Sunday, January 31, 2021

"Simultaneous harvest failures in key regions would bring global famine, says the Met Office"

A repost from 2018 brought to mind by the earlier story "Food export restrictions by a few countries could skyrocket global food crop prices". 

Monday, February 19, 2018

We're probably a couple years from this concern even becoming a possibility so there's no immediacy and additionally the choice of the U.S. and China as the location of the crop failures is a bit problematic, based as much on ease of modeling as on the probability of the scenario unfolding.
Agricultural catastrophe could just as easily strike via a combination of cool/damp in Ukraine and western Russia along with drought in India.

You'll hear more over the next few years but the point to be made right now is: We have just experienced 30-some years of near-perfect conditions for industrial scale agriculture and are at risk of complacently forgetting the lesson of Tennyson's "In Memorium".*

From The Guardian, July 15, 2017:

Simultaneous harvest failures in key regions would bring global famine, says the Met Office 

Maize, rice, wheat: alarm at rising climate risk to vital crops

Governments may be seriously underestimating the risks of crop disasters occurring in major farming regions around the world, a study by British researchers has found.

The newly published research, by Met Office scientists, used advanced climate modelling to show that extreme weather events could devastate food production if they occurred in several key areas at the same time. Such an outcome could trigger widespread famine.

The scientists, led by Chris Kent, of the Met Office, focused their initial efforts on how extreme weather would affect maize, one of the world’s most widely grown crops. Heat and drought were the prime risks, although flooding was also included in the analysis.

The group found there is a 6% chance every decade that a simultaneous failure in maize production could occur in China and the US – the world’s main growers – which would result in widespread misery, particularly in Africa and south Asia, where maize is consumed directly as food.

“The impact would be felt at a global scale,” Kent told the Observer. “This is the first time we have been able to quantify the risk. It hasn’t been observed in the last 30 years, but the indications are that it is possible in the current climate.”

An example of the kind of disaster that could occur is provided by the maize harvests that failed last year in Africa. Communities in Zambia, Congo, Zimbabwe, Mozambique and Madagascar were affected and six million people were left on the brink of starvation. A joint failure of China and America’s maize harvest would have a far greater impact.

Having studied the risks facing maize production, the group is now following up this work by studying climate impacts on the world’s other staple crops – in particular rice, wheat and soya beans – in order to assess how weather extremes could affect their production.

According to the UN Food and Agriculture Organisation, maize, rice and wheat together make up 51% of the world’s calorie intake. Billions of people rely on these crops for survival. Any disruption to their production would have calamitous consequences.

The trouble is that crop-growing methods and locations have changed considerably over time, as has the climate and the probability of extreme events, Kent told the Observer. “This means the number of relevant observations to the present-day growing of stable crops has been reduced, and that limits our ability to have useful estimates of the risks to the growing of these crops.”

To get round this problem, the team ran 1,400 climate model simulations on the Met Office’s new supercomputer to understand how climate might vary in the next few years and found that the probability of severe drought was higher than if estimated solely from past observations. The scientists concluded that current agricultural policies could considerably underestimate the true risk of climate-related shocks to maize growing and food supply.

The particular risk outlined by the study envisaged simultaneous catastrophic disruptions in China and the US. In 2014 total world production of maize was around 1 billion tonnes, with the US producing 360 million tonnes and China growing 215 million. If production in these two countries were hit by simultaneous extreme weather events, most likely droughts, more than 60% of global maize production would be hit....MORE
Here's the paper via the Institute of Physics:

Using climate model simulations to assess the current climate risk to maize production

*Fifty-sixth stanza of Tennyson's "In Memoriam":
Man her last work, who seem'd so fair,
Such splendid purpose in his eyes,
Who roll'd the psalm to wintry skies,
Who built him fanes of fruitless prayer,

Who trusted God was love indeed
And love Creation's final law -
Tho' nature, red in tooth and claw
With ravine, shriek'd against his creed -
Much of the world, including large populations in the developed world, are only a few weeks (paychecks) removed from that nature, red in tooth and claw.

Glad to see the "probably a couple years from this concern even becoming a possibility" turned out to be accurate but there are a few things starting to get one's attention.

Here's a little Easter egg for folks who have stuck with me this far: Hot, maybe very hot in Central and Eastern Europe for the summer of 2021.

See "Die Dürre in Mitteleuropa 1540" for a possible historical comparison.

S3 Partners' Ihor Dusaniwsky Says A Lot Of GameStop Shorts Were Covered Last Week

I was hoping the FT's Izabella Kaminska would have a comment or two on rehypothecation and how short interest can exceed float as she did with ETFs but it may be on to the next big thing* before she gets the chance.

From S3 Partners:

New S3 Partners Data Reveals $GME Short Bets Decline

The retail-hedge fund battle rages on. We’ll reveal more $GME insights tomorrow morning. Meanwhile, follow us on Twitter for updates.
By Ihor Dusaniwsky

Last week, the brick-and-mortar video game retailer GameStop hijacked the national conversation as a tidal wave of retail investors bandied together to buoy the company’s stock in a social-media-led move against short-sellers. The resulting dynamic also upended the share price of several other companies, led to a social-media revolt against the Robinhood trading app, united the unlikely political bedfellows Ted Cruz and Alexandria Ocasio-Cortez, and generally left investors scratching their heads about what was to come next.

S3 short insight data foresaw GameStop’s meteoric rise. Last Monday, in fact, company founder Robert Sloan presaged the stock movement on Bloomberg TV. Now, the firm’s singular analysis foreshadows where the stock is headed this week....


And here is Mr. D's personal Twitter feed

Stock index futures positive by a quarter-percent or so. Silver up 6.66%

*I'm reminded of the story last seen in the intro to "60 Elvis Impersonators Flee Fire Alarm":

Some years ago I was trying to track down something or other relating to Ted Binion's silver hoard and found myself standing on Fremont Street quoting Hunter S Thompson:
 "Still humping the American Dream, that vision of the Big Winner somehow emerging from the last minute pre—dawn chaos of a stale Vegas casino. Big strike in Silver City. Beat the dealer and go home rich. Why not? I stopped at the Money Wheel and dropped a dollar on Thomas Jefferson—a $2 bill, the straight Freak ticket, thinking as always that some idle instinct bet might carry the whole thing off. But no. Just another two bucks down the tube. You bastards! No. Calm down. Learn to enjoy losing....
when the longest limousine in a city of long limos pulls up and all these Elvis impersonators start piling out.

It was hilarious and I lost it and couldn't stop laughing at the sight of maybe two dozen Elvii, young Elvis, older Elvis, fat Elvis, leather pants Elvis etc.
About half of them went with the Jumpsuit Elvis look. Sooo...

"Food export restrictions by a few countries could skyrocket global food crop prices"

 From the American Association for the Advancement of Science' EurekAlert, January 28:

Global shocks such as COVID-19 call for improved political decisions and accountability to secure food for everyone

Recent events such as the Covid-19 pandemic, locust infestations, drought and labour shortages have disrupted food supply chains, endangering food security in the process. A recent study published in Nature Food shows that trade restrictions and stockpiling of supplies by a few key countries could create global food price spikes and severe local food shortages during times of threat.

'We quantified the potential effects of these co-occurring global and local shocks globally with their impacts on food security,' explains Aalto University Associate Professor Matti Kummu. The results of this research have critical implications on how we should prepare for future events like Covid-19, he says.

The researchers modelled future scenarios to investigate the impact of export restrictions and local production shocks of rice, wheat, and maize would have on their supply and price. These three crops form the backbone of global trade in staple crops and are essential for food security across the globe.

The results show that restriction by only three key exporters of each crop would increase the price of wheat by 70%, while maize and rice would rise by 40% and 60%. When combining this with potential local shocks that occurred last year, the prices would nearly double....MUCH MORE

And via Aalto University: Read the paper published in Nature Food.

Completely unrelated to Matti, Aalto, or any of the above: 

The Culture That Is Finland

"Defiant Redditors buy Times Square billboard as GameStop stock saga rages"

 For some reason Senator Elizabeth Warren seems to be siding with the hedge funds rather than these folks:*

Digital billboard maker Matei Psatta paid for the supportive billboard to be shown for one hour on Friday.

From the New York Post:

Defiant amateur investors on Reddit say they are not backing down on their investments in GameStop — and even took out billboards in Times Square and across the country urging the faithful to continue holding the line.

“$GME GO BRRR,” blared a digital ad on the corner of 54th and Broadway in Manhattan. The ad ran for an hour on Friday and was a creation of digital billboard maker Matei Psatta.

The line refers to a popular internet meme that uses “Brrr” to signify the sound a money-printing machine makes. GME is the stock’s ticker symbol on the NY Stock Exchange.

Investors on Reddit have driven the price of GameStop — a dusty mall electronics retailer worth only $2.57 a share at one point last year — to astronomical highs in just days. From a value of just under $40 a share on Jan. 14, the stock skyrocketed to $483 a share. Though price swings have been extremely volatile, the stock has spent much of the last five days comfortably above $300....MORE

*Everybody knows hedge funders can't meme. 

Plus, I though we saw some prints above $500.

A *Short* Story: That Time A Stock Corner Caused The Rest of The Market To Collapse


"He who sells what isn't his'n, Must buy it back or go to prison."
-Daniel Drew
Wall Street speculator*

Before we get to the Northern Pacific corner of aught-one here's a note on the Volkswagen corner of 2008 with the hedgies behaving in a fashion remarkably similar to last week's wailing and crying: 

So how many hedgies did Porsche really kill?

It was a classic corner. My first thought was Northern Pacific 1901 where the stock went from under $100 to $1000 during the squeeze. Although the VW squeeze was only half the magnitude it had the same effect, the speculators sell everything else as they desperately try to locate stock to cover. First up, the headline story from FT Alphaville:
Difficult to say, of course, but we’d be sellers of the €30bn figure being banded about by newspapers as they struggle to explain how speculators borrowed shares in Volkswagen, not knowing they belonged to Porsche, sold them, and then seemingly had to buy them back (from Porsche) at five times the price, before giving them to Porsche. (We won’t address the pref side of the trade!)>>>MORE

Next, some truly pathetic whining from the hedge funds via the Telegraph:

How Porsche took the wind out of the hedge funds' sails

And from Global Financial Data the action that led to the Panic of 1901:

Complete Histories – Northern Pacific – The Most Famous Stock Corner in History 

The Northern Pacific Railway was a transcontinental railroad that operated across the northern tier of the western United States from Minnesota to the Pacific Coast. The goal was to connect the Great Lakes with the Puget Sound. Along with the Southern Pacific and the Union Pacific (originally the Central Pacific, but renamed during the Civil War), it was to be the northernmost of three transcontinental railroads. The Northern Pacific Railway was approved by Congress in 1864 and given nearly 40 million acres (160,000 km2) of land grants, which it used to raise money in Europe for construction. Construction began in 1870 and the main line opened all the way from the Great Lakes to the Pacific when former president Ulysses S. Grant drove in the final “golden spike” in western Montana on Sept. 8, 1883. The railroad had about 6800 miles of track. The cost of building the Northern Pacific was much greater than Jay Cooke and other investors anticipated, pushing the Northern Pacific into bankruptcy in 1873 during the Panic of 1873, which the railroad succeeded in escaping through austerity measures, though the company had to reorganize in 1879. The company fell into bankruptcy again during the Panic of 1893 because the Northern Pacific had incurred huge costs, but was earning insufficient revenues to cover its costs. The railroad reorganized in 1896.

One of the primary problems was that the railroad lacked a direct link to Chicago, the economic center of the midwest. Not only did Villard, of the Northern Pacific, lack a direct link to Chicago, but James J. Hill, who controlled the Great Northern, and Edward Harriman, who controlled the Union Pacific, also needed a direct link to Chicago. One railroad that did offer a direct link was the Chicago, Burlington and Quincy. Charles Perkins demanded $200 per share for his railroad, and although Harriman balked at the price, Hill was willing to pay it. The Chicago, Burlington and Quincy Railway was purchased with 48.5% going to both the Great Northern and the Northern Pacific. Not content with this, Harriman decided to buy out the Northern Pacific. Harriman initiated a raid on Northern Pacific stock and was able to obtain all but 40,000 shares, a portion of which were owned by J.P. Morgan. The problem was that many traders had gone short Northern Pacific stock because the raid had made the shares overvalued, and as Daniel Drew once put it: “He who sells what isn’t his’n, must buy it back or go to prison.” Harriman had essentially, though unintentionally cornered Northern Pacific stock and there were almost no shares left to buy back to cover the shorts. The stock price then exploded. The stock had been at 95 in April 1901, and hit $150 on May 6, 1901. The highest recorded price on the New York Stock Exchange was $1000. The shorts faced economic ruin, and neither Villard nor Harriman could “win” this raid, so the two decided to call a truce....


Although they mention the $1000 print there were off-exchange trades rumored as high as $2000 after desperate shorts sold everything else they owned to buy-back a few shares.

And it was that selling that caused the panic. U.S. Steel dropped almost in half 46 to 24, the Atchison, Topeka & Santa Fe, another railroad from 76 to 43 and on and on. The Milwaukee Road has some of the history online (from George Kennan's 1922 biography of Harriman) and the New York Times of that day was much more detail oriented and much less opinionated in the news section of the paper. I'll see what is in the link-vault and on the interweb as we await the open of the futures.

ZeroHedge has been pounding the table on silver for the last couple days and I almost wrote that Wednesday's little story of the Hunt Brothers versus the silver shorts was not intended to be a roadmap but, whatevs.

which also links to a snappy little paper hosted on Wharton's servers: "Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners"

Lizards The Size Of Dogs Are Spreading From Florida To Louisiana, Texas

Just wait 'til 2020 turns '21 and starts drinking they said but did I listen? Noooo. 
Elon Musk is getting ready to escape to Mars and I haven't even bought my ticket yet.

From Lafayette, Louisiana's KLFY ch.10:

National Geographic: Dog-size lizards spreading into Texas and Louisiana from Florida

The Argentine black-and-white tegu, a large lizard that can grow up to four feet in length, has already proliferated widely throughout South Florida. But it’s not stopping there. These invaders have started popping up throughout the southeastern United States, posing a potential threat to native species and farmers.

And during the past few months, the reptiles have been spotted in four counties in South Carolina, where biologists suspect they may be reproducing as well....MORE

Already getting a bit of the 'ol David Bowie, Future Legend vibe about the new year:

And in the death
As the last few corpses lay rotting on the slimy thoroughfare
The shutters lifted an inch in temperance building, high on Poacher's Hill
And red mutant eyes gazed down on Hunger City
No more big wheels

Fleas the size of rats sucked on rats the size of cats
And ten thousand peoploids split into small tribes
Coveting the highest of the sterile skyscrapers
Like packs of dogs assaulting the glass fronts of Love-Me Avenue
Ripping and rewrapping mink and shiny silver fox, now legwarmers
Family badge of sapphire and cracked emerald
Any day now, the year of the Diamond Dogs

"This ain't rock and roll! This is genocide!"

As they pulled you out of the oxygen tent
You asked for the latest party

Genius Lyrics

Chinese Scholars Believe China’s Digital Currency a Return to Planned Economy

Ya think?

This is stuff that Stalin and Mao couldn't have imagined in their wildest totalitarian fantasies. Control baby!

From Radio Free Asia, Mandarin service, August 17, 2020:

China’s state-owned banks such as the Agricultural Bank of China and China Construction Bank are testing the operation of digital currencies. Scholars believe that the Chinese model of the digital currency actually enables the central government to exert full control over personal wealth, which means returning to the era of a planned economy.

Si Ling, a financial scholar from Shandong University told Radio Free Asia (RFA), “The purpose of China’s vigorous promotion of digital currency is to manage its fiscal revenue in a more organized manner. With the deterioration of Sino-US relations and China’s foreign trade situation, the government will focus on fiscal revenue. In the past, many people used cash transactions to evade tax collection.”

Si believes that, if the Chinese government fully implements digital currency, “transactions will be completely under government supervision, which is conducive to the growth of government revenue. If digital currency is implemented, it may be a public-private partnership in the 21st century. In other words, private wealth can become public owned overnight, if the government chooses to do so.”

Dong Yongqi, a businessman from Shanxi province, told RFA that once the Chinese people start to use digital currency, their personal interests and their privacy will be infringed upon. “For the common people, it will do more harm than good. Most people read the propaganda and don’t understand the invasion of personal privacy that occurs with digital currency. The digital currency is the preparation for returning to the planned economy.”

Dong discussed the fundamental difference between China’s digital currency and that of Western democracies. “The digital currency of a free country by nature uses the blockchain technology and is decentralized, but our country’s digital currency has been centralized. The central bank is in charge.”

Chinese economist Hu Xingdou told RFA that China’s so-called digital currency is not a digital currency in the real sense: “It should be called electronic currency. It is very different from digital currency in terms of privacy and traceability. In other words, digital currency protects personal privacy. Other people, even the government, control no information.”

Caijinglengyan, an overseas social media account, commented that China’s digital currency is to prepare for the planned economy! Its characteristic is the control over currency use and material distribution. One can consider digital currency such as food stamps, meat coupons, travel passes, transportation documents, and permits for big-ticket purchases in the digital age.

 RFA is part of the U.S. propaganda effort to break through the Great Firewall of China.

It is probably a good thing but doesn't seem nearly as effective as the Chinese propaganda efforts.

In "Leaderboard: "China is global leader in imprisoned journalists for a second consecutive year, watchdog group finds"" I swerved dramatically off the headline topic to look at the Chinese efforts to curry favor with U.S. media (and Eric Swalwell).

"Children Are A Luxury Item"

From Upfina, January 21:

In the K-shaped recovery, the lower income class has far underperformed the middle and upper class. In the past expansion, much was made about the growing gap between the rich and the poor. Therefore, you might think recessions like this are normal. However, that’s an incorrect assumption. We also don’t think this type of recession is the future template for recessions. It will only be repeated if there is another pandemic.

The chart below shows how hard it has been for the working class. As you can see, 15% of renters say their household is not caught up on last month’s rent. Furthermore, 26% of households with children aren’t caught up on rent. We recently read something very profound for long term demographics. They said children are a luxury item. Obviously, we aren’t trying to equate kids with a fancy car.

The point here is having kids is getting very expensive. 100 years ago, having kids helped the family on the farm. Now kids need to be babysat which is expensive. Furthermore, young adults are moving out later. No longer do parents need to take care of their kids from birth to 18. Now they need to take care of them until their lower 20s.

The two biggest expenses with having kids are education and healthcare. Kids are all going to pre-k and kindergarten and most young adults are trying to go to college. Healthcare is very expensive. COVID-19 made it even harder for lower income people with kids. Having kids is becoming something only upper middle class and rich people can afford to do....


"Ye olde Substack: publishing’s hot new business model has 17th-century origins"

 "Launching a newsletter today is like launching 
a blog 20 years ago, or a podcast five years ago"

From The Economist's 1843 vertical, January 28:

The gossip sheets of yesteryear have been reborn as email newsletters

As Twitter and Facebook become more acrimonious and less trusted, an older means to get information has made a comeback: the email newsletter. Chances are that newsletters make up a larger part of your media diet than they did a couple of years ago. You may even be paying for some of them.

In recent months several journalists have left jobs at established publications to earn a living by asking their most loyal readers to subscribe to a personal email newsletter instead. Entrepreneurs, cookery writers and academics have also embraced this model. Who needs a publisher if you can sell your writing straight to your readers?

Most of these people are established experts in a particular field. They have chosen to bypass the involvement of advertisers and algorithms in favour of the pleasingly straightforward approach of delivering their thoughts directly to the inboxes of paying subscribers. Writers with large online followings can earn a respectable income even if only a small fraction of their fans sign up (typically for $5 a month, or $50 a year).

Substack, the newsletter-publishing platform that has championed this new model, takes 10% of the proceeds in return for handling distribution and billing. Launching a Substack newsletter today is like launching a blog 20 years ago, or a podcast five years ago, with one important difference: people are actually getting paid.

There are some enviable success stories. Heather Cox Richardson, a history professor at Boston College, is thought to make more than $1m a year from her politics newsletter, “Letters from an American”. The New York Times recently described her as “by accident the most successful independent journalist in America”. Substack paid Matthew Yglesias, co-founder of Vox, an American news website, an advance of $250,000 when he left his job to concentrate on his newsletter, “Slow Boring”. Other journalists who’ve gone solo include Andrew Sullivan, Glenn Greenwald and Haley Nahman. In January Twitter bought Revue, a Dutch startup and rival to Substack. Your inbox could soon be stuffed with new newsletters.

Subscription newsletters may be all the rage today, but the idea of readers paying writers directly for information has deep roots. The ancestors of today’s inbox epistles were the handwritten “letters of news” that circulated in England in the 17th century.

These early newsletters were typically compiled by political informants in London and sent to recipients in the countryside who wanted to keep abreast of gossip from the city. Information was picked up in St Paul’s cathedral, at the Royal Exchange, from Thames boatmen (the equivalent of modern taxi drivers), in taverns and from friends in high places.

Initially such information was sent as a favour by those in the city to distant friends or patrons. Then John Pory and Edmund Rossingham, two enterprising news writers, began sending weekly newsletters to paying customers in the 1620s, at a cost of £20 a year. This was an impressive sum at the time (equivalent to about $7,000 today). With a dozen or so subscribers, they and other newsletter writers could make a good living....



"Announcing the next Substack Fellowship for Independent Writers"
"The Substackerati"

Saturday, January 30, 2021

"The Roubini Cascade: Are we heading for a Greater Depression?"

Thomas Homer-Dixon is one of the big shots of the thinking-about-going-to-hell-in-a-handbasket biz.

Michael Lawrence is one of the post-doc researchers at the Institute.

From British Columbia's Cascade Institute, Royal Roads University December 4, 2020:

The Roubini Cascade Are we heading for a Greater Depression?

Michael Lawrence and Thomas Homer-Dixon

Background:Temporary crisis or sustained economic collapse? Even before the COVID-19 pandemic struck, the world had sunk into deep economic uncertainty. Just as the various shocks of the 1970s and 1980s upended post-war Keynesian economics and propelled the flip to monetarism,1 so too did the 2007-2009 financial crisis shake the foundations of monetarism. The consequent “Great Recession” provided few hints as to what macroeconomic paradigm would follow, but it did reveal the economic conditions with which a new framework must now contend: low economic demand; high economic inequality; high savings and low investment by the wealthy; and interest rates stuck near zero, thus enfeebling the chief lever of monetary policy (The Economist 2020a). “A profound shift is now taking place in economics,” The Economist (2020b) recently proclaimed, “of the sort that only happens once in a generation.” 

The coronavirus has worsened this uncertainty, while compelling leaders around the world to implement radically unconventional economic policies. Governments have borrowed and printed vast amounts of money to fund the massive fiscal stimulus at the core of their pandemic response. Canada, for example, is running a budgetary deficit of CAD$328.5 billion in the 2020-21 fiscal year—high above the CAD$36.5 billion deficit of 2019—including an estimated CAD$225.9 billion spent in response to COVID-19. Equal to 15 percent of Canada’s gross domestic product (GDP), this figure represents the largest budgetary deficit (relative to GDP) incurred since reporting began in 1966 (PBO 2020). The International Monetary Fund (IMF 2020) estimates that global government debt will reach an unprecedented level equal to almost 100 percent of global GDP in 2020, up from 83 percent the year before. 

But with both interest rates and inflation near zero, fiscal deficits that would previously have seemed catastrophic now appear to be sustainable, necessary, and even desirable. Whether they acknowledge it or not, governments are implementing core precepts of Modern Monetary Theory (see Box 1), which just years ago was derided as “radical” and “fringe” for its suggestion that governments can and should spend much more than they do, despite the resulting deficits (Pittis 2020a). 

In the midst of an economic paradigm shift, and as governments gamble that unprecedented spending will see us through the pandemic without producing even greater economic catastrophe, renowned economist Nouriel Roubini has made a distressing prediction. Roubini first gained notoriety in 2006 when he proposed—to the bewilderment of many of his peers—that the US housing market was about to collapse (Levitz 2020). He was right, and a global financial crisis soon followed. Now, Roubini forecasts that the global economy will fall into a “Greater Depression”—a period even worse than the Great Depression of the 1930s—within the next decade. Whereas optimists project a V-shaped recovery from the coronavirus slump, and an emerging, more cautious consensus foresees a U-shaped recovery, Roubini predicts that, in the coming years, the graph of economic growth will take on an L-shape as the global economy makes a short-lived rally and falls into depression.

Roubini’s analysis deserves special attention, because he is a uniquely systemic thinker. Whereas other economic commentators focus narrowly on macro-economic factors (interest rates, unemployment, deficits, exchange rates, and the like), Roubini additionally considers factors such as geopolitical tensions, technological advances, political attitudes, demographic change, and environmental crises—as well as the interactions between these factors. Roubini also highlights causation across multiple scales of analysis, from the micro-scale of household finances upwards to industry trends, public policy, international relations, and ultimately the changing nature of globalization itself.  

But tracing the relationships among such a range of factors is a daunting task. In this Brief, we therefore develop a systems map of Roubini’s argument that will allow us to better assess the risks of a Greater Depression and to identify some of the feedbacks that might drive the global economy into this crisis. Follow-up Briefs will further evaluate Roubini’s causal claims, show how they differ from the analyses of other prominent economists, and test their sensitivity to shifts in key underlying factors and trends. 

Box 1: What is Modern Monetary Theory? 

Modern Monetary Theory (MMT) offers one explanation of how money actually works and the consequent implications for government spending. The theory applies exclusively to monetary sovereign countries—those countries in whichthe government is the monopoly issuer of a fiat currency, such as the United States, Canada, Japan, the United Kingdom, and Australia. The currency of these countries is not tied to any other currency or commodity (such as gold); when these governments take on debt, they do so in their own currency. That currency has value because the issuing government decrees that it has value (by “fiat”), and because people act accordingly, as if it has value. These conditions grant monetary sovereign governments significant control over their money supply and the value of their currency.  

At the crux of MMT is the difference between users of money (such as individuals and businesses) and issuers of money (monetary sovereign governments). Users of money must either earn money or borrow money before they can spend it, and spending too much can readily cripple them with debt. Users of money must therefore balance their budgets just like households do. Monetary sovereign governments need not. As the issuers of currency, they simply order money into existence by either printing currency (cash and bonds) or by increasing the numbers in banks’ digital accounts. These governments do not rely exclusively upon tax revenues or borrowing in order to spend. Taxation functions largely to create demand for the government’s currency so that people have an incentive to carry out the work that the government wants done—by building infrastructure and providing public services, for example. People need currency to pay their taxes, and the government issues such currency in ways that achieve its goals.

Many implications of MMT defy common sense, but only because that “common sense” assumes that governments must budget like a household does. Monetary sovereign countries, for example, cannot go broke; they cannot run out of money because they can always issue more. The question “how will the government pay for it?” is irrelevant. Unlike households, governments do not need to come up with the money (through taxation and borrowing) before they spend it; they can simply issue the currency they spend. The balance of the government budget—whether in the form of deficit or surplus—is not the measure of economic health and stability, and repeated calls for fiscal belt-tightening are misguided impediments to better economic policy.

MMT, however, does not promise a free lunch. Governments cannot spend indefinitely without running into big problems. But the limit to government spending is not the size of its budgetary deficit, as many believe; rather the limits are the “real resources” of the economy and inflation. Real resources define an economy’s productive capacity, and include its technology, the quantity and quality of its labor, capital, natural resources, and so on. Inflation decreases purchasing power of the currency, thus limiting what governments can achieve by issuing that currency. MMT proposes that governments should produce money at a rate that stimulates the full use of the country’s productive capacity, but it warns that exceeding that level triggers harmful inflation.

The feasibility and desirability of government spending is instead a matter of what that spending achieves—the extent to which it creates full employment, equitably distributes wealth, and triggers inflation, for example. Historically, deficits have been too small. Limited government spending leaves unused capacity (conventionally understood using such concepts as the “natural” rate of unemployment) and thereby misses opportunities to improve the economy and peoples’ well-being. 

MMT comes up regularly in Roubini’s webcasts. He refers to the deficit spending that MMT advocates as “helicopter drops of money,” a term coined by Milton Friedman to castigate such proposals. Roubini argues that “quantitative easing” (QE)—one of the major policy responses to the Great Recession and a term used frequently today—is essentially the same thing as MMT. Both involve “monetized budget deficits,” wherein central banks finance government budget deficits by buying government bonds—basically by printing money that is channeled into the economy through public spending, transfers, tax breaks, and/or secondary bond markets. By financing the deficit through monetary policy rather than bonds issued in private markets, the government avoids raising the interest rate. The only significant difference between QE and MMT is that—rhetorically, at least—the deficits of the former are temporary while the deficits of the latter are more permanent. Presently, MMT is the de facto (though not official) policy of advanced economies in their response to the economic fallout of the coronavirus pandemic (see Roubini’s 6 October 2020 webcast, 1h 1m).

The economic harms of COVID-19 will be much worse for poorer countries, in part because they do not have monetary sovereignty. Their debts are denominated in foreign currencies. The recommendations of MMT are thus unavailable to poorer governments, which also lack the fiscal space to mount the economic stimulus at the core of rich countries’ response to the pandemic. So, these countries may face a “lost generation” due to low growth and rising poverty. International inequality (economic divergence between rich and poor countries) will almost certainly increase as a result.

This summary is based primarily on: Kelton 2020.

Analysis: Roubini’s argument

Roubini argues that ten trends—what he refers to as the ten “deadly Ds”—that emerged after the global financial crisis of 2007-9 are now pushing the world towards a Greater Depression, sometime in the next decade.3 “These 10 risks,” he contends, “now threaten to fuel a perfect storm that sweeps the entire global economy into a decade of despair” (Roubini 2020a). The deadly Ds would trigger this depression even in the absence of the COVID-19 pandemic, but the pandemic has intensified the underlying problems and accelerated the crisis. And while Roubini argues that all ten trends are advancing today, not all are necessary for the global economy to fall into a Greater Depression. In this sense, a global depression is over-determined.....

....MUCH MORE (24 page PDF) 

See also the map of relationships:

"India proposes law to ban cryptocurrencies, create official digital currency"

From Reuters via The Hindu, January 30:

The Centre plans to introduce a law to ban private cryptocurrencies such as bitcoin and put in place a framework for an official digital currency to be issued by the central bank, according to a legislative agenda listed by the government.

The law will "create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India [RBI]," said the agenda, published on the Lower House website on January 29.

The legislation, listed for debate in the current parliamentary session, seeks "to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses," the agenda said.

In mid-2019, a government panel recommended banning all private cryptocurrencies, with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies....


Is 'facilitative framework' a felicitous phrasing? 

Inquiring minds and all that.

Friday, January 29, 2021

Beating the Shorts the Old School Way: Bring In Jesse Livermore

 A repost from 2017 with a replacement for the previously rotted link to GFD.

Investing History: "The Piggly Crisis" Or: Bring In Jesse Livermore and the Pigs Get Slaughtered
"Bulls make money, bears make money, pigs get slaughtered"
-old Wall Street saying adopted by Jim Cramer
From Global Financial Data:
The next time you go to the grocery store, pull out a shopping basket and walk down the aisles, you should think about the fact that the modern grocery store is a result of the innovations of one man: Clarence Saunders

Saunders’ Self-Shopping Innovation
Until the 1920s, customers did not pick up their own groceries. Instead, they went to clerks who stood behind a counter and put together their purchases for them. Think of the way an old country store was set up. 

Saunders was obsessed with the idea of efficiency, and thought that customers wasted a lot of time waiting on clerks. Saunders wanted to free customers from the tyranny of clerks by letting them do their own shopping. Saunders also developed a just-in-time delivery system to get food to his Piggly Wiggly stores. This system later inspired Toyota to apply the same concept to automobiles which helped Toyota to control costs and conquer the globe. 

Saunders opened up his first Piggly Wiggly store on September 6, 1916 at 79 Jefferson Ave. in downtown Memphis, Tennessee. Each store had a turnstile at the entrance. Every item in the store had a price on it, another innovation, and Saunders provided shopping baskets so customers could take their items to a check-out stand in front. Saunders patented the idea of self-service stores in 1917.  
Saunders incorporated the Piggly Wiggly Stores Corp. in 1918. The stores were an immediate success. By 1922, there were over 1,200 Piggly Wiggly Stores of which about 650 were owned by Saunders, and by 1932, there were 2,660 Piggly Wiggly stores with sales of $180 million.
Unfortunately, in 1923, Saunders had lost control over his Piggly Wiggly stores. 

Saunders vs. the Shorts
Clarence Saunders also became part of the last stock corner on the New York Stock Exchange in 1923. The corner became so prominent, that the whole affair became known as the Piggly Crisis. Clarence Saunders was generous, determined, stubborn, and well-known in Memphis. Saunders became known as the home boy who faced off the financiers of Wall Street who were using a bear raid to try and profit from a decline in Piggly Wiggly stock. 

The goal of shorting a stock is to borrow shares from someone who owns them and sell them. When the stock declines in price, the shorts buy the shares back at a lower price, make a profit, and then return the stock to the person they borrowed it from. In a bear raid, several shorts make a concerted effort to drive the price of a stock down so they can profit from the decline. 

The bulls, on the other hand, can try and beat the shorts by forcing the price of the stock up, squeezing the shorts and forcing them to sell at a loss. If the bulls can buy up the existing float, the stock is cornered. The shorts have no choice but to buy the stock from the bulls at whatever price they demand. Of course, creating a corner is risky for the bulls as well because it takes a lot of resources to buy up the float in the stock. Once the corner is completed and the shorts have covered their positions at the inflated price, little demand is left for the stock. The price of the stock can collapse, leaving the bulls with a burdensome load of debt. The whole process can end up bankrupting both the shorts and the bulls. 

Piggly Wiggly shares started trading over-the-counter in July 1920 and listed on the New York Stock Exchange (NYSE) in June 1922. In November, 1922, several of the independently-owned Piggly Wiggly stores in New York, New Jersey and Connecticut failed and went into receivership. Although Saunders’ corporation operated independently of these stores and was profitable, some Wall Street operators saw this as a reason to begin a bear raid on Piggly Wiggly stock. 

The bear raiders began selling PIggly Wiggly short and spread rumors that the company was in poor shape. Saunders took this challenge personally. He had created Piggly Wiggly stores, created the concept of self-shopping, was spreading his stores across the country, and some bears were trying to create profits by spreading lies about his stores. Saunders decided to “beat the Wall Street professionals at their own game.” 

Saunders not only used his own money to battle the shorts, but he borrowed ten million dollars from a group of bankers in Memphis, Nashville, New Orleans, Chattanooga and St. Louis to buy up the existing float. In the Wall Street of the 1920s, bear raids came and went. Companies didn’t go bankrupt because of bear raids, and if the fundamentals of the company were sound, the stock would bounce back after the bear raid was over. Nevertheless, Saunders refused to give in to the Wall Street city slickers. 

Saunders hired Jesse L. Livermore, the most famous bear on Wall Street, to help him break the back of the bear raiders. Within a week, Livermore had bought 105,000 shares of Piggly Wiggly, over half the float of 200,000 shares. The bears had shorted Piggly Wiggly stock in the 40 range, but by January, Saunders’ bull campaign had pushed the price of shares past 60. The shorts were losing money.  
The Shorts Are Cornered
Piggly shares were traded on both the Chicago and New York Stock Exchanges. In January, the Chicago Exchange announced that the stock had been cornered, though the NYSE denied that a corner existed. So Saunders decided to try a new tack. He announced that he would issue 50,000 shares of Piggly Wiggly shares at $55 each. Saunders regularly advertised his stores in the newspapers, and he used some of these ads to offer shares to small investors. Saunders pointed out that Piggly Wiggly stock paid a $1 per quarter dividend, yielding 7% to investors. Since this occurred before the S.E.C. came into existence, Saunders could promise that this was a “once in a lifetime opportunity,” and get away with it.
Since Piggly stock was then trading at $70, why would Saunders offer shares at $55, leaving $15 on the table for each of the 50,000 shares? The reason is that Saunders knew that once the shorts had been cornered, the demand for Piggly stock would dry up. Saunders’ stock distribution created a market where he could distribute his shares to new investors. Saunders even allowed investors to buy new shares on the payment plan, put $25 down and pay $10 a month for three months. Since the new shareholders couldn’t sell their shares until they were paid for, this would keep the shorts from obtaining these newly minted shares to cover their positions....

The Effect On Earth Of A "Perfect" Coronal Mass Ejection: You Don't Want To Know

 From Spaceweather, January 28:

WHAT IF A 'PERFECT CME' HIT EARTH? You've heard of a "perfect storm." But what about a perfect solar storm? A new study just published in the research journal Space Weather considers what might happen if a worst-case coronal mass ejection (CME) hit Earth. Spoiler alert: You might need a backup generator.

For years, researchers have been wondering, what's the worst the sun could do? In 2014, Bruce Tsurutani (JPL) and Gurbax Lakhina (Indian Institute of Geomagnetism) introduced the "Perfect CME." It would be fast, leaving the sun around 3,000 km/s, and aimed directly at Earth. Moreover, it would follow another CME, which would clear the path in front of it, allowing the storm cloud to hit Earth with maximum force.

None of this is fantasy. The Solar and Heliospheric Observatory (SOHO) has observed CMEs leaving the sun at speeds up to 3,000 km/s. And there are many documented cases of one CME clearing the way for another. Perfect CMEs are real.

Using relatively simple calculations, Tsurutani and Lakhina showed that a Perfect CME would reach Earth in only 12 hours, allowing emergency managers little time to prepare, and slam into our magnetosphere at 45 times the local speed of sound. In response to such a shock, there would be a geomagnetic storm perhaps twice as strong as the Carrington Event of 1859. Power grids, GPS and other high-tech services could experience significant outages.

Sounds bad? Turns out it could be worse.....


EIA Natural Gas Weekly Update

 From the Energy Information Administration:

for week ending January 27, 2021   |  Release date:  January 28, 2021

In the News:

Industrial sector natural gas consumption returns to pre-pandemic levels

Data from EIA’s Natural Gas Monthly show that industrial natural gas consumption (not including lease and plant fuel) in September and October 2020 exceeded consumption in those months in 2019. October 2020 consumption of 22.5 billion cubic feet per day (Bcf/d) was the highest of any October in EIA’s data going back to 2001. For the first eight months of 2020, industrial consumption of natural gas remained lower than 2019 levels, and May’s consumption of 20.2 Bcf/d was the lowest level of any month since 2017.

In the first quarter of 2020, industrial natural gas consumption was lower than first-quarter 2019 by about 0.6 Bcf/d. Some of this comparative decline in industrial natural gas consumption was the result of warmer-than-normal weather. The United States had 15% (334) fewer heating degree days (HDDs) in the first quarter of 2020 than in the first quarter of 2019.

However, March marked the beginning of efforts to mitigate the spread of COVID-19 in the United States. As the pandemic progressed, a slowing economy contributed to an overall decrease in industrial output in the second quarter of 2020. Despite a colder April in 2020, which had 71 more HDDs than in April 2019, industrial consumption of natural gas fell relative to April 2019.

Since April 2020, increases in industrial activity have contributed to an increase in industrial natural gas consumption. The Short-Term Energy Outlook’s (STEO’s) natural gas-weighted industrial production index—which reflects the growth of manufacturing subsectors and the relative importance of those subsectors to total natural gas consumption—was 15% lower in April 2020 than in April 2019. From April to October, the index rose, increasing 12%.

Not all industries are recovering at the same rate, according to the Federal Reserve’s Industrial Production data, which are used to calculate the industrial indexes EIA uses in the STEO. The production index for the entire industrial sector (including lease and plant fuel) fell by 16% from January to April, and EIA expects it to rise higher than January 2020 levels by March 2022 (based on IHS Markit economic forecasts used in the STEO). The index for chemicals, a natural-gas-intensive industry, had less of an initial decrease (6%), and returned to January 2020 levels by the end of 2020. However, the production index for primary metals (which is less natural gas intensive) fell initially by 28%, and does not return to pre-pandemic levels (January 2020 levels) during the STEO forecast period (through 2022).

Quicker recovery in industries that consume more natural gas allowed total industrial natural gas consumption to return to pre-pandemic levels in the final months of 2020, even as total industrial output did not. EIA’s STEO forecasts November 2020 industrial natural gas consumption was less than November 2019 levels by 0.5 Bcf/d, but December 2020 was 0.2 Bcf/d higher than in December 2019.....

....U.S. LNG exports decrease week over week. Eighteen liquefied natural gas (LNG) vessels (five from Sabine Pass, four each from Cameron, Corpus Christi, and Freeport, and one from Cove Point) with a combined LNG-carrying capacity of 65 Bcf departed the United States between January 21 and January 27, 2021, according to shipping data provided by Bloomberg Finance, L.P.

During the report week, U.S. LNG traffic flow was affected by the weather conditions (fog) at Sabine Pass LNG, Corpus Christi LNG, and Cameron LNG. Piloting services in the waterways around Corpus Christi LNG were suspended for part of the day on January 21, 2021. Pilot services were suspended for Sabine Pass LNG traffic on January 21, 23, and 25 because of fog conditions. Weather-related closures were also reported for several days at Lake Charles—the location of Cameron LNG.

On January 26, 2021, a new record for U.S. LNG daily loadings was set. EIA estimates that 25.4 Bcf were loaded on seven LNG tankers that departed U.S. LNG terminals on that day.


Capital Markets: "Please Stay Seated, the Ride is not Over"

 One of Mr. Chandler's best headlines of the year.

From Marc to Market:

Overview: Powerful corrective forces continue to grip the market. After a large rally to start the New Year, the correction is punishing. Most Asia Pacific equities markets were off again today to bring the week's loss to 2.5% to 5.5% throughout the region. Europe's Dow Jones Stoxx 600 is a little more than 1% lower on the day. The 2.4% loss for the week would be the largest since October and wipes out the month's gain. US shares are trading heavily, and the S&P futures point to around a 1% drop, which is marginally lower for the year. Bond markets are not drawing a safe-haven bid, and yields are mostly 2-4 bp higher. Italian bonds are performing best as the market anticipates some kind of resolution to the political turmoil without resort to disruptive and distracting elections. The 10-year US Treasury yield is about 1.07%, a four basis point increase on the week. Only the Norwegian krone is stronger against the dollar today among the major currencies. Of note, despite risk-off, the weakest of the major currencies today are the Australian dollar and Japanese yen, off around 0.5%. Emerging market currencies are mixed, and the JP Morgan Emerging Market Currency Index is up a little today but is still off about 0.25% for the week. If sustained, it would be the sixth consecutive weekly decline. Gold is firm but continues to consolidate around $1850 (200-day moving average). Silver has reportedly drawn interest from the swarm of retail investors. The metal was up nearly 5% yesterday and is up nearly another 1% today. Near $27.10, silver at three-week highs. March WTI is little changed and is in the lower end of its recent consolidative range ($52-$54).

Asia Pacific
Japan's economy finished 2020 on a weak note.
Retail sales fell by 0.8% in December, a little more than expected, and follows a 2.1% decline in November. Industrial output tumbled 1.6% in December for a 3.2% year-over-year contraction. Unemployment was unchanged at 2.9%. The preliminary PMIs show economic activity is still contracting, and areas that account for around 60% of GDP are in a formal state of emergency. The BOJ does not meet until March. Talk that it would pull back from its ETF buying has been dampened by the recent volatility, while some speculate that officials could tolerate a wider range for the 10-year yield.

South Korea and Taiwan data points point to a regional recovery, despite Japanese woes.
Seoul reported a 3.7% jump in December industrial output, a multiple of what was expected. Taipei reported Q4 GDP rose 4.9% year-over-year, making it one of the few economies to expand in 2020. Over the weekend, China's PMI will be released, and a little softening is expected within the expansion.

The Japanese yen's safe-haven appeal always seemed more complicated to us than "buy yen when there is trouble". We often saw it linked to unwinding its funding role (borrowed and sold to finance the purchase of higher beta assets, and when those assets go south, which they invariably do, the trade is unwound the funding currency has to be bought back too). Despite the dramatic equity reversal, the yen is at its weakest level against the dollar since mid-November. The greenback has risen more than 0.5% against the yen today, its third consecutive advancing session. It appears that participants turned more cautious as the JPY105-level came into view. Three-month implied volatility is firm just below 6%, which is still soft. The 100-day average is closer to 6.8%. We suspect the spot move today is exhausted or nearly so. Support now is seen in the JPY104.40-JPY104.60 area....


Thursday, January 28, 2021

"Saudi Arabia’s Ousted Spymaster Is Accused of Embezzling Billions"

 Go big or go home.

Or go to Chop-Chop Square.

From the Wall Street Journal, January 27:

Lawsuit filed in Canada by a Saudi state-owned conglomerate targets a longtime ally of the kingdom’s former crown prince

State-owned companies of Saudi Arabia have sued the country’s former spymaster in a Canadian court, alleging he embezzled billions of dollars, in a case that throws a spotlight on a bitter royal feud.

Ten companies owned by Tahakom Investments Co., a subsidiary of Saudi Arabia’s sovereign-wealth fund, filed the civil suit in Ontario Superior Court against Saad al Jabri, who fled the kingdom and is now living in Canada. Mr. Jabri is the former top aide of Prince Mohammed bin Nayef, known as MBN, who was removed as crown prince in 2017 by King Salman in favor of his son, Mohammed bin Salman, or MBS. Saudi authorities detained MBN last year and accused him of plotting a coup.

MBN was once one of the most influential members of the Saudi ruling family and a trusted U.S. ally known for his role in helping combat al Qaeda. His dismissal capped the rapid rise to power by his younger cousin, MBS.

Mr. Jabri, for years at MBN’s side in the Interior Ministry, which MBN helped run, is credited by former U.S. officials with helping stop terrorist attacks on Western targets. He was fired several months before his boss lost his job, which prompted his flight to Canada.

The lawsuit against Mr. Jabri highlights the clash at the top echelons of the Saudi monarchy and brings unprecedented scrutiny in a Western court to the opaque business dealings of the royal family.
The lawsuit alleges that MBN colluded with Mr. Jabri to receive at least $1.2 billion in misappropriated funds. MBN allegedly transferred at least $55 million to Mr. Jabri as kickbacks, according to the suit. MBN, who remains in custody in Saudi Arabia, isn’t named as a defendant in the lawsuit that was filed in the Canadian court.

A campaign advocating for the Jabris said the family would “fight the recycled corruption allegations vigorously and are confident they will succeed in dismissing them.” It said in a statement issued in response to the case: “The family welcomes the opportunity to face off against MBS in neutral judicial forums.”

MBN hasn’t been reachable for comment since his detention in Riyadh last year....


"The Ultimate Stealth Ship"

 Following up on last night's "Just about every nation has secret missile platforms hidden in shipping containers"

From the Center for International Maritime Security, October 12, 2017:

By Salvatore R. Mercogliano, Ph.D.

When one thinks of a stealth ship, images of the Chinese Type 055 destroyer, the French La Fayette-class frigate, or Swedish Visby-class corvette come to mind. The use of material and technology to produce a smaller radar cross-section or to reduce sound and electronic emissions are all common attributes of what is commonly considered a stealth ship. Yet, if one was to ask what is the stealthiest ship in the U.S. Navy, the answer may prove surprising. It is not USS Zumwalt, the newest destroyer in the fleet. It is also not the most recent Virginia or Seawolf-class submarine, and it most assuredly is not one of the littoral combat ships. The ship that holds this title is not even a commissioned vessel in the U.S. Navy, or owned by the government, but leased from one of the largest ship operators in the world. MV Ocean Trader, chartered by the Military Sealift Command for the U.S. Special Operations Command, most assuredly holds this title.

One may remember back to early 2014 when articles began to appear about the Navy obtaining a “Big, Secretive Special Operations Mothership,” as reported by David Axe in War is Boring. The story went, “The U.S. Navy is quietly converting a 633-foot-long cargo ship into a secretive helicopter carrier with facilities for supporting a large contingent of Special Operations Forces and all their gear, including jet skis.” In 2016, pictures appeared of the ship while at the BAE Shipyard in Mobile, Alabama. Constructed in the Odense Steel Shipyard in 2011 for Maersk Line, MV Cragside is capable of speeds of up to 21 knots. Her design is a common one in Europe, derived from the Flensburger roll-on/roll-of ships. She is a near sister ship to the four Point-class roll-on/roll-off ships chartered by the United Kingdom Ministry of Defense in 2002. The ship’s configuration, when compared to photos of the vessel before conversion, indicate an addition aft of the main house without windows or ports. Forward of the house, two enclosed helicopter hangers are added with the addition of a large flying off platform indicated by the drop-down nets along the edges.

That picture of the ship in Mobile is the last available image and report of the vessel by an American source. A French news agency reported the arrival of the renamed MV Ocean Trader in the Mediterranean on May 16, 2016. According to Maritime Administration records, the ship was renamed on October 30, 2015 and remains on the rolls as a U.S. flagged merchant ship as of July 1, 2017, although a few of the sources identify the ship as Marshall Island flagged. Checks of various Automatic Identification Systems (AIS) has the ship in Gibraltar on May 14, 2017, Souda Bay, Crete on May 24, 2016, and Amsterdam on August 16, 2017. The ship does not currently show up on any active AIS systems. A search of the Navy’s Military Sealift Command records, including both their annual reports – which state all the vessels owned and under long-term charter to the Navy – and the U.S. Navy’s official sites, have no records of the ship....


"Subway’s tuna is not tuna, but a ‘mixture of various concoctions,’ a lawsuit alleges"

 This one should be easy enough to sort out. DNA and all that.

The Irish court decision on Subway's bread was actually a bit trickier, link after the jump.

From the WaPo via the Seattle Times, January 27:

Subway describes its tuna sandwich as “freshly baked bread” layered with “flaked tuna blended with creamy mayo then topped with your choice of crisp, fresh veggies.” It’s a description designed to activate the saliva glands — and separate you from your money.

It’s also fiction, at least partially, according to a recent lawsuit filed in U.S. District Court for the Northern District of California. The complaint alleges the ingredient billed as “tuna” for the chain’s sandwiches and wraps contains absolutely no tuna.

A representative of Subway said the claims are without merit. Not only is its tuna the real deal, the company says, but it’s wild-caught, too.

The star ingredient, according to the lawsuit, is “made from anything but tuna.” Based on independent lab tests of “multiple samples” taken from Subway locations in California, the “tuna” is “a mixture of various concoctions that do not constitute tuna, yet have been blended together by defendants to imitate the appearance of tuna,” according to the complaint. Shalini Dogra, one of the attorneys for the plaintiffs, declined to say exactly what ingredients the lab tests revealed.

“We found that the ingredients were not tuna and not fish,” the attorney said in an email to The Washington Post.

Two plaintiffs are identified in the complaint: Karen Dhanowa and Nilima Amin, both residents of Alameda County in the Bay Area. But attorneys for Dhanowa and Amin hope to get their claim certified as a class action, which could open the case up to thousands of Subway customers in California who purchased tuna sandwiches and wraps after Jan. 21, 2017....


On the something's fishy beat:

"Blockchain Could Help Restaurants Make Sure the Seafood You Order Is Actually What Lands on Your Plate"
I vaguely recall this story from a couple years ago. Something about cats and preventing diarrhea or something. It seemed to be one of the few uses of blockchain tech that actually made sense.
Take a look at this from Futurism and I'll see if I can find a post with felines and gastric distress.
Fish Fraud....


And the ins-and-outs of bread in Ireland: 

"Pain, brioche, and the language of taxation"

We made mention of the Irish court ruling as the outro from another post on Irish Whiskey:

And in other news from Ireland, from The
Subway sandwiches contain 'too much sugar' to legally be considered bread, Supreme Court rules

The sugar is equal to 10% of the weight of the flour which probably caramelizes nicely but puts the stuff near the range of confection.

And here's a language lesson from  Canadian econ blog Worthwhile Canadian Initiative:

Ireland's Supreme Court recently ruled that the buns Subway uses in its sandwiches contain too much sugar to be considered "bread", and are thus subject to Value Added Tax (VAT). The decision lead to headlines and discussion along the lines of "Irish High Court Rules Subway’s Sandwich Bread Is Not Legally Bread" or "Ireland declares that Subway’s bread is basically cake". The emphasis was on how "confused" and "bizarre" the entire debate was, and the cost and arbitrary nature of distinctions made in tax legislation: "Having moral distinctions between foodstuffs in your tax regulations turns out to be an awfully expensive thing".

Yet the discussion of whether or not Subway buns are bread is only confused and bizarre in English, with our barren culinary language. In French, the discussion would not seem peculiar. French distinguishes between three broad categories of baked goods: unsweetened bread is "pain", sweetened bread (often made with eggs and milk) is "brioche", and cake is "gâteau." Hence the expression "Qu'ils mangent de la brioche" is (somewhat misleadingly) translated as "let them eat cake", because there is no English word for sweetened bread.


Montreal is the fourth largest French speaking city in the world, something I should have mentioned in last year's: 
 I'm putting the odds of Montreal passing Abidjan for the #3 spot at 0%.

"Harvard Management Company Has Invested in Bitcoin Since 2019, per Report"

From The Harvard Crimson, January 27:

Harvard Management Company — the firm managing the University’s $41.9 billion endowment — may have bought Bitcoin as early as 2019 from market exchanges, per a Monday CoinDesk report.

Bitcoin, a cryptocurrency that operates independently of central banks, exists only as a series of transactions on a series of servers known as “blockchains.”

When it started in 2009, bitcoin ranged in value from $5 to $20. But in the past four years, the price of a single bitcoin has spiked to more than $20,000 before falling back to around $16,000.

This is not the first time the University is reported to have invested in cryptocurrency. In April 2019, Harvard-affiliated investors purchased around $11.5 million worth of Blockstack cryptocurrencies, according to filings made with the Securities and Exchange Commission.

Blockstack, which started as an open-source digital privacy project, launched its coin in 2018. It was one of the first cryptocurrencies to gain approval from the United States Securities and Exchange Commission....


Shipping: It Turns Out France's CMA CGM's Mega Ships Aren't Just Big....

....but also have the most powerful marine engines in the world.

And powered by LNG. 

[reposting, typo in the headline]

From Offshore Energy:

WinGD’s biggest X-DF dual-fuel engine wins Guinness World Records power title

WinGD’s 12X92DF engine has been awarded the Guinness World Records for the most powerful Otto-cycle engine ever built.

In tests carried out at engine builder CSSC-MES Diesel Co (CSSC-CMD) and verified by Guinness World Records, for the official record title ‘Most powerful marine internal combustion engine (otto cycle) commercially available’,  the 2,140-tonne engine demonstrated a power of 63,840 kW at a speed of 80 rpm.

The super-sized engines fueled from 18,600 cbm tanks, containing enough liquefied natural gas (LNG) to sail complete Asia to Europe round trip, will propel nine 23,000 TEU containerships operated by French shipping and logistics company CMA CGM.
These ships are the result of seven years of research and development, and a concentration of technological innovations.... 


We have a lot of posts on these ships.  

EIA Natural Gas Storage Report

First up, the estimates going in via FX Empire:

....NGI [Natural Gas Intelligence] is reporting that Bespoke anticipates EIA to report to a draw of 140 Bcf for the week-ended January 22.

“Analysts are broadly expecting a triple-digit pull, though not as big of a decrease as reported a week earlier. EIA recorded a pull of 187 Bcf from storage for the week ended January 15, the largest decrease of the season,” NGI wrote.

“For the latest week, a Reuters poll found estimates ranging from withdrawals of 127 Bcf to 145 Bcf, with a median decrease of 138 Bcf. Bloomberg’s survey of analysts landed at a median decrease of 139 Bcf, with estimates ranging from pulls of 131 Bcf to 143 Bcf,” NGI said....

And the report from the Energy Information Administration

...Working gas in storage was 2,881 Bcf as of Friday, January 22, 2021, according to EIA estimates. This represents a net decrease of 128 Bcf from the previous week. Stocks were 78 Bcf higher than last year at this time and 244 Bcf above the five-year average of 2,637 Bcf. At 2,881 Bcf, total working gas is within the five-year historical range.... 

Finally, the price action over the last week (30-minute candles) via the CME:

Last week's "EIA Natural Gas Storage Report", January 22 at 2.441:

With that bigger of the gaps stretching from 2.35 to 2.56 the turnaround could begin at any level now.

Got lucky, that happened to be the day of the intermediate-term low.

"Samsung says auto chip shortage could hit smartphones"

 From Ars Technica:

Warning comes as car companies lobby governments for help. 

Samsung Electronics said a global semiconductor shortage that has hit global carmakers could also disrupt orders for the memory chips used in smartphones, as manufacturers rushed to respond to the crisis.

The warning from the world’s biggest memory chipmaker comes as companies and governments grow concerned that constrained chip manufacturing capacity could derail countries’ economic recoveries from the coronavirus pandemic.

The rush by semiconductor foundries to meet demand for auto chips means many are now operating at full capacity, limiting their ability to take on new orders, which could in turn slow deliveries of chips designed for mobile devices.

Samsung said on Thursday that this squeeze on foundries, and any subsequent slowdown in mobile device orders, could affect demand for its Dram and Nand memory chips, which enable smartphones and tablets to perform multiple tasks at once....



Interactive Brokers Goes "Liquidation Only" On AMC, BB, EXPR, GME, and KOSS Options

 Via ZeroHedge:

...In a statement to CNBC, IB said: 

“As of midday yesterday, (1/27/2021) Interactive Brokers has put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice. We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only. We will continue to monitor market conditions and may add or remove symbols as may be warranted.”...


See also last night's "A Heads-Up To The Gamestop, AMC etc. Crowd: They Are Going to Change The Rules On You" and "Discord has shut down the /r/WallStreetBets server (GME)":

....When the Billionaire Hunt brothers were attempting to corner the silver market in January 1980 the head of one of the world's largest grain traders said "Those boys don't know what deep pockets are".
The "commercials" had been shorting into the Hunt bros. buying and the grain trader was at the top of the "commercial" heap.

On January 21 the COMEX went "liquidation only".
On January 22 the CBOT went "liquidation only".
On Tuesday the 22nd silver closed at $34, down 27% from its close the previous Friday.
The Hunt's still had enormous paper profits but any attempt to book them would smash the markets even further.

Prices declined to $17 by March, down 66% from the January high and the Hunt's were receiving calls of $60 Million per day in variation margin. On March 27 the price dropped from $21.62 to $10.80 and one of their brokers, Bache was in violation of net capital requirements and another, Merrill Lynch was on the brink.
As the attorneys got involved over the next few years, oil prices headed south, destroying the value of Daddy's creation (and the brother's piggybank) Placid Oil.

Bunker Hunt filed for bankruptcy in September 1988 as did his brother and Placid.

At the time the grain trader said "Those boys don't know what deep pockets are" it is probable that the various branches of the Hunt families comprised the wealthiest "family" in America.

Wednesday, January 27, 2021

Big Re/Insurance: "Ohio Federal Court Rules Business Interruption Coverage Extends to Loss of Use of Property Due to State-Ordered Closures"

 Big money, big problem.

The insurers reinsurers did not charge premiums for what they thought they were not covering.

From JD Supra, January 26:

On January 19, 2021, the U.S. District Court for the Northern District of Ohio Eastern Division ruled in Henderson Road Restaurant Systems, Inc. dba Hyde Park Grille, et al. v. Zurich Am. Ins. Co., No. 1:20-cv-01239, that a commercial insurance policy business income coverage form issued by Zurich American Insurance Company provided coverage to several steak and seafood restaurants in Ohio, Pennsylvania, Michigan, Indiana, and Florida which closed in response to state governmental orders restricting the operations of restaurants in an effort to abate the spread of COVID-19.

Insurer’s Arguments

In support of its motion for summary judgment, Zurich argued that plaintiffs’ economic losses were not covered by the policy as a matter of law because they were not caused by “physical loss or damage to property.” Alternatively, Zurich argued that, even if there had been direct physical loss to plaintiffs’ property, the policy’s microorganism exclusion would exclude coverage. Boiled down to its essence, Zurich argued that the underlying cause of loss was COVID-19, that COVID-19 is a microorganism, and that the microorganism exclusion applies. Other arguments proffered by Zurich were (i) the policy’s Civil Authority provision does not apply because the states’ orders did not “prohibit access” to plaintiffs’ premises, but rather permitted plaintiffs to continue to operate on a carry-out and delivery basis and therefore did not prohibit access to plaintiffs’ restaurants as required by the policy, and (ii) the Civil Authority coverage is inapplicable because the states’ orders did not respond to a direct physical loss of or damage to property located within one mile from the premises.

 Insureds’ Arguments 

In opposition, plaintiffs argued that Zurich could have easily drafted the policy language to limit coverage to physical or structural alteration/damage to tangible property, but instead, Zurich chose the language “direct physical loss of or damage to property,” contending that “direct physical loss of” includes an inability to possess something in the real, material or bodily world, and that the government orders caused plaintiffs to lose their property in some manner – pointing out that Zurich’s policy does not state that “direct physical loss of or damage to property” required “physical alteration or structural damage to any property at the Insured Premises....


See also: 

BigLaw on Big Insurance: Covid-19 Business Interruption Claims In The UK 

Knowledge@Wharton: "What Role Should Insurers Play in Covering Pandemic Business Losses?"

If interested, November 10's "Insurance: Epic Battle Over Covid-19 Coverage" has many of our previous links. It's big money 

"How listening to salmon helps feed them more efficiently"

"Any other talents you can bring to the job?"

"Well, I wasn't going to mention it but I'm a salmon whisperer."

Via New Atlas:

A salmon can't pick up and drop its supper dish like a dog, so how do you know if they are hungry? It's an important question in aquaculture, and by using a combination of audio sensors and artificial intelligence, the Smart System for Feeding Control (SICA) offers a new way to answer it.

Farmed salmon make up between 60 and 70 percent of all salmon produced today, but the process suffers from an efficiency problem. Like any fish, salmon need to be fed. The problem for the farmer is to make sure the growing salmon get enough food to stay healthy and put on weight, but not so much that the food is wasted or starts to have a negative impact on the local environment.

Feed can account for half the cost of farming salmon, so making mealtimes more efficient also has a major impact on profits. Unfortunately, figuring out whether or not a salmon is hungry isn't easy. Currently farmers rely on techniques like monitoring behavior by video, which are expensive and intrusive....