Thursday, March 30, 2023

Ray Kurzweil: "Humans will achieve immortality in eight YEARS..."

The Daily Mail headline continues: "....says former Google engineer who has predicted the future with 86% accuracy". That is a VERY problematic statement. Read more after the jump, if one is so inclined.

From the DM, March 28:

  • Ray Kurzweil predicts nanobots will help achieve human immortality
  • The technology will repair cells and tissues that deteriorate as the body ages

A former Google engineer has made a stark realization that humans will achieve immortality in eight years - and 86 percent of his 147 predictions have been correct.

Ray Kurzweil spoke with the YouTube channel Adagio, discussing the expansion in genetics, nanotechnology, and robotics, which he believes will lead to age-reversing 'nanobots.' 

These tiny robots will repair damaged cells and tissues that deteriorate as the body ages and make us immune to diseases like cancer.

The predictions that such a feat is achievable by 2030 have been met with excitement and skepticism, as curing all deadly diseases seems far out of reach.

Kurzweil was hired by Google in 2012 to 'work on new projects involving machine learning and language processing,' but he was making predictions in technological advances long before.

In 1990, he predicted the world's best chess player would lose to a computer by 2000, and it happened in 1997 when Deep Blue beat Gary Kasparov.  

Kurzweil made another startling prediction in 1999: he said that by 2023 a $1,000 laptop would have a human brain's computing power and storage capacity.

Now the former Google engineer believes technology is set to become so powerful it will help humans live forever, in what is known as the singularity....


 We have a lot of posts on Mr. Kurzweil. Here's one from 2012:

"The Ray Kurzweil Show, Now at the Googleplex" (GOOG)

Last year I mentioned some of the problems with Mr. Kurzweil's predictive abilities which a couple years ago he said were running "102 for 108".

The easiest critique is stuff like a linear extension of current trends. No real insight there.
(more after the jump)

One that he's going to have to put in the miss column is from June 2008: "Ray Kurzweil: Cost Competitive Solar Within Five Years". Here he makes a rookie mistake violating the admonition given to all junior analysts:
"If you are going to publicly call a price, for God's sake don'!"
When all is said and done though, Ray has a bigger brain than I and gets stories about him published under the subject heading:
Among the stranger things Ray Kurzweil will say to your face is that he intends to bring his father back to life. The famed inventor has a storage locker full of memorabilia—family photographs, letters, even utility bills—tied to his father, Fredric, who died in 1970. Someday, Kurzweil hopes to feed this data trove into a computer that will reconstruct a virtual rendering of dear old Dad. “There is a lot of suffering in the world,” Kurzweil once explained. “Some of it can be overcome if we have the right solutions.”

Kurzweil, 64, has spent many of the past 40 years exploring his theories on life extension and other matters from a lab in Boston. Now he’s taking the show on the road. In mid-December, Kurzweil announced he’s moving to California to begin his new job as a director of engineering at Google (GOOG). He’ll work on language processing, machine learning, and other projects. “I’m thrilled to be teaming up with Google to work on some of the hardest problems in computer science so we can turn the next decade’s ‘unrealistic’ visions into reality,” Kurzweil posted on his website.

He’s not the first senior technology celebrity Google has hired. Internet pioneer Vint Cerf often shows up at events in three-piece suits as an “evangelist” for the search giant, while Hal Varian, founding dean of the School of Information at the University of California at Berkeley, is now chief economist.

There are some practical reasons Kurzweil makes sense at Google. He was a coding prodigy who, as a youngster, taught computers to play music and predict the best colleges for high school students. Later he built a line of sophisticated music synthesizers and early scanners and then worked on artificial intelligence software for Wall Street equities traders. “Ray Kurzweil is the best person I know at predicting the future of artificial intelligence,” Bill Gates, the Microsoft (MSFT) co-founder, says on the jacket of one of Kurzweil’s books....MORE from BusinessWeek
And from our March 2011 post "Solar: Kurzweil Sees Energy Need Met In 16 Years":
...Here is some of the back-and-forth on Mr. Kurzweil's predictions. In 2010 he said he was batting 102 of 108 which raises the question: Is he predicting the inevitable?
A simple example would be "smaller computers". A prognosticator doesn't get any points from me on that type of prediction.

First up, the brainiacs at IEEE Spectrum:
Ray Kurzweil's Slippery Futurism

Techi's headline is:
Ray Kurzweil's Tech Predictions Have Been Eerily Accurate

Kurzweil fans SingularityHub write:
Kurzweil Defends Predictions for 2009, Says He is 102 for 108.

Finally, Next Big Future has a response from Ray and an update from a skeptic:
Ray Kurzweil Responds to the Issue of Accuracy of His Predictions
Update: Ray Kurzweil’s January 17th, 2010 response to this is posted below my initial post. He said, “your review is biased, incorrect, and misleading in many different ways”....
More than you cared to know?
There are many, many more:
...Instead, humans will assimilate machines.
And related:
"Are we heading towards a singularity of crime?"

"Fisher Investments Moves to Texas Over Taxes"

Though not as big a deal as Citadel leaving Chicago, this is still a signpost on the way to a very different country. Fisher has been over $200 Billion in Assets Under Management. 

$173,418,270,044 as of the most recent Form ADV, March 27, 2023

From Barron's, March 28:

Fisher Investments is relocating its headquarters from Washington state to Texas in the wake of a court ruling that paves the way for a capital gains tax in Washington.

The wealth and investment management firm announced Friday it was moving to Texas, where it already has an office in Plano, a suburb of Dallas. Since 2015, Fisher Investments’ headquarters have been in Camas, Wash.

Fisher Investments’ announcement came the same day that Washington’s State Supreme Court ruled that a capital gains tax approved by lawmakers in 2021 was constitutional. Implementation of the tax had been held up by legal challenges.

“In honor of the Washington State Supreme Court’s wisdom and knowledge of the law, and in recognition of whatever it may do next, Fisher Investments is immediately moving its headquarters from Washington State to Texas,” Fisher said in a statement.

A company representative did not respond to a request for additional comment.

The capital gains tax applies only to individuals and profits above $250,000 per year, according to the state’s Department of Revenue. The tax does not apply to real estate or assets held in retirement accounts....


Another shop we follow, deep value (sometimes very deep value) mavens Smead Capital Management left Washington State a few years ago:

Factor Investing: "When Quality Fails"

....Along the way we also had a story about Smead Capital with this introduction: 

Seattle Real Estate Not a Good Bet

The news that the city is going to shut-down CHAZ CHOP is not going to be nearly enough to save Seattle.
Amazon and Microsoft have been the engine of growth, in a way similar to Silicon Valley where the whole world is funneling money into a small geographical area and in the case of Amazon with coronavirus we've just seen the high-water mark for this cycle.
Like so many societies throughout history getting wealthy means getting flabby, with politics and programs that a poorer, hungrier society can't afford.

Looking at a third metro area, Minneapolis' heyday was roughly 1880 - 1980 with the northern tier railroads, Great Northern and Northern Pacific and the heavyweight ag businesses, Pillsbury, General Mills etc. giving way to first round tech, Medtronic and St. Jude Medical, Control Data and Cray Research and then stagnation into a violent* little backwater, coasting on accumulated capital and slowly becoming irrelevant on the world stage except as a chokepoint for soybeans and corn being sent down the Mississippi or up to Duluth and eventually the Atlantic.

Seattle was touted as heaven-on-earth with the $15.00 minimum wage for restaurant workers but the touts never mentioned that it was only because of Amazon that it was possible.
And now those jobs are no more and 50% of them will not come back.
For a while Seattle had more construction cranes than New York and even London but those days are gone and here's the rest of the story from Phoenix's KTAR news:

Due to Seattle’s unrest, billion-dollar investment firm moving to Phoenix....

When quality fails.

Media: Izabella Kaminska, Vulture Capitalist

Actually, vulture capitalist is just the term-of-art. What she is describing is the need for Job-ian patience combined with the reflexes of a rattlesnake when the time to strike is at hand.

From her Twitter timeline:

Tend to agree with @RobinWigg on this. It would be very cool if journalists could club together to create their own platform in a way that does not require dodgy billionaires, states or crypto to underwrite it. But Substack has too many legacy liabilities/sunk costs to make this work - new retail buyers will just be propping up the corp until an IPO (that will likely never happen). 

The writers would be better off starting afresh, ideally by forging a legal partnership that then waits on the sidelines until Substack collapses. Then they could sweep in to acquire the infrastructure, databases etc for $1 or less -- and restructure the business model in a way that makes it actually work....

....MUCH MORE, including a commenter who refers to Semafor without mentioning Bank-man-Fried or the Chinese influence group.

Like Warren Buffett in early September 2008, biding his time to make a bid for something, doing an hour's worth of research and swooping on Constellation Energy on the 18th of that crazy, crazy month, I too watch and wait, coiled and ready:

So there I am, glancing at NVIDIA, biding my time like the panther waiting to pounce, $135, come on now, just a little bit closer and What. The. Hell?
Okay, maybe not really waiting to pounce, maybe waiting for something to land within a few inches.
So I don't over-exert myself:

"A $3 Trillion Threat to Global Financial Markets Looms in Japan"

Do not forget about Japan.

From Bloomberg via Yahoo Finance, March 29:

Bank of Japan Governor Haruhiko Kuroda changed the course of global markets when he unleashed a $3.4 trillion firehose of Japanese cash on the investment world. Now Kazuo Ueda is likely to dismantle his legacy, setting the stage for a flow reversal that risks sending shockwaves through the global economy.

Just over a week before a momentous leadership change at the BOJ, investors are gearing up for the seemingly inevitable end to a decade of ultra-low interest rates that punished domestic savers and sent a wall of money overseas. The exodus accelerated after Kuroda moved to suppress bond yields in 2016, culminating in a mountain of offshore investments worth more than two-thirds Japan’s economy.

All this risks unraveling under the new governor Ueda, who may have little choice but to end the world’s boldest easy-money experiment just as rising interest rates elsewhere are already jolting the international banking sector and threatening financial stability. The stakes are enormous: Japanese investors are the biggest foreign holders of US government bonds and own everything from Brazilian debt to European power stations to bundles of risky loans stateside.

An increase in Japan’s borrowing costs threatens to amplify the swings in global bond markets, which are being rocked by the Federal Reserve’s year-long campaign to combat inflation and the new danger of a credit crunch. Against this backdrop, tighter monetary policy by the BOJ is likely to intensify scrutiny of its country’s lenders in the wake of recent bank turmoil in the US and Europe.

A change in policy in Japan is “an additional force that is not being appreciated” and “all G-3 economies in one way or the other will be reducing their balance sheets and tightening policy” when it happens, said Jean Boivin, head of the BlackRock Investment Institute and former Deputy Governor of the Bank of Canada. “When you control a price and loosen the grip, it can be challenging and messy. We think it’s a big deal what happens next.”

The flow reversal is already underway. Japanese investors sold a record amount of overseas debt last year as local yields rose on speculation that the BOJ would normalize policy.

Kuroda added fuel to the fire last December when he relaxed the central bank’s grip on yields by a fraction. In just hours, Japanese government bonds plunged and the yen skyrocketed, jolting everything from Treasuries to the Australian dollar.

“You’ve already seen the start of that money being repatriated back to Japan,” said Jeffrey Atherton, portfolio manager at Man GLG, part of Man Group, the world’s biggest publicly traded hedge fund. “It would be logical for them to bring the money home and not to take the foreign exchange risk,” said Atherton, who runs the Japan CoreAlpha Equity Fund that’s beaten about 94% of its peers in the past year....


Raghuram G. Rajan: "The Fed’s Role in the Bank Failures"

Professor Rajan is one of the few central bankers who seems to know what's what (except maybe for the RBI currency switcheroo of November 2016. That was a fustercluck).

I don't know his co-author (NYU-Stern) on this piece, from Project Syndicate, March 28:

There are four reasons to worry that the latest banking crisis could be systemic. For many years, periodic bouts of quantitative easing have expanded bank balance sheets and stuffed them with more uninsured deposits, making the banks increasingly vulnerable to changes in monetary policy and financial conditions. 

CHICAGO – The recent bank collapses in the United States seem to have an obvious cause. Ninety percent of the deposits at Silicon Valley Bank (SVB) and Signature Bank were uninsured, and uninsured deposits are understandably prone to runs. Moreover, both banks had invested significant sums in long-term bonds, the market value of which fell as interest rates rose. When SVB sold some of these bonds to raise funds, the unrealized losses embedded in its bond portfolio started coming to light. A failed equity offering then set off the run on deposits that sealed its fate.

But four elements of this simple explanation suggest that the problem may be more systemic. First, there is typically a huge increase in uninsured bank deposits whenever the US Federal Reserve engages in quantitative easing. Because it involves buying securities from the market in exchange for the central bank’s own liquid reserves (a form of cash), QE not only increases the size of the central-bank balance sheet, but also drives an expansion in the broader banking system’s balance sheet and its uninsured demandable deposits. 

We (along with co-authors) called attention to this under-appreciated fact in a paper presented at the Fed’s annual Jackson Hole conference in August 2022. As the Fed resumed QE during the pandemic, uninsured bank deposits rose from about $5.5 trillion at the end of 2019 to over $8 trillion by the first quarter of 2022. At SVB, deposit inflows increased from less than $5 billion in the third quarter of 2019 to an average of $14 billion per quarter during QE. But when the Fed ended QE, raised interest rates, and switched quickly to quantitative tightening (QT), these flows reversed. SVB started seeing an increase in outflows of uninsured deposits (some of which were coincident with the downturn in the tech sector, as the bank’s stressed clients started drawing down cash reserves).

Second, many banks, having benefited from the firehose of deposits, purchased liquid longer-term securities such as Treasury bonds and mortgage-backed securities, in order to generate a profitable “carry”: an interest-rate spread that provided yields above what the banks had to pay on deposits. Ordinarily, this would not be so risky. Long-term interest rates had not moved up much for a long time; and even if they did start to rise, bankers understand that depositors tend to be sleepy and will accept low deposit rates for a long time, even when market interest rates move up. The banks thus felt protected by both history and depositor complacency. 

Yet this time was different, because these were flighty uninsured deposits. Having been generated by Fed action, they were always poised to flow out when the Fed changed course. And because large depositors can coordinate easily among themselves, actions taken by just a few can trigger a cascade. Even at healthy banks, depositors who have woken up to bank risk and the healthier interest rates available at money-market funds will want to be compensated with higher interest rates. The juicy interest-rate spreads between investments and somnolent deposits will be threatened, impairing bank profitability and solvency. As an apt saying in the financial sector goes, “The road to hell is paved with positive carry.”....


Some of our posts on Professor (U.Chicago-Booth) Rajan:

February 11, 2022
Former Reserve Bank of India Head, Raghuram Rajan: "Central Banks Have to Start to Move"
«We sort of stopped thinking about countries like Italy. But if we come out of the pandemic and interest rates are not at 1% or 2%, but at 4% or 5%, what happens to public finances? Obviously, the biggest risks are always the ones you don’t see. But this is a risk we haven’t paid attention to for a long time»:
—Raghuram Rajan.

Long time readers may remember Professor Rajan from such hits as: 

Raghuram Rajan on The Boom and Bust in Farm Land Prices in the United States in the 1920s
India’s Central Bank Governor Discusses Robber-Baron Capitalism and a Fine Veg Cutlet 

Okay, I'm being a bit whimsical, the man is brilliant and I wish he was running the U.S. Fed rather than sitting in his comfy endowed chair at the Booth School of Business.

From Neue Zürcher Zeitung's, February 10:....


"The Banking Crisis Knock-On Effect Has Been a Stampede into Government Money Market Funds – Foiling the Fed’s Effort to Raise Market Interest Rates"

From Wall Street On Parade, March 27:

On Sunday, Financial Times reporters Brooke Masters, Harriet Clarfelt and Kate Duguid published an article under the headline: “Money market funds swell by more than $286bn as investors pull deposits from banks.”

This article needs some important clarifications. First is the fact that money market funds had to be bailed out by the government during both the 2008 financial crisis and the more recent financial panic of 2020 stemming from the COVID pandemic.

On September 19, 2008 (four days after Lehman Brothers was placed into bankruptcy), stocks were crashing and investors were in a panic, the Department of the Treasury announced that it would provide a guarantee for money market mutual funds, standing behind more than $3.5 trillion in money market fund assets.

In mid-March 2020, as the share prices of mega banks on Wall Street were plunging in price and investors were in another panic,  the Federal Reserve, with the required approval of the U.S. Treasury Secretary for emergency bailout programs from the Fed, established the Money Market Mutual Fund Liquidity Facility (MMLF). Under the facility, the Boston Fed made loans to various banks to purchase troubled assets from money market funds. When the Fed finally released the details of that program, Wall Street On Parade crunched the numbers and found that just six Wall Street firms received 72 percent of the $162.9 billion in cumulative loans made under the MMLF. The three largest recipients were Federated, JPMorgan Chase and Morgan Stanley. (See our full report here.)

MMLF Largest Borrowers

Most Americans are unaware that there are two vastly different kinds of money market vehicles. There is the “money market account” that one can hold at a federally-insured bank which is FDIC-insured up to $250,000 per depositor per bank. If you have multiple FDIC-insured accounts at the same bank (money market account, checking, savings, certificates of deposit), they all count toward the $250,000 insurance limit.

There is also the “money market fund” which is an uninsured mutual fund packed with short-term debt instruments of varying quality.

It was these uninsured money market funds that had to be bailed out during the 2008-2009 financial crisis on Wall Street and again during the March 2020 financial panic related to the COVID pandemic.

The Financial Times article is talking about the uninsured money market funds.

So why would Americans be flocking to these uninsured money market funds during the latest banking panic?

We found our answer in the data released by the Investment Company Institute ( According to ICI’s statistics, $276.49 billion of that $286 billion reported by the Financial Times (or a whopping 97 percent), went into a very specific type of money market fund – the kind that holds short-term debt instruments guaranteed by the U.S. government. These are referred to as “government money market funds.”....


Capital Markets: "Dollar Soft but Stretched"

From Marc Chandler at Bannockburn Global Forex:

Overview: While bank stress seems to continue to ease, the dollar languishes against most of the major currencies. The Japanese yen is the notable exception. It is off about 1.5% this week. The Dollar Index has given back the gains scored at the end of last week but remains inside the range set last Thursday and Friday (~101.90-102.35). Perhaps the participants are waiting for Friday. In addition to month-, quarter, and fiscal-year ends, it is jammed with important data points: China's PMI, Tokyo's CPI, eurozone's CPI, and US PCE deflator.

Outside of Tokyo, the large equity markets in the Asia Pacific traded with a firmer bias earlier today, led by Australia's 1% gain. Europe's Stoxx 600 is up nearly 1% as well and bank index is up 2.3% to bring this week's recovery to about 7%. US futures are extending yesterday's gains. Europe's benchmark 10-year yields are mostly 2-3 bp lower, while the 10-year Treasury yield is flat near 3.56%. In the foreign exchange market, only the Scandis are struggling to rise against the greenback. However, the intraday momentum indicators are stretched for most of other G10 currencies. Emerging market currencies are higher (Turkey and Thailand are the exceptions), led by central and eastern European currencies today, ahead of the Latam session. Gold is firm but still consolidating inside Tuesday's range (~$1949-$1975). May WTI is trading a little higher but holding below yesterday's high near $74.35. The $74.65 area corresponds to the (61.8%) retracement of the slide since the March 7 high (~$81.05)....


Wednesday, March 29, 2023

Real Estate (Virtual): Metaverse Property Values Collapse 89% On Realization That "Virtual" "Real" Estate Is Gibberish and Stupid

The last time I looked Bankman-Fried's FTX auditors were still anchor tenants in their virtual building.

From the Wall Street Journal, March 29:

The Metaverse Is Quickly Turning Into the Meh-taverse Disney and Microsoft both closed projects tied to the digital realm this month
The metaverse, the virtual world that was the hot thing in tech less than two years ago, is facing a harsher reality.

Walt Disney Co. has shut down the division that was developing its metaverse strategies, The Wall Street Journal reported this week. Microsoft Corp. recently shut down a social virtual-reality platform it acquired in 2017. And Mark Zuckerberg, who renamed Facebook as Meta Platforms Inc. to signal his seriousness about the metaverse, focused more on artificial intelligence on an earnings call last month.

Meanwhile, the price for virtual real estate in some online worlds, where users can hang out as avatars, has cratered. The median sale price for land in Decentraland has declined almost 90% from a year ago, according to WeMeta, a site that tracks land sales in the metaverse.

Meta’s name change in October 2021 spurred excitement about metaverse experiences, products and platforms. But slow user adoption, driven in part by expensive hardware requirements and glitchy tech, and deteriorating economic conditions have put a damper on expectations the metaverse will drive meaningful revenue soon....

....Smaller companies such as Decentraland and the Sandbox where users have been able to buy virtual land and build their own worlds have seen some of the most success so far. But even so, land sales are down. The median price per square meter in Decentraland has dropped from about $45 a year ago to $5, according to data from WeMeta, the firm that tracks the sales.

A spokesperson for the Decentraland Foundation, which oversees the platform, said land sales aren’t indicative of user growth. A spokesperson for the Sandbox said all of the new land they have put up for sale over the past six months has sold out....

Related, March 12: 

"Who Killed Silicon Valley Bank?" (SIVB)

Well, after all, it was you and me.

If only we had bought into Web3, those wannabe unicorns would have had revenue that SIVB would loan against (profits? pshaw) thus generating fees enough to buy some interest rate swaps. But no, you didn't buy an AR/VR headset did you.

Don't like that explanation? Here's one: King Charles III heard from Christopher Steele that Meghan and Harry had deposited all the proceeds from "Spare" at the depository his erstwhile employer, BetterUp—where the young Duke is Chief Impact Officer—uses.

No? I guess that's the last time I use Twitter for my sources, here's the Wall Street Journal, March 12...

Silicon Valley Bank Bankruptcy And Its Impact On Energy and Energy Transitions

A deep dive from Energy Musings, March 21:

It was not the Ides of March – a day Shakespeare’s soothsayer warned Julius Caesar about, but rather Friday, March 10th in Silicon Valley. That day had a similar history – especially for cleantech startups. On that “Black Friday,” Federal Deposit Insurance Corporation (FDIC) officials seized the assets of tech’s “artery for finance,” the Silicon Valley Bank (SVB), the nation’s 16th largest bank. Days before, the bank’s CEO Gregory Becker told a technology investment conference in San Francisco that the outlooks for technology and his bank were “bright.” At the same time, investment rating firm Moody’s called for a meeting to tell SVB management it was considering downgrading the credit rating to “junk” status. That call had set off a scramble to raise new capital to help stem a wave of depositor withdrawals and shore up SVB’s balance sheet. The day before Black Friday, the volume of withdrawal requests exceeded the cash and funding available to SVB, leaving it no option but to surrender to the FDIC.....
....As a key investor and funder of tech startups, SVB followed its customers and was active with clean and sustainable technology startups. According to Bloomberg, SVB was “leading or participating in 62 percent of financing in U.S. developments,” referring to community solar developments. About 5.6 gigawatts of community solar power have been installed in the U.S. This figure is projected to double over the next five years according to the Solar Energy Industries Association. SVB also noted, “it had more than 1,550 customers in the broader climate technology and sustainability sector, and it has committed $3.2 billion in innovation projects in the field.” Plans were to expand that commitment to $5.0 billion by 2027.

According to data firm Infralogic, SVB made about $1.2 billion of project finance loans to U.S. renewable-energy projects in 2022. That made SVB the sixth-largest lender in the space. The reason regional bank stocks have been slammed by investors is that many of them were also big lenders to renewable-energy projects and cleantech startups. KeyBank was the second-largest provider of U.S. renewable project finance loans last year. Zions Bancorp and East West Bank were also active in that lending space.

SVB has a report on its website titled “The Future of Climate Tech 2022.” The headline in the Executive Summary section is “Climate Tech Goes Mainstream.” When talking about the opportunities for climate technology, the bank wrote: “In order to achieve ‘net-zero,’ new technologies need to be developed and scaled, including sustainable aviation fuels (SAFs), carbon capture and sequestration (CCUS) systems and ‘green’ cement.” These are developing markets, but their emergence has been propelled by government subsidies.

The SVB report went on to discuss the success climate tech was experiencing. It wrote that “US venture capital investment in climate tech companies increased 80% between 2020 and 2021, reaching $56B. The energy and power sector experienced the fastest growth, increasing 180% year-over-year.” Without a doubt, this rapidly growing sector would include batteries, wind, solar, pumped storage, and geothermal energy, to name other prominent markets.

We thought it interesting that the report contained the following comment: “A cautionary note: the climate tech sector does not come without its challenges. Timelines for companies to scale are typically longer, talent is in short supply, infrastructure is lagging plus inflation and supply-chain pressures are increasing the cost of operations.” Add to that now financing disruptions.

The chart below from the report shows recent year totals of VC fundraising and investing in clean tech ventures. Notice the cyclicality of fundraising, but the surge in new funds closed in 2021. On the investment side, there has been a steady rise in amounts and deals with a spike in 2021. The columns to the right of the yearly investment totals show Transportation & Logistics accounted for the most money invested, but Agriculture & Food represented the largest number of deals.

Exhibit 2. Venture Capital Fund Raising And Investing In Clean Tech

Chart Description automatically generated with low confidence

Source: SVB

The SVB report commented on VC investing trends by noting that Transportation & Logistics requires substantial capital to build vehicles and infrastructure. The report pointed to Tesla having begun business in 2003 but did not produce its first electric vehicle until 2009. Tesla needed to raise just under $1 billion, with equity representing about 55% of the total and debt the balance, to fund the enterprise....


Also in this edition of Energy Musings

Offshore Wind’s Economics Questioned By A Big Player
New offshore projects continue to be proposed while the head of the U.S.’s leading renewable energy utility company warns his CERAWeek audience that “offshore wind is a bad bet.” READ MORE

The Cost Of Getting To Net Zero By 2050
States are mandating utilities reduce their carbon emissions to reach net zero by 2050. An analysis of Wisconsin’s plan shows its consumers will paying $248 billion (2022$) more. READ MORE

SVB And The ESG And Woke Attacks
Critics blame SVB’s ESG and DEI focus for its failure. They point to the directors’ backgrounds and associations. Their skills instead raise questions about the lack of management oversight. READ MORE

"The Cantillon Effect: Because of Inflation, We’re Financing the Financiers"

Following on yesterday's revelation that ten accounts at Silicon Valley Bank had an aggregate $13.3 billion on deposit.*

This article is going on five years old but rings truer today than when it was written.

From the Foundation for Economic Education, October 28, 2018:

Not to mention actively harming the living standards of low-income earners. 

It may come as a surprise to you that the United States has been financing a welfare program that takes money from the poor and gives it to the rich.

Inflation as a Policy Tool

If you read a lot of modern macroeconomic literature or major in economics in college, you’ll hear economists talk of the “multiplier effect” of monetary and fiscal stimulus. In times of economic slump, money injection (for monetary policy) or government spending (fiscal policy) greases the wheels of our complex economic machine, bringing unemployment down and output up.

In response to these policy proposals to change the level of unemployment or production, “real” metrics of the economy, Milton Friedman argued that money is “neutral.” In other words, changing the supply of money in the economy to manipulate relative price levels doesn’t actually change anything in the long run. When people realize their money is worth less than before, they adjust their mindset, demanding higher wages for higher prices. After these changes are made, unemployment and production end up in the same place as before.

While Friedman’s argument sheds light on many failed economic policies from the latter half of the 20th century, it doesn’t explain the mechanics behind rising price levels (from inflationary policy) once the newly created money travels through the economy, sector by sector.

Contextualizing the Cantillon Effect

Richard Cantillon first suggested in 1755 that money is not as neutral as we think. He argued that money injection—what we could consider inflationary policies—may not change an economy’s output over the long-term. However, the process of readjustment affects different sectors of the economy differently. This analysis, known as the Cantillon Effect, serves as the foundation for the non-neutrality of money theories.

Cantillon’s original thesis outlines how rising prices affect different sectors at different times and suggests that time difference effectively acts as a taxing mechanism. In other words, the first sectors to receive the newly created money enjoy higher profits as their pay increases, but general costs are still low. On the other hand, the last sectors in which prices rise (where there is more economic friction) face higher costs while still producing at lower prices. Because, as Friedman taught us, the real economic variables are still the same in the long run, the price of inflation is paid for by a “tax” on the sectors with more friction, which subsidizes more time-responsive sectors. In our modern economy, the Cantillon Effect is at play with a stratified socioeconomic impact, favoring investors over wage-earners.

For Example

Let’s say the Fed decides to lower interest rates (by expanding the supply of money in the economy). Soon after the Fed makes its announcement, investors anticipate new earnings from increased investment. In fact, once even a few people get wind of the Fed’s intentions, investors expect prices to rise, whether they rely on algorithms or rumors for their information. Investors flock to the financial markets, hoping to get there first; if they can buy stocks while the prices are still low, they can reap enormous profits once prices rise.

However, the sudden increased demand for stocks in the financial market bids up asset prices, and this happens rapidly. Within minutes—seconds, even—the expected increase in the price level has been factored into the financial markets. The first place where “inflation” is felt is in the financial marketplace.

This means that people who are most invested in the market are the first to benefit from inflation. They see their asset prices increasing, yet the prices in the rest of the economy are still low because this happens seconds after it’s clear the Fed is inflating the money supply....

As noted earlier today in the outro from "The Cantillon Effect and Populism": 

There are currently no pure-play pitchfork manufacturers and it has been a long-cherished dream (since 2008!) to fill the void and/or live up to my junior high school personal file description: the instigator was....

The Cantillon Effect and Populism

From some Austrians (real Austrians: Jasomirgottstrasse 3/12, 1010 Vienna):
Austrian Economics Center 

Monetary policy and everything concerning it has to be one of the most interesting topics out there. With monetary economics, there are quite a few interesting concepts which come with it. One is the so-called Cantillon effect.

Richard Cantillon was an economist in the 18th century who mainly wrote about money and how it circles around the economy.

The so-called Cantillon effect describes the uneven expansion of the amount of money. If a central bank pumps more money into the economy, the resulting increase in prices does not happen evenly. The Austrian economist Friedrich August von Hayek compared this monetary expansion with honey. If you pour honey into a cup, it won’t spread out evenly. It will clump in the middle of the cup first before spreading out.....
.... This theory doesn’t imply that money creation is always biased towards the powerful, only that how money travels matter. There is no inherent money neutrality, such neutrality must be constructed by institutional arrangements. Much of the New Deal in the 1930s and 1940s was designed to build alternative channels for lending so that small business, industry and individuals could have access to money as quickly as big banks.....

There are currently no pure-play pitchfork manufacturers and it has been a long-cherished dream (since 2008!) to fill the void and/or live up to my junior high school personal file description: the instigator was....

Media: "Substack Asks Writers For Money As VC Funding Freezes"

From ZeroHedge:

Substack is initiating a crowdsourcing funding round, allowing writers to invest as little as $100 in the company. On Tuesday morning, the startup emailed writers about the investment opportunity. The development comes amidst a freeze in venture capital funding markets, which followed the collapse of Silicon Valley Bank. 

"Today, we're starting a process that will let writers and readers invest in Substack and own a piece of the company. We are serious about building Substack with writers and readers and this community round is one way to concretize that ideal," the email said. 

Substack is using the crowdfunding service Wefunder to raise $2 million. Around noon on Tuesday, nearly $800k had been raised....


Pfizer vs The Undertaker (PFE)

Our quasi-periodic look at the performance of the stocks of Pfizer and the country's largest funeral home operator, Service Corp. International (SCI):


As can be seen in the above chart (one year, daily prints), SCI outperformance has widened to almost thirty percentage points.

Tuesday, March 28, 2023

Did I Mention That The Auditor For Silicon Valley Bank Also Audits The Federal Reserve? (SIVB; SI; FED)

Signature too.

From the Board of Governors of the Federal Reserve System, March 24:

Federal Reserve Board releases annual audited financial statements

The Federal Reserve Board on Friday released the 2022 combined annual audited financial statements for the Reserve Banks. An independent public accounting firm engaged by the Board issued unqualified opinions, asserting that its audit found the financial statements for the Board and the Reserve Banks to be free of material misstatements in accordance with the applicable auditing standards. The Board released preliminary income and expense data earlier this year.

Additionally, the Board released individual statements for the 12 Federal Reserve Banks, the Board, and 3 limited liability companies (LLCs) related to lending facilities established to support the Federal Reserve's pandemic response. The audited financial statements provide information about the assets, liabilities, and earnings of the Federal Reserve Banks, the Board, and the LLCs as of December 31, 2022.....

.... The Board engaged KPMG LLP to audit the financial statements of the Reserve Banks and the LLCs in accordance with standards issued by the American Institute of Certified Public Accountants and the Public Company Accounting Oversight Board, and the audit of the Board's financial statements was also conducted in accordance with the Generally Accepted Government Auditing Standards. KPMG also conducted audits of internal controls over financial reporting for the 12 individual Reserve Banks and the Board....



Yes, The Rumors Are True: Silicon Valley Bank's Auditors Issued An "Unqualified" Opinion On The Bank's Financials Two Weeks Before It Failed (SIVB; OOPS)

KPMG also audits Citicorp and Wells Fargo. Now if you will excuse me I have to make enquiries about a couple other banks.

"‘'The Billionaire Bailout': FDIC Chair Says the Biggest Deposit Accounts at SVB Held $13 Billion"

From Common Dreams, March 28:

"The bailout really did protect billionaires from taking a modest haircut," one observer wrote in response to the FDIC chief.

In prepared testimony for a Senate Banking Committee hearing slated for Tuesday morning, the chair of the Federal Deposit Insurance Corporation reveals that the 10 largest deposit accounts at Silicon Valley Bank held a combined $13.3 billion, a detail that's likely to intensify criticism of federal regulators' intervention in the firm's recent collapse.

When SVB was spiraling earlier this month, the FDIC, Treasury Department, and Federal Reserve rushed in to backstop the financial system and make all depositors at the California bank whole, including those with accounts over $250,000—the total amount typically covered by FDIC insurance.

"At SVB, the depositors protected by the guarantee of uninsured depositors included not only small and mid-size business customers but also customers with very large account balances," FDIC chief Martin Gruenberg writes in his prepared testimony. "The ten largest deposit accounts at SVB held $13.3 billion, in the aggregate."

Gruenberg goes on to estimate that the FDIC's $125 billion Deposit Insurance Fund (DIF)—which is financed primarily by assessments on insured banks and "backed by the full faith and credit of the United States government"—took a $20 billion hit as a result of the SVB intervention.

According to Gruenberg, nearly 90%—$18 billion—of the DIF loss stemming from SVB is "attributable to the cost of covering uninsured deposits." He added that the DIF absorbed a roughly $1.6 billion cost to cover uninsured deposits at Signature Bank, which failed shortly after SVB....


Did the depositors prudently purchase private deposit insurance for the amount over the $250K FDIC limit? If not, why not?

Shoulda been a bail-in.

Previously from Common Dreams:

And many more.

Capital Markets: "Firmer Rates and Higher Bank Stocks Give the Greenback Little Help"

 From Marc to Market:

Financial strains eased yesterday, and short-term yields jumped. The two-year US yield jumped 25 bp to pierce 4%. Yet, the dollar fell against most of the major currencies yesterday and is mostly softer today. Banking stress is ebbing. The Topix bank index snapped a three-day decline and jumped nearly 2% today to recoup the lion's share of its three-day decline. The Stoxx 600 index of EMU banks is extending yesterday's 1,7% advance. The AT1 ETF up about 0.25% after falling by more than 3.6% in the past three sessions. 

Most large bourses in the Asia Pacific region rose today, led by 1%+ gains in Hong Kong, the mainland shares that trade there, and South Korea's Kospi. China and Taiwanese markets were sold. Europe's Stoxx 600 has edged a little higher, while US futures are a bit softer. Benchmark 10-year yields are 6-10 bp higher in Europe and the US 10-year yield is up a little near 3.54%. Gold is trading lower for the third consecutive session. It traded above $2000 before reversing lower ahead of the weekend and slipped to almost $1944 yesterday. It is trading quietly, mostly above $1950 today. May WTI is extending its recent gains and near $73.50, it is at its best level in two weeks. Chinese demand and some supply disruptions have underpinned crude. The 20-day moving average is around $73.35 and it has not closed above the moving average since March 6. That said, the $74.65 area is the next important chart area....

And deeper into the daily missive:

....Before the weekend, the Fed funds futures market had discounted about a 1-in-4 chance of a 25 bp hike at the next FOMC meeting on May 3. Yesterday, there was a 2.7% jump in the KBW bank index, and nearly as large a rally in Charles Schwab shares, which was the subject of pre-weekend jitters, and almost a 5% rally in Deutsche Bank shares, which had fallen by more than 12% in the previous three sessions. The futures market now sees the chances of a hike in May as a little better than a 50/50 proposition. There is no FOMC meeting in August, so the implied yield of 4.75% of the August contract implies a quarter-point cut by early Q3. On March 8, the implied yield was 5.67%. Similarly, the swap market continues to discount a 25 bp cut by the Bank of Canada at its July 12 meeting. At the end of last week, the market has discounted 40 bp of cuts by then....


"Bulgaria refuses to send weapons to Ukraine, joins Hungary and Austria’s neutrality stance"

Bulgaria is an interesting case.
Although not vehemently anti- or pro-Russia you get some hints that there is a lot going on in the Bulgar psyche.

A Soviet-era sculpture that Izabella Kaminska used as the graphics teaser image for a post at The Blind Spot:

That image reminded me that the Sovs. were into intaglio and relief—both bas and high.

Which of course reminded me of some other relief, in this case comic:

That's the monument in Sofia Bulgaria, to the Soviet soldiers who defeated the Nazis.

Of course that isn't how it looked when it was unveiled, as far as I know Santa doesn't carry a submachine gun, but in 2011 some Bulgarian pranksters decided the statue needed a makeover.

If memory serves, it only lasted one day before the authorities started taking the paint off but it offers a slightly askew insight into Bulgaria.

Here's ReMix News with the headline story, March 27:

For the time being, Bulgaria will not send any military equipment to Ukraine

After Austria and Hungary, Bulgaria has also joined the minority group of European Union countries that refuse to send weapons to Ukraine, news and opinion portal Mandiner reports.

Bulgaria has declared that it will not take part in the EU’s joint ammunition purchase program, nor will it supply fighter jets or tanks to Ukraine, Euronews reports. Bulgarian President Rumen Radev is under enormous pressure from opposition parties, but he has said he stands by his position.

“Bulgaria does not support and is not involved in the joint procurement of ammunition for Ukraine.
However, we will support efforts to restore peace. As long as the interim government is in power, Bulgaria will not make its fighter aircraft, anti-aircraft missile systems, tanks and other equipment available to Ukraine,” said Radev.

At the end of January, Hungarian Defense Minister Kristóf Szalay-Bobrovniczky and his Austrian counterpart, Klaudia Tanner, said in Budapest that neither country will offer any kind of military assistance to Ukraine in order to “prevent further escalation.”

Although many of its Western allies accuse Hungary of siding with Russia in the war based on its firm stance of not sending weapons to Ukraine, last December Prime Minister Viktor Orbán said that his government is simply on the side of the Hungarians....



Monday, March 27, 2023

"Chicago to Launch Its First Air Taxi Route In 2025"

From ExtremeTech, March 27:

The city will leverage eVTOL aircraft to turn a 30-60 minute trip into a 10-minute one. 

If you’re heading to O’Hare International Airport from downtown Chicago, you might be able to skip traffic by taking an “air taxi” instead—provided that your jaunt can wait a couple of years. United Airlines announced Thursday that it will launch Chicago’s first commercial air taxi route in 2025, leveraging electric vertical takeoff and landing (eVTOL) aircraft to transport people between hotspots.

Beginning in 2025, residents and tourists can hop onto an Archer Aviation “Midnight” eVTOL from Vertiport Chicago to O’Hare International Airport and vice versa. Vertiport Chicago, the continent’s largest eVTOL takeoff and landing facility, is conveniently located near several medical, shopping, and recreation amenities, making it an ideal hub for the city’s new transportation option. A flight between the two takeoff and landing points will take about 10 minutes, compared with 35 minutes of driving (in light traffic) and an hour of public transit use....


"Fallen 'Crypto King' Who Owes Millions to Investors Was Kidnapped and Tortured"

I'm thinking he had it easy compared to the advisor who was kidnapped and tortured by a bunch of German retirees. Or the stockbroker who was kidnapped and tortured by a client dressed in a Santa suit.

From Yahoo Finance, March 27:

A self-styled "Crypto King" who allegedly fleeced investors out of millions was kidnapped and tortured, according to explosive court documents.

Aiden Pleterski led a lavish lifestyle and owned McLaren sports cars and a Lamborghini — and even rented a plush waterfront home for $45,000 a month.

He had promised his investors healthy returns of 7%, but it all came crashing down and he ended up filing for bankruptcy.

It's believed Pleterski, who was 23 when his company went under, was abducted by disgruntled creditors.

Testimony from his father Dragan reveals:

One person that Pleterski was allowed to contact was a man called Sandeep Gupta, his landlord.

Gupta recalled receiving multiple calls late at night from Pleterski, in which he said:

Gupta told him that this would be impossible to arrange — and while he was determined not to pay any money, he wanted to engineer the situation so he didn't come to harm. On a different phone, he began to call 911.

Over the following days, the landlord worked with officers in an attempt to set up a sting meeting and ensure that Pleterski could be brought to safety.

He was later released on the understanding that he would get the cash to his kidnappers as soon as possible — and was warned that interacting with law enforcement would make his situation much, much worse.....


The dentist:

....In a July '07 post "FBI: Goldman Sachs threat not of 'high credibility' (Off-topic)" I asked:

...2) Does anyone remember the story of the dentist who put on a Santa Claus suit, kidnapped his stockbroker and tortured him for three days with a cattle-prod, all the while screaming the names of the lousy deals the broker had put him in?

When I ask this question at parties I get funny looks and solitude.
If you have any details please email....
I received some confirmations from folks who recognized the story but no citations. If you've got the cite, drop us a line.

A quick Google search turns up a reference I don't recall, dated December 21 2000:

Ah! Thank you, Miss or Mr. Anonymous: Pittsburgh Post-Gazette Jan. 4,1984
Now back to those German pensioners...   

German pensioners ‘kidnap and torture their investment adviser’

A group of well-to-do pensioners who lost their savings in the credit crunch staged an arthritic revenge attack and held their terrified financial adviser to ransom, prosecutors said yesterday.

The alleged kidnapping is the latest example of what is being dubbed “silver crime” — the violent backlash of pensioners who feel cheated by the world.

“As I was letting myself into my front door I was assaulted from behind and hit hard,” the financial adviser James Amburn, a 56-year-old German-American, said. “Then they bound me with masking tape until I looked like a mummy. I thought I was a dead man.”

He was freed by 40 heavily armed policemen from the counter-terrorist unit last Saturday. The frightened consultant was in his underwear, his body lacerated by wounds allegedly inflicted by angry pensioners.

It appears that two couples had entrusted Mr Amburn’s investment company with €2.4 million (£2 million), which he ploughed into Florida’s boom-and-bust property market. The properties became forfeit during the sub-prime mortgage crisis but the couples wanted their money back.

After being bundled into the boot of an Audi in the west German town of Speyer, Mr Amburn was driven southwards to Chieming, close to the Austrian border, where one of the couples Roland K, and his wife, Sieglinde, 79, had a holiday home.

The financial adviser claims he was held there in a cellar for four days almost naked, fed soup twice a day and beaten. Another couple, Gerhard F, 63, and his wife, Iris, 66, both retired doctors, allegedly helped to torture the prisoner....MORE

See also: 

The Spirit Of Enron Lives On In The Hearts Of Electricity Traders Everywhere

From Bloomberg, March 23:

Some of the UK’s biggest energy companies have received £525 million from a practice that regulators say drives prices higher.
On the morning of Dec. 12, as plunging temperatures left poorer Britons struggling to heat their homes, traders for Vitol Group’s VPI Power Ltd. abruptly served notice that one of the London area’s largest power stations would begin turning off just after midday.

This change of plans left Britain’s power grid at risk of running low on electricity. But the traders had another offer on the table: They’d keep running their plant for as much as £6,000 ($7,340) per megawatt-hour, four times more than the regular market rate. With little choice, the grid operator paid up, an £11 million tab that was ultimately passed to UK consumers, many of whom are already contending with prices that have more than doubled in the last two years.

Traders at firms including Vitol’s VPI, Uniper SE and SSE Plc have frequently announced they would cut off electricity capacity — sometimes with just a few hours’ notice — ahead of the busiest evening periods. At the same time, they offered power from their plants in a special side market where they charged higher prices to meet the shortfalls they helped create. Traders dramatically increased their use of this practice — and the prices they charged — as the lifting of Covid restrictions and then Russia’s war in Ukraine brought turmoil to the UK electricity market, a Bloomberg News investigation has found. Current rules do not prohibit such off-on maneuvers.

An analysis of more than 100 million market records shows that firms rang up more than £525 million in inflated revenue using this practice between 2018 and 2022. Nearly 90% of that amount came in just the last two years. Plants controlled by VPI and Uniper together accounted for £321 million of the total.

The data analysis can’t account for why, on any individual occasion, a company acted in this way — and whether there were circumstances involved other than the pursuit of revenue. But in interviews, 13 current and former traders said that off-and-then-on-again supply-gaming is a widespread tactic that’s aimed at maximizing profit. A source familiar with VPI’s move on Dec. 12 said the firm raised its price in response to tight market conditions.

“Something is broken here,” said Fred Smith, the managing director of H&E Smith Ltd., a glazed tile manufacturer in the northern English city of Stoke-on-Trent. The firm has struggled with a 150% jump in its power costs as energy inflation hammers the UK economy. Around the time of VPI’s big payday in December, Smith was asking his 20 employees to take a week off work after Christmas to save on operating costs....


From "The Trouble With Cap-and-Trade" :
....And this from a former Goldman Sachs trader:

The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.
—New York Times, May 8, 2002

For the much more egregious Enron in California story:
March 2008
California's cap-and-trade won't work
Here at Climateer Investing the comparison between California electricity deregulation and carbon trading seemed self-evident, based, if for no other reason, on the fact that the pals and alumni of Enron are the ones pushing the trade. Now the media is picking up on where the trade part of cap-and-trade is going. The LA Times gets it....

September 2007
Blackout: Enron and the California Power Crisis (Transcript)
August 2009
Enron:The Musical (ENE)
February 2011
Enron Lives! Were Texas Utilities Gaming the System to Gouge Customers?

And finally a visit to the big daddy of market manipulations, corners and squeezes, Professor Craig Pirrong—you may know him as The Streetwise Professor—has a snappy little paper linked in our "How to Manipulate Non-storable Commodities Markets.

Capital Markets: "Calmer Markets to Start the New Week"

From Marc Chandler at Bannockburn Global Finance:

Overview: There did not appear to be any negative surprises over the weekend, and this is helping calm investors' nerves at the start of the new week. Deutsche Bank shares have recovered most of the pre-weekend loss in the German market, and Stoxx bank index is posting a gain for the first time in four sessions. The AT1 ETF is slightly softer. In Japan, the Topix bank index slipped around 0.5%, its fourth decline in the past five sessions. Asia Pacific equities were mixed. China, Hong Kong, Taiwan, and South Korean markets fell, while Japan, Australia, and India rose. Europe's Stoxx 600 is up nearly 1% after losing about 1.5% in the previous two sessions. US equity futures are trading with a firmer bias. Benchmark 10-year yields are jumping back. The 10-year US Treasury is seven basis points higher near 3.45%, while European yield are mostly 6-10 bp higher, and the peripheral premium is smaller. 

The US dollar is mostly lower in subdued turnover. The Swiss franc and sterling are leading the G10 currencies higher. The New Zealand dollar, Japanese yen, and Norwegian krone are softer. Emerging market currencies are mixed. The Mexican peso continues to recover from the risk-off losses and after the Russian rouble is the strongest among the emerging market currencies today. The South African rand leads the decliners with a nearly 0.9% pullback. Rising rates has tarnished gold. After briefly trading above $2000 before the weekend it has been sold to about $1853 today and looks poised to test last week's lows near $1935. A push beyond that would weaken the technical outlook. May WTI is trading quietly as it straddles the $70 area.

Asia Pacific
While identifying China as one of the "green shoots" in the world economy, the IMF's Managing Director Georgieva urged Beijing to strengthen consumption. The IMF forecast China to grow by about 5.2% this year, which would account for around a third of the world's growth. Conventional thinking has long criticized China for under-consumption. Georgieva argued that shifting away from investment and toward consumption is more durable, less reliant on debt, and will help address climate change....

Sunday, March 26, 2023

As Ford Asks To Be Considered A Start Up, Elon Musk Says Twitter Is An "Inverse Startup"

From the New York Times, March 26, 2023, 1:33 p.m. ET:

Elon Musk Values Twitter at $20 Billion
The billionaire bought the social media company for $44 billion in October and took it private. 

SAN FRANCISCO — Elon Musk said Twitter is now worth about $20 billion, according to an email he sent the company’s employees on Friday, a significant drop from the $44 billion that he paid to buy the social network in October.

The email, which was viewed by The New York Times, was sent to employees to announce a new stock compensation program. In it, Mr. Musk warned workers that Twitter remained in a precarious financial position and, at one point, had been four months away from running out of money. He said “radical changes” at the company, including mass layoffs and cost cutting, were necessary to avoid bankruptcy and streamline operations.

“Twitter is being reshaped rapidly,” Mr. Musk wrote, adding that the company could be thought of as “an inverse start-up.”

Twitter’s value has declined as Mr. Musk has dramatically overhauled the company. In October, Mr. Musk took Twitter private, which means it is no longer obligated to provide transparency about its finances. But the billionaire has indicated publicly that the company lost revenue as advertisers fled the platform after his takeover, and suggested that Twitter was in danger of bankruptcy.

The $20 billion figure values Twitter slightly higher than Snap, the parent company of Snapchat, which has recently struggled with an advertising slump and predicted its revenue would fall. Snap, which has a market capitalization of about $18 billion, has about 375 million daily active users, compared with Twitter’s 237.8 million in the company’s final public disclosure before it went private.

Mr. Musk did not respond to a request for comment and an email to Twitter’s communications department was returned with a poop emoji. The company’s new valuation was earlier reported by The Information....


The Ford story, immediately below: ""Ford says EV unit losing billions, should be seen as startup" (F)"

"Ford says EV unit losing billions, should be seen as startup" (F)

Apparently it is not as easy as it looks.

From the Associated Press, March

Ford Motor Co.’s electric vehicle business has lost $3 billion before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology.

The figures were released Thursday as Ford rolled out a new way of reporting financial results. The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units.

Company officials said the electric vehicle unit, called “Ford Model e,” will be profitable before taxes by late 2026 with an 8% pretax profit margin. But they wouldn’t say exactly when it’s expected to start making money.

Chief Financial Officer John Lawler said Model e should be viewed as a startup company within Ford.

“As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share,” he said....


Ford does have ambitious goals but they may also have to contend with a worldwide slowdown/recession.  

OnlyFans Economics

Yes, I was looking at Twitter today.

MUCH MORE (thread)

Uh Oh: "Jim Cramer has just said that Deutsche Bank, $DB, is fine."

And as was said regarding beer and the 2010 malting barley crisis: " Damit ist eine Katastrophe vorprogrammiert.". (It's a recipe for disaster)

WARNING: Irony Ahead

It is rather impressive.

Jim Rogers: «Commodities are the only attractively valued asset class»

This is the piece at NZZ I was going for before getting sidetracked by the risk of the shadow banking system ending everything. 

Two quick points on Mr Rogers and commodities: 1) he has been early, sometimes very early in his calls and 2) he seems to treat commodities as an investment class when they are actually a class of "trading" instruments. Except for farmland, which he has advocated owning and which because of its hybrid nature, income producer and (sometimes) inflation hedge seems more of a "long ain't wrong" asset.

From Neue Zürcher Zeitung's, March 21:

Deutsche Version

After the collapse of Silicon Valley Bank and Signature Bank, financial markets have become very jittery again. Stress is also surfacing in Europe: In Switzerland, over the weekend, Credit Suisse was taken over by larger rival UBS, in order to stabilize fragile markets.

Despite these stress signals, legendary investor Jim Rogers is not worried about the very near term, «central bankers are scared after the collapse of Silicon Valley Bank, so things will be okay for a while». For the moment, the Fed will probably pause with rate hikes. Longer-term, however, he is convinced that inflation will come back with a vengeance, which will cause a painful bear market.

In an in-depth interview with The Market, which has been edited for clarity, Jim Rogers gives his view on the global economy, says which asset classes are still attractively valued and explains why there is no longer a sound currency anywhere in the world – not even the Swiss franc.

What is your assessment of the global economy and financial markets?

We had a big crisis in 2008 and to fight it, for several years governments printed, borrowed and spent money like never before. So, the world economy for a few years has been strong and continues to be somewhat strong because governments keep spending money. And it’s not over yet. We probably won’t have many more interest rate hikes, as central bankers are scared after the collapse of Silicon Valley Bank, so things will be okay for a while. However, when inflation comes back central banks will have to raise interest rates again and then markets will collapse.

Is the Fed done with interest rate hikes in this cycle?

No, I think for the moment they are done. However, when inflation comes back – and it will come back – further interest rates hikes will be necessary. In the 1970s we had such a big inflation problem that the Fed had to increase interest rates to the highest level in history. In the 1980s yields on United States Treasury bills rose to over 21%. And it worked! The president got re-elected, the economy went into recession but inflation come down.

Isn’t the stress in the banking sector a signal that monetary policy has become too tight?

It’s a signal that some market participants were overextended and yes, there will be more problems like that at a later stage. Right now, things will calm down, as Washington is terrified and the Fed probably won’t raise interest rates much further or not at all. But inflation will come back and interest rates will start moving higher again and then we will have a serious bear market....


A question we posed introducing another interview in January: "Has the world seen the high water mark for inflation in this decade? In this century? "  

"ECB warns that shadow banking could trigger next financial crisis"

I've forgotten how big the shadow banking ecosystem is but it's very large.

From the Ireland's Business Post, March 26:

Irish domiciled funds in growing shadow banking sector now account for over $4.2trn in assets 

The shadow banking sector is the “soft spot in the financial system” and could trigger the next financial crisis, the vice-president of the European Central Bank (ECB) has warned.

In the aftermath of the rescue of Credit Suisse last week, Luis de Guindos told the Business Post that he believed the European banking sector was “sound and resilient”, but the non-bank sector “could be a source of problems for the whole financial system”.

The non-bank sector involves firms which are engaged in bank-like activities, but are neither registered nor regulated as banks. These include the likes of funds, insurance firms, venture capitalists and currency exchanges. It is also commonly known as the “shadow banking” or “market-based finance” sector.

In an exclusive interview with the Business Post, De Guindos warned that firms in this sector had taken “a lot of risks” during the period of low interest rates which could now be exposed by rate rises, and could affect the wider financial system.

De Guindos said he did not think the recent turmoil in the US or Europe had exposed fresh systemic weaknesses in the European banking sector. However, he expressed concern about what may happen in the non-bank sector, which he said had grown to become a substantial part of the European financial system in the last decade.

“In the case of Credit Suisse and the American banks, there were specific and idiosyncratic factors. Our main concern in terms of financial stability is the situation of the non-banks. This has been the case for some years, and it is the soft spot in the financial system,” De Guindos told the Business Post....


Raising the question: How exposed to the shadow bankers was Credit Suisse? And who else has big exposure?

On the first question, Myret Zaki, who has looked at shadow banking a few times, seems to think the answer is "A fair amount.":

L’arbre Credit Suisse cache la forêt du «shadow banking»

And a few years ago: 

And a few days ago:

The Cost of Ignoring the Shadow Banking System