Wednesday, January 31, 2018

Cargill Invests In Facial Recognition For Cows

Do cows have faces?

From AgFunder:
Cainthus, an Irish startup focused on using computer vision and predictive imaging analysis to monitor the health and well-being of livestock has received an undisclosed investment from protein giant Cargill. 

Cainthus uses various types of imaging equipment to monitor livestock operations while artificial intelligence and custom algorithms detect behavior in individual animals to monitor their health and alert the user when an action is required. The Cainthus system is able to detect food and water intake in individual animals as well as when the animals are in heat and more, says founder David Hunt. 
Imagery can come from drones, satellites, CCTV, and smart devices, but the most common set-up in Cainthus trials is an installation of a few dozen CCTV cameras on dairy farms. 

Within seconds Cainthus imaging technology can identify individual cows by their features, memorize their unique identity and record individual patterns and movements.

“If you boil down on a granular level we’re looking at rate of change of pixels. We train our AI to understand that a particular pixel pattern is a cow and when that pixel pattern exhibits a rate of change of movement that determines what the gesture is,” explained Hunt. 

Cargill is also entering into a partnership with the startup and has already run several trials with Cainthus technology. So far, Cainthus has tested their system in commercial dairy farms in New York, California, Canada, Italy, and Spain.

An internal team at Cargill has been searching for strategies to use digital technologies to fundamentally improve livestock and aquaculture operations for around eight months, Sri Kantamneni, managing director of digital insights at Cargill, told AgFundernews. He said that one of the most attractive qualities of Cainthus technology was its potential to apply to all animal protein sectors.....MORE
Bovine adversarial image teams around the world are working feverishly to beat the machines with ideas ranging from the (udderly) ridiculous:

To the...actually they're all ridiculous.

Hiding from the cameras may be the only foolproof technique:

We'll give the ruminators something to think about with a few of our previous posts on the topic:

Adversarial Images, Or How To Fool Machine Vision
Fooling The Machine: The Byzantine Science of Deceiving Artificial Intelligence
"Magic AI: These are the Optical Illusions that Trick, Fool, and Flummox Computers"
Another Way To Fool The Facial Recognition Algos
Talented Makeup Artist Takes Facial Optical Illusions to a Whole New Level
31-year-old Mimi Choi, a makeup artist from Vancouver, spends hours turning her face into mind-boggling optical illusions that look photoshopped at first glance.

That last may be a bit much to expect from the cloven-hoofed beasties but it's something to aspire to.

Catfishin': Creating Felix Salmon and the What, Why and How He Got Paid What He Got Paid

Catfishing has a specific meaning on the internet* and I in no way wish to impute that meaning to Mr. Salmon.
It's just that in life we all create ourselves (see footnote) and what with the Felix and the Salmon, I'm going with it.

From The Awl:

Felix Salmon, "Fusion Money," and Floating Upward 
What, why, and how he got paid what he did.
Last Friday, just after 2pm, the financial journalist Felix Salmon posted a blog titled “Why I’m Leaving Fusion.” It was a very short post indeed:

So, that is a provocative shruggie, is it not? At the very least it implies a cheeky “I don’t know (I know)” along with a dash of womp-womp (“not of my own volition!”). Salmon was most recently “working to develop and launch a new project that will explore the world of philanthropy, activism, social entrepreneurship, and spotlighting those working to try and make the world a better place,” on Fusion’s Rise Up “social impact” team, and before that, he had been a Senior Editor since the time he joined Fusion in 2014. For years, there has been rampant speculation among media types (loser dorks) about how much money the “hybrid television and digital media outlet” was paying to poach high-profile digital editors. But two weeks ago, the growing resentment within the Gizmodo Media Group newsroom toward Salmon and his significant salary—which because of a clerical error in 2016 had become an open secret in the newsroom—boiled over.

On January 17, in GMG’s media chat slack channel, Salmon revealed his money privilege in a way that didn’t sit well with some. “As someone who just installed a new kitchen in a rental at my own expense, I can say that decorating rentals is a good and sensible thing to do,” Salmon wrote. It seemed no one else in the room could relate—some took issue with the distinction between “decorating” and “renovating,” while others could not fathom having the money to do either. Salmon explained the sense in spending “3 months’ rent on making your permanent rental a much nicer place to live” thusly: “if you amortize 3 months’ rent over another 6 years, it works out at a pretty small monthly increase for a much nicer place.” Technically he is correct! Practically speaking, this is not the best thing to discuss in a room full of smart alecks who know they’re making a fraction of what you do:

Salmon dug into his economically sound but nonetheless tone-deaf point: “It’s cheaper than paying more rent to rent a nicer place. It’s much, much cheaper than buying. It’s still not cheap. But it does make financial sense, if what you want is, say, a dishwasher.” Tipped off to the exciting chat going on, several staffers joined in to make winking reference to their own financial status as self-pitying millennials who will never be able to afford houses because of avocados and baby boomers:
(n.b. Salmon LOVES talking about the the rent-vs.-buy calculation and rightly insisted buying is “vastly more expensive.”)
“I had a termite swarm this year, so termites caked my floor,” chimed in one person. Another uploaded a photo of a hole in their apartment ceiling. “Which is worse, a hole in the ceiling or a hole in the floor?” asked another. “My old place had a corner with rotting boards where anything smaller than a ping-pong ball would fall through.”

(At some point, Salmon left the chat, but the wonderment continued.)
The next day on Twitter, Salmon posted a tweet reassuring his followers he DOES NOT have enough money to buy a $10 million villa. Presumably he was implying he doesn’t have the twenty percent down payment (about $1.96 million), and any rumors of his wealth have been greatly exaggerated....MUCH MORE
HT: Longform

From the Urban Dictionary:
Purporting to be someone or something you are not on the Internet in order to gain friends, attention, partners, pity, sympathy or money. Named after the faux-documentary "Catfish", Catfishers have been known to post fake pictures of themselves (including but not limited to catalog images), claim to have a dying fiance or mother, or create an entirely fictional version of themselves.
Uh oh, did you see that perfectly posed photo of Donna she posted? That girl is so catfishin'.

Oh man, I heard Northlad's girlfriend is really sick. I sure hope he isn't catfishin' u

Fancy Finance: "Art Capital sues Croman for backing out of fine art-backed loan"

From The Real Deal:
Lender alleges the now-jailed landlord refused to close, breached contract 

Art Capital, a financial firm specializing in art-backed loans, is suing jailed landlord Steve Croman and his wife Harriet for allegedly backing out of a $50 million loan Croman sought following his guilty plea to mortgage and tax fraud charges in June.

According to the complaint, Croman signed a term sheet for a $50 million loan backed by his Upper East Side Mansion and 38 pieces of fine art. The term sheet included exclusivity and payment of expenses provisions and the Cromans wired a $50,000 deposit, the suit says. Croman sought the loan, according to Art Capital’s filing, because he needed to pay off debt to New York Community Bank and CitiBank, who are named defendants in the suit.

But Croman never closed on the loan and wanted different terms, the suit states. One of his attorneys, Andrew Albstein, informed Art Capital earlier this month, with Croman now in jail, that they would not be pursuing the loan anymore and that they had retained “Meridian Group” to find debt opportunities elsewhere. Art Capital said this stance put Croman in breach of contract and that he additionally owed $1.7 million in costs related to loan due diligence work, as required by the term sheet.

In December, New York Attorney General Eric Schneiderman announced an $8 million settlement owed by Croman in connection with a separate tenant harassment case against him, a development that had factored into the loan talks with Art Capital, according to the court complaint, because it complicated the matter as to whether Art Capital has the first-priority lien on Croman’s art and home.
Benjamin Brafman, an attorney for Croman, did not immediately respond to a request for comment. Nor did Albstein, Croman’s real estate attorney. Art Capital’s attorney, Francis Majorie, also did not immediately respond to a request....MORE
Some earlier fancy finance posts that may be of interest:
Carlyle and Banque Pictet Hook Up For Art Financing Action
What's the Scam? Why Did Deloitte Set Up Their Art & Finance Practice In Luxembourg?
Deloitte's Art and Finance Report 2014: Buying Art On Margin
The Art Finance Biz Seems Quite Robust: "Sotheby’s Adds Another $200 Million to Credit Facility for Guarantees"
In "Liechtenstein Is Using One of the World's Finest Art Collections to Market Its Private Bank to the Chinese" I took the not-too-controversial position that "'Prince of Liechtenstein' is a very good gig."
I'm thinking that Grand Duke of Luxembourg ain't too shabby either.

"Forget Apple: The Stock Market’s Rise Is All About Boeing" (BA)

Boeing quietly has more pull on the stock market than pretty much any other company.
The aerospace giant’s stock has doubled and then some over the past 12 months, including an additional 5.3% Wednesday. That came after the firm forecast a higher profit margin and a jump in operating cash as it continues to deliver record numbers of jetliners.

With the most recent rise, the company now makes up about 9.4% of the Dow Jones Industrial Average, far more than Apple or any other company in the 30-stock index. The Dow is price-weighted, which means Boeing’s stock price, far and away the most expensive at more than $355, has the most pull on the index.

In Wednesday trade, it was responsible for 123 of the Dow’s 143-point rise.

Boeing became the highest-weighted stock in the Dow last July, when it surpassed Goldman Sachs Group Inc.. The aerospace company, now worth more than $200 billion, made up less than 6% of the index a year ago, according to The Wall Street Journal’s Market Data Group. Before this most recent stretch, Boeing was also the highest-weighted stock during brief stints in 2006, when it made up roughly 6% of the index.

The S&P 500 by contrast is market capitalization weighted, so the mammoth tech giants get the highest weight, and Boeing’s market cap makes up just 0.8% of that index’s total value. Still, those tech giants are specks in the S&P 500 compared to Boeing’s weighting in the Dow. Apple, Microsoft, and, three of the biggest companies in the S&P 500, together make up about the same share of that index as Boeing does of the Dow....MORE

"Tesla Model 3s bought by firm selling Tesla’s secrets: report"

There is a downside to being out front early.
From the Mercury-News' SiliconBeat:
Tesla’s competitors want to know the secrets of the company’s Model 3 entry-level electric sedan, and they’re willing to pay more than $500,000 for them.

That’s according to a new report saying a Chicago-area engineering company has bought several Model 3s for about $100,000 each, from third parties.

Caresoft Global is pulling the cars apart, doing high-tech imaging scans and “selling data and technical insights to Tesla competitors — for upward of $500,000,” the Wall Street Journal reported Jan. 30.

Production delays have beset the car — which starts at $35,000 — and only a few thousand Model 3s at most have so far been delivered to customers, and many of those have gone to Tesla employees.

“A shortage of Model 3 sedans has created a frenzy among curious competitors, Tesla enthusiasts and auto reviewers to get their hands on the electric car,” the WSJ reported (paywall).

“Investors and competitors are devouring any morsel of information.”...MORE

Indian Ridshare Ola Expands to Australia To Take On Uber

It might work.
People in Sydney still remember when Uber's surge pricing kicked in during a terrorist hostage crisis back in 2014. The same thing happened during terrorist attacks in London and New York, it's an automatic response by the algos to the increase in demand when folks are trying to flee and of course Uber refunded the extra charge but for some reason the Australia event stood out.

Anyhoo, lifted in toto from the marketing mavens at The Drum:

Ola drives its first international expansion in Australia to combat Uber
Indian cab hailing service Ola has stepped up its competition with global rivals, such as Uber, as it announces its first international expansion into the Australian market.

As reported by TechCrunch, Ola’s initial plan is to launch private hire vehicles in Australia. Meanwhile, China's Didi Chuxing also expanded internationally this year into Brazil and Taiwan.
Ola co-founder and CEO Bhavish Aggarwal said: “We are very excited about launching Ola in Australia and see immense potential for the ride-sharing ecosystem which embraces new technology and innovation.

With a strong focus on driver-partners and the community at large, we aim to create a high-quality and affordable travel experience for citizens and look forward to contributing to a healthy mobility ecosystem in Australia."

SoftBank which has stakes in Ola, also acquired a $9bn stake in Uber recently
"Ola is stocking up its war chest in India while Uber struggles with its worst nightmare"
Didi Chuxing buys control of 99, Brazil’s leading ride-hail app
You Understand Why Mr. Son and SoftBank Are Circling Uber, Right?
"SoftBank Emerges as the Lead Financier for Uber Rivals"

Also at The Drum:
Starbucks’ Rewards scheme is part of its much bigger vision for a blockchain-backed digital currency

"Don't Fear China's Arctic Takeover"

No fear.
Via The Drive:
“We need to look differently at what an icebreaker does... We need to reserve space, weight and power if we need to strap a cruise missile package on it... U.S. presence in the Arctic is necessary for more than just power projection; it’s a matter of national security... If they remain unchecked, the Russians will extend their sphere of influence to over five million square miles of Arctic ice and water.”
—Coast Guard Commandant Admiral Paul Zukunft
Strap a cruise missile package on icebreakers?

Here's the headline story from Bloomberg View:

It's natural that China wants to stake a claim at the top of the world.
Last week, China said it plans to build a "Polar Silk Road" that will open shipping lanes across the largely pristine region at the top of the world. It's an ambitious idea for a country that lacks an Arctic border, and it has raised concerns around the world about China's ultimate intentions and its capacity for environmental stewardship. Although these are reasonable worries, they're almost certainly overblown.

In theory, melting Arctic ice will create a significant economic opportunity. By one account, the region holds 22 percent of the world's oil and gas reserves. As the ice recedes due to climate change, those reserves will be easier to mine. As new shipping lanes open, they should also be easier to transport. A cargo vessel going from Shanghai to Rotterdam via the Northwest Passage, rather than through the Panama Canal, will shave 2,200 miles off its journey. Already, some 900 Arctic infrastructure projects are at various stages of development.

To be sure, most won't get anywhere. It's hard to predict exactly how and where polar ice will melt. Some hoped-for shipping lanes may not open until the 2070s, and those routes that have already opened are unlikely to support profitable shipping businesses, thanks to their remoteness and the high cost of insurance. In 2016, only 19 vessels traversed the Northern Sea Route between Asia and Europe -- hardly evidence of an Arctic "gold rush" or competition for the Panama Canal.

Yet China is taking the long view. In the past decade, Chinese academics have started publishing papers on the role of the Arctic in China's economic and geopolitical future. Policy makers have begun describing China as a "near-Arctic state" and an Arctic "stakeholder," despite having no coastline or other obvious territorial claims in the region. In 2016, China published a 356-page guidebook on navigating Canada's Northwest Passage -- then made a successful voyage through the fabled sea route just a year later.

All this has led to some understandable concerns. Canada, for one, is worried that China will fail to respect existing sovereignty claims, and recently accused it of obtaining a permit for its Northwest Passage voyage under false premises. As the world's largest consumer of oil, gas, minerals and seafood, China is also sure to have an outsized impact on the region's environment.

But that's all the more reason for it to have a seat at the table in determining the Arctic's future. So far, at least, China has been willing to work within international rules. In 2013, it obtained permanent observer status at the Arctic Council, a group that includes the eight Arctic nations and six indigenous communities....MORE

"Coinbase Strategy Teardown: How Coinbase Grew Into The King Midas Of Crypto Doing $1B In Revenue"

Coinbase is the Andreessen Horowitz backed cryptocurrency play that's working out. is the one that isn't.

Here's CB Insights:

To sustain the cryptocraze, Coinbase will need to foster real applications of cryptoassets — and not just speculation.
Coinbase is the most popular consumer-facing cryptoasset exchange in the United States. Operating since 2011, the company allows users to buy, sell, and store cryptoassets, like bitcoin and ethereum.
The company already has significant visibility with consumers in a sector that was once exclusively the province of cryptoasset enthusiasts. In mid-December, the company’s mobile app reached the top spot on Apple’s App Store.

Coinbase has soared in popularity and turned itself into the on-ramp for mainstream crypto investors by positioning itself as a safe harbor among cryptoasset exchanges. The company has never been hacked, unlike many of its competitors. Coinbase has also maniacally pursued compliance with existing regulations and law enforcement, putting it on the right side of the law — another huge asset in a sector that is still in desperate need of regulatory guidance.

This has helped Coinbase secure $217M in equity financing from some of the biggest-name VCs, and vaulted the company into the unicorn club.

However, while Coinbase is best known for its cryptoasset exchange, it has bigger aspirations than helping people buy and sell crypto. The company’s stated goal echoes cryptoasset enthusiasts’ ultimate vision: to create a new, “open financial system.”

For the time being, though, Coinbase looks a lot like a traditional financial services player. Coinbase makes money by charging fees for its brokerage and exchange. It also custodians user funds, like a bank, and decides which cryptoassets to list, like the NASDAQ or NYSE.

Coinbase thus finds itself caught between worlds: it’s the most well-funded blockchain company in the United States, but it’s a centralized company, not a decentralized ledger. The company once advertised cryptoassets as the “future of money,” but now positions itself as a way to “buy and sell digital currency.” In many ways, Coinbase is a centralized on-ramp to a decentralized ecosystem.
This begs the question: how does Coinbase view the assets that it enables customers to buy and sell? Is it still interested in encouraging crypto adoption to build a new financial system, or primarily occupied with encouraging the speculation that fuels its core lines of business?
In this report, we examine Coinbase’s strategy, financing history, product offerings, business initiatives, threats and future opportunities. We dig into how Coinbase operates, how it’s capitalizing on cryptoasset speculation, and what it’s doing to push forward blockchain technology.

Style notes: “Cryptoassets” includes all coins, tokens, and digital assets traded on cryptoasset exchanges. “Bitcoin” refers to the Bitcoin ledger, or protocol, while “bitcoin” refers to the asset or a unit of account on the Bitcoin ledger. This is reflected for all cryptoassets in this report.

Exchanges 101
Cryptoassets like bitcoin, ethereum, and litecoin are primarily obtained in one of two ways: through mining or through an exchange.

Mining has high barriers to entry. Participating in a mining pool or operating mining “rigs” can be expensive and complicated. For the more novice consumer, fiat-cryptoasset exchanges and brokerages – like Coinbase, Kraken, and Bitstamp – have established themselves as the primary on-ramps to this asset class. These allow consumers to trade fiat (e.g. USD, GBP) for cryptoassets (e.g. BTC, ETH, LTC).

There are a couple of important terms to understand when discussing exchanges.
An annotated screenshot of Coinbase’s exchange, GDAX.
  1. First, the “trading pair” (or, “currency pair”) is the product being traded. In the above screenshot the product is ETH, and the “quote currency” is USD. This means that traders are buying and selling the cryptoasset ethereum, priced in dollars.
  2. The order book shows all the bids and asks at a given time. A “bid” is the price at which a buyer will buy, and an “ask” is the price at which a seller will sell. The order book also shows the aggregate amount of asks and bids (supply and demand) at a given price, called the “market size.”
  3. The “depth chart” is another way to visualize the order book, showing cumulative bid and ask orders over a range of prices. Coupled with volume — or, the total amount traded over a given time period — the depth chart provides a good way to measure “liquidity.” Liquidity describes how easy it is to turn an asset into cash. For instance, if ethereum suddenly saw a massive sell-off, there might not be enough buyers, or enough “liquidity,” for sellers to sell to.
  4. Lastly, the “mid-market price” is the price between the best “ask” price and the best “bid” price. It can also be defined as the average of the current bid and ask prices. The “price” of an asset (as quoted on Yahoo Finance or Bloomberg, etc.) is a direct function of the bids and asks in the market, which in turn reflect supply and demand.

What is Coinbase?

Coinbase was founded in July 2011 by former Airbnb engineer Brian Armstrong and was first funded by Y Combinator. In 2012, co-founder Fred Ehrsam, a former Goldman Sachs trader, joined the company, after which Coinbase launched services to buy, sell, and store bitcoin.
Today, Coinbase operates in 32 countries and can be divided into four primary lines of business:
  • Coinbase
  • GDAX
  • Custody
  • Toshi


"The Best Book on Gold "

This is a repost from 2013, still true, probably evergreen.
Original post: 

The most important thing to know about commodities is: They are mean-reverting sumbitches.
Except for guano. As far as I know guano is the only resource that people have actually used up.

All the rest mean-revert, often in nominal terms, always on a real, price basis.
They can mean-revert from a high price either by falling in nominal terms or trading sideways until inflation catches up to the speculative high price.
That's it. It will continue until it stops, until the next guano.

Although this corner of the internets is not a goldbug hangout I do know at least one thing:
...I've come to believe, is yes gold does store value.
It does not, however, produce wealth. The first point is well made in The Golden Constant: The English and American Experience, 1560-1976*, by Roy W. Jastram, late professor of business at the University of California, Berkeley:

"Gold maintains its purchasing power over long periods of time, for example, half-century intervals."
The second point is as well made by Econompic as anybody, plus it's in color.

*The book has been out-of-print and commanding $4-500 second-hand. In April it will be re-printed by Edward Elgar Publishing, with new material and updated to 2007. It's priced at
-from our 2009 post "Hey Gang, Is That a Double Top in Gold?"

Four years later the re-print is quoted on Amazon at $131.88 while Edward Elgar Publishing is asking £80.10.
There would be an arbitrage assuming shipping was free.
There are no readily available copies of the out-of-print edition.

The store of value proposition seems to works at a 50 to 100 year timeframe, nothing shorter.

Jill Leyland did the update on the reprint. From the World Gold Council:

...She is former Economic Adviser to World Gold Council with whom she has been associated since 1997. In addition she has worked, as an adviser or staff member, for the Organisation for Economic Cooperation and Development (OECD), the UK Office of National Statistics, the Economist Intelligence Unit (EIU), the UK Department of Trade and Industry, the Financial Times and the Commodity Research Unit (CRU)...

...Jill is currently a Vice President of the Royal Statistical Society and chairs its National Statistics Working Party. 
-from the WGC's 4 page PDF "The Golden Constant".

And here's her 2 page write up for the London Bullion Marketers Association:

Tuesday, January 30, 2018

"UN expert decries homeless conditions in Bay Area as ‘cruel,’ ‘unacceptable’"

It's a deliberate policy decision by the municipal and county government. More on that point next month.
From Curbed, S.F., January 22:

“Do they have anywhere else to go?” human rights advocate asks of SF population
Leilani Farha, a special rapporteur on Adequate Housing for the United Nations (special rapporteurs areindependent experts appointed by the UN’s Human Rights Council to do fact-finding missions), made an unofficial visit the Bay Area last week and gave a grim assessment of local conditions for the homeless. Farha describes the “cruelty” of chronic homelessness in Oakland and San Francisco.

A reporter for the UK’s Guardian newspaper accompanied Farha and recorded her reactions to Oakland homeless camps:

“In international human rights law,” Farha said, “providing shelter to people who are homeless is the absolute minimum standard for any country, regardless of resources.”

[...] Farha was struck by the stories she heard of homeless people losing their few possessions in encampment sweeps, and laws that criminalize sitting on sidewalks or food sharing. “There’s a cruelty here that I don’t think I’ve seen,” she said.

Farha noted that, although the Bay Area enjoys breathtaking levels of wealth, conditions for the unhoused are comparable to those in chronically-impoverished countries.

East Bay Express reports:

“In Mexico City, I visited a low-income settlement that had been moved by the city onto empty land near a railway line,” [Farha] said. “They had no running water. They stole electricity.” The camp was noisy and dangerous. She noted that the camp in Mexico is virtually identical to those she visited in Oakland, including the Wood Street and 23rd Avenue encampments.

The contrast between haves and have-nots proved even worse when Farha visited San Francisco. On Twitter, she wondered where San Francisco’s homeless population has to go once rousted from public spaces....

Cobalt on a Blockchain (no drones)

Via the FT's Commodities & Mining Editor and observer of the passing parade, Neil Hume:

"Russia and China could use AI to TAKE OVER world warns former Google CEO"

That's the headline at The Express who can be a bit click-baity but it was between them and the BBC's "Brian Cox and Eric Schmidt discuss the future of Artificial Intelligence" and, well...
...When in doubt, go with the most hysterical headline. 
(Rule one of blogging is that the End Of The World will be good for page views.)
Joel Achenbach, Washington Post 
-World War Five

From The Express:

FORMER Google CEO Eric Schmidt has claimed he is “very concerned” about Russia and China leading the way in the race on artificial intelligence technology
He made the remarks at an event where he was discussing AI with Professor Brian Cox during BBC's Tomorrow's World Live at London's Science Museum

One audience member asked Mr Schmidt: "(Vladimir) Putin said last year that whoever wins this race or in fact leads in AI will rule the world.

"And we also had China saying that by 2024 they want to lead this race. What are your views on that?”

Mr Schmidt responded: "I'm very concerned about this.
"I think that both the Russian and the Chinese leaders have recognised the value of this, not just for their commercial aspirations, but also their military aspirations.”

The former Google CEO also said the US and Europe need more funding to combat the problem.

He added: "It is very, very important that the incredible engines that exist in Europe, and Britain, wherever, United States etc. get more funding for basic research, ethics and so forth.

"I'd like us to deal with the Chinese and Russian competition not by copying their approaches, but being more like us, more of the incredible intellects that have been produced here in this country....MORE
"Putin: Leader in artificial intelligence will rule world"
"CIA has 137 projects going in artificial intelligence"
Military AI: China, Russia and the U.S. are Running Neck-and-Neck in an Arms Race

Insurance/Reinsurance: "California wildfire industry losses put at $13.2bn by Aon Benfield"

Speaking of wildfires.*
From Artemis:
The insurance and reinsurance industry loss estimates for the California wildfires of 2017 continue to rise, with the latest being an estimate of a $13.2 billion impact from the October wildfires in northern California and the December wildfires in the south of the state, from Aon Benfield.

Reinsurance broker Aon Benfield reveals its $13.2 billion California wildfire loss estimate in a breakdown of insured loss estimates from its new Weather, Climate & Catastrophe Insight: 2017 Annual Report from catastrophe risk unit Impact Forecasting.

The report highlights roughly $14 billion of global insured wildfire losses in 2017, but the vast majority are from the two major California fire outbreaks.

The October outbreak in northern California and the wine region is estimated to have caused an economic loss of $13 billion, with $11 billion of that estimated to be covered by insurance and reinsurance. This outbreak is the fourth largest economic and insured catastrophe loss event of 2017, according to Aon Benfield’s data.

The December outbreak in southern California is estimated to have cost the economy around $3.2 billion and re/insurers an estimated $2.2 billion, according to the brokers data in the report.
So that gives a $13.2 billion insurance and reinsurance industry loss just from the two main Californian wildfire outbreaks.

Should the estimate from RMS, of up to $2.5 billion of losses to the re/insurance industry from just the Thomas wildfire in southern California, prove accurate it means the tally for California wildfires could rise even higher....MUCH MORE
*"Elon Musk’s flamethrower faces possible sales ban in California"

Dec. 2017
Cat Bonds/Reinsurance: California Fires Could Force Payouts
Nov. 2017  
"California wildfire insured loss expected to hit $8bn: Aon"
Oct. 2017
"California wildfire costs rising with 8,400+ structures destroyed"
Oct. 2017
"California wildfires could cost re/insurers $4.6bn & rising: Moody’s"
It's going to be much more than that.
6000+ structures at even $100k average per gets you to $6 bil...

Capital Markets: "Dollar and Bonds Stabilize; Equities not Yet"

As with cryptocurrencies, FX headlines can change quickly. The euro is now approaching 1.25 with the dollar index down to 88.88 and looking weak.

From Marc to Market:
The US dollar is paring yesterday's gains, and the 10-year Treasury yield has slipped back below the 2.70% level after pushing 2.73% briefly. European bonds have also eased, with yields one-two basis points lower. It is thus far a mild Turn Around Tuesday but suggests that the market psychology that has driven the dollar lower and yields higher persistently since mid-December have not been broken.

One implication is that since these markets do not act in a vacuum is that equities will likely also recover, though it is not evident yet. The MSCI Asia Pacific Index pulled back by a little more than 1% for the largest loss since early December. No regional market was unscathed, though the regional leader has been Korea's KOSDAQ and it was down marginally (almost 0.7%), leaving it up 15.3% so far this month. The Hong Kong Enterprise Index that tracks China's H-shares fell nearly 2% to bring this month's gain to a still-amazing 14.4%.

In Europe, the Dow Jones Stoxx 600 gapped lower. It is trying to fill that gap in the early turnover, but all the main bourses are still lower on the day, and the S&P 500 is trading about 0.25% lower.

The news stream is picking up. Japan reported employment and consumption, while the focus in Europe is on Q4 GDP, but also Germany's preliminary inflation reports ahead of tomorrow's advance estimate for EMU. In the US, the focus is on President Trump's first State of the Union speech.

Japanese unemployment unexpectedly ticked up
to 2.8% from 2.7%, but it appears to have been driven by people leaving jobs, which is also in this context, a sign of the tightness of the labor market. Jobs-to-applicants rose to a new high of 1.59 from 1.56. On the other hand, overall household spending was poor. In December, it stood at -0.1% year-over-year. The median in the Bloomberg survey was for a 1.3% rise after 1.8% in November. Retail sales held up better, rising 0.9% rather than fall by 0.4% as the median had forecast.

In the eurozone, Q4 GDP was in line with expectations. It rose 0.6% for a 2.7% year-over-year rise. The asymmetrical risk we thought was on the upside, but this impulse was picked up in Q3, with an upward revision to 0.7% from 0.6%. German states reported January CPI figures and the national one will be reported shortly. German inflation typically falls in January. A 0.7% decline is needed to keep the year-over-year pace steady at 1.6%. The risk may be on the downside after the states' reports....

"Elon Musk’s flamethrower faces possible sales ban in California"

It's all flamethrower fun and games until someone starts a wildfire that kills 20 people and costs a billion dollars.
From Teslarati:
If a California assemblyman has his way, none of Elon Musk’s The Boring Co. flamethrowers would ever be sold in the Golden State. In a passionate announcement on Twitter, California assemblyman Miguel Santiago (D-Los Angeles) expressed his outrage at the Boring Company flamethrowers, saying that the product is insensitive considering the recent wildfires that swept the state. 

Santiago further urged the public to be equally offended by Elon Musk’s latest product. According to the assemblyman, he would be proposing a legislation that would ban the sale of the fiery device to the public. In a strongly-worded statement posted by The Verge, Santiago described the release of the Boring Company flamethrower as a “slap in the face.”...
Jan. 26
"Here’s Elon Musk’s $600 Boring Company flamethrower"
October 2016 
The Urban Assault Bicycle You've Been Waithing For: BOND Bike Has Flamethrower, Ejector Seat

Monday, January 29, 2018

"China set to launch its new supercomputer"

NVIDIA watches, some commentary after the jump
From Asia Times:

Chinese supercomputers running on indigenous processing units are charging ahead; new model capable of 1 billion billion calculations per second
A prototype of China’s next generation “exascale” supercomputer capable of crunching data that’s equal to one billion billion calculations within a blink of an eye, is slated for trial later this year,  the National Supercomputer Centre in Tianjin said in a statement on Monday.

That number translates into 1,000,000,000,000,000,000 calculations per second.

Yet to be christened, the new supercomputer – co-developed with the People’s Liberation Army-affiliated National University of Defence Technology – will be 200 times faster and have 100 times more storage capacity than the 600 million yuan (US$95 million) Tianhe-1 (Sky River) supercomputer launched in Tianjin in 2010. The latter model was capable of a maximum range of 2.5 peta floating point operations per second (FLOPS), a measure of computer performance, and briefly retained the crown as the world’s fastest computer from October 2010 to June 2011, Xinhua reported.
The Tianhe-1 has been operating at full capacity as China’s military and commercial needs for supercomputing has shot up since it was launched.

The power of supercomputers is harnessed for tasks such as simulated nuclear tests and weaponry design, oil exploration, equipment modeling, biological medicine, animation design and weather forecasting.

These machines are in fact clusters of tens of thousands of CPUs – central processing units – and graphic processing units, as well as legions of servers that typically occupy hundreds of square meters....MORE
On the last Top500 list of the world's fastest supercomputers, 87 systems use NVIDIA GPUs as accelerators. Not the top two however. You have to go down to #3, Switzerland's Piz Daint which was upgraded with NVIDIA chips in 2016. China is using an entirely different architecture which we touched on in June 2016's "Milestone: China Builds The (NEW) World's Fastest Supercomuter Using Only Chinese Components (and other news) INTC; NVDA; IBM".

The different approaches have implications beyond simple bragging rights. As we said a couple weeks ago in  the outro from "'Can Chinese AI Chip Makers Compete with Nvidia?' (NVDA)":
One thing not mentioned in the Nanalyze report that is critical to understanding Chinese R&D is the importance of the People's Liberation Army (Navy) and the advantage the closed loop of academia, end-user and PLA contracted-and-government-owned companies conveys:...
You'll note the Asia Times story has the co-developer research lab as the PLA funded National University of Defence Technology.

The 200 petaflop/second (quadrillions of calculations per second) Summit supercomputer being built at Oak Ridge National Laboratory will blow past the current world's fastest, the 93 petaflop/s Sunway TaihuLight but this latest monster is planned to be five times faster still.

At that point, if you were to use it for, saaay, training artificial intelligence, you are going places that the human mind literally can't comprehend much less forecast or, dream on, guide.

If interested see also:
Jan. 11, 2018
With the Summit Supercomputer, U.S. Could Retake Computing’s Top Spot (NVDA)
Jan. 1, 2018
Military AI: China, Russia and the U.S. are Running Neck-and-Neck in an Arms Race
September 2017
"China Upgrading Milky Way 2 Supercomputer to 95 Petaflops"
September 2017
"The Astonishing Engineering Behind America's Latest, Greatest Supercomputer"

US Freight Spending, Shipments, Rates & Costs all Surge

A trend is emerging, links below.
From Wolf Street:
Transportation Recession of 2015 and 2016 is just an Ugly Memory.
The transportation recession of 2015 and 2016 has receded into memory, and the trucking industry is hopping and railroads are getting their share, rates are surging, and so are costs, and the money is flowing. The Cass Freight Index, which tracks US shipment volumes by all modes of transportation, rose 7.2% year-over-year in December, to the highest level for any December since 2007.

The Cass Freight Index is not seasonally adjusted, with peaks in early summer for back-to-school season and in September during shipping season ahead of the holiday sales season. December marks the end of shipping season, and shipments normally plunge from November. But in December 2017, instead of plunging, shipments barely edged down from November. In the chart, the difference between 2017 (red line with black markers) and 2016 (black line with red markers) shows the severity of the transportation recession and the powerful recovery since:
The green line in the chart above represents 2014, which had been a banner year for US transportation until it began to unravel at the end of 2014 and descended into the full-blown transportation recession covering much of 2015 and 2016.

The index is based on “more than $20 billion” in annual freight transactions, according to Cass Information Systems. It does not cover bulk commodities, such as oil and coal but is focused on consumer packaged goods, food, automotive, chemical, OEM, and heavy equipment, shipped via truck, rail, barge, and air....MORE
If interested see also:
Dec. 21
Economic Indicators: "Truck tonnage is impressive"
Nov. 28
Signposts: Trucking Looking Very Good
Sept. 26
Inflation: "For truckload carriers and their customers, the moment of truth has arrived"
When prices start rising this deep in the logistics pipeline the effects can be economy-wide, Mr. Bezos.
From the supply chain mavens at DC Velocity:

Sustained pickup in freight demand will push tight truck supply over the edge, driving up rates, experts say....

Distribution Channels: "European Cocaine Seizures Hint at New Possibilities for Colombia Traffickers"

From Insight Crime:
Major cocaine seizures in Spain, Portugal and Ecuador illustrate the European cocaine pipeline that has become a central part of the operations of Colombian drug traffickers, and could represent lucrative new opportunities for them to occupy new roles the drug supply chain.

On January 17, Spanish and Portuguese police announced the seizure 745 kilograms of cocaine during the course of an operation against an international drug trafficking ring operating in both countries. Press reports indicated the network was led by Colombian nationals.

The group allegedly imported Colombian cocaine in shipping containers traveling from Panama to Portugal, and were in the process of trying to import 355 kilograms of cocaine stashed in hollowed-out pineapples.

According to police, the network transported the drugs to a stash house in Barcelona, and then on to several properties in Madrid, which were used as “laboratories,” presumably to cut the cocaine, and distribution points for sales within the city.

Police arrested nine people, among them at least three Colombians and a Venezuelan, with two Colombian brothers named as the alleged ringleaders. They also seized 400,000 euros ($490,000), two hydraulic presses, precision scales, three packaging machines and documentation related to fruit import companies, reported Catalonian newspaper La Vanguardia.

In Ecuador, meanwhile, the Interior Ministry announced the seizure of 1.45 metric tons of cocaine hidden in a shipping container of frozen fish that was set to sail from the port of Guayaquil to Belgium.

According to the police, the drugs came from Colombia and comprised shipments from three different trafficking networks, with the packages marked with different images — some of Russian President Vladimir Putin, others of a chainsaw, and others of a bull....MUCH MORE

Now It's Alibaba Founder Jack Ma Saying AI, Big Data Pose Threats to Humans

From Business Today (India), Jan. 25:

WEF 2018: Alibaba founder Jack Ma says AI, big data pose threat to human being
A day after Prime Minister Narendra Modi struck a chord with business and political leaders at the World Economic Forum in Davos, Jack Ma , founder and Executive Chairman of Chinese ecommerce giant Alibaba, took the centre stage in one of the sessions at the alpine resort of Davos and talked about the impact of technology, artificial intelligence, role of women business leaders in today's world and globalization. Ma warned that latest technologies like AI and big data are a threat and would disable people instead of empowering them.
On the impact of technology, Ma said: "We are very lucky because the world is in big transformation mode because of technology. Though this revolution will create successful leaders and opportunities, every new technology will also create social problems. The first technology revolution caused the First World War and the second technology revolution caused the Second World War. Now we have the third the tech revolution. If the third world war happens, it should be fought against disease, pollution and poverty, not against each other."...MORE

Algorithm matches refugees with best place to resettle

It appears that Mayfair, Silicon Valley, Monte Carlo and Zürich come out on top.

From Futurity:
As the world faces its largest crisis of displaced people since World War II, a new algorithm could help countries resettle refugees in a way that boosts their employment success and overall integration.
Researchers used a machine-learning algorithm to analyze historical data on refugee resettlement in the United States and Switzerland. They found that the refugees’ eventual economic self-sufficiency depended on a combination of their individual characteristics, such as education level and knowledge of English, and where they were resettled within the country. It turned out that refugees with particular backgrounds or skills achieved better outcomes in some locations than others.

The algorithm assigned placements for refugees that they project would increase their chances of finding employment by roughly 40 to 70 percent compared with how the refugees actually fared, according to the new study in Science.

“As one looks at the refugee crisis globally, it’s clear that it’s not going away any time soon and that we need research-based policies to navigate through it,” says Jeremy Weinstein, a professor of political science at Stanford University and a coauthor of the study. “Our hope is to generate a policy conversation about the processes governing the resettlement of refugees, not just on the national level in the United States but internationally as well.”

The group, from Stanford and ETH Zurich, says the algorithm, which could be implemented at virtually no cost, could help resource-constrained governments and resettlement agencies find the best places for refugees to relocate.

Where to go?
In recent years, a record number of people have been displaced as a result of war, persecution, and other human rights violations, surpassing the numbers seen after World War II. In 2016 alone, about 65.6 million people were forced to flee their homes, according to the United Nations’ refugee agency...MORE
It could be just like the Cambodian refugees going to Georgetown outside D.C. in 1973:
In other refugee news George Soros announced at Davos he would be putting refugees on a blockchain:
George Soros Announces Blockchain Plans to Solve Refugee Crisis at Davos
No word on an ICO. We'll update when it comes.

Silicon Valley Doings: Atherton Police Report

Back when "The Mess that Greenspan Made" was still being published we would check in from time to time, not so much for the central bank stuff but for the Bozeman (Montana) Police Reports. Here's an example from 2012:
...Things appear to be livening up a little bit around here after weeks of mostly dull police reports, the first item below being a summary of this story in today’s paper that, for some reason, editors felt deserved to be a featured report. This was just one of multiple similar reports last week, a category that hasn’t really been noticed in the year or so since these police reports have became regular Saturday fare here. And remember, driving with your lights off at 2 AM is one of the surest ways to get pulled over for drunk driving.
  • A Big Sky woman was accused of slipping out of handcuffs while riding in the back of a patrol car, pulling down her pants and urinating. The woman was arrested in Big Sky for aggravated drunken driving around 4 a.m. Friday and, before being taken  to Gallatin County jail (about 40 miles away), was allowed to use the restroom at the Big Sky Fire Station. But while traveling on U.S. Highway 191 near Deer Creek, she was able to remove her handcuffs, unbuckle her seat belt, pull her pants down, and then urinated in the back of the squad car.
  • Police warned two men on East Main Street around 2:30 a.m. for being disorderly “as they were having a heated discussion about the end of the world.”
  • A yellow Nissan truck that says “pooper man” on the side has been parked near East Curtiss Street and South Wallace Avenue for three months.
  • A teenage boy was seen urinating under an apple tree in a North Eighth Avenue woman’s yard at 12:46 p.m.
  • A slender man with black goggles was walking toward the library when he gave a woman a weird feeling
  • A woman called to report her friend stranded, out of gas and freezing in the Big Sky area at 3:10 a.m. Deputies found the man asleep in a stolen vehicle and arrested him

I mentally end the stories with "alchohol may have been involved" in a very poor Montana accent.
Here's Slope of Hope reporting from Silicon Valley:

The Mean Streets of Atherton
People seem to think that Palo Alto is a “rich” town, just because the likes of Mark Zuckerberg, Marissa Mayer, and Larry Page live here. Not so. It’s full of slobs like me. The really rich town is Atherton, a few miles from here, populated by an increasingly large proportion of Indian billionaires.

As you might guess, Atherton law enforcement doesn’t struggle with the same crimes that, say, Baltimore or Detroit police do. Here’s a recent sampling:
  • Police assisted a man who stepped out onto a balcony and had the door close behind him.
  • A resident hired a locksmith who hadn’t returned with the key.
  • A person sitting in a vehicle outside a residence was waiting for a friend who lives there.
  • A man was reported to be sitting down and talking to himself. Police made contact and confirmed he was using a cellphone.
  • A large statue was stolen.
  • A resident worried that a noisy hawk in a tree was in distress. When authorities arrived, the hawk was quiet and enjoying dinner.
  • Four or five juveniles were reported to be running around at Selby Lane School and involved in “horseplay” on a summer afternoon.
  • A resident asked for help finding a lost cat.
  • A woman whose finger got stuck in a drain was reported to be conscious and breathing.
  • A pedestrian was reported after midnight wearing black pants and a white dress shirt.
  • A woman told police someone rang her doorbell but when she called out to ask who it was, no one answered. Police responded and determined the visitor had delivered a package

"Chinese Company Sinovel Wind Group Convicted of Theft of Trade Secrets" (AMSC)

AMSC got so screwed by the Chinese the damage may be irreparable.
From the U.S. Department of Justice, January 24:
A manufacturer and exporter of wind turbines based in the People’s Republic of China was convicted today of stealing trade secrets from AMSC, a U.S.-based company formerly known as American Superconductor Inc., announced Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Scott C. Blader for the Western District of Wisconsin. 

Following an 11-day trial, a jury sitting in Madison, Wisconsin, convicted Sinovel Wind Group Co. Ltd., dba Sinovel Wind Group (USA) Co. Ltd. (Sinovel) of conspiracy to commit trade secret theft, theft of trade secrets, and wire fraud.  Sentencing is set for June 4.

“Sinovel nearly destroyed an American company by stealing its intellectual property,” said Acting Assistant Attorney General Cronan.  “As today’s jury verdict demonstrates, this type of conduct, by any corporation – anywhere – is a crime, and won’t be tolerated.  The Department is dedicated to helping foster innovation and growth in our economy by deterring and punishing intellectual property theft from American companies.”

“Today’s verdict sends a strong and clear message that the theft of ideas and ingenuity is not a business dispute; it’s a crime and will be prosecuted as such,” said U.S. Attorney Blader.  “Sinovel’s illegal actions caused devastating harm to AMSC.  I commend the efforts of the investigation and prosecution team, and reaffirm the commitment of this office to protect American commerce and prosecute those who would seek to steal intellectual property.”

As proven at trial, Sinovel stole proprietary wind turbine technology from AMSC in order to produce its own turbines powered by the stolen intellectual property.  AMSC developed the technology – software that regulates the flow of electricity from wind turbines to electrical grids – in Wisconsin and elsewhere.  At the time of the theft in March 2011, Sinovel had contracted with AMSC for more than $800 million in products and services to be used for the wind turbines that Sinovel manufactured, sold, and serviced. 

Sinovel was charged on June 27, 2013, along with Su Liying, the deputy director of Sinovel’s Research and Development Department; Zhao Haichun, a technology manager for Sinovel; and Dejan Karabasevic, a former employee of AMSC Windtec Gmbh, a wholly-owned subsidiary of AMSC.  The evidence presented at trial showed that Sinovel conspired with the other defendants to obtain AMSC’s copyrighted information and trade secrets in order to produce wind turbines and to retrofit existing wind turbines with AMSC technology without paying AMSC the more than $800 million it was owed and promised.  Through Su and Zhao, Sinovel convinced Karabasevic, who was head of AMSC Windtec’s automation engineering department in Klagenfurt, Austria, to leave AMSC Windtec, to join Sinovel, and to steal intellectual property from the AMSC computer system by secretly downloading source code on March 7, 2011, from an AMSC computer in Wisconsin to a computer in Klagenfurt.  Sinovel then commissioned several wind turbines in Massachusetts and copied into the turbines software compiled from the source code stolen from AMSC.  The U.S.-based builders of these Massachusetts turbines helped bring Sinovel to justice.  Su and Zhao are Chinese nationals living in China, and Karabasevic is a Serbian national who lived in Austria, but now lives in Serbia.     

According to evidence presented at trial, following the theft, AMSC suffered severe financial hardship.  It lost more than $1 billion in shareholder equity and almost 700 jobs, over half its global workforce.

The case was investigated by the FBI’s Madison, Milwaukee, and Boston Offices; the FBI Legal Attachés’ Offices in Vienna, Austria and Beijing; the FBI Criminal Investigative Division; the FBI Intellectual Property Rights program; the Bundeskriminalamt (Federal Criminal Intelligence Service) and the Bundesministerium Fuer Justiz (Federal Ministry of Justice) in Austria; the Landeskriminalamt - Klagenfurt and the Staatsanwaltschaft - Klagenfurt (Criminal Investigative Police and State Prosecutor’s Office – Klagenfurt, Austria); and with the assistance of the Justice Department’s Office of International Affairs and the Cybercrime Laboratory of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS)....MORE
Back in 2011 we noted the thefts:

"Tesla is reportedly looking to invest in Chile’s largest lithium producer"

That might explain Mr. Musk kicking around Chile a month ago and SQM's regulator giving the green light to expand production.
Oddly enough other than a chemistry post, those are our only recent lithium stories. Links below.

From Teslarati:
Tesla is currently in talks with Sociedad Química y Minera de Chile (SQM), Chile’s largest lithium producer, as a possible partner in the development of a processing plant in the South American country. 

Chilean development agency Corfo executive vice-president Eduardo Bitran noted that the deal between Tesla and SQM would likely result in a new facility that would aid the Elon Musk-led electric car maker and energy firm in securing the supply of raw material used in lithium-ion batteries.

In a statement to the Financial Times, the Corfo executive vice president stated that Tesla’s interest in Chile would ultimately help the country become a key player in the emerging electro-mobility market. Lithium, after all, is a valuable component of electric car batteries, and it is incredibly abundant in the region. As electric vehicles become more mainstream, however, the prices for battery raw materials have also soared. Thus, in a lot of ways, Tesla’s initiatives at sealing a partnership with SQM will not only result in more battery supplies for its cars; it would help the company’s operating costs as well. 

“With an increasing supply of lithium, Chile is key for any company that wants to become global in electro-mobility. Being close to Chile or having a strategic alliance in Chile becomes a strategic factor for a company like Tesla,” Bitran said, according to an FT report

As the auto industry races to develop and build emissions-free vehicles, lithium-abundant countries such as Chile are set to emerge as valuable partners for the world’s biggest car companies. Like Tesla, Toyota has also expressed its interest in securing a partnership with a lithium provider from the region. Just recently, the Japanese automaker purchased a 15 percent stake in Orocobre, an Argentinian lithium producer, most likely as a strategic initiative to secure lithium resources for its upcoming electric vehicles. 

Chile’s lithium industry has the potential to significantly improve the South American nation’s economy. Considering that Chile owns 54 percent of the world’s lithium reserves — around 14.3 million cubic tonnes, it is estimated that the lithium industry can attract as much as $10 billion in investment and up to 10,000 new jobs for its citizens, as noted in a report from the Global Finance Magazine....

Lithium: After Four Years of Negotiating, SQM and Regulator Reach Agreement On Increased Production (SQM; ALB)
Lithium: Here Comes the Supply Surge
"Welcome @elonmusk to Chile, the Saudi Arabia of lithium, a potential 'solar country' and a leader of world economic freedom."

The Periodic Table of Commodity Returns

From Visual Capitalist:
If for some reason, you still think that the commodity markets are predictable, today’s chart provides a nice piece of humble pie.

The Periodic Table of Commodity Returns, which comes to us annually from our friends at U.S. Global Investors, shows the returns of commodities over each year of the past decade.
As you may have guessed, commodities are a volatile asset class – and as a result, their respective rankings fluctuate wildly each year, making things really interesting for any observer.

The Year in Review
In 2017, we experienced the second full year of recovery from the collapse of commodities that plagued the dreaded stretch from 2011 to 2015.
Aside from natural gas (-20.7%), commodities were basically up across the board. The graphic, which focuses mostly on major commodity markets, has palladium (56.3%), aluminum (32.4%), coal (31.2%), copper (30.5%), and zinc (30.5%) as the big winners over the last year.
It’s worth mentioning that some smaller markets are not included on the table – and battery metals like cobalt (133%) also did exceptionally well in 2017.

Deeper Digging
If you are not yet thoroughly geeked out, there is an interactive version of this graphic as well. It allows you to sort by category, performance, or volatility.

Surprisingly, the least volatile substance on the table is gold:...MORE

Ag Investing: Farmland Asset Class Evolution

From Global AgInvesting, Jan. 17:
By Jeff Conrad, Managing Principal and President, AgIS Capital LLC

Institutional investment in farmland grew significantly over the last decade. This growth started in the more developed U.S. market and spread to emerging markets around the world. During this time, the NCREIF Farmland Index, a recognized property index for U.S. farmland, expanded dramatically, increasing from $1.1 billion in 2008 to $8.1 billion in 2017.1 This growth had been fueled by a combination of new properties being added to the index combined with increased asset values. The expansion of the U.S. market was complemented by growth in other key markets around the world, including Brazil, Australia, New Zealand, and Eastern Europe. The trends that drove and shaped the growth of the farmland asset class during this period were multi-faceted, but six, in particular, played significant roles.

The Great Recession of 2008—2009:  The global economy took a major downturn in the late 2000s, the period that has been dubbed “The Great Recession”. The downturn was broad and extreme and adversely impacted nearly every asset class in which institutional investors participate. However, farmland was one of the few bright spots during the period. Based on the NCREIF Farmland Index, U.S. farmland delivered a 15.8 percent return in 2008 and followed with a 6.3 percent return in 2009.2 This was extremely attractive investment performance for this difficult and dark period for institutional investors. Based on the NCREIF Farmland Index, the sector followed the downturn with several years of solid, double-digit investment performance. The farmland sector, which historically has performed counter-cyclically to the general economy, performed well during this difficult period. Even during challenging periods, people continue to need food and fiber and this demand provided an underpinning for the farm sector during this era.

For those involved in the farmland asset class during its early days in the 1990s, when its capacity to preserve capital and provide portfolio diversification were the attributes that were most frequently emphasized, the performance of farmland during this period was further proof of the valuable and important role it could play in a broadly diversified institutional portfolio. As major banking institutions collapsed or teetered on the edge during and just after The Great Recession, the Farm Credit system remained active and continued to originate loans. In fact, major farmland portfolios were leveraged during this period at very attractive long-term rates. This strong performance during a difficult investment period helped establish the farmland asset class that we have today.

The Faltering Performance of Timberland: For the last 25 years, timberland and farmland, both biologically-based, hard asset investments, have competed for the interest and attention of institutional investors. Both asset classes offer similar attributes in that they have the potential to provide current income as well as portfolio diversification benefits and inflation hedging protection. The timberland asset class became more established in the 1990s based on exceptionally strong investment performance – a result of environmental restrictions being placed on the harvesting of public forests in the Western United States and a massive industry consolidation that led to the liquidation of timberland holdings by the world’s major forest products, paper, and packaging companies. These circumstances provided opportunities for timberland investment management organizations (TIMOS) to become established and to build significant portfolios for institutional clients based in the U.S. and elsewhere. By comparison, the farmland asset class struggled for acceptance because its performance was less compelling when assessed against the temporal case then being made for including timberland in a portfolio. Faced with having to choose between the two asset classes, each offering similar benefits, but timberland offering higher, near-term returns, investors made the easy decision, which led to the more rapid growth of the timberland investment sector.

When The Great Recession hit in 2008, the tables turned for farmland and timberland. Based on data from the NCREIF Timberland Index, after the downturn, the timberland asset class struggled to maintain and regain momentum – generating two consecutive years of negative returns. These, in turn, were followed by several additional years of weak performance relative to the asset class’ most recent trend. This period highlighted the dependence of the timberland asset class on demand for both raw land and building products. Because of weak economic growth, the U.S. housing market floundered for several years after The Great Recession. This led to a decline in land values, especially for timberland assets that were acquired at premium pricing because they were initially assessed as being in the path of residential and commercial development. It also undercut demand for the timberland asset class’ highest value product, sawtimber, which is used to produce dimensional framing lumber. The end result was a prolonged period of weak returns for timberland. TIMOs responded on behalf of their investment clients by allowing their trees to continue growing on the stump – foregoing near-term income in the hope of capturing higher margins from the sale of larger and more valuable sawtimber products in the future. However, this strategy, which was widely adopted because few other options existed for capturing value, only exacerbated the problems TIMOs and their clients faced in the long run because it led to a more sluggish recovery for the timberland asset class. The large supply overhang of sawtimber kept prices suppressed even as the housing market began to show signs of sustained recovery three years ago. Meanwhile, today, the building products sector continues to work through the excess inventory of sawtimber....MORE