"Red-Light District Dims as Zurich Bankers Curb Spending"

The world's oldest profession.
From Bloomberg:

Zurich’s red-light district is dimming. Bankers who have been core patrons of the city’s sex industry and cabarets are curbing spending.

The venues of Langstrasse -- or long street -- are closing, replaced by hipster bars, techno clubs and even a backpackers’ hostel. Like the finance industry, the sex trade has opted for a lower profile.

“Times have changed,” said Kevin Joliat, the manager of the Petit Prince nightclub in central Zurich. “Bankers really have to show who the client was, why they spent the money and was it really necessary,” said Joliat, who once worked at Zuercher Kantonalbank, Switzerland’s largest state-owned bank.

The decline of erotic entertainment highlights a changing culture in Zurich as banking jobs ebb and public opinion turns against inflated bonuses. That and smaller budgets for entertaining customers have deprived the clubs and bars of a key customer base....MORE

“Immersive Journalism” Using Virtual Reality to Put the Viewer In the Story

We've noted that Pearson PLC, owner of the Financial Times was interested in VR for the classroom.
Here's another angle they may be looking at.
From the BBC:

News reports often feel remote and irrelevant to our lives. But will that change with “immersive journalism” that places viewers in the centre of the story?

News events across from distant countries can feel so far away, it is difficult to grasp their importance. But that may change as journalists create reports with virtual reality, so that viewers feel as if they are witnesses to the unfolding action.

Nonny de la Pena, senior research fellow at the University of Southern California’s Annenberg School of Journalism, does this by mixing traditional journalism with immersive gaming technology. Her team might record sound clips on the ground before combining them with visual reconstructions of the scene....MORE

I'm just spitballin' here:
"Facebook, Oculus, And Businesses' Thirst For Virtual Reality"

One of the least talked about aspects is the use of VR in education. Because the mind has trouble distinguishing between virtual reality and the outside world you should be able to get people to believe almost anything you want them to accept, given enough repetition and an engaging story line. Whether the learner has deep understanding is pretty much immaterial.

Pearson, the edu/testing co. with the Financial Times and Economist attached will be moving in this direction.
Think deeply immersive multiplayer gaming as an example, then put on some virtual reality goggles....

Pearson May Be Rethinking That "Sell the Financial Times" Strategy
"Financial Times CEO: 'We've now achieved critical mass in digital' "
 "The Inside Story of Oculus Rift and How Virtual Reality Became Reality"

Meanwhile, at Pearson Labs:
Beyond gaming: virtual reality hits the classroom

Burton Malkiel is Alive! (his latest advice for investors)

Economist Burton Malkiel's "A Random Walk Down Wall Street" influenced a generation of theoreticians.
He is 82 years old.
It is the strong version of the Efficient Market Hypothesis that is dead.
From Morningstar:

Burton Malkiel's Latest Advice for Investors 
Patience, emerging-markets stocks, and municipal bonds. 

Bait and Switch
In yesterday's Wall Street Journal, Burton Malkiel asked, "Are Stock Prices Headed for a Fall?" Surely a tease, I thought. This past December, in the same space no less, Malkiel wrote that "nobody can foretell what the market can do in 2014." Has he had a revelation? Has he realized that he is The One? Well...no, he doesn't. The article completely avoids the question.

It does, however, discuss three other items.

All Things Considered...
While Malkiel won't touch the stock market's immediate future, he does speculate about its long-term prospects. Like many, he is wary. The cyclically adjusted price/earnings ratio, or CAPE ratio, is 25, well above its average level of 15. Malkiel writes that while the "CAPE is not useful in predicting returns one or two years into the future"--what indicator is?--that it "does a reasonably good job of predicting 10-year equity returns."

Of that I am not certain. To my mind, London Business School professors Dimson, Marsh, and Staunton have convincingly demonstrated that the CAPE ratio has been predictive after the fact, but not beforehand. When the trio simulated what the ratio would signal using only information that was available at the time, they found that the forecast had little power....MORE

HT: Abnormal Returns

It's Time to Bomb Iceland

It is past time to deal with this. The stakes are just too high.
From Damon Tucker Hawaii News and Information (Dec. 2010):

The folks over at the Pacific Aviation Museum just posted this on Facebook and I thought it needed to be given a bit more attention.

I always thought that the lava flows were pretty much unstoppable but this seems to prove otherwise.

I would have no problem with the military dropping a few bombs above Hilo if it meant saving the entire town!

…Explosives were first suggested as a means to divert lava flows threatening Hilo, Hawaii during the eruption of 1881. They were first used in 1935, without significant success, when the Army Air Force bombed an active pahoehoe channel and tube system on Mauna Loa’s north flank. Channel walls of a Mauna Loa flow were also bombed in 1942, but again there were no significant effects. The locations of the 1935 and 1942 bomb impact areas were determined and are shown for the first time, and the bombing effects are documented. Three days after the 1942 bombing the spatter cone surrounding the principal vent partially collapsed by natural processes, and caused the main flow advancing on Hilo to cease movement. This suggested that spatter cones might be a suitable target for future lava diversion attempts…MORE

Also: "Engineering Volcanic Eruptions"

*See for example this morning's "Icelandic volcano could trigger Britain's coldest winter EVER this year".

Pope Francis: Elite Finance Manager

From Fortune:
This pope means business

Il Papa di global macro

The wildly popular Francis is more than a pontiff of the people. He’s an elite manager who’s reforming the Vatican’s troubled finances.

The new pope wanted to talk about money. That was the message that went out to a group of seven prominent financiers—major Catholics all—from around the world in the summer of 2013. Barely five months after the shocking resignation of Pope Benedict XVI, Pope Francis had summoned them to assemble at the seat of holy power, the Vatican. They knew their general assignment: to create a plan to restructure the Vatican’s scandal-plagued finances. And like Catholics everywhere, they knew that Francis had already signaled that he was a new kind of pontiff, a “people’s pope” who championed charity and tolerance over dogma. Still, they didn’t know what to expect when they arrived at the Vatican for a meeting with the pope on the first Saturday in August. How interested was he in finance, really? And how serious was he about changing business as usual inside the Vatican?

A major hint came from a change in tradition upon their arrival: The visitors didn’t report to the Apostolic Palace, the Renaissance showplace where for centuries past popes had received visitors in high style. Instead they entered Vatican City on the other side of the colonnade of St. Peter’s Square and took a 150-yard stroll through the hilly enclave to the new pope’s place of business—Casa Santa Marta, a five-story limestone guesthouse that could be mistaken for a newish hotel. There they were ushered into a nondescript meeting room on the first floor with no paintings or religious ornaments and took their seats around a conference table. The members—including Jean-Baptiste de Franssu, ex-chief of asset-management giant Invesco in Europe; Jochen Messemer, a top executive at ERGO, a large German insurer; and George Yeo, former foreign minister of Singapore—chatted nervously as they waited....MUCH MORE

"What's Replacing Coal In Europe? Imported Wood"

Great.
From Smithsonian Magazine:

In trying to meet renewable goals, Europe is relying on wood from forests in the Southern United States

Europe is trying really hard to reduce its dependence on oil and coal, by upping the use of solar, wind and trash as energy sources. But not all of the methods that the continent has tried are exactly environmental panaceas. 

One of the ways that European countries are trying to reduce their dependence on non-renewable fuels sources is by burning wood. Specifically, a whole lot of wood pellets created from trees harvested in the Southeastern United States. According to the EIA, wood pellet exports doubled between 2012 and 2013, mostly because of demand from European countries who are trying to meet their 20-20-20 goals. 

The 20-20-20 targets aim to increase energy efficiency, lower greenhouse gas emissions and increase the amount of renewable energy sources in use. One of the sources classed as renewable is biomass, which includes wood. The problem, as Grist reports, is that a recent report out of the U.K. (the largest importer of U.S. wood pellets) found that, in some scenarios, burning imported wood from North America can produce just as much greenhouse gas as burning fossil fuels. Other scenarios (depending on factors including transportation distance, the land and type of tree used) resulted in lower greenhouse gas emissions. But in all cases, the U.K. report asserts, the energy invested in producing North American wood pellets was greater than the energy invested almost any other fuel source (renewable or otherwise)....MORE

See also: 

Bonfire of the Subsidies: Europe Returns to Early Stone Age Fuel as Putin Mocks

Chart: 500 Years of Energy Prices

You Aren't Imagining It: People Are Getting Dumber 

Wood gas vehicles: firewood in the fuel tank

Putin Calls for the “Statehood” of Southeast Ukraine

Hey, how's about a land bridge to Crimea!
From the Financial Times:

Putin calls for negotiations on statehood for southeast Ukraine

Vladimir Putin has called for negotiations on the “statehood” of southeast Ukraine, sharply raising the stakes in his stand-off with the west as Europe prepares to impose tougher sanctions against Moscow. 

The comments by the Russian president are the latest escalation in rhetoric from the Kremlin amid an intensification of fighting in eastern Ukraine that Kiev and western governments say is being fuelled by an inflow of Russian soldiers and equipment.

“We must immediately begin substantive, meaningful negotiations, not on technical questions but on questions of the political structure of society and of the statehood of southeast Ukraine in order to guarantee the legal interests of people who live there,” Mr Putin said in a TV interview....MUCH MORE

"The secret world of power generation, and the arrival of Earth-spanning super grids"

From ExtremeTech, 30July:

A long, long time ago, before the wind, before the snow — well, the middle of the 1800s to be exact — electricity was an intriguing but mostly useless thing. Some factories and residences toyed with early electric lights and motors powered by on-site generators, but most of the world used piped steam and natural gas to heat their homes and drive their machines for decades after electrification began. That would all change, however, with Nikola Tesla’s invention of three-phase high-voltage power distribution at the end of the 1800s and the creation of the world’s first synchronized national electricity grid in Great Britain in 1938.

Overnight, electricity became cheap and constantly available — it became a utility — and the number of users in the UK shot up dramatically, from around 750,000 in 1920 to 9 million in 1938. Synchronized electricity — 50Hz from every socket in the country — meant that devices (radios, TVs, motors) worked everywhere, and the production and sales of those early electric devices boomed accordingly. Other countries would soon follow, and eventually, thanks to intra- and international interconnections between networks, the world’s power grids are now mostly synchronized at either 50 or 60Hz.

A modern power grid is a wondrous thing. Basically, through the magic of high-voltage direct-current (HVDC) cables, electricity generation and consumption can be balanced across an entire country — or even an entire continent. If you need power down south, you can spin up a hydroelectric generator in the north; if you have excess power in the south, you can use it to pump water back up to the top of the dam in the north. If it’s particularly windy or sunny, you can turn off a few coal and combined cycle gas turbine (CCGT) power plants. If a neighboring country or state is being hit by a heatwave, you can pump power into their grid via an interconnector. If you have a lot of constant nuclear power generation (like France), you can export surplus power to other countries  – and then, during peak times, import power from those same countries if you ever need it.

Perhaps most impressively, though, it’s important to remember that the world’s electricity grids have almost no energy storage at all. With the exception of pumping water back to the top of a hydroelectric dam — an option that’s only available in limited quantities and only in some countries — all electricity generated must be consumed immediately. As you can imagine, spinning up exactly the right number of turbines to match the power needs of millions of people is rather difficult — and in the UK, it’s all done by a single person....MUCH MORE

Electric Avenue in Brixton, London: The first market street to be illuminated by electric street lights (1895)

And, of course, Eddy Grant's song about Brixton 1981:

"Icelandic volcano could trigger Britain's coldest winter EVER this year"

The caps are in the original.
From the Daily Express:

BRITAIN could freeze in YEARS of super-cold winters and miserable summers if the Bardarbunga volcano erupts, experts have warned.

Depending on the force of the explosion, minute particles thrust beyond the earth’s atmosphere can trigger DECADES of chaotic weather patterns.

Tiny pieces of debris act as billions of shields reflecting the sun’s light away from earth meaning winter temperatures could plunge LOWER THAN EVER before while summer will be devoid of sunshine.

The first effect could be a bitterly cold winter to arrive in weeks with thermometers plunging into minus figures and not rising long before next summer.

The Icelandic Met Office has this week warned  of “strong indications of ongoing magma movement” around the volcano prompting them to raise the aviation warning to orange, the second highest and sparking fears the crater could blow at any moment.

The region has also this week been hit by a magnitude-four earthquake - the strongest for almost 20 years, officials said.

The British Met Office said the effects of an explosion on Britain’s weather depends on the wind direction in the upper atmosphere.

Spokeswoman Laura Young said: “If the upper winds are north-westerly it will have an effect on our weather.

“If the upper winds are westerly then it won’t.”...MUCH MORE

After a warmer than average Spring and slightly elevated temps over the summer the COLDEST WINTER EVER would feel a bit nippy.

Attention Prognosticators: Seven of Italy’s top Scientists were Convicted of Manslaughter Following a Catastrophic Quake

We've been following this case for a few years:
June 2011
Attention Prognosticators: "Italian scientists charged with manslaughter for failing to predict earthquake"
Sept. 2012
Attention Prognosticators: "Italian Prosecutors Target Scientists Who Failed To Predict the Future"
Oct. 2012
Convicted: Italian Scientists Who Failed to Warn of Earthquake

And here's the latest, from Matter:

Giulio Selvaggi was asleep when the shaking started. It was the night of April 5, 2009, and the head of Italy’s National Earthquake Center had worked late into the night in Rome before going home to crash.

From the motion of his bed, Selvaggi could tell the quake was big — but not close. When you’re near the epicenter of a major quake, it’s like being a kernel of corn inside a popcorn maker. When you’re farther away, the movement is slower and steadier, back and forth, as the shock waves hit you.

Selvaggi hopped from the bed and checked his phone, but there were no messages. He hurried into the living room, dialing the office on the way.

“Where is it?” he asked.

“L’Aquila, 5.8,” came the answer.

(It would later be classified as a 6.2.)

Selvaggi’s first thought: At least it’s not a 7. A magnitude 7 quake centered in L’Aquila, a medieval town high in the mountains, would have killed 10,000 people....

...MUCH MORE

 HT: Page Turner

"Found: The Islamic State's Terror Laptop of Doom"

The plague is not nearly the scariest stuff that can be weaponized so maybe President Obama was correct when he referred* to ISIS as the JV (junior varsity).

From Foreign Policy:

Buried in a Dell computer captured in Syria are lessons for making bubonic plague bombs and missives on using weapons of mass destruction.

ANTAKYA, Turkey — Abu Ali, a commander of a moderate Syrian rebel group in northern Syria, proudly shows a black laptop partly covered in dust. "We took it this year from an ISIS hideout," he says.

Abu Ali says the fighters from the Islamic State of Iraq and al-Sham (ISIS), which have since rebranded themselves as the Islamic State, all fled before he and his men attacked the building. The attack occurred in January in a village in the Syrian province of Idlib, close to the border with Turkey, as part of a larger anti-ISIS offensive occurring at the time. "We found the laptop and the power cord in a room," he continued, "I took it with me. But I have no clue if it still works or if it contains anything interesting."

As we switched on the Dell laptop, it indeed still worked. Nor was it password-protected. But then came a huge disappointment: After we clicked on "My Computer," all the drives appeared empty.

Appearances, however, can be deceiving. Upon closer inspection, the ISIS laptop wasn't empty at all: Buried in the "hidden files" section of the computer were 146 gigabytes of material, containing a total of 35,347 files in 2,367 folders. Abu Ali allowed us to copy all these files -- which included documents in French, English, and Arabic -- onto an external hard drive.

The laptop's contents turn out to be a treasure trove of documents that provide ideological justifications for jihadi organizations -- and practical training on how to carry out the Islamic State's deadly campaigns. They include videos of Osama bin Laden, manuals on how to make bombs, instructions for stealing cars, and lessons on how to use disguises in order to avoid getting arrested while traveling from one jihadi hot spot to another.

But after hours upon hours of scrolling through the documents, it became clear that the ISIS laptop contains more than the typical propaganda and instruction manuals used by jihadists. The documents also suggest that the laptop's owner was teaching himself about the use of biological weaponry, in preparation for a potential attack that would have shocked the world.

The information on the laptop makes clear that its owner is a Tunisian national named Muhammed S. who joined ISIS in Syria and who studied chemistry and physics at two universities in Tunisia's northeast. Even more disturbing is how he planned to use that education.

The ISIS laptop contains a 19-page document in Arabic on how to develop biological weapons and how to weaponize the bubonic plague from infected animals.
"The advantage of biological weapons is that they do not cost a lot of money, while the human casualties can be huge," the document states....

...MORE

*“The analogy we use around here sometimes, and I think is accurate, is if a J.V. team puts on Lakers uniforms that doesn’t make them Kobe Bryant”
-The New Yorker interview was an astonishing 17,000 words.

Note to FP: I may in future appropriate the term "Laptop of Doom".

You Aren't Imagining It: People Are Getting Dumber

From the Daily Mail, 21Aug:

Are we becoming more STUPID? IQ scores are decreasing - and some experts argue it's because humans have reached their intellectual peak

Dumb and dumber? Evidence suggests the IQs of people in the UK, Denmark and Australia have declined in the last decade. A study by the University of Hartford claims the larger the global population becomes, the less intelligent we will be, dropping by around eight IQ points by the year 2110 - and other estimates are even more pessimistic

Technology may be getting smarter, but humans are getting dumber, scientists have warned.

Evidence suggests that the IQs of people in the UK, Denmark and Australia have declined in the last decade.

Opinion is divided as to whether the trend is long-term, but some researchers believe that humans have already reached intellectual peak.

An IQ test used to determine whether Danish men are fit to serve in the military has revealed scores have fallen by 1.5 points since 1998. 

And standard tests issued in the UK and Australia echo the results, according to journalist Bob Holmes, writing in New Scientist. 

The most pessimistic explanation as to why humans seem to be becoming less intelligent is that we have effectively reached our intellectual peak. 

Between the 1930s and 1980s, the average IQ score in the US rose by three points and in post-war Japan and Denmark, test scores also increased significantly - a trend known as the ‘Flynn effect’.

This increase in intelligence was due to improved nutrition and living conditions - as well as better education - says James Flynn of the University of Otago, after whom the effect is named....MORE

Previously on the stupid channel:

"Were the Victorians cleverer than us? The decline in general intelligence estimated from a meta-analysis of the slowing of simple reaction time"

 

Climateer Line of the Day: Mental Entropy Edition

 

Thanks, I think, to a reader.

"I would be willing to wager that if an average citizen from Athens of 1000 BC were to appear suddenly among us, he or she would be among the brightest and most intellectually alive of our colleagues and companions. We would be surprised by our time-visitor’s memory, broad range of ideas and clear-sighted view of important issues. I would also guess that he or she would be among the most emotionally stable of our friends and colleagues."...

...MORE

"The Five Cities Most At Risk For The Next Big Earthquake"

From ZeroHedge:

Damages from the earthquake that hit the San Francisco area this weekend are estimated to be as high as $4 billion. For many cities around the world, particularly coastal cities situated on the geologically active Ring of Fire, an earthquake could be catastrophically destructive. Bloomberg looks at the five cities that are most vulnerable to earthquakes.

As Michael Snyder rather ominously warns, the quake last weekend is just the start of the shaking in California...

Don't get too excited about what happened on Sunday.  Scientists assure us that it is only a matter of time before "the Big One" hits California.

In fact, the 6.1 magnitude earthquake that hit northern California on Sunday was not even the largest earthquake along the Ring of Fire this weekend.  According to the U.S. Geological Survey, a 6.4 magnitude earthquake shook the area around Valparaiso, Chile on Saturday and a 6.9 magnitude earthquake struck Peru on Sunday.

As I mentioned above, we have moved into a time when seismic activity is steadily rising.  It has gotten to the point where even the mainstream media cannot ignore it anymore.  For example, just check out the following excerpt from a recent CBS News report…

The average rate of big earthquakes — those larger than magnitude 7 — has been 10 per year since 1979, the study reports. That rate rose to 12.5 per year starting in 1992, and then jumped to 16.7 per year starting in 2010 — a 65 percent increase compared to the rate since 1979. This increase accelerated in the first three months of 2014 to more than double the average since 1979, the researchers report.

Something is happening that scientists don't understand, and that is a little scary.
As I wrote about the other day, earthquake activity seems to particularly be increasing in the United States.  While the west has been relatively quiet, the number of earthquakes in the central and eastern portions of the nation has quintupled over the past 30 years….MORE

Hurricane Watch: The Tropics Go Quiet World-Wide

This is just about unheard of for Labor Day weekend.
From Wunderblog Aug. 29:

Hurricane Cristobal ceased to be at 11 am EDT on Friday, as the storm completed its transition to a powerful extratropical storm. Though Cristobal is no longer a hurricane, it still has hurricane-force winds, and will be a threat to marine interests off the Newfoundland coast today, and to Iceland on Sunday night. With Cristobal's transition to an extratropical storm and the demise of the Eastern Pacific's Tropical Storm Marie earlier today, there are now no named tropical cyclones anywhere in the world--an unusual situation for what is traditionally one of the busiest days of the Northern Hemisphere's tropical cyclone season. This quiet period appears likely to extend though the weekend, as I don't expect any new named storms to form anywhere in the world through Sunday....MORE

His Aug. 30 post:
Invest 99L in Western Caribbean a Threat to Develop on Monday

There have been 5 large storms in the Pacific this season but since our focus is on the insurance/re-insurance companies we watch the Atlantic. Here is the most widely accepted shorthand of activity, Accumulated Cyclone Energy, which measures intensity x duration, via Weather Bell:

2014 Accumulated Cyclone Energy [ACE]

Basin	Current YTD	Normal YTD	% of Normal YTD	Yearly Climo*
Northern Hemisphere	280.0795	244	114%	562
Western N Pacific	127.942	129	99%	302
Central N Pacific	0.64
Eastern N Pacific	126.215	76	166%	138
North Atlantic	21.515	30	71%	104
North Indian	4.4075	7	62%	18
Southern Hemisphere +	197.643	209	94%	209
Global	412.0375	416	99%	771

*Climatology from historical 1981-2010 Tropical cyclone best track datasets
...MORE

"Hidden Obstacles for Google’s Self-Driving Cars" (GOOG)

From MIT's Technology Review:

Impressive progress hides major limitations of Google’s quest for automated driving. 

Watch out: Google’s self-driving car can “see” moving 

objects like other cars in real time. But only a pre-made

map lets it know about the presence of certain stationary 

objects, like traffic lights.

Would you buy a self-driving car that couldn’t drive itself in 99 percent of the country? Or that knew nearly nothing about parking, couldn’t be taken out in snow or heavy rain, and would drive straight over a gaping pothole?

If your answer is yes, then check out the Google Self-Driving Car, model year 2014.

Of course, Google isn’t yet selling its now-famous robotic vehicle and has said that its technology will be thoroughly tested before it ever does. But the car clearly isn’t ready yet, as evidenced by the list of things it can’t currently do—volunteered by Chris Urmson, director of the Google car team.

Google’s cars have safely driven more than 700,000 miles. As a result, “the public seems to think that all of the technology issues are solved,” says Steven Shladover, a researcher at the University of California, Berkeley’s Institute of Transportation Studies. “But that is simply not the case.”

No one knows that better than Urmson. But he says he is optimistic about tackling outstanding challenges and that it’s “going to happen more quickly than many people think.”

Google often leaves the impression that, as a Google executive once wrote, the cars can “drive anywhere a car can legally drive.” However, that’s true only if intricate preparations have been made beforehand, with the car’s exact route, including driveways, extensively mapped. Data from multiple passes by a special sensor vehicle must later be pored over, meter by meter, by both computers and humans. It’s vastly more effort than what’s needed for Google Maps.

Google’s cars are better at handling some mapping omissions than others. If a new stop light appeared overnight, for example, the car wouldn’t know to obey it. However the car would slow down or stop if its on-board sensors detected any traffic or obstacles in its path.

Google’s cars can detect and respond to stop signs that aren’t on its map, a feature that was introduced to deal with temporary signs used at construction sites. But in a complex situation like at an unmapped four-way stop the car might fall back to slow, extra cautious driving to avoid making a mistake. Google says that its cars can identify almost all unmapped stop signs, and would remain safe if they miss a sign because the vehicles are always looking out for traffic, pedestrians and other obstacles.

Alberto Broggi, a professor studying autonomous driving at Italy’s Università di Parma, says he worries about how a map-dependent system like Google’s will respond if a route has seen changes.

Michael Wagner, a Carnegie Mellon robotics researcher studying the transition to autonomous driving, says it is important for Google to be open about what its cars can and cannot do. “This is a very early-stage technology, which makes asking these kinds of questions all the more justified.”...MORE

HT: Marginal Revolution 

"See an Exclusive ‘Self-Portrait’ From the Creator of XKCD"

From TIME:

The webcomic's science series, What If?, is now a book

Munroe has fun with the formulas for angular momentum of a spinning object (top) and centripetal force (bottom). Randall Munroe for TIME

For the past two years, xkcd creator Randall Munroe has been answering fantastical science questions for his popular webcomic’s sister site, What If?. In the new issue of TIME, Munroe talks about turning the project into a book (What If?: Serious Scientific Answers to Absurd Hypothetical Questions, hitting shelves Sept. 2) and how he conducts his investigations into topics like jetpacks and dinosaur nutrition.

“I try to be entertaining in the way I share them, but my real motivation with each question is that I want to know the answer,” Munroe says. “Once a question gets into my head, it will keep bugging me until I figure out the answer, whether I’m writing an article about it or not.”...MORE

"Home-Flipping Collapses in San Francisco, Losses Spread"

This is the first I've seen of "losses". To date the focus has been on decreasing rates of appreciation.
From S.F. based Wolf Street:

Home flippers are hardy folks who dive head-first into housing markets to buy homes at a discount from estimated market value, rehab them if they have to, trim the trees and cut the weeds out front, and flip the unit in less than a year, hopefully at a premium over estimated market value. If all works out, they’re rewarded with fat returns on investment.

It involves leverage, so some of the risks get shuffled off to the lender. It involves skills, connections, knowledge, and a good dose of luck. Above all, it requires the ability to buy low and sell high. To take home some serious dough, flippers need to purchase at double-digit discounts below “estimated market value” (based on AVM) and add enough value to sell at a premium over estimated market value. In the intervening months, home prices must also jump. So double-digit home price increases over the last two years have made flipping a lot more profitable. And easier.

This is the magic mix. If the conditions are met, the equation works out. It not, it’s a leveraged bet that can go to heck in a hand basket.

But flipping has started to run out of air in much of the country. And in the multi-county metro area of San Francisco, flipping collapsed in the second quarter, and flippers for the first time in years, started wading into red ink.

Home sales in the US have been declining since last fall, with mortgage applications plummeting at double-digit rates year over year. All sorts of excuses were dragged out of the closet, from tight inventories to bad weather, until inventories started to balloon and the weather was gorgeous, and sales were still dropping. Now it’s perfectly clear even to the most recalcitrant economists why: soaring prices have moved homes out of reach for many potential buyers. At first, the swoon in unit sales didn’t seem to have any impact on prices. But now the inevitable is happening: over the last few months, price increases have shriveled before our very eyes, and in some markets, on a monthly basis, outright price declines have started to crop up.

On Friday, in a section ominously titled, “Price Drops: ‘There’s Blood in the Water,’” Redfin reported on the growing prevalence in July of sellers having to lower listing prices as homes, rather than stirring up bidding wars, sit around for weeks or months. Redfin expects this trend to continue, with prices “potentially” declining month over month in September and October. “If that happens, it will be the first three-month price decline since the fall 2012,” it explained....MORE

Previously:
San Francisco Real Estate As A Leading Indicator Of the World Economy:
.

 
Signposts: Momentum Stock Fiasco Pricks San Francisco Housing Bubble

Getting Into The System: Indians Open 15 Million Banking Accounts in One Day

From the Business Standard:

PM Modi launches Jan Dhan Yojana, 1.5 crore bank accounts opened
FM Arun Jaitley said by Jan 26, 2015, the number will swell to 7.5 crore

Prime Minister Narendra Modi releases publications at the launch of Pradhan Mantri Jan Dhan Yojana in New Delhi

 

Prime Minister Narendra Modi today formally launched the government's financial inclusion programme - the Pradhan Mantri Jan Dhan Yojana.

The project. which will help provide a bank account for every Indian household is widely seen as the first comprehensive financial inclusion scheme in the country.

Speaking at the ceremony, Finance Minister Arun Jaitley said 1.5 crore accounts will be opened on first day of the scheme.

He said the scheme will be carried out on a "mission mode". He said the scheme hopes to rope in 7.5 crore accounts by Jan 26th, 2015.


Speaking at the event, Prime Minister Narendra Modi said more than 1.5 crore people getting insured in one day is a big record in the banking history and that the scheme will provide confidence to people.

He said the scheme's objective was to eradicate poverty and eliminate the "financial untouchability" that exists in the country....MORE

HT: Alphaideas 

Update 7:44p IST 10:48a EDT
Banks open 2.14 crore accounts under Jan Dhan mission

Barron's Cover: "Work's for Squares"

From Barron's:

The unemployment rate may be falling, but with more people than ever out of the workforce, the news is bad and getting worse.

The job market has made a comeback over the past year, but the American labor force hasn't, and the prospects don't look good. Work seems to be on the wane in the U.S., with worrisome consequences for economic growth. 

While the unemployment rate slipped to 6.1% in June -- its lowest level in six years -- the percentage of adult American workers who are actually in the workforce is at its lowest level in 36 years, with no rebound in sight.

No one in government is facing up to the severity of the problem. In her recent talk at the Jackson Hole Economic Policy Symposium, Federal Reserve Chair Janet Yellen posed the question of whether weak labor-force participation is due to cyclical factors that will pass with a stronger expansion or to structural factors likely to endure. She offered no sure answer.

Illo: Scott Pollack for Barron's

Barron's will answer that question for her. The problem increasingly appears to be structural. Following the devastating recession of 2008-09, the "jobless recovery" drove many workers out of the labor force, as often happens when the economy is in a downward cycle and then struggles to recover. But now that the expansion is starting its sixth year, the rebound in the job market is beginning to make the decline in participation look anomalous and therefore likely to persist. 

The share of the adult population, 16 and over, participating in the labor force is at its lowest level since 1978, at 62.8% and 62.9% in June and July, respectively. In a comprehensive study of trends in the workforce released in December, the Bureau of Labor Statistics said it expects a further decline in labor-force participation, to 61.6%, by 2022.

The BLS study provides an indispensable framework, essentially asking whether the retiring baby boomers will be replaced in sufficient numbers by younger cohorts. The agency's conclusion is not reassuring.

Indeed, a closer look suggests that the problem is far worse than the BLS supposes. There are two key reasons. For starters, the study makes no mention of the surge in disability filings that has already claimed millions of dropouts from the labor force and will likely claim more. It also makes no mention of the Affordable Care Act's likely negative effects on incentives to work. The Congressional Budget Office projects that the ACA could reduce the labor force by the equivalent of more than two million full-time workers. 

Furthermore, the BLS study projected that the labor-force participation rate of prime-age men, ages 25 to 54, would fall to 88.2% by 2022, from the agency's baseline of 88.7% in 2012. But the participation rate of prime-age men has already fallen below the 2022 projected level, according to the most recent data, fluctuating at 66-year lows of 88% to 88.1% from May through July. 

Given all of this, when the BLS updates its 10-year projections, it will probably lower its estimated figure for this all-important group.

Barron's is focusing on men ages 25 to 54 as a way to track the core rate of labor-force participation, because most have finished school and are too young to retire. For other demographic groups, there are cross-currents that make the overall trend hard to interpret, but that apply far less to prime-age men. As American Enterprise Institute senior fellow Charles Murray has bluntly observed, there was a time when "healthy men in the prime of life who did not work were scorned as bums." Murray goes on to note that the "norm has softened," but has not completely faded.

WHILE THE LABOR MARKET might not be restored to perfect health, it is certainly on the rebound. The jobless rate among prime-age males in July was down to 5.1%, with the overall rate at 6.2%. New unemployment-insurance claims from May through July hit lows not seen since May-July 2007. Job openings in the second quarter of this year, as tracked by the BLS, have risen to a monthly average of 4.6 million, a high not seen since second-quarter 2007. 

All of this makes it hard to blame the continued decline of prime-age males in the job market on a lack of work opportunities, especially when their labor-force participation rate has already lost so much ground. From May through July of this year, the participation rate of prime-age males has been 88%-88.1%, down from 88.7%-88.4% in the same three months of 2013. At these 66-year lows, nearly one prime-age male out of eight -- an average of 7.3 million -- has opted out of the labor force in any given month....MUCH MORE 

Work's for Squares 

Ninth Anniversary Of Hurricane Katrina at NOLA.com

From the Times-Picayune:

Drag your cursor (on a computer) or swipe your finger (on a phone or tablet) across each photo below. The 2005 Hurricane Katrina photo will dissolve into a picture from the identical vantage point nine years later....

...MORE
Additional T-P coverage.
And for the wonks, Wunderground's "Major Hurricane Katrina" page.

Oil & Gas: The EIA's Drilling Productivity Report

In October 2013 the U.S. Energy Information Administration introduced a new report that attemptz to caputre the impact of various drilling technologies. A couple weeks after the introduction we posted "Oil&Gas: A Deep Dive Into the EIA's New Metric, Rig Productivity"
See why I get invited to all the best salons?

This ramble was triggered by Izabella Kaminska's follow up post to the one we linked to in "Hey, Good News: Shale Is Not a Ponzi! (But what is a Ponzi?)":

Shale is not a ponzi, Part 2

Here's the latest Drilling Productivity Report, dated Aug. 11:

	New-well oil production per rig barrels/day				New-well gas production per rig thousand cubic feet/day
Region	August 2014	September 2014	change		August 2014	September 2014	change
Bakken	516	522	6		527	535	8
Eagle Ford	511	519	8		1,307	1,319	12
Haynesville	23	23	-		5,035	5,127	92
Marcellus	30	31	1		7,889	7,952	63
Niobrara	380	388	8		1,696	1,727	31
Permian	162	165	3		315	321	6
Utica*	172	179	7		3,667	3,815	148
Rig-weighted average

...MUCH MORE

We'll be back with the September report on Monday the 8th.
See also: Highlights

World's Supply of Corn Hits a 27-Year High

From Agrimoney:

The International Grains Council raised to a 27-year high its forecast for world corn inventories, citing improved hopes for crops in Brazil, Europe and Ukraine, as it hiked again its estimate for grain supplies.

The intergovernmental group raised by 3m tonnes to 190m tonnes its estimate for world corn stocks at the close of 2014-15 – up 17m tonnes year on year and "their largest since 1987-88".

The estimate, which takes the IGC's figure above the USDA forecast for a 15-year top in world inventories, reflected an improved forecast for global production, upgraded by 4m tonnes to 9763m tonnes.

"Northern hemisphere [corn] yield prospects continued to improve in August, including in the US, where crops have benefitted from a prolonged period of benign weather," the council said.

"The outlook for corn is notably higher, with a record outturn in the US and upward revisions for Brazil, the European Union and Ukraine."

Corn vs wheat

However, the council also, turning to consumption trends, highlighted the enhanced rivalry in the feed market with wheat, following a low quality harvest in many producing countries, such as France.

"The world [wheat] harvest will include an above-average proportion of low/medium grade supplies," the IGC said, a factor which would become evident in "strong competition in most markets" between corn and wheat....MORE

Currencies: "Goldman Slashes EURUSD Forecast To 1.20"

1.3144 last
From ZeroHedge:

Having flip-flopped from forecasting EUR strength for the next 12 months in April (target 1.40), Goldman has rapidly ratcheted down its expectations for the flailing currency to 1.30 previously and now forecasts EURUSD at 1.20 in 12 months. As Goldman notes, "because we believe the dynamics of the Euro have fundamentally changed and because we expect cyclical outperformance of the US, a prolonged period of Euro undervaluation can be expected and this is reflected in our longer-term forecasts." Trade accordingly...

Via Goldman Sachs,
1. We are revising down our EUR/$ forecast to 1.29, 1.25 and 1.20 in 3, 6 and 12 months (from 1.35, 1.34 and 1.30 previously). We are also revising our longer-term forecasts lower, bringing the end-2015 number down to 1.15 (from 1.27), that for end-2016 to 1.05 (from 1.23) and that for end-2017 to 1.00 (from 1.20). We switched from forecasting Euro strength to weakness in April, when we revised our 12-month forecast from 1.40 to 1.30, and the decline since then has been faster than we anticipated. Our latest forecast change aims to signal that the current move lower in EUR/$ has staying power and, in our view, is the beginning of a trend.

2. This forecast change is very much a restatement of our bullish Dollar view. Indeed, because we are keeping our EUR/CHF, EUR/GBP, EUR/NOK and EUR/SEK forecasts unchanged, this change is disproportionately important for our trade-weighted Dollar forecast. When we first switched to forecasting Euro weakness in April, this implied a 6% appreciation of the trade-weighted Dollar against the G10 on a 12-month horizon. Since then the Dollar has appreciated about 3%, i.e., about half that, thanks in large part to the drop in EUR/$. Revising our 12-month EUR/$ forecast to 1.20 implies a trade-weighted appreciation of the Dollar against its G10 peers of a further 6%....MORE

How's My Driving: Remember the Highflier Collapse in April? (TWTR; FB; TSLA; P; NFLX)

On April 4 we posted "Mind the Gaps: A Lot Of Momentum Stocks A Starting to Look Interesting (NFLX; TWTR; XBI; FB; P)":

We have very little commentary on these names, in large part because we prefer our readers not lose bucketloads of money for reasons we don't understand, partly because of the old saw (attributed variously) about it being better to be thought an idiot than opening one's mouth and removing all doubt and partly because knowing the difference between a tweet, a twit and a tweeting twit seems a waste of what grey matter one has managed to retain.

That said, take a look at these charts....MORE

That was followed by "Barron's Cover: Equities-The Highfliers Are Still Too High":

It's been a week since Friday Apr. 4's "Mind the Gaps: A Lot Of Momentum Stocks A Starting to Look Interesting (NFLX; TWTR; XBI; FB; P)", the results are not going to earn anyone a bonus.
The initial group:

NFLX  337.38 -17.31
TWTR   42.96 -1.09
XBI     132.28 -6.90
FB         57.18 -2.31
P           27.82 -2.03

Only one, Facebook, managed to turn a profit and even FSLR cracked and went into the red.
Not too impressive Mr. analyst guy.
Tesla dipped five bucks under support on Friday before rallying to close at $203.78 and remains the most interesting of the bunch. The rate of descent in the biotechs (XBI and IBB) has slowed but they are still dangerous, tradable for the nimble only.

Also, I have to repeat, we are still in a bull market, although you would be excused for believing otherwise based on the performance of the above group of misfits....MORE

Well, I'm pleased to report things improved, especially over the last few months:

I should note: we are not nearly as bullish right now, actually looking for another little decline before new highs really kick in.
S&P 500 2001.60; Nasdaq 4574.25.
See also April 10's "One of These is Not Like the Others (FSLR; FB; TSLA; NFLX; IBB; SPY, IXIC)" for more links if interested.

Trouble In Paradise: Mount Tavurvur Erupts

While waiting for Bárðarbunga to declare its intentions.

From The Independent:

This is not Iceland.

Some international flights were diverted and several communities evacuated in the early hours of Friday morning after a volcanic eruption on Papua New Guinea.

Mount Tavurvur, on East New Britain Island, erupted hours before dawn, sending plumes of smoke and ash high above the nation and forcing local communities to evacuate....MORE

So This Is What Euroland Rates Have Been Saying: "Italy Back In Deflation With Lowest CPI Print In History"

From ZeroHedge:

Curious why European bond yields tumble to fresh new lows day after day (with the explicit backstop of the ECB of course, which makes fundamental analysis of sovereign solvency an irrelevant matter)? Then look no further than Italy, where as the chart below shows, not only has the economy "filled the gap" of its economy as tracked by its EU-Harmonized CPI, but at an August print of -0.2%, this is the lowest print in history, worse even than the brief -0.1%, flirt with deflation recorded just in the aftermath of the Lehman crash.

But it wasn't only Italy: as Eurostat also reported today, Euroarea inflation also dropped once again, touching 0.3%, down from 0.4% a month ago, the lowest print October 2009....

...MORE

"What Americans Really Want From Their Smart Homes"

I dunno.
World peace?
Monster soda cups to celebrate the departure of Mayor Bloomberg?
From Greentech:

Smartphone-enabled, security-minded, and no monthly fees

Well there you go.

Here's the rest of the story, if you're interested.

"Be Vewwy Afwaid: These Bunnies Are Huge"

Since both the Sierra Club and 350.org have dropped polar bears as their charismatic megafauna global warming reps (in favor of cat videos), we've been looking for some branding assistance. We're thinking of going with rabbits.

First though, the video for the September 21st climate change walk:



And from Modern Farmer:
 

Rabbits are a mainstay of our collective childhood memories – we love them because they are small, cute, childlike and pure. But what if rabbits had the power to strike fear in your heart?

Your run of the mill rabbits, like Peter and “Watership Down’s” Hazel, have larger cousins. Much larger. Among breeds of rabbits there are over 10 giant varieties. Soon there may be one more. In 2009, the Spanish government started a breeding program to bring back the giant Valenciano Rabbit. Vincente Garcia, the engineer in charge of the program, told the Telegraph: “We have already started a breeding program and will test the productivity and profitability of the Valenciano with the goal that it will once again be viable to produce for human consumption.”

There has been no word yet if Garcia was able to pull the rabbit out of the hat and on to the dinner tables (please excuse us). The Valenciano was a popular source of meat in Spain as well as in Cuba and Argentina, but disappeared in the ’70s. The appeal is clear, however — these rabbits can produce up to 15 pounds of meat, which is no small potatoes.

Giant rabbit terror — provoked by scientific experimentation like Garcia’s — was brought into the spotlight in the 1972 cult classic, “Night of the Lepus.” Set in a small Arizona town, giant mutant rabbits attacked humans with deadly consequences. The filmmakers used a mix of miniature sets with normal-sized rabbits and actors in rabbit suits....MORE

If you would like to read our entire blog in the voice of Elmer Fudd (and frankly, who wouldn't?), here is the Dialectizer. As an example, we'll use the earlier post on shale oil:

Cwimateew Investing 
We've been at the fwont of the wine compwaining about cash fwows, fwee cash fwow, cash on cash wetuwns and aww the othew awcana that makes me so exciting at pawties.
Fwom the Financiaw Times:
Shawe oiw and gas pwoducews’ finances wift gwowf hopes

De independent oiw and gas companies at the fowefwont of the US shawe wevowution have substantiawwy impwoved theiw financiaw position – boosting confidence that the wapid gwowf in pwoduction can continue.

Cash eawned fwom opewations by 25 weading Nowf Amewican expwowation and pwoduction companies is expected in aggwegate to exceed theiw capitaw spending next yeaw fow the fiwst time since 2008, accowding to an anawysis by Factset fow the Financiaw Times. Oh, dat scwewy wabbit!

US oiw and gas pwoduction has gwown shawpwy in the past decade, thanks to advances in hydwauwic fwactuwing and howizontaw dwiwwing techniqwes, as weww as highew oiw pwices that made it viabwe to devewop shawe wesewves....MORE

We first became interested in the giant rabbits when a shipment from Germany of what was supposed to be breeding stock was intercepted by North Korean elites and never seen again. See:
Totally off-topic: Kentucky Fried North Korea

 

Herman, in happier times. Then:

No More Monster Bunnies for North Korea

The fate of 12 German giant rabbits delivered to North Korea is in doubt. The breeder who sent them suspects they have been eaten by top officials rather than used to set up a bunny farm. Berlin's North Korean embassy denies the allegation. One thing is sure: the country will have to find another seller....

Also:
We're So Proud: Our Second Most Popular Post Last Weekend Was "Bummer Kid, I'm the Ether Bunny"

Are folks coming to the blog for the incisive commentary?
The actionable markets discussion?
A breezy devil-may-care weltanschauung?

Nah.
They visited for the  picture of the giant bunny, Darius.
Great....

Hey, Good News: Shale Is Not a Ponzi! (But what is a Ponzi?)

We've been at the front of the line complaining about cash flows, free cash flow, cash on cash returns and all the other arcana that makes me so exciting at parties.
From the Financial Times:
Shale oil and gas producers’ finances lift growth hopes

The independent oil and gas companies at the forefront of the US shale revolution have substantially improved their financial position – boosting confidence that the rapid growth in production can continue.

Cash earned from operations by 25 leading North American exploration and production companies is expected in aggregate to exceed their capital spending next year for the first time since 2008, according to an analysis by Factset for the Financial Times.

US oil and gas production has grown sharply in the past decade, thanks to advances in hydraulic fracturing and horizontal drilling techniques, as well as higher oil prices that made it viable to develop shale reserves.

As production has grown, however, the industry has been reliant on sustained inflows of capital to finance its drilling programmes – through borrowing, equity issuance and asset sales.

Some critics have described the industry as a “Ponzi scheme”, relying on the excitement over the shale boom to attract new investment, and warned that it could collapse when companies ran out of financing to drill more wells. However, shale companies’ finances have improved rapidly as a result of a shift by many away from natural gas towards more lucrative oil production and a pick-up in natural gas prices after they fell to 10-year lows in 2012....MORE

HT: FT Alphaville whose Izabella Kaminska not only knows this stuff:: 

Shale is not a ponzi

...Joy for shale! And all gratitude to break-even oil prices of no less than $90 per barrel.

Except, as John Kemp at Reuters recounts, the sceptics aren’t necessarily convinced (our emphasis)....MORE

But who appears to be working on Ponzi recognition at her personal blog.

From Dizzynomics: 

What is not a Ponzi?

Having become totally bored of explaining why things like Bitcoin are a Ponzi, I thought for a change I would approach the issue from the opposite direction.

What then doesn’t constitute a Ponzi?
So here we go:

1) any enterprise that can take your money and invest it in an activity that generates earnings which can cover operational costs/taxes and leave an excess to be reinvested in the business or to be paid out to shareholders, (irrespective of new money coming in or not)....MUCH MORE

Which was followed by:

What is not a Ponzi? (Short version)

The preceding post became tl;dr.
To summarize....MORE

"The Relative Weakness in Gold Ain't Over Yet"

Long suffering readers know we have been bearish on gold since FT Alphaville's Izabella Kaminska pointed out the TIPS/shiny correlations back in December 2012, and have been calling for an $875 bottom for the last 14 months.
From Dragonfly Capital:

Gold ($GLD) has been weak relative to the S&P 500 ($SPY). This has been the case since mid 2011. And throughout 2014 there have been signs that there might be an inflection point in the making. Gold might be ready to strengthen against equities. But the past few weeks have shown that it is not time for the fat lady to sing yet.

The chart above shows nearly 10 years of relative performance of Gold to the S&P 500. It traces out a a bullish Shark harmonic, which sounds great for a reversal. Except that the bullish part of that harmonic pattern kicks in after it has fallen to point D, another 25% lower in the ratio. Or worse at a ratio of 0.21 another 45% lower. Ugh. She had better take a seat or order some food...

...MORE
See also:
Spot Gold Down $21.80 as HSBC, Credit Suisse Lower Forecasts (GLD)

A Fool and His Money Is Not Worth Your Time

From I Love Charts: