Thursday, January 31, 2019

"Nord Stream 2 gas pipeline to open by November"

From Deutsche Welle:
Russian gas will be piped direct to Germany from November despite the project's detractors, a project engineer has asserted. Critics have said Europe will be left vulnerable and climate goals will be undermined.
Russia's second natural gas pipeline across the Baltic seabed to Germany is just months away from completion, despite warnings from the US, Ukraine, Poland and Lithuania and the EU commission over Europe's energy security.

Klaus Haussmann, engineer at Nord Stream 2's future landfall site at Lubmin on Germany's Baltic Sea coast told German public radio station Deutschlandfunk that the "raw" laying of the pipeline would be finished by the middle of 2019.

"Then comes the entire installation of the electrical equipment, security chains. And, then it's planned on the large scale that we get the first conduit filled with gas in November, from Russia," said Haussmann.

Nord Stream 2 — in fact two welded conduits, each with an inside diameter of 1.2 meters (4 feet) and largely following the route of Nord Stream 1 (operational since 2011) — will pipe gas - sourced in northwest Siberia - from its Leningrad region, tracking 1230 kilometers (764 miles) across the Baltic seabed, through Finnish, Swedish and Danish maritime waters, to northeastern Germany.
Along its trajectory, environmentalists including Friends of the Earth claim that seabed wildlife will be "irreparably damaged."

Just before Christmas, Nord Stream said 370 kilometers of pipeline had already been laid and special construction ships and their crews were "proceeding according to plan and on schedule" into Swedish waters.

Rough Baltic weather
Haussmann told DLF his concern was more the impact of the Baltic's winter weather and waves on construction at sea and less so the international pros and cons.

"For two years or more, Nord Stream 2 has been pretty much under fire. But at the moment we have more worries with the weather outside," he said....MUCH MORE
Natural Gas: Poland Is Already Expanding Its New LNG Terminal As Nord Stream 2 Heads For Germany
Natural Gas: "Chancellor Angela Merkel has offered government support to efforts to open up Germany to U.S.."

...As the kids say: Find someone to look at you the way Putin looks at Gerhard Schröder.

They also hug a lot.
 A lot.

Total S.A./CNOOC: "Discovery of biggest UK gasfield in a decade raises industry hopes"

From The Guardian, Jan. 29:
Gas from Glengorm reservoir under North Sea could meet about 5% of annual demand
A Chinese-led consortium has discovered the UK’s biggest gasfield in more than a decade, leading experts to say there is life yet in the country’s offshore sector.

Drilling found the equivalent of about 250m barrels of oil could be recovered from the Glengorm reservoir in the central North Sea, about 5% of the UK’s annual gas demand.
The find was hailed as significant by industry and the regulator of the region’s last oil and gas reserves, where production has been declining since the turn of the century.

But environmental groups said it was a disgrace that new oil and gas prospects were being found and developed, given their contribution to climate change.

The Chinese firm CNOOC owns 50% of the Glengorm project, with a subsidiary of the Italian company Edison holding another 25% and the French oil firm Total owning the other 25%. The size of the find is the biggest since the Culzean find in 2008, and 11th largest of any kind in the UK in the past 30 years....

Is China’s plan to use a nuclear bomb detonator to release shale gas in earthquake-prone Sichuan crazy or brilliant?

After the Three Gorges Dam was completed some very serious problems emerged, I mean beyond the environmental degradation and the slowing of the earth's rotation, some straight-up engineering concerns: shifting, cracking, earthquakes etc.
The civil engineers went to a very famous Chinese engineering Professor in search of solutions.
The first thing he told them was: "You are dealing with powerful forces, almost beyond human comprehension."
I met him at his daughter's home, classic little old Chinese gentleman, pants pulled up to his armpits,  where he was singing, in German. It was a bit surreal.

From the South China Morning Post:
  • Scientists have developed an ‘energy rod’ that can fire multiple shock waves to frack sedimentary rock at depths of up to 3.5km
  • China has the world’s largest reserves of natural gas but current mining technology makes most of it inaccessible
China is planning to apply the same technology used to detonate a nuclear bomb over Hiroshima during the second world war to access its massive shale gas reserves in Sichuan province. While success would mean a giant leap forward not only for the industry but also Beijing’s energy self-sufficiency ambitions, some observers are concerned about the potential risk of widespread drilling for the fuel in a region known for its devastating earthquakes.
Despite being home to the largest reserves of shale gas on the planet – about 31.6 trillion cubic metres according to 2015 figures from the US Energy Information Administration, or twice as much as the United States and Australia combined – China is the world’s biggest importer of natural gas, with about 40 per cent of its annual requirement coming from overseas.
In 2017, it produced just 6 billion cubic metres of shale gas, or about 6 per cent of its natural gas output for the whole year.

The problem is that 80 per cent of its deposits are located more than 3,500 metres (11,500 feet) below sea level, which is far beyond the range of hydraulic fracturing, the standard method for extraction.
But all that could be about to change, after a team of nuclear weapons scientists led by Professor Zhang Yongming from the State Key Laboratory of Controlled Shock Waves at Xian Jiaotong University in Shaanxi province, released details of a new “energy rod” that has the power to plumb depths never before thought possible.

Unlike hydraulic fracturing, or fracking as it is more commonly known, which uses highly pressurised jets of water to release gas deposits trapped in sedimentary rock, Zhang’s torpedo-shaped device uses a powerful electric current to generate concentrated, precisely controlled shock waves to achieve the same result.

He told the South China Morning Post that while the technology had yet to be applied outside the laboratory, the first field test was set to take place in Sichuan in March or April.
“We are about to see the result of a decade’s work,” he said....MUCH MORE
Powerful forces.

Not the Professor but could be.

Capital Markets Bonus Edition: "Two Brinkmanship Games and a Possible Third"

From Marc to Market:
Some historians give Adlai Stevenson credit for inventing the word "brinkmanship" as part of his criticism of US foreign policy under Dulles, who said that "if you are scared of going to the brink, you lost." But surely we can agree that the tactic is as old as civilization.

The idea is you take the issue to the very edge, risking a significant confrontation, to force a deal, is the way it may seem. The Cuban Missile Crisis is the classic example. Kennedy's quarantine of Cuba was an act of war, but he dared Khrushchev to risk a direct confrontation with the US if he tried running it.

Often, it seems brinkmanship games can be seen from a different perspective as escalation ladders. In a conflict, the stronger side made try to escalate the issue. If the weaker side matches, it does so again. This may be repeated until a rung is reached that the other cannot or will not take. There are feints, bluffs, and other ploys.

The UK government seems to be engaged in a brinkmanship game with the EU and the House of Commons. She is authorized to seek a new deal on the backstop and has been advised against not securing an agreement. The EC has made it clear this is a non-starter. It refuses to re-open the 18-month negotiated settlement and has demonstrated strong cohesiveness in insisting on the open-ended backstop. The strategy may be to bring the UK to the brink of exiting without a Withdrawal Agreement and count on Parliament or the EC blinking, which in this case, means softening their positions.

Thomas Schelling, who shared a Nobel Prize for his work in game theory, may have called this a version of "burning the bridge." Consider two young people playing what in "chicken." They are to drive their cars at each other, and the first one to turn is ostensibly the "chicken." If you were silly enough to play, how could you best convince your equally silly friend that could would not turn first? Schelling suggested throwing your steering wheel out the window. Purposely limited your options, forces the other to act.

In brinkmanship, you give your adversary little choice but to back down or face even greater potential difficulty. In the face of no alternative between the much-unloved and rejected negotiated Withdrawal Bill and a no-deal exit, something will have to give. The Leave camp wants to avoid a second referendum. No one wants to get blamed for the economic disruption of the UK leaving the EU without an agreement. A later and softer exit still seems like the most likely scenario.

A second brinkmanship game is being played out in the US and Chinese trade talks....

"View from Washington: How do you solve a problem like Huawei?"

From Engineering & Technology Magazine, Jan. 29:

Concerns about collateral damage from Washington’s face-off with the Chinese telecoms giant are growing.
The US Department of Justice’s unsealed indictments against Chinese telecoms giant Huawei, its CFO Meng Wanzhou “and others” have provoked a range of reactions from western high technology.
On one side, there is satisfaction that the Trump administration is following through on its rhetoric about China’s lax – many would claim still larcenous – attitude to foreign intellectual property (IP).
The IP issue has been a Silicon Valley bugbear for decades. However, it appears to have been accentuated now by the allegation in one indictment that Huawei encouraged staff to steal from rivals and offered bonuses to those who did (page 19, paragraph 47 here).

Let’s set aside those long-standing concerns, because - alongside unquestionably serious allegations that also cover sanctions-busting - another issue lurks in the background: can the global 5G market mature outside China, as it needs to, without Huawei? It is the technology’s largest and arguably most advanced supplier.

Following the indictments, questions that have been asked ever since Washington began to ratchet up its attacks on the Chinese conglomerate have taken on greater urgency.
They reach beyond infrastructure. The Internet of Things (IoT), artificial intelligence (AI), machine learning and machine-to-machine (M2M) communication are seen as fundamental to returns on 5G investments. They justify the capital cost for a technology that, according to Deloitte, will not ramp among consumers much faster than 4G.

Many M2M applications will indeed operate over unlicensed, short-range wireless networks (Wi-Fi, Zigbee, Bluetooth etc) and pass data over wired broadband. 5G is nevertheless seen as a source of extra capacity (Cisco forecasts that M2M connections will account for almost 3ZB [zettabytes] of all Internet traffic by 2022) and as fundamental to applications in areas such as autonomous driving, e-medicine and agriculture because of speed, lower latency and, eventually, ubiquity.

Analysts reckon that Huawei today has a healthy technological lead over its main 5G infrastructure rivals, Nokia and Ericsson. It has invested $1.4bn (£1.1bn) in research and development during the last decade and participated widely in the standardisation process at the Third Generation Partnership Project (3GPP).

Similarly, the company’s willingness to compete aggressively on hardware prices is thought to have made some 5G proposals economically viable.
In that context, here are five of the key questions those who feel uneasy about the Washington-Huawei/China standoff are asking, but which have not got as much of an airing as the allegations surrounding IP and also spyware.

Like many such questions, they tend to suggest worst possible scenarios. Those are unlikely to come about in full. The aim instead is illustrate why uncertainty is spreading and why, in the words of Vodafone CEO Nick Reed, this crisis is being addressed at a “too simplistic level”.
  1. Could ‘No Huawei’ mean ‘No 5G’?
In global terms, no.

US carriers have already excluded Huawei. China will move ahead as originally planned. Most of Europe seems prepared with, for example, Vodafone ‘pushing pause’ on supplies from the company last week, while BT/EE has excluded Huawei from bidding on its core 5G network – both regardless of any specific instruction from Brexit-bedevilled Westminster.
In Australia, one putative carrier, the wired broadband operator TPG, has just abandoned plans to enter 5G because the Australian government has followed the US lead (and encouragement) in banning Huawei from infrastructure.

“In light of the government’s announcement in late August 2018, [the] upgrade path has now been blocked,” TPG said. “It does not make commercial sense to invest further shareholder funds.”
Will others reach the same conclusion and - far more likely than no 5G at all - could the rollout therefore be slower, geographically patchy and have fewer competitors than expected? Nobody knows, but TPG is a warning sign of that rising uncertainty.
  1. Could the rest of the 5G supply chain support ‘No Huawei’?

"I Cut Google Out Of My Life. It Screwed Up Everything" (plus Alternatives to Google Products – The Complete List)

First up, Gizmodo's Blocking the Big 5 series:
Goodbye Big Five 
Reporter Kashmir Hill spent six weeks blocking Amazon, Facebook, Google, Microsoft, and Apple from getting her money, data, and attention, using a custom-built VPN. Here’s what happened.
Week 3: Google
Long ago, Google made the mistake of adopting the motto, “Don’t be evil,” in a jab at competitors who exploited their users. Alphabet, Google’s parent company, has since demoted the phrase in its corporate code of conduct presumably because of how hard it is to live up to it.

Google is no stranger to scandals, but 2018 was a banner year. It covered up the potential data exposure of a half million people who probably forgot they were still using Google+. It got caught trying to build a censored search engine for China. Its own employees resigned to protest Google helping the Pentagon build artificial intelligence. Thousands more employees walked out over the company paying exorbitant exit packages to executives accused of sexual misconduct. And privacy critics decried Google’s insatiable appetite for data, from capturing location information in unexpected ways—a practice Google changed when exposed—to capturing credit card transactions—a practice Google has not changed and actually seems proud of.

I’m saying goodbye to all that this week. As part of an experiment to live without the tech giants, I’m cutting Google from my life both by abandoning its products and by preventing myself, technologically, from interacting with the company in any way. Engineer Dhruv Mehrotra built a virtual private network, or VPN, for me that prevents my phone, computers, and smart devices from communicating with the 8,699,648 IP addresses controlled by Google. This will cause some huge headaches for me: The company has created countless genuinely useful products, some that we use intentionally and some invisibly. The trade-off? Google tracks us everywhere.

I’m apprehensive about entirely blocking Google from my life because of how dependent I am on its products; the company has basically taken up residence in my brain somewhere near the hippocampus.
Google Calendar tells me what I need to do any given day. Google Chrome is how I browse the internet on my computer. I use Gmail for both work and personal email. I turn to Google for every question and search. Google Docs is the home of my story drafts, my half-finished zombie novel, and a running tally of my finances. I use Google Maps to get just about everywhere.

So I am shocked when cutting Google out of my life takes just a few painful hours. Because I’m blocking Google with Dhruv’s VPN, I have to find replacements for all the useful services Google provides and without which my life would largely cease to function:
  • I migrate my browser bookmarks over to Firefox (made by Mozilla).
  • I change the default search engine on Firefox and my iPhone from Google—a privilege for which Google reportedly pays Apple up to $9 billion per year—to privacy-respecting DuckDuckGo, a search engine that also makes money off ads but doesn’t keep track of users’ searches.
  • I download Apple Maps and the Mapquest app to my phone. I hear Apple Maps is better than it used to be, and damn, Mapquest still lives! I don’t think I’ve used that since the 90s/a.k.a. the pre-smartphone age, back when I had to print directions for use in my car.
  • I switch to Apple’s calendar app.
  • I create new email addresses on Protonmail and (for work and personal email, respectively) and direct people to them via autoreplies in Gmail. Lifehack: The easiest way to get to inbox zero is to start a brand new inbox.
Going off Google doesn’t come naturally. In addition to mentally kicking myself every time I talk about “Googling” something, I have to make a “banned apps” folder on my iPhone, because otherwise, my fingers keep straying out of habit to Gmail, Google Maps, and Google Calendar—the three apps that, along with Instagram and Words With Friends, are in heaviest rotation in my life. 
There’s no way I can delete my Gmail accounts completely as I did with Facebook. First off, it would be a huge security mistake; freeing up my email address for someone else to claim is just asking to be hacked. (Update: While other companies recycle email addresses, many Googlers have informed me since this piece came out that Google does not.) Secondly, I have too many documents, conversations, and contacts stored there. The infinite space offered by the tech giants has made us all digital hoarders....MORE
And from RestorePrivacy, Nov. 23:

Alternatives to Google Products – The Complete List
It’s been fun Google, but it’s time to say goodbye.
Have you noticed?
Google’s entire business model is based on you surrendering to their corporate surveillance. That’s it. All they do is repackage mass corporate surveillance into convenient, free, trendy applications that suck up all your data. Your private data helps Google dominate the online advertising market.

You are the product.
The other key issue to consider here is that Google is tracking and recording your activity in order to build a user profile, which can be used for various purposes. Google has many ways to track your activity, even if you are not logged into a Google account:
  • Tracking through Google Adsense (all those annoying banner ads you see on most websites also function as tracking)
  • Tracking through YouTube and other Google-owned platforms and products
  • Tracking through websites that use Google Analytics (most websites use Google analytics – but not Restore Privacy)
All the data that Google collects about you is usually monetized through targeted advertising (Google is now the largest advertising company in the world). Your data may also be provided to government authorities (Google has been cooperating with governments for mass surveillance since 2009).
In other words, Google is working to track your every move online, even if you are working hard to avoid it.
The solution to this problem basically entails:
  1. Deleting your Google accounts and data
  2. Avoiding Google products and using alternatives (this guide)
  3. Using good privacy tools, such as a private browser and a good VPN service, which will help protect your data from third parties
Google search alternativesWhen it comes to privacy, using Google search is not a good idea. When you use their search engine, Google is recording your IP address, search terms, user agent, and often a unique identifier, which is stored in cookies.
Here are a few Google search alternatives:
  • Searx – A very privacy-friendly and versatile metasearch engine.
  • Qwant – A private search engine based in France.
  • Metager – A private search engine based in Germany.
  • DuckDuckGo – This is a great privacy-friendly Google alternative that doesn’t utilize tracking or targeted ads, but they do record search terms.
  • StartPage – StartPage gives you Google search results, but without the tracking.
Check out the private search engine guide for additional information.

Gmail alternatives
Gmail is one of the worst products you can use if you’re concerned about privacy. Everything you do through Gmail is collected by the parent company – every email, attachment, and image… Using Gmail gives Google an intimate view of your private life and personal contacts.
When you remain logged in to your Gmail account, Google can easily track your activities online as you browse different websites, which may be hosting Google Analytics or Google ads (Adsense).
There are many different secure email options; here are a few great choices:
  • Tutanota – based in Germany; free accounts up to 1 GB
  • Mailfence – based in Belgium; free accounts up to 500 MB
  • Posteo – based in Germany; €1/mo with 14 day refund window
  • StartMail – based in Netherlands; 7 day free trial
  • Runbox – based in Norway; 30 day free trial
For additional information about these and other Gmail alternatives, check out the secure email guide. All of these secure email providers are ad-free, based in privacy-friendly jurisdictions, and do not give third parties access to your emails....MUCH MORE

"Bezos Launches Investigation Into Leaked Texts With Lauren Sanchez That Killed His Marriage"

Quick note of clarification up front regarding the DB headline:I don't think it was the texts that killed Bezos' marriage.
It was probably something about his boinking the neighbor lady that rubbed Ms. B the wrong way.

From the Daily Beast, Jan. 30:

The Amazon chief’s security consultants suspect the leak to the National Enquirer may have been politically motivated
Jeff Bezos’ personal security team has launched an investigation into how his text messages ended up in The National Enquirer, and the inquiry is increasingly convinced that political motives are behind the disclosure.

The investigation is taking place independent of Amazon, and Bezos, the world’s richest man, is personally funding it. Investigators want to know who leaked the texts that publicly blew up Bezos’ marriage earlier this month by revealing, in lurid detail, his affair with Los Angeles news anchor Lauren Sanchez.

The leaked text messages contained flowery missives from Bezos such as “I want to smell you, I want to breathe you in. I want to hold you tight,” and “I love you, alive girl. I will show you with my body, and my lips and my eyes, very soon.”

According to three people familiar with the probe, investigators initially explored the possibility that Bezos’ phone was hacked. But those sources say a digital forensic analysis turned up no evidence of a hack and the theory was quickly discounted.

They also looked into Sanchez herself, and whether she might have leaked the messages in an effort to break up Bezos’ marriage. But all three sources said the inquiry has not uncovered evidence that she was involved.
A third theory, that the leak was politically motivated, is one that investigators believe would explain not just the leak itself, but its publication in the Enquirer, rather than a more reputable outlet, and the extensive resources that the tabloid devoted to digging into the story.

That avenue of investigation stems from Bezos’ new role as a punching bag for President Donald Trump. The president gleefully promoted the Enquirer’s story, using it to hammer Bezos over his ownership of The Washington Post, which Trump frequently maligns as a hostile advocacy arm of Amazon....

"Stuff Elon says" (TSLA)

In early pre-market trade the stock is down $10.61 (-3.44%) at  $298.16, not quite as bad as yesterday's final after-hours print of $294.
The market's initial reaction to the earnings release was muted, off a few bucks, but then Elon started talking.
From FT Alphaville:

Elon Musk is often dubbed a genius.
And yet... if the following statement Musk made during the Tesla Q4 earnings call is anything to go by, he has a habit of stating the obvious and thinking it sounds deeply profound and insightful:
The demand for - the demand for Model 3 is insanely high. The inhibitor is affordability. It's just like people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary.
So, to help introduce Elon to the concept of how demand and supply interacts with price we thought we'd take the above quote and adapt it according to various economic scenarios in classic econ text book style.

Scenario one: Private jets
Johnny is a labourer on minimum wage. Johnny idolises the pop star lifestyle....MORE. so much more
And we'll be back with more stuff Elon says after the open.

Capital Markets: "Did Powell Toss in the Towel or was it a Tactical Retreat? "

From Marc to Market:
Overview: The Fed's dovish tone and earnings news are the main drivers of the capital markets today, helping lift stocks, bonds, and currencies. Large equity markets in Asia, including Japan, Hong Kong, China's CSI 300, India, and Indonesia, all rose more than 1%, putting the MSCI Asia Pacific Index in a good position to extend its rally for a fourth consecutive week. European shares are higher, but the gains are not as impressive, and the leading sectors are energy and healthcare. Financials, information technology, and communication sectors are laggards. Sovereign 10-year benchmarks are mostly 2-3 basis point lower, though Japan and Australia were flat. The dollar is seeing yesterday's Fed-inspired losses extended against the major and most emerging market currencies. The euro, sterling, and the Canadian dollar are the weakest, while the yen and the Antipodean currencies are the strongest.

Asia Pacific
Industrial output edged 0.1% lower in Japan in December, which was a smaller than expected decline. On a year-over-year basis, output in December was off 1.9%. In December 2017, it had risen by 3.2%. Japan's economy contracted by 0.6% in Q3, and although it has stabilized in Q4, it has not covered fully recovered. The Q4 18 GDP estimate is not released until toward the middle of the month. A 0.3%-0.4% increase is likely.

China's official PMIs
did a little better than expected. The manufacturing PMI ticked up to 49.5 from 49.4, though many forecast another decline. It was helped by output and raw materials, while the decline in export orders slowed. The non-manufacturing PMI rose to 54.7 from 53.8 to stand at a four-month high. The rise in services offset the weaker construction reading. Tomorrow the Caixin PMIs will be reported. Caixin's survey covers smaller and more private sector enterprises than the official measure.

Australia reported favorable terms of trade developments
in Q4, but slower private credit expansion in December. In Q4 18, import prices rose 0.5%, while export price rose 4.4%. It is a key factor behind Australia's improved trade balance, where the six-month average surplus is near record levels. On the other hand, private credit growth slowed to 0.2% in December, putting the year-over-year pace at 4.3%, the slowest in four years.

The dollar was turned back from JPY110 last week and posted an outside down day yesterday (trading on both sides of Tuesday's range and closing below its low). There has been follow-through selling today, which pushed the greenback near JPY108.50. There is a nearly $440 mln option struck there that will be cut today, but stronger support is not seen until closer to JPY108.00. The $760 mln at a JPY109 option that also expires seems safe. The Australian dollar is firm, in narrow ranges, around yesterday's highs, a little below $0.7300. It is up nearly a cent from last week's close. We have argued that the dollar's "approved" range against the Chinese yuan is CNY6.70 to CNY7.0. It slipped through the lower end briefly but snapped back to close onshore session above the floor.

Beginning on the aggregate level, EMU reported Q4 GDP rose 0.2% for a 1.2% year-over-year rate. In Q3, the regional economy also expanded by 0.2%, but then the year-over-year pace was 1.6%. Unemployment finished the year at 7.9%, matching the cyclical low set in November. At the end of 2017, EMU unemployment was at 8.6%. In a difficult year for growth, after posting 0.7% growth each quarter in 2018, but the continued decline in unemployment was an important bright spot. The labor market may be a chief consideration behind the ECB's patient response to steep economic moderation....

Wednesday, January 30, 2019

"Russia Proposes Easing Laws On Corruption, Saying It's Unavoidable Sometimes"

Shades of Viktor Chernomyrdin, former Russian Prime Minister and former chairman of Gazprom:
"We meant to do better, but it came out as always"
From National Public Radio (U.S.), January 29:
Russia's Ministry of Justice is proposing a change to make some corrupt acts exempt from punishment, if the corruption is found to be unavoidable. The proposed rule says officials and public figures could be exempt if "objective circumstances" made it impossible for them to comply with corruption laws.

Corruption that is "due to force majeure is not an offense," the proposal states. But it does not go into detail about the circumstances under which conflicts of interest, bribery, fraud and other offenses might be decriminalized.

The proposed rule, which is published online, was created to fulfill a decree signed by President Vladimir Putin last year. Because of that order, several federal agencies are now working to amend Russia's corruption laws, with the Justice Ministry leading the effort along with the ministries of labor and internal affairs and the public prosecutors' office.

The proposal is currently in a 15-day public comment period that opened Friday and will close on Feb. 8.

News of the corruption proposal is making headlines in Russia as the group Transparency International releases its annual Corruption Perceptions Index, which gives Russia a score of 28 out of 100 (with 100 being least corrupt)....MORE
Some other Viktorisms that have graced our pages, most via Foreign Policy:

On his background as energy minister: "I have grown up in the atmosphere of oil and gas."

On dealing with the frequently uncooperative Duma: "Government is not the organ in which one uses his tongue only."

On Russia's unstable party system: "Whatever party we establish, it always turns out to be the Soviet Communist Party."

On his critics: "If your hands are itchy, scratch yourselves in other spots."

On the future: "We will live so well that our children and grandchildren will envy us!"

On Ukraine's Orange Revolution:  "American ears are sticking out everywhere."

On his family: "I have approximately two sons."

On political efficiency: "We accomplished all items: from A to B."

On women: "You can't scare a woman with high-heeled shoes."

On language: I can talk to anyone in any language, but I try not to use that instrument."

On the life of the mind: "I am far from thought."...

Back in 2010 upon word of his death we posted:
"I liked that '...turned out as always' line and apparently other folks did too, the first three hits on a Google search turn up the three times I used it." 
Time passes on and now Climateer Investing only has two of the first ten usages of the quote but it still exemplifies an attitude that is quintessentially Russian.

Tesla Reports, Misses, Stock Slips (TSLA)

After an $11 burst of enthusiasm during the regular session the stock has given back $3.65 (-1.18%) ahead of the conference call.
Date Event Details
Jan 30, 2019
2:30 PM PST

Tesla, Inc. Q4 2018 Financial Results and Q&A Webcast

Tesla Fourth Quarter & Full Year 2018 Update 
 Q4 operating income stable compared to Q3 at $414M, operating margin of 5.7%
 Operating cash flow less capex improved from Q3 to $910M in Q4
 Cash and cash equivalents of $3.7B at Q4-end, increased by $718M in Q4
 Q4 GAAP net income of $139M impacted by $54M non-cash charge
 Model 3 GAAP and non-GAAP gross margin remained stable at >20% in Q4

More to come

"Fed Capitulates To Market, Surprises With Unexpected Balance Sheet Unwind Adjustment"

Following up on Monday's "The Federal Reserve May Be Reconsidering 'Autopilot' Balance Sheet Reductions".
From ZeroHedge:
....So, did The Fed deliver?

They appeared to do so - folding entirely to the market -
  • Fed removes reference to further gradual rate increases
  • Fed says it plans to continue with current floor approach
  • Fed says it’s prepared to adjust balance-sheet normalization
  • Fed reiterates federal funds target is primary policy tool
  • Fed says economic activity rising at solid rate, jobs strong
  • Fed says labor market strengthened, unemployment remained low
  • Fed says spending grew strongly, investment moderated
  • Fed says core and headline inflation remain near 2%
So The Fed is saying everything is awesome with the economy but we are panicking out of our rate-hike and balance sheet normalization process because the market shit the bed?
The biggest change, as Goldman previewed:
the FOMC adds "patient" rate outlook amid muted inflation and global developments, and introduces flexibility in balance-sheet normalization.
The Fed removes a statement about "some further gradual increases."
The line about "balance of risks" is also removed, replaced by a line about policy "patience amid muted inflation and global economic and financial developments."
As for the one main thing the market was looking for, namely guidance future path of the balance sheet unwind, the Fed folded here too, stating that "the Committee is revising its earlier guidance regarding the conditions under which it could adjust the details of its balance sheet normalization program" and said it wants to maintain “an ample supply of reserves” to ensure that monetary policy is conducted through interest rates, adding that "The committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments." Here is the full statement:
After extensive deliberations and thorough review of experience to date, the Committee judges that it is appropriate at this time to provide additional information regarding its plans to implement monetary policy over the longer run. Additionally, the Committee is revising its earlier guidance regarding the conditions under which it could adjust the details of its balance sheet normalization program. Accordingly, all participants agreed to the following:
  • The Committee intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve's administered rates, and in which active management of the supply of reserves is not required.
  • The Committee continues to view changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy. The Committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments. Moreover, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.
In other words, the Fed not only capitulated to the market, but just set the stage for QE4.
Commenting on the Fed's surprise balance sheet announcement, Futures Firts's Rishi Misra said that "Operating under a regime with "an ample supply of reserves" - that's basically saying B/S would remain large! And that they are willing to amend it anyway if required!"
Bloomberg's Ira Jersey had a more nuanced take, pointing out that the catalyst that triggers the Fed to delay the balance sheet run off will be when the Fed Funds rate surpasses IOER for a "prolonged period", which means all stock traders will soon become IOER "experts" too.
"In regards to the Fed's balance sheet, the Fed said they are ready to adjust the path of runoff, but did not make any changes. We suspect this could placate the market for now.
We think the Fed would likely halt runoff if the fed funds effective rate set above IOER for a prolonged period, fed funds trading volumes increased measurably, or if banks began large T-bill purchases to replace reserve balanced used for capital ratio purposes."
Bear in mind that the S&P 500 Index has declined on the day of each of the seven decisions he's presided over. According to Bespoke Investment Group, that's the longest Fed-Day losing streak on record...

‘Doomsday Prepper’ Castle in Nevada Desert On Sale for $900,000

From Sputnik:

If you’ve always dreamed about living in a castle away from it all, here’s your opportunity.
A four-story, 22-room, 8,000-square-foot castle in the Nevada desert, also known as the Hard Luck Mine Castle, is now for sale for $900,000.

The property, which is located at 1 Bonnie Clair Road in Goldfield, Nevada, 187 miles from Las Vegas and 325 miles from Reno, was constructed over 12 years, from 2000 to 2012, according to the property's listing.

The castle has become a tourist attraction in Esmeralda County and is owned by Randy Johnson, a former builder and craftsman who lived in Southern California and Lake Tahoe.

"He built the Castle following his dream to construct something of that magnitude under his own design," Jake Rasmuson, who is marketing the property, told Business Insider. "He plans to fulfill other adventures after the sale."

"In a lot of ways, it's a ‘doomsday prepper' dream home…MORE, including video
No castle-builder in their right mind would construct their edifice directly below an overlooking hill.

It sort of fits the mood of Goldfield though. Here from the Encyclopedia of Forlorn Places is the world-famous Arc de la Débâcle:

"Google’s Sidewalk Labs Plans to Package and Sell Location Data on Millions of Cellphones" (GOOG; EVIL)

Of course.
From The Intercept, Jan. 28:
Most of the data collected by urban planners is messy, complex, and difficult to represent. It looks nothing like the smooth graphs and clean charts of city life in urban simulator games like “SimCity.” A new initiative from Sidewalk Labs, the city-building subsidiary of Google’s parent company Alphabet, has set out to change that.

The program, known as Replica, offers planning agencies the ability to model an entire city’s patterns of movement. Like “SimCity,” Replica’s “user-friendly” tool deploys statistical simulations to give a comprehensive view of how, when, and where people travel in urban areas. It’s an appealing prospect for planners making critical decisions about transportation and land use. In recent months, transportation authorities in Kansas City, Portland, and the Chicago area have signed up to glean its insights. The only catch: They’re not completely sure where the data is coming from.
Typical urban planners rely on processes like surveys and trip counters that are often time-consuming, labor-intensive, and outdated. Replica, instead, uses real-time mobile location data. As Nick Bowden of Sidewalk Labs has explained, “Replica provides a full set of baseline travel measures that are very difficult to gather and maintain today, including the total number of people on a highway or local street network, what mode they’re using (car, transit, bike, or foot), and their trip purpose (commuting to work, going shopping, heading to school).”
To make these measurements, the program gathers and de-identifies the location of cellphone users, which it obtains from unspecified third-party vendors. It then models this anonymized data in simulations — creating a synthetic population that faithfully replicates a city’s real-world patterns but that “obscures the real-world travel habits of individual people,” as Bowden told The Intercept.
The program comes at a time of growing unease with how tech companies use and share our personal data — and raises new questions about Google’s encroachment on the physical world.
If Sidewalk Labs has access to people’s unique paths of movement prior to making its synthetic models, wouldn’t it be possible to figure out who they are, based on where they go to sleep or work?
Last month, the New York Times revealed how sensitive location data is harvested by third parties from our smartphones — often with weak or nonexistent consent provisions. A Motherboard investigation in early January further demonstrated how cell companies sell our locations to stalkers and bounty hunters willing to pay the price.

For some, the Google sibling’s plans to gather and commodify real-time location data from millions of cellphones adds to these concerns. “The privacy concerns are pretty extreme,” Ben Green, an urban technology expert and author of “The Smart Enough City,” wrote in an email to The Intercept.

“Mobile phone location data is extremely sensitive.” These privacy concerns have been far from theoretical. An Associated Press investigation showed that Google’s apps and website track people even after they have disabled the location history on their phones. Quartz found that Google was tracking Android users by collecting the addresses of nearby cellphone towers even if all location services were turned off. The company has also been caught using its Street View vehicles to collect the Wi-Fi location data from phones and computers....

"Visa says a cashless Super Bowl is coming soon"

These entrenched payment systems seem pretty fired up on the world going cashless.
And that's before we talk about the data they collect, whether individual or mass, anonymized or sent to Equifax (for later dissemination via hackers)

From MarketWatch:

Cashless transition expected by 2025, as company cites convenience, security
ATLANTA — So you’re headed to the Super Bowl some year in the future, and you’re wondering how much cash you’ll need for the big game.

No worries: During its sponsorship renewal with the NFL through the 2025 season, Visa V, +1.28%   envisions the first cashless Super Bowl.

It won’t be this year, although 50% of concession stands that are available for making purchases for Sunday’s title game between the Rams and Patriots will be cashless. But it likely is coming.
“Part of what we talk a lot about with the NFL is getting a path to cashless events, and the epicenter is the Super Bowl,” says Chris Curtin, Visa’s chief brand and innovation marketing officer. “We are working on an architecture that will get us there, it’s something we are really keen on.

“We want an experience that from head to toe will be a cashless experience. The NFL has agreed to partner with us in making that a reality. That is where our energy is now. We have a lot of learnings from other partnerships such as the Olympics and World Cup, we would like to apply those learnings to this experience and make it engaging and rewarding and inviting to fans.”

And not only at the Super Bowl, but at other league-run events such as the draft, the Pro Bowl, and the international games in London and Mexico City. During Super Bowl week in Atlanta, Visa is activating a dedicated “MVP” checkout lane at the NFL Shop to encourage cardholders to pay with contactless devices and get in and out of line quickly. They also might run into an NFL player manning the checkout....MORE

Big Fund: Thoma Bravo Raises $12.6 Billion For Tech Private Equity

I still have trouble with the concept of "tech PE" but from what we've seen they are actually a bit more ah...venturesome (ahem) then their VC cousins.

From PitchBook, Jan. 29:
Thoma Bravo raises $12.6B as PE continues tech investing push
The first US mega-fund of 2019 has arrived. And it's put Thoma Bravo in some elite company, helping the firm to join a select group of private equity giants that have closed buyout funds of $10 billion or more.

The tech-focused Thoma Bravo has wrapped up its 13th flagship fund on a $12.6 billion hard cap, pulling in capital from a variety of investors including sovereign wealth funds, public pension funds and corporations. Dubbed Thoma Bravo Fund XIII, the vehicle easily surpasses a predecessor that raised $7.6 billion in 2016, and Thoma Bravo Fund XI, which closed on $3.65 billion in 2014. The latest announcement comes after the Chicago-based firm collected $2.4 billion in April 2018 for its Discover Fund II.

Thoma Bravo typically employs a buy-and-build investment strategy that's become increasingly common for PE deals in the tech industry. The buyout shop specializes in the tech and software sectors, with a specific focus on application, infrastructure, security software and tech-enabled services businesses. And it won't hesitate to spend big, with investments from the firm's flagship funds ranging from $400 million to $1 billion or more.

It's no shock that Thoma Bravo was able to increase its fundraising by 66% from Fund XII to Fund XIII, considering the private equity industry's growing appetite for US tech companies. Private equity investments in the US IT sector have increased annually every year dating back to 2010, according to the PitchBook Platform. And in 2018, those transactions made up a larger proportion of US PE deals than at any point since at least 2010, per our 2018 Annual US PE Breakdown.  ...

Worst-Case Wednesday: How to Survive a Volcanic Eruption

And does your home insurance have the volcano rider?
From Quirkbooks:
It’s Wednesday again, and we’re approaching the big summer travel season. In honor of my own upcoming vacation, I’m going to share some advice from The Worst-Case Scenario Survival Handbook: Travel.

Okay, I am unlikely to encounter this specific danger in Orlando, but you never know what’s coming.

How to Survive a Volcanic Eruption
From the Worst-Case Scenario Survival Handbook: Travel
1. Watch out for falling rocks, trees, and debris. If you are caught amid falling debris, roll into a ball to protect your head. If you are trapped near a stream, watch out for mudflows. (Mudflows are mudslides caused by a large volume of melted snow or ice combined with rocks, dirt, and other debris.) Move up slope, especially if you hear the roar of a mudflow.

2. If you are in the path of lava, try to get out of its path in any way possible. You will not be able to outrun the lava, so do not try to race it downhill. If you are near a depression or valley that might divert the flow from you, try to get to the safe side.

3. Move indoors as soon as possible. If you are already inside, stay there and move to a higher floor, if possible. Close all doors and windows and move any cars or machinery indoors, if there is time.

4. Do not sit or lie on the floor or ground. It is possible to be overcome by volcanic fumes. The most dangerous gas is carbon dioxide: It does not have a strong odor, and it is denser than air, so it collects near the ground.

5. Evacuate the area, but only if authorities tell you to do so. Your best chance of survival is to use a car to drive to a safer area, but even a car may not be fast enough to outpace a lava flow. Some flows travel at 100 to 200 miles per hour. Since volcanic ash can quickly clog the radiator and engine of your car, avoid driving except to evacuate....MORE
Closer to home see also, from Trusted Choice Insurance:

What is Volcano Insurance? Do I Need It?
If you are like most people, your primary knowledge of volcanoes comes from movies and school science projects. While volcanoes are great Hollywood material, volcanic eruptions have very real consequences. In 1980, Mount St. Helens erupted in Washington, blowing off the top half of its peak. The combination of lava, ash, smoke and flames wiped out homes, businesses, roads, vehicles and wilderness for miles in all directions. If you live near an active or dormant volcano, you should know that there is insurance coverage available to you that could really make a difference when the unexpected happens. Volcano insurance endorsements are solutions that make sense for a certain group of homeowners.

FAQs About U.S. Volcanoes
  • There are 98 known volcanoes in Alaska, 21 in California and 16 in Hawaii
  • 17 states are home to known volcanoes
  • The eruption of Mount St. Helens in 1980 is one of the largest eruptions ever recorded; 90 people died and the eruption caused $860 million in damage
Are There Volcanoes in My Part of the Country? Known volcanoes exist in 17 states, many of which have not erupted in millions of years. Kilauea in Hawaii has been continually erupting for the last 30 years. The U.S. Geological Survey provides the latest information about known volcanoes. Every now and then, the survey will locate a new volcano based on seismic activity, changes in heights of mountains and a buildup of magma under the earth’s surface in a particular part of the country....MORE
Finally, from 2018's "Hawaii Volcano Victims May Face Insurance Crisis":
With zero disrespect toward the victims intended, told ya.
We have been warning of obscure perils for years, more after the jump....
...Our most recent mention of the need for risk management, from last September's "And In Other Volcano News: More than 120,000 flee Bali’s Mt Agung volcano":
...Volcano insurance?
Why yes stranger.
The state of Washington wants everyone to know about "Volcano coverage for your home and auto"
The major property/casualty insurer State Farm has a page devoted to "How Volcano Damage is Covered on Your Insurance"
Here's a testimonial:
Peter: "No, no, no. I read about this in a book once."
Brian: "You sure it was a book? You sure it wasn't nothing?"

Salesman: "How about I let you in on something every home owner needs: VOLCANO INSURANCE!
Now, I have an uncle that knows a lot about volcanos, and he says a volcano is coming THIS WAY."

Peter: "But we've never had any trouble with volcanos."
Salesman: "Well don't you think we're due for one?"

Peter (thinking): Touche, salesman. I too have an uncle.
Peter: Come in.

Qualcomm, 5G in Judge’s Hands

From EE Times, Jan. 29:

A cellular industry in transition awaits San Jose ruling
The fate of Qualcomm’s patent licensing — the most profitable business of one of the world’s top 10 chip vendors — is in the hands of a U.S. District Court judge here. Her ruling could also impact hundreds of licensees that the company holds across a cellular ecosystem in the early days of a transition to 5G.

Sadly, no ruling in the case of the U.S. Federal Trade Commission v. Qualcomm can change a broader reality that the evidence shows. The tech industry’s way of determining the value of a company’s contribution to a fundamental standard is laborious, subjective, and opaque.

The FTC argued that Qualcomm charged for years unfairly high royalties for its CDMA and LTE patents while it held greater-than-90% share in modems and used threats of halting chip shipments to win favorable deals. Qualcomm countered that it repeatedly earned a position as a leader in a booming, dynamic market and sought fair value for its patents without ever stopping chip shipments.
In a 2017 ruling, the FTC persuaded a judge to order a drug company to pay a billion dollars in illegally gained profits. But in this case, the FTC is seeking an injunction to change Qualcomm’s licensing practices.

“The most likely remedy would be an order forcing Qualcomm to drop its ‘no license, no chips’ policy,” said Mark Lemley, a law professor at Stanford who focuses on the tech industry.
The judge could also force Qualcomm to license to rival chipmakers, said Jennifer Rie, an antitrust litigation analyst for Bloomberg Intelligence. Currently, Qualcomm and other patent holders focus licensing efforts on system OEMs because it is the most lucrative and keeps negotiations simple, but the practice leaves chip rivals open to infringement suits.

In addition, the judge could forbid Qualcomm from insisting on cross-licenses as part of its deals. That was one flash point that Apple objected to in its negotiations with the chip vendor.
Although Qualcomm dominated LTE modems for a time, its share has dropped rapidly, 
said an expert testifying for the company. Click to enlarge. (Source: FTC v. Qualcomm)

Any decision against Qualcomm will reverberate through the company and the cellular industry, both at sensitive moments.

Qualcomm ranked seventh in global chip sales last year but next to last in growth among the top 50 at −3%, according to IC Insights. In the wake of losing its bid to merge to with NXP, it shed a billion dollars in costs. The cuts included an effort to expand into processors for cloud systems, which are growing at a faster clip than maturing handsets.

Looking forward, Qualcomm is said to be 12 to 24 months ahead of rivals such as Huawei, Intel, Mediatek, and Samsung in delivering 5G silicon. The initial 5G handsets shipping this year will be powered by its chips, and it has already struck as many as 50 5G patent licenses.
A decision will take at least until next week.

“There’s a tremendous amount of evidence to go through and the law is complex, so although I love to give speedy orders, this will not be as speedy as my usual,” Judge Lucy Koh told attorneys shortly before testimony ended on Friday (Jan. 25).

Indeed, the record includes conflicting reports from top antitrust experts who took issue with each other’s reports, hours of depositions from dozens of OEM and chip executives, many detailed contracts, complete cellular specifications, and volumes of emails to and from all of the parties.
An antitrust expert testifying for Qualcomm warned Judge Koh not to tamper with an industry that is shipping products improving at a rapid pace as net prices fall.

“Because the industry is thriving, there is more of a downside risk of taking an industry rolling along by any indicator and throwing it into chaos and disrupting it — there’s a real downside risk with any intervention,” said Aviv Nevo, an economics professor and former chief economist for the antitrust division of the U.S. Department of Justice.

An FTC attorney suggested that Nevo was deaf to testimony from many handset OEMs. They complained that Qualcomm’s royalties of up to 5% of a handset’s net selling price are well above rates from any other cellular patent holder. They also expressed frustrations over times when they lacked alternatives to Qualcomm’s chips....MUCH MORE

"Are US Public Pensions Cooked?"

Let's ask someone who tracks pension doings for a living.

From Pension Pulse:
Eric Boehm of Reason reports, Can Public Pensions Survive the Next Recession?:
A decade of consistent economic growth lifted the major stock market indices to all-time highs in 2018. But even before the recent dip, many state pension plans were struggling to get back to where they were before the last recession. Unfunded pension debt across the 50 states totals a staggering $1.6 trillion, even by the plans' own (often overly rosy) accounting.

If a decade of positive investment returns can't fix what's wrong with America's public pension systems, how much worse could things get in the event of another downturn? That's what Greg Mennis, Susan Banta, and David Draine, three researchers at the Harvard Kennedy School, set out to determine. They subjected state pension plans to a series of stress tests meant to simulate the consequences of a variety of adverse economic climates over the next two decades, including everything from another major recession to merely lower-than-expected investment growth.

What they found isn't pretty.

"Public pension systems may be more vulnerable to an economic downturn than they have ever been," the trio of researchers concluded in a paper published by the Pew Charitable Trusts in 2018. Deeply indebted pension plans in places such as Kentucky and New Jersey face insolvency if annual returns average 5 percent for the foreseeable future rather than the higher (usually around 7 percent) rates the plans assume. In other words, it won't take much to tip those systems into bankruptcy.

If a major downturn does come, states such as Colorado, Ohio, and Pennsylvania—which are closer to the national average in terms of how well-funded their pensions are—could require "contributions that may be unaffordable" to avoid insolvency.

One of the only states that seems ready to survive fiscal troubles is Wisconsin, where the combination of low existing debt and a 401(k)-style defined benefit plan means unexpected costs would be manageable and shared between employees and taxpayers.

Mennis, Banta, and Draine argue convincingly that stress tests provide a better snapshot of the health of a state pension system than more traditional methods, such as looking at aggregate unfunded liabilities or the funding ratio—that is, the percentage of future liabilities projected to be covered by a combination of future contributions, taxes, and investment earnings. Those metrics can be gamed by making unreasonable assumptions of future investment growth, but stress testing is a reminder that the good times won't keep rolling forever.

Connecticut, Hawaii, New Jersey, and Virginia have passed legislation or adopted policy changes mandating annual stress-testing of public pension plans, while California and Washington have created informal guidelines establishing similar processes. More states should do the same.
Last June, I discussed the great pension train wreck and where John Mauldin alluded to the Harvard study funded by Pew Charitable Trusts using “stress test” analysis, similar to what the Federal Reserve does for large banks.

Between you, me and the lamppost, things are going to get worse, much, much worse for many chronically and not-so-chronically underfunded US public pensions when the next recession hits and you don't need fancy stress tests conducted by Harvard researchers to understand why, all you need is to think clearly about the facts....

Zombie Saab Finds New Electric Car Partner: Sweden's Koenigsegg

From Jalopnik:
In 2009—which was a decade ago, FYI—Koenigsegg’s purchase of the beloved and mostly deceased Swedish automaker Saab was all but complete before it fell through at the last minute and Saab later went bankrupt. But now, 10 years later, Koenigsegg and zombie Saab are together once more, expanding a partnership to “develop a product for new and untapped segments” and talking about electrification.

Will Saab never die? Will Saab never be allowed to die? It’s hard to say.

Koenigsegg announced the partnership on Tuesday, adding to its involvement with the confusingly named Chinese company National Electric Vehicle Sweden, or NEVS, which plucked Saab from bankruptcy in 2012.

NEVS debuted an electric “NEVS 9-3” model based on the Saab 9-3 in 2017, having lost rights to the Saab name when, two years after it acquired Saab, it also had a bankruptcy scare.

Anyway, Koenigsegg said it and NEVS will team up to develop “parallel vehicle models in slightly higher volumes” with emphasis on electrification—basically, sharing resources to make more cars that would either be hybrids, EVs or something else that falls under the vague banner of “electrification.” It also said the partnership would help “growth opportunities” in the hypercar segment, but didn’t say exactly how.

Technically, your multi-million-dollar Koenigsegg supercar can’t exactly be a Saab, but maybe you can wish it into existence if you stretch your imagination and buy some badges off eBay....

Not your grandmother's Saab:

Soybeans: Global feed production is at an all-time high

Could you guys hold off for just one season? Nooooo.
Everybody wants to get into the act.

Long ain't wrong:

but the headwinds are delaying my quest for world domination (or catching Bezos).

From AgWeb:

Insights from Alltech’s Global Feed Survey 
Global feed production is at an all-time high. In the 2019 Global Feed Survey, Alltech estimates a strong 3% growth to 1.068 billion metric tons of feed produced. This is the third consecutive year the survey exceeded the billion-ton production mark.

The feed industry has seen 14.6% growth over the past five years, says Dr. Mark Lyons, during the media webinar Tuesday. As the population grows, so does the middle class, which is well reflected in an increase in overall protein consumption.

Eight countries, China, U.S., Brazil, Russia, India, Mexico, Spain and Turkey, produce 55% of the world’s feed and have 59% of the world’s feed mills.
Here’s a brief look at the top trends from the survey:

China Remains Top Feed Producer and User
The world’s largest producer and consumer of feed has faced clear challenges in its pig herd with African swine fever (ASF) and foot-and-mouth disease in cattle. But overall, this year the country saw only a small decline of 0.4% in animal feed production.

China maintained status as the top feed-producing country in the world with 187.89 million metric tons, 10 million metric tons more than the U.S. More than 42% of the country’s feed production goes to pigs. ASF has only further accelerated China’s move toward larger, more professional farms and improved cost-efficient pork production. While feed production growth might not be as high this year as one might expect, the feed-cost ratio has improved dramatically.

The survey only showed a small portion of the ASF’s effect on feed use and demand. Lyons said some industry estimates are predicting a loss of up to 30% of China’s hog production in 2019 and 2020.

“That’s something for us to think about. Even if as that pork is removed from the market, we recognize that exports can only represent a certain percentage of the picture. The Chinese market is so dominant and so large, there’s few countries can export enough pork to make up that gap,” he said.
China’s dairy and beef feed production also both declined by 17%. China’s dairy industry is struggling as dairy farmers try to balance high priced inputs with poor returns from milk processors. The beef industry’s decline indicates the displacement of local production with both cheaper imports and higher quality imported meats. China’s layer and broiler industries also saw small declines of 11% and 5% in feed production, respectively.

Regional changes:

  • North America, 2% growth
  • Latin America, 1% Growth
  • Europe, 4% Growth
  • Africa, 5% Growth
  • Middle East, 2% Growth
  • Asia Pacific, 3% Growth
global supply
Global feed production;  Source: 2019 Alltech Global Feed Survey
Pig Industry Is A Story in Efficiency
Globally, pig feed production increased by nearly 1% in 2018. The only region that saw a decline in pig feed production was the Asia-Pacific region, including Mongolia, Vietnam, China, New Zealand and Japan. In addition to disease challenges, Lyons pointed to efforts in those areas to create a more professional and cost-effective production systems. From a tonnage standpoint, Europe saw the largest growth at approximately 2.2 million metric tons. Russia and Spain accounted for the majority, while Finland, Denmark, France and Poland also contributed. Latin America saw the greatest growth in pig feed, at 5% growth, thanks to increases in Mexico and Argentina....MORE
 Now you have Singapore's Wilmar talking 600,000 hectares of soybeans in Russia's Far East and Russia talking about leasing 2.5 million acres to the Chinese and Brazil going flat out if Bolsonaro survives the stab wounds and......
...fucking Bezos.

Elon Musk’s private jet appears to make frivolous flights, per Washington Post

In contrast the WaPo's Mr. Bezos' planes will only take off if there is a transplant organ requiring delivery or a disaster site in need of air-dropped supplies along the flight path.
Via Ars Technica:

For a CEO who claims to care about carbon emissions, Musk's flight habits are eyebrow-raising.
Flight data obtained by The Washington Post shows that Tesla and SpaceX CEO Elon Musk has a private jet that logged about 150,000 miles in 2018. While many billionaires have private jets, Musk's jet stands out in the number of trips it made and miles it logged, the Post reports.

Perhaps most egregious, the plane logged a number of 20-mile trips, repositioning from the south side of Los Angeles to the north side. "Tesla said Musk never used the plane to fly between different spots in Los Angeles," the Post reports. Instead, the jet would make the 20-mile repositioning flights to meet the CEO at a closer airport.

Flying is an extremely carbon-intensive activity, made worse when only a few people are transported rather than many are on a commercial jet. According to the Post, the 150,000 miles that Musk's jet flew represents roughly 250 flights. Although it's not always clear that Musk was aboard every flight, the CEO's private jet made 100 more flights than the private jet of Jeff Bezos, CEO of Amazon (and owner of The Washington Post).

Beyond Musk's carbon budget, the private flights also impose on Tesla financially, as the company covers much of Musk's jet expenses. Apple reportedly spent $93,000 on private flights for CEO Tim Cook in 2017, whereas Tesla seems to have spent about $700,000 that same year on flying Musk around in a Gulfstream G650ER....MORE

China Really Wants to Get 'Smart' Appliances Into People's Homes

From The Asia Times:

Local governments encouraged to boost home appliance upgrade
The government will offer subsidies to consumers who buy green and intelligent home appliances, but critics remain skeptical that it will help the sector
China has released the much-anticipated stimulus policy to boost the upgrade to energy-saving home appliances before the arrival of Chinese New Year, reported.

The government will offer subsidies to consumers who buy green and intelligent home appliances.
Local governments are also encouraged to provide subsidies to consumers who sell their old household appliances including refrigerators, washing machines, air conditioners, TV sets, range hoods, water heaters, cookers and computers.

However, analysts remain concerned about whether the new policies can really stimulate consumption....

Tuesday, January 29, 2019

IBD: Afterhours Dow Jones Futures: Apple, AMD Lead These Big Earnings Movers Late

Apple is now up $9.33 (+6.03%) to $164.01.
If it holds through tomorrow's open that is over 60 DJIA points.

From Investor's Business Daily:
5:38 PM ET
Dow Jones futures rose late Tuesday, along with S&P 500 futures and Nasdaq futures, with Apple stock fueling gains. Apple earnings headlined a huge night for tech results, with Advanced Micro Devices (AMD), Amgen (AMGN), Illumina (ILMN) and eBay (EBAY) also reporting. Apple (AAPL), AMD stock and eBay stock rose late. Amgen stock and Illumina stock lost ground.

Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures climbed 0.5%. Nasdaq 100 futures popped 0.85%. Apple stock is a member of the Dow Jones, S&P 500 index and Nasdaq composite. AMD stock, Amgen stock, Illumina stock and eBay stock are all S&P 500 and Nasdaq components. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular session.

Stock Market Rally Update
The stock market rally continues to consolidate, with the Dow Jones, S&P 500 index and Nasdaq composite pulling back Tuesday but holding above their 50-day moving averages. Tech giants such as Microsoft (MSFT), (AMZN) and Facebook (FB) struggled, while some top software stocks outpaced the market decline. Microsoft, Amazon and Facebook earnings are due later this week.

China trade talks kick off in Washington, D.C., on Wednesday. Hopes for a China trade deal have been a huge driver of the stock market rally. Another stock market catalyst has been a less-hawkish Federal Reserve. The first 2019 Fed meeting ends Wednesday with no expectation of a Fed rate hike. The real question is what policymakers may say about possibly curbing or ending the Fed's quantitative tightening policy of letting its balance sheet wither.

Apple Earnings Good Enough For Apple Stock
Apple earnings rose 7% to $4.18 a share, up 7% vs. a year earlier and 1 cent above fiscal Q1 views. Revenue fell to $84.3 billion, narrowly topping lowered estimates. Services revenue climbed 19% to $10.9 billion.
Apple sees fiscal Q2 revenue at $55 billion to $59 billion, with the $57 billion midpoint well below the consensus for a 4% drop to $58.83 billion.

Apple stock leapt 6% in late trading, as the Apple earnings report and guidance weren't worse than expected....

So much for that 'Soft bigotry of low expectations' theory.