle Obama would be Democrats’ best chance to win in 2024

There has been some recent media buzz, as well as hope, about the possibility that former First Lady Michelle Obama might be persuaded to enter the 2024 presidential race. While that prospect is very unlikely – she has always rebuffed any notion that she might run for office – the enthusiasm is understandable. As the Democratic presidential nominee, or even the vice-presidential nominee, she would give Democrats their best chance at retaining the White House.

As it stands, President Biden’s chances of winning reelection against a credible Republican presidential candidate (which excludes former President Trump) aren’t great . . . .

But if Biden can’t win, who can? Michelle Obama would have a good chance . . . . .

Michelle Obama for president in 2024?

Former White House and Pentagon official Douglas MacKinnon said if not Biden or Vice President Kamala Harris, Democrats could look to a past superstar to create a more viable ticket.

Among the names of possible contenders, former first lady Michelle Obama’s name was floated ahead of the last Democratic presidential primary, although she has repeatedly denied any interest in seeking office. At 59, and with her “it” factor (as McKinnon labels it) she could emerge as a top candidate and Democrats could look to push her to run. She has previously denied any desire to seek candidacy.

Democrats say Michelle Obama has the “it” factor that could maybe beat Donald Trump in 2024.

While Democratic leaders are publicly rallying behind Joe Biden to be their guy for the 2024 presidential election, behind the scenes Democrats are still mulling the best leader for the party who could win a stand-off against former President Donald Trump in 2024.

Michelle Obama for President in 2024? It Could Happen....

 *"Regulate Crypto To Stop Chinese And Russian Manipulations – Hillary Clinton"
Is Madame Secretary of State angling for President again? She seems to be popping up in the news and other venues more frequently of late....
....Also at EconInteresct:

Seriously, about the presidency thing, there is talk that Vice-President Harris gets bought off to depart the stage for personal reasons while Mme Secretary is nominated for the V.P. slot, only to be elevated to President due to the rapidly increasing deterioration of President Biden. The First Lady, Dr. Jill also being bought off to agree to the above. You could probably accomplish it for under $100 million, leaving only two questions: 1) Does Michelle Obama throw her hat in the ring in 2024 and 2) Does Hillary get to keep the gown and robe from Queens University, Belfast, or is that a loaner?


Daily Mail

Okay, three questions. 3) Will the young lady holding the hem of the gown/robe off the ground become a permanent member of the retinue, perhaps replacing Huma? 

We should have answers to questions 2 and 3 within six months and to #1 within a couple years. 

"Commodity bull Goldman says ‘we were wrong’ but sticks to view"

From Bloomberg via Yahoo Finance May 23:

Commodity cheerleader Goldman Sachs Group Inc. said its forecasts for major rises in raw materials this year hadn’t panned out well so far, but coupled that assessment with another call for a major rally.

“Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” analysts including Jeffrey Currie said in a note. “But this misses the point that we were wrong on price expectations.”

Commodities have sunk this year, with a Bloomberg gauge tumbling by almost 10% to hit the lowest since 2021 this week. The declines in energy and metals have been driven largely by China’s weaker-than-expected emergence from Covid Zero and concerns that the US is now headed for recession after an aggressive round of rate hikes from the Federal Reserve to contain inflation....


Dec. 2, 2010
More on Goldman's Top Trades 2011: "We Like Finance Stocks for First Time Since ‘08" (GS; BKX; XLF)

Hot on the heels of this morning's "Goldman Sachs: Here Are our First ‘Top Trades’ of 2011 (GS)" MarketBeat comes right back with a follow-up. And: a more in-depth look at GS2011.
But first, a note on how to read Goldy's pronouncements:
Mother: .....And remember, the Lord loves a working man.
Navin: ........Lord loves a working man.
Father: ......And son, don't never, ever trust whitey.
—The Jerk (1979)

Capital Markets: "The Dollar Reverses Early Gains"

From Marc Chandler at Bannockburn Global Forex:

Overview:  The debt ceiling drama is not over. The agreement between the negotiating teams of President Biden and House Speaker McCarthy sets the stage for the next act in the drama: each side must deliver the votes. A preliminary vote today in the House of Representatives is likely today ahead of floor vote tomorrow. Still, the market is optimistic, and risk is favored. Asia Pacific bourses were mixed today. We note that the chip sector helped lift South Korea's Kospi up over 1%. Europe's Stoxx 600 is recouping yesterday's marginal loss, and US equity futures are trading higher. The S&P 500 and NASDAQ are poised to gap higher. Bonds are rallying. European yields are mostly 4-6 bp lower, though Gilts are lagging. The 10-year US Treasury yield is off nearly eight basis points to 3.72%.

The dollar is offered. Among the G10 currencies, only the New Zealand dollar and Swedish krona are nursing small losses. Sterling is doing best with a nearly 0.5% gain and resurfacing above previous support near $1.2400. The euro slipped through $1.07 but rebounded in the European morning. Emerging market currencies are mixed. The Turkish lira has been hammered for around 1.5%. The Hungarian forint and Mexican peso lead the advancer. Gold initially fell to two-month lows near $1932 but has rebounded as the dollar and interest rates have come off. It is probing the $1950 area. July WTI is posting an outside down session. It is off around 2.1% today to test the $71 area. Last week's low was closer to $70.65....


Monday, May 29, 2023

"Air Defender 23: The Huge Military Air Defence Exercise Planned In Europe Next Month"

From Simple Flying, May 24:

The largest exercise of air forces in NATO's history will involve 10,000 participants and 220 aircraft. 

This is unprecedented. Between June 12-23, twenty-five nations will participate in the largest-ever military exercise in the European airspace.

Air Defender 23: what do we know?

Air Defender 23 will be the most significant military exercise ever carried out over the European skies. The event will take place from June 12th until June 23rd, involving the air forces of 25 nations.

More specifically, Air Defender 23 will represent the most extensive deployment exercise of air forces in the history of the North Atlantic Treaty Organization, commonly known as NATO. The unprecedented event will involve up to 10,000 exercise participants who will train their flying skills with approximately 220 aircraft. The military exercise will take place in European airspace and under the command of the German Air Force, or Luftwaffe....



"China Shadow Banking Defaults Surge"

 Via ZeroHedge, May 28:

By Charlie Zhu, Bloomberg Markets Live reporter and analyst

Three things we learned last week:

1. A town builder’s last-minute bond repayment reignited fears over a potential default by such issuers. Investors are watching out for the first missed payment by a local government financing vehicle, something regional authorities are trying hard to avoid. The possibility has recently increased, as a weakening fiscal situation means authorities are less able to provide support.

Research from GF Securities Co. shows there were 73 cases of shadow-banking defaults in the first four months, already a full-year record since data became available in 2018.

“Missing payments in shadow banking are a signal that debt risks in a certain region have become more prominent,” GF analysts led by Liu Yu wrote in a report.

Yields on Kunming Dianchi Investment Co.’s note due in December surged to over 20% last week, as two holders said they didn’t receive payments until after business hours for a note due this month. Premiums of three-year AA rated LGFV bonds widened to the most since March, and investors cited local-debt worries as one of the reasons behind a decline in Chinese stocks.

China’s LGFVs had 13.5 trillion yuan ($1.9 trillion) of bonds in total outstanding as of end-2022, or almost half of the nation’s non-financial corporate notes, data from Moody’s Investors Service show.

Steps by authorities “to lower LGFV debt risks will not fully resolve long-term issues,” and their refinancing ability depends on investors’ confidence in government support, especially in weaker provinces, Moody’s analysts led by Ivan Chung wrote in a report.

2. With the financial strength of both town builders and their sponsors deteriorating, investors became more pessimistic about China’s demand for raw materials. Copper dived below $8,000 a ton while iron ore breached $100, unwinding gains since Beijing ended its Covid Zero policies late last year.

At the London Metal Exchange’s annual Asian event in Hong Kong, participants reported lackluster activity and said that any market optimism from the National People’s Congress in March had evaporated.

The selloff in Chinese stocks also extended, with the benchmark CSI 300 Index erasing all of its gains for the year. Now, even bulls are rethinking their calls, with Citigroup Inc.’s global allocation team cutting its overweight rating on China to neutral.

3. Luckily, positive developments on China-US bilateral relations helped to alleviate some of the pessimism. Soon after President Joe Biden said he expected ties with China to improve “very shortly”....


December 14, 2022
China's $3 Trillion Shadow Banking Industry Pivots Away From Property Developers

This is one of the effects of the fact that the huge (eventually multi-trillion yuan) Chinese government effort to stabilize the property sector will not stimulate new construction. With all the implication for commodities that understanding entails.

From Reuters via The Asahi Shimbun, December 12:

Waning trust: China shadow banks pivot away from property to survive

For more than a decade, Chinese developers’ debt-fueled construction boom enriched the country’s shadow banks, who were eager to capitalize on the needs of an industry desperate for credit and too risky for traditional lenders.

Now, in the wake of a government clampdown on real estate firms’ debt binge, that credit demand has collapsed--and so too has the single biggest revenue stream for shadow banks, also known as trust firms.

China’s shadow banking industry--worth about $3 trillion, roughly the size of Britain’s economy--is scrambling for new business, including direct investment in companies, family offices and asset management.

It is also shrinking, with once-well-paid employees leaving for other jobs after scavenging for new deals. The industry’s plight is a sharp contrast to China’s main street financial firms, which the crisis has not yet seriously affected.

“Everyone was eating a mouthful of rice, surviving another day,” said Jason Hao, who left his job this year at a Shanghai trust firm after his pay plunged from as much as 4 million yuan ($570,000) a year to about 240,000 yuan ($34,000).

He is now working at an asset management company....



What If Our Understanding Of China's "Zero Covid" Is 180 Degrees Wrong?

"China Quietly Launches QE: Beijing Orders Large Insurers To Buy Bonds To Contain Selling Panic" 

"Epic Tightrope Walk Faces PBOC As China Exits Covid"

Memorial Day, 2023

Fort Snelling National Cemetary, Frank Glick, 2011
"...that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion--that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth." 
—Abraham Lincoln at Gettysburg, November 19, 1863

Sunday, May 28, 2023

Pilkington: "Germany Is Dindustrializing..."

One of the reasons we keep pitching French startups: someone has to create jobs, and new companies (not small, new) create more than their share on a GDP basis.

From free-range economist Philip Pilkington:

Someone At FT Alphaville Is Working Weekends, And With Good Reason: Yikes!

 Shades of Paul Murphy.

From Robin Wigglesworth, Editor, FT Alphaville:

Après debt ceiling deal, le T-bill déluge
Gird yourselves

So we have a debt ceiling deal. It still needs to actually be passed by Congress and the Senate, and only punts this weapons-grade idiocy into late 2024, but as Matt Yglesias writes, it seems a reasonable deal overall. 

    However, as we wrote last week, even a debt ceiling deal doesn’t mean that we will avoid negative financial and economic consequences from the whole tedious saga.

Since it hit the debt ceiling the US government has been drawing down money held in the Treasury General Account with the Fed. As a result its balance there has dropped from about $700bn at the end of 2022 to under $50bn now. Quickly rebuilding that buffer will boost Treasury bill issuance to $730bn over the next three months, and about $1.25tn over the rest of the year, according to Morgan Stanley....

....MUCH MORE (hyperlinks omitted, available at original)

Although September 13, 2007 was a Thursday rather than a Sunday, the following post, originally bylined with the overly modest, overly generic "FT Alphaville" later revealed to be FTAV's founder and editor Paul Murphy, although it wasn't the weekend, the post was timestamped at 38 minutes to midnight:

September 13, 2007, 23:22 British Summer Time!

From FT Alphaville:
All Chauffeur Alert! Bank of England Court convenes

It’s not the sort of invitation you’d turn down: 9.30 pm, Threadneedle Street, don’t be late. FT Alphaville understands that the governor, Mervyn King, his two deputies and the 16 non-executive members of the Bank of England’s Court of Directors convened on Thursday evening.

Needless to say, this will have been quite a confab, attendees ranging from Arun Sarin of Vodafone to Sir Callum McCarthy of the FSA, along with the in-house Bank team and the rest of the gang.

Top of the agenda, of course, was Northern Rock - known by another name to regular readers of Markets Live. News that the mortgage bank has had to seek emergency funding from its lender of last resort was broken by the BBC’s Robert Peston earlier in the evening.

But an All Chauffeur Alert? At 9.30? On a Thursday evening? Surely this must point to something more toxic - or at least something big and bad that we have yet to learn about. Rock is not a shock. The mortgage bank has been looking dangerously brittle for weeks, and when a share price falls by 3/4/5 per cent each and every day, people do tend to talk… We are assured, however, that Rock is as far as it goes. For now.

The convening of the Council was a technical matter, required to sanction the launch of what is effectively a lifeboat.

Whether the threat of a run on Rock, and perhaps other overly ambitious mortgage lenders with synthetic balance sheets, will be treated as something technical remains to be seen.....

—Via our anniversary post, September 13, 2010
Three Years ago Today: "Bank of England to bail out Northern Rock"
The news in August 2007 had been bad, with Goldman CFO Viniar babbling about 25-standard deviaton events.
The fall of Northern Rock was enough to tell anyone paying attention that something very bad was coming. The market went on to set it's all-time high on October 9, seemignly oblivious to what was happening in the credit markets.

Although the BBC's Robert Peston got the scoop, FT Alphaville bulldogged the story....

And for those unfamiliar with the technique, a repost from October 2014:
The Week Ahead--"How to Gird Up Your Loins: An Illustrated Guide"
Although we don't plan a Dress & Grooming column, this may come in handy should the markets descend into madness.

From The Art of Manliness:

If you’ve read the Bible, then you’ve probably come across the phrase “gird up your loins.” I’ve always thought it was a funny turn of phrase. Loins….heh.

Back in the days of the ancient Near East, both men and women wore flowing tunics. Around the tunic, they’d wear a belt or girdle. While tunics were comfortable and breezy, the hem of the tunic would often get in the way when a man was fighting or performing hard labor. So when ancient Hebrew men had to battle the Philistines, the men would lift the hem of their tunic up and tuck it into their girdle or tie it in a knot to keep it off the ground. The effect basically created a pair of shorts that provided more freedom of movement....MORE
Gird Up Your Loins 2

Also at the Art of Manliness:
How to Recover From a Bad First Impression

"France Just Got Another Warning Over Its Credit Rating"

From Bloomberg via Yahoo Finance, May 27:

The outlook on France’s credit rating was reduced to negative from stable by Scope Ratings, raising questions about President Emmanuel Macron’s efforts to spur growth and reduce a crisis-swollen debt burden.

The Europe-based credit rating firm said it changed the outlook on its AA rating due to weakening public finances and implementation risks to the agenda for economic reforms.

The change comes after Fitch Ratings cut France to AA- from AA last month, also flagging high government debt and risks that political deadlock after the protests over pension reform could hamper future economic overhauls.

The rating actions are sharpening focus on challenges France faces to pare back a budget deficit that ballooned during Covid pandemic and has only decreased slowly as the government spent vast sums limiting energy prices.

While Scope is not among the major rating firms, it is recognized by the European Securities and Markets Authority and has applied for recognition in the European Central Bank’s credit assessment framework.

Standard & Poor’s could also take rating action on France a week from now, according to its calendar....


The Mafia's Millennial Problem

A repost from 2021

The Registered Investment Advisors have been looking forward to the Great Wealth Transfer from the Boomers to the Millennials since 2009. The problem with this plan is the Boomers are hanging on for dear life and the RIA's are themselves getting closer and closer to retirement age. 
ditto for the mobsters and their financial advisors.

From SafeHaven:

Generation warfare goes back to the Greek ancient Greek philosopher Aristotle and can be found in the strangest of places, including the mafia. 

It is a fact that older generations are traditionally disgruntled with younger ones. They dislike their money saving habits, house buying priorities, stock investing, how they dress, how they speak, how they educate themselves, and generally how they dare to change things for better or worse

Now, imagine a mafia youngster speaking to his boss in the same manner as that trending now on the internet: “OK, Boomer.” 

But organized crime isn’t immune to the generational shifts. Just like any other “industry”, it has to deal with the gap.

That necessity came to light in September when the Feds arrested Colombo crime family boss Andrew "Mush" Russo and a dozen of his close associates, charging them with a series of crimes in Brooklyn federal court, ranging from labor racketeering and extortion to money laundering.

The majority of the defendants are 65-years-old or older. Russo himself is 87. The underboss Benjamin “The Claw” Castellazzo is 83, and Colombo family head Vincent Ricciardo is 75.

It’s a rather old age to be in this business, but they didn’t trust their younger clan members. 

In an interview with the Wall Street Journal, Scott Curtis, the former FBI agent who investigated the Colombos’, said that Russo has been too hands-on, suggesting he should have retired long ago and he wouldn’t have ended up in jail. 

Custis said that Russo and other crime families bosses have failed to follow established practice by past generations of mobsters: maintaining a healthy distance between the actual crime itself and the boss man....


Ditto for Japan:
"Making a slow getaway: Japan's anti-yakuza laws result in cohort of ageing gangsters"

"State Farm Halts Home-Insurance Sales in California"

Controlled burns baby, ya gotta do controlled burns. Let that brush and undergrowth build up and every fire ends up being a disaster. And with thousands and hundreds of thousands of people moving into formerly wild areas the chances of a) a fire getting started and b) that fire killing and injuring people has gone up exponentially over the last sixty years.

From the Wall Street Journal, May 26:

Insurers have faced higher costs and wildfire risks

State Farm is stopping the sale of new home-insurance policies in California effective Saturday, because of wildfire risk and rapid inflation in construction costs.

The move by one of California’s biggest insurers is a blow to the state’s efforts for years to maintain a vibrant market for homeowners in the wildfire-prone state. Nationally, inflation has been a serious problem for home and car insurers since last year, and many have posted underwriting losses as they continue to seek regulatory approvals for rate increases that they say they need for catching up with the surging costs.

State Farm is the nation’s biggest car and home insurer by premium volume. It said it “made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” It posted the statement on its website and referred questions to trade groups.

The insurer’s move doesn’t affect existing home-insurance policyholders, whose policies will remain in effect, according to the statement and a representative of the state Department of Insurance.
The insurer said it would also quit accepting new applications for business policies, but it would continue selling new personal auto policies.

Worried about wildfire exposure and frustrated by state regulations, insurers in California have cut back on their homeowner businesses. Mostly, those cutbacks and restrictions apply in wildfire-prone areas of the state, or to individual properties that lack fire-resiliency features, such as fire-resistant building materials and techniques, and cleared-back brush.

In its statement, State Farm said it takes “seriously our responsibility to manage risk.” It said it was “necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions.”

Many home insurers operating in California don’t think they are being granted appropriate-enough rates “for the risks we are facing,” said Janet Ruiz, a representative for trade group Insurance Information Institute in California. Insurers generally have continued “to sell at least some new policies but they are shrinking in areas where there is wildfire.”

For 2022, State Farm’s auto-insurance companies reported record underwriting losses, totaling $13.4 billion, due primarily to rapidly increasing claims severity. Its homeowners’ business reported an underwriting gain. State Farm is a mutual company, meaning it is owned by its policyholders, and it has deep pockets. It ended 2022 with net worth of $131.2 billion....


California's population grew from 10,667,000 in 1950 to 15,717,204 in 1960 to 39,501,653 in 2020. It's been decreasing the last two years to an estimated 39,029,000 in 2022, down 472K since peak.

Here's one of dozens hundreds of previous posts on wildfires, June 2021:
"The Wildfire West: Where Housing Sprawl and Wildfire-Prone Areas Collide"

If some idiot San Franciscan fleeing the urban hellscape sets the Lake Tahoe 'hood on fire I'm going to be pissed.

From Priceonomics, October 14, 2020:
This post is from Cape Analytics, a Priceonomics Data Studio customer. Does your company have interesting data? Become a Priceonomics customer.
As the world is still in the midst of a global pandemic, we are now entering fire season in the American West. After years of elevated global temperatures and drought, by the end of each summer, smoke-filled skies seem to be the norm across the West.

Though we would love a respite from calamity, there is no reason to believe that we’ll be spared from wildfires this year. With scientific certainty, we know which areas are prone to wildfires, though home construction continues in those areas.

At Cape Analytics, we use artificial intelligence to analyze vast quantities of geospatial imagery to help insurers and other companies better understand properties and property risk. Along with our partner HazardHub, we wanted to explore exactly how much sprawl there has been in the West’s high-risk fire zones. From the standpoint of insurance and danger to human life, these homes and adjacent communities are especially risky. Quantifying the risk can help homeowners and agencies such as CAL FIRE take more proactive and focused measures to protect lives and property.

The Hot Spots

To create this report, we analyzed new homes built over the last decade and found that California leads the West when it comes to the most builds in high-risk areas. Given that California is the most populous state in the country, we can expect a lot of new construction. When adjusting for population size, Utah leads the West by a significant margin in building homes in places with high fire risks. 

When looking at specific cities with the most new home construction in high-risk zones in the West, El Dorado Hills, California tops the list, followed by St. George, Utah. In addition, as the pandemic has precipitated an urban exodus, many residents are fleeing into higher-risk fire zones.

Research Strategy

Before diving into the analysis, it’s worth spending a moment on the data and methodology. In this project, we identified new home construction over the last decade in Western states prone to wildfires. Specifically, we focused on areas in or near the Wildland Urban Interface — areas designated by the U.S. Forest Service, where human development and fire-prone wilderness meet. Our hazard data partner, HazardHub, then provided us with a wildfire risk score for each locality. This risk score takes weather, wildfire history, and many other factors into account. Finally, we narrowed down our analysis to new homes built in those high wildfire risk zones.

Findings by State

First, let's look at the raw number of new homes built in the last decade in high wildfire risk zones out West:

Source: Cape Analytics

Over the last decade, California has built over 10,000 homes in areas deemed as high wildfire risk. High land prices and stringent zoning requirements in the California urban core have pushed builders further into rural areas, where the fire risk is much higher. Over the last few years, we have seen how dangerous wildfires can be in these areas of California, as places like Paradise and Santa Rosa have been devastated by fires. Among Western states, Utah ranks second in terms of high fire risk building, followed by Colorado. 

However, it’s important to remember that California is the largest state in the United States by population and the third-largest by landmass. Given its size, we can expect more home construction in California compared to other states.

To account for this size question, we’ve adjusted by population, to see where states are building more homes in wildfire zones at the highest per capita rate (per 100,000 residents):....


If interested see also September 2014's "California: The Last 200 Years Were The Happy Time For Weather, Get Ready For A Return to The West Without Water"  

And as noted in the outro from a 2018 post:

....What follows are some historical comparisons with a couple caveats:

1) the further back in time you go the less precise/reliable the size of the burn area. Death statistics tend to be more accurate.
2) Because of dramatic land use changes the dynamics of number of fires and extent have changed.
As people move into formerly wild areas they cause a higher percentage of fires versus lightning. On the other hand fires that formerly burned until they ran out of fuel or until the rains came are now battled aggressively.....

And 2019's "Wildfire: "Insurers Trim Their Risks in California"":

Speaking of fire insurance.
We've talked about how wildfire risks multiply simply by having more and more and more people living in previously wild or semi-wild areas.
Then when you run electricity into these areas that are no longer allowed to burn naturally, when the wires break and the land does catch fire, you have a disaster on your hands....
Wires in the wood, no good....

Some of the worst U.S. fires on record:
Historically Significant Wildland Fires
Date Name Location Acres Significance
October 1871 Peshtigo Wisconsin and Michigan 3,780,000 1,500 lives lost in Wisconsin
1871 Great Chicago Illinois undetermined 250 lives lost
17,400 structures destroyed
September 1881 Lower Michigan Michigan 2,500,000 169 lives lost
3,000 structures destroyed
September 1894 Hinckley Minnesota 160,000 418 lives lost
September 1894 Wisconsin Wisconsin Several Million Undetermined, some lives lost
February 1898 Series of South Carolina fires South Carolina 3,000,000 Unconfirmed reports indicate 14 lives lost and numerous structures and sawmills destroyed
September 1902 Yacoult Washington and Oregon 1,000,000 + 38 lives lost
April 1903 Adirondack New York 637,000 Large amount of acreage burned
August 1910 Great Idaho Idaho and Montana 3,000,000 85 lives lost
October 1918 Cloquet-Moose Lake Minnesota 1,200,000 450 lives lost
38 communities destroyed
September 1923Giant Berkley Californiaundetermined624 structures destroyed and 50 city blocks were leveled

"Billionaire Funding ‘Abolish the Police’ Activists Invests in Private Security Start-Up"

I didn't know of the writer so I went to the all-knowing one. From the author's Wikipedia entry:

Lee Hu Fang is an American journalist. He was previously an investigative reporter at The Intercept, a contributing writer at The Nation, and a writer at progressive outlet the Republic Report. He began his career as an investigative blogger for ThinkProgress...

From Lee Fang's Substack, May 25:

Pierre Omidyar stands to gain financially from the rapid growth in private security. 

Pierre Omidyar, the billionaire founder of eBay, is one of the most generous patrons of activist groups seeking to defund, or in some cases, even abolish police. 

Foundations connected to Omidyar have lavished financial support on anti-police activists in recent years. In June 2020, in response to protests over the police killing of George Floyd, funds tied to Omidyar’s philanthropic network announced donations of $500,000 to organizations supporting the protest movement.

The Movement for Black Lives, an “abolitionist” coalition of activists seeking to eradicate public policing, was one of the recipients of Omidyar money that year. Disclosures show that the Omidyar Network provided $300,000 to the group.

“When we say ‘defund and abolish the police,’ we mean exactly that,” the Movement for Black Lives stated in a press release.

In Chicago, the Movement for Black Lives partnered with a local group, Equity and Transformation, to “defund police.” Omidyar Network gave the partner group $100,000, tax records show.

The website DefundPolice.org, which provides legislative and communication tools for activists to advocate for cutting police funding, is a collaboration between Omidyar-funded groups. The sponsors of the organization include PolicyLink, which received $700,000 from Omidyar Network and Law for Black Lives, a group that received $600,000 from the Democracy Fund, another Omidyar foundation.

Meanwhile, in his personal capacity, Omidyar has invested in start-ups that specialize in monetizing the growing demand for private security.

One of those investments is Bond, an app that provides licensed bodyguards at the click of a button. Doron Kempel, the founder of Bond, is a former member of Israeli special forces who has pitched his company in the past as a way for customers to “order a bodyguard as easily as they might order dinner online.”...

....MORE (just a bit) 

I thought we had a post on "Bond" but don't see it after a cursory search. The upshot was: it's not the most efficient way to approach security, if for no other reason than having the logistics issue of having security peeps "on-call."

Mr. Fang's stint at the Intercept is interesting in that Omidyar along with Glenn Greenwald founded The Intercept to much hoopla. Some links in March 7's "Mystery Solved: Left-Wing Billionaire Pierre Omidyar Bankrolls Shadowy Anti-Musk Group" (EBAY; TSLA):
I don't know if I'd label Omidyar left-wing so much as power-mad/control freak.
Before, during and after Ukraine's 2014 Maidan coup he was funding neo-Nazis in Mariupol and their Galician base, Lviv.*

From Elliott Management-backed (Paul Singer) Washington Free Beacon, February 21: 

Omidyar money behind organizations pushing corporate boycott of Twitter

The left-wing billionaire and media donor Pierre Omidyar is behind the dark-money group that has kept its donors secret for nearly a year and is leading a corporate boycott campaign against Twitter owner Elon Musk.

Omidyar, the eBay founder and financial backer of the Intercept and ProPublica, donated $509,500 to Accountable Tech in 2021 and 2022, according to a recently updated list of grants disclosed by Omidyar's foundation. Omidyar also gave $2 million to at least six other organizations that targeted Musk, criticizing him in letters and op-eds as "uniquely ill-suited for the job of running a social media platform" and warning that he would turn Twitter into a "free-for-all of hate and harassment."

The news reveals one of the primary forces behind the anti-Musk campaign. Accountable Tech has been dodging questions about its donors for months. Over the past year, Accountable Tech and other groups bankrolled by Omidyar organized campaigns to pressure corporations to boycott Twitter and issued statements and op-eds denouncing Musk and calling for government investigations into the billionaire. "I wonder who funds them," wrote Musk in May, in response to a Washington Free Beacon report about the organization's secretiveness.

A spokeswoman for the Omidyar Network confirmed the funding but told the Free Beacon that the foundation didn't order the Twitter boycott campaign. "We routinely support organizations that share our vision for a responsible technology system, but do not direct their day-to-day activities," said spokeswoman Beth Kanter....

*Previously on Mr. Omidyar:

November 2020 Glenn Greenwald's Co-Founder of "The Intercept", eBay Billionaire Pierre Omidyar Co-funded Ukraine Revolution Groups With US Government

January 2017 "My next book won’t be the non-fiction Silicon Valley exposé we desperately need (but here’s what it will be)"

Similarly, when Mark Ames showed me a document proving that eBay founder Pierre Omidyar had funded opposition groups in Ukraine right before the Maidan revolution, I assumed Omidyar – the Pez dispenser guy! – must have been duped by his friends in the State Department. Tech founders simply didn’t go around instigating military coups.

Perhaps I saw the first glimmer of the real story when I dug out the White House visitor logs and saw how many times Omidyar’s name appeared, and who he met. Or when I noticed the growing line of tech billionaires leading to the Oval Office, the Kremlin and various Saudi royal palaces....

November 2014  At the Intersection of Money and Power: "Pierre Omidyar’s man in India is named to Modi’s cabinet" (EBAY; AMZN; WMT)

And a bunch of links regarding The Intercept

October 2013 Adventure Capital: Ebay Founder Omidyar And NSA Nightmare Glenn Greenwald Team Up in a $250 Million Journalism Venture
October 2013 Columbia Journalism Review: The extraordinary promise of the new Greenwald-Omidyar venture
August 2014 Possible Problems in the New New Journalism: "Growing pains at the Omidyar/Greenwald venture"
October 2014 "Matt Taibbi Disappears From Omidyar’s First Look Media"

And many more.

Russian Spy Whale Seen In Norwegian Waters

Note the lack of "scare quotes" in the headline. They're real and they're magnificent.

From The Barents Observer, May 24:

The "spy whale” is back
The well known ‘Whaledimir’ beluga whale has been detected in the waters near Oslo. 

This time the arctic waters whale has reached the densely populated area near Oslo. On Tuesday, May 24, the Norwegian Directorate of Fisheries, that has management responsibility for marine mammals, called for people not to interact with the mammal in order not to cause it any harm.  

The beluga ‘Whaledimir’ (Hvaldimir in Norwegian) was first spotted by local fisherman Joar Hesten on Norway’s Barents Sea coast in April 2019 in Måsøy municipality and has since been traveling along the Norwegian coast....


What's it doing so far south, vacationing?

April 2019
WTH: "Whale with harness could be Russian weapon, say Norwegian experts"
May 2019
"Satellite Images Reveal Russian Navy's Secret Arctic Marine Mammal Facility"
....Seen here returning a woman's phone, dropped in her excitement:

Hvaldimir? What kind of name is Hvaldimir?
Whaley McWhaleface should have been a lock.

There is some question whether this Beluga returning a woman's dropped phone is Hvaldimar or just some rando phone retrieving cetacean:

Meanwhile, In Wales: Couple With 400 Different Personalities Between Them

It's probably a good thing they found each other, though it must get confusing at times.

Thanks, I think, to a friend for this five-year-old story.

From The Daily Mail:

Couple with identity disorders who have over 400 personalities between them reveal they sometimes go a day without eating – because their child ‘alter-egos’ don’t know how to COOK 

  • Kai and Franz have both been diagnosed with Dissociative Identity Disorder
  • It means the couple both have a number of different personas, known as 'alters'
  • Alters' include boisterous children to quiet adults and emerge without warning
  • Simple tasks such as cooking and shopping can be almost impossible for them

A couple who both suffer from a multiple personality disorder have revealed the struggle of living with hundreds of competing identities.

Kai, 27, and Franz, 26, who live in Cardiff, have both been diagnosed with Disassociative Identity Disorder and have more than 400 different personalities, known as 'alters', between them.

The 'alters' range from boisterous children to competent adults and each comes with their own memories, behaviours, attitudes and perceived age.

In 5Star documentary My Multiple Personalities & Me, viewers are shown how Kai and Franz can both 'switch' alters several times during a single trip to the supermarket, forcing them to try and appease each one with the shopping list....


I wonder if LSD would be therapeutic.

Iran Seems Quite Pleased By The Number Of Engineers They've Trained Over The Last 30 Years

From Statista via the Islamic Republic News Agency:

The 2015 numbers via one of the commenters on the tweet (where's China?):

Saturday, May 27, 2023

"President of Belarus hospitalised after meeting with Putin"

Very unverified.

From Ukrainska Pravda, May 27:

Valery Tsepkalo, Belarusian opposition leader, said that after a meeting with Russian President Vladimir Putin, the self-proclaimed President of Belarus Alexander Lukashenko was taken to the Central Clinical Hospital of Moscow in critical condition.

Source: Tsepkalo on Telegram

Quote: "According to the information we have, which needs additional confirmation, Lukashenko, after meeting with Putin behind closed doors, was urgently taken to the Central Clinical Hospital of Moscow, where he is now located. The best specialists were sent to return him from a condition assessed by doctors as critical. [His - ed.] blood was purified, Lukashenko's condition was proclaimed not transportable.

The organised measures to save the Belarusian dictator were intended to ward off speculation about the possible participation of the Kremlin in his poisoning. It does not matter whether he returns to working condition or not, doctors warn of a possible recurrence of relapses. "....


"Monetary financing at the Bank of England, the Federal Reserve, and the European Central Bank"

From Phenomenal World, May 27:

Pecuniary Salvation

Monetary financing—the issuance of public money to support public expenditure—has in recent times become a policy taboo. The message from economists to politicians, policymakers, and society more broadly is often that any central bank support for public expenditure is likely to destroy an economy.

In 2009, the taboo stopped the European Central Bank (ECB) from buying sovereign debt in the open market, an activity that, as we will shortly see, European treaties had been explicitly drafted to allow. Newly issued public debt languished on the market. Eventually, pent up supply and panicked investors brought the very project of European integration to the brink of collapse. This was a very different scenario to what happened in the US and the UK, where, in 2008 and 2009 respectively, central banks launched enigmatic “quantitative easing” (QE) programs, which involved buying large volumes of government debt. 

By 2020, the ECB had changed its tune. At the outset of the pandemic, it followed the Bank of England and the Fed, dutifully launching massive public debt purchase programs. Former ECB president Mario Draghi published an op-ed with the ominous title: “We face a war against coronavirus and must mobilize accordingly.” The model to follow was, he argued, was wartime monetary finance. When Christine Lagarde took over as president in 2019, she pointed to the role of government debt purchases in ensuring “supportive financing conditions […] for governments.” 

In recent years, central bankers have taken a more conciliatory position. While conceding that central banking does at times involve outright purchases of debt, they maintain to the public that today’s quantitative easing should not be confused with monetary financing. The reason is that the objective of bond purchases is not to facilitate government spending. Indeed, orthodox central bankers and critical academics have alike sought to distinguish today’s interventions in sovereign debt markets from historical practices of monetary financing. Despite those efforts, there are few notable differences between the bond purchases of the Great Depression, the two World Wars, and the Cold War and the “unconventional” policies of 2008–2022. The main contrast lies in communications strategy.

In a recent article in the Review of International Political Economy, we propose a new macro-financial account of monetary financing to explain the historical continuity of central banking practices. As we show, central banks have almost always acted to buy debt issued by governments in a crisis. We make our case by pointing to how central banks supported treasuries in the jurisdictions that have issued the two global currencies of the post-industrial age: the United Kingdom and the United States. We show that monetary financing has always been important in helping states navigate large fluctuations in the demand for, and supply of, government debt. The ECB’s 2009 refusal to support struggling member states stands as an exception in twentieth-century central banking practice. Relying on newly disclosed archival documents, we also show that in the early ‘90s, central bankers drafted the ECB mandate to make sure the central bank could buy government debt when needed—an insight that got lost in the market-ideological enthusiasm of the late ‘90s and early 2000s.

Central banks have always acted—and always will act—as the lender of last resort to governments facing what we describe as “sovereign-financing gaps.” Wars, post-war reconstructions, financial crises, and other economic emergencies force the treasury to spend as fiscal receipts disappear, irrespective of private investor demand. The central bank, as the issuer of new public money, typically accommodates those spending programs, either by directly acquiring debt from governments or by bulk purchases in secondary markets from securities dealers. Its role is to monetize deficits until supply and demand dynamics stabilize. On this account, stabilization of sovereign financing conditions is a “feature” not a “defect” of central banking. 

The most distinctive feature of sovereign finance is the demand for a continuous but irregular supply of funds which is exceptionally large relative to any other borrower, even in normal times. Sovereign financing gaps can easily exceed private creditors’ willingness to lend. In extreme circumstances, no credit is available in markets at affordable prices, for even the most solvent sovereign. When “debts are large and precarious creditors shy away,”1 the volume of debt that treasuries can sell, even at high interest rates, is limited. Monetary finance becomes necessary “because debt cannot be sold.” Wherever sovereign financing gaps arise, governments must rely on central banks....


Equities: "Are cheap Scandinavian valuations a sweet red herring?"

From Verdad Advisers, April 24:

Swedish Fish

Sweden, the land of ABBA, meatballs, and, of course, the iconic Swedish Fish candy, may not be the first country that comes to mind when you think of global investment opportunities. Yet a new report from quantitative research firm Research Affiliates identifies Sweden as the developed market with the highest 10-year expected returns. And while the Swedish market is small, our internal valuation screens are also finding disproportionate opportunities in the land of lingonberries.

Europe generally is cheap. Today, Europe’s CAPE ratio is 20.4x versus 28.2x in the US, according to data from Barclays. This means Europe’s CAPE valuation today is 28% below the US, a discount that is nearly double the 15% historical average discount since 1981. On the right axis of the figure below, we measure the European discount in percentile terms, as illustrated by the gray line. Today’s European discount of 28% is in the 76th percentile of recorded history since 1981, having recently narrowed from the 95th percentile in October 2022.

Figure 1: European Discount Relative to the United States (1981—2023)


Sources: Barclays and Verdad analysis

Wide valuation spreads have historically presaged high future returns. Over four separate two-year periods beginning in September 1992 and June 1996, 1999, and 2003, Europe outperformed the US by 5.7 percentage points per year, on average, as valuation spreads narrowed over the course of two years. And over the six months between October 2022 and March 2023, the European equity market has returned 31.8%, more than double the US market’s return of 14.8%, according to data from Ken French.

Sweden isn’t the cheapest market within Europe. That distinction goes to Poland, another place we believe value investors are finding attractive bargains. Sweden’s CAPE ratio of 20.1x today is slightly below the European market at a 2% discount. But Sweden usually trades at a significant premium to the broader European market. Sweden has a highly skilled workforce, a stable political environment, and a business-friendly regulatory framework, as well as a number of market-leading global companies like Volvo (which today trades at 8x EBITDA), Ericsson (which trades at 5x EBITDA), and H&M (which trades 11x EV/EBITDA). Sweden is also the original home of IKEA (which is privately traded), and the country remains a core element of the company’s brand. In the table below, we present a valuation spread analysis where CAPE ratios for each major European country are measured relative to the 20.4x CAPE ratio of the overall European market. The table is ranked by valuation percentile relative to recorded history since 1981....


Friday, May 26, 2023

So How Did Thales Price The World's First (known) Call Options?

Speaking of presses (the post immediately below), here's a repost.

So How Did Thales Price The World's First (known) Call Options? 

Beats me.
I say first known because Thales had a pretty good press agent in Aristotle and we can't know those earlier math whizzes who got written up by lesser scribes.

We've posted a few times* on the first known reference to derivatives. Here's the 2010 iteration:

More on Buffett's Grandfather Clause in the Derivatives Bill (BRK.B; BRK.A)

...The earliest mention of a simple derivative, an option, that I am aware of is found in Aristotle's "Politics", circa 350 B.C.E.
MIT's Internet Classics Archive uses the Benjamin Jowett translation.

From Book One part XI:

Enough has been said about the theory of wealth-getting; we will now proceed to the practical part. The discussion of such matters is not unworthy of philosophy, but to be engaged in them practically is illiberal and irksome.

The useful parts of wealth-getting are, first, the knowledge of livestock- which are most profitable, and where, and how- as, for example, what sort of horses or sheep or oxen or any other animals are most likely to give a return. A man ought to know which of these pay better than others, and which pay best in particular places, for some do better in one place and some in another. Secondly, husbandry, which may be either tillage or planting, and the keeping of bees and of fish, or fowl, or of any animals which may be useful to man. These are the divisions of the true or proper art of wealth-getting and come first.

Of the other, which consists in exchange, the first and most important division is commerce (of which there are three kinds- the provision of a ship, the conveyance of goods, exposure for sale- these again differing as they are safer or more profitable), the second is usury, the third, service for hire- of this, one kind is employed in the mechanical arts, the other in unskilled and bodily labor. There is still a third sort of wealth getting intermediate between this and the first or natural mode which is partly natural, but is also concerned with exchange, viz., the industries that make their profit from the earth, and from things growing from the earth which, although they bear no fruit, are nevertheless profitable; for example, the cutting of timber and all mining. The art of mining, by which minerals are obtained, itself has many branches, for there are various kinds of things dug out of the earth. Of the several divisions of wealth-getting I now speak generally; a minute consideration of them might be useful in practice, but it would be tiresome to dwell upon them at greater length now.

Those occupations are most truly arts in which there is the least element of chance; they are the meanest in which the body is most deteriorated, the most servile in which there is the greatest use of the body, and the most illiberal in which there is the least need of excellence.

Works have been written upon these subjects by various persons; for example, by Chares the Parian, and Apollodorus the Lemnian, who have treated of Tillage and Planting, while others have treated of other branches; any one who cares for such matters may refer to their writings.

It would be well also to collect the scattered stories of the ways in which individuals have succeeded in amassing a fortune; for all this is useful to persons who value the art of getting wealth.

There is the anecdote of Thales the Milesian and his financial device, which involves a principle of universal application, but is attributed to him on account of his reputation for wisdom. He was reproached for his poverty, which was supposed to show that philosophy was of no use. According to the story, he knew by his skill in the stars while it was yet winter that there would be a great harvest of olives in the coming year; so, having a little money, he gave deposits for the use of all the olive-presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest-time came, and many were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a quantity of money. Thus he showed the world that philosophers can easily be rich if they like, but that their ambition is of another sort....
Thales lived c. 624 BC to c. 547 BC.

Although they were far from the first--Bachelier's stuff was damned advanced--Black and Scholes formalized options pricing in 1973, with one of the key variables being the risk-free interest rate.

In the Black-Scholes equation, the symbols represent these variables: σ = volatility of returns of the underlying asset/commodity; S = its spot (current) price; δ = rate of change; V = price of financial derivative; r = risk-free interest rate; t = time. Photograph: Asif Hassan/AFP/Getty Images