Tuesday, January 31, 2017

And In Other News: German Panzers Roll Into Lithuania

From Reuters:
Germany sends tanks to Lithuania for NATO mission
Germany began sending tanks and other equipment to Lithuania on Tuesday as part of a NATO mission to beef up the defense of eastern Europe and send a signal of resolve to Russia, which has denounced the build-up as an act of aggression.
The German army command said it was sending about 200 vehicles, including 30 tanks, by train to Lithuania along with 450 troops, the first of whom arrived last week. The transports would continue until late February.

Seven decades after the end of World War Two, the movement of German troops to eastern Europe, even on a NATO mission, remains a sensitive issue both in Germany and the region.

On Monday the U.S. military deployed thousands of soldiers and heavy weaponry to Poland, the Baltic states and southeastern Europe in its biggest build-up since the Cold War.

The movements are part of a strategy agreed by NATO leaders last July to reassure member states that were once part of the Soviet bloc and have been alarmed by Russia's seizure of the Crimean peninsula from Ukraine in 2014....MORE
Meanwhile, Russia appears to be doing some sort of flanking maneuver into the Arctic:

Russia embarks on its largest Arctic military push since the fall of the Soviet Union
-Daily Mail

Releasing none-too-subtle photos that have to have the Lapps (Sami) thinking WTH:
Image Attribute: Russian servicemen of the Northern Fleet's Arctic mechanized infantry brigade participate in a military drill on riding reindeer and dog sleds near the settlement of Lovozero outside Murmansk, Russia January 23, 2017. Picture was taken January 23, 2017. Lev Fedoseyev/Ministry of Defence of the Russian Federation/Handout via REUTERS

Five Nobel Laureates Talk Shop: "Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality"

ProMarket is one of the Chicago Booth blogs--the other, Capital Ideas, seems to have been subsumed  into ChicagoBoothReview, la, di, da--and has a slightly different focus:
Today's linkage is from January 10:
Angus Deaton: “A lot of the inequality in the U.S. comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government.”

Eliminating rent seeking and toughening enforcement of antitrust laws are “critical” to reducing rising inequality, said two Nobel Laureates, Angus Deaton and Joseph Stiglitz, during a panel of Nobel laureates last Friday. Two fellow laureates, Roger Myerson and Edmund Phelps, echoed their message and warned of a return to 1930s-style corporatism.
“To the very considerable extent that inequality is generated by rent seeking, we could sharply reduce inequality itself if rent seeking were to be somehow reduced,” said Angus Deaton, recipient of the 2015 Nobel Prize in Economics. Deaton described inequality in the U.S. as being primarily driven by industry rents, and rejected proposals to increase taxes on the rich as a way to reduce rent seeking.

“I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” he said.

The panel was part of the annual Allied Social Sciences Associations (ASSA) meeting in Chicago. Fellow Nobel Laureate Joseph Stiglitz, recipient of the 2001 prize, offered a more sympathetic view of higher taxes on the rich as a method to reduce inequality, but stressed the importance of rent-seeking to the rise in inequality in the U.S.

“In all areas of economics, the rules of the game are critical—that is emphasized by the fact that similar economics exhibit markedly different patterns of distribution, market income, and after tax and transfers income. This is especially so in an innovation economy, because innovation gives rise to rents—both from IPR and monopoly power. Who receives those rents is a matter of policy, and changes in the IPR regime have led to greater rents without having any effects on the pace of innovation,” said Stigltz.

Both Stiglitz and Deaton agreed that tougher antitrust enforcement is “incredibly important” in reducing inequality (an argument that was explored at length in ProMarket as well), rejecting claims that diminishing the role of government and regulation is the key.

The panel included five Nobel laureates: Deaton, Stiglitz, Myerson, Phelps, and Robert Shiller. All expressed deep concerns over the rise of inequality, both within the U.S. and around the world, as well as recent political turmoil associated with the resultant public outrage, such as the election of Donald Trump. The panel, moderated by Fordham professor Dominick Salvatore, was characterized by a general agreement that a decline in innovation and competition and an increase in rent seeking are contributing to the rise in inequality, as well as a general agreement over a number of policies to reduce it.

While the panel dealt with a wide array of topics related to inequality, such as globalization, the decline of innovation, and the dangers of a secular stagnation, much of the panel focused on the issue of rent seeking and its impact on the U.S. economy.

While some forms of inequality could be linked to progress and innovation, said Deaton, inequality in the U.S. does not stem from creative destruction. “A lot of the inequality in the U.S. is not like this. It comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government,” he said.

Deaton highlighted a particularly salient example of rent seeking: the American health care system which, he said, “seems optimally designed for rent seeking and very poorly designed to improve people’s health.”

In his remarks, Deaton referred to a 2015 study that he and his wife, Princeton professor Anne Case, published in 2015. In the paper, Deaton and Case analyzed health and mortality records and showed a troubling rise in the death rates of middle-aged white Americans. This rise in mortality was unique to white non-Hispanic Americans, they concluded, and was driven primarily by an epidemic of suicides and diseases related to substance abuse among poorly-educated whites, particularly heroin and prescription opioids such as oxycodone.

“There are around 200 thousand people who have died from the opioid epidemic, were victims of iatrogenic medicine and disease caused by the medical profession, or from drugs that should not have been prescribed for chronic pain but were pushed by pharmaceutical companies, whose owners have become enormously rich from these opioids,” said Deaton, who later advocated for a single-payer health care system in the U.S., saying: “I am a great believer in the market, but I think we need a single-payer health care system. I just don’t see any other sensible way to address it in this country.”...MUCH MORE
Previously from ProMarket:
"Is the Digital Economy Much Less Competitive Than We Think It Is?"

And Capital Ideas:
"Are video games killing work for young men?"

"Gold Prices Advance as Dollar Sinks"

The most active, April, gold contract is up $16.40 at $1212.40 with the dollar index down 0.9% at 99.51.

That cluster of prints between 1215 and 1223 on the 17th-18th and again on the 23rd-24th rather grabs ones attention.
From Economic Calendar:
Gold prices gained more than 1% in today’s trading, as the US dollar index fell to a new low in the decline that has been underway since the kickoff of 2017. The gold contract for April settlement on the COMEX division of the New York Mercantile Exchange rose as high as $1,214.7 and ended the session with a $15.40 (1.3%) gain at $1,211.40/oz.

The dollar got hit today after comments from Peter Navarro, the head of Donald Trump’s new National Trade Council. He stated that Germany is using the “grossly undervalued” euro to exploit its US and EU trade partners.

Also not helping the dollar’s case were comments from Trump himself who stated in a meeting with top officials from several US drug manufacturers that pharmaceutical companies were outsourcing production because of currency devaluation outside the US. The US dollar index, which measures the greenback’s strength against a basket of six currencies, is currently trading at 99.58, down 0.79%.
The dollar was already under pressure heading into today’s session, given Monday’s downside reversal after President Trump issued an executive order to temporarily ban citizens from several majority-Muslim countries from entering the US. The order has sparked uncertainty surrounding the Trump presidency and sent investors out of the dollar and equities and into the safe-haven of gold.

As a result of today’s move to the upside, gold prices have broken above overhead resistance at the January 19 low at $1,198.10. The solid break above this level has voided the minor double top that was confirmed with last week’s decline. The move above this level now leaves the target at the recent highs near the $1,220 level....MORE

On Top Of the SEC Settlement: Och-Ziff Hedge Fund Execs Now Face Additional Federal Charges (OZM)

We don't much care for these folks, some prior posts after the jump.

From Courthouse News Service, Jan 27:
BROOKLYN (CN) – Two former executives of Och-Ziff Capital Management face a federal complaint that says they paid bribes in the tens of millions to the influential leaders of African nations in exchange for lucrative mining deals.

The Jan. 26 suit in Brooklyn comes four months after the Securities and Exchange Commission’s suit reached a $200 million settlement with the hedge fund itself.

Thursday’s complaint takes aim at a pair the SEC accuses of acting as the driving force behind the scheme: Michael Cohen, head of the company’s European office, and Vanja  Baros, the front man for Africa-related deals.

“Cohen and Baros were the masterminds of Och-Ziff’s bribery scheme that improperly used investor funds to pay bribes through agents and partners to officials at the highest levels of foreign governments,” Kara Brockmeyer, head of the commission’s Foreign Corrupt Practices unit, said in a statement.

A cease-and-desist order that the SEC levied against the firm in September said Och-Ziff’s bribes drew investments from the Libyan Investment Authority sovereign wealth fund and secured mining rights in Libya, Chad, Niger, Guinea and the Congo.

CEO Daniel Och agreed to pay $2.2 million as part of the settlement, and the SEC noted that it would assess a penalty against CFO Joel Frank at a later date.

Both consented to the order without admitting or denying the charge that they turning a blind eye to the red flags and risks associated with the transactions, failed to ensure proper bookkeeping of the deals, and failed to have safeguards in place to prevent such bribes from happening.

Thursday’s charges identify at least seven bunk transactions that Cohen and Baros ran at the alternative investment fund....MORE
Previously (the first story is a major piece from Institutional Investor last November):

OZM Och-Ziff Capital Management Group LLC daily Stock Chart 

As Sales Begin: "The Strategic Petroleum Reserve's Muted Effect in the Shale Era"

From RBN Energy, Jan. 29:
Fundamental changes in U.S. crude oil production, crude transportation patterns, refinery sourcing of oil, import volumes and other factors have undermined the ability of the Strategic Petroleum Reserve to mitigate the domestic impact of a world energy crisis. Worse yet, the Department of Energy’s planned fix for the SPR will take at least several years—assuming it’s allowed to proceed according to plan. Today we consider current shortfalls in the SPR’s crude-delivery network, the potential effect on U.S. refineries in the event of an emergency, and the DOE’s plan to fix things.

Few of us give much thought to the jack in the truck, the flashlight in the drawer, or the blue tarp in the garage until a tire goes flat, the lights go out, or a tree falls on the roof. Similarly, it’s easy to forget about the federal government’s Strategic Petroleum Reserve (SPR), which was set up more than 40 years ago after the 1973-74 oil embargo but whose emergency use has been only occasional (thankfully). As we said in our Save It For a Rainy Day series a couple of years back, the SPR, which currently stores about 695 million barrels (MMbbl) of sweet and sour crude at four underground salt dome storage facilities along the Gulf Coast, has been tapped for emergency drawdowns only three times since it was created. The first time was during the Persian Gulf War in 1991, when—at President H.W. Bush’s order—the Department of Energy (DOE) implemented a plan to sell 33.75 MMbbl to help stabilize world oil markets. In the end, only about half of that amount—17.3 MMbbl—needed to be sold to achieve the desired effect. Next, in the aftermath of Hurricane Katrina (and its damage to oil production facilities, terminal pipelines and refineries) in 2005, up to 30 MMbbl was authorized for sale. Again, much less was actually bought—about 11 MMbbl. Finally, in 2011, about 30 MMBbl of SPR crude was authorized for sale—and sold to 15 companies—because of supply disruptions in Libya and other countries. Technically, there was a fourth use of the SPR. In 2013, the SPR conducted an emergency exchange with Marathon Oil after Hurricane Isaac disrupted Gulf Coast oil production, refining and distribution systems. By contract, Marathon repaid the 1 MMbbl in three months.

The initial purposes of the SPR were to help reduce the impact of severe energy supply interruptions (like the 1973-74 embargo) on U.S. refineries, and to meet the U.S.’s obligations under the International Energy Agency’s (IEA) International Energy Program (IEP), which requires IEA members that are net oil importers to maintain crude oil inventories equal to at least 90 days of domestic demand. These purposes remain, but the SPR also came to be used to minimize the price shocks that come with major supply interruptions, whether they be the result of far-away wars or major hurricanes in the Gulf of Mexico. The SPR consists of 60 underground salt caverns (with capacities totaling 714 MMbbl) at four sites: Bryan Mound in Freeport, TX (capacity, 247 MMbbl); Big Hill in Winnie, TX (170 MMbbl); West Hackberry in Hackberry, LA (220 MMbbl); and Bayou Choctaw in Plaquemines, LA. Each of the four is currently between 96% and 99% full.
Fortunately, there’s been no instance so far in which the SPR has needed to go into what you might call “full-bore” operation. The SPR system is designed for an initial maximum drawdown (or oil-withdrawal) rate of 4.415 million barrels a day (MMb/d) —that rate could be sustained for 90 days (by which time ~400 MMbbl would have been withdrawn), after which the maximum rate would gradually drop. It would take a total of more than 150 days to drain the system’s 695 MMbbl if the spigots were left wide open.  Figure 1 shows the maximum pace of withdrawals and how much crude (and which types—sweet or sour) would come from each SPR facility....

Oil & Gas 360 reported on Jan. 26th:

DOE Announces Sales from Strategic Petroleum Reserve 

First sales of largest SPR drawdown in history
The DOE awarded contracts for the sale of 6.4 million barrels of crude from the Strategic Petroleum Reserve (SPR) yesterday, with additional future sales planned. Contracts were awarded to Shell Trading Company and Phillips 66 Company with deliveries scheduled for March and April.  
Multiple acts of congress in the past two years have called for sales from the SPR. Two separate sections (403 and 404) of the 2015 Bipartisan Budget Act have mandated yearly sales from the SPR through 2025. Sales made between 2017 and 2020 will generate up to $2 billion in revenue to fund the planned SPR Modernization Program, which will improve the SPR infrastructure to ensure long-term integrity. Additionally, sections of the 21st Century Cures Act and the Fixing America’s Surface Transportation Act have called for SPR sales with proceeds going to the general fund of the Treasury...MORE

Questions America Wants Answered: "What impact will the Trump administration have on the hedge fund industry?"

From HedgeWeek:
By Ron Geffner (pictured), Sadis & Goldberg –
With the Trump administration in the White House, regulatory uncertainty permeates the financial services industry.  While many on Wall Street are very excited by the Trump presidency, others are approaching this new era with trepidation. President Trump is unpredictable in many ways and the industry eagerly awaits his actions hoping that the financial markets do not respond negatively and create chaos in the global marketplace.  

While we should expect that the Trump administration will aim to cut back financial regulation implemented during the last eight years, it is unrealistic that these laws will be eliminated in their entirety. Though the financial markets have been extremely volatile of late and react very swiftly upon the announcement of any meaningful global news, various aspects of recent financial regulation have been positive for the industry.  For example, the requirement for many investment advisers to register with the US Securities and Exchange Commission (SEC), one of the requirements of The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) which was signed into federal law by President Obama on 21 July, 2010, in retrospect, has been viewed as a positive change within the industry....MORE
As laid out in the intro to "Questions America Wants Answered: "What Is Camp Alphaville?"":

Part of our ongoing, quasi-periodic, series o'queries, links after the jump....

...Errrmmm, yes, sometimes artificial is the only intelligence one can find in markets.
And self-aware? Does this kurtosis make my butt look fat?

Previously in this series:

Questions America Wants Answered: Should Climateer Investing Drop the Finance/Investing Stuff and Devote Itself to Cat Videos?
Questions America Wants Answered: "What does a £15,000 whisky taste like?"
Questions America Wants Answered: What's the Best Measure of a Portfolio--Sharpe Ratio, Alpha or Geometric Mean? 
Questions America Wants Answered: "Which Unfinished Mega-mansion Do You Prefer?"
Questions America Wants Answered: Alphaville's Pub Quiz Edition
We'll just try to forget that I actually thought "Obese metropolitan oenophile punters" was a call for contestants.
The Questions America Wants Answered: "Can Megayachts Be Eco-Friendly?"
Questions America Wants Answered: Why Don't Companies Advertise on the Homeless?
Questions America Wants Answered: "Who Would Win in an All-Out Battle: Star Wars or Star Trek?"
Questions America Wants Answered: “Should I dilute the laudanum before rubbing it on the gums of my caterwauling baby?”
Questions America Wants Answered: "Stocks Keep Falling. But Why?"
Questions America Wants Answered: "Do Valuation Shorts Work Better Than Fraud Shorts?"
"Can Limited Nuclear Attacks De-Escalate Conflicts?"
Questions America (and maybe Ukraine) wants answered. 

Questions America Wants Answered: Is Sherlock Holmes in the Public Domain or Not?
Questions America Wants Answered: "Does Silent Assembly's New Bra Technology Spell The End Of The Underwire?"
Questions America Wants Answered: "Do Writers Deserve to Make a Living?"
Questions America Wants Answered: How Much Necklace Will a Million Bucks Get You?
Questions America Wants Answered: "How Far Out of Touch with the Real World Are Academic Economists?"
What Are Your Options If You Want a Private Compound in West Los Angeles?
Part of our Questions America Wants Answered series. 

Questions America Wants Answered: "Should Presidential Campaigns Spend More Money Manipulating Intrade?"
Questions America Wants Answered: "What do the Amish think of a Mormon presidential candidate?"
Questions America Wants Answered: When Caught in the Rain, Do You Stay Drier If You Run?
"Pro-forma I'm Miss America" (insurance and nakedness)
Questions America Wants Answered: "Does Forward Guidance Work?" - New York Fed
Questions America Wants Answered: "Is The Yield Curve Flattening? Does It Even Matter?"
Questions America Wants Answered: Was Leo DiCaprio’s ‘Wolf of Wall Street’ Paid for With Stolen Money?
Questions America Wants Answered: How Does Brexit Affect the Bordeaux Wine Market?
Questions America Wants Answered: Should You Have A Separate Toilet Room Inside Your Bathroom?
Questions America Wants Answered: 'Is Craft Beer Bullshit?'

And many more. Use the 'Search blog' box if interested. 

The Extraordinary Size of Amazon (AMZN)

File under: Great graphics.

From Global Macro Monitor:



"NY Times biz desk undergoing reorganization"

From TalkingBizNews, Jan. 30:
The New York Times business news desk is undergoing a reorganization as part of the newspaper’s broader overhaul.

Here is an email from business editor Dean Murphy on Monday to the staff explaining some of the changes so far:
You’ve read the 2020 report. You’ve listened to Dean’s Q/A sessions. You’ve seen our multiple job postings.

So what does this all mean for you and BizDay?

As we embrace new ways of storytelling and presenting the work that we do, business journalism at The Times remains purposeful, poignant and relevant. We investigate, explain, and, ultimately, serve. We break news, make news, and tell stories that are essential and that shape the conversation.

Already, readers look to us to sort through the background noise, to make sense of complex subjects and to be truthful and fair. (There is no better example than our contributions to the Trump coverage in recent days.) Now we are examining the ways we reach and engage our readers, and the priorities we set for our journalism. Business is a vital ecosystem that is forever evolving, and we are evolving with it, bringing our authority and deep expertise with us, and also our creativity and responsiveness to change.

To this end, we’re in the middle of a substantial reorganization that has been in the works for some months now. Not all of the pieces are in place, but there is much to report (so apologies for the length of this note):
  1. We remain excited about and committed to developing our core areas of coverage: finance, tech, media and economics.
Even as we talk about adjusting to a smaller newsroom, we’ve demonstrated this commitment in recent months by adding amazing muscle to our domestic and global staffs with the hiring of Kate Kelly, Jesse Drucker, Sui-Lee Wee, Dai Wakabayashi, Sapna Maheshwari, and Peter Goodman, as well as welcoming back (favorite son and daughter) Charles Duhigg and Jessica Silver-Greenberg. In addition, we are also actively recruiting for an economics editor and seven newly authorized staff positions in tech.
  1. As the broader newsroom becomes more organized around themes, some of our BizDay reporting colleagues and their beats are moving elsewhere:


Here's "The Report of the 2020 Group" at the NYT.

Benchmarking Extremely Diversified (multi-asset) Portfolios

From the CFA Institute's Enterprising Investor blog, Jan. 25:

Benchmarking Multi-Asset Portfolios: The Global Capital Stock
Multi-asset investing is nothing new.

William Sharpe first postulated that the market portfolio was the natural starting point in portfolio construction in 1964. The balanced portfolio, which held fixed proportions of bonds and equities, was another antecedent to today’s multi-asset portfolio.

With increased global access to various asset classes, multi-asset investing has entered the mainstream for certain second generation asset allocation methods — for multi-factor/multi-period models.

Constructing optimally diversified multi-asset portfolios is all the more critical for investors who follow the principles of such third generation asset allocation methods as adaptive asset allocation or adaptive risk management techniques.

Multi-asset investing’s growing popularity reflects these preferences: More than 14,000 multi-asset funds are offered in Europe alone.

Yet after all these years, the core question remains: How do you  know whether a multi-asset portfolio is worth the investment?

Observation vs. Opinion
Many institutions have policy guidelines based on their investment managers’ preferences and expectations about the risks and returns associated with each asset class.

Other institutional investors run peer-group comparisons with similar multi-asset managers or measure their portfolios against broadly defined total return indices.

But these are only work-arounds. No policy portfolio benchmark exists against which investors can measure their multi-asset investment strategy.

A hypothetical global index purist could simply buy all of the outstanding assets in the world. The resulting global market portfolio would include all risky assets in proportion to their market capitalization. The purist could then use this as a benchmark to compare strategies.

While this approach has an appeal, not all risky assets are investable or measurable. With publicly available financial databases, we can now compute a global investable market portfolio. Researchers at McKinsey Global Institute report built a “map” of global financial assets. However, their data incorporated only traditional financial assets, omitting alternative assets.

So other researchers went a step further and added real estate and private equity to their broader asset universe. But they only included investable assets, with their portfolio weights based on their assets under management (AUM).

One Step Beyond
Our calculations are the next logical stage in this evolution. Our springboard is the definition of “capital.”

Capital is “non-financial assets having a dual role in an economy, being both a source of capital services in production and a storage of wealth,” according to the United Nations System of National Accounts (UNSNA)....MUCH MORE
 Here's "The Global Capital Stock. A Proxy for the Unobservable Global Market Portfolio" at the SSRN:

This article summarizes our attempt to measure the current economic stock of a broad universe of risky assets worldwide. Therefore, by measuring the global capital stock of assets, financial and non-financial ones, we intend to provide a proxy for the global market portfolio. We compute the market value of global assets included in 11 asset classes for the period 2005-2015. Despite the lack of data for non-financial assets, we consider our methodologies sound and feel strongly optimistic about future development, which will further reduce the margin of error and then provide a more accurate benchmark for multi-asset portfolios.

Monday, January 30, 2017

Shipping: What the Heck Happened to Hanjin’s Ships and the Collapsed Freight Rates?

From Wolf Street: 

Bankruptcy reveals “opaque ownership.” And freight rates surge.
When Hanjin Shipping Co. declared bankruptcy on August 31, 2016, the world’s seventh largest container carrier, and the largest ever to go bankrupt, threw the shipping industry into chaos. Fully loaded ships were stranded at sea and in legal limbo. Supply chains were disrupted. Hanjin had been considered too-big-too-fail for South Korea, and the industry had relied on a bailout, but it was allowed to fail.

Now that Hanjin is being liquidated and that the logistical nightmares have cleared up, what happened to Hanjin’s 98 containerships – and their “opaque” ownership?

And what happened to container freight rates? They’d plunged to historic lows in the spring of 2016, among rumors that they’d collapse to “zero,” and had pushed already listing Hanjin to keel over entirely.

After Hanjin’s bankruptcy, its 98 ships with a combined nominal capacity of 610,000 twenty-foot equivalent container units (TEU) joined the already massive global idle fleet as overcapacity has been dogging the industry. According to Drewry Maritime Research, the total idle capacity soared from 904,000 TEU in August before Hanjin’s bankruptcy to a peak of 1.7 million TEU by mid-November. Nearly 9% of the global fleet was anchored somewhere, waiting for better days!

Since then, idle capacity has been dropping, “in large part due to some of those ex-Hanjin ships being re-chartered,” according to Drewry: 
So this is what happened to Hanjin’s 98 ships:
  • 4 smaller ships with a combined capacity of 15,000 TEU were scrapped. But only two of them were actually owned by Hanjin, the other two had been leased by Hanjin.
  • 31 ships with a combined capacity of 134,000 TEU are now plying the seas for other carriers.
  • 63 ships with a total capacity of 461,000 TEU remain idle.
Of those 31 Hanjin ships that have found new operators, only one had been owned by Hanjin....

Shipping: Hanjin Re/Insurance Loss Could be $2 Billion Says Credit Suisse
Shipping: "Welcome to the Hanjin California"
"Hanjin Shipping Rebounds As Creditors Talk Of Funding Support Again"
Shipping: AP Moller-Maersk Break-up, Hanjin Breakdown
Shipping: "Following Hanjin’s Collapse, Heavily Indebted Yang Ming at Risk of Financial Trouble"

BP Energy Outlook: GDP to Double By 2035; Oil Demand Growth To Slow

From BP:
The Energy Outlook sets out a base case which outlines the 'most likely' path for global energy markets until 2035, based on assumptions and judgments about future changes in policy, technology and the economy. The Outlook also develops alternative cases to explore key uncertainties
The main story in this year's Energy Outlook is about the energy transition that is taking place and is likely to continue to take place over the next 20 years. On the demand side, there's a shift in the pattern of demand, away from the US and Europe to fast-growing Asian markets. On the supply side, the story is one of a continuing shift in the fuel mix towards lower carbon fuels.
Spencer Dale, group chief economist
In the base case, the world’s economy almost doubles in size over the Outlook period, driven by fast-growing emerging economies, as more than two billion people are lifted from low incomes.
This rising prosperity drives an increase in global energy demand, although the extent of this growth is substantially offset by rapid gains in energy efficiency. Energy demand increases by only around 30% - around a third as much as the expected growth in the global economy.

The fuel mix continues to adjust: although fossil fuels remain the dominant source of energy, renewables, together with nuclear and hydro energy, provide half of the additional energy required out to 2035. Natural gas is expected to grow faster than oil or coal, helped by the rapid growth of liquefied natural gas increasing the accessibility of gas across the globe.

The most likely path sees carbon emissions from energy continuing to increase, indicating the need for further policy action and raising important choices and opportunities for our industry....MUCH MORE
Exploring four themes
Beyond the base case, the BP Energy Outlook examines some of the big issues that will shape energy supply and demand through to 2035 - and beyond.
The impact of electric cars on oil demand
Oil supplies in a world of increasing abundanc
Key uncertainty - a faster mobility revolution

HT: Next Big Future who pulled a few of the graphics:


Japan's Cheap Money Era May Be Coming To An End

If true this would upset more than a few apple carts.
From the Diplomat:

Japan’s Cheap Money Era May Be Ending
Japan is hopeful about the prospects of long-hoped-for inflation rates in the Year of the Rooster. 
The Bank of Japan’s (BOJ’s) war against deflation is far from over, but analysts are hopeful that 2017 may mark a turning point for the world’s third-largest economy.

Evidence that two decades of deflation have yet to be fully expunged came Friday, with core consumer prices excluding fresh food dropping by 0.2 percent in December for the 10th straight monthly decline. For 2016, core consumer prices dipped by 0.3 percent, the first annual fall under BOJ Governor Haruhiko Kuroda and despite massive monetary stimulus.
However, overall consumer prices rose by 0.3 percent in December, with analysts suggesting a weaker currency and rising oil prices could contribute to stronger inflation in 2017.

“Core CPI will likely return to gains as early as February, and may reach 1 percent around October,” Hiroaki Muto, chief economist at Tokai Tokyo Research Center, told Bloomberg News, adding, “It’s all about energy prices this year.”

Okasan Securities chief economist, Nobuyasu Atago, told the financial news service that “CPI [consumer price index] is at the turning point – it’s gradually gaining momentum,” although he warned about the need for stronger wages growth and consumer spending to ensure a sustainable upturn.

The BOJ’s latest forecasts suggest inflation will not reach its 2 percent target until fiscal 2018, despite having introduced the price stability target in January 2013. Along with zero interest rates, the central bank has conducted both quantitative and qualitative monetary easing (QQE) to reach its goal, including currently buying 80 trillion yen ($695 billion) worth of Japanese government bonds a year, along with exchange-traded funds and other assets.

Analysts suggest the BOJ will be in no hurry to change policy at its upcoming policy meeting later this month. Yet stronger recent economic data could prompt an upgrade to its forecasts, according to Japan’s Nikkei.

In December, the BOJ upgraded its outlook for the national economy for the first time in 19 months, while Kuroda suggested recently that gross domestic product (GDP) could expand by around 1.5 percent in fiscal 2016 and 2017, above previous forecasts....MUCH MORE

"Does Clickbait cause blindness? Yes it does" (FB)

That's the sub-head at the Register:

Facebook ad biz comes scrutiny in MPs ‘Fake News’ probe
Zeitgeist-hungry MPs at the UK Parliament will conduct an inquiry into “Fake News”.

The Culture Media and Sport select committee will look at trying to define modern propaganda, its impact, and also asks whether “changes in the selling and placing of advertising encouraged the growth of fake news, for example by making it profitable to use fake news to attract more hits to websites, and thus more income from advertisers?”

It also wants to know if giant internet platforms (like Facebook and Google) have responsibilities - “particularly those which are accessible by young people” - and whether computer algorithms are “viable”.

“Just as major tech companies have accepted they have a social responsibility to combat piracy online and the illegal sharing of content, they also need to help address the spreading of fake news on social media platforms,” Collins said in a statement launching the inquiry.

He said MPs will also examine the idea that new “tools” could help weigh the truthiness of an article – a proposal rife with potential for abuse. (Who censors the censors?) China lost little time in citing the post-election concern over “Fake News” to implement its own crackdown.

Facebook finds itself under fire for its so-called “News” feed, and the clickbait business model that incentivises generators of low quality content. Facebook experimented with human curators of News last year before opting to promote stories via algorithms.
To be fair, MPs sound mildly sceptical about the whole thing:

“Are there differences between the UK and other countries in the degree to which people accept 'fake news', given our tradition of public service broadcasting and newspaper readership?”...


Clicking On Clickbait WILL Lower Your IQ
This Machine Writes Better Clickbait Than You: How it works will shock you
Why Is FT Alphaville Obsessed With North Korea's Kim Jong-Un? 
Bloomberg: Goldman Sachs, Sex, Viagra, Tiger Woods, and Barack Obama
The New Trend In Apps: Content Blockers 
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Ag Futures: "Hedge funds hike bullish bets on ags - but is this a high water mark?"

Last Chg
Corn 358-4-4-0
Soybeans 1035-0-14-2
Wheat 416-2-4-2

From Agrimoney:

Hedge funds, despite a sell-off in cocoa, hiked bullish bets on agricultural commodities to the highest in seven months, in a move which raised some ideas that further such buying may be harder to come by.
Managed money, a proxy for speculators, hiked its net long position in futures and options in the top 13 US-traded agricultural commodities, from hogs to sugar, by 145,883 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.
The increase in the net long – the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – took it to 737,652 contracts, doubling so far in 2017 to its highest level since June.
And it reflected a further rise in bullish positioning in both grain and livestock complexes, contrasting with an easing in the net long in New York-traded soft commodities under the weight of a wave of selling in cocoa, in which speculators' gross short position hit a record high.
'Could prove bearish'
In US-traded grains, including the soy complex, hedge funds turned bullish at the fastest rate since April top lift their net long above 300,000 lots for the first time in six months, spurred by concerns over the dent to Argentine row crop prospects after heavy rains.
However, with Argentine weather fears now easing - MDA said that "drier weather in central crop areas is allowing wetness concerns to ease a bit" – investors flagged doubts over speculators' willingness to extend bullish bets.
On soybeans, for instance, broker Benson Quinn Commodities said that the "big increase in the fund long" as revealed by the Commodity Futures Trading Commission data "could prove bearish" for futures....MORE

Currencies: "State of the Dollar's Downside Correction" (DXY; GBP; EUR)

This is Mr. Chandler's Saturday post, his Monday commentary is linked after the jump.
Here's the last twelve month's action in the dollar index via FinViz:

 100.97 up 0.44.

And here's Marc to Market, Jan. 28:
The US dollar spent the first month of the new year correcting lower after a strong advance in the last several months of 2016. We argue that the correction actually began in mid-December following the Federal Reserve's rate hike.  Over the last two week, we have been cautioning that greenback's downside momentum was fading and the correction was coming to an end.  We retain that view and have been encouraged by the recent price action.

The Dollar Index found a base 99.80-99.90. It spent the last session completely above 100 for the first time in a week.  After being essentially flat the first week of the year, the Dollar Index lost 1% in the second week and 0.5% in the third week.  Last week it fell about 0.25%.  The fading downside momentum is not the same thing as a renewed uptrend.  For that, it must move back above the 101.00-101.30 area.  

A small bullish divergence is being seen in the RSI, where the new lows in the index were not matched with new lows in the technical indicator.  The MACDs and Slow Stochastics have not turned, but they have flattened out, which are still consistent with the next significant move being to the upside.  That said, a break of the 99.40-99.60 area would undermine the constructive technical case we have been building.

The euro's five-week advance was snapped, as the single currency finished marginally lower on the week.  The euro stalled near $1.0770, in front of the 50% retracement target (~$1.0820) of the sell-off since the US election. The MACDs and Slow Stochastics have not turned down yet, but they seem poised to do so next week.  The euro has not violated the trend line drawn off the January 3 low near $1.0340.  It is found on Monday near $1.0675 and $1.0740 at the end of next week.  We had suggested a close below $1.0660 would bolster the chances that a high is in place, but more cautious participants may want to monitor the 20-day moving average.  The euro has not closed below it since January 3.  It was near $1.0620 before the weekend.

The dollar rose against the yen last week for the second consecutive week and the third advance in the past four weeks.  The dominant chart pattern is a potential double bottom near JPY112.50. The neckline was formed by the high on January 19 near JPY115.60, which also corresponds with a 50% retracement objective of the dollar's push lower from the early January high near JPY118.60. The minimum measuring objective of the double bottom projects toward that high.  The dollar finished the week above the 20-day moving average (~JPY115.10) for the first time since January 4. The Slow Stochastics have turned higher, and the MACDs are poised to do so.  The RSI is also trending higher.  A break of JPY114.25 would be an initial indication that this constructive outlook may be wrong.

From the January 16 gap lower opening through January 26, sterling gained almost 6% against the US dollar.  It reached almost $1.2675 before running out of steam.  We identified several technical considerations that suggested potential toward $1.28.  First, a potential inverse head and shoulders pattern may have been carved....MORE
January 30:

Sunday, January 29, 2017

"How to Speed Read the Internet"

1. Low latency machine-readable data feeds.
2. Employees
3. Today's link

From Inverse:
In an age of information overload, is there a quicker way to digest everything?
Humans are inundated with more online information now than ever, but there are a few ways to take it in without taking it all in.

Speed reading is defined as reading up to three times faster than normal — without losing any comprehension. The scientific community mostly agrees that speed reading at perfect comprehension is impossible; most people are incapable of glossing over words so quickly without missing important information. In fact, when someone thinks they are speed reading, they’re probably just skimming.
That doesn’t mean you can’t try to speed read the Internet, according to experts who offered some tips.

Only skim what you know.
When a college-educated person reads text, they read at a speed of about 200 to 400 words per minute. There is huge variation in there, and it all depends on how closely a person is sticking to the text. By that count, a typical news article takes approximately five minutes. When a person speed reads, however, they cut that time in half.

“There’s a tradeoff between speed and accuracy,” said Elizabeth Schotter, assistant professor in cognition and neuroscience at the University of South Florida. “As you go faster you aren’t going to be able to get as detailed information out of the text. You want to develop more effective skimming techniques like reading just the parts of a story that you need.”

Think of skimming as a way of sampling.
Skimming can serve as an exercise in efficiency and prioritization: Is what you’re reading actually worth your time? According to Marcel Just, director of the Center for Cognitive Brain Imaging at Carnegie Mellon, “Sometimes you’re really familiar with something and you can reconstruct the text after skimming. Speed reading isn’t a good method for expanding your knowledge base, but it is a good way to quickly determine what some piece of writing is about and whether it’s worthwhile to go read it in detail or not.”

If you’re an expert in astronomy, for example, you probably don’t need to read an entire article about how a lunar eclipse happens, but skimming it can be an effective way to pick up small details fairly quickly and efficiently. ....MORE
That was the counsel of one of my mentors, many years ago. I've mentioned it a couple times.*
In one of her recent posts on her personal blog the FT's Izabella Kaminska commented en passant on keeping up with the flow of information. It can seem overwhelming at times but it's pretty much the essence of the Information Age.

The thing to do is avoid wasting the time you have and that means employing a range of hacks: From paying people to pre-screen what you focus on to constantly asking yourself if the task at hand is the highest value use of your time. It's not easy and it does take some effort because the tendency of the universe is towards entropy and people are lazy but it does not kill one to absorb large amounts of information and convert the info into knowledge and hopefully wisdom.

From Dizzynomics...
Does Your Career Entail Reading A Large Volume Of Not Very Interesting Material? Here's a Simple Hack To Speed The Job Along
So You've Rewired Your Brain To The Point You Can't Read A Book. Idiot
Probably related:
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."...

"Mystery death of ex-KGB chief linked to MI6 spy's dossier on Donald Trump"

From The Telegraph, Jan. 27:
An ex-KGB chief suspected of helping the former MI6 spy Christopher Steele to compile his dossier on Donald Trump may have been murdered by the Kremlin and his death covered up. it has been claimed.

Oleg Erovinkin, a former general in the KGB and its successor the FSB, was found dead in the back of his car in Moscow on Boxing Day in mysterious circumstances.

Erovinkin was a key aide to Igor Sechin, a former deputy prime minister and now head of Rosneft, the state-owned oil company, who is repeatedly named in the dossier.

Erovinkin has been described as a key liaison between Sechin and Russian president Vladimir Putin. Mr Steele writes in an intelligence report dated July 19, 2016, he has a source close to Sechin, who had disclosed alleged links between Mr Trump’s supporters and Moscow.

The death of Erovinkin has prompted speculation it is linked to Mr Steele’s explosive dossier, which was made public earlier this month. Mr Trump has dismissed the dossier as “fake news” and no evidence has emerged to support its lurid claims.
The Russian state-run RIA Novosti news agency reported Erovinkin’s body was “found in a black Lexus... [and] a large-scale investigation has been commenced in the area. Erovinkin’s body was sent to the FSB morgue”.

No cause of death has been confirmed and the FSB continues to investigate. Media reports suggested his death was a result of foul play....MORE
The headline at The Independent:
KGB chief linked to Trump file found dead amid Kremlin cover up claims

Internet of Things: "Hotel ransomed by hackers as guests 'locked in' rooms"--UPDATED, CORRECTED

Update: We added the quotation marks around 'locked in', due to this line at Motherboard:
“This is totally wrong,” hotel owner Cristoph Brandstaetter told Motherboard. “It was just a normal cyberattack and no guests were locked in.”
Motherboard continued:
The main problem, according to Brandstaetter, was the hotel was unable to issue new key cards to guests who arrived during the 24 hours that the hotel’s reservation system was down. Ultimately, Brandstaetter was forced to pay the ransom after failing to secure help from the police....
Rest is fine.* 

Original post:
From The Local (Austria) 28 January 2017:

One of Europe's top hotels has admitted they had to pay thousands in Bitcoin ransom to cybercriminals who managed to hack their electronic key system, locking hundreds of guests in or out of their rooms until the money was paid. 
Furious hotel managers at the Romantik Seehotel Jaegerwirt, a luxurious 4-star hotel with a beautiful lakeside setting on the Alpine Turracher Hoehe Pass in Austria, said they decided to go public with what happened to warn others of the dangers of cybercrime.

And they said they wanted to see more done to tackle cybercriminals as this sort of activity is set to get worse. The hotel has a modern IT system which includes key cards for hotel doors, like many other hotels in the industry.

Hotel management said that they have now been hit three times by cybercriminals who this time managed to take down the entire key system. The guests could no longer get in or out of the hotel rooms and new key cards could not be programmed.

The attack, which coincided with the opening weekend of the winter season, was allegedly so massive that it even shut down all hotel computers, including the reservation system and the cash desk system.

The hackers promised to restore the system quickly if just 1,500 EUR (1,272 GBP) in Bitcoin was paid to them.

Managing Director Christoph Brandstaetter said: "The house was totally booked with 180 guests, we had no other choice. Neither police nor insurance help you in this case.

"The restoration of our system after the first attack in summer has cost us several thousand Euros. We did not get any money from the insurance so far because none of those to blame could be found."
The manager said it was cheaper and faster for the hotel to just pay the Bitcoin....MORE
Earlier today:
"Click Here to Kill Everyone"

*'Rest is fine' is one of the categories of newspaper corrections that Craig Silverman of the formerly stand-alone Regret the Error, which moved to Poynter, uses. Here's an NYT example from 2007, emphasis mine:
An art review in Weekend last Friday about “Paradise in Print,” an exhibition at the New York Botanical Garden in the Bronx that includes images of breadfruit, included a number of incorrect historical references to the works.

Britain’s plan to export breadfruit from Tahiti to the West Indies in the late 18th century eventually succeeded; the plan was not abandoned after the 1789 mutiny on the Bounty, although that ship’s breadfruit cargo was lost.

During the mutiny, the Bounty was sailing near the Tonga archipelago; it was not then in Tahiti.
The author of an 1820s text on medicinal plants that includes an engraving of a coffee plant that is on display was François Pierre Chaumeton — not Pierre Turpin, who executed the engraving.

The creator of an 18th-century image of a basket of fruit in the exhibition was William Jowett Titford, not Georg Dionysius Ehret.

And the artist of an engraving in a 1685 treatise on coffee by Philippe Sylvestre Dufour is unknown; it is not directly attributed to Dufour. Link
Rest is fine
Here's one of the corrections at Poynter:

New York Times column used quote from fake news site ‘without attribution’
...added (as an Editor's Note):
An earlier version of this column was published in error. That version included what purported to be an interview that Kanye West gave to a Chicago radio station in which he compared his own derrière to that of his wife, Kim Kardashian. Mr. West’s quotes were taken, without attribution, from the satirical website The Daily Currant. There is no radio station WGYN in Chicago; the interview was fictitious, and should not have been included in the column.
We highlighted a Reuters correction in 2012:
It's best if you can do it right the first time but if that doesn't happen you've got to fess up to the facts.
From a Reuters story, yesterday:
(Editing by David Lindsey and Eric Walsh)

(Removes words "and at times has had difficulty paying his mortgage," paragraph 7; removes "he did not make payments on a $100,000-plus student loan" and instead states "he did not pay down the balance of a $100,000-plus student loan," paragraph 10; removes "he was caught up in an Internal Revenue Service Investigation" and instead states "his name surfaced in an Internal Revenue Service investigation," paragraph 12; removes "voted against Sonia Sotomayor, Obama's Supreme Court nominee" and instead states "opposed President Barack Obama's Supreme Court nomination of Sonia Sotomayor," paragraph 41; removes "voted against Obama's healthcare overhaul" and instead states "opposed Obama's healthcare overhaul," paragraph 41)
Rest is fine.
At least it's not as egregious as:

Newspaper Retracts Editorial on Gettysburg Address
From Poynter:
In 1863, the Harrisburg, Pa. paper then known as the Patriot & Union published an editorial about Abraham Lincoln’s Gettysburg Address.
They panned it:
We pass over the silly remarks of the President. For the credit of the nation we are willing that the veil of oblivion shall be dropped over them and that they shall be no more repeated or thought of....
Here's today's Patriot-News:
...In the editorial about President Abraham Lincoln’s speech delivered Nov. 19, 1863, in Gettysburg, the Patriot & Union failed to recognize its momentous importance, timeless eloquence, and lasting significance. The Patriot-News regrets the error. 
Hey, at least they used the proper "regrets the error".
Finally, possibly greatest of all time from the Ottawa Citizen:
“The Ottawa Citizen and Southam News wish to apologize for our apology to Mark Steyn, published October 22nd.
In correcting the incorrect statements about Mr. Steyn, published October 15th, we incorrectly published the incorrect correction.

We accept and regret that our original regrets were unacceptable, and we apologize to Mr. Steyn for any previous distress caused by our previous apology.”
HT: Jay Leno

"Click Here to Kill Everyone"

The writer is one of the gurus* of the cybersecurity biz.

From New York Magazine's Select/All:

With the Internet of Things, we’re building a world-size robot. How are we going to control it?
Last year, on October 21, your digital video recorder — or at least a DVR like yours — knocked Twitter off the internet. Someone used your DVR, along with millions of insecure webcams, routers, and other connected devices, to launch an attack that started a chain reaction, resulting in Twitter, Reddit, Netflix, and many sites going off the internet. You probably didn’t realize that your DVR had that kind of power. But it does.

All computers are hackable. This has as much to do with the computer market as it does with the technologies. We prefer our software full of features and inexpensive, at the expense of security and reliability. That your computer can affect the security of Twitter is a market failure. The industry is filled with market failures that, until now, have been largely ignorable. As computers continue to permeate our homes, cars, businesses, these market failures will no longer be tolerable. Our only solution will be regulation, and that regulation will be foisted on us by a government desperate to “do something” in the face of disaster.

In this article I want to outline the problems, both technical and political, and point to some regulatory solutions. Regulation might be a dirty word in today’s political climate, but security is the exception to our small-government bias. And as the threats posed by computers become greater and more catastrophic, regulation will be inevitable. So now’s the time to start thinking about it.
We also need to reverse the trend to connect everything to the internet. And if we risk harm and even death, we need to think twice about what we connect and what we deliberately leave uncomputerized.
If we get this wrong, the computer industry will look like the pharmaceutical industry, or the aircraft industry. But if we get this right, we can maintain the innovative environment of the internet that has given us so much.

We no longer have things with computers embedded in them. We have computers with things attached to them.

Your modern refrigerator is a computer that keeps things cold. Your oven, similarly, is a computer that makes things hot. An ATM is a computer with money inside. Your car is no longer a mechanical device with some computers inside; it’s a computer with four wheels and an engine. Actually, it’s a distributed system of over 100 computers with four wheels and an engine. And, of course, your phones became full-power general-purpose computers in 2007, when the iPhone was introduced.

We wear computers: fitness trackers and computer-enabled medical devices — and, of course, we carry our smartphones everywhere. Our homes have smart thermostats, smart appliances, smart door locks, even smart light bulbs. At work, many of those same smart devices are networked together with CCTV cameras, sensors that detect customer movements, and everything else. Cities are starting to embed smart sensors in roads, streetlights, and sidewalk squares, also smart energy grids and smart transportation networks. A nuclear power plant is really just a computer that produces electricity, and — like everything else we’ve just listed — it’s on the internet.

The internet is no longer a web that we connect to. Instead, it’s a computerized, networked, and interconnected world that we live in. This is the future, and what we’re calling the Internet of Things.
Broadly speaking, the Internet of Things has three parts. There are the sensors that collect data about us and our environment: smart thermostats, street and highway sensors, and those ubiquitous smartphones with their motion sensors and GPS location receivers. Then there are the “smarts” that figure out what the data means and what to do about it. This includes all the computer processors on these devices and — increasingly — in the cloud, as well as the memory that stores all of this information. And finally, there are the actuators that affect our environment. The point of a smart thermostat isn’t to record the temperature; it’s to control the furnace and the air conditioner. Driverless cars collect data about the road and the environment to steer themselves safely to their destinations.

You can think of the sensors as the eyes and ears of the internet. You can think of the actuators as the hands and feet of the internet. And you can think of the stuff in the middle as the brain. We are building an internet that senses, thinks, and acts....MORE
In 2014, security guru Bruce Schneier...

On the September-October 2016 events:

Uh Oh: Internet Security Pro Hit By Botnet Made Of Internet-of-Things Connected Cameras
This is very bad....

Details Emerge On The Big Internet-of-Things Hack: This Is Just Sick

"This Is Probably Why Half the Internet Shut Down Today [Update: It’s Happening Again]"

Elbonians Will Rue The Day - Dilbert by Scott Adams