Saturday, July 22, 2017

Questions America Wants Answered: "Are Macro Gods in Big Trouble?"

The thing I don't understand in stories like this on macro or in "funds fleeing commodities" stories is:
In two-sided markets the ability to choose long or short is a big source of alpha generation (the rare 'true' arb opportunity is another) so someone who fails to make money is—almost by definition—exposing themselves as a bit of a scam, leveraged beta gussied up as 2-and-20 alpha.

From Bloomberg Pension Pulse via:
Saijel Kishan of Bloomberg reports, Markets No Longer Make Sense to Macro Managers:
Financial markets no longer make sense to macro managers like Mark Spindel.

After spending three decades focusing on things like economic trends, currency moves, politics and policy, Spindel has been confounded by markets shaped by low volatility, algorithms and more. He finally gave up and closed his nine-year-old hedge fund.

“I felt the intensity of following markets at a time of increasing political and economic confusion very hard,” said Spindel, founder of Potomac River Capital in Washington. “My entire career had centered on an understanding of monetary politics and I had trouble getting my head around it all. It was exhausting.”

These are troubled -- and troubling -- times for macro managers, those figurative heirs of famed investor George Soros who were once dubbed the masters of the universe. They’ve barely made money this year and once again, their returns pale next to those of cheaper index funds. Many investors are looking elsewhere.

Andrew Law at Caxton Associates has posted record losses. Alan Howard had the worst first-half in his hedge fund’s history. Even the old hands in the business such as Louis Bacon haven’t been spared from losing money. And Soros’s son, Robert, conceded last month that his family firm has made fewer macro bets amid “lackluster” opportunities.

It’s enough to make a macro man wonder: in an age of untested central bank measures and algorithms, can this classic hedge fund style pay off like it used to?

Opaque Markets

The old guard made their fortunes when markets were more opaque, less efficient and when they had access to market information privy only to a few. Price trends were easier to latch onto, leverage heavily used and competitors fewer. Today, funds face an onslaught of technology that’s disseminating information more quickly and widely, while some algorithms are able to spot -- and capture -- price anomalies almost instantly. And computer models can more cheaply follow market trends.

Macro managers posted their worst first-half since 2013, losing on average of 0.8 percent after a 1 percent decline in June, according to Hedge Fund Research Inc. data. The managers returned less than 1 percent annually over the past five years. The broader hedge fund industry returned 3.7 percent in the first half after barely making any money last month, and returned about 4.9 percent annualized over the past five years, the research firm said.

After winning a brief reprieve at the end of 2016 in the wake of President Donald Trump’s election win, macro managers’ fortunes reversed this year as the dollar and oil declined, stocks rallied and a political crisis erupted in Brazil. Volatility in equity and currency markets also fell to their lowest in years. In recent weeks, though, the dollar and Treasury yields have risen amid a hawkish tone from developed-nation central banks.

Investors have lost patience with the strategy. They pulled about $3.8 billion from discretionary macro managers in the first quarter, the fifth straight quarterly outflow, while adding $4.9 billion into computer-driven macro funds, HFR data show.

For years, managers have blamed central bank policies for their failure to deliver stand-out profits. Low interest rates globally made it harder to make money from differences among nations, they say. And as computers probabilistically forecast economic and market data, some managers say it’s a challenge to compete with algorithms that can be a driver of short-term price action, and create shorter and sharper investment cycles.

Disconnected Markets

Spindel, a former investment chief at a World Bank unit, is searching for answers to why macro didn’t work for him. Things started going awry for the 51-year-old just after Greece skirted Grexit two years ago. Spindel was wrong footed by China’s currency devaluations and Brexit -- at times trading from his couch at home during the night to keep abreast of political developments overseas.

Over a salad lunch during a visit to New York last month, Spindel recounted times when he got his economic forecasts right but market predictions wrong. He referred to charts that show a declining relationship between economic-data surprises and bond yields, and discussed how he was perplexed by new central bank measures.

“The dispassion felt harder in the Grexit-Brexit window,” Spindel said, whose fund generated an annualized 11 percent return from 2007 to July 2015. “Markets had become increasingly disconnected with economics and politics.”

In addition, increased regulation and fee pressure made it more expensive to run his $760 million firm, he said. After losing 12 percent through September last year, he returned money to clients.

Elephant in Room

“The elephant in the room is that macro should have done well in the past seven or so years because of all the political and economic events,” said Adam Duncan, a managing director at Cambridge Associates, a Boston-based firm that advises clients on investing. “Yet no one has made any money. The idea that the opportunity set hasn’t been there is just not true. Markets have been moving all over the place.”...MUCH MORE

Gig Economy, 18th Century Style

Interestingly (or not, your call) the two-wheeled one-horse open carriage was introduced around the time this article focuses on:
Gig and miniature horse

From The Conversation:
The Uber pool of the 18th century. James Pollard - The London-Faringdon Coach passing 
The Taylor Report, the UK government’s recent major review of modern work, paid particular attention to the “gig economy”. This is the idea that the traditional model of work – where people often have a clear career progression and a job for life – has been upended. It encompasses “self-employed” Uber drivers to the web developer freelancers and it allows workers more freedom – but also denies them benefits and protective regulation.

While it might seem that long-established ways of working are being disrupted, history shows us that the one person, one career model is a relatively recent phenomenon. Prior to industrialisation in the 19th century, most people worked multiple jobs to piece together a living. Looking to the past uncovers some of the challenges, benefits and consequences of a gig economy.

The diaries of three men in 18th-century Britain that I have found give a fascinating insight into how middle class people – the supposed beneficiaries of today’s gig economy – made multiple employments work. Edmund Harrold, a resident of Manchester in the early 18th century was a barber by training and title. He rented a small shop, shaved customers’ heads, bought and sold hair, and crafted wigs. In the hours unfilled by this he worked as a book dealer, and eventually as an auctioneer, selling various items in alehouses within Manchester and in outlying towns. He lent out money when he had it, earning 10% interest on his holdings.

Another enthusiastic embracer of the gig economy was Thomas Parsons, working as a stone carver in the city of Bath in 1769, as well as an amateur scientist – work that we might normally classify as leisure. In the West Country, John Cannon took jobs as an agricultural labourer, excise man, failed maltster, and teacher.

Like people earning money through the gig economy today, the three men were thrown into a world of precariousness. They had independence but fretted frequently about having enough money to pay bills, and feared the potential for failure. Parsons agonised about his ability to pay his debts, noting in one entry....MUCH MORE

Making the World a Better Place, One Pizza At a Time

From Yahoo Finance:

The pizza-making robots that want to change the world
HBO’s comedy “Silicon Valley” makes fun of the way even boring startup tech companies adopt the same mission statement: “To make the world a better place.”

But serial entrepreneur and former Microsoft executive Alex Garden isn’t shy about stating his new company’s path to making the world a better place—through pizza. It’s not just any pizza, though. Zume pizzas are made by robots, and they’re cooked in pizza ovens inside delivery trucks.

“One of the founding principles of this company is that every American has a right to a healthy meal they can afford,” he told me. “If you look at pizza, what is it? It’s high-quality bread, and high-quality organic vegetables, and meats and cheeses. All of these things are things that are good for you in moderation. And the number of calories really is a function of how much sugar is in the food. Zume Pizza is half the calories per slice, roughly half the cholesterol and half the fat, of any of the national leading chains.”

How? “The main reason is sugar,” says Garden, whose pizzas range in price from $10 for a cheese to $20 for a pineapple express.

“We don’t put any extra sugar in the sauce. We don’t put any extra sugar in the dough. And we let our dough age for 24 hours; during that process, the fermentation of the dough further reduces the sugar in it.”

He also has much to say about where he gets his ingredients—directly from the providers, without the warehouses and distribution channels that, say, Pizza Hut (YUM) or Domino’s (DPZ) employ. He uses software—predictive algorithms—to know what he’ll need when. He makes his sausage and tomato sauce in-house.

But that’s not the most headline-grabbing feature of Zume pizza, which was founded in 2015 and currently delivers in Mountain View, California, and surrounding areas. The biggest feature is the robots.

The robots
Inside the Zume kitchen, robots are displacing more human workers every passing month. These days, one robot presses out the dough into the familiar flattened circle; a second and third (Pepe and Giorgio) squirt tomato sauce or white sauce onto each pie; a fourth (Marta) spreads the sauce around (“perfectly, but not too perfectly,” Garden says). Humans apply the toppings, but then a fourth machine (Bruno) scoops up the pizza from the conveyor belt and delicately lays it into the baking oven; a fifth (Leonardo) chops it neatly into eight slices with a single, 200-pounds-of-force stroke....MORE
Coincidentally an earlier post was:
CDC Report: 100 Million Americans Either Diabetic or On Their Way

Supercomputers "The 49th TOP500 List was published June 20, 2017 in Frankfurt, Germany."

We're usually more timely posting the list but reality keeps intruding on the blog stuff.
A couple things to point out, we've made a few mentions of the Swiss supercomputer Piz Daint, here's one of them from last November:
NVIDIA Builds Its Very Own Supercomputer, Enters The Top500 List At #28 (NVDA)
...To be clear, this isn't someone using NVDA's graphics processors to speed up their supercomputer as the Swiss did with the one they let CERN use and which is currently the eighth fastest in the world or the computer that's being built right now at Oak Ridge National Laboratory and is planned to be the fastest in the world (but may not make it, China's Sunway TaihuLight is very, very fast)....
You can see the results of the upgrade in the current list, Piz Daint went from 8th fastest to 3rd fastest in the world. 

Possibly also of interest, NVIDIA's 'puter has been bumped down to #32, behind Facebook's AI/machine-learning supercomputer which is based on NVIDIA's DGX-1 and uses NVDA chips as their graphics accelerator.
From Top
June 2017
In the latest rankings, the Sunway TaihuLight, a system developed by China’s National Research Center of Parallel Computer Engineering & Technology (NRCPC) and installed at the National Supercomputing Center in Wuxi, maintains its top position. With a Linpack performance of 93 petaflops, TaihuLight is far and away the most powerful number-cruncher on the planet.

Tianhe-2, (Milky Way-2), a system developed by China’s National University of Defense Technology (NUDT) and deployed at the National Supercomputer Center in Guangzho, China, occupies the number two position with a Linpack mark of 33.9 petaflops.  Tianhe-2 was the number one system in the TOP500 list for three consecutive years, until TaihuLight eclipsed it in June 2016.

The new number three supercomputer is the upgraded Piz Daint, a Cray XC50 system installed at the Swiss National Supercomputing Centre (CSCS). The upgrade was accomplished with additional NVIDIA Tesla P100 GPUs, doubling the Linpack performance of the system’s previous mark of 9.8 petaflops in November 2016, which itself was the result of a significant upgrade. Piz Daint’s current Linpack result of 19.6 petaflops enabled the system to climb five positions in the rankings.

As a result of the Piz Daint upgrade, Titan, a Cray XK7 system installed at the Department of Energy’s (DOE) Oak Ridge National Laboratory, drops to number four in the rankings. Its Linpack mark of 17.6 petaflops has remained constant since it was installed in 2012.
Rounding out the top 10 are:
  • Sequoia (17.2 petaflops), an IBM BlueGene/Q system installed at the DOE’s Lawrence Livermore National Laboratory, at number five;
  • Cori (14.0 petaflops), a Cray XC40 system housed at the National Energy Research Scientific Computing Center (NERSC), at number six;
  • Oakforest-PACS (13.6 petaflops), a Fujitsu PRIMERGY system running at Japan’s Joint Center for Advanced High Performance Computing, at number seven;
  • Fujitsu’s K computer (10.5 petaflops), installed at the RIKEN Advanced Institute for Computational Science (AICS), at number eight;
  • Mira (8,6 petaflops), an IBM BlueGene/Q system installed at DOE’s Argonne National Laboratory, at number nine; and
  • Trinity (8.1 petaflops), a Cray XC40 system running at Los Alamos National Laboratory, at number ten.
With the two Chinese supercomputers and one Swiss system occupying the top of the rankings, this is the second time in the 24-year history of the TOP500 list that the United States has failed to secure any of the top three positions. The only other time this occurred was in November 1996, when three Japanese systems captured the top three spots....MORE
TOP 10 Sites for June 2017
For more information about the sites and systems in the list, click on the links or view the complete list.
Rank System Cores Rmax (TFlop/s) Rpeak (TFlop/s) Power (kW)
1 Sunway TaihuLight - Sunway MPP, Sunway SW26010 260C 1.45GHz, Sunway , NRCPC
National Supercomputing Center in Wuxi
10,649,600 93,014.6 125,435.9 15,371
2 Tianhe-2 (MilkyWay-2) - TH-IVB-FEP Cluster, Intel Xeon E5-2692 12C 2.200GHz, TH Express-2, Intel Xeon Phi 31S1P , NUDT
National Super Computer Center in Guangzhou
3,120,000 33,862.7 54,902.4 17,808
3 Piz Daint - Cray XC50, Xeon E5-2690v3 12C 2.6GHz, Aries interconnect , NVIDIA Tesla P100 , Cray Inc.
Swiss National Supercomputing Centre (CSCS)
361,760 19,590.0 25,326.3 2,272
4 Titan - Cray XK7, Opteron 6274 16C 2.200GHz, Cray Gemini interconnect, NVIDIA K20x , Cray Inc.
DOE/SC/Oak Ridge National Laboratory
United States
560,640 17,590.0 27,112.5 8,209
5 Sequoia - BlueGene/Q, Power BQC 16C 1.60 GHz, Custom , IBM
United States
1,572,864 17,173.2 20,132.7 7,890
6 Cori - Cray XC40, Intel Xeon Phi 7250 68C 1.4GHz, Aries interconnect , Cray Inc.
United States
622,336 14,014.7 27,880.7 3,939
7 Oakforest-PACS - PRIMERGY CX1640 M1, Intel Xeon Phi 7250 68C 1.4GHz, Intel Omni-Path , Fujitsu
Joint Center for Advanced High Performance Computing
556,104 13,554.6 24,913.5 2,719
8 K computer, SPARC64 VIIIfx 2.0GHz, Tofu interconnect , Fujitsu
RIKEN Advanced Institute for Computational Science (AICS)
705,024 10,510.0 11,280.4 12,660
9 Mira - BlueGene/Q, Power BQC 16C 1.60GHz, Custom , IBM
DOE/SC/Argonne National Laboratory
United States
786,432 8,586.6 10,066.3 3,945
10 Trinity - Cray XC40, Xeon E5-2698v3 16C 2.3GHz, Aries interconnect , Cray Inc.
United States
301,056 8,100.9 11,078.9 4,233

"Relative Finger Lengths and The Voices of Bankers [research study]"

From Improbable Research:

Relative Finger Lengths and The Voices of Bankers [research study]
Comes yet another discovery about relative finger lengths. The new study is:

Prenatal exposure to testosterone (2D:4D) and social hierarchy together predict voice behavior in bankers,” Erik Bijleveld, Joost Baalbergen, PLoS ONE, vol. 12, no. 6, June 28, 2017, e0180008. The authors, at Radboud University and Utrecht University, The Netherlands, explain:
“Prohibitive voice behaviors are employees’ expressions of concern about practices, incidents, or behaviors that may potentially harm the organization…. In a sample of bankers, we used 2D:4D (i.e., the ratio of the length of the index finger to the length of the ring finger)  [and we] used a self-report scale to measure prohibitive voice. For low-ranked employees, lower 2D:4D was related to using less voice. No such relation was found for high-ranked employees. [Our] findings are consistent with the ideas that (a) people low in 2D:4D tend to strive to attain and maintain social status and that (b) remaining silent about perceived problems in the organization is—at least for low-ranked employees—a means to achieve this goal….
“In any case, by bridging management science and neuroendocrinology, this research suggests a new, biological way of thinking about people’s decisions to (not) use voice.”...MORE
A quick heads-up, Improbable's Ig Nobels are just around the corner:
Tickets for the 27th First Annual Ig Nobel Prize Ceremony go on sale THURSDAY, JULY 20, 2017, at noon (US eastern time). We expect (based on experience) the tickets will get snapped up quickly.
The Harvard Box Office handles all ticket sales. The physical ticket office [now in a temporary location in Farkas Hall, 10 Holyoke Street, Cambridge] is open some (but not all!) days from noon to 6 pm.Telephone (+1) 617-496-2222.
The web site is open 24 hours, every day.
Tickets: $75 / $65 / $55 / $35
Student tickets: $70 / $60 / $50 / $30
Ig Glorious tickets....

CDC Report: 100 Million Americans Either Diabetic or On Their Way

There's an opportunity in here, somewhere. The direct costs of healthcare for diabetics has to be five grand a year per. That gives us a half-trillion dollar market to address. Plus, who really wants a countryside full of blind amputees on dialysis?

From Sputnik:
The US Centers for Disease Control and Prevention (CDC) has announced the alarming results of research that shows more than 100 million US adults are living with diabetes or are somewhere in the "prediabetes" spectrum.
According to the report, as of 2015, a whopping 30.3 million Americans are diabetic and another 84.1 million have prediabetes, a condition that typically leads to type 2 diabetes within five years.

Deemed the seventh leading cause of death in the US, the disease incites a wide range of complications, including blindness, heart disease, stroke, kidney failure and the amputation of fingers, toes and whole limbs.

Released every two years, the report doesn’t exactly paint a happy picture of America’s health.
In 2015 alone, an estimated 1.5 million new diabetes cases were diagnosed in people aged 18 and older. Even more shocking, many were completely unaware of their condition.

"Nearly one in four adults living with diabetes – 7.2 million Americans – didn’t know they had the condition," the report noted.

The only good news that came out of the study was that despite the scary statistics, cases weren’t turning up as often as prior research suggested....MORE

Friday, July 21, 2017

How Do We Know James Chanos Got Under Elon Musk's Skin? (TSLA SCTY)

Chanos has been living rent-free in Elon's head for over a year.

The departure this week of the second of Mr. Musk's two cousins, the Rive boys who had been running SolarCity reminded me I had promised another example of the toll the stress of keeping all the plates spinning may be taking on Elon.
In Monday's "Being Told Tesla Exists Because of Tax Breaks and Subsidies Drives Elon Musk Crazy (TSLA)" I said:
Regarding Mr. Musk, it is starting to appear he's a bit thin-skinned, we'll have another example later today or tomorrow....
went into a meeting and forgot until today.

Here's the set-up for this example. Back in the fall of 2015 Chanos was pretty vocal about SolarCity being the quintessential short-it-to-zero-stock. The company was burning enormous amounts of cash, had no path to profitability, and couldn't get anyone but SpaceX to buy their debt.
On October 21 SCTY shared their financials and we posted "Pray For Elon Musk: SolarCity Drops 21% (SCTY)".

The public relations people earned their keep with "SolarCity pivots to slower growth mode" and I recounted how earlier, in August, Lyndon Rive, SolarCity's CEO was told Chanos was shorting his stock and  "SolarCity's CEO When Told Jim Chanos Is Shorting His Stock: "First I've ever heard of the guy" (SCTY)".
Oh dear.
Oh dear, oh dear, oh dear.
SolarCity's CEO is an ahistorical idot.

I mean we're all idots from time to time but most of us at least try to conceal our idot-hood from the freakin' media!
Well, Mr. Chanos apparently took note of this and the next day, while being interviewed on CNBC started out with "One of our big short positions in the renewable space is SolarCity".

The interviewer says "Elon Musk's company" and Chanos replied "Who?"

Here's the video if you care to see it, it's pretty funny: "SolarCity: Jim Chanos On Elon Who? (SCTY)".

Fast-forward to the week before last and, via Sujeet Indap, the FT's Lex US editor:

The Journal does a story on Tesla's need for cash,
One of the fanbois tells Elon not to sweat it,
Mr. Musk uses a variant of the 2015 trash talk:
The upshot? Elon got to use the line, the Rive boys got to say "thanks cuz" for turning their going-to-be-worthless SCTY stock into TSLA, I get to do this post and Chanos gets screwed by the self-dealing bail-out but hey, 3 out of 4 ain't bad.
Plus, the TSLA the cousins received may or may not be worth the current price after the model 3 roll-out.
We shall see.

"7 Signs that You’re NOT a Thought Leader"

A repost from 2016 because I heard the term three times today, once from a guy who actually said
"As a thought leader I...".
Allow me to complete that thought:  
Somewhere between pretentious and insufferable: thought leadership.
From Marketing Craftsmanship:

Thought Leadership is perhaps the most widely used and consistently abused strategy in professional services marketing. There’s diverse opinion regarding what it is, and fuzzy expectations with respect to its benefits.

Our simple definition is that Thought Leadership is a content marketing strategy designed to leverage intellectual capital as a means to engage target audiences. The practical benefits of Thought Leadership are delivered through the power of “intrinsic selling.”

Without getting overly theoretical, here’s what we mean by that:

“Extrinsic selling” occurs when a seller’s credibility relies heavily on work they’ve performed for other customers. This requires the prospective customer to make a leap of faith; to believe the service provider can match or exceed what’s been done for others. It’s a “trust me” sales approach.
Conversely, intrinsic selling does not require a prospective client to base their selection on work done for others. Instead, it engages the prospective client based on ideas, opinions and advice that enables them to make their own objective decision regarding the seller’s potential to add value. Because no leap of faith is required, it’s a more powerful sales methodology.

The intellectual capital embodied within Thought Leadership is what provides you with credibility, and gives potential buyers the confidence to do business with you. It also serves as a sophisticated sales hook designed to grab their attention.

It’s easier to understand what Thought Leadership is by examining the behaviors that are contrary to its fundamental principles.

So here are 7 signs that you’re not cut out to be a Thought Leader:
  1. You call yourself a Thought Leader. Worse yet, you call yourself a “visionary.” Thought Leadership is not a mantle that can be claimed. It’s a market perception that’s earned over time, and an unofficial stature that’s assigned to you by others.
  2. Your editorial content is self-serving. If you’re unwilling to provide insights, information and recommendations without making yourself the hero, or without directly plugging your firm’s products / services, then you’re not really practicing Thought Leadership.
  3. You lack original or interesting ideas. Repurposing “archived” content (a/k/a other people’s thinking), or providing summaries or news reports of information that’s available elsewhere, will likely position you as an industry parrot, rather than a Thought Leader....

HT: The Big Picture

"Justin Bieber banned from China in order to 'purify' nation "

At The Telegraph but, really, what more needs to be said

Y Combinator Is Raising a $1 Billion Fund

That's a lot of starting-up.
From Axios:

Y Combinator raising $1 billion for new fund
Silicon Valley startup accelerator Y Combinator is raising up to $1 billion for a new venture capital fund, Axios has learned from multiple sources. No word yet on when it is expected to close. YC is also making changes to its investment organization.

Why it matters: Y Combinator is one of the most influential startup entities in Silicon Valley, having incubated such companies as Airbnb, Dropbox and Stripe. But, at it's core, it's an investor — so it's no surprise to see it evolve and expand its reach.
Details, per sources:
  • Merger: This is technically for YC's second Continuity fund, the first of which was a $700 million vehicle designed to invest in later-stage rounds of companies incubated by YC. But YC has decided to merge its existing early-stage investment program with its later-stage fund, so the $1 billion would go toward both.
  • Inside and out: YC has strayed a bit from its original Continuity mission, in that it's now willing to selectively back companies that didn't participate in its accelerator program (something it originally said it would not do). So far it's only done one such deal, which remains unannounced, but more could come. This puts YC more squarely in competition with traditional VC funds that usually invest in startups after they've completed the accelerator program....

Greylock’s Reid Hoffman and SoftBank are leading a $159 million round into a driverless-car tech startup

From recode:

Greylock’s Reid Hoffman and SoftBank’s Shu Nyatta will join Nauto’s board as part of the investment.
Greylock Partners and SoftBank are leading a $159 series B round into auto-tech startup Nauto. As part of the investment, Greylock partner and LinkedIn co-founder Reid Hoffman as well as SoftBank partner Shu Nyatta will be joining the board. 

While Nauto is currently primarily focused on making professional drivers safer with its aftermarket device that uses an inward-facing camera to detect things like distracted driving, the company has already started working with its automaker partners to begin developing the deep-learning algorithms that will enable the cars to drive autonomously. 

The company wouldn’t go into much detail about exactly what that development effort with the automakers entailed. 

However, some of the automaker partners include Nauto’s previous investors — that have also participated in this round — General Motors Ventures, BMW iVentures, Toyota AI Ventures and a few others, Nauto CEO Stefan Heck told Recode. Andy Rubin’s Playground Global also previously led a $12 million round into the company. 

In partnership with Nauto, these companies will use the driver behavior, accident, road and safety data that the devices — which have been deployed in “dozens of fleets” and some of the automakers’ development cars or car-sharing fleets — are collecting to eventually inform the autonomous system....MORE

Loot From World's Biggest Art Heist Probably In Ireland-Investigator (plus the 'catalogue' of the Hermann Göring collection)

That's "biggest" if you don't count the Nazis.
The value of the "Hermann Göring collection" alone was pegged by the NYT at $200 million in 1945.
To get to current valuations you should probably add a couple zeros.
And maybe multiply that by five. We've been meaning to post something on Fat Hermann for a while, the inventory that came out in 2015 is linked after the jump.

From CBS News:

Investigator "100 percent sure" stolen art from legendary heist is in Ireland
Twenty-seven years later, it's still a mystery.

The biggest art heist in history, thieves targeted some of the highest-value art from Boston's Isabella Stewart Gardner Museum, leaving behind empty frames, tied-up security guards and few clues.
The 13 stolen masterpieces valued at around half-a-billion dollars included a Rembrandt and a Vermeer, reports CBS News correspondent Seth Doane.

"I'm 100 percent sure that they are in Ireland. Hundred percent sure. No doubt in my mind," art investigator Arthur Brand said. He's described as the Indiana Jones of the art world.
It's an audacious claim to make after nearly three decades. But Brand alleges his leads point to the Irish Republican Army, or the IRA.

"We have had talks with… former members of the IRA – and after a few Guinnesses, after a few talks – you can see in their eyes that they know more," Brand said.
"How do we believe you?" Doane asked.

"Well, I have a track record. We have found some pieces back before. So let's give this a shot," Brand said.

Brand's highest-profile find to date came working with German police to recover bronze horse statues which stood in front of Adolf Hitler's Grand Chancellery building. He also helped recover Salvador Dali's "Adolescence."

"How is this stolen art used?" Doane asked.

"They use it as payment for drug deals, for arm deals," Brand said. "Sometimes they use it for, like, art-napping. They kidnap paintings and they use it as – to get a lesser sentence."...

HT: Marginal Revolution

Inventory of Hermann Göring art collection at Unterstein, Germany, 1945

Renoirs, Rubens', Monets, Corot, Tintorettos, van Goghs, Botticellis, a bunch of Cranachs and on and on.

Previously on the Izabella Stewart Gardner Museum theft:
June 2017
"Cracking the Biggest Art Heist in History"

At the museum "Thirteen Works: Explore the Gardner's Stolen Works"

May 2016
Risk: Stolen Gardner Museum Masterpieces Probably Destroyed
The author, James Ratcliffe, is director of recoveries & general counsel at the Art Loss Register, London  
August 2015
New Video May Show $500 Million Gardner Heist Perps
June 2011
What does Whitey Bulger know about the 1990 Gardner Museum art heist?

Possibly also of interest:
Duveen, The Greatest Salesman in the World: Isabella Stewart Gardner, Bernard Berenson and the Boston Connection Pt. IV

The courtyard of Mrs. Gardner's home, now the museum and site of the $500 million art theft

"EU’s antitrust ‘war’ on Google and Facebook uses abandoned American playbook" (GOOG; FB)

From The Conversation:

The casual observer could be forgiven for thinking that European antitrust regulators have declared war on American tech giants.
On June 27, the European Union imposed a €2.4 billion (US$2.75 billion) fine on Google for giving favorable treatment in its search engine results to its own comparison shopping service. And Germany’s antitrust enforcer is investigating Facebook for asking users to sign away control over personal information.

In contrast, American antitrust enforcers have shown little interest in these companies. The Federal Trade Commission (FTC) did open an investigation into whether Google has a search bias, but closed it in 2013, despite recognizing that it “may have had the effect of harming individual competitors.”
Anti-Americanism, however, does not explain these starkly different approaches. Europe targets homegrown companies with the same ferocity. Last summer, for example, the EU fined a cartel of European truck-makers even more than it did Google.

Instead, the divergence is explained by America’s abandonment in the 1980s of the theory that competition promotes innovation, which is still embraced by Europe today. America now seems to operate under the theory that competition threatens innovation by denying companies that develop a superior product the rewards of monopoly.

My research suggests that embrace of this new theory has led to under-enforcement of America’s antitrust laws, which may in turn have actually held back innovation.

Betting on competition
The mission of antitrust law, first articulated by the framers of the Sherman Act in 1890, is to ensure that markets contain large numbers of equally matched competitors. That’s why Europe calls its own antitrust rules “competition law.”

The Sherman Act implemented this goal by prohibiting two things: “restraint of trade,” such as price fixing, and monopolization, the attempt of a powerful company to keep competitors out of its markets. European competition laws have a similar bipartite structure.

The EU case against Google falls under the second category, monopolization, or as Europeans dub it “abuse of dominance.”

One of the most important and difficult areas of the law of monopolization involves infrastructure, which can be anything from the roads that crisscross America to the engineering standards that mobile phones use to communicate. Great innovations, such as Google’s search engine, often become the infrastructure that the next generation of competitors need to access in order to create their own, innovative products. But the infrastructure owner will often shut those competitors out, to maximize profits.

The goal of antitrust law would seem to require that its enforcers – the Department of Justice and the FTC in the U.S. – sue to force owners to share their infrastructure on reasonable terms with competitors.

Skeptics emerge
But in the 1960s, skeptics – particularly antitrust economists and lawyers associated with the University of Chicago and led by Robert Bork – started to argue that forcing a business to share its infrastructure on an equal basis with competitors reduces the rewards a company can expect to generate from innovation, potentially discouraging technological progress....MUCH MORE

You Can Tell If Someone’s Rich or Poor by Looking at Their Face

From New York Magazine's Science of Us:
Throughout the late 1960s and 1970s, the English artist David Hockney painted a series of “double portraits,” two subjects depicted side by side — of the fashion designer Ossie Clark with the textile designer Celia Birtwell; of the author Christopher Isherwood with the artist Don Bachardy; and one of his own mother and father, among others. For nearly all of them, critics especially applauded Hockney’s ability to convincingly paint faces, capturing both emotion and a sense of mysterious intimacy.

The one exception to these sympathetic, evocative depictions, however, is a painting titled “American Collectors (Fred and Marcia Weisman),” in which the Weismans’ faces are slightly blurred and blunted to appear similar to the statues behind them. It’s not an obviously negative portrayal, exactly, but to most viewers, it seems clear that Hockney perceived his subjects as flat and dull, their faces signifying their well-bred background and high social class but also their utter lack of original artistic discernment.

The ability to convincingly and subtly depict social class through one’s face alone is a rare skill — not everyone can be David Hockney — but the artist was also tapping into something more universal: Research suggests that the face alone might provide clues to someone’s social class, especially for those who know how to look.

Generally speaking, we pick up hints on a person’s socioeconomic status by looking for more obvious markers, things that are buyable or learnable —clothes, watches, comportment, manner of speech. (Just think of the line in The Great Gatsby when Jay Gatsby turns to Nick to proclaim that Daisy’s “voice is full of money.”) There are subtler, academically proven cues, too, like the fact that someone from a higher class tends to be more disengaged and aloof when dealing with someone from a lower one.

But a study recently published in the Journal of Personality and Social Psychology posits that we really don’t need any of these clues to know someone’s social class: The face alone can be our guide.
“We know that people use facial information for a lot of other things,” says lead study author Nicholas O. Rule, a psychology professor at the University of Toronto. We look at the face to make judgments on “someone’s race, someone’s sex, someone’s age, and even more subtle things like sexual orientation, political affiliation, or religion. It seemed very logical to us, actually, that people would be able to get social class information from people by looking at their faces.”...MORE
The 'cues' paper is:
Signs of Socioeconomic Status A Thin-Slicing Approach

Thursday, July 20, 2017

Risk:Today's 6.7-Magnitude Turkish Earthquake Was Not The 'Big One'

From Reuters:
Turkey quake to cause small tsunami: EMSC
A 6.7-magnitude earthquake off the southwestern coast of Turkey could cause a small tsunami in the area, European quake agency EMSC said, although Turkish officials said large waves were more likely than a tsunami.... 
From the U.S. Geological Service via the New Straits Times:

The epicenter is just offshore southwestern Turkey while  the 'big one' is expected in Istanbul's backyard.

As the Daily Sabah reminds us:
... Turkey is among one of the world's most seismically active countries as it is situated on a number of active fault lines, with the most potentially devastating one being the Northern Anatolia Fault (NAF), where the Anatolian and Eurasian plates meet.
The NAF, a strike-slip fault formed as the Anatolian plate was being pushed northwestwards by the Arabian plate, has produced devastating earthquakes throughout history, with the most recent ones being magnitude 7.4 and 7.2 earthquakes in northwestern Izmit and Düzce provinces in August and December 1999. The 1999 earthquakes killed thousands in Kocaeli, Adapazarı, Istanbul, Yalova and nearby towns in the northwest, which serve as Turkey's economic and industrial heartland....

...Scientists have warned that the epicenter of Turkey's next big earthquake is likely to occur under the Sea of Marmara, where the NAF passes.
For which see: May 20's "Risk: Massive Earthquake Could Hit Istanbul at any Moment with just SECONDS Warning, Say Scientists".

"Amazon Prime and other Subscription Businesses: How do you Value a Subscriber?"

This might be pertinent not just for Prime and others, but for Tesla, should it survive the model 3 ramp-up. More on that next week.
From 25iq, July 15:
Businesses increasingly don’t just sell products and services in a single transaction. Subscription and other businesses that focus on recurring sales have existed for a very long time. What is new is that many more businesses have adopted a subscription approach, which makes them look a lot more like a company in the the cable television business than an auto parts manufacturer.

Successfully implementing a subscription business model can be particularly hard since the customer acquisition cost (CAC) happens up front and the revenue appears over time. These subscription businesses have a revenue profile that is more like an annuity. This revenue profile is not like the manufacturer’s business that many people learned about from a college introduction to accounting class. Unlike an annuity, the revenue stream of a subscription business is subject to risk, uncertainty and ignorance. The good news is that it is precisely because there is risk, uncertainty and ignorance that an opportunity for profit exists. The bad news is that it can be hard to capture. The reality is that if you do not capture this profit your competitors may do so.

Someone may ask: Why should I worry about this? Will it be on the test? The answer is: Yes and yes. Charlie Munger says it best: “The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.” The text in bold in the Munger statement is critical with a subscription service like Amazon Prime- you can’t understand the value of the business by looking at just one month or even a few months since it is lifetime value that matters.

Why are these new subscription businesses being created more often? The economics of a subscription business can be very favorable if you get it right. A lot of financial leverage can be generated if the customer does not need to be acquired repeatedly. Customer acquisition cost is lower for a well-run subscription business even though it is more front loaded. Yes, subscription business models can have more predictable revenues, but that is not caused by the tooth fairy. More predictable revenues are a byproduct of lower overall CAC and some operational approaches and investments in customer retention. The trade-off is that a subscription business model can also be deadly if you get it wrong. Each of the key variables in a subscription business can be either: (1) many angels working together to build something wonderful, or (2) a pack of hungry wolves that can tear the business to shreds. Propelling more businesses to adopt a subscription business  model is a simple truth: if your competitors or competitors get this model right your business may be doomed.

The benefits of this new way of doing business was chronicled well in the book The Outsiders by Thorndike. One of the major innovators of this way of doing business model was John Malone in the cable television industry. Here is John Malone talking about the model he used to build many of his businesses:

“We decided… to go on a cash flow metric very much like real estate. Levered cash flow growth became the mantra out here. A number of our eastern competitors early on were still large industrial companies — Westinghouse, GE, — and they were on an earnings metric. It became obvious to us that if you were going to be measured on earnings, it would be real tough to stay in the cable industry and grow.” “I used to say in the cable industry that if your interest rate was lower than your growth rate, your present value is infinite. That’s why the cable industry created so many rich guys. It was the combination of tax-sheltered cash-flow growth that was, in effect, growing faster than the interest rate under which you could borrow money. If you do any arithmetic at all, the present value calculation tends toward infinity under that thesis.” “It’s not about earnings, it’s about wealth creation and levered cash-flow growth. Tell them you don’t care about earnings..” “The first thing you do is make sure you have enough juice to survive and you don’t have any credit issues that are going to bite you in the near term, and that you’ve thought about how you manage your way through those issues.” “I used to go to shareholder meetings and someone would ask about earnings, and I’d say, ‘I think you’re in the wrong meeting.’ That’s the wrong metric. In fact, in the cable industry, if you start generating earnings that means you’ve stopped growing and the government is now participating in what otherwise should be your growth metric.”

The more you understand about what John Malone has accomplished in his business the more you will understand what companies like Amazon are doing in their business....MUCH MORE

"Why on earth is India’s most famous yoga guru building an army of security men?"

I think the FT had the story first:

Indian guru Baba Ramdev expands into private security
Yoga-televangelist has shaken up consumer goods sector with ‘natural’ products
July 12, 2017 by: Amy Kazmin in New Delhi 
Baba Ramdev, the Indian yoga guru turned entrepreneur who has been challenging consumer goods giants Nestlé, Colgate and Unilever, is diversifying into another of his country’s fastest-growing business areas: private security services. Mr Ramdev, a popular yoga-televangelist and high-profile backer of Prime Minister Narendra Modi, has recruited former army and police officers to help train guards for his new venture, Parakram Suraksha (Valour Security) Private Ltd. The new security business will “help develop military instinct in each and every citizen of the country so as to awaken the spirit and determination for individual and national security,” the Hindu holy man said in a statement announcing the company’s formal launch....MUCH MORE 
But Quartz had the better picture (and the headline which we lifted):
India’s most famous yoga guru-turned-businessman is building an army of security guards.
On July 12, fifty-one-year-old Ramdev, whose Patanjali Ayurved has taken on India’s reigning consumer business giants, announced the launch of Parakram Suraksha (Valour Security) which will supply guards and provide security services. The company says it has recruited former Indian Army personnel and police officers to train youngsters....

... “Maybe the baba feels the need for protecting his own assets,” Kunwar Vikram Singh, chairman of Central Association of Private Security Industry (CAPSI), said. “There is a huge need for private security…particularly to protect infrastructure, women, homes, and airports. Of course, the opportunity is massive.”

Lucrative private security...

Accounting: "Egad, Pharma Bro Martin Shkreli Was an Insufferable Client"

From Going Concern:
Everyone who works in public accounting experiences a bad client or two. But then again, there are bad clients, and then there are the Martin Shkrelis of the world. It’s really a disservice to the bad clients out there to lump Martin Shkreli in with them.

This CNBC report details the testimony of Corey Massella, who was a partner at Citrin Cooperman, the firm helping Shkreli’s company, Retrophin, get ready to go public. Shkreli is currently on trial for securities charges. According to Massella, Shkreli’s business is the stuff clients from hell are made of. Highlights include:
  • Retrophin’s accounting described as “very chaotic.”
  • Shkreli repeatedly sending “changes in the stock ownership tables,” that caused an exasperated Massella to write “WTF?” in an email.
  • Shkreli getting testy over Citrin Cooperman’s questions about contractors and their requests for Retrophin’s agreements with them.
  • Numerous head-scratching debit card transactions for “iTunes, Starbucks and travel expenses.”
  • Compensation payments to Shkreli that didn’t run through payroll, including “a $575,000 transfer from Retrophin to Shkreli’s personal bank account” that was explained as “back pay and ‘bonus pay.'”
Then there’s this doozy....

Hey Kids, You Can Bring Back the Pox For a Measly Hundred Grand!

Well this doesn't sound good.

From Futurism:
Researchers Brought Back a Pox Virus Using Mail-Order DNA and it Only Cost $100,000
Reviving Extinct Viruses
Canadian researchers revived an extinct horsepox virus last year on a shoestring budget, by using mail-order DNA. That may not seem like a big deal, until you consider that this relatively inexpensive technique could be used by anyone — perhaps even to bring back something like smallpox, one of the most feared diseases in humanity’s history. The team’s research — which remains unpublished — was intended to create better vaccines and even cancer treatments.

Though David Evans of the University of Alberta, the research lead, admitted that he also undertook the project to prove that it could be done. And, that it wouldn’t necessarily require a lot of time, money, and even biomedical skill or knowledge. As he told Science, “The world just needs to accept the fact that you can do this and now we have to figure out what is the best strategy for dealing with that.” Thus reigniting a powerful debate in the biomedical science community.

The researchers bought overlapping DNA fragments from a commercial synthetic DNA company. Each fragment was about 30,000 base pairs long, and because they overlapped, the team was able to “stitch” them together to complete the genome of the 212,000-base-pair horsepox virus. When they introduced the genome into cells that were already infected with a different kind of poxvirus, the cells began to produce virus particles of the infectious horsepox variety. While horsepox doesn’t infect humans, other pox viruses do: and if the technique works to recreate one kind of pox virus, it could likely work for others as well. This technique was first demonstrated by another group of researchers in a Proceedings of the National Academy of Sciences paper in 2002.

Possible Implications
The idea that it would someday be possible to synthesize poxviruses is nothing new. In 2002, virologists assembled the poliovirus from scratch.....MORE

"Sears + Amazon=Bad News for Whirlpool, Home Depot?" (AMZN; SHLD)

"Now I am become Death, the destroyer of worlds."*

From Barron's Stocks to Watch:

Sears' announcement that it would be selling appliances on Amazon has hit competitors...hard. (AMZN) has done it again. Today, Sears Holdings (SHLD) announced that it would start selling its Kenmore appliances on Amazon, and that some of them would even be able to use Alexa.

And just like after Amazon announced that it had agreed to buyWhole Foods Market (WFM), the news is hammering every company competes with Sears in the appliance space, including Whirlpool (WHR), Home Depot (HD), and Lowe's (LOW).

The announcement, however, raises more questions than answers....MORE
*Robert Oppenheimer's thought upon the successful detonation of the first atomic bomb, using the Christopher Isherwood-Swami Prabhavananda translation of the Bhagavad Gita.

LOW   $72.94 -3.89  (-5.07%)
HD    $147.00 -6.30  (-4.11%)
WHR  $189.54-8.80  (-4.44%)

Recent use of the image:
"Amazon Is Pure Madness: It's Going to Destroy Almost Every Industry Alive and It Must Be Stopped", Bezos Denies Being Satan's Minion

More Troubles For DryShips Economou (DRYS)

Sure he's got securities attorneys chasing him on DryShips and sure he's got creditors trying to nail down the location of Ocean Rig's drillships but this could be a problem.
From the New York Post:

Billionaire’s ex-gal pal claims she was cheated out of $240M
A filmmaker who says she was “instrumental” in turning her ex into a billionaire shipping magnate claims he cheated her out of a $240 million settlement.

Angela Ismailos met George Economou in 1994. They started dating and Economou moved into her $1.8 million Park Avenue pad, according to her Manhattan ­Supreme Court suit.

At the time he “was a struggling ship owner with five old vessels co-owned by a bank,” the suit says.
Over the next two decades, Ismailos “was instrumental in Economou’s rise to becoming a billionaire shipowner,” her suit says.

They never married, but Economou signed agreements in 2012 promising Ismailos a 50 percent stake in assets, court papers state....MORE

Société Générale's Albert Edwards: Just One Aberration Prevents A "Petrifying Bear Market"

Every time I am asked why we post on Mr. Edwards "when he's been wrong so often" I debate whether to explain or just give a glib answer.
The flippant rationale would be we get to go with headlines such as:

Société Générale's Albert Edwards Descends Into A Nightmare World of Dream Demons and Market Depravity
Société Générale's Albert Edwards: "Many Think I am Mad..."  
Société Générale's Albert Edwards Sees Blue Skies, Sunshine, the Lame Shall Walk Again
Of course it's possible I have misinterpreted the meaning of:
"the US economy is on crutches, and they are about to be kicked away"
Société Générale's Albert Edwards Has Some Troubling News He Reluctantly Shares
Société Générale's Albert Edwards Not His Usual Jolly Self (II)
Société Générale's Albert Edwards: "I Have Been Wrong – I’ve Been Too Bullish"
It May Be Time To Put Société Générale's Albert Edwards On Suicide Watch
Société Générale's Albert Edwards: Cry Havoc and Let Slip the...Ah Screw it

And many, many more.
The straight-up answer is: I can't think of anyone else who nailed the deflationary bias in credit markets as well as he has for as long as he has, pretty much the last 15-20 years.
And as far as equities go, absent the extraordinary measures of the world's central banks the landscape would look very, very different.

The biggest criticism you can lay on the guy is he didn't realize what he was up against re: the powers that be.*
Plus that whole Albert-in-the-bathtub period was just stupid.

From ZeroHedge:
One month after he shared his preview of the endgame of this current centrally-planned economic regime (expect no happy ending there, as "citizens will soon turn their rage towards Central Bankers.") Albert Edwards is out with a new note asking whether "H2 2017 will undo the trend of lower inflation, bond yields and the dollar?" and - if the answer is no - he cautions that "investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!"

The creator of the "deflationary ice-age" concept starts off by noting that equities have risen to new all-time highs as weak US inflation data have reduced expectations of further Fed rate hikes. This has driven both bond yields and the dollar lower and in turn EM and commodity prices higher. But, Edwards warns, the trend might easily reverse as the second half of this year progresses.
"This might dampen the impact of recent compelling evidence that core CPI and wage inflation seem destined to remain curiously weak throughout the remainder of this cycle."
But as the SocGen strategist concedes, a far bigger question is how the recent equity highs sit with our Ice Age thesis – is it dead or just sleeping?"

Before he answers that question, Edwards first reminds us that with the latest inflationary print, US core CPI and wage inflation have surprised on the downside for four successive months and argues that "only two data points are sufficient for most of us to be able to draw a trend, but four data points surely provide clear evidence of the decisive re-emergence of a deflationary trend. At the very least this recent data is grounds for a dismissal of the argument that ‘end of cycle’ inflationary pressures might make a brief appearance, before the long-term deflationary secular trend reasserts itself in the next downturn."

Which brings us to the first key question posed by Edwards:
If inflationary pressures are indeed ebbing in the US economy, this begs the question that if the third-longest cycle in US history cannot produce a cyclical uplift in wages and prices, what on earth will happen in the next recession! Investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!
The US is not alone however in failing to spur inflation: as Gerard Minack shows in the chart below, although the number of OECD countries in absolute deflation at the core CPI level has receded, those undershooting a typical core CPI target of 2% are at an all-time high. This, Edwards says, "is quite amazing given where we are in the global economic cycle."
None of the above should come as a surprise: recall that the primary driver of global inflation in the past decade has been - without fail - China, the same China that as we showed recently has seen its credit impulse collapse, and is therefore once again no longer exporting inflation.
Assuming that Edwards is right, and that China will be stuck exporting deflation for the foreseeable future, and that the latest wave of inflation is about to be submerged, that means that Edward's patented deflationary "Ice Age" scenario is about to become the dominant topic again.

As a quick reminder,  Edwards' big Ice Age call was that the tight positive correlation between equity yields and bond yields that market participants had enjoyed since 1982, driven by ever-lower inflation, would break down....

 March 17, 2017
*Société Générale's Albert Edwards: Winter Is Coming
Yes, Albert has been forecasting the arrival of the economic ice age since at least 1996 (our links go back to 2010 and probably earlier), but the House Fed has thwarted his House Stark at every turn.
Now he's getting ready to roll but it may be too late for him.
"I fought. I lost. Now I rest. But you, Lord Snow… you'll be fighting their battles forever."
Albert addressing another standing room only investment conference crowd

Okay, that's enough Game of Thrones references for now.... 

Welcome to Short-Attention-Span Television: "Inside Jeffrey Katzenberg’s Plan to Revolutionize Entertainment on Mobile Screens"

From Variety:

Inside Jeffrey Katzenberg’s Plan to Revolutionize Entertainment on Mobile Screens
When Jeffrey Katzenberg touched down in Sun Valley, Idaho, last week, it extended a streak of appearances at the annual conference going back more than 30 years, nearly to the time Allen & Co. first launched its event in 1983.

But for Katzenberg this year wasn’t just another elite gathering for captains of industry; it represented a critical juncture in a journey he quietly embarked on last August after leaving DreamWorks Animation, the studio he sold to Comcast’s NBCUniversal for $3.8 billion.

His ambitious goal at this year’s conference: getting one of the myriad tech and telco giants he’d been talking to in the intervening months to leverage its infrastructure and reach for his latest venture. The entry fee for the interested company: $2 billion to help bring his vision to fruition. While he declines to specify which executives he spoke to in Idaho, Katzenberg was spotted meeting with a wide range of power brokers from Apple’s Tim Cook and Eddy Cue to YouTube’s Susan Wojcicki to Verizon’s Lowell McAdam, Marni Walden and Tim Armstrong.

“Is this a gigantic undertaking? The answer is yes,” says Katzenberg in an exclusive interview with Variety in which he lays out the full scope of his plans. “Is it bigger than DreamWorks? I hope so.”
Katzenberg’s plan involves nothing less than the creation of a whole new species of entertainment targeting 18- to 34-year-olds: short-form video series produced with budgets and production values you might expect from primetime TV, along with top-shelf creatives on both sides of the camera. For example, imagine a drama akin to “Empire” or “Scandal” but shrunk to 10-minute episodes made for mobile consumption. Or a five-minute talk show, or a two-minute newscast — all with high-profile talent attached....MORE

Wednesday, July 19, 2017

"'The Most Dangerous Moment': Why Every Bank Is Suddenly Talking About Q3 2018"

I'll just wheel out the introduction to June 25's "QE-Unwind may start in September" which itself refs an earlier intro. It's self-reverence self-reference all the way down:
Our intro to May 16's "Gavyn Davies: 'The consequences of shrinking the Fed’s balance sheet'":
This has the potential to be the most important econ/finance/market story of the second half of this year.... 
A no-brainer, and I'm just the person to say it....
Cosmologically regressive but it saves on the typing.

From ZeroHedge:
By now everyone is probably familiar with one of the scariest financial charts created recently by Bank of America: it shows that not only have central banks injected a record $15.1 trillion in liquidity since the crisis, but in 2017 alone - a time when the global economy is supposedly improving - they added a record $1.5 trillion, or as BofA's Michael Hartnett calculated, $3.1 trillion annualized.
Or maybe not: in a little noticed comment from Hartnett made later in June, Hartnett observed that "central banks in aggregate still printing: bought $350bn in April, $300bn in May, <$100bn in June…big 5 central banks buying less but not yet selling."

And while the ECB quietly tapered from €80 to €60BN last December (even though Mario Draghi went to great lengths to described the tapering as a non-event) and is expected to announce a formal tapering again, most likely during Jackson Hole , nowhere is this quiet slowdown in central bank purchases more evident than in the balance sheet of the BOJ, whose average purchases have declined sharply in recent months from a JPY80trillion average to a far lower level:
Indeed, it is safe to say that the topic of the liquidity injection by central banks, or rather its removal, has become one of the most discussed topics within the financial community. Case in point, in a note from last week, Credit Suisse's Andrew Garthwaite wrote that "on a year-on-year basis, the aggregate balance sheet of the big 4 central banks is set to continue expanding through 2018, although the pace of expansion will steadily slow, as shown in the second chart below. Our estimates, which include our economists' assumptions on ECB, Fed and BoJ buying and keep current FX rates constant, suggest that it is Q3 2018 when the contraction in the Fed's balance sheet on a monthly basis (which at that point will be $40bn a month) will start to exceed the purchase of assets by the ECB and BoJ."

Or, as he puts it in easily digestible format: "The inflection in central bank balance sheets comes in Q3 2018."...