Friday, June 30, 2017

What the Market Needs now is...Earnings

Okay, enough of the 'Love, Sweet, Love' in the post immediately below.

From StockCharts' ChartWatchers newsletter:
The market moved into a rare funk last week as traders decided in unison to take profits, especially in the tech heavy NASDAQ. This is quite understandable with all three of the major indexes hitting record levels during the month of June.

There are various theories as to why stocks took a tumble from being overpriced to worries about the lack of progress with the health care bill to quarter end window dressing to a more aggressive Fed. Whatever the reason, there's always one good remedy that seems to cure all market ills; solid earnings.

Just take a look at the chart below of the S&P and you will see how the market perked up right after earnings season began in January for 2016 Q4 and then again in April for 2017 Q1.
The good news for the bulls is the 2017 Q2 earnings season will kick off over the next few weeks and for a solid month+ we'll be getting earnings reports galore. And if companies continue to show earnings growth it could help to get stocks back on track....

Of course we'll continue to see headlines that stymie the market but those headlines will become less important once actual numbers start to get released....MORE
Previously on Q2 earnings, Trinity Asset Management's Fundamentalis blog:
Second Quarter 2017 S&P 500 Earnings Will Likely See at Least 10% – 12% Y/Y Growth

This Is So Beautiful

(click through for the poetry)

"‘Aristocrat of wheat’ soars in price as US drought worsens"

From the Financial Times:

Grain favoured for bagels and pizza crust has been hit by High Plains weather
The price of a wheat prized for baking bread has soared on the back of a worsening drought in the US High Plains, attracting record trading volumes and hedge fund activity in an otherwise sleepy corner of the commodities markets.

Hard red spring wheat — the “aristocrat of wheat”, according to US Wheat Associates, an export promotion body — hit a three-year high on the Minneapolis Grain Exchange after gaining 32 per cent in the month of June.

The grain variety is grown during the summer in only a handful of places, notably South Dakota and North Dakota. Data released Thursday by the US Drought Monitor show more than 90 per cent of the two states was in drought, with “severe” or “extreme” conditions in dozens of counties.

“Basically, the crop is burning up,” said Joe Lardy, research manager at CHS Hedging, a commodities broker....MUCH MORE 
Here's this week's U.S. Drought Monitor via the University of Nebraska-Lincoln:

Current U.S. Drought Monitor
And the High Plains regional pic:

U.S. Drought Monitor forHigh Plains
This month:
June 30
Ag Futures: Ahead of Big Data Day Some Exuberance in Grains
June 15
Ag Futures: "Spring wheat is losing its grip"
June 13
"'Abysmal' US crop rating sends spring wheat futures to two-year top"
June 13
Ag Futures: "Spring wheat futures soar anew, as US crop rating tumbles"
June 8
Ag Futures: "Talk of 'Blast Furnace Winds' Fuels Grain Gains"
June 7
Ag Commodities: Ahead of this Week's Reports "Grains Tick Higher, But 'Explosion' Not Seen Yet
June 6
Ag Commodities: Weather Taking a Toll on Spring Wheat Sayeth Yesterday's Crop Progress Reports
June 5
Ag Futures: 'When Should We Start Paying Attention to Crop Condition Ratings for Corn and Soybeans?'

Correction—Gauguins's "When Will You Marry" Was NOT Sold For $300 Million—Correction (lawsuit reveals actual price)

For the record, here's how you do a 'Regret the error' .gif:

When a journalist accidently misquotes a source

That was from Party like a Journalist, last seen in 2014's "Upworthy Does a Correction On The McDonald's Chicken McNuggets Video" and appropriate here.

In January 2016 we posted Questions Americans Are Asking: "Are Paintings Pricier than Soccer Players?":
Okay, maybe not all Americans.
From The Creators Project:
In terms of money, 2015 was a great year for art. In February, Paul Gauguin's When Will You Marry? became the most expensive work of art ever when it sold for nearly $300 million (€275 million). A few months later, Les Femmes d’Algers (Version “O”) by Pablo Picasso set records as the most expensive painting ever sold at auction, when it was bought for $179 million (€164 million).
When Will You Marry? by Paul Gauguin, 1892,  via Wikimedia Commons, and Gareth Bale, via Wikimedia Commons
So for now, art is winning. The most expensive soccer player in the world, Welsh winger Gareth Bale, was sold to Real Madrid for €100 million in 2013. In 2015, the most expensive player was Belgian Kevin de Bruyne, who was sold to to Manchester City for €75 million—which amounts to a quarter of the price of that Gauguin painting.

But for how much longer will Picassos out-price players? Clubs are increasingly able to establish a total player value no Gauguin can match—Manchester City recently established a team worth upwards of €400 million. Thanks to a mix of corrupt bosses, lack of controls, and soccer sugar-daddies from abroad, transfer fees seem to be increasing exponentially in recent years. And while soccer is the world’s favorite sport, no one player’s career value is as timeless as that of a Picasso or a Van Gogh.

This upward drift in transfer fees can easily be visualized in a graph. If current trends hold, then the most expensive soccer player in 2025 will cost more than €160 million....MORE
In February of this year we repeated the error with "Sotheby’s Hires Wall Street Vet to Head Private Sales" (BID), although, in our defense we at least expressed a bit of scepticism:
...The three (reputedly) most expensive paintings were all traded privately:
"Qatar Purchases Cézanne’s The Card Players for More Than $250 Million, Highest Price Ever for a Work of Art"
Cézanne, The Card Players
$259 million- April 2011

Questions Americans Are Asking: "Are Paintings Pricier than Soccer Players?"
Gauguin, When Will You Marry?
$300 million February 2015

Ahem. The Art Market May Still Be Alive: Speculation That Citadel’s Kenneth Griffin Spent $500 Million On a 2-Piece Private Sale
deKoonig, Interchange 
$300 million September 2015

We happened to have a post on each one.

And now this, via Art Market Monitor:

Simon de Pury’s Lawsuit Reveals True Price Paid for Gauguin’s Nafea faa ipoipo (When will you marry?)
There’s a lawsuit in the UK that gives us a narrative of the $300m sale of Gauguin’s Nafea faa ipoipo (When will you marry?) which was bought from Rudolf Staechlin’s family foundation in 2014 for an endlessly repeated report of $300m privately, one of the key events in marking the top of the art market in the 2014-15 period.

It turns out that the sale was for $210m and that is a source of some recriminations between the seller and one of the intermediaries who is suing to get a commission.

Simon de Pury went to school with Staechelin and acted as a go-between for Guy Bennett, the al-Thani family’s representative in art dealings. But de Pury tried one of the oldest sales moves, get the buyer and seller talking and hope one of them will move.

Turns out the Qataris were firm on their price and Staechelin eventually compromised:...MORE

Ag Futures: Ahead of Big Data Day Some Exuberance in Grains

Symbol Last Chg
Corn 371-4+2-0
Soybeans 927-4+2-6
Wheat 508-6+12-6

From Agrimoney:

AM markets: big day for grains starts on a firm note, but...
A particularly big day on grain markets opened on more volatile note in many contracts than might be imagined.
Often, grain markets freeze ahead of the kind of US Department of Agriculture data that will be released later on Friday – much-anticipated statistics on US grain stocks (as of June 1) and on crop sowings.
These two briefings have a history of causing massive price volatility on release, so prompting a bit of market caution beforehand.
The reports "have historically been big market movers so an already frothy market could be spooked again", said CHS Hedging.
And that is not all that investors have to worry about, with the calendar bringing month end, a period when funds are often said to close positions, with the trend potentially enhanced this time by the occurrence of quarter-end too.
Furthermore, there is the prospect next week of the US July 4 holiday, meaning a curtailed (and likely low-volume) session on Monday, and no main trading session on Tuesday itself.
'Weather woes…'
Still, the spotlight is being taken away from such considerations in the wheat market especially by weather considerations, and the potential for even more damage to the US spring wheat crop from drought in its northern Plains heartland.
"US weather woes continue to support the market," said Terry Reilly at Futures International.
"Supportive features haven't changed," said Benson Quinn Commodities.
Western areas of the northern Plains "remain very dry, which is expected to continue for at least the next week.
"Additionally, temperatures are warming after a period of relatively benign temperatures through much of the region."...MORE
Chicago wheat over the last year, and in particular the last month gets one's attention, what with the verticality and all while the Minneapolis variety is, simply, approaching escape velocity:

Chicago via FinViz

Minneapolis via the MGEX:

Washington Talks Fail to Secure Breakthrough in Qatar Crisis; Saudis Turn Screws on Qatar With Currency Blockade

First up, al Monitor, June 29:
WASHINGTON — Qatar’s top diplomat told an audience here today that his country is willing to have a dialogue with Arab Gulf states that have been blockading the tiny country for more than three weeks. But he rejected their ultimatum that Doha agree to a list of non-negotiable demands, from closing Al Jazeera news channel and a Turkish military base to downgrading diplomatic relations with Iran.

“We are willing to negotiate with our neighbors, but we won’t compromise our sovereignty,” Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani told journalists and experts at an event hosted by the Arab Center Washington DC.

The blunt remarks confirmed the prevalent mood that the parties remain as far apart as ever despite days of talks in the US capital.

Secretary of State Rex Tillerson cleared much of his schedule this week to huddle with Al Thani and Kuwaiti officials trying to mediate the dispute. But the State Department acknowledged today it was unsure when the crisis might get resolved.

“Everyone gets it,” State Department spokeswoman Heather Nauert said at her press briefing today. “This needs to be resolved. When it will be resolved, we are not certain of it at this time.”
Nauert said the rival camps need to negotiate.

“We hope the parties get together and recognize that there is going to be a negotiation,” Nauert said. “We are standing by and ready to help.”

Saudi Foreign Minister Adel al-Jubeir earlier this week told journalists at a press briefing that the demands from Saudi Arabia and the United Arab Emirates are non-negotiable.

“It's very simple. We made our point. We took our steps. And it's up to [Qatar] to amend [its] behavior,” Jubeir told journalists June 27. “And once they do, then things will be worked out. But if they don't, they will remain isolated. If Qatar wants to come back into the GCC [Gulf Cooperation Council] pool, they know what they have to do."

Without naming Saudi Arabia, Al Thani criticized the remarks. The Qatari envoy said such ultimatums were hard to stomach.

“I emphasized [to Tillerson] that suggestions by one party that their demands are non-negotiable are not helpful,” Al Thani noted....MORE
And From Sputnik, June 30:

Riyal Boycott: Saudi Arabia Turns Screws on Qatar With Currency Blockade 
Residents of Qatar are having problems exchanging their riyals after exchange services worldwide stopped accepting them, following the economic blockade announced by Saudi Arabia and its Arab allies.

The Qatari riyal has fallen to its lowest trading value against the dollar in 12 years as a result of the boycott of Qatar by a group of Arab countries.

On June 5, Saudi Arabia, the UAE, Bahrain, Egypt, Yemen and Libya cut diplomatic ties with Qatar, alleging that the Gulf nation supports terrorists and militant groups with ties to Iran.

Saudi Arabia closed the crossing at Qatar's only land border, which Qatar uses to import about 40 percent of its food supplies. Qatar's Arab neighbors also denied permission for the national carrier Qatar Airways to use their airspace, and airline carriers from the UAE canceled all flights to Doha.

Iran, with which Qatar shares a natural gas field in the Persian Gulf, and Turkey, which has a military base in Qatar, have sent deliveries of food and other supplies to Qatar by sea.

While the Qatari riyal has been officially pegged at $3.64 to the dollar since 2005, offers for the currency have fallen below the fixed rate amid a fall in demand. According to Bloomberg data, the spot exchange rate for the riyal dipped to 3.79 on June 26, before recovering to 3.72 on Friday....MORE

Thursday, June 29, 2017

"Mayo-scandal firm Hampton Creek from San Francisco going whole hog for Frankenmeat: report"

I like the descriptor "Mayo-scandal firm...".

From the Mercury News' SiliconBeat blog, June 27:
Unicorn meat could be on the menu as soon as the Christmas after next.

That would be meat made by a unicorn, not meat from a unicorn.

San Francisco food startup Hampton Creek, whose $1.1 billion valuation gives it the legendary status of the one-horned beast, and whose alleged affinity for the purchase of its own products once gave it a black eye, claims it will have lab-grown meat on the market within a year and a half, according to a new report.

“For the last year, it has been secretly developing the technology necessary for producing lab-made meat and seafood,” online magazine Quartz reported.

The firm will have “something out there on the marketplace” by the end of 2018, CEO Josh Tetrick told Quartz.

One or two major traditional meat producers will invest in the company soon as a result of ongoing talks, Tetrick said.

Now, Hampton Creek has a hurdle: to make Frankenmeat with current methods, blood sucked from the fetuses of pregnant cows — aka “fetal bovine serum” — must be mixed up in a vat with meat cells and other goodies to trigger the cells to reproduce, according to Quartz. And while fetal bovine serum is not nearly so rare as fetal unicorn serum, supplies are apparently limited.
“But Hampton Creek says its scientists are investigating other ways to trigger cells to reproduce, by replacing the cow blood with nutrients coming from plants,” the magazine reported.

If the company can get a lab-grown meat product to market in the time-frame claimed, it may beat another Bay Area firm, Memphis Meats. Memphis last year said it had made beef meatballs in the lab, and in March announced it had created Frankenchicken and Frankenduck, although it didn’t use those exact words. However, Memphis said it was aiming for a 2021 product launch, long after Hampton Creek’s target date....MORE
Frankenduck's not bad either, I may have to learn more about this "".


Just Mayo Guy, Hampton Creek's Josh Tetrick, Pivots to Industrial Scale Ingredient Supply Biz
Hampton Creek (Just Mayo) Reports an Attempted Employee Coup
Hampton Creek: Remember All Our Vegetarian Talk? Never Mind
Bro Culture Apparently Works Best With An Unending Supply of Other People's Money: Hampton Creek Edition

Gambler's Ruin and Bet Sizing

A topic of abiding interest.
From ZeroHedge, June 25:

"Big Swinging Dick" Defined
"Big Swinging Dick: (Very) informal and somewhat derogatory; a trader who believes his methodology is perfect and will always result in sizable profits. However, it originally was a term of self-designation for major bond-traders. The term was popularized by the book Liar's Poker, which describes the author's experience as a bond trader on Wall Street in the 1980s." Source: financial dictionary
While much has been written about trade size, meaning how much trading capital should be risked on each trade, this remains a nebulous imprecise topic.
That’s unfortunate because it can make all the difference between staying in the game or losing all trading capital – known in the business as “blowing up”. Yes, even (especially) if you are a big swinger.

The concept of a "trading edge" is central here. Broadly speaking, this is how much a trader is expected to make over a reasonable number of trades (meaning, with some statistical significance), taking into consideration the risk of loss and how much will be made or lost with each trade on average.

Basically, if you don’t know what your edge is you should not be trading, or gambling for that matter. Buying and holding for some time perhaps, but not regularly going in and out of the market without a good plan.

Let’s assume that you are in a situation where you have a negative edge, by definition meaning you are likely to lose money over a large enough number of trades. The conventional example is a casino, where as we know the house always wins in the end because of that reason. So as you walk through the entrance, how large should your bet size be?
Surprisingly to some, the answer is actually 100% of your capital, meaning all of it, in one go – more so if the edge is especially unfavorable to you.

Casinos want to keep their patrons gambling for as long as possible, because they know the longer they keep on playing the greater the chances they will give back all their winnings and then some. Therefore, if the goal is to maximize expected profits go for all or nothing, then walk away (unless you are there to have a good time, in which case bet as little as possible each time).

The other situation where 100% is appropriate is at the other side of the spectrum, when a trader just can’t lose. The more capital traded each time the higher the profits will be since there are no losses. This of course is unrealistic in any speculative endeavor. It’s mentioned here for illustrative purposes only.

The much trickier question lies in between those two scenarios, when there is a positive edge but no certainty of profit. What to do in this situation?

Let's assume there is a 99% chance of doubling your money versus 1% of losing it all, which are fantastic odds. Since we are near certainty, should we bet everything once again?
A big swinger surely would. However, unlikely as it may be we can still suffer a loss, which would instantly put us out of the game. The economic loss is actually much greater than the trading capital in this case, because had we managed to hold on eventually we could stand to make a lot of money with those fantastic odds. But as fate would have it, we blew up. Big swinger no more.
So no matter how good the odds with uncertainty there is nothing preventing a string of losses from occurring (that’s how life works by the way).

The key point here is endurance, meaning having enough trading capital – and mental stamina – on reserve so that if one of those mean streaks hits you can survive and eventually get back to the higher probabilities of winning again.

As such, defining how much should be risked on each trade requires a quantifiable (even if not exact) framework that takes all these factors into consideration. Fortunately, this can be done without too many mathematical gymnastics. Here’s one way to do it.

Let’s assume we trade a fixed amount of our capital, called “R”. That's how much we are risking each time. As a result, trade profits and losses can now be expressed as a function of R, such as a loss of -2R and a gain of 1R. This way the framework can be standardized and applied to any futures contract, stock, FOREX or bond.

Next we assign some probability of occurrence to each resulting R level (usually based on historical analysis or backtesting). Now we can quantify the edge, which is roughly speaking the sumproduct of the two.

The graph below shows a hypothetical trading model that delivers a 0.2R on each average trade. That’s a very decent trading system. Not only are the odds of not losing money higher than losing it, wins are skewed heavily to the upside.
Any trader would love to use such a system any time of the year. However, even if on paper the results look great, it is worth remembering that these are based on statistical averages. This can make all the difference in the world, potentially generating some pretty big swings in your accumulated trading capital over time.

To illustrate how, let’s also assume that we trade this system once every week for ten years, so 52 x 10 trades in total. We define cumulative loss as the maximum loss in terms of R from a trading capital high to a trading capital low over the course of those ten years. This is actually a very important number since a lot of things can happen during that time frame.

As a side note, we are putting on the trades sequentially in a portfolio of one security only. This avoids the complication of figuring out correlation coefficients between securities, where any correlation less than perfect would yield some diversification benefit, in principle reducing the cumulative loss. So we are using the most conservative scenario here.

Finally, Microsoft Excel is used to generate 520 random trades over 1000 times to derive the average cumulative loss. This is like 1000 traders using the same exact system completely independently, and that high number carries some statistical robustness. The resulting histogram is shown below:
We can immediately observe how luck plays such a prominent role in trading (or any activity that involves risk for that matter), even when the edge of the system is quite positive: traders using exactly the same system can experience cumulative losses ranging from 5R all the way to 43R. Of course these are extremes (or tails) with limited occurrences but it does highlight the point.
There is some concentration of outcomes around 12R, the cumulative loss with the most occurrences. But the chance of actually losing more than, say, 19R at some point is over one in five so the tail risk is clearly not insignificant. And it’s also a function of trading over 10 years using this particular system. If it had been, say, just two years (104 sequential trades) that figure would have been 2%, virtually one tenth of that.

In other words, the more you trade the higher the odds you will have a big losing streak at some point, unlikely as that may be. As professional traders often remind us, the worst drawdown is always ahead of us. We can see why here.

That’s a hugely underappreciated point that is often lacking in more meaningful discussions about trade size. And it makes sense. The more you walk under the rain the higher the likelihood you will get wet - even if you have a great umbrella.

If you are planning to trade sporadically and opportunistically, that’s one thing; but if you are considering regularly going in and out of the market over many years that's quite another. Again, it bears repeating that the chances of something bad happening increase with the number of trades.
The size of the edge also makes a huge difference to the outcome. Let’s assume that the edge in the model above is now reduced from 0.2R to just 0.05R (by taking out five percentage points from the odds of getting 2R and allocating them to -1R). The chance of losing more than 19R over ten years is now a staggering 73%.

So the worse the edge the greater the chances of having a string of losses. As it should be of course.

Why are such tail numbers relevant? Because if there isn’t enough capital set aside you will blow up your trading account. Pure and simple.

The higher that tail risk the smaller the trade size should be so you have enough cash stashed away for that rainy day. And this should have implications on how trades are structured.

Moreover, market conditions can and do change, possibly even invalidating the trading system and the edge altogether. In times of great volatility for instance, where swings can frequently occur in both directions, it pays to play even safer than suggested by these figures....MORE
Some of our previous posts on the subject:
March 2008
Markets, Risk and Gambler's Ruin

June 2011
Dreamtime Finance (and the Kelly Criterion)
I've been meaning to write about Kelly for a couple years and keep forgetting. Today I forget no more.
In probability theory the Kelly Criterion is a bet sizing technique used when the player has a quantifiable edge.
(When there is no edge the optimal bet size is $0.00)

The criterion will deliver the fastest growth rate balanced by reduced risk of ruin.
You can grow your pile faster but you increase the risk of ending up broke should you, for example bet 100% of your net worth in a situation where you have anything less than a 100% chance of winning.

The criterion says bet roughly your advantage as a percentage of your current bankroll divided by the variance of the game/market/sports book etc..
Variance is the standard deviation of the game squared. In blackjack the s.d. is 1.15 so the square is 1.3225.

As blackjack is played in the U.S. the most a card counter can hope for is a 1/2% to 1% average advantage with much of that average accruing from the fact that you can get up from a negative table.
Divide by 1.3225 and you've got your bet size.

It's a tough way to grind out a living but hopefully this exercise will stop you from pulling a Leeson, betting all of Barings money and destroying the 233 year old bank.

I'll be back with more later this week.In the meantime here's a UWash paper with the formulas for equities investment....

August 2015
"The High Stakes History of Card Counting (And Its Uncertain Future)"
One of the rules of life:

NEVER EVER play a negative expectation game unless forced.
More after the jump....

What Proportion of Your Bankroll Should You Bet? "A New Interpretation of Information Rate"
How did Ed Thorp Win in Blackjack and the Stock Market?
Journal of Investment Consulting: Interview With Edward O. Thorp
Markets, Risk and Gambler's Ruin
"Not in my house: how Vegas casinos wage a war on cheating"

Finally, another rule of life:

Cassandra's (Not so) Golden Rules About Investing (And Not Investing)
#21. NEVER double-down (except when you have material non-public information and deep pockets) or if you're Ed Thorp, or if you're playing at The Martingale Room. 

Don't double down, double up.

The Cobalt Trade Worked Out, On To Ruthenium

FT Alphaville's Kadhim Shubber took over the Further Reading chores today and linked to a story in this month’s American Economic Review on the violence that often accompanies the mining biz.
Here's "A “dark side” to the commodity boom in Africa" which, of course reminded me of something, in this case Presidential Executive Order 13712 of November 2015, which begins, in part:
I, BARACK OBAMA, President of the United States of America, find that the situation in Burundi, which has been marked by the killing of and violence against civilians, unrest, the incitement of imminent violence, and significant political repression, and which threatens the peace, security, and stability of Burundi, constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat. I hereby order:...
Bet you didn't know about that one huh?

Anyway, in 2015-2016 we had a series of posts on a trade to capitalize on Tesla's battery ambitions that we hoped would go beyond the "common knowledge" lithium action (which we had covered here on the blog for the prior ten years):

Why the CIA Reads The Financial Times (and you should too) Tesla and Cobalt
"Freeport Sinks On Sale of Africa Copper Mine To Chinese" (FCX; LUN.TO)
DR Congo’s State Mining Company Submitted An Offer to Buy Freeport McMoRan's Stake In Tenke Fungurume Copper, Cobalt Mine (FCX;
"Electric-car makers on battery alert as hedge funds stockpile cobalt"

Here is the last couple years of price action for U.S. cobalt:
Oops, gotta run, we'll be back to this in July. 

ABC-TV Settles $1.9 Billion "Pink Slime" Defamation Lawsuit

From the Sioux City Journal:

BPI claims settlement with ABC 'vindicates' Dunes firm's beef product
ELK POINT, S.D. | As the Union County courtroom began to fill Wednesday morning, one could sense an atmosphere different from the one present in the room during the previous 17 days of trial in Beef Products Inc.'s $1.9 billion defamation lawsuit against ABC.
BPI's lawyers, usually serious and businesslike in the minutes before a session began, joked and laughed with one another.
BPI owners Eldon and Regina Roth were present as they had been through much of the trial, but were accompanied by several other family members. A contingent from the Siouxland Chamber of Commerce filled several seats in the room.
The scene begged the question: Was something up?
That question was answered seconds after Circuit Judge Cheryle Gering entered the courtroom and sat down, addressing the 16 jurors who had sat through hours of testimony from BPI witnesses called to support the company's claim that ABC news reports that had repeatedly used the term "pink slime" to describe BPI's Lean Finely Textured Beef product had caused millions of dollars in damages to the Dakota Dunes-based meat processor.
"Ladies and gentlemen of the jury, I have many things to tell you this morning," Gering said. "First of all, the case is settled. Neither the court, nor the jury, nor the public will be told the terms of the settlement today.
"The case is over."
Just like that, a trial expected to last eight weeks was settled midway through the fourth week.
BPI sued ABC, correspondent Jim Avila, who reported many of the stories, and several others who were later dismissed from the suit in September 2012, claiming that ABC knowingly used false information about LFTB during a series of reports in March and April 2012. Those reports regularly referred to the product as "pink slime," an unflattering moniker BPI said led consumers to believe the product was unsafe and low in nutritional value.
BPI, a privately held, family business once considered the world's largest producer of boneless beef, had sought $1.9 billion, a claim that could have been tripled to $5.7 billion under provisions of South Dakota's Agricultural Food Product Disparagement Act, a law designed to protect agricultural interests.
Terms of the settlement are confidential, but judging from the celebratory mood of BPI officials and their lawyers, it was apparent that the agreement was favorable to the company.
"We are extraordinarily pleased with this settlement," BPI attorney Dan Webb said outside the Union County Courthouse. "I believe we have totally vindicated the product."
Webb, a prominent trial attorney based in Chicago, took no questions from the media....MUCH MORE
HT: How Appealing

Van Gogh and Vermeer Together

It's a cult.
A very strange yet oddly compelling cult.


Together, again

Wednesday, June 28, 2017

Uber: Aswath Damodaran Puts On His Finance Prof. Hat and Rolls Up His Sleeves

As said in our intro to last week's piece, "Professor Damodaran on Uber":
Not one of the good professor's most insightful blogposts but interesting because he puts the odds of Uber failing at only 5%.
And because you can feel his "I need numbers dammit" pain....
Here he schools me with this 3000-level update:
(that sounded arrogently snotty which was definitely not the intent) 

Wednesday, June 28, 2017
User/Subscriber Economics: An Alternative View of Uber's Value
In the week since I posted my Uber valuation, I have received many suggestions on what I should have done differently in the valuation, with many of you arguing that I was being a over optimistic in my forecasts of total market, market share and margin improvements and some of you positing that I was too pessimistic. I don't claim to have any certitude about these numbers but the spreadsheet that I used to value Uber is an open one, and you are welcome to convert your suggestions into valuation inputs and make the valuation your own. In just the last few days, though, I have been watching an argument unfold among people that I respect. about whether the reason for my low valuation for Uber is that I am using a DCF model, with the critics making the case that valuing a company based upon its expected cash flows is an old economy framework that will not yield a reasonable estimate of value for new economy companies, driven less by infrastructure investments and returns on those investments, and more by user and subscriber economics.  I have long argued that DCF models are much more flexible than most people give them credit for, and that they can be modified to reflect other frameworks. So, rather than deflect the criticism, I will try to build a user based model to value Uber and contrast with my conventional valuation.

Aggregated versus Disaggregated Valuation
If you are doing an intrinsic valuation, the principle that the value of a business is the present value of the expected cash flows from that business, with the discount rate adjusted for risk, cannot be contested. That is true for any business, manufacturing or service, small or large, old economy or new economy. Since that is what a discounted cash flow valuation is designed to do, I have to believe that what critics find objectionable in my Uber DCF model is not with the model itself but in how I estimated the cash flows for Uber, and adjusted for risk. I followed the aggregated model for discounted cash flow valuation where I estimated the cash flows to Uber as a company, starting with its revenues and working through the consolidated expenses and total reinvestment each year and discounted these cash flows at a cost of capital that I estimated for the entire company. Along the way, I had to make assumptions about a total market that Uber would go after, the market share that I expect the company to get in that market and the operating margins in steady state. 
Disaggregated Valuation
Value is additive and you can value any company on a disaggregated basis, breaking it down into different divisions/businesses, geographical areas or by units:
  • Business Units: In a sum of the parts valuation (SOTP), you can break a multi-business company into its individual business units and value each unit separately.  I have a paper where I describe the process of doing a SOTP valuation, using United Technologies, a conglomerate, as my example. If that SOTP valuation is much higher than the value that the market attaches to the company, you may very well find an activist investor targeting the company for a break up. 
  • Geographical Groupings: When valuing a multinational, you can break the company's operations down geographically and value each geographical grouping (Asia, Latin America, North America, Europe) separately, not only using different assumptions about growth and risk in region but even different currencies for each region. 
  • Unit-based Valuation: More generally, when valuing any company, you can try to value it on a unit-basis, building up to its value by valuing each unit separately and then aggregating across units. Thus, a pharmaceutical company can be valued by taking each of the drugs that are in its portfolio, including those in the pipeline, and valuing that drug based upon its cash flows and risk and then adding up the values across the entire portfolio. A retail business can be valued by valuing individual stores and adding up the store values and a subscription-based company can be valuing by valuing a subscription and multiplying by the number of subscriptions, current and forecasted.
I may be misreading the critics of my Uber valuation but it seems to me that some of them, at least are making the argument it is better to value Uber, by valuing an individual Uber user first, and then scaling the value up to reflect not just the number of users that Uber has today (existing users) but also new users it expects to add in the future. 
Aggregated versus Disaggregated Valuations: Weighing the Trade offs
Valuation on a disaggregated basis allows you to be much more flexible in your assumptions, allowing them to vary across each grouping but there are four reasons why you seldom see them practiced (or at least practiced well) in company valuation.
  1. Law of large numbers: As companies get larger and more diverse, there is an argument to be made that you are better off estimating on an aggregated basis rather than a disaggregated one. The reason is statistical. To the extent that your estimation errors on a unit basis are uncorrelated or lightly correlated, your estimates on an aggregated level will be more precise than the unit-based estimates. For example, you will have a much better chance of estimating the aggregate revenues for Pfizer correctly than you do of estimating the revenues of each of its dozens of drugs.
  2. Information Vacuums: Information on a disaggregated basis is difficult to get for individual businesses, geographies, products or users, if you are an investor looking at a company from the outside. If you are doing your valuation from inside the company (as an owner or venture capitalist), you may be able to get this information, but as you will see with my Uber user valuation, even insiders will face limits.
  3. Missing Value Pieces: When valuing a company on a disaggregated business, it is easy to overlook some items that are consequential for value. In sum of the parts valuation, for instance, analysts are so caught up in estimating the values of individual businesses that they sometimes forget to value "corporate costs", which can be a multi-billion drag on value.  
  4. Corporate Structure: There are some items that are easier to deal with at the aggregate level, because that is where they affect the business. Thus, you can model when taxes come due and the effect of losses easier when you are valuing an aggregated business than when you are valuing it on a disaggregated level. Similarly, if you are concerned about legal penalties or corporate governance, these are better addressed at the aggregated level.
It is true that aggregation comes with costs, starting with the blurring of differences across disaggregated units (business, geographies, products, users) as well as the missing of competitive advantages that apply only to some units of the business and not to others. It is also true that using an aggregated valuation can result in a process that is disconnected from how the owners and managers at user-based companies think about their companies and thus cannot help them in managing these companies or valuing them better....MUCH MORE 

"Canada’s Supreme Court Rules Google Must Block Certain Search Results Worldwide"

It may be time to bid adieu to the GOOG and go retro.Maybe Alta Vista? Nope, bought by Yahoo, shut down.
Lycos? Hmmm... the results appear to be 95% ads.
Excite? Ewww, now called My Excite, that's vaguely disturbing.

I do like the new Google News.
It seems to believe I am a 14 year old girl who thinks Nikola Tesla is dreamy.
Maybe we stick with Google for a while. At home. And quit saying ewww...
Don't mention the My Excite.
To anyone.

From The Verge:
The landmark ruling could have far-reaching implications
Canada’s Supreme Court upheld a British Columbia court ruling today that ordered Google to de-list entire domains and websites from its global search index.

The 7-2 landmark ruling stems from case Google v. Equustek, which began when BC-based technology company Equustek Solutions accused distributor Datalink Technology Gateways of relabeling one of its products and selling it as their own online. Further, Equustek also claimed Datalink acquired trade secrets in order to create a similar competing product. Datalink first denied the accusations, then fled the province, continuing business operations mostly outside of Canada. Datalink representatives never appeared in court, and Equustek won default judgment.

Though Google was never directly named in the lawsuit, Equustek requested that the search engine remove Datalink search results until the allegations could be tested. Google did so voluntarily, de-indexing over 300 websites associated with Datalink, but only on the Canadian version of the search engine. 

The Supreme Court of BC then granted a broader injunction ordering Google to stop displaying search results globally for any Datalink websites, which Google appealed in the Supreme Court of Canada. The court found in favor of Equustek, rejecting Google’s argument that the right to freedom of expression should have prevented the order from being issued....

Meanwhile the Register is going with this image:


"US Shale Producers Under Oil-price Pressure"

WTI and gasoline turned up after today's EIA release but due to the tropical storm and some pipeline issues the picture is not as clear as it might first appear.

From Petroleum Economist, June 28:
US tight oil companies staged a comeback at the first sign of a price recovery last year. Now, as surging US shale activity undercuts the oil price, markets want them to start putting on the brakes.
Front-month WTI futures—the US crude benchmark price—briefly fell below $43 per barrel on 21 June before recovering to around $44/b later in the month. That's an almost $10/b-drop from a year-earlier.

Bearish market sentiment from speculators—due to fears that commitment to the Opec-non-Opec production cuts may waiver—may account for some of the pressure on prices.

But the real culprit is US shale. The rig count has been on a tear, rising every week for the last six months. And a flood of crude is following. US tight oil output looks set to rise by around 1m barrels per day by the end of this year (compared to the year-earlier level) exceeding nearly all expectations at the start of the year.

Not long ago, investors were enamoured by shale companies' plans to grow at a double-digit pace this year. The thinking was that Opec would pick up the slack and tight oil would get the benefit from both high growth and rising prices. That logic helped make US shale equities some of the market's best performers in 2016, following the collapse a year earlier.

But as it has become clear that US tight oil is once again swamping the market, investors have turned sharply against go-go shale growth. Take valuations. Investor sentiment towards shale peaked in early December, in the weeks after Opec first announced its deal to rein in supply. Since then, the S&P's Exploration and Production index is down 30%. And being in the Permian, where the growth has been concentrated because of the play's strong economics, hasn't been much help. A group of 11 Permian-focused drillers tracked by Petroleum Economist saw their shares drop by an average of 27% over the same period.

Market intervention
Another sign that the market is trying to cool shale growth has been the slowdown in new equity and bond issuances. Last year, producers tapped equity markets for around $31bn as they sought to raise cash to fortify their balance sheets and fund growth, according to data from the research house PLS. That slowed to less than $5bn in the first quarter of this year. It has likely fallen further in Q2 as investors grow weary of pumping more money into the sector.

There has been a similar slowdown in deal-making for tight oil producers. The first quarter of this year was gangbusters for oil bankers, with 20 deals worth $21.36bn in the Permian alone, according to the consultancy PWC. But the deal pipeline for oil producers, especially for big-ticket items, has frozen up since then, Chad Michael, managing director for upstream investment banking at Tudor, Pickering, Holt & Co, told an IPAA conference in southern California last week....

 Ducs in a row: Drilled but uncompleted wells in top tight oil plays Source: EIA
...According to data from the investment bank Raymond James, if oil stays at $50/b, the shale industry is on pace to outspend its cash flow by 50%—a staggering number even by the sector's own profligate standard....

"Uber Made an Unusual Legal Pledge to the Head of Its Driverless Car Project"

After some of the documents were produced in March our thinking was:
...Combine Kalanick's statements and the corporate culture he created with the fact the central figure in the Waymo lawsuit was in contact with Uber before he left the Alphabet company's autonomous efforts  and even a dull-witted paralegal could make a case for conspiracy,

And that would threaten Uber's existence....
This latest would seem to make the conspiracy point pretty much a lock. More after the jump.

From Bloomberg, June 23:
Uber made an unusual commitment to the engineer it hired to lead its driverless car project: It would cover the costs of legal actions against him over information stored in his head from his previous job at Waymo.

That promise -- buried in the fine print of an otherwise straightforward employment contract for an executive -- emerged in documents unsealed last week in San Francisco federal court.
Waymo alleges that in 2015, Anthony Levandowski and Uber Technologies Inc. hatched a plan for him to steal more than 14,000 proprietary files, including the designs for lidar technology that helps driverless cars see their surroundings. Uber, which acquired Levandowski’s startup, Otto, in August for $680 million, has denied Waymo’s allegations.

The Alphabet Inc. unit’s claims were bolstered Wednesday when it told the court Uber has said that Levandowski informed then-Chief Executive Officer Travis Kalanick more than a year ago that he had five discs containing Google data. Kalanick told him not to bring the information with him to Uber, and Levandowski said he then destroyed the files, according to the filing.

Even though neither of the men are still at the company -- Kalanick stepped down this week while Levandowski was fired last month -- Uber has to defend itself from Waymo’s suit as well as a possible criminal probe after U.S. District Judge William Alsup asked prosecutors to take a look at the allegations.

Uber’s legal fees promise is further evidence that the talent competition in the driverless car sector is cut-throat. It was a highly risky benefit to offer, according to Jim Pooley, a lawyer at Orrick in Menlo Park, California.

The indemnification document may be “very powerful” evidence that Uber suspected Levandowski would be taking proprietary information from Waymo, said Pooley, who has more than 35 years of litigation experience and is the author of the “Secrets: Managing Information Assets in the Age of Cyberespionage.”

“What Uber did was to leave the door open for Levandowski to use whatever he remembered of Waymo’s trade secret information, so long as he didn’t deliberately memorize it,” the lawyer said....MORE
Sunday, June 25
Alphabet says Travis Kalanick knew one of Uber’s acquisitions had taken Alphabet files

Ransomware: "Everything you need to know about the Petya, er, NotPetya nasty trashing PCs worldwide"

From the Register:

This isn't ransomware – it's merry chaos
[it's ransomware]
Analysis It is now increasingly clear that the global outbreak of a file-scrambling software nasty targeting Microsoft Windows PCs was designed not to line the pockets of criminals, but spread merry mayhem.
The malware, dubbed NotPetya because it masquerades as the Petya ransomware, exploded across the world on Tuesday, taking out businesses from shipping ports and supermarkets to ad agencies and law firms. Once inside a corporate network, this well-oiled destructive program worms its way from computer to computer, encrypting the infected machines' filesystems.
Although it demands about $300 in Bitcoin to unscramble the hostage data, the mechanisms put in place to collect this money from victims quickly disintegrated. Despite the slick programming behind the fast-spreading malware, little effort or thought was put into pocketing the loot, it appears.
"The superficial resemblance to Petya is only skin deep," noted computer security veteran The Grugq. "Although there is significant code sharing, the real Petya was a criminal enterprise for making money. This [latest malware] is definitely not designed to make money. This is designed to spread fast and cause damage, with a plausibly deniable cover of ransomware.”
Here's a summary of the NotPetya outbreak:
  • The malware uses a bunch of tools to move through a network, infecting machines as it goes. It uses a tweaked build of open-source Minikatz to extract network administrator credentials out of the machine's running memory. It uses these details to connect to and execute commands on other machines using PsExec and WMIC to infect them.
  • It also uses a modified version of the NSA's stolen and leaked EternalBlue SMB exploit, previously used by WannaCry, plus the agency's stolen and leaked EternalRomance SMB exploit, to infect other systems by injecting malicious code into them. These cyber-weapons attack vulnerabilities patched by Microsoft earlier this year, so the credential theft is usually more successful, at least at places that are on top of their Windows updates.
  • Crucially, NotPetya seeks to gain administrator access on a machine and then leverages that power to commandeer other computers on the network: it takes advantage of the fact that far too many organizations employ flat networks in which an administrator on one endpoint can control other machines, or sniff domain admin credentials present in memory, until total control over the Windows network is achieved.
  • One way to gain admin access is to use the NSA exploits. Another way is to trick a user logged in as an admin or domain admin into running a booby-trapped email attachment that installs and runs the malware with high privileges. Another way is to feed a malicious software update to an application suite running as admin or domain admin, which starts running the malware on the corporate network again with high privileges. It is understood NotPetya got into corporate networks as an admin via a hijacked software update for a Ukrainian tax software tool, and via phishing emails.
  • With admin access, the software nasty can not only lift credentials out of the RAM to access other internal systems, it can rewrite the local workstation's hard drive's MBR so that only it starts up when the machine reboots, rather than Windows, allowing it to display the ransom note; it can also encrypt the filesystem tables and files on the drive. NotPetya uses AES-128 to scramble people's data. Needless to say, don't pay the ransom – there's no way to get the keys to restore your documents.
  • Not only should you patch your computers to stop the SMB exploits, disable SMBv1 for good measure, and block outside access to ports 137, 138, 139 and 445, you must follow best practices and not allow local administrators carte blanche over the network – and tightly limit access to domain admins. You'd be surprised how many outfits are too loose with their admin controls.
  • The precise affected versions of Windows aren't yet known, but we're told Windows 10's Credentials Guard spots NotPetya's password extraction from memory.
  • Creating the read-only file C:\Windows\perfc.dat on your computer prevents the file-scrambling part of NotPetya running, but doesn't stop it spreading on the network. Note, the software is designed to spread internally for less than an hour and then kicks in; it doesn't attempt to spread externally across the internet like WannaCry did.
In the beginning
So far, the vast majority of infections have occurred in Ukraine and Russia, but some big names in the West have also suffered. International advertising conglomerate WPP was taken offline (even its website was down), global law firm DLA Piper was infected and, most worryingly, shipping goliath Maersk is warning of a worldwide outage that could seriously bork the global transport supply chain. Computer terminals in major ports were borked for hours by the malware.

In Ukraine itself, which appears to be ground zero for the attack, the situation was critical. Large numbers of businesses were caught by the software nasty – the contagion has broken the automatic radiation monitoring systems in Chernobyl, meaning some unlucky scientists are going to have to take readings manually for the time being. Energy companies were hit as well as government agencies.

According to Ukraine's cyber-cops, as well as phishing emails booby-trapped with malware-laden attachments, financial software firm MeDoc was used to infect computers in the ex-Soviet nation. We're told miscreants managed to compromise a software update for the biz's products, which are widely used in the country, so that when it was downloadable and installed by victims it contaminated their network with NotPetya. If this software was running with domain admin access, it would be immediately game over....MUCH MORE

"Venture Capitalists May Face a Cash Crunch as More Technology Startups Stay Private Longer"

From Quartz:
Raise a fund. Invest in hot startups. Cash out in 10 years with hefty profits (and fees) for your trouble. The model that has performed so well for venture capital over the last few years (and sometimes not so well) is stumbling.

Private equity research firm Pitchbook reports startup exits—sales or mergers of companies delivering returns to shareholders—has fallen in recent years. The number and value of startup exits were down about 70% last year from their 2014 peak. Despite big IPOs of companies such as Snap, 2017 has yet to yield a bumper crop of new exits as companies stay private longer.

That’s pushed venture capital firms to reevaluate how to cash out some, or all, of their equity holdings without waiting (and waiting) for an IPO.

It’s not a new problem, says Scott Jordon, managing director at Glynn Capital, but it’s now more acute. The time it takes for technology firms time to IPO has stretched (pdf) from around five to eight years in 2000 to about 11 years today. Pitchbook’s Nizar Tarhuni says they’re seeing venture firms extend funds or negotiate longer periods than the standard 10 years to return money to their limited partners such as pension funds. Of course, IPOS aren’t the only game in town. Plenty of companies are opting to pursue mergers and buyouts, two avenues that have remained relatively open even as IPO activity has stalled. Venture funds have also raised record sums. Last year, more than 200 venture capital funds raised $41.6 billion, a 10-year high, reports the National Venture Capital Association.

Although private investors have proved willing to pour billions into fast-growing, money-losing Silicon Valley startups such as Uber, that’s changing....MORE 
That second chart is very telling.
Smart-money buyers (strategic acquirers) aren't willing to pay the valuations that VC's have ascribed to their little treasures.

As related in another context:
I'm reminded of a situation I watched back in the day.
A trader sold a position to another firm a few minutes before a trading halt. The news was negative.

The buyer D.K.'ed (Don't Know) the trade, meaning we'd still own the position, at which point the head of the firm got on the phone and told his counterpart "I don't want the shit, whyd'ya you think I sold it to you?"

Forget Amazon: "How Lidl in America Will Drive U.S. Grocers Out of Business"

From Money Morning:
It's pronounced "lee-duhl" – you'll need to know that when a Lidl supermarket replaces your local grocery store.

Lidl is a German grocery chain that offers heavily discounted yet shockingly high-quality products.
"[Lidl] is going to be an interesting wake-up call for a lot of retailers," George Faigen, of management consulting firm Oliver Wyman, said to Retail Dive on June 15.

"The question is not whether it will disrupt the American grocery industry, but to what degree."
The company hopes to appeal to a wide range of shoppers with its simple store layouts and offerings pared down to just six aisles of carefully selected items. It's seen success throughout Europe, and now it's ready to take on the United States.

With a plan to open more than 600 stores across America, analysts expect Lidl to push traditional grocery stores to their breaking points, and the end result will likely be an Amazon versus Lidl "grocery war."

What's Lidl's strategy? Let's take a look…

Lidl Will Take the United States by Storm, Just Like It Did Europe
The German discounter evolved from a single store in tiny Ludwigshafen, Germany, to more than 10,000 stores across 27 countries in just over 40 years.

Now Lidl has opened its first 20 stores in America. Its newest locations are concentrated in Virginia, North Carolina, and South Carolina, however 90 more East Coast locations are planned for the coming year.

To get ahead in the cutthroat U.S. grocery industry, Lidl executives say they plan to offer discounts that are practically unheard of to American consumers – up to 50% lower than rival stores.
What's more, several of the recently opened stores sit adjacent to or across the street from a Wal-Mart (NYSE:WMT), the "low-price" retailer, putting Lidl in prime position to steal critical market share.

Lidl's entry to the American market comes at a time when shoppers are looking for new experiences. In fact, according to a survey from Oliver Wyman, an international management consulting firm, 39% of U.S. consumers say they would like to shop at Lidl once a week or more, while 67% said they would shop at the store at least once.

How Lidl Balances Quality and Price… and Why American Grocers Can't Keep Up
How is Lidl so successful?

The German grocer has made its name offering a very limited assortment of goods, many of them private label, at ultra-low prices – and it plans to use that same strategy to rein in U.S. consumers.
"A lot of the [typical] supermarkets are so large, it's a challenge for people to go shopping," said Lidl U.S.'s CEO Brendon Proctor last month. "If I wanted to go in and get a bottle of ketchup – first of all, there are probably about 24 aisles in the store. I have to find what aisle it's in. I get there, I find that there's 50 types of ketchup. Who honestly needs 50 types of ketchup? So we can streamline that."
Lidl's unique strategy is to offer a simplified assortment of goods to consumers. Pared down to just six aisles, Lidl's stores are easy for people to navigate. To make things efficient and keep storage costs down, Lidl often keeps items in the cardboard containers they were shipped in.

You see, the company is able to offer its high-quality, private label brands at below-average prices by cutting down on typical store costs like storage and lighting.

Lidl has also embraced technology in ways that other traditional brick-and-mortar retailers are failing to do. According to Retail Dive, Lidl uses data to measure everything – from the time it takes to move products to shelves to the exact care, temperature, and timing required to make a dozen roses bloom right as they arrive at the store.

"Lidl wants to reinvent exactly the way Americans shop," said Anne Schwedt, a German economy expert, to DW on June 14.

"The mainstream players are going to have a hard time competing with prices on the lower end, and they'll have a harder time being differentiated on the higher end," said Doug Koonts, head of content and research at Planet Retail, to Retail Dive.
However, even if Lidl takes out the mainstream players, the retailer still has to face this e-commerce leviathan…

Amazon: The King of All Disruptors
While Lidl's strategy of offering high-quality items at below-average prices is unique to the European market, we've already seen the same thing unfold in the United States.

We're talking about Inc. (Nasdaq: AMZN). The e-commerce leviathan just bought the giant organic grocery retailer Whole Foods Market Inc. (Nasdaq: WFM), and you can be sure it will give Lidl a run for its money.

But here's the thing: For investors, it doesn't matter which company wins the battle for the American grocery market. The smart money is on Amazon even if a Lidl pops up next to every Wal-Mart in the country.

That's because Amazon's hefty $13.7 billion investment has less to do with groceries and more to do with one long-term strategy.

You see, Amazon is going to leverage Whole Foods the same way it has leveraged its enormous warehouses, according to Money Morning Capital Wave Strategist Shah Gilani. Shah is an expert in identifying and profiting from market-shaking trends.

"The Whole Foods acquisition fills in the missing link in Jeff Bezos' grand plan to sell the world to the world and profit from the sale of everything, including books, clothes, food, and anything to do with data," said Shah on June 22.

Amazon's recent purchase means it has Whole Foods' 457 stores to play with....MORE
See also:
"Whole Foods’ big new threat: the cheap German supermarkets that conquered Europe"

Yesterday I Learned About ATMs

It started with Paul Murphy at Alphaville's Markets Live:

Tuesday, 27th June, 2017  
Live markets commentary from
PM Hi there -- welcome to Markets Live
PM Suddenly lots of things happening...

PM Suppose we need to in on the various bits of tech-related news 

PM That's John Shepherd Barron, inventor of the ATM

PM The ATM is 50 years old today
PM Spin forward to the cutting tech of today...MORE
Which of course lead to the question "Do the Vatican Bank ATM's really have instructions in Latin?"
(I had heard that from a less-than-reliable-source)

As it turns out, the answer is:,fl_progressive,q_80,w_800/17ktqx1deauuejpg.jpg

Yes, Latin is one of the language options.
In fact there's even a TIL thread at reddit.
Which managed to stay on topic for about four comments:
Pope: Why do I have to push "1" for Latin? It should only be Latin! If you're gonna come here, learn the language! Foreigners!

"And then they ask 'Are you sure you want to withdraw $DCXLII?'"
"$642? The ATMs in the Vatican give out ones!?"
Smallest note in the EU is €5 Maybe it's €640 and two Hail Marys?

"Romanes eunt domus."
The line is "People called 'Romanes' they go the house." "Romanes" is not a Latin word; he pluralized a second declension word as if it were third declension, so it doesn't translate to anything.

"Eunt?? What is eunt???"
3rd person plural present active of the verb 'eo, ire', meaning to go.
And from there it just descended into madness.

Until Il Papa decided to show off by making a withdrawal:

Questions America Wants Answered: "Is a Subway Token a Security?"

From Elaine's Idle Mind:

Is a Subway Token a Security? and other non-legal advice.
In 2003, I had the best business idea ever. The MBTA had recently announced an upcoming increase in the price of Boston transit tokens, from a dollar to $1.25. The change would not be effective until the following January, which meant that any T tokens acquired before then would be guaranteed a 25% return. I had just over a month to hoard as many tokens as possible.

I wasn’t the only one with this strategy; many of my classmates did the same. But after a month-long buying spree, it became clear that realizing those profits would be a pain in the ass.
We could never use all those tokens ourselves, and there was no secondary market because all our friends had made the same brilliant investment. If only T tokens were tradeable on the blockchain!
How many potential buyers were discouraged by the lack of a convenient aftermarket? Without the liquidity limitation, the MBTA could have held a far bigger token sale. Maybe it could have paid for a new railway. Maybe another Big Dig. Maybe even a hyperloop!

Why don’t we finance all our infrastructure projects with token sales? Is Trump still looking for ways to pay for that wall? Issue a Wall Token and put it on the blockchain! Each Wall Token confers the right to one border crossing.

But it turns out such Tokens might constitute a security....
....Here’s a 1977 paper about property developers who finance their facilities by selling usage licenses before construction. Two fun examples:...MORE