Saturday, August 31, 2019

"French Investors and the Revolution of 1848"

From the data wizards at Global Financial Data:
The Revolution of 1848 in Paris produced the most dramatic drop in the price of stocks and bonds in French history.  The stock market dropped in value over 70% when prices collapsed like a waterfall.  It took years of political stability for the market to recover from this collapse.

GFD has daily data on the behavior of Banque de France stock, France’s 5% Consolidated bonds and other shares which enable us to analyze how the market responded to the Revolution.  What we discovered was that the events of the Revolution of 1848 directly impacted the market, driving it up and down as the Revolution spread through Paris.

The Revolution of 1848  Louis Phillipe gained power in 1830 after Charles X was forced to flee when the king abolished the freedom of the press, reduced suffrage by 75% and dissolved the lower house. Louis Phillippe was supported in France by the financial aristocracy of bankers, stock exchange magnates, railroad barons, mine owners and other capitalists. Although France prospered in the 1840s, it fell into a financial crisis with bad harvests in 1846 and a depression in 1847.  Many French felt that the financial crisis was due, in part, to government corruption. Industrialists with monopolies and other government permits were able to take advantage of protectionism.  They succeeded because of the government’s protection, not because of their success in the market.

Political gatherings were banned in France in 1847, so citizens led fund-raising banquets as a way of exercising their political rights.  When the government realized its citizens were using these banquets to promote their political agenda, the banquets were outlawed in February 1848. This led to an open revolt. The French took to the streets on February 22, 1848 and manned the barricades.  As a result, on February 23, Prime Minister Guizot resigned and a crowd gathered outside the Ministry of Foreign Affairs. An accidental discharge by one soldier caused other soldiers to fire on the crowd leading to the deaths of 52 people.   On February 26, the liberal opposition formed a provisional government which they referred to as the Second Republic.  Elections for a constituent assembly were scheduled for April 23. At that point, only landowners, representing about 1% of the population could vote, but universal male suffrage was introduced on March 2, 1848. The hope was that extending the vote would produce a better representation of citizens in the constituent assembly.
However, the elections returned the conservatives to power. Few radicals were elected.  Workers invaded the assembly on May 15, but they were quickly suppressed by the National Guard. The workers revolted between June 23 and June 26 and with a force of over 120,000 soldiers, Cavaignac suppressed the revolt. On June 28, Cavaignac was appointed head of the French state and remained in power for the next six months. A new constitution was finished on October 23, and elections were held on December 10, 1848. Louis-Napoleon Bonaparte won the election by a landslide and became the new leader of France.  Napoleon III staged a coup in 1851 and remained in power until 1870.

The Collapse of the Paris Bourse
The price of shares in the Banque de France is illustrated in Figure 1. You can use this chart to follow the events discussed above.  Banque de France shares were at 3180 on February 23 when Prime Minister Guizot resigned.  This caused the price of shares to collapse for the next three weeks, hitting 1295 on March 15, bounced back for the next three days, then fell down to 995 on April 8. Clearly, the uncertainty over the events in the streets of Paris cost shareholders two-thirds of their money in the greatest decline in Parisian share prices since the collapse of the Compagnie des Indes bubble in 1719....

What Emma Did At The CIA

From Emma Best:
Things Emma Did At CIA
Here’s a list of totally real things from my time working for CIA, which I’ll add to as I “remember” more things. During my time with the Agency, I was the inspiration for 1 out of every 5 new rules and regulations created.
Disclaimer: Any Resemblance to Actual Persons, Living or Dead, is probably unintentional and definitely classified.
  1. I was caught tilting all the pictures in the seventh floor hallway.
  2. I was (accurately) accused of stealing paperclips one at a time.
  3. I was ordered to stop using SF-706 labels to mark my lunch and anyone else’s ham sandwich.
  4. According to a performance review, I was once caught “attempting to spike the coffee with coffee.”
  5. I was once chastised for “having a staring contest with a security camera.”
  6. I was yelled at by the librarians when I started pulling on all the books to see if any opened a secret door.
  7. HR once sat me down and explained that there were “a lot of reasons” I couldn’t BASE jump off HQ.
  8. During the polygraph I was told to stop laughing about the operator being trained in a pseudo-science.
  9. Asked if I associated with unsavory characters, I said “no, they taste fine.”
  10. They said I wasn’t allowed to use the suggestion box anymore because I kept suggesting design changes for the box.
  11. I was told that food fights aren’t acceptable behavior at CIA, “not even on casual Friday.”
  12. I set off the sprinklers because I burned the bag at my desk.
  13. Security repeatedly confiscated my carrier pigeons.
  14. An operations manager once demanded that I “stop suggesting we sink Iranian ships with loose lips.”
  15. I was told that my “eChrips about Party in the CIA being #careergoals” raised some concerns.
  16. I was once described by DIRNSA as “who is this and why are they asking me questions?”
  17. I was ordered to stop putting subliminal messages in the Deputy Director’s voicemails.
  18. They laughed when I tried to combine secret Santa and paintball assassin. They stopped laughing at Xmas.
  19. They suspended my email access after I sent the office my fanfic about how CIA did kill JFK, but it was future CIA and we only did it to preserve the timeline.
    1. They said the writing was cliched, and
    2. They were confused by my comment in the email that “we need to get on this.”
  20. My supervisor wrote me up for starting a betting pool about deceased CIA Directors and who or what they reincarnated as.
  21. NSA wrote me a nasty note when I asked if they could tap HBO’s systems and intercept Game of Thrones before it aired.

Emma did other stuff at the CIA. Follow the link to her site to see what she's thinking about these days.

As The World's Largest Container Ship Completes Its Maiden Voyage from China to Europe, A Call For Even Bigger Behemoths

Two from gCaptain. First up, August 19th:
The world’s largest containership, MSC Gülsün, has completed its maiden voyage from Asia to Europe, its MSC Mediterranean Shipping Company said Monday. 

AIS ship tracking data shows the MSC Gülsün has arrived in Bremerhaven, Germany after completing its journey from northern China. 

At some 400 meters long and more than 60 meters wide, MSC Gülsün has a remarkable 23,756 TEU capacity. The record-setting capacity means the ship can emit less CO2 per container carried. Built at Samsung Heavy Industries in South Korea, the vessel is the first in a class of 10 ultra-large container vessels (ULCVs) to be delivered to MSC. 

In total, SHI will deliver six of the new class of ships, while Daewoo Shipbuilding & Marine Engineering (DSME) is constructing the other five, also in South Korea....MORE
Which reminded me of a gCaptain editorial from last spring:

Opinion: Trans-Pacific Beneficial Cargo Owners Deserve 18,000 TEU+ Container Vessels
The deployment of 18,000+ Ultra Large Container Vessels in the Trans-Pacific trade would substantially decrease the operating costs of shippers, consignees and ship owners.
There is a proposed port in Sonora, Mexico that has the potential of being the first purpose-built port in North America capable of handling, on a steady basis, the largest container ships in the world, which are 18,000 to 23,000 TEU (Twenty-foot Equivalent Unit). 18,000 TEU is the equivalent of 9,000 forty foot 18 wheeler trailers. At present, there are 72 of these vessels in service, all operating in the Far East/ Europe trade. Forty-two additional vessels of this size are now on order. They are too large for the Ports of Los Angeles, Long Beach or any Pacific Coast port to handle on a steady basis because the number of containers would overwhelm their existing shoreside infrastructure.

The M/V Benjamin Franklin, owned by CMA CGM and with a capacity of 18,000 TEU, called the Port of Los Angeles once in late Dec 2015. In Feb 2016 this ship called the Port of Long Beach and then the Port of Seattle. The largest container ships now in the trans-Pacific trade are 14,000 TEU. Due to the tremendous economies of scale, an 18,000 TEU ship has 50% lower operating costs and 50% lower CO2 emissions versus a 14,000 TEU ship. Shipping stakeholders should be interested in this proposed container port because it can make the Trans-Pacific container trade more cost-effective than it is now.

This proposed container port in Sonora, Mexico takes advantage of the naturally deep water in the Sea of Cortez and is not located near a major metropolitan area. The Sea of Cortez is two miles deep at its mouth, 700 miles long and much of its width is over 80 miles across. Vessel operations would be an on-dock rail layout with ship to train and train to ship container moves with no trucks involved. All of this is in contrast to the existing container ports on the U.S. West Coast which are located in major cities and susceptible to heavy truck congestion. All rail operations would be on double tracks with Double Stack Trains (DST’s). The Mexican national railroad, Ferromex, is 25% owned by the Union Pacific railroad. Double Stack Trains would cross the border at Nogales, Arizona without stopping due to U.S.Customs clearance having taken place at the new container port. DST’s would operate at speeds above 40 mph throughout the transit from the port to the U.S.A....
.... Harry Valentine wrote an article titled New Sailing Routes for Future Container Mega-Ships which appeared Nov 13, 2017, in In this article, he projected the following increased container vessel capacities:
  • 28,000 TEU by 2027 requiring a depth of water of 59 feet (18 m).
  • 35,000 TEU by 2050 requiring a depth of water of 62.3 feet (19 m).
  • 50,000 TEU by 2070 requiring a depth of water of 80.7 feet (24.6m).....

"The first Notre Dame-Northwestern game, in 1889...."

"They had a different definition of "nobody was badly hurt" in the 19th century"

From the Twitter feed of American sports journo Matt Brown:

"The Early History of Regulatory Arbitrage" (How Put-Call Parity Helped Russell Sage Evade the Law And Become Rich)

Really rich.
Banker to the Vanderbilt's rich.
One of the richest Americans of all time rich.
Some day I'll get around to doing a post on Mr. Sage, he was an interesting person.
As was Olivia , Mrs. Sage, the distaff side of the family parity.

From the Oregon Law Review via the University of Pennsylvania Law School's Penn Law: Legal Scholarship Repository:

The Ancient Roots of Modern Financial Innovation: 
The Early History of RegulatoryArbitrage
Michael S. Knoll University of Pennsylvania Law School,

Recent years have seen an explosion in financial innovation.1The typical, contemporary American investor has access to financial services and instruments, such as exchange-traded stock funds (“ETFs”), Treasury inflation-protected securities (“TIPS”), and socially responsible index funds, that did not exist a generation ago.2 Less obvious, but of equal significance, are mortgage-backed securities and related developments that allow lenders to hedge their interest rate risk. These developments have made it possible for lenders to provide fixed-rate home mortgages at lower rates than otherwise possible during times of interest volatility.3 The impact of financial innovation has been even greater on Wall Street, which designs and sells innovative financial contracts and establishes the markets where these contracts trade, and Main Street, which has been an enthusiastic customer. Many large companies use credit derivatives, Eurobonds, interest-rate swaps, securitizations, and other recent financial innovations to reduce borrowing costs, hedge risk, increase earnings, reduce taxes, and speculate (sometimes with disastrous results) on price movements.4 The principle that underlies the rapid pace of financial innovation is that cash flows can be disaggregated and rebundled in almost unlimited combination.5 Not surprisingly, the rush of new financial products has created nightmares for regulators, who must fit new innovations into existing categories.6 The pressure is not incidental. The exploitation of regulatory inconsistencies is a major impetus for financial innovation.7Indeed, it might be the primary impetus.8 There is a strong incentive to innovate around prohibited or disadvantaged transactions. These innovations are commonly referred to as regulatory arbitrage.

Until recently, it was widely believed that most recent financial innovations were distinctly modern without direct antecedents.10 One reason for this view is that many financial innovations rely on option theory, which is of recent vintage11and mathematically sophisticated.12 In general, option theory is not accessible without training in advanced mathematics and many of its results are not readily intuitive. However, in a series of recent articles, leading finance experts have traced some recent innovationsmany of which are based on option theoryback to the innovations’ roots. This literature has succeeded in tracing some innovations back as far as four hundred years.13 This Article contributes to that literature by tracing the roots of one specific application of one well-known technique. The technique is put-call parity. The put-call parity theorem states that given any three of the four following financial instrumentsa zero-coupon bond, a share of stock, a call option (“call”) on the stock, and a put option (“put”) on the stockthe fourth instrument can be replicated.14 Thus, the theorem implies that any financial position that contains these assets can be constructed in at least two different ways. 

Professor Hans Stoll first described put-call parity in 1969. His article, “The Relation Between Put and Call Option Prices,”15 is deservedly a classic.16 It has produced an extensive academic literature and is the source of many important innovations.17 The application of put-call parity described in this Article is its use to avoid usury by synthesizing a loan. Although first described in the academic literature less than forty years ago, put-call parity is more intuitive than many ideas in option theory. Because it is so intuitive, the principle was being used before it was formally described:  
Put-call parity has been known for at least 100 years. Legend has it that the relationship was discovered by one Russell Sage, an extremely successful businessman in the 19th century. At one point, state usury laws prohibited him from making a high-interest-rate loan to a customer, so he bought stock in a publicly traded company from the customer at the market price. Simultaneously, he bought a put and wrote a call on the underlying stock at fictitious prices, where the customer took the opposite side of each transaction. This provided Mr. Sage with a guaranteed rate of return on his investment . . . . The customer, by always taking the opposite side, was effectively borrowing at this guaranteed rate. The prices of the options were set so that the rate of return to Mr. Sage was above what the usury laws allowed. Bank examiners did not prohibit this complex transaction, because they could not figure out that it was a loan in disguise.19
The thesis of this Article is that put-call parity has been used to engage in regulatory arbitrage for much longer than previously believed. This Article traces the use of put-call parity to evade usury restrictions back two thousand years.19 This Article also describes the important role put-call parity played in developing the modern mortgage. 

A. The Basic Instruments  
This Part describes the put-call parity theorem.20 The first step in illustrating the theorem is to describe the four financial instruments that are its components. These four instruments are a zero-coupon bond, a share of common stock (also called the underlying asset for a reason that will soon be apparent), a call on the stock, and a put on the stock. The call and the put both have exercise prices equal to the face value of the zero-coupon bond. The two options and the bond all mature on the same date. B. An Intuitive Proof of the Put-Call Parity Theorem21The put-call parity theorem states that the payoff from a portfolio consisting of one share of stock, and the right to sell that share (at date T for exercise price E), is equivalent to that from a portfolio consisting of a zero-coupon bond (that pays E at date T), and the right to buy one share of stock (at date T for exercise price E).22Using the convention that a subscript T indicates the payoff from holding an instrument at maturity and allowing S to denote the underlying stock, P a put on that stock and C a call, both with expiration date T and exercise price E, and E a zero-coupon bond that pays E at date T, then the put-call parity theorem....

See also at the SSRN: "Derivatives and Usury: The Role of Options in Transactions Used to Act in Fraud of the Law"
Date Written: May 17, 2015
The search for derivative contracts with complex features can also be explained as the market’s attempt to elude the restrictions imposed by the law on money loans. This is an undesirable effect of anti-usury rules. It can be added to the one mentioned by Montesquieu and Adam Smith, who pointed out that usury increases with the severity of the prohibition, since the lender indemnifies himself for the risk he runs of suffering the penalty.

In this paper we look at some of the ways in which derivative contracts can be used to circumvent anti-usury provisions and conceal money loans made at exorbitant rates.
After examining the simplest cases, we will consider more complex contracts, such as swaps with embedded options, which are often used in dealings between banks and municipalities. Our thesis is that, in all these cases, in order to detect usury, we have to calculate the contracts’ option-adjusted yields.
 SSRN download page

News You Can Use: "What you need to know when taking art onboard your yacht"

Don't take the good stuff.
From Spear's Magazine, Aug. 26:

There are manifold issues when it comes to floating assets, particularly art. Here is what you should consider when taking your art afloat, writes Rudy Capildeo
When travelling by yacht between ports, borders are often crossed with little or no fanfare and usually, the journey or tour is over a short period of time. Coupled with the varying diligence levels of customs controls in different jurisdictions, and you can begin to understand why collectors may not consider ensuring they have the relevant or necessary paperwork in relation to the art and collectibles on board the yacht. Particularly if the yacht intends to return to its original port at the end of the journey.

However, such a laissez-faire attitude is not wise. In the Mediterranean, for example, a yacht will generally travel between multiple EU countries and a collector may be fooled into thinking they can rely on the freedom of the movement of goods within the EU.

But that is only the case if the collectibles have firstly been imported into the EU with the correct paperwork and import VAT (and other duties if relevant) paid. If they do not qualify as ‘cultural property’, this falls outside the rules of freedom of movement and will need their own independent export licence from the relevant EU State.

An example of authorities being alive to yachts travelling with art and collectibles on board with no paperwork was played out a few years ago when a painting by Pablo Picasso worth over €25 million and considered a Spanish national treasure was seized from a British registered yacht moored off Corsica by French authorities. It was alleged by French customs that ‘Head of a Young Woman’, which was owned at the time by Spanish billionaire Jaime Botin, was being exported to Switzerland.
The seizure was the latest chapter in a longer running saga concerning Mr Botin’s wish to take the artwork to London having had a request in 2012 turned down by the Spanish Ministry of Culture. Mr Botin had argued that the artwork was not technically in Spain because it hung on his superyacht moored at the Valencia Royal Nautical Club under a British flag and the artwork was owned by a Panamanian company. These arguments were given short shrift by the Spanish court, citing the 1982 Montego Bay Convention stating that ‘the existence of a ship in a Spanish port except in the case of military vessels, is subject to Spanish law.’

Therefore, before the route is mapped and the yacht leaves port, crew and collectors should be alive to the objects on board the yacht, keep an inventory and make sure the necessary paperwork is in place to ensure the works are not seized by customs officials.

How to get insurance right
The obvious risk of keeping art on a yacht is that it may become affected by damp conditions. However, most superyachts have their temperature, humidity and light maintained by a full-time crew and the conditions can rival (and even surpass) some museums’ climate control facilities. The key considerations are therefore around appropriate insurance coverage. Often, separate policies will have to be taken out if the artworks exceed $50,000 in value....

A Pair Trade In The Style Of Davos: Short Ski Chalets/Long Superyachts
Will Your Panic Room Defend Against Both Poison Gas and Radiation?
"The Paranoid World of London's Super-rich: DNA-laced Security Mist and Superyacht Getaway Submarines"
"Today's superyacht owners are younger and more in tune with the climate change around us"
"Kidnapped by Pirates at Sea? Here's How Economics Can Save You"

"China’s Spies Are on the Offensive"

From The Atlantic:

China’s spies are waging an intensifying espionage offensive against the United States. Does America have what it takes to stop them?

In early 2017, Kevin Mallory was struggling financially. After years of drawing a government salary as a member of the military and as a CIA and Defense Intelligence Agency officer, he was behind on his mortgage and $230,000 in debt. Though he had, like many veteran intelligence officials, ventured into the private sector, where the pay can be considerably better, things still weren’t going well; his consulting business was floundering.
Then, prosecutors said, he received a message on LinkedIn, where he had more than 500 connections. It had come from a Chinese recruiter with whom Mallory had five mutual connections. The recruiter, according to the message, worked for a think tank in China, where Mallory, who spoke fluent Mandarin, had been based for part of his career. The think tank, the recruiter said, was interested in Mallory’s foreign-policy expertise. The LinkedIn message led to a phone call with a man who called himself Michael Yang. According to the FBI, the initial conversations that would lead Mallory down a path of betrayal were conducted in the bland language of professional courtesy. That February, according to a search warrant, Yang sent Mallory an email requesting “another short phone call with you to address several points.” Mallory replied, “So I can be prepared, will we be speaking via Skype or will you be calling my mobile device?”

Soon after, Mallory was on a plane to meet Yang in Shanghai. He would later tell the FBI he suspected that Yang was not a think-tank employee, but a Chinese intelligence officer, which apparently was okay by him. Mallory’s trip to China began an espionage relationship that saw him receive $25,000 over two months in exchange for handing over government secrets, the criminal complaint shows. The FBI eventually caught him with a digital memory card containing eight secret and top-secret documents that had details of a still-classified spying operation, according to NBC, which followed the case along with other major outlets. Mallory also had a special phone he’d received from Yang to send encrypted communications. Gone was the polite, careful language from their initial conversations. “Your object is to gain information,” Mallory told Yang in one of the texts on the device. “And my object is to be paid.” Mallory was charged under the Espionage Act with selling U.S. secrets to China and convicted by a jury last spring. Mallory’s attorneys alleged that he’d been trying to uncover Chinese spies, but a judge dismissed the idea that he was working as a double agent, a defense that other accused spies have tried to deploy. He was sentenced to 20 years in prison in May; his lawyers plan to appeal the conviction.

If Mallory’s story was unique, he’d just be a tragic example of a former intelligence officer gone astray. But in the past year, two other former U.S. intelligence officers pleaded guilty to espionage-related charges involving China. They are an alarming sign for the U.S. intelligence community, which sees China in the same tier as Russia as America’s top espionage threat.
Ron Hansen, 59, is a former DIA officer fluent in both Mandarin and Russian, who had already received thousands of dollars from Chinese intelligence agents over several years by the time the FBI caught him last year, court documents show. Hansen gave the Chinese sensitive intelligence information and, the FBI alleged in its criminal complaint, export-controlled encryption software. He told the FBI that in early 2015, Chinese intelligence officers offered him $300,000 a year “in exchange for providing ‘consulting services,’” according to the complaint. He was caught when he began asking a DIA case officer to pass him information. Among his requests were classified documents about national defense and “United States military readiness in a particular region,” according to the Justice Department.
The case of Jerry Chung Shing Lee, 54, a former CIA officer, is perhaps the most enigmatic. After leaving the CIA in 2007, Lee moved to Hong Kong and started a private business, but it never really took off, according to the indictment. In 2010, Chinese intelligence operatives approached him, offering money for information. According to the Justice Department, he conspired to pass his handlers sensitive intelligence, and had created a document including “certain locations to which the CIA would assign officers with certain identified experience, as well as the particular location and timeframe of a sensitive CIA operation.” Lee also possessed an address book that “contained handwritten notes … related to his work as a CIA case officer prior to 2004. These notes included … intelligence provided by CIA assets, true names of assets, operational meeting locations and phone numbers, and information about covert facilities.” The ramifications of Lee’s leaks are still unknown. While NBC reported last year that U.S. authorities suspect that the information Lee passed to his handlers helped lead to the death or imprisonment of some 20 U.S. agents, a subsequent Yahoo News report blamed the compromise on a massive communications breach initiated by Iran....
"How Does Industrial Espionage Affect Economic Growth?"
"How Silicon Valley Became a Den of Spies"
"Xi’s world order: July 2024"
Russia Warns China: Don't Count On Us For Soybeans 
I like the bit of propaganda in the headline, the "U.S. trade war" bit.
See, China was just innocently enforcing tariff and non - tariff barriers to foreign companies entering its home markets while happily pursuing predatory mercantilist policies abroad and not just stealing technology but actively using state espionage as just another tool of state economic policy.
And then out of the blue, Orange Man Bad started the war.
(if I may mix my color metaphors)*
"The CIA's communications suffered a catastrophic compromise. It started in Iran."
Sometimes I think the U.S. intelligence community isn't as good as they say they are.

I have this picture in my head of that Peter Strozk fellow in the Home for Retired Spooks with spy guys and gals from all around the world, Russians and Chinese and the Iranians and North Koreans and the British and the Germans and the Israelis and the Macedonians, all of 'em.

Now Strozk was a pretty big deal,  He was Chief of the Counterespionage Section of the FBI.
He was also the #2 of the entire FBI Counterintelligence Division.

And he left 50,000 text messages with his paramour, DOJ and FBI attorney Lisa Page, laying around.
50,000 mash notes to sweetie-pie.
Right there, in the phone, on a server, where any junior-grade investigator could find them.

And in my vision all the old spies spies and counter-spies are waiting for dinner and laughing at Strozk and reverting to childhood as the elderly are sometimes wont to do and chanting, almost in unision:
"Peter and Lisa sitting in a tree, T-E-X-T-I-N-G..."
So, although the story below is about the CIA, it was 'ol FBI Pete who I thought of when I saw the article....
And many more.

"The past stinks – a brief history of smells"

From Reaction Magazine:
A sunny afternoon in Paris. An intrepid TV presenter is making his way through the streets asking passersby to smell a bottle he has in his hand. When they smell it they react with disgust. One woman even spits on the floor as a marker of her distaste. What is in the bottle? It holds, we are told, the “pong de paris”, a composition designed to smell like an 18th-century Parisian street.
The interpretation of past scents that we are given on the television, perhaps influenced by Patrick Süskind’s pungent novel Perfume, is frequently dominated by offence.

It’s a view found not just on TV but in museums. In England, York’s Jorvik Viking Centre, Hampton Court Palace, and the Museum of Oxfordshire have all integrated smells into their exhibits.
The one smell that unites these attempts at re-odorising the past: toilets. Viking toilets, a Georgian water closet, and the highly urinous and faecal smell of a Victorian street, all included in the above examples, thread the needle of disgust from the medieval to the modern.

The consequence of such depictions is to portray the past as an odorous prelude, with foul-smelling trades and poor sanitation, to the clean and pleasant land of modernity.

Suggesting that people who are not “us” stink has a long history. It is applied to our forebears just as often as is to other countries, peoples, or cultures. It is not accident that, “Filthy Cities” – an English television program, highlighted the stink of 18th-century France – even in the 18th century the English had associated the French, their absolutist Catholic enemies, with the stink of garlic.
The toilet-training narrative is a simple and seductive story about “our” conquest of stench. But the “pong de paris” misses the point. Too busy turning the past into a circus of disgust for modern noses, it fails to ask how it smelt to those who lived there. New historical work reveals a more complex story about past scents.

A careful examination of the records of urban government, sanitation, and medicine reveal that 18th-century English city-dwellers were not particularly bothered by unsanitary scents. This was partly because people adapted to the smells around them quickly, to the extent that they failed to notice their presence....MUCH MORE
Previously on stinky, smelly awfulness:

Things I Did Not Know: Sebaceous Cyst Edition (or: how to write about really bad smells)

Now There's Vomitoxin In the Corn
Along with cadaverine and putrescine this is one of the most perfectly named of Mother Nature's offerings.
It does exactly what is said on the tin.
If you can get pigs to eat grain that has the chemical on it, well you can guess what happens.
"Too hot? In 1858 a heatwave turned London into a stinking sewer"

Long Hot Summers
Between 1500 and 1900 Paris went from 8th largest city in the world with a population of around 185,000 to 3rd largest in the world with a population of, depending on how far out from the city center you measured, 2.7 to 3.6 million.
Back in the day those big cities were aromatic, see the first link below, if interested.
"When Paris’s Streets Were Paved With Filth"
Faux Paris
"What Makes Paris Look Like Paris?"

"Inside the UK unicorn that's about to become the Intel of AI"

In November 2016 we headlined a post Artificial Intelligence: What Could Derail NVIDIA? A Lab in Shenzhen; A Basement in Moscow; An Office in Bristol (NVDA).

Graphcore was the "Office in Bristol".
A year later: "Sequoia Backs Graphcore as the Future of Artificial Intelligence Processors" (NVDA; INTC):
From Wired, August 27:

Bristol-based Graphcore's "intelligence processing unit" aims to do for AI what the graphics processing unit did for computing
In September 2015, hardware veterans Nigel Toon and Simon Knowles were doing the rounds of venture capital offices in Silicon Valley and London, touting their latest startup. The pair had a dazzling track record – among other achievements they’d sold their previous semiconductor company Icera to NVIDIA for $435 million (£346 million) four years earlier. And their vision for Graphcore – a new Bristol-based venture – was bold: they were building a new generation of microchips known as intelligence processing units (IPUs), designed for the rapidly approaching artificial intelligence age.
Yet early reactions to their pitch for series A financing were distinctly muted. “In many cases we were laughed out of court,” recalls Toon, Graphcore’s CEO. 

Typically, Toon says, they’d find a partner in a VC firm who was excited by what they were doing. “But then they’d go to their partner meeting, where the first question would be: ‘What’s AI?’ It’s stunning to think that was a conversation that was happening [as recently as] 2015.” From there, it was an uphill struggle. “Even if they got the fact that AI might be interesting, they’d then say: ‘Your business model is to build a chip for this AI thing? Well, nobody’s made money from chip investments in the last 10 years.’”

Toon, who is 55 and has the mellifluous voice of an old-school BBC continuity announcer, says that chip development, in the eyes of most investors at the time, was considered highly capital intensive, with returns failing to justify the upfront financing required. “It’s not more capital intensive than software,” says Knowles, Graphcore’s co-founder and CTO. “But software has this joyful property that you can try it out in small scale first, whereas with a chip you’re all in. If it doesn’t work, you’ve spent all your money.” 

That was 2015. Fast forward to today and, of course, AI hardware is a white-hot category for investors, with VC funding for US AI companies jumping by 72 per cent in 2018 to a record $9.3 billion (£7.4 billion), a fifth straight year of growth, according to a report by CB Insights and PwC.

What changed over those three years? Toon points to two things. First, in 2016 traditional chip giant Intel acquired an AI software and hardware startup called Nervana for $350 million (£280 million), raising eyebrows all over the Valley. Second, Google announced it was going to build its own chips – evidence, Toon says, that existing chips weren’t up to the task. 

Knowles describes the impact of Google’s decision as “seismic”. The fact that Google thought AI was going to be a sufficiently big deal to justify the pain and expense of building its own chip team helped make the Graphcore founders’ case for them. He and Toon had been arguing that it was worth digging deep financially to develop new processor hardware because existing graphics processing units (GPUs) – used, for example, in mobile phones, games consoles and personal computers – weren’t designed for AI workloads such as machine learning and deep learning. 

By then, their startup was already ahead of the pack in developing a new processor architecture. Soon top-tier investors – including Atomico, one of Europe’s best-known VCs – were beating a path to their door. Atomico, which went on to lead Graphcore’s $30 million (£24 million) Series B round in July 2017, was followed six months later by one of the Valley’s biggest guns, Sequoia Capital. At the time, Graphcore, having recently closed its Series B, didn’t need investment – but the west coast investor wasn't taking "No thanks" for an answer. “They came to see us here in Bristol and said, ‘No, you don’t understand, we want to invest in your business,’” laughs Toon. “So we work out terms and they invest $50m into the company. And that’s one of the very few investments they’ve made in the UK, because they’ve got so much opportunity on their doorstep.” 

Sequoia partner Matt Miller, who now sits on Graphcore’s board, admits he was somewhat bemused to find himself chasing down a company based in Bristol. “We knew there was an opportunity for a new architecture that would be designed from the ground up that could massively accelerate our entry into this AI age, and we were trying to landscape all of these companies in China, the US and Europe,” he says. “But our references were all pointing to this one company in Bristol, whom we hadn’t met yet.” 

A roar of laughter distorts the line from the Valley. “Lemme tell you, if you’d asked me a month prior if I’d ever [sit on] a board in Bristol I’d have said ‘No way!’ It’s not your typical destination on your tour of Europe. But to be honest, it’s been surprising for us in the Bay Area because the quality of talent in the UK, and particularly in Bristol in the semiconductor space, is very strong. The team they’ve been able to build there is on a par with the best in the world.”

Following a $200 million (£160 million) Series D round in December 2018, Graphcore was most recently valued at $1.7 billion (£1.36 billion), with investors, innovators and large corporates now seemingly convinced it will be the company to power the AI era in much the same way as Cambridge-born chip giant ARM dominated mobile devices, shipping over 130 billion chips and reaching 70 per cent of the global population. The opportunity at stake is nothing less than the future of AI, with applications ranging from medical advances to autonomous vehicles, space exploration and just about everything in between....MUCH MORE 
If interested, see also:
Aug 26 
June 13 
April 22
Dec. 26, 2018
Dec. 19 
May 2018 
And many more, use the 'Search blog box if interested

Friday, August 30, 2019

"U.S. appeals court revives aluminum antitrust cases vs Goldman, JPMorgan, Glencore" (GS; JPM; GLEN.L)

Return with us now to those halcyon days early in the currentt decade!*
From Reuters, Aug. 27:
A federal appeals court on Tuesday revived lawsuits by aluminum purchasers that accused Goldman Sachs, JPMorgan Chase, mining company Glencore and other companies of conspiring to drive up prices for the metal by reducing supply.

In a 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said a federal judge erred in dismissing antitrust claims by “direct” purchasers of aluminum such as Novelis, and by other purchasers including Eastman Kodak, Fujifilm and Reynolds Consumer Products.
Purchasers accused banks and commodity trading, mining and metals warehousing companies of conspiring to hoard aluminum inventory earlier this decade, after prices had declined because industrial activity fell during the global financial crisis.

The purchasers said the alleged conspiracy led to delays in processing orders and higher storage costs, ultimately inflating the cost to produce cabinets, flashlights, soft drink cans, strollers and other goods containing aluminum.

Lawyers for the defendants did not immediately respond to requests for comment.
Writing for the appeals court, Circuit Judge Pierre Leval said the purchasers could sue because they claimed to suffer harm in a market that the defendants allegedly restrained, the market to buy and sell primary aluminum.

He distinguished them from commercial end users and consumer end users, whose own antitrust claims were rejected by the appeals court in an August 2016 decision because their claimed injuries were too far removed from the alleged misconduct.

Leval faulted U.S. District Judge Katherine Forrest, who has since returned to private practice, for relying on that decision to conclude that any manipulation would have occurred in the warehousing market, not the primary aluminum market...MORE
*As noted in the outro from 2013's "UPDATED: "How Goldman Made $5 Billion By Manipulating Aluminum Inventories (and Copper is Up Next)"":
Reuters and especially the Financial Times' Alphaville blog have been on top of this almost from the time the big banks started buying the warehouse companies back in 2010. Here's some FTAV:
Is ‘cash for commodity’ the biggest trade in town?  
Just like a giant secured loan to commodity producers 
The UK is concerned about banks that warehouse commodities
Please wait 10 months for your aluminium. Thank you
LME warehouse recommends upping load-out rates
Welcome to ‘synthetic warehousing’ 
Let’s count the copper with dust on it
Goldman on metal pawning
An upcoming dehoarding effect in metals?
Deripaska on the collateralisation of aluminium
Collateral crunch, commodity financing edition

And many, many more.
We also have quite a few posts, here's the Google site search: warehouse
The first three of 251 hits:
Want to Get Copper Out of the Warehouse? Pay a Premium (there's $3.75 mil per day being made)
End Users Close to Telling LME, Warehouses: "Go To Hell"
Playing the LME Copper Warehousing Game: New Loadout Rules May Have Increased Financing Deals

And for one of the cases mentioned in the headline story: 
September 3, 2014
Bloomberg's Matt Levine Talks Goldman Sachs and Aluminum 
Dizzynomics alerted us to to the dismissal on Aug. 30. More interesting was her piece immediately preceding the aluminium  post on "Muscle Economics"
Here's more detail, from Bloomberg:
The Goldman Sachs Aluminum Conspiracy Lawsuit Is Over...

"How Amazon Is Coming For The $50T+ Commercial and Residential Real Estate Industries" (AMZN)

As the report highlights,  it's not just the 'smart' stuff.
From CB Insights, Aug. 29:
Amazon has its eyes on the residential and commercial real estate markets. We take a look at how the tech giant is expanding far beyond its e-commerce ambitions.
Amazon is moving well beyond e-commerce and broadening its smart home focus into the lucrative world of real estate.

While the tech giant has been instrumental in the growth of online retail, it’s now gaining traction in the property market. It shelled out $4B for its Seattle campus, including The Spheres, and after a highly publicized bid for the site of its second headquarters (known as HQ2), Amazon settled on Virginia. The company is set to invest $2.5B on the location and another $230M on a new Operations Center of Excellence in Nashville.

But beyond real estate ambitions to support its own growth, Amazon also seems to be looking to move into the broader industry as a whole.
While its primary focus has been on the smart home arena, Amazon is widening its reach to include other aspects of commercial and residential spaces. The company is creating smart buildings, serving as an intermediary between home buyers and sellers, and even making preliminary moves into home building.

In this brief, we examine Amazon’s moves within the residential and commercial real estate spaces to get a view into where the company might be headed.

Starting a smart revolution
Amazon is fueling a smart revolution — starting with our homes, offices, and buildings. Through its Alexa-powered devices, the e-commerce giant is making us even more connected.

Smart homes
Amazon is on a quest to dominate the smart home product market, which is expected to reach a value of $7T globally, according to CB Insights’ Industry Analyst Consensus. And it’s doing so with the help of Lennar, one of the largest home construction and real estate companies in the U.S.
New Lennar homes will have built-in smart home capabilities powered by Alexa, such as smart doorbells from startup Ring (which Amazon acquired for upwards of $1B), lights, locks, and thermostats. Integrating Alexa through these amenities could add value for Lennar home purchases.
Additionally, the companies have created “experience centers” — model homes outfitted with Alexa-activated technology that showcase a smart home experience. The partnership could benefit both organizations, with Lennar homeowners becoming more deeply embedded customers within the Amazon ecosystem, and Amazon customers buying Lennar homes featuring Amazon devices as a value-add amenity.

Smart offices & Buildings
Amazon is putting Alexa to work outside the home too, integrating its Echo devices and voice assistant technology into a commercial setting. In 2017, the company launched Alexa for Business, a platform which allows Alexa to be used as an intelligent assistant in the office.
Booking meeting rooms, managing work calendars, and answering common onboarding questions for new employees are just some of the tasks Alexa can do in the workplace. Organizations can choose among thousands of Alexa “skills” — voice commands developed for businesses — or build custom ones tailored to their needs. Employees can even use their personal Alexa devices at their office desks or at home to join meetings and access workplace resources.
Amazon itself has used Alexa, with 53% of its meetings kicking off with a voice command rather than a manual call-in. As a result, meetings have started in under nine seconds on average, according to data obtained by CNBC.

WeWork was one of the earliest adopters of Alexa for Business, making Alexa-enabled devices available in meeting rooms at its New York headquarters. Other companies have since followed suit, including Condé Nast and GE.

Moreover, Amazon is enabling more connected buildings through Amazon Web Services (AWS), its cloud computing platform. For instance, Cognizant’s Connected Places is an integrated solution hosted on AWS for managing geographically dispersed buildings, providing a real-time, unified view of facilities and services, including lighting, utilities and energy, smoke and fire alarms, building automation, and predictive maintenance.

But smart devices broadly come with a host of privacy issues. In a 2019 survey, 63% of respondents said they found connected devices “creepy” in how they collect data about people and their behaviors. More than half distrust their connected devices when it comes to protecting their privacy, and 75% feel concerned about other organizations using their data without their consent....

"Uber CEO says it 'sure looked like' Levandowski took Google's files" (UBER)

Keeping in mind Mr. Khosrowshahi had nothing to do with the former Waymo engineer, that was Kalanick's baby.*
From Bloomberg:
Uber Technologies Inc. CEO Dara Khosrowshahi said Thursday that "it sure looked like" former executive Anthony Levandowski took information on self-driving cars from his former employer, Google.

Prosecutors charged Levandowski this week with 33 counts of stealing trade secrets from Alphabet Inc.’s autonomous-vehicle unit Waymo. The charges revive a painful period for Uber when co-founder Travis Kalanick still ran the company. Levandowski was fired by Uber and Kalanick later resigned and was replaced by Khosrowshahi two years ago.

Uber ultimately settled a Waymo trade-secret lawsuit by paying about $245 million in equity. This year, when the San Francisco-based ride-hailing company filed to go public, Uber disclosed that it may have to pay about $127 million more to cover Levandowski’s obligations to the Alphabet unit.
"I wasn’t here when we brought Anthony on board but what I do know is that we went to incredible depths to make sure that any information that Anthony might have acquired from Google -- and it sure looked like he did -- didn’t make it over to our company," Khosrowshahi said in an interview Thursday with Bloomberg TV’s Emily Chang. "That was our responsibility and I think we were incredibly diligent in making sure that we were not guilty of anything that could be nefarious one way or another."

Now the U.S. Attorney’s office is re-opening that saga by bringing charges against Levandowski. Prospectors have said their investigation is ongoing. Levandowski pleaded not guilty and his lawyer said he didn’t steal anything.

Today, Kalanick, who personally recruited Levandowski to Uber, sits on the board.
"He’s on the board for now and he’s going to be on the board tomorrow," Khosrowshahi said. "Ultimately now we’re a public company and the shareholders are going to get to pick their own board and that governance process will take care of itself going forward." Khosrowshahi called Kalanick "bright" and the CEO said he consults with the co-founder from time to time....MORE
Levandowski Arrested, Charged With Selling Waymo Autonomous Vehicle Trade Secrets to Uber (GOOG; UBER)
Which includes a link to 2017's:
The Third Rate Bromance of Travis Kalanick and Anthony Levandowski (plus Elon Musk does a drive-by)
And a few dozen more, use the search blog box if interested, keyword: Levandowski.
(or go for the five years of UBERliciousnes)

Natural Gas: EIA Weekly Update

Natty has been ticking up for the last week and it appears the game is afoot.

The positioning of the commercials (vs the large speculative traders) is what caught our collective eye:
As noted in a late July post commercial users of natural gas are as long futures as wee've seen in years:
which led to this on Aug. 21:  Ya Know What Seems Cheap? Natural Gas Seems Cheap.

And now, from the U.S. Energy Information Administration:
for week ending August 28, 2019   |  Release date:  August 29, 2019  
In the News:
Corn crop maturity suggests late harvest and high heating fuel demand this winter
Indicators reported by the U.S. Department of Agriculture (USDA), the National Oceanic and Atmospheric Administration (NOAA), and other agencies suggest demand for heating fuels during the 2019 grain drying season may rise higher than the five-year average for the first time since 2013. Although crops are still about two months away from harvest, the combination of expected wet, late corn crops; relatively high grain prices; and relatively low propane prices suggest strong propane demand during this year’s grain drying season.
Corn crop maturity
Demand for heating fuel for drying corn grain in commercial dryers―instead of in the field―is affected by several factors:
  • Moisture content of harvested grain—corn kernels sold into the wholesale market must have a moisture content within allowable limits.
  • Harvest time—the later the harvest, the less likely producers are to leave the corn to dry in the field, and the possibility of frost and precipitation increases.
  • Producer economics—wholesale corn grain prices may or may not be high enough to allow producers to spend additional funds on commercial grain drying.
  • Cost of fuel—producers use either natural gas or propane in commercial dryers.
The USDA surveys producers to capture several corn maturity indicators, and they report these indicators weekly. After emergence, when seeds sprout, the USDA’s National Agricultural Statistics Service reports four stages of corn grain development:
  • Silking—about 9 to 10 weeks after emergence
  • Dough—about 3 weeks after the silking stage
  • Dent—about 1 week after the dough stage
  • Mature—about 3 to 5 weeks after the dent stage
The USDA reported that corn crops are reaching the dough stage one to two weeks later than the 5-year average in the seven Midwest (PADD 2) states with the highest grain drying fuel demand (Illinois, Indiana, Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin). However, this year’s crops appear to be catching up. Emergence occurred about five weeks behind the five-year average, and silking was only about three weeks behind the five-year average.
NOAA’s National Weather Service 30-day forecast suggests that in September―when corn crops should be reaching maturity―corn-growing states will experience weather that is both cooler and wetter than normal. This weather could slow the crop’s maturing process and increase the moisture that must be removed during the drying process.

The USDA projects 13.9 billion bushels of corn will be harvested in 2019—less than in the previous three years but slightly higher than the 13.8 billion bushels harvested in 2013. The relatively small corn crop, combined with lower corn inventories, has resulted in higher average futures prices for December corn delivery than at any time since 2013. Midwest propane prices, on the other hand, as reported at Conway, Kansas, are at multi-year lows, averaging less than 35 cents per gallon so far this August, less than one-half the price in August 2018 and less than one-third the price in August 2013.
(For the week ending Wednesday, August 28, 2019)
  • Natural gas spot prices fell at most locations this report week (Wednesday, August 21 to Wednesday, August 28). Henry Hub spot prices dropped slightly from $2.25 per million British thermal units (MMBtu) last Wednesday to $2.24/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the September 2019 contract expired yesterday at $2.251/MMBtu, up 8¢/MMBtu from last Wednesday. The October 2019 contract increased to $2.222/MMBtu, up 4¢/MMBtu from last Wednesday to yesterday. The price of the 12-month strip averaging October 2019 through September 2020 futures contracts climbed 3¢/MMBtu to $2.373/MMBtu.
  • Net injections to working gas totaled 60 billion cubic feet (Bcf) for the week ending August 23. Working natural gas stocks are 2,857 Bcf, which is 15% more than the year-ago level and 3% lower than the five-year (2014–18) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 27¢/MMBtu, averaging $4.37/MMBtu for the week ending August 28. The price of natural gasoline fell by 2%. The prices of ethane, butane, isobutane, and propane, rose by 16%, 13%, 10%, and 5%, respectively.
  • According to Baker Hughes, for the week ending Tuesday, August 20, the natural gas rig count decreased by 3 to 162. The number of oil-directed rigs fell by 16 to 754. The total rig count decreased by 19, and it now stands at 916.

Capital Markets: "US Dollar Finishing August on Firm Note as Euro nears Two-Year Lows"

From Marc to Market:
Overview: Global equities are advancing at least in part on ideas that trade tensions are easing. China announced it would not take immediate action on the five percentage point increase in levies that the US announced strictly in response to China's retaliatory tariffs. A lull between blows is not the same thing as de-escalation or truce. The next round of tariff increases is set for September 1. Nevertheless, equities are higher following the 1.25% rise in the S&P 500 yesterday. China and Indian markets were the notable laggards in the Asia Pacific. The Dow Jones Stoxx 600 is up about 0.7% and near its best levels since August 2. US shares are trading firmer and the S&P 500, which gapped higher yesterday is approaching the upper end of the month's range near 2950. Rising equities has removed a bid from bonds, and most yields are edging higher today. Italian bonds are a notable exception with new record lows as a crisis appears to have been avoided. The dollar is firm against the major currencies. Central and Eastern European currencies remain under pressures, but emerging currencies in Asia, led by the Korean won are firmer. South Korea reported a 2.6% jump in July (month-over-month) industrial output compared with expectations for a 0.5% increase. Oil is snapping a three-day advance and gold is soft for a third day. End of month activity ahead of a three-day weekend for the US and Canada is also a consideration today.

Asia Pacific
The yuan was stronger in the Asian session but has given back those gains in Europe. The PBOC again (eighth session) set the dollar's reference rate lower than the models the banks use suggested. We do not read much into China's restraint in not retaliating against the hike in previously announced tariffs. The US has now admitted that Chinese officials did not call Trump to restart talks that were already underway. That was simply used to support the markets comes as no surprise to many. New tariffs will go into effect on September 1. The real signal seems to be not a de-escalation in the tensions but that a trade agreement between the two is unlikely any time soon....MUCH MORE