Sunday, June 30, 2019

"Indonesia vs China in a fish fight at sea"

China is pushing wherever it thinks it can push.
The headline conflict is not even part of the South China Sea disputes, where China's makes its ridiculously huge claim, here shown in red but usually delineated with a "nine - dash - line" and where Indonesia has no claims:
Indonesia's territory on the island of Borneo—which it shares with Malaysia and Brunei—does not have a seacoast on the SCS,
Instead, this dispute is is being waged among the 17,000 islands that make up Indonesia:

From the Asia Times, May 31, 2019:

Fisheries Minister Susi Pudjiastuti is going toe-to-toe with Chinese and other foreign poachers she claims illegally take 80% of her nation’s catch
The catch has expanded dramatically, the fish are bigger and new canneries have sprung up all around Indonesia, all apparent signs of a hale and hearty fisheries industry.
But Fisheries Minister Susi Pudjiastuti continues to fight a constant battle since she banned foreign trawlers from Indonesian waters in arguably one of the most notable achievements of Joko Widodo’s first term as president.

In an interview with Asia Times, Pudjiastuti said she believes up to 80% of the nation’s catch is still exported illegally or offloaded on to foreign, often Chinese-owned, mother ships outside its 200-mile economic exclusion zone (EEZ) – a transshipment practice she wants declared an international crime.

Moreover, she says only a quarter of the estimated 3,000 new 100-200 tonne fishing boats built locally in the past three years have been properly registered; the rest are painted the same color and carry duplicate names to avoid paying taxes.

There is big money involved for the 100 or so Indonesian businessmen involved, of whom about 20 own 4,500 of the 7,600 registered boats above 30 tonnes, according to the minister. Annual profits, she says, range from US$1-2 million for 30-100 tonne vessels, and $2-4 million for those in the 100-200 tonne capacity.

The result: many of the Indonesian businessmen who previously engaged in flawed joint ventures with Chinese, Thai and other large regional fishing companies to plunder their country’s maritime resources are now finding ways to do it independently.

Despite all that, the fisheries sector’s contribution to gross domestic product (GDP) has risen from 7.3% to 7.9% in the past three years, growing by 5.7% per year and making Indonesia into the world’s second-biggest producer of fisheries and aquaculture, according to the 2018 European Union Fish Market Report....

M&A in Space: LIGO Detects Possible Black Hole Merger Event

From the Laser Interferometer Gravitational-Wave Observatory's Twitter feed:

More to come.

"Water and power: The French connection"

I was talking to a friend about Enron and Azurix and investing in water when he said "Since you follow investigative journalists for ideas, have you looked at what they say about water?"
And I had to confess I hadn't really thought to do that.

To partially fill this gap in the knowledge base here's the International Consortium of Investigative Journalists with a bit of a backgrounder, from their series The Water Barons:
March 12, 2012
PARIS — “You don’t send God to prison,” goes the bitter joke that circulated among citizens of the alpine city of Grenoble. Jérôme Monod must be God, they said — otherwise, how did the world’s leading water executive manage to avoid prison? Only God, after all, can walk on water.
While serving as CEO of the largest water utility, Suez Lyonnaise des Eaux, from 1987 to 2000, Monod helped plan the privatization of Grenoble’s water, a process that was enabled by bribes and resulted in the price gouging of customers. The city’s mayor and three water company officials were convicted of corruption in 1995, and the water concession was canceled. Monod, a close adviser to French President Jacques Chirac, was accused in testimony during the trials of having instigated the corruption, but he denied those accusations and was never charged.

Chirac and Monod, both Gaullist conservatives, have been close allies for most of Chirac’s four-decade political career, in which he has served as cabinet minister, Paris mayor, French prime minister and president. Yet despite evidence that Chirac’s party’s finances owe a debt to illegal payments from multinational French water companies, Chirac, too, has managed to float above the scandal.

France could be described as the birthplace of water privatization. Private companies have run French waterworks to one degree or another since the Napoleonic era. Suez and Vivendi Environnement are by far the largest private water companies in the world. Together with Saur, they control 80 percent of the water market in France, leaving the rest to municipal utilities. Comfortably secure in their home-market dominance, they set out in the early 1980s to privatize the world. Suez now controls water services in 130 countries on five continents and has about 115 million customers. Vivendi Environnement has 110 million customers in more than 100 countries. Number three Thames Water of the U.K., owned by German conglomerate RWE, has 70 million customers.
Back home in France, both Suez and Vivendi have come under scrutiny in a host of criminal and civil cases, with accusations that include bribery of public officials, illegal political contributions, kickbacks, price fixing, operating cartels and fraudulent accounting.

Suez and Vivendi have close ties to the French government; the water companies appear to be crucial sources of income for the political parties, particularly Chirac’s Rassemblement pour la République (RPR). In 2000, in fact, Monod, 69, left Suez and moved into the Elysée Palace, becoming a senior adviser to Chirac.

The government, meanwhile, has taken a protectionist approach to the water business. No foreign companies have water concessions in France (See sidebar).

Suez’s roots lie in the building of the Suez Canal in the 19th century. But its contemporary expansion began with the privatization of waterworks in cities such as Grenoble. The lengthy, widely publicized Grenoble corruption investigation reflected the deep political connections French water companies trade on and the unique nature of the water business itself, where padded billings can be difficult for a customer to detect.

Closer politically to home, as early as 1985 investigations by the Cour des Comptes, the federal comptroller, found that the Paris mayor’s office had signed a contract with the Compagnie Générale des Eaux (now Vivendi) and with Suez that allowed the two to indulge in fraudulent accounting. Auditors found that the companies, which share contracts for water distribution in Paris, had hidden enormous profits.

A handful of separate judicial inquiries in Paris have alleged that subsidiaries of Suez, Vivendi and other companies financed Chirac’s party through illegal commissions in exchange for public contracts ranging from elevator maintenance to water concessions. Prosecutors claimed the Vivendi and Suez subsidiaries formed a “pact of corruption” for public construction contracts in the province of Île-de-France, which surrounds Paris, according to court records.

One of these inquiries, which opened in June 1997 and is still ongoing, found that the companies colluded with civil servants by paying illegal commissions, primarily to Chirac’s party, the RPR. Prosecutors have charged that the pact operated between 1989 and 1995 and was involved in public contracts worth $3.3 billion. Up to $86 million was funnelled to the RPR, although many other parties got smaller kickbacks. Almost all public construction contracts in Île-de-France were awarded in violation of the law, the prosecutors have charged.

Both company officials and the party executives have admitted the companies agreed to pay 2 percent to 3 percent of the cost of each contract to political parties. Several party executives are awaiting sentencing. Vivendi refused to comment on the cases because they are still before the courts. A Suez official said there was no other way to finance political parties at that time and it was not clear whether these payment were in fact illegal. He noted that Suez has since sold the subsidiary involved in the corruption case.

Throughout this period, from 1977 to 1995, Chirac was mayor of the city — indeed, Parisian water was often referred to as “Chateau Chirac.” Chirac, himself, has been investigated — one prosecutor even summoned him for questioning — but prosecutors have not been able to question him. Under French law, a sitting president is immune from prosecution. Chirac was elected president in 1995, and re-elected in 2002.

The Cour des Comptes in 1997 accused the companies of deficient management, including imprecise accounting, inadequate management controls and a lack of competitive bids for services in Paris. Consumers paid dearly for this “lack of rigor.” The Water Union, which includes representatives from 144 regional municipalities around Paris, claimed at a 2002 news conference that water bills had increased 100 percent from 1990 to 2001....

Back to Azurix, while we have dozens of posts on Enron there are only a couple mentions of their water business. In "It's So Hard to Find a Decent Bet on Water (investment vehicles)" , coincidentally also from 2012 which we introduced with:
Water has confounded smarter people than me.

Enron's adventure in H2O is a cautionary tale, they bought Wessex Water in England, bought water concessions in Argentina and had a long term contract in Cancun.
Enron partially spun out the water sub, Azurix at $19.00. Within 18 months it was trading at $3.50 where Enron tendered for the 34% of the company that the public owned.

Not a very sweet deal for anyone involved. Water is tough business.
And, of course, Enron being Enron, they bid 100% more than any one else in the business to get the Argentina deal to have some big pre-IPO news....
If interested, another post linked to the post-mortem done by The Guardian:

"Too hot? In 1858 a heatwave turned London into a stinking sewer"

Opportunity is where you find it and right now I'm thinking the return of nosegays can't be too far away. And with a world-wide market to boot.
As the philosopher said "San Francisco is the only city where the dogs complain about stepping in people doo."
From the BBC, August 3 2018:

Suffering in the hot weather? Spare a thought then for the population of London back in 1858, a year of sky-high temperatures and the Great Stink.
That year, the London Standard reported temperatures of over 30C by the middle of June and the weather stayed hot for several weeks

There was no air conditioning, no refrigeration, it was really hard to keep food fresh and there was no proper sewerage system, according to Museum of London curator Beverley Cook.

Everything you didn't want ended up in the River Thames, from the contents of people's chamber pots and the new-fangled flush lavatories, to dead dogs, decomposing food and industrial waste, including animal parts from abattoirs and chemicals from leather tanning factories along the river.
The Thames embankment had not yet been built, accidental drownings and river suicides were common and bodies were rarely recovered from the water.

On top of this, everything was horse-drawn - so the streets were full of massive piles of manure, says Ms Cook.
"Flies were swarming down on this and of course transmitting disease such as diarrhoea and typhoid."

It was a nauseating mix and the heat made it worse - standing close to the river was enough to make you retch.
It was dubbed the Great Stink and it was no joke.

By the 1850s, London was the largest city on the planet, with a rapidly growing population that had already topped 2.5 million - but it was struggling to provide its citizens with clean water and sanitation.

In Little Dorrit, written that decade, Charles Dickens described the Thames: "Through the heart of the town a deadly sewer ebbed and flowed, in the place of a fine fresh river."
Worse, Londoners drew their drinking water from the Thames and its tributary rivers, which were often just as polluted.
A condition called summer diarrhoea was common, as was typhoid, while cholera killed thousands in a series of epidemics.....

"Reviewing Mervyn King's The End of Alchemy: Money, Banking, and the Future of the Global Economy"

From Inference Review, Volume 2, Issue 4
The King’s Revolt
There is growing anger towards the central banks. Their seven-year experiment in monetary policy has not worked. The banks are undeterred. Normal economic growth, they argue, is shortly to resume. In the meantime, our economies must deal with negative interest rates. There are even rumors about such as measures as helicopter money—the direct transfer of cash to the private sector from the central bank.

Mervyn King’s The End of Alchemy, which was published in March 2016, is therefore an event. For the ten years between 2003 and 2013, King was the governor of the Bank of England. He was thus in power during the 2007–2008 financial crisis. Given the position that he held, King is remarkable in his forthrightness: “The crisis raised deep questions about the foundations of the economic models used by central banks around the world.”1 Paul Krugman has correctly emphasized the peculiarity of a book in which an insider’s insider sets himself in opposition to economic orthodoxy and its standard forecasting models.2

Minor Key Rebel
King’s criticisms are often astute. Given that economic decisions always take place under conditions of radical uncertainty, King is right to question a purely probability-based definition of risk. This is criticism that can be tracked back to Frank Knight’s work at the beginning of the 1920s.3 “At the heart of modern macroeconomics,” King writes, “is the illusion that uncertainty can be confined to the mathematical manipulation of known probabilities.”4 Perhaps influenced by Friedrich Hayek, one of his predecessors at the London School of Economics, King rejects general equilibrium models based on rational optimization that are reducible to a limited set of mathematical equations.5 In the real world, King notes, human rationality involves rules derived from experience, or tradition. “Heuristics are not deviations from the true optimal solution but essential parts of a toolkit to cope with the unknown.”6

One might think that King, having sloughed off traditional Keynesianism, has undergone pupation as a neoliberal economist. “Our inability to anticipate all possible eventualities,” he writes, “means that we—households, businesses, banks, central banks and government—will make judgements that will turn out to have been ‘mistakes.’”7 That mistakes play a role in any economy is a central tenet of the Austrian approach to business-cycle theory. “The problem,” King remarks, “is not just complexity, but also the pretence of knowledge.”8 It is worth noting that Hayek’s 1974 Nobel Prize acceptance speech was entitled “The Pretence of Knowledge.”9 While King clearly aims at cultivating an image of himself as a heterodox economist, he carefully avoids going too far. Whatever Krugman may say, most of King’s animadversions remain anchored in mainstream economics.

King Completes Bernanke’s Narrative
King’s attachment to conventional orthodoxy is revealed in the parts of the book where he deals with the origins of the 2007–2008 financial crisis. He may not share the stereotypical language of the central bankers, and he does not mince words when criticizing their post-crisis quantitative easing strategies: “Central banks are trapped into [sic] a policy of low interest rates because of the continuing belief that the solution to weak demand is further monetary stimulus.”10 Yet King endorses Ben Bernanke’s explanation for the origins of the Great Recession. In Bernanke’s view, the financial crisis was the product of a global savings glut. This was, in turn, due to the determination of emerging Asian economies to accumulate large trade surpluses as a hedge against a shortfall of foreign currency. These countries produced more than they spent, and saved more than they invested. This excess of savings depressed global interest rates to historically low levels. Combined with the financial deregulation of the 1990s, low interest rates meant that asset prices rose around the world. A massive rise in debt levels followed. Investors began taking risks in an effort to obtain higher returns. Banks responded by creating ever more complex financial instruments. When the inevitable bubble burst, it triggered a banking crisis and a major recession.

After eight years and despite massive injections of base currency, the system has not bounced back to normal economic growth. To Bernanke’s narrative, King now adds its missing conclusion. His explanation relies on Milton Friedman’s concept of permanent income, along with time-preference and malinvestment.11 These are terms that again call to mind the Austrian economic school, circumstances that are never mentioned in King’s book, not even in the notes.

King’s theory focuses on the behavior of spendthrift consumers who have become aware that the pace of their spending is no longer sustainable. The more they draw on their future spending to sustain present demand, the greater the shortfall in future demand. In such a situation, consumers rationally revise downwards their expected future income. They decrease their present spending. “The impact of the crisis,” King writes, “was to make debtors and creditors—households, companies and governments—uncomfortably aware that their previous spending paths had been based on unrealistic assessments of future long-term incomes.” This is an interesting theory, even though, as Krugman points out, it still has not been formally confirmed: “I suspect that this is exactly the kind of situation in which words alone can create an illusion of logical coherence that dissipates when you try to do the math.”12....

Saturday, June 29, 2019

Seasteading: "The Plot Against the Principality of Sealand"

From Narratively:

How the world’s quirkiest micro-nation got pulled into one of history’s most epic intercontinental frauds.
Michael Bates was caught off guard by a newspaper item he read in late July 1997. He and his parents, a retired couple residing in the seaside county of Essex in southeastern England, were being connected to the murder of Italian fashion icon Gianni Versace.

Michael, then 44, is a stocky man with close-cropped hair and a tough demeanor. He runs a business harvesting cockles, an edible mollusk found in the North Sea near where he grew up. He squinted at the paper and continued to read.

It turned out that a passport issued by the Principality of Sealand, a micronation his family founded on an old naval platform, and over which Michael happens to reign as prince, was found on the houseboat where Versace’s murderer had committed suicide.

The newspaper laid out the puzzling circumstances of the case. On July 15, 1997, Versace was leaving his opulent Miami Beach mansion when he was gunned down on his front steps by 27-year-old Andrew Cunanan. Allegedly distraught that a rich benefactor had cut him off, Cunanan embarked on a kill rampage across four states, murdering four people before coming back to Miami and shooting Versace for seemingly no reason. When police finally tracked him down eight days later, Cunanan led them on a chase, broke into a houseboat, and shot himself.

Investigators learned that the owner of the houseboat was a German citizen named Torsten Reineck, described by some acquaintances as well-spoken and polite but by others as “obnoxious, unpleasant, disgusting.” He also owned a Las Vegas health spa where orgies allegedly took place. Reineck was a socialite who loved showing off his Sealand passport and was said to have diplomatic plates from Sealand on his car. Consequently, authorities began looking into the micronation to see what role it may have played in Versace’s murder.

The Principality of Sealand, standing on two massive pillars in the roiling waters of the North Sea, was declared a sovereign nation by Michael’s father, Roy Bates, in 1967. Located in international waters and technically outside of the control of Britain, or any other nation, the country straddles a line between eccentric experiment and legal entity of uncertain definition. Authorities investigating Versace’s murder soon realized that the rulers of Sealand were not joking about their claims of sovereignty and had on many occasions taken up arms to defend their micronation.

Formerly called Roughs Tower, Sealand was one of a series of naval forts built seven miles off the coast of southeastern England during the Second World War to shoot down Nazi warplanes. The British government left the forts to the elements following the end of the war, and in the mid-1960s a group of enterprising DJs moved in and set up illegal radio stations. The BBC had a monopoly on the airwaves at the time and pirate radio was the only way to get pop music to the masses.

Roy Bates, who fought with the Royal Fusiliers in World War II, and later said he “rather enjoyed the war,” was a wheeler-dealer businessman who at various points owned a chain of butcher shops, imported rubber, and sold seaweed to New York florists. One day while taking the train to work, Roy had a moment in which he realized he was done with the 9-to-5 routine; instead, he wanted to enter the pirate radio fray.

Roy decided to set up his station, Radio Essex, on Knock John, one of the naval forts. The forts were a hot commodity, and violent struggles for control of them sometimes broke out between competing stations. A decorated soldier who had once had a grenade explode in his face, Roy stepped up to the occasion and resolutely defended his fort.

“Roy was a throwback,” wrote former radio pirate David Sinclair in Making Waves: The Story of Radio Essex on the Knock John Fort. “He should have been born in the time of the first Queen Elizabeth and sailed with Drake. If ever there was a true buccaneer, it was Roy.”

He eventually let Michael drop out of school to help “turf off” rivals (in skirmishes that included gunfire and Molotov cocktails) and the family manhandled its his way into possession of Roughs Tower, another fort farther out at sea. Roughs Tower was at least three miles outside of Britain’s maritime boundaries, and Roy used its extraterritorial location to his advantage. His long-term intention was to turn the fort into some kind of lucrative enterprise, such as an international casino or independent television station. He declared Roughs Tower the Principality of Sealand on September 2, 1967, and installed himself as prince and his wife Joan as princess. In 1968, Michael and Roy Bates appeared in British court after firing across the bow of a Royal Navy vessel that got too close to the fort. The judge ruled that Britain’s firearms laws couldn’t be applied to structures in international waters, which the Bates family took to be confirmation of Sealand’s sovereignty.

The family elected to stay at the fort after the British government green-lit commercial radio and brought pirate radio to an end, and the Principality of Sealand quickly became the foremost micronation in the world, influencing people on every continent who now claim their bedroom, neighborhood or disputed territory as a country of their own. Although they no longer live there, the Bates family has continued its hold on the fort until the present day, successfully upending Crown plots to blow up the platform, warding off more attempts at invasion, and winning bureaucratic victories, such as the time the British government ruled that Roy didn’t have to pay into the national health care system while he lived at the fort.

As they built up the reputation of the concrete-and-metal statelet, the family issued coins, stamps and other trappings of statehood, including passports. The Sealanders had issued around 300 of them over the years, but only to trusted compatriots, and certainly not, Michael Bates was sure, to anyone who would commit cold-blooded murder. His head was spinning when he finished the article.
Authorities would soon determine that the Bates family had nothing to do with Versace’s murder, but as it turned out, this was just the beginning of a series of problems involving bootleg Sealandic documents. The family didn’t realize just how successful they’d been at asserting Sealand’s statehood, and now the tiny nation was being used to facilitate a series of wild scams all over the world.
On April 4, 2000, a trim, handsome 46-year-old man named Francisco Trujillo Ruiz made a few adjustments to the odds and ends in his office at 210 Paseo de la Castellana, a street in a fashionable part of Madrid, before sitting down to speak with a newspaper reporter. Trujillo Ruiz, a flamenco club owner and former police officer who’d been kicked off the force for burglarizing a home, was going to talk to the journalist about his duties as a high-level government official....

Trade Truce: Analysts React

From Bloomberg:
...Mansoor Mohi-uddin, senior macro strategist at NatWest Markets in Singapore:
“Investor sentiment is set to be buoyed in the week ahead by a truce in the U.S.-China trade war.”
“Financial markets are unlikely to significantly reduce their expectations for Federal Reserve rate cuts despite global trade tensions easing. Thus risk assets -- stocks, commodities and emerging markets -- are set to rally while the safe-haven dollar, yen and Swiss franc underperform.”
Stephen Innes, managing partner at Vanguard Markets in Bangkok:
The “reset button” being hit on trade talks was the markets’ base-case scenario, and this is supportive for risk, but the lack of a timeline for progress may cap “bullish topside ambitions.”
“With no news reading algorithms to steamroll the markets on Saturday, traders will have a 36-hour cooling off period to quantify their next move. And I would expect the markets to be very orderly on Monday open.”
The extensive lists of demands from both sides may be “a bridge too far.”
“Underlying sentiment remains quite bearish in terms of the medium-term outlook for a U.S.-China trade deal as well the global growth outlook.”
Chris Weston, head of research at Pepperstone Financial in Melbourne:
“I can’t see this meeting doing risk assets any harm, but there is still a lot of work to do to convince central banks they don’t need to act to keep the economic expansion in check.”
“A few weak shorts may look to close out on Monday” given the tariff reprieve, prospects for negotiations to restart and that both sides “actually appear more united than expected.”
Watch Sunday’s China PMI data....

HT: ZeroHedge

Trade Truce: The Tip-off was in the Soybeans

From the U.S. Department of Agriculture a succinct press release June 28:
Private Exporters Report Sales Activity for China
WASHINGTON, June 28, 2019—Private exporters reported to the U.S. Department of Agriculture export sales of 544,000 metric tons of soybeans for delivery to China during the 2018/2019 marketing year. ...
HT: AgriPulse,

China makes big soy purchase on eve of Trump-Xi meeting
USDA on Friday reported an export sale of 544,000 metric tons of soybeans to China, just a day before President Donald Trump and Chinese President Xi Jinping meet with the aim of ending the two countries’ trade war.

The announcement marked the first Chinese purchase of more than 500,000 tons since trade talks between the two countries fell apart in early May, when U.S. Trade Representative Robert Lighthizer announced that China had backtracked on agreements that had already been struck.

About two weeks ago China agreed to buy 130,000 tons of U.S. soybeans, but that was well short of the purchases China had been making before the talks broke down. USDA announced export sales of 816,000 tons to China on March 29 and 828,000 tons on Apr. 1....

Earlier today:
"Donald Trump, Xi Jinping agree to trade war truce and to resume talks after G20 summit meeting"

It's Been Called 'Pig Ebola': "Scientists Race to Build Vaccine for African Swine Fever"

From The Scientist, June 24:

The devastating outbreak of the disease that has led to millions of pig deaths in East Asia has intensified efforts to develop a vaccine quickly, but the virus presents several challenges that are yet to be overcome.
African swine fever, a fatal disease of pigs, has been around for decades. Believed to have originated in sub-Saharan Africa, it’s made several visits to other continents, with outbreaks surfacing in Russia, Brazil, and various parts of Europe—where it still maintains a stronghold in wild boar populations.
But it only escalated to what Dirk Pfeiffer calls “the biggest animal disease outbreak ever” when it reached China last August, spreading like wildfire across the world’s largest pig congregations. “There’s so many pigs in China, it was just a matter of time,” says Pfeiffer, a veterinary epidemiologist at the City University of Hong Kong and the UK’s Royal Veterinary College.
The disease not only threatens the world’s largest pork industry, but also the global supply of the blood thinner heparin, most of which is produced by Chinese pigs.

Alarmed, Chinese officials have reportedly culled more than 1.2 million pigs to date in an attempt to prevent new infections, but the disease is spreading and has jumped to Vietnam and Cambodia in recent months. Pfeiffer reckons that anywhere between 10 percent and 40 percent of Chinese pigs could have been infected with the virus so far, although official statistics have not yet been released.
Desperate for a vaccine, China has put around $15 million towards research on the virus, according to Nature News, spurring researchers to find one quickly. There are several routes researchers are taking to do so, but this is proving challenging—in part because of the very nature of the virus.

Early failures of an ASFV vaccine
The sheer complexity of African swine fever virus (ASFV) is one reason why it’s so hard to tackle. Its double-stranded DNA genome can span an impressive 190 kilobases and codes for almost 170 proteins, dwarfing many other viruses, such as Ebola (some strains have only 7 proteins).
ASFV infects and replicates in macrophages, but also induces cell death in uninfected B and T lymphocytes. “It effectively wipes out the immune system so there’s not an effective response,” explains Linda Dixon, a virologist at the UK’s Pirbright Institute, part of the government’s Biotechnology and Biological Sciences Research Council. Ultimately, ASFV kills pigs by causing extreme hemorrhagic fever and massive destruction of lymphocytes in lymph tissues.

Both early studies in 1967 and more recent ones have shown that the classical and most obvious strategy of developing a vaccine doesn’t work for ASFV: killing or inactivating the virus and injecting it into healthy animals to prompt their immune system to generate antibodies that protect against future infections was attempted, but it failed. The protective antibodies produced just weren’t enough to ward off ASFV infection.

Scientists have instead learned that one of the most effective ways to produce immunity against ASFV is to expose animals to a less virulent strain of the virus. This can be produced through passaging the virus in culture until it loses its virulence, a strategy that has been successful in containing the spread of a different virus that causes similar symptoms in pigs, classical swine fever. Alternatively, attenuated viruses can be isolated from animals: in wild boar populations across Europe, for instance, many ASFV strains have naturally lost their potency to kill over time.

Some groups have shown that injecting a weaker ASFV strain isolated in 2017 from a wild boar in Latvia can protect domestic pigs against a virulent form of the virus, explains José Manuel Sánchez-Vizcaíno, a virologist at the World Organization for Animal Health’s reference laboratory for ASF in Madrid. He and his colleagues recently demonstrated that the same strain could also protect wild boars, an approach he thinks may be helpful in preventing spillovers of the disease to domestic pigs.

However, the main concern with live attenuated vaccine candidates is safety. Researchers realized this as early as the 1960s, when they tried to vaccinate large numbers of pigs in Portugal and Spain with a naturally attenuated form of ASFV. Although the animals didn’t die, many of them developed a debilitating, chronic form of the disease. “This is the biggest problem: it’s good protection, but not very safe,” explains Sánchez-Vizcaíno. He and his colleagues are currently evaluating the safety of their attenuated virus.

Genetically modified viruses
As researchers have amassed more knowledge about ASFV’s biology and its genome, they have adopted a more targeted approach to attenuate ASFV: genetically modifying the virus by deleting genes that make it so virulent and then vaccinated animals with it. “It’s a case of trying to disarm the virus so that the host has a chance to respond and control replication and induce an adaptive immune response that will be a memory response,” explains Dixon....

"Donald Trump, Xi Jinping agree to trade war truce and to resume talks after G20 summit meeting"

Two from the South China Morning Post. First up, the headline story:
  • North Korea, Taiwan and students also discussed in Osaka, Japan
  • Chinese leader tells US counterpart that Beijing must protect its ‘core interest’, Xinhua reports
Chinese President Xi Jinping and his US counterpart Donald Trump have wrapped up their high-stakes summit at the G20 in Osaka, Japan, with the American leader saying the outcome was “better than expected”, and China saying the US had agreed not to impose any further tariffs on its goods.
When asked about the talks, Trump said it was a “very, very good meeting, better than expected”.
“We’re right back on track,” he said, without elaborating.
China’s state news agency Xinhua said the two leaders had agreed to resume economic and trade negotiations, and that the US said it would not impose any new tariffs on Chinese products.

It had been widely expected that the two world’s two largest economies would agreed to another truce – as they did after Xi and Trump met in Buenos Aires in December – but the news will still have come as a relief to investors and helped to allay fears of a further deterioration of China-US relations.
Trump had threatened to impose tariffs on a further US$300 billion worth of Chinese products if Xi did not meet him in Japan or if the talks failed to produce a tangible result....MUCH MORE
As it happened: Donald Trump confirms US companies can continue to sell to Huawei during G20 press conference

So You Are Well Versed In South Sea Bubble Lore, Know Law and the Mississippi Madness But Do You Recall....

...The Dutch 'Wind-trade', which also popped and dropped during those memorable months of 1719 - 1720?
From Professor (Erasmus U., Rotterdam) David Smant's personal website:

DUTCH MIRROR OF FOLLY, Windhandel 1720
 .....Published by various connoisseurs, in order to taunt this despicable and deceiving trade, by which in this year, several families and persons of high and low standing were ruined, and depraved of their resources, and the real trade halted, in France, England and the Netherlands. 

As long as the greedy person, Has money and goods,
The swindler will get his way,
Because the greedy and feeble-minded will always supply him.
[The Great Picture of Folly, 1720]
The scene is set. This is the text on the cover page of one of the main sources of information about what has become known as the Dutch 'windhandel' (wind trade) of 1720. Hardly a strong recommendation for objective and serious analysis of this episode in Dutch share trading. The Great Picture of Folly consists of a collection of cartoons, comedies and satires, poems and a few texts depicting the short-lived boom in Dutch joint-stock companies. Approximately 40+ joint-stock companies were proposed and founded in the period June-October 1720. Most of these companies were designed to follow the recent English example for joint-stock assurance companies (aiming to replace the existing private, individual insurance underwriting) although their plans also included various combinations of commercial (e.g. shipping and trade) and financial (loans and lotteries) activities. Besides the fact that the proposed joint-stock companies required an official charter, their planning and organization included a close cooperation with the Dutch city governments (today that would be called public-private partnership).

The following table presents a survey of most of the Dutch companies and the available information on key features with respect to date, nominal capital and nominal share value. Eight of the proposed companies were stopped at an early stage, mostly because official consent was not obtained. All the projects followed each other within a very short time frame from June to October 1720. The most important feature was perhaps that the proposals with respect to share capital included a large maximum share capital that in most cases was not at all intended to be called on short notice. Most initial calls of share capital were between 1 and 15 percent. The maximum share capital seems to have functioned as an upper limit on shareholder liability (particularly in the case of the insurance companies) and as a shareholder commitment to supply future funds (something we today would compare to loan commitments or credit lines offered by banks). The effective nominal value of shares should be adjusted accordingly; only the percentage called or paid-in capital amount is relevant. As is clear from the final rows in the table, from the enormous amount of 363 mln guilder capital (more than 800 mln guilder incl. the stopped projects) only 41 mln gld of capital was actually called to start company operations. Still a large amount of money, but of course of a different order than the exaggerated 363 or 800 million that others like to emphasize when commenting on this episode.
[Note: The table is constructed using information from various sources. Information published is not always reliable and frequently confusing because the situation was constantly changing with many companies adjusting their subscription conditions during 1720 and later. Pct. capital called refers to the total, not merely the first installment that is reported in some sources. The Societeit Berbice is treated separately because although founded in the same period, its origin was not related to the other assurance and commerce projects. A few other proposals may have circulated at the time, informally with little information or simply unknown to us today. A unique printed price list for the daily prices on the Amsterdam exchange, dated 25Sep1720, lists 26 domestic compagnies, and includes companies in Schoonhoven and Staveren but these two companies' shares had no prices. Embden is located in Germany but right on the border with the Netherlands.]

Joint-stock (marine) insurance companies

As mentioned before, half or more of the proposed Dutch joint-stock companies mentioned assurance as one of their important activities. At the time, the joint-stock insurance activities could perhaps be viewed as an attractive major new business opportunity. The share prices of some of the important assurance compagnies (Stad Rotterdam, Middelburg Assurantie, and also Delft, Gouda) do suggest they contain a premium over the other compagnies (see the graph of share prices below). The proposed other, frequently somewhat unfocused, commercial activities must probably be viewed as essentially serious attempts of public-private partnerships to accumulate funds of capital that were needed or desired to stimulate the various local economies; the Dutch economy was (probably) experiencing a somewhat difficult conjuncture period that had started approx. a year earlier (1719).
The importance and subsequent experience of the joint-stock insurance companies is perhaps aptly described by the following text [adapted from Kingston (2007, JEH): Marine insurance in Britain and America, 1720-1844: A comparative institutional analysis] 

At the start of the 18th century, marine insurance in Britain was carried out entirely by private individuals. Many underwriters were merchants who wrote insurance on the side, but any wealthy individual could underwrite a policy. A merchant (or a broker acting on his behalf) wishing to purchase insurance drew up a policy and presented it to private underwriters for their signature. Risks were usually shared among several underwriters. The parties negotiated a premium, and the underwriter wrote on the policy the amount he was willing to insure. 
In 1717 several groups of merchants and speculators began petitioning to obtain charters for joint-stock marine insurance corporations. The promoters argued that the proposed corporations would provide cheaper and more secure insurance than the existing system of private underwriters. Their underwriting would be backed by a large capital fund, and in the event of a claim, it would be easier for a merchant to recover losses from a corporation than from many individual underwriters separately. Corporations also expanded the pool of available capital by enabling those without specialist knowledge of marine risks, or with relatively modest amounts of capital, to act as insurers by entrusting their underwriting decisions to experts. The proposed charters were opposed by merchants and private underwriters in London and Bristol, who claimed that the existing system was adequate, and that a monopoly would harm trade. Both sides in the debate, however, shared the expectation that if charters were granted, the proposed corporations would drive private underwriters out of the market. The argument was settled when the two main groups of promoters offered the King £600,000 (to pay off the debt on the Civil List) in exchange for charters. 
Two joint stock corporations (the Royal Exchange Assurance and the London Assurance) were subsequently incorporated as part of what later became known as the “Bubble Act” of 1720. The Bubble Act made it illegal for joint-stock companies to operate without a corporate charter. 
In all industries except marine insurance, however, other kinds of unincorporated companies, including partnerships and trusts, were still allowed, and businessmen were later able to use these devices to create (highly imperfect) substitutes for the joint-stock business corporation (Harris, 2000)....

Professor Smant's homepage.

See also the Rijksmuseum

Friday, June 28, 2019

Libra: The Video (FB)

From the Financial Times' Pinewood Alphaville Studios:

Libra myth-busting (video) 
Sooo, the Zuck Buck. The Zuckerbuck. The Schmuck buck. The Schmuckerbuck. The, er... OK just watch this (it features fancy graphics and virtual purple smoke!):....MORE
Click through for the four-minute vid and the reviews, some raves, some raving.
Sorry about the "Pinewood" error, I was thinking about spies and stuff: 

(proto) Fish on the Move: "The world’s fisheries are incredibly intertwined, thanks to baby fish"

From Science News:
Marine fisheries are typically managed by individual nations. But the fish in those stocks often originate elsewhere, according to a computer simulation of how eggs and larvae from hundreds of fish species ride ocean currents around the world.

That finding means that many nations with economies that rely on fishing must depend on other countries to maintain important spawning grounds. The results of the simulation highlight the importance of international cooperation in sustaining the fisheries that provide millions of people with food and livelihoods, researchers report in the June 21 Science.

Oceanographer Nandini Ramesh of the University of California, Berkeley and colleagues simulated ocean currents transporting the eggs and larvae of more than 700 species of commercially harvested fish among 249 national fishing grounds. More than 90 percent of the world’s fish are caught within these marine territories, which extend a few hundred kilometers off the shores of coastal nations. The simulation accounted for when and where different species lay eggs, as well as the speeds and directions of ocean currents throughout the year.

A vast network of larval flows connects fisheries across the globe, the researchers found. In 114 national territories, at least 1,000 tons of catch per year originates from elsewhere. Many countries, from Indonesia to Norway to Mexico, harvest hundreds of thousands of tons of fish born outside their jurisdictions. For Russia and South Korea, that catch exceeds 1 million tons.

Major spawning hubs off countries like Brazil, Barbados and Kiribati feed larvae into many other territories in the global fishery network. Harm to such major spawning grounds, from overfishing, pollution or other environmental changes, could significantly reduce fish stocks for other nations, Ramesh and colleagues say. On the flip side, good fisheries management by one nation can boost fish populations elsewhere....MORE

Beyond Parody: Arby's Has Created A Carrot Made of Meat That Tastes Almost Exactly Like the Root (BYND)

Arby's is privately held (Roark Capital Group), hence no symbol in the headline.

From Insider  Lifestyle:

Arby's has flipped the vegan 'meat' trend on its head with the 'megetable,' a carrot made out of turkey that looks and tastes almost exactly like the vegetable
  • Arby's latest creation is a "megetable" called the "Marrot," a carrot made of meat that looks and tastes just like the orange vegetable.
  • Arby's says it boasts more than 30 grams of protein and more than 70% of the recommended daily amount of vitamin A.
  • INSIDER had a chance to taste the Marrot ahead of its public reveal, and it was shockingly reminiscent of a carrot in both taste and appearance.
  • Neville Craw, Arby's brand executive chef, hinted to INSIDER that the Marrot could roll out in stores across the country.


I think Insider Lifestyle is one of the Business Insider verticals, this is our first visit.

Futures—USDA annual acreage report: "U.S. corn plantings top expectations despite floods; prices sink"

From Reuters:
U.S. farmers planted more corn than expected despite heavy rains and flooding that market watchers had said kept farmers out of the fields for much of the spring, the U.S. government said on Friday.

Soybean acreage came in below forecasts, however. Analysts had expected the data to show farmers had boosted their soybean acres due to the corn planting delays - and many cast skepticism on the Agriculture Department’s report. Soybeans can be planted later in the year than corn.
Chicago Board of Trade (CBOT) futures reacted sharply to the news, with corn plunging its daily 25-cent trading limit to its lowest since June 11. CBOT soybeans rallied to their highest since Feb. 1.

The USDA’s planting progress reports issued throughout the spring showed corn planting on a historically slow pace.

“I think the USDA is sending the message that corn acres got planted - regardless of what some of these farmers up here in the Midwest see outside their kitchen windows,” said Karl Setzer, market analyst for Agrivisor....MUCH MORE
Here is the USDA reports page:
Today's Reports
Jun 28, 2019

Released at 12:00 pm ET

Grain Stocks
Released at 12:00 pm ET

And from AgWeb June 25, the trade estimates and comparables:
USDA annual acreage report will be released this Friday at 11 a.m. CST. Analyst estimates for corn plantings on this report are 86.662 million acres of corn (89.800 million acres June WASDE, 92.792 million acres March forecast). Soybean plantings average estimate at 84.355 million acres (84.600 million acres June WASDE, 84.617 million acres March forecast). All wheat plantings average estimate at 45.654 million acres (45.800 million acres June WASDE, 45.754 million acres March forecast).
See also June 24's "Soybeans Could Be Next Market to Surge as U.S. Showers Drag On".

From FinViz, the last two week's action in corn and beans:

The Jobs Where Liars Excel

So there I was, preparing for a meeting and flinging (metaphorical) poo at the internet when this popped out of one of the feeds.

From BBC - Capital, June 26:
It’s a head-scratcher: in some jobs, being less trustworthy means that other people will trust you to be better at that job.
I have a confession: I lie. A lot. I lie to stop or start conversations, to spare others’ feelings, or my own, and to simplify social or professional life in a million little ways.
To some extent we know that the people we work with are lying to us. They can’t always be having a good day, be excited about work or be completely happy for a colleague who’s been promoted instead of them.

But what about when deception isn’t just about mood, but is baked into the content of a job? New research suggests that one reason lying persists in certain professions is the belief that people with flexible attitudes towards the truth are actually better at these jobs.

Attitudes toward workplace liars
In general, deception in the workplace is viewed negatively – if someone has to resort to lying, they’re probably not very good at their job. And deceit can be toxic to a culture of trust and teamwork. But according to recent research by US academics Brian C Gunia and Emma E Levine, there’s an exception for jobs that are perceived as being high in selling orientation rather than customer orientation....MORE
Now there's more to this story than the fact people think lying and sales go together. That's been going on forever, from sharp practice to outright theft, from Jack and the Beanstalk to modern securities law: "...employ any device, scheme, or artifice to defraud".

The new thing seems to be a devolution toward this behavior in many, many aspects of society.
More to come.

WaPo: "Google Chrome has become surveillance software. It's time to switch"

Is Amazon coming out with a browser?

From the Washington Post:
Commentary: Google Chrome has become surveillance software. It's time to switch. 
You open your browser to look at the web. Do you know who is looking back at you?
Over a recent week of web surfing, I peered under the hood of Google Chrome and found it brought along a few thousand friends. Shopping, news and even government sites quietly tagged my browser to let ad and data companies ride shotgun while I clicked around the web.
This was made possible by the web’s biggest snoop of all: Google. Seen from the inside, its Chrome browser looks a lot like surveillance software.
Lately I’ve been investigating the secret life of my data, running experiments to see what technology really is up to under the cover of privacy policies that nobody reads. It turns out, having the world’s biggest advertising company make the most-popular web browser was about as smart as letting kids run a candy shop.
It made me decide to ditch Chrome for a new version of nonprofit Mozilla’s Firefox, which has default privacy protections. Switching involved less inconvenience than you might imagine.
My tests of Chrome versus Firefox unearthed a personal data caper of absurd proportions. In a week of web surfing on my desktop, I discovered 11,189 requests for tracker “cookies” that Chrome would have ushered right onto my computer, but were automatically blocked by Firefox. These little files are the hooks that data firms, including Google itself, use to follow what websites you visit so they can build profiles of your interests, income and personality.
Chrome welcomed trackers even at websites you’d think would be private. I watched Aetna and the Federal Student Aid website set cookies for Facebook and Google. They surreptitiously told the data giants every time I pulled up the insurance and loan service’s log-in pages.
And that’s not the half of it.
Look in the upper right corner of your Chrome browser. See a picture or a name in the circle? If so, you’re logged in to the browser, and Google might be tapping into your web activity to target ads. Don’t recall signing in? I didn’t, either. Chrome recently started doing that automatically when you use Gmail.
Chrome is even sneakier on your phone. If you use Android, Chrome sends Google your location every time you conduct a search. (If you turn off location sharing it still sends your coordinates out, just with less accuracy.)
Firefox isn’t perfect — it still defaults searches to Google and permits some other tracking. But it doesn’t share browsing data with Mozilla, which isn’t in the data-collection business....MUCH MORE
HT: Democratic Underground

The Brave browser is also gaining some traction.

Economy: Atlanta Fed's GDPNow for Q2 Declines to 1.5%

From the Federal Reserve Bank of Atlanta:
...Latest forecast: 1.5 percent — June 28, 2019
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 1.5 percent on June 28, down from 1.9 percent on June 26. After this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis (BEA), the nowcast of second-quarter real personal consumption expenditures growth decreased from 3.9 percent to 3.7 percent. After yesterday’s GDP release and this morning’s release of the underlying detail tables of the national income and product accounts, both from the BEA, the nowcast of second-quarter real gross private domestic investment growth fell from -3.8 percent to -4.9 percent.
The next GDPNow update is Monday, July 1. Please see the "Release Dates" tab below for a list of upcoming releases.
And from the Federal Reserve Bank of New York:

Jun 28, 2019: New York Fed Staff Nowcast
  • The New York Fed Staff Nowcast stands at 1.3% for 2019:Q2 and 1.2% for 2019:Q3.

One Of The Most Dangerous Situations In Finance: Dollar Denominated Emerging Market Corporate Debt

Over the years we've harped on the risks of borrowing in a currency other than the one in which you earn your income.
The quintessence were the Polish homeowners enticed by ultra-low interest rates who took out Swiss franc denominated mortgages which they paid by earning in zloty, converting to CHF and sending in the payments. When the franc appreciated it took more and more zloty to buy the francs, to the point in some situations the homeowners owed more on the mortgages than their monthly income.

When I saw this headline yesterday "Reaching for yield: the reshaping of the EM corporate debt market" my first though was "Yeah, reaching for yield can come back to bite you".
But when I read the first few paragraphs:
The massive universe of negative-yielding bonds hit a new milestone earlier this month. On the backs of central banks around the world tilting dovish, the value of this debt surged higher to an eye-watering $12.5tn — a level not seen since 2016.

Risk assets have simultaneously rallied, accelerating a well-known dynamic that has come to characterise the post-financial crisis decade: the reach for yield.

It is this phenomenon that's helped to turbocharge both the US junk bond market and the leveraged loan market, helping them to become $1tn asset classes stateside, according to S&P Global. This phenomenon can also take credit for the growing popularity of illiquid assets and Japanese investors increasing their holdings of unhedged foreign bonds, despite the risks should FX rates move against them.

A new paper by Columbia University's Charles Calomiris, and a team of academics, traces how this hunger for yield has helped to propel the growth of another asset class: emerging market (EM) corporate debt. More specifically, dollar-denominated bonds issued by EM corporates with a face value of $500m or more....
 the reaction changed to "Holy crap, these are going to get creamed, how do we get some shorts on?"
The story is from FT Alphaville and continues HERE

Previously on borrowing in a foreign currency:
Our Dec. 2014 post: Evans-Pritchard: "Dollar surge endangers global debt edifice, warns BIS":
Two quick points*:
1) This is the second BIS warning in under six months.
2) It is very dangerous to borrow in a currency other than the one in which you earn your income.
True at retail, true at wholesale....
Reprised in "'Russian ruble's fall: A classic 'currency collapse'" and Why It's Such a Big Deal".
Borrow In Dollars, Pay In Tears 
We've said ad nauseum*
Remember When the BIS Was Warning That A Strong Dollar Would Wreck Everything?

In Which Izabella Also Comments On Russia and Foreign Liabilities
We beat her to it, I think. Our post "Russian ruble's fall: A classic 'currency collapse'" and Why It's Such a Big Deal" was timestamped at 11:56 am PST while hers is 20:07 GMT. 11 minutes ahead.
Great minds and all that....

And some of our January 2015 posts on the plight of the Polish home buyers:

Poland To Help Holders Of Swiss Franc Denominated Mortgages
Speaking of borrowing in a currency other than the one you earn your income in.*
"The Swiss franc appreciation and the sorry saga of FX lending"
Polish Swiss-Franc Mortgages May Sink Austrian Bank

Agriculture: China's Domestic Soybean Production Push Withers As Subsidies Dry Up

From Nikkei's Asian Review:

Government fails on handout promise to farmers, stunting growth of crucial crop
DALIAN, China -- China's goal to increase soybean production to offset plunging imports from the U.S. is not going according to plan.

Beijing wants to increase soybean production 20% by 2020 over 2018 levels, as tariffs on American soybeans caused U.S. imports to fall 70%. But government subsidies aimed at encouraging growers to switch to soybeans have dried up, leaving farmers dismayed at what they see as broken promises.
"I don't trust the government because its support programs frequently change," said a farmer in his 30s in China's soybean capital of Heilongjiang Province, where 40% of the nation's soybeans are grown.

The grower had allotted 10% of his land to soybeans on the promise by the local government in February of a 150 yuan ($21.80) subsidy for every 667 sq. meters of land converted to soybeans. But the agriculture ministry suddenly nixed the subsidy in March, throwing the farmer's finances into disarray as he had already purchased seed and fertilizer for his new crop.

Soybeans are crucial to feeding the country. They are processed into bean curd, cooking oil and other food products, and the pomace is an important livestock feed.

The government was hopeful that a new seed -- developed under a $4.6 million grant -- would increase yields. According to its creator, the Research Institute of Soybean, the new variety doubles yields.

"The new seed will allow China to weather the trade war," said Cao Jujin, head of the institute, in reference to overcoming the dearth of American soybeans.
China is the world's biggest consumer of soybeans at 100 million tons per year, but relies on imports for 90% of this figure.

Brazil is the country's largest soybean supplier followed by the U.S. But Beijing slapped a 25% tariff on American beans in July 2018, causing imports from the U.S. to tumble 70% in the January-April period from a year earlier....MORE

Thursday, June 27, 2019

Latest Act in the Crisis of the Enormous Korean Shipbuilders

From Wolf Street: 

And now not even their foreign subsidiaries are immune.
In February 2019, Hyundai Heavy Industries (HHI) was selected by the Korea Development Bank (KDB) as the “sole bidder” for the ailing Daewoo Shipbuilding and Marine Engineering (DSME), in which the State-owned Korea Development Bank holds a 55.7% stake. Samsung Heavy Industries (SHH) had already announced they had no interest in taking over DSME, making this selection process little more than a formality.

In March, HHI finalized the deal worth about 2 trillion won ($1.6 billion) and announced it will split in two entities to fully digest DSME. HHI and DSME workers, supported by the Korean Metal Workers Union, are opposed to this spin-off, fearing it will lead to mass layoffs similar to those experienced by another money-losing mega-shipyard, Hanjin Heavy Industries, back in 2011.

While HHI is threatening workers with hellfire in form of lawsuits and injunctions, the Korean government, through its Korea Development Bank, has already pledged a further 1.5 trillion won  ($1.3 billion) in fresh paid-in capital, plus a further 1 trillion won (over $1 billion) to be provided “if needed.”

This is the latest act in the long-running crisis of the enormous Korean shipbuilding industry, which has been at the receiving end of a colossal bailout starting in 2016. DSME alone received $2.6 billion in public funds in 2017 after being caught in the largest corporate financial scandal to ever rock Korea just one year earlier. Back in 1999, the Daewoo chaebol from which DSME was later spun off, collapsed under the weight of a similar accounting and bribery scandal.

And now not even their foreign subsidiaries are immune.
To take advantage of low labor costs and often very generous financial incentives ranging from tax breaks to loans at favorable conditions, the big Korean shipyards have opened subsidiaries abroad which are just as liable to their carefree attitude towards the most basic financials as the domestic operations.

In 2004, Hanjin Heavy Industries started construction of a huge shipyard in the Zambales Province, Philippines, to take advantage of both local labor costs and the generous financial and fiscal conditions offered to private investors in the Subic Bay Freeport Zone (SBFZ). By 2016 Hanjin was employing over 20,000 locals plus hundreds of foreign nationals (chiefly from Korea and Romania), making it one of the largest private employers in the Philippines.

Hanjin apparently did not merely export their production system but also their cavalier attitude towards budgets: in January 2019, Hanjin Philippines filed for “corporate rehabilitation” (roughly equivalent to bankruptcy protection) following a default on $412 million of loans owed a consortium of five Filipino banks. This was just a slice of the company’s debt. It also owes $900 million to Korean banks, and the fate of that debt remains unclear.

This is by far the largest corporate default in Filipino history, and it has led to a very complicated aftermath, with rumors of a takeover by Chinese and/or Japanese investors, and the Filipino government tempted to nationalize the whole insolvent lot.

Daewoo-Mangalia Heavy Industries (Mangalia for short), a shipyard set up by DSME to take advantage of Romania’s low wages, ready access to the highly lucrative European market, and generous fiscal incentives for foreign investors, accumulated $800 million in losses between 2012 and 2017.

Late in 2017 the Romanian government and the KDB arranged for Mangalia to be sold to the Dutch Damen Shipyards Group for a measly $26 million. Considering the size of the docks (able to accommodate pretty much any merchant ship now in service and over 90% of existing maritime structures) and how modern and productive the whole facility is, Damen made the proverbial bargain.
Facilities as large as the Mangalia shipyard are not merely needed to build new ships, but to repair, overhaul and upgrade existing ones.

For example, in March 2018 the Maersk Honam, a very new and very large Singapore-registered container carrier belonging to the eponymous Danish conglomerate, caught fire in the Arabian Sea while en route from Singapore to Suez. It took the Indian Coast Guard over a month to put out the fire aboard the drifting ship under control (image via SMIT which was involved in the salvage operation)....

Follow the link and see why I have this weird fascination with heavy lift ships. 

Shipping: Moody's Says Industry Earnings Set To Increase

From World Maritime News:
The outlook for the global shipping sector into 2020 will remain stable despite geopolitical and trade uncertainties, according to rating agency Moody’s.

This is because higher expected earnings are counterbalanced by US/China trade tensions and worldwide regulatory risks, Moody’s Investors Service said in a new report.

As explained, the key drivers of the stable outlook are a combination of anticipated EBITDA growth of 16%-18% into 2020 and largely balanced demand and supply growth.

These positives are offset by downside risks from protectionist trade policies and increasing regulation....

Société Générale's Albert Edwards Talks Time Lag Between Yield Inversions and Recessions, Bear Markets

Albert is early. See June 18's "Just a Reminder: Riding the Bubble Can Be Very Profitable":
Last Friday we had a post linking to Albert Edwards' latest on bonds with this outro:

Whether you are using the 3 mo./5 yr; the 3mo./ 10 yr. the 2's/10's whatever, the period after the inversion can give you stupendous equity returns so we are faced with the decision whether-or-not to play a dangerous little game, riding the bubble knowing full well it is a bubble or retiring to the sidelines.
We'll have more on the time lags between yield curves going inverted and equity downturns and recessions later this summer but for now one of our favorite economists with one of our favorite stories....
But timing quibble aside, Mr. Edwards is always worth a listen when the subject is debt and rates. 

Albert Edwards: This Was The Final Recessionary Shoe, And It Has Now Fallen
Exactly three months ago, in late March, the 3 month-10 year spread inverted for the first time since 2007...
... an event which sparked near-panic in the market as historically curve inversion has preceded the last 7 recessions.
However, while the inversion was certainly a memorable event, the question on everyone's lips is how do risk assets perform once the curve flattens and/or inverts. According to backtests from Goldman, since the mid-1980s, significant stock drawdowns (i.e. market crashes) began only when term slope started steepening after being inverted.

In other words, as we noted then, "Curve Inversion Is Bad, But It's The Steepening After That Kills."
Fast forward to today, when in his latest bearish missive, SocGen's permabear Albert Edwards picks up where we left off, and in a note titled "the final recession shoe has now fallen", he notes that while inversion of the US yield curve is seen as a reliable precursor to US recessions, "it has a long and variable lead time", and instead "a far more immediate and present danger of recession occurs when after inversion, a rapid steepening occurs."

Sound familiar?

In any case, as we first commented in early 2019, Edwards notes that this subsequent steepening "usually informs investors the cycle is over and it is time to flee for the hills."
Well, for those who haven't figured out the punchline yet, rapid curve steepening is now occurring, and as Edwards gleefully concludes, this "suggests recession may indeed either be imminent or else it has already arrived."
Should Edwards be right, the implications are clearly huge, and not just for the economy and markets - perhaps the most dramatic consequence will be what happens with the world's most powerful institution: the Federal Reserve.
"As a long time harsh critic of the Fed (and other central banks) for their obscenely easy money policies" Edwards writes that he is loath to criticize President Trump’s nearly constant slams of Fed Chair Powell, especially since President Trump has a very clear agenda: namely, he is going to make sure the Fed gets the blame from the electorate if the economy goes into recession and the equity market plunges ahead of the next presidential election.
"And by hook or by crook, Powell will be out on his ear", Edwards says.
Which is good news and bad news, because while Powell clearly threw in the towel on the hawkish monster that he was perceived as less than a year ago when he spooked markets that the Fed would keep hiking until the mid-3's, and is now as dovish and meek as Yellen or even Bernanke, it's not like his departure would also end the Fed.
Quite the opposite, because considering that this is what President Trump is like now, imagine what he will be if the US leads the global economy into another deep recession and financial crisis like 2008:
Even before the irascible Trump became President, I said the Fed would lose its (supposed) independence if they were the midwife to another crisis. There will be no deft, disingenuous shifting of blame to the commercial banks this time around. The Fed will carry the can.
As a result, Trump will promptly appoint a Fed chair who is the most dovish one can find, and here Kashkari comes to mind: after all, the former Goldman IT banker and  "architect" of the 2008 bank bailout plan (or rather Paulson's smokescreen) not accidentally said he was hoping for a 50bps rate cut earlier this week - he is clearly angling for Powell's job.

Meanwhile, and going back to the recession narrative, it's not just the re-steepening of the 3M-10Y. As Edwards ominously concludes, there is another key indicator that everyone is focused on: "we (and others), have also pointed out that the alarm bells for an imminent recession would really start ringing if the 10y-2y curve began to steepen."....