Thursday, September 30, 2021

University of Chicago's Luigi Zingales: "Break Up Big Tech? A conversation about the future of the industry"

This interviewer, Allison Schrager is very good. Zingales seems to know his stuff as well.
(just kidding Professor Z.)

From City Journal, September 21:

Luigi Zingales, the Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago’s Booth School of Business and a contributing editor of City Journal, joined Allison Schrager, a senior fellow at the Manhattan Institute and contributing editor of City Journal, for a conversation about the tech industry, its effects on politics, and the possibility of reform.

Allison Schrager: The FAANGs—Facebook, Amazon, Apple, Netflix, and Google—as well as Twitter have faced rising political scrutiny, which has led to to calls to regulate them. Such calls have come both from the Left, which points to their size and potential market power, and the Right, which notes their ability to control information in a way that’s biased against conservatives. In economics, these properties are hallmarks of a monopoly—a firm with too much market power. Are these companies really monopolies? If so, is their monopoly power durable? Can we expect them to stay monopolies without government intervention to break them up?

Luigi Zingales: I am going to disappoint you by giving the typical economist’s answer: it depends. It depends on how you define monopoly, the time horizon you are considering, and which company you are talking about.

Do the FAANGs have a very large market share? The answer is yes, and not by coincidence. In this sector, there are large network externalities or big economies of scale (or both). We value Facebook and Twitter because a lot of other people are on Facebook and Twitter. Google’s value comes from its superior search engine, which gets better with use. These are markets subject to tipping—i.e., when a company starts to become dominant, it quickly takes over the entire market.

More difficult is to determine whether these companies have enough market power to be considered monopolies. That’s harder to answer, especially when it comes to a market in which companies don’t charge consumers for their services. To prove that a company is a monopoly you have to show that it delivers excessively low quality. The best paper I’ve seen on this topic shows that Facebook weakened privacy standards after Myspace disappeared. This is clear evidence of Facebook abusing its monopoly power.

Given that there are many alternative social media, where does Facebook’s market power come from? A combination of inertia and network externalities. Let me explain it with an example. My high-school friends and I are in a WhatsApp chat. In late January, when WhatsApp announced its new privacy settings, many participants (myself included) wanted to switch to Signal. Most of us did it, while a few did not (mostly for inertia). As a result, for a little while there were two parallel chats. Eventually, however, everybody went back to the original one.

Schrager: What if there were a better alternative to Signal? Would that have made a difference?

Zingales: It is unlikely, because you still would have had to convince everyone to switch platforms. Major events, like Elon Musk telling everyone to use Signal, are helpful, but often not sufficient (as in this case). This is the reason why an inferior technology like VHS was able to displace a superior one like Betamax.

Schrager: Yes, but eventually VHS gave way to DVDs, then to Blu-Ray, and then to streaming.

Zingales: Now you’re getting to the next part, which is time horizon. How long will these companies’ dominant position last? It’s a good question. If they don’t get subsidies or government intervention, eventually a better technology will come along. But the important question is: how long will “eventually” take, and how much damage will be done in between?

Schrager: Traditionally, monopolies were considered worthy of regulation because they harm consumers—specifically, they charge very high prices. But many of the services we consume from the FAANGs and Twitter are free. Are there other ways besides cost in which they pose harm?

Zingales: Again, it depends—on where and how long you look. We can distinguish between potential harm and active harm. Do these companies have the potential to do harm? Absolutely. Take Google: the way it ranks news sources and search results has a big impact on what you buy and perhaps even whom you vote for. From the case against Google in Europe, we know that when the firm started its own shopping service, it de-ranked its competitors in Google search results.

Sometimes, just the threat of changing the search algorithm is enough to cause harm. If I am a politician in a competitive district, do I really want to go after Google when Google can make my life more difficult? This isn’t just an issue in the U.S. It’s true all over the world. If I am the Sri Lankan prime minister, do I want to attack Google? I think this is going on right now; we see politicians holding back.

Schrager: It hasn’t held back Elizabeth Warren from criticizing these companies, though. She has been a very vocal opponent.

Zingales: It depends on how secure your district is. In Massachusetts, it’s hard for a Democrat to lose. But take Mike Lee, a Utah Republican who changed his mind on Google and antitrust issues—I wonder why.

Schrager: Do these companies influence elections?

Zingales: I am not saying they do, but they could. If I search for “Biden” and news about Hunter Biden comes up first, I may not vote for his father. By contrast, if the bad news about Biden only shows up on the second page of search results, I might happily vote for Biden. Do you know the jokes that all the skeletons are buried in page two of the search results, because you can be sure that nobody would find them?

Then there’s the political issue. What we saw on January 10, with Facebook and Twitter’s banning of Trump, was that a few people have a disproportionate power to block the circulation of certain ideas. I do believe that businesses have the right to choose what they diffuse. But this right is compatible with a free society only if the service is provided in a competitive way. If I am the only inn in a desert, my freedom to refuse to serve you must be restricted, because it becomes my freedom to kill you.

Finally, we, the consumers, pay the cost of advertising. If the FAANGs influence the price of advertising, this will show up in the final price of goods. There’s no evidence yet that they do, but it’s not out of the question. It’s something we should pay attention to.

Schrager: So what can be done? Do you suggest breaking the FAANGs up?....


Creighton Rural Mainstreet Index Remains Above Growth Neutral: Bankers Report Record Farmland Price Index

 From Creighton University's Heider College of Business, September 16:

September Survey Results at a Glance:

  • Overall index declined for the fourth straight month, but remained in a range indicating slower, but positive, growth for the next several months.
  • Farmland price index soared to a record high.
  • More than eight of 10 bankers expect the stepped-up basis portion of President Biden’s $3.5 trillion bill to have a negative impact on the Rural Mainstreet economy.
  • Almost two-thirds of Bank CEOs expect the Federal Reserve to begin reducing their bond buying stimulus before the end of 2021.
  • More than half of bankers reported that the negatives from Covid-19 expanded in September.
  • Growth among the 10 states from top to bottom were: Minnesota (tops), Illinois, Colorado, South Dakota, Nebraska, Wyoming, Iowa, North Dakota, Kansas, and Missouri (bottom).

OMAHA, Neb. (Sept. 16, 2021) – For the 10th straight month, the Creighton University Rural Mainstreet Index (RMI) remained above growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: For the fourth straight month, the overall index dropped. The September reading of 62.5 was down from August’s 65.3. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

Approximately, 35.7% of bank CEOs reported that their local economy expanded between August and September.

“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. USDA data show that 2021 year-to-date agriculture exports are more than 27.6% above that for the same period in 2020. This has been an important factor supporting the Rural Mainstreet economy,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

“More than eight of 10 bankers expect, if implemented, the stepped-up basis portion of President Biden’s $3.5 trillion bill before Congress to have a negative impact on the Rural Mainstreet economy,” said Goss.

According to Don Vogel, CEO of Farmers National Bank in Sterling, Illinois, “The loss of stepped-up basis is a significant issue as it relates to farmland being passed on to the next generation.” However, he goes on to say that “If the next generation is going to farm the ground, what the basis is does not matter.” He contends that it is more of an issue for investors.

However, Jeff Bonnett, president of Havana National Bank in Havana, Illinois. was less optimistic saying that, “The stepped-up basis for inherited assets (farmland) is critical to the preservation of the family farm. If approved this will be a game changer for family farms. This proposal will also impact any family-owned small business (Main Street vs Wall Street) that also has the goal of passing on their business to the next generation.”

Farming and ranching: The region’s farmland price index advanced above growth neutral for a 12th straight month to a record high 85.2 from August’s very strong 76.6.

The September farm equipment-sales index climbed to 66.0 from 64.7 in August. Readings over the last several months represent the strongest consistent growth since 2012.

Banking: The September loan volume index rose to 58.9 from August’s 53.0. The checking-deposit index sank to 58.8 from August’s 68.8, while the index for certificates of deposit, and other savings instruments increased to a weak 37.5 from 34.4 in August.

Almost two-thirds, or 64.3%, of bankers expect the Federal Reserve to begin reducing their economically stimulative monthly bond purchases before the end of 2021. “I expect this pullback in monthly purchases to push long term interest rates slightly higher in the fourth quarter of 2021,” said Goss.

Hiring: The new hiring index slipped to a strong 67.9 from 70.3 in August. However, labor shortages continue to be a significant issue for Rural Mainstreet businesses....


Wednesday, September 29, 2021

France: The Gold Coin Hoard Discovered In Plozévet, Brittany Realized €1 Million At Auction Today

The amazing thing is: these little hoards are all over the world. Buried under a tree, down a well, next to the fireplace hearth, they are all over.

From Malaysia's Malay Mail, September 30:

French home renovation yields golden treasure of €1m 

Hundreds of rare gold coins dug out of the walls of a remote French mansion fetched more than €1 million at an auction. — Reuters pic

Hundreds of rare gold coins dug out of the walls of a remote French mansion fetched more than €1 million at an auction. — Reuters pic 

ANGERS, Sept 30 — Hundreds of rare gold coins dug out of the walls of a remote French mansion fetched more than €1 million (RM4.85 million) at auction on Wednesday.

Stonemasons discovered 239 pieces of gold, minted before the French Revolution, when they began renovating the property near Quimper in the western Brittany region, auctioneers Ivoire/Deloys said.

The family kept four coins as souvenirs and put the rest up for auction in the western town of Angers, with an estimated value of €250,000-300,000.

Bidding opened at €8,000 for a very rare double Louis d’Or, depicting Louis XIV and dating back to 1646. It went for €46,000, the same price as a Louis d’Or from Paris dated 1640 and stamped with the Templar’s Cross.....


I've mentioned I was asked by a very wealthy client to answer his question re: gold as an investment during times of deflation. Barrick had just purchased Homestake in 2001 and equities were still heading toward the bottom of their gruesome March 2000 - September 2002 bear market (down 77% on the Nasdaq) So I thought I should look at what the folks at HM were actually writing during the Great Depression. As noted elsewhere:

....After the mine closed in 2002 I went out to Lead to answer the question "Is gold an asset you want to own during deflation?" I was quite possibly the last person with access to the company records from the '30's. The skeleton staff that Barrick had in place for the shutdown were literally boxing documents for the archivists as I sat there....

In addition to the archivists I got to know the librarians at the Deadwood Public Library.

They would tell me stories about the little "nuggets" they came across during their researches and over and over again they'd mention some miner in the surrounding district (425 mines) who went to town, got drunk and fell down a shaft or otherwise killed themselves on the way home from the saloons.

And over and over again there were rumors of miner's pokes in their wild west version of safe deposit, a hole under the corner of their tents or little cabins.

And there were enough of these found years later, not big mind you, three, five, ten ounces of gold at a time, there were enough found that the librarians would try to estimate just how much of the stuff was out there. 

Here is the auctioneer on the French find, Deloys.

The "Golden Louis with a long curl" that fetched €46,000 was estimated before the auction at 15,000 euros.

There are several especially rare coins among the collection, including the Golden Louis with a long curl, which has an estimated value of 15,000 euros ($17,805).

"Agrifoodtech was the favored destination for climate-focused funding in past 12 months: report"

From AgFunderNews, September 2:

Investors looking to tackle the climate crisis through clean technology over the past year were most interested in startups dealing with food and water, according to industry newsletter Climate Tech VC‘s mid-year review of venture capital funding.

The authors, who are investors themselves, tracked deals made across seven sectors — carbon, industrial, consumer, climate, energy, food and water, and mobility — between Q2 2020 and Q2 2021 and found food and water attracted the largest number of unique investors by far.

The ubiquity of food and water in everyday life and the global Covid-19 crisis are two likely factors that prompted this heightened interest, says Sophie Purdom, co-founder of Climate Tech VC and an active investor in early-stage climate technology businesses.

Food and water “are the most visceral and the most tangible of all of those climate investing categories,” she told AFN.

“Keep in mind this time period we’re tracking is also squarely during pandemic times, when maybe for the first time in a while everyone’s at home and thinking about what food they put in their body, what they’re stocking in their fridge, and engaging with the world around them and their lifestyle in a way that they hadn’t before.”

“Investors are people too, and we’re all biased in our decision making by our lifestyles, and so I have to think in some ways that the pandemic influenced investors wanting to participate at that obvious intersection of climate and food,” Purdom added.

These categories also attract investors who are “dipping their toes into ESG for the first time,” she said, referring to the environmental, social, and governance issues that investors are increasingly paying attention to.

Image credit: Climate Tech VC

Climate tech investment as a whole is heating up, with startups raising about $16 billion across some 250 deals in the first half of 2021 – equivalent to total deals funded in the whole of 2020.

Energy, the more traditional sector for cleantech investors, is still attracting a large number of deals. But they pale in comparison to food and water — as well as mobility — in terms of actual dollar amount invested....


UPDATED—It's Fat Bear Week And A Media Frenzy!

Update: Unbeknownst to me there had been a single-elimination Fat Bear Junior competition to select one cub to compete against the adults.

The winner was (drumroll please):

 132's Spring Cub

 With tough competition from 909’s Spring Cub and the other contenders

Fat Bear Week home

Regret the omission. 

Original post:

What had started (for us) with a casual tip from an FT Alphaville commenter last year is now being reported by Newsweek, USA Today, CNN, the Seattle Times, the Wall Street Journal (chubby cubbies), Reuters and any number of other outlets.

We will go direct to the source.

Dateline: King Salmon Alaska, September 29, 2021

News Release

It’s a bird, it’s a plane, it’s …. a very fat bear! Bracket for 2020 Fat Bear Week (9/30-10/6) Now Available

A chart that shows the competition brackets for bears for the 2020 Katmai Fat Bear Week event

Katmai National Park and Preserve

Contact: Amber Kraft

King Salmon, AK – Katmai National Park and Preserve, – No capes are needed for these furry superheroes. They may not be faster than a speeding bullet, but despite the weight they are carrying, these burly beasts can still run faster than most humans. These brown bears’ power of packing on the pounds gets them through the winter and able to live to compete another year. With or without the lasso of truth around us, our story remains the same: fat bears = healthy bears.

While the plumpest of the plump work to gain even more, Katmai’s bears of Brooks River will compete in head-to-head matchups in Fat Bear Week’s single elimination tournament. Your votes decide who will wear the mantle of 2020’s Fattest Bear. We are moving this voting from Katmai National Park’s Facebook page to hosted by Experience the excitement of survival of the fattest when Fat Bear Week 2020 begins Wednesday, September 30th! Matchups will be open for voting from 12 - 10 p.m. Eastern (8 a.m. - 6 p.m. Alaska).

Does Bear 747 have a chance to get his first championship by dethroning last year’s reigning champion, 435 Holly? Will a new bear come from the outside and topple the competition for the ultimate win? Can multi time champ 480 Otis reclaim his spot on top for one more year? While we can’t foresee the future champion, we do know the paunchy bear will only achieve their win with all of you casting your votes.

This competition is brought to you through the partnership of Katmai National Park and Preserve, and the Katmai Conservancy. If you want to check out the live bear cams, you can find them here.

Ready to check out the competition for this year’s crown? Here is the 2020 Fat Bear Week Bracket for you to fill out! Then remember to come back to daily from Wednesday, September 30th through Championship Tuesday, October 6th. Remember, with great Fat Bears comes a great responsibility to vote!

That's from the National Park Service website.

This release has more more detail:

Competitor lineup with slider comparison photos:

Bears are presented in numerical order with their slider photos, a brief summary of how to identify the bear and the bears biography....


It's morning in Alaska and the bears are just now making their way to the breakfast buffet:

September 2
....the beta bears are trying to put on weight:
During June and July the alpha bears hang out at the falls upstream, feasting on salmon and getting enormous while the smaller bears are pushed down to less favorable fishing spots.
The big ones usually come back sometime between now and mid-September before waddling off for the winter.

Here's the suite of all the cameras.

And here are the "Bears of Brooks River, 2021"

From Last October's "Where The Bears Are":

Really, really fat bears, up to 1400 pounds (635 kg)*
Do click through.

Here's 747 doing his bear thing:

He is very, very big.

"Leaked Documents Show How Amazon's Astro Robot Tracks Everything You Do" (AMZN; EVIL)

From VICE, September 28:

Leaked meetings show the robot will heavily rely on facial recognition and user behavior, but sources who worked on Astro say the robot is flawed.

Amazon's new robot called Astro is designed to track the behavior of everyone in your home to help it perform its surveillance and helper duties, according to leaked internal development documents and video recordings of Astro software development meetings obtained by Motherboard. The system's person recognition system is heavily flawed, according to two sources who worked on the project.

The documents, which largely use Astro's internal codename "Vesta" for the device, give extensive insight into the robot's design, Amazon's philosophy, how the device tracks customer behavior as well as flow charts of how it determines who a "stranger" is and whether it should take any sort of "investigation activity" against them. 


In its announcement video, Amazon says Astro is designed to give "peace of mind" to its owners. First and foremost, Astro is a surveillance device that tracks you and everyone who enters your home. When a user purchases the $999 robot, customers are asked to "enroll" their face and voice, as well as the faces and voices of anyone who is likely to be in a home, so Astro can learn who is supposed to be there.

One of the internal documentation files presented in a development meeting and obtained by Motherboard describes how Astro patrols an owner's home and tries to identify people it encounters. Other files refer to “Sentry,” the components and software that control the device's security features. Sentry software includes integration with Ring cameras and Alexa Guard, Amazon's home security service.Screen Shot 2021-09-28 at 5.04.20 PM.png

The meeting document spells out the process in a much blunter way than Amazon's cutesy marketing suggests.

"Vesta slowly and intelligently patrols the home when unfamiliar person are around, moving from scan point to scan point (the best location and pose in any given space to look around) looking and listening for unusual activity," one of the files reads. "Vesta moves to a predetermined scan point and pose to scan any given room, looking past and over obstacles in its way. Vesta completes one complete patrol when it completes scanning all the scan point on the floorplan.

"Astro is terrible and will almost certainly throw itself
down a flight of stairs if presented the opportunity."

If the robot detects what it thinks is something out of the ordinary, such as seeing a person it doesn't recognize, or a sound like glass breaking or a fire alarm, it will investigate further including following an unidentified person around the house, the file reads....


BlackRock Plans to Raise $2.3bn+ for ESG Fund That Targets Catastrophe Bonds

 We'll have more on this and its implications next month.

From Artemis, September 29:

Giant asset manager BlackRock is aiming to raise more than $2.3 billion for its new environmental, social and governance (ESG) investment fund strategy that includes catastrophe bonds as one of its target asset types.

As we were the first to cover back in August, the investment manager is marketing the soon to launch BlackRock ESG Capital Allocation Trust, a closed-end fund strategy focused on equity and debt securities, at least 80% of which will be expected to meet specified environmental, social and governance (ESG) criteria.

The strategy will see BlackRock’s portfolio managers for the ESG fund screen out certain issuers and focus on bonds that are demonstrably ESG appropriate.

This can include where a securities proceeds are going to be used in a green manner, while other allocation criteria will also be used to identify ESG appropriate bonds to invest in.

Different categories of securities are detailed in the BlackRock ESG Capital Allocation Trust prospectus as potentially appropriate for the fund to allocate to, and one of these is event-linked bonds, including catastrophe bonds and certain other securitized ILS or reinsurance instruments.....


Natural Gas: Some Possibly Good News For Europe—Winter Temperatures Expected To Be Average To Above Average 2021 - 2022

This doesn't mean it will be warm, winter is winter, but the odds are for more of a Jimmy Carter "Put on a sweater" winter rather than a skating on the canals or Ice Faire on the Thames type of winter.

Those should return in 2028.

From SevereWeatherEurope, September 25:

*Winter forecast 2021/2022* First look at Winter reveals a shift in the jet stream due to the new La Nina, felt in North America and in Europe



We now know what La Nina is, and how it can change the jet stream and the weather. Now we will take a look at the global long-range models, and how they see the developing Winter 2021/2022. 

We decided to focus on the 3 main (or most used) seasonal models. The ECMWF and UKMO from Europe, and the CFSv2 from the United States. Graphics are from the Copernicus Climate EU project and the CPC/NCEP.

All these forecasts are an average picture over the course of 3 meteorological winter months (December-January-February) and show the general prevailing weather patterns. Even if the models would be completely accurate, it does not mean that such weather conditions would last for 3 months straight. It only suggests how the weather patterns might look 40-60% of the time.


The ECMWF model is most often referred to as the most reliable model, at least in the long-range category. In reality, a lot depends on the individual situation and individual seasons. But generally, the ECMWF model is at the top of the chart as far as reliability goes. But no long-range/seasonal forecast can ever be deemed “reliable. We are only looking at trends and how the weather patterns might evolve over the entire continents or the planet.

In the pressure pattern forecast from ECMWF below, we can see the strong high-pressure system in the North Pacific, typical for a La Nina. The low-pressure system is developed over eastern Canada and the jet stream is bending in between the two pressure systems, just like we have seen in the previous segment.

We also see the North Atlantic in a positive NAO mode, which means an amplified jet stream over the British Isles and into Scandinavia. But this is not a typical positive NAO setup, as it is more west-oriented. It allows for winter situations over Europe. Most likely if the high-pressure system in the central Atlantic can crawl further up north, blocking the jet stream and creating a more northerly flow into Europe.


Europe also features higher than normal temperatures, but not to a high degree. Tho a more westerly flow dominant scenario is suggested, the pressure pattern does allow for a break in the flow. Occasional cold flow from northwest Europe is possible down into the mainland.

Looking closer at Europe, we see the surface temperatures are mostly above normal. Higher temperature anomalies and milder conditions are more likely towards the eastern regions. Central and western regions are likely to see occasional cold fronts from the northwest, hence the lower magnitude anomaly.



The 2m anomaly is the modeled divergence from average for temperature taken at two meters.

Tuesday, September 28, 2021

"Deep Learning’s Diminishing Returns: The cost of improvement is becoming unsustainable."

A major piece from IEEESpectrum, September 24:

Deep learning is now being used to translate between languages, predict how proteins fold, analyze medical scans, and play games as complex as Go, to name just a few applications of a technique that is now becoming pervasive. Success in those and other realms has brought this machine-learning technique from obscurity in the early 2000s to dominance today.

Although deep learning's rise to fame is relatively recent, its origins are not. In 1958, back when mainframe computers filled rooms and ran on vacuum tubes, knowledge of the interconnections between neurons in the brain inspired Frank Rosenblatt at Cornell to design the first artificial neural network, which he presciently described as a "pattern-recognizing device." But Rosenblatt's ambitions outpaced the capabilities of his era—and he knew it. Even his inaugural paper was forced to acknowledge the voracious appetite of neural networks for computational power, bemoaning that "as the number of connections in the network increases...the burden on a conventional digital computer soon becomes excessive."

This article is part of our special report on AI, “The Great AI Reckoning.”

Fortunately for such artificial neural networks—later rechristened "deep learning" when they included extra layers of neurons—decades of Moore's Law and other improvements in computer hardware yielded a roughly 10-million-fold increase in the number of computations that a computer could do in a second. So when researchers returned to deep learning in the late 2000s, they wielded tools equal to the challenge.

These more-powerful computers made it possible to construct networks with vastly more connections and neurons and hence greater ability to model complex phenomena. Researchers used that ability to break record after record as they applied deep learning to new tasks.

While deep learning's rise may have been meteoric, its future may be bumpy. Like Rosenblatt before them, today's deep-learning researchers are nearing the frontier of what their tools can achieve. To understand why this will reshape machine learning, you must first understand why deep learning has been so successful and what it costs to keep it that way.

Deep learning is a modern incarnation of the long-running trend in artificial intelligence that has been moving from streamlined systems based on expert knowledge toward flexible statistical models. Early AI systems were rule based, applying logic and expert knowledge to derive results. Later systems incorporated learning to set their adjustable parameters, but these were usually few in number.

Today's neural networks also learn parameter values, but those parameters are part of such flexible computer models that—if they are big enough—they become universal function approximators, meaning they can fit any type of data. This unlimited flexibility is the reason why deep learning can be applied to so many different domains.

The flexibility of neural networks comes from taking the many inputs to the model and having the network combine them in myriad ways. This means the outputs won't be the result of applying simple formulas but instead immensely complicated ones.

For example, when the cutting-edge image-recognition system Noisy Student converts the pixel values of an image into probabilities for what the object in that image is, it does so using a network with 480 million parameters. The training to ascertain the values of such a large number of parameters is even more remarkable because it was done with only 1.2 million labeled images—which may understandably confuse those of us who remember from high school algebra that we are supposed to have more equations than unknowns. Breaking that rule turns out to be the key.

Deep-learning models are overparameterized, which is to say they have more parameters than there are data points available for training. Classically, this would lead to overfitting, where the model not only learns general trends but also the random vagaries of the data it was trained on. Deep learning avoids this trap by initializing the parameters randomly and then iteratively adjusting sets of them to better fit the data using a method called stochastic gradient descent. Surprisingly, this procedure has been proven to ensure that the learned model generalizes well.

The success of flexible deep-learning models can be seen in machine translation. For decades, software has been used to translate text from one language to another. Early approaches to this problem used rules designed by grammar experts. But as more textual data became available in specific languages, statistical approaches—ones that go by such esoteric names as maximum entropy, hidden Markov models, and conditional random fields—could be applied....


It was only seven years ago that we were posting "Deep Learning is VC Worthy

And four years ago for: 

Cracking Open the Black Box of Deep Learning

One of the spookiest features of black box artificial intelligence is that, when it is working correctly, the AI is making connections and casting probabilities that are difficult-to-impossible for human beings to intuit.
Try explaining that to your outside investors.

You start to sound, to their ears anyway, like a loony who is saying "Etaoin shrdlu, give me your money, gizzlefab, blythfornik, trust me."

See also the famous Gary Larson cartoons on how various animals hear and comprehend:
He has one for cats as well but it's not as deep.Something about them not hearing anything.

Ford and Korea's SK To Invest $11.4 Billion in Three Battery Plants, Electric Truck Plant

Go big or go home.

From the Boston Globe:

Ford Motor significantly increased its commitment to electric cars and trucks on Monday by announcing that it would spend billions of dollars to build three battery factories and an electric truck plant in the United States, creating 11,000 jobs over the next four years.

 The company described the investment, which it said would enable it to produce more than 1 million electric vehicles a year in the second half of this decade, as the single largest in its 118-year history. All told, Ford and a South Korean supplier will spend $11.4 billion on the project.

The announcement is the latest multibillion-dollar move by an automaker to quickly move to electric vehicles and phase out gasoline-powered cars and trucks as part of the global effort to combat climate change. Transportation, chiefly cars and trucks, is responsible for about 30 percent of US greenhouse gas emissions, more than the power sector.

President Biden is pressing Congress and other countries to enact policies that would quickly move the world away from fossil fuels, and Ford’s announcement could influence negotiations in Washington over Biden’s climate and energy agenda. It could also become a talking point at a United Nations climate change conference that Biden and other world leaders will attend in Glasgow, Scotland, in November.

“I think the industry is on a fast road to electrification,” Ford’s executive chairman, William C. Ford Jr., said in an interview. “And those who aren’t are going to be left behind.”

Environmentalists have long criticized automakers for not responding forcefully enough to climate change and for selling large, gasoline-guzzling trucks and sport utility vehicles. But the industry has made a hard pivot to electric vehicles in recent months because of growing environmental concern — and because of the competitive threat posed by Tesla, the dominant maker of electric cars.

Established automakers like Ford and General Motors are racing to catch up to Tesla, which is on track to sell more than 800,000 electric cars this year. Tesla has become the most valuable automaker in the world by far, with a market capitalization of nearly $800 billion. Ford’s market value is $56 billion....


Watch Out Umicore: Ford partners with battery recycling and materials startup Redwood Materials

Solar Power Export Cable From Australia to Singapore Gets Indonesia's Okay

Both Singapore and Indonesia have to be a bit concerned that dealing with Australia means dealing with a police state so here's hoping they get some sort of indemnification for said dealings.

From the Asia Times, September 25:

Sun shines on Indonesia in massive solar cable deal
Sun Cable's $21.8 billion Australia-Singapore solar power export deal will effectively pay to pass through Indonesian waters

JAKARTA – Lured by the promise of US$2.8 billion in local investments, the Indonesian government has given the go-ahead for an Australian company to lay a 4,500-kilometer high-voltage power cable through Indonesian waters on its path from the world’s biggest solar farm to Singapore and perhaps beyond.

Sun Cable’s $21.8 billion project, a joint venture between mining magnate Andrew Forrest and fellow tech billionaire Mike Cannon-Brookes, aims to meet up to about 15% of Singapore’s energy needs, which now depend solely on natural gas, and reduce its carbon emissions by six million tonnes a year.

Perth-born Forrest, 59, founder and former chief executive of the Fortescue Metals Group, and Cannon-Brookes, 41, co-founder and co-chief executive of software company Atlassian, have a collective net worth of more than $40 billion.

Forrest made his fortune in West Australia’s booming iron ore industry, but Fortescue’s reported control over vast reserves of hard-rock lithium, the mineral of the future for the electric car industry, has given him a keen interest in renewable energy.

The company, which is using solar energy to power some of its operations, recently formed a partnership with PT Adaro Energy, Indonesia’s largest coal company in East Kalimantan, to fast track the development of a global green hydrogen industry.

Indonesia will not receive any of the solar cable’s electricity, but it will benefit from the $1 billion to be spent during the construction phase, expected to run from 2024 to 2028, and another $1.5 billion on operational costs, including a marine repair base and technological transfers. 

In exchange, Sun Cable has received a development permit for the Indonesian section of the 3,750-kilometer Australia-Asia PowerLink cable through the heavily trafficked Lombok Strait and Java Sea, and expects to receive environmental clearance by 2023.

Sun Cable chief executive David Griffin says the 12,000-hectare solar farm, to be built near the town of Elliott, 400 kilometers south of the Northern Territory capital of Darwin, has been expanded to a planned 20 gigawatts (GW) with a staggering 35-42 gigawatt-hours of battery storage.....


I suppose if it came down to it I'd put Singapore's Gurkhas up against the whole lot of the Aussie cops whose only skill seems to be beating disarmed civilians. Seriously, have you seen some of the videos?


August 2020
"Australians have $16B plan to beam solar energy onto Asia's power grids"
November 2020
Guy Hands Family Office buys largest private cattle company in Australia (also the land that Singapore's electricity is supposed to be generated on)
July 2020
"Could a US$14 billion Australian solar farm provide a fifth of Singapore’s energy?"

May 22
BP Smacks Exxon Upside Head With New Green Hydrogen Scheme (can SunCable to Singapore be far behind?) 
A couple of the approaches being talked about, make hydrogen in Australia and send it to Singapore or use submarine electrical cable to carry (solar) electricity to Singapore.  

And the Gurkhas?
In 2018's "Dyson chooses Singapore for first electric car plant" I retold the story of a retired Gurkha soldier who took on 40 robbers/would-be gang rapists on his train trip home.
The group he went up against were armed with knives, firearms and swords while he had his Gurkha kukri knife.
He killed three, wounded eight and chased the other 29 off the train. The young lady was not raped.

Platts Commodity Tracker: "4 Charts To Watch This Week"

 From S&P Global Platts, September 27:

Prices of steel raw materials diverge as uncertainties hit the market amid the financial issues faced by Evergrande, China's second-largest property developer. Climate action also continues to be a strong theme across different sectors and continents ahead of COP26. 

...2. China ratchets up climate commitment ahead of pre-COP26 summit in Milan...

China energy mix

What's happening? In a pre-recorded address to the UN's General Assembly Sept. 21, China's President Xi Jinping said China would cease financing of new coal-fired power plants abroad, and step up support for other countries to develop green and low-carbon energy. He said China would also strive to ensure its own carbon emissions peak "before 2030," rather than by 2030, as previously stated. What looked like relatively modest steps could in fact be significant for the countries concerned. As of early 2021 China was supporting some 27 GW of coal-fired generation development mainly in South Asia and Southeast Asia—close to the size of Poland's entire coal fleet.

What's next? Italy is hosting this year's pre-COP summit in Milan Sept. 30—a key preparatory gathering of energy and climate ministers from up to 50 countries to frame discussions at the main event in Glasgow in November. It is not known yet whether China will attend COP26 in Glasgow, but its engagement on coal has given the UN talks a late boost. The next stage is for China, the world's biggest emitter of CO2, to detail how it intends to get to net-zero by 2060. The projected cost is eye-watering. China would need Yuan 136 trillion ($21.1 trillion) of investments—around $500 billion a year on average—to reach carbon neutrality by 2060, according to Zhang Shaogang, vice chairman of China Council for the Promotion of International Trade. To get on trajectory to meet the UN's Paris Agreement on global warming, it needs to cut nearly 70% of its coal consumption by 2050....


China's nice words mean nothing. Even verifiable reductions mean nothing if they are running a scam along the lines of their refrigerant b.s. Build a plant, get paid for the total estimated lifetime production of the greenhouse gas if you tear it down, build a plant, get paid to tear it down. They took billions off of the German hausfraus.

From December 27, 2020's "Why Is China Placing Huge (Global) Bets On Coal?":

....For some reason I can't get HFC-23 out of my head. It's a refrigerant chemical that China used to rake in billions from the Kyoto treaty signatories (read German hausfraus).

HFC-23 is 12,000 times as potent a greenhouse gas as CO2.

They would build plants to make the stuff  (as a byproduct of HFC-22) and then offer to shut them down for Kyoto cash. Based on the estimated lifetime production of the plants. Best guess is they netted $6 billion after construction costs.

After a while (years) the carbon credit people caught on and then we saw China's reaction:

"China Threatens Massive Venting of Super Greenhouse Gases in Attempt to Extort Billions as UNFCCC Meeting Approaches"

We're no  HFC-23 Johnny-come-latelys. From September 2007: 

China's Kyoto Scam = $Billions

Been calling them out for a long, long time.

German Politics and Policies: Izabella Kaminska On the German Election, Economy, and Markets

I was thinking about what the Polish-born German Communist revolutionary Rosa Luxemburg would have thought of self-proclaimed socialist Alexandria Ocasio-Cortez having a servant carry the hem of her dress as she walked the carpet to her waiting SUV and concluded that Luxemburg would have slapped AOC silly.

The servant wore a corona mask, as did all the servants at the Met Gala, while the attendees gamboled without facial coverings.

Because I was thinking about Luxemburg my mind was already primed for a move to the left in German politics. In fact I was thinking pretty far to the left. In the 1920's Berlin was the second "Reddest" capital in Europe, second only to Moscow, and though the German civil war of 1919 had ended with the formation of a republic things were very much in flux. The formation of the communist/socialist/whatevs paramilitary street thug organization, the Roter Frontkämpferbund in 1924 was an indication of how close Berlin was to emulating Moscow.

So with all this running through my head, the first thing I saw regarding German politics on Monday was that the referendum to expropriate and socialize Berlin apartments from Germany's largest landlord had passed. Although the referendum is not binding on the Berlin government the result 57% ja/39% nein is one heck of an indication of the political zeitgeist.

And with that background here is the editor of the Financial Times' Alphaville property: 
What do the German election results mean for markets?
Whatever the coalition talks muster, a revolutionary spirit is in the making in Germany. 
The German elections have corroborated what much of the European establishment already suspected: that the country’s political compass had splintered greatly in the last few years. For those not abreast of the latest, Merkel’s CDU/CSU — now fronted by Armin Laschet — narrowly lost out to the Social Democrats over the weekend. But the biggest takeaway of the vote has been the diminishing size of the collective centrist vote, with results that looked like this:

It is only now that the hard work of forging a three-party coalition begins. But while the fragmentation is unlikely to be news for eagle-eyed politics watchers, Helen Thomas, founder and CEO of analysis firm Blonde Money, has been warning for months that markets have been failing to account for the possibility of a greener and more-left leaning German political establishment from October onwards....


Capital Markets: "Soaring Energy Prices Lift Yields, Weigh on Equities and the Greenback Pops"

 From Marc to Market:

Overview: Rising energy prices and yields are helping lift the US dollar and weighing on equities. November WTI has pushed above $76, while Brent traded above $80, and natural gas is up for the fourth consecutive session, during which time it has risen by about 25%. The US 10-year yield has surged to almost 1.53%, up more than 20 bp since the middle of last week. Near 32 bp, the US 2-year yield is at a new 18-month high. European yields are 3-5 bp higher, with UK, Sweden, and Swiss benchmark yields at new three-month highs. Outside of China and Hong Kong, most Asia Pacific bourses finished lower. More than 1% declines were recorded in Australia, South Korea, and the Indian market. The Dow Jones Stoxx 600 in Europe is also off more than 1.5% today, its third consecutive fall. The NASDAQ futures are off 1.6% near midday in Europe, while the S&P 500 futures are trading almost 1% lower. The dollar has popped higher. The euro approached the low for the year (~$1.1665), and the greenback has neared the high for the year against the yen (~JPY111.65). The Antipodeans and Norwegian krone are the weakest of the majors. The euro and Canadian dollar are the most resilient today. The emerging-market currency complex is under pressure, and the JP Morgan EM FX Index is down the third session and seven of the past 10 to move within striking distance of the year's low. Rising yields have sapped gold, trading around $20 off yesterday's high near $1760. Iron ore is giving back yesterday's 2.8% gain, and copper is off 1%. The CRB reached new five-year highs yesterday and extended its advance for the fifth consecutive session.

Asia Pacific
Industrial profits in China rose 10.1% year-over-year in August, down from 16.4% in July.
It matches the lows since May 2020. Commodity producers in the coal and oil/gas sectors reported profits above 200% from a year ago. On the other hand, electricity and heat producers reported a 15.3% drop in January-August profits. With the economy losing its forward momentum, the case for easier PBOC policy has been heard, and the squeeze on industrial profits adds to the argument, with a cut in reserve requirements the favored tool.

Local governments reportedly are taking more control of parts of Evergrande, and many observers are shifting the focus from debt to energy. Power outages, higher prices, and factory shutdowns are thought to surpass the finances of the property developer to bedevil Beijing and investors.
Two major forces are at work. The first is Beijing's attempt to meet emission targets, and this means to curtail production in the energy and pollution-intensive sectors, like steel, aluminum, and cement. The second is the rise in prices to distribute the scarcity of oil and gas. Utilities have not been permitted to pass on the increase in coal prices to households. According to estimates, roughly 2/3 of China's electricity stems from coal and 70% of the electricity for industry.

Australia's retail sales slumped for the third consecutive month in August. However, the 1.7% month-over-month decline was smaller than expected, and the lockdowns are taking their toll.
Department stores and cafes/restaurants saw large slumps, while food and other retailing (on-line?) were more resilient. Sydney is in the 14th week of its lockdown, for example. Australia is ranked at 58th for the percentage of fully vaccinated, just ahead of the US (58th place). New South Wales and Victoria have accelerated their vaccination efforts as they prepare to re-open. Portugal is the most vaccinated at about 84% coverage, and Canada has surpassed the 70% vaccination rate. The Reserve Bank of Australia meets next week. Earlier this month it proceeded with its tapering but extended its bond-buying through mid-February, understood to be a three-month extension. 

 Rising US yields are lifting the dollar against the yen for the fifth consecutive session....


Monday, September 27, 2021

Dear Fellow Members Of The Laptopocracy: You Did Not Have A Bad Day....

....This is a bad day.

From SciTechDaily:

As the inhabitants of an ancient Middle Eastern city now called Tall el-Hammam went about their daily business one day about 3,600 years ago, they had no idea an unseen icy space rock was speeding toward them at about 38,000 mph (61,000 kph).

Flashing through the atmosphere, the rock exploded in a massive fireball about 2.5 miles (4 kilometers) above the ground. The blast was around 1,000 times more powerful than the Hiroshima atomic bomb. The shocked city dwellers who stared at it were blinded instantly. Air temperatures rapidly rose above 3,600 degrees Fahrenheit (2,000 degrees Celsius). Clothing and wood immediately burst into flames. Swords, spears, mudbricks, and pottery began to melt. Almost immediately, the entire city was on fire.

Some seconds later, a massive shockwave smashed into the city. Moving at about 740 mph (1,200 kph), it was more powerful than the worst tornado ever recorded. The deadly winds ripped through the city, demolishing every building. They sheared off the top 40 feet (12 m) of the 4-story palace and blew the jumbled debris into the next valley. None of the 8,000 people or any animals within the city survived – their bodies were torn apart and their bones blasted into small fragments.

About a minute later, 14 miles (22 km) to the west of Tall el-Hammam, winds from the blast hit the biblical city of Jericho. Jericho’s walls came tumbling down and the city burned to the ground.

It all sounds like the climax of an edge-of-your-seat Hollywood disaster movie. How do we know that all of this actually happened near the Dead Sea in Jordan millennia ago?....


So...blinded first, then your meatsack body begins to boil, then you are sandblasted to dust and what's left ends up spread over dozens of square miles along with the dust that used to be family and friends..

That's a bad day.

The whole paper in Nature is pretty amazing.

"Suppliers in China for Apple, Tesla, Intel, Nvidia, Qualcomm, NXP, Infineon, ASE Forced to Halt Production amid Energy Crackdown"

 From Wolf Street, September 26: 

The Everything Shortage keeps promising to keep getting worse.

Amid China’s many crackdowns is a crackdown on energy consumption, motivated by a slew of reasons, including most pressingly, spiking prices for coal and natural gas, particularly Liquefied Natural Gas. China is the second largest importer of LNG behind Japan. As Europe and Asia compete for supply, the price of LNG for November delivery to Japan and Korea has exploded to $27.45 per million British thermal units on the NYMEX, up from the $6-range a year ago (chart via CME Group):

In addition to the spike in energy prices, there are the government’s efforts to reduce emissions and to tamp down on the growth of energy consumption. To that effect, China has imposed a number of policies. The crackdown on bitcoin mining falls into this category.

This crackdown on energy consumption, handed down from Beijing to provinces and cities, is now taking the form of suspensions or reductions of industrial electricity supply that manufacturers in numerous industries are hit with, including key facilities that produce components for Apple, Tesla, Intel, Nvidia, Qualcomm, NXP, Infineon, and ASE Tech, along with many smaller manufacturers. They’re now under orders to temporarily halt production.

The provinces that haven’t lived up to Beijing’s demands to reduce total energy consumption are having to hand out suspensions of industrial electricity supply; they include the provinces of Liaoning, Jilin, and Heilongjiang, according the Nikkei Asia. Jiangsu, Zhejiang, Guangdong, and other provinces are subject to restrictions on industrial electricity supply.

Production halts now starting at...

On Sunday, Taiwanese companies with manufacturing operations in China disclosed in filings with the Taiwan stock exchange, cited by the Nikkei Asia, that they have to halt operations at some of their plants in China:

Eson Precision Engineering, an affiliate of Foxconn and a key mechanical parts supplier for Apple and Tesla, disclosed in a filing with the Taiwan stock exchange on Sunday that it would suspend its production from Sunday until Friday at its facilities in the city of Kunshan, Jiangsu Province, in response to the city’s policy of stopping electricity supply for industrial use.

“The company will leverage its inventory to maintain the operation while production is halted,” Eson said in the filing. “We expect to arrange production on the weekends or in the upcoming holidays [next month] to meet customers’ needs.”

Unimicron Technology, a print circuit-board maker and Apple supplier, disclosed in filing with the Taiwan stock exchange that its subsidiaries in Suzhou and Kunshan, both in Jiangsu Province, would stop production from Sunday until the end of September. It said it would mobilize production capacity in its other manufacturing sites to mitigate the impact.

Concraft Holding, which makes iPhone speaker components and owns manufacturing facilities in Suzhou, Jiangsu Province, disclosed in a filing with the Taiwan stock exchange that it would suspend production from Sunday through Thursday and rely on its inventory to support demand.

Chang Wah Technology, a leading chip-packaging material maker supplying NXP, Infineon, and ASE Tech Holding, disclosed in a filing with the Taiwan stock exchange on Sunday that it has to halt production from Sunday through the end of the September.

Nikkei Asia, citing sources, said that the facilities in Jiangsu Province of several chip packaging and testing service providers that supply Intel, Nvidia, and Qualcomm also received notices to suspend production.....


"Nuclear reactions are smoldering again at Chernobyl"

 From the journal Science, May 5, 2021:

‘It's like the embers in a barbecue pit.' Nuclear reactions are smoldering again at Chernobyl
Slow rise in neutrons stirs concerns about possible “criticality” accident 

Thirty-five years after the Chernobyl Nuclear Power Plant in Ukraine exploded in the world's worst nuclear accident, fission reactions are smoldering again in uranium fuel masses buried deep inside a mangled reactor hall. "It's like the embers in a barbecue pit," says Neil Hyatt, a nuclear materials chemist at the University of Sheffield. Now, Ukrainian scientists are scrambling to determine whether the reactions will wink out on their own—or require extraordinary interventions to avert another accident.

Sensors are tracking a rising number of neutrons, a signal of fission, streaming from one inaccessible room, Anatolii Doroshenko of the Institute for Safety Problems of Nuclear Power Plants (ISPNPP) in Kyiv, Ukraine, reported last week during discussions about dismantling the reactor. "There are many uncertainties," says ISPNPP's Maxim Saveliev. "But we can't rule out the possibility of [an] accident." The neutron counts are rising slowly, Saveliev says, suggesting managers still have a few years to figure out how to stifle the threat. Any remedy he and his colleagues come up with will be of keen interest to Japan, which is coping with the aftermath of its own nuclear disaster 10 years ago at Fukushima, Hyatt notes. "It's a similar magnitude of hazard."

The specter of self-sustaining fission, or criticality, in the nuclear ruins has long haunted Chernobyl. When part of the Unit Four reactor's core melted down on 26 April 1986, uranium fuel rods, their zirconium cladding, graphite control rods, and sand dumped on the core to try to extinguish the fire melted together into a lava. It flowed into the reactor hall's basement rooms and hardened into formations called fuel-containing materials (FCMs), which are laden with about 170 tons of irradiated uranium—95% of the original fuel.

The concrete-and-steel sarcophagus called the Shelter, erected 1 year after the accident to house Unit Four's remains, allowed rainwater to seep in. Because water slows, or moderates, neutrons and thus enhances their odds of striking and splitting uranium nuclei, heavy rains would sometimes send neutron counts soaring. After a downpour in June 1990, a "stalker"—a scientist at Chernobyl who risks radiation exposure to venture into the damaged reactor hall—dashed in and sprayed gadolinium nitrate solution, which absorbs neutrons, on an FCM that he and his colleagues feared might go critical. Several years later, the plant installed gadolinium nitrate sprinklers in the Shelter's roof. But the spray can't effectively penetrate some basement rooms.

Chernobyl officials presumed any criticality risk would fade when the massive New Safe Confinement (NSC) was slid over the Shelter in November 2016. The €1.5 billion structure was meant to seal off the Shelter so it could be stabilized and eventually dismantled. The NSC also keeps out the rain, and ever since its emplacement, neutron counts in most areas in the Shelter have been stable or are declining.

But they began to edge up in a few spots, nearly doubling over 4 years in room 305/2, which contains tons of FCMs buried under debris. ISPNPP modeling suggests the drying of the fuel is somehow making neutrons ricocheting through it more, rather than less, effective at splitting uranium nuclei. "It's believable and plausible data," Hyatt says. "It's just not clear what the mechanism might be."....


HT: The History of Yesterday at Medium, September 17:

"Private Communication Between Managers and Financial Analysts: Evidence from Taxi Ride Patterns in New York City"

From the "Obscure Data Sources That May Be Exploitable For A While" file.


From Columbia Law School's CLS Blue Sky blog, September 24:

Firm managers spend substantial time meeting privately with analysts and investors (e.g., Thomson Reuters 2009; Soltes 2014; Brown, Call, Clement, and Sharp 2015; Bushee, Gerakos, and Lee 2018). As evidenced by a wealth of anecdotes and surveys, such private communications are now found everywhere, becoming an important source of information to sell-side analysts (Brown et al. 2015). Despite the importance of these off-line, non-public interactions, however, little is known about the timing, nature, and value of private communications, primarily due to the data limitations inherent in their private nature. This study seeks to fill this gap by constructing a unique proxy for unobservable, face-to-face private meetings between managers and sell-side analysts from New York City’s (NYC) daily taxi trip records.

The NYC Taxi and Limousine Commission (TLC) collects pick-up and drop-off dates and times of all daily taxi trips in NYC, along with their precise pick-up and drop-off locations. We identify the presence and timing of private meetings by mapping these detailed, large-volume taxi trip records to the GPS coordinates of companies in Compustat and brokerages in I/B/E/S. All identified taxi trips represent ex-ante unobservable private communications, as TLC uploads monthly taxi trip records with a six-month lag. Thus, analyzing taxi rides provides a unique setting to study private communications that have the potential to increase information gaps between participants and others who are left unaware of the occurrence of these private meetings.

We first validate our measure by showing that ride volumes increase significantly around earnings announcement dates (hereafter, EAD) and reach their peak on the day of the earnings announcement. The increase is economically meaningful; the weekly mean of ride volumes around EAD increases by 7.2 percent compared with four weeks before EAD. Moreover, consistent with taxi rides capturing sell-side analysts’ activities, we find that the magnitude of increases in ride volumes between a company and broker is significantly greater for brokers having analyst coverage of companies than for those without such coverage.

Using the validation analyses as a starting point, we examine the value of private communications. While managers have limited ability to convey material non-public information to analysts in private settings under Regulation Fair Disclosure (Reg FD), the unclear definition of materiality allows managers considerable leeway in helping analysts fill in their “mosaic view” of the companies (SEC 2000). Thus, private communications may improve the accuracy of analysts’ earnings forecasts and enhance the quality of their stock recommendations by providing analysts with likely non-material pieces of information that can become material, when taken together, within the context of other public and private information that they already have. For example, private communications around EAD could provide analysts with additional details and contexts into firm news and future developments, enabling them to better understand the implications of current earnings signals for future earnings (SEC 2002). Consistent with our prediction, we find that private meetings around EAD are significantly negatively associated with analysts’ earnings forecast errors issued in the post-EAD period and positively associated with the profitability of recommendations issued after EAD (but these effects dissipate over longer horizons).

While our findings do not speak directly to whether managers violate Reg FD (and that is not the purpose of this study), it is certainly possible that analysts obtain material information during the in-person communications....

....MUCH MORE (some excellent references)

"Bond Bloodbath Continues: 30Y Yield Tops 2.00%, 2Y Yield Highest Since March 2020"

This is such a tricky game we play. Macro theory says we get a stronger currency with higher yields. Until we don't. Because macro theory also says higher inflation gives us a weaker currency,

And catching that inflection point is critical to all the commodity bets denominated in dollars.

As the old-timers used to say: "Pay attention or pay the offer."

From ZeroHedge:

Following the hotter than expected durable goods headline data, 30Y Yields briefly spiked up to almost 2.05%, but fell back on the core data - although they are still holding above 2.00%

Source: Bloomberg

This has been a key level to watch in recent months...

Source: Bloomberg

The short-end of the curve is really suffering with 2Y back above Fed Funds and at its highest level since March 2020 (and 10Y back above 1.50%)....


Capital Markets: "Quiet but Nervous Start to the New Week"

Nervous, jittery, out of sorts. It was ever thus.*

From Marc Chandler at Bannockburn Global Forex:

Overview: The dollar has begun the new week on a firm note, rising against most major and emerging market currencies. Sterling and the Canadian dollar are the most resilient, while the euro has been sold back below $1.1700, and the greenback is nearing JPY111.00. The US 10-year yield is up another four basis points to 1.49%. European yields are also 2-4 bp higher. Oil prices have risen to new highs, with November WTI straddling $75. Natural gas is up more than 3% for the third consecutive session. Gold extended its recovery but ran into a wall of sellers above $1760 and has returned to below $1750 near midday in Europe. Iron ore is traded higher in China for the third session, and it gained in Singapore for the fifth session. Copper has come back lower after gaining nearly 1% last week. Equities in the Asia Pacific region were mixed, with Tokyo, Shanghai, and Shenzhen lower. Europe's Dow Jones Stoxx 600 snapped a three-week drop last week and is posting small gains today. US futures are trading with a modest upside bias.

Asia Pacific
China's "cultural revolution" may be turning to finance.
Reports suggest the anti-corruption campaign will start "routine" inspections fo [sic] 25 financial institutions, including the four large asset managers, including Huarong. The focus reportedly is on "political awareness gaps." Separately, the energy crisis is broadening. Households in several northern areas have suffered blackouts, and reports claim traffic lights were being turned off in Guangdong. Some provinces have ordered industrial cuts to meet emissions and energy-use goals. For others, there is a genuine lack of electricity due to rising coal and natural gas prices. This could further weaken output measures of the world's second-largest economy and could excite price pressures.

Before the weekend, a deal was struck that allowed the release of Huawei's Meng and the two Canadian's that Beijing nabbed in retaliation (Spavor and Kovrig). Press reports say that China's Xi was directly involved, seemingly underscoring the political nature of the developments, but can it be forgotten that then President Trump said he would have the charges against Meng dropped in exchange for a trade deal. It seems the more relevant question is about the timing of the agreement. It follows the first call between Biden and Xi in several months. The US initiated the call and seemed to be the first to move on the "prisoner exchange." It is also notable that the "swap" was made after the Canadian election.

This is a busy week for Japan, though it begins slowly. On Wednesday, the LDP will choose a new leader. Kono appears to be the favorite. However, there are two issues for which there seems to be a strong agreement. First, a large fiscal package that could be as large as JPY30 trillion (~$270 bln) will be assembled. While most other large economies are poised to reduce fiscal support, Japan is moving in the other direction. Second, several wings of the LDP have been advocating stronger defense for years, and China's aggressiveness in the region is providing a fresh impetus. The highlights of the high-frequency data this week include August industrial production, retail sales, employment, and on October 1 in Tokyo, the Q3 Tankan Survey. 

 Rising US yields are helping the dollar extend its gains against the Japanese yen....




Sunday, September 26, 2021

"Should the Climate Movement Embrace Sabotage?"

From The New Yorker, September 24:

The New Yorker Radio Hour

....Also, Professor Andreas Malm, who studies the relationship between climate change and capitalism, insists that the environmental movement reconsider its roots in nonviolence.

How to Blow Up a Pipeline
Andreas Malm insists that the environmental movement rethink its roots in nonviolence and instead embrace “intelligent sabotage.”
Also at the New York Times, January 22:
By Andreas Malm
200 pp. Verso. Paper, $19.95.

In September 2019, millions of people around the world participated in nonviolent demonstrations demanding action on climate change. Over and over again, politicians and business leaders have said that we face an existential threat. And yet, from 2017 to 2019 investments in new fossil fuel infrastructure projects have grown. To become profitable (and then some), these new projects will pump more greenhouse gases into the atmosphere for decades.

Meanwhile, the polar icecaps melt, sea levels rise, hundreds of thousands of species may go extinct, fires rage, hurricanes boil, people continue to suffer and die.

“To say that the signals have fallen on the deaf ears of the ruling classes of this world would be an understatement. If these classes ever had any senses, they have lost them all,” writes Malm, a Swedish professor of human ecology and climate change activist, in his compelling but frustrating treatise.

A proportionate and rational response, Malm argues, should be to target fossil fuel infrastructure: Destroy fences around a power plant; occupy pipeline routes, as protesters did for the Keystone XL and Dakota Access pipelines; at coal mines or similar sites, set up climate camps, which Malm believes are effective as laboratories for activism and for shutting things down by putting bodies on the line.

He also advocates powerfully against despair and powerlessness. One of the most satisfying parts of his book comes when he brutally dispatches with “climate fatalists” like Jonathan Franzen, who argue that we should all just give up. “Climate fatalism is for those on top,” Malm writes. “Its sole contribution is spoilage.”

So Malm wants us to fight back (though I should add that there aren’t any actual instructions here about how to blow anything up).

He argues that there should be room for tactics other than strict nonviolence and peaceful demonstrations — indeed, he is a bit contemptuous of those who offer strategic pacifism as a solution — and notes that fetishizing nonviolence in past protest movements sanitizes history, removing agency from the people who fought, sometimes violently, for justice, freedom and equality.

Sure. But the problem with violence, even if it’s meant only to destroy “fossil capital,” is that ultimately it’s impossible to control.

"Norwegians celebrate end of COVID restrictions"

 Joining the Danes and Swedes.

From The Barents Observer, September 24:

Bars and nightclubs are expecting a mass influx of guests as the Nordic country announces a full reopening of society. More than 90 percent of the adult population is now vaccinated. 

“The one meter distance rule does no longer apply and we can be together the way we used to,” Prime Minister Erna Solberg said in a press conference on Friday.

“We remove restrictions on the number of people that can assembly in public places and events and there will no no more limitations in restaurants and cultural institutions,” she added.

More than 1,5 years after the COVID-19 came to the country, Norway takes a big step toward normality.

The new rules come into force on Saturday 25th September at 4 pm.

The decision was met by rejoice in the restaurant industry and cultural sector, and a big number of people is this weekend expected to to go party.

Norway has recently experienced a significant drop in the number of new coronavirus cases and only few people are now hospitalised because of COVID. At the same time, the lion’s share of the population is now fully vaccinated.

As of the 24th of September, 90,6 percent of people over 18 have got at least one jab of the vaccine. A total of 83,6 percent have got two jabs, figures from the Norwegian Institute of Public Health show. Also most children over 12 have now gotten one jab....


Meanwhile at Brown University, one of the Ivy League schools, despite a 98% vaccination rate the administration has suspended in-person gatherings. Brown has had a medical school for over 200 years.

I don't know if they still use leeches.

Watch Out Umicore: Ford partners with battery recycling and materials startup Redwood Materials

Umicore is one of the world's major exotic metals recyclers.

From TechCrunch,

Ford Motor has tapped Redwood Materials to create a closed loop system for its upcoming deluge of electric vehicles — a partnership that will cover recycling production scrap and EVs at the end of their life as well as supplying the automaker with raw battery materials.

The deal comes as Ford adds more electric vehicles to its portfolio, including the Mustang Mach E that launched last year and the upcoming F-150 Lightning pickup truck. Securing a supply of batteries — or the materials to make them — has prompted the automotive industry to partner with cell manufacturers and increasingly turn to companies like Redwood Materials.

Ford alone will require a hefty supply. The company’s global plans for battery electric vehicle calls for at least 240 gigawatt hours of battery cell capacity by 2030, according to the automaker. That is roughly 10 plants’ worth of capacity. Ford has previously said that 140 GWh will be required in North America, with the balance dedicated to other regions, including Europe and China.

“Closing the loop for us in our end-of-life products and allowing those to re enter the supply chain will help us drive down costs,” Lisa Drake, Ford’s chief operating officer in North America, said during a press briefing. “Of course, it’ll help us reduce the reliance on importing a lot of the materials that we use today when we build the batteries. And then it’ll reduce the mining of raw materials, which is going to be incredibly important in the future as we start to scale on this space.”

All of this, Drake says, will made EVs cheaper and more sustainable.

Redwood Materials recycles scrap from battery cell production and consumer electronics like cell phone batteries, laptop computers, power tools, power banks, scooters and electric bicycles. The company, which was founded and is led by former Tesla CTO JB Straubel....


Straubel was more than just Chief Technical Officer at Tesla. He was part of the company's founding team and more than anyone got the batteries and gigafactory into mass production