Tuesday, May 26, 2015

Belfast Is the European City Most At Risk Of Terror Attack

For what it's worth, three cities, Luhansk (46) and Donetsk (56) in Ukraine, and Grozy (54) in Russia, rank higher than Belfast but RT doesn't entertain the idea that they are European.
From RT:

Terror threat: Belfast most dangerous city in Europe – risk analysts
Belfast faces the highest risk of terrorism of all European cities, while London is “low risk” despite being an “attractive target,” a new study claims.

The research, published this week, examines cities across the globe most likely to suffer terror attacks. It was carried out by risk analytics firm Verisk Maplecroft, which compiles data for use by insurers and financial corporations.
 
The focus of the report is guiding investment and protecting global economies from the risks of terrorism.
An estimated 80 percent of global GDP is generated from cities,” Verisk Maplecroft’s leading analyst, Charlotte Ingham, told the Independent.

Visibility of the sub-national differences in terrorism levels should be an imperative for multinational organizations looking to understand and price the risks to assets, employees and supply chains,” he said.

London is ranked 400th, despite the current heightened terror alert. Verisk Maplecroft says this low ranking comes from the fact that Britain’s capital has not suffered a terror attack since the 7/7 bombing in 2005.
Paris has soared in the rankings to 97th, however, due to the attack on the offices of French satirical magazine Charlie Hebdo in January.

The risk level in Paris is representative of a wider trend for Western countries, including Belgium, Canada and Australia, where key urban centers face substantially higher threat levels than elsewhere in the country,” Verisk Maplecroft said.

A number of African cities are considered high risk, including Nairobi in Kenya and Lagos in Nigeria.
Belfast’s position as most-at-risk city in Europe may also reflect recent British defense policy.

In March, it was announced that British Special Forces soldiers are once again operating in Northern Ireland to counter violent dissident groups including the Real IRA, intelligence sources say....MORE
Here's Verisk's product page.

According to the map at the Daily Mail Las Vegas Nevada is also dangerous:
Hotbeds of terror: The map produced by Verisk Maplecroft gives an at-a-glace breakdown of the world's most dangerous cities, with the worst places marked out in red

Meet Zoox, the Robo-Taxi Start-up Taking on Google and Uber" (GOOG)

From IEEE Spectrum:

Exclusive details and images of the stealthy startup’s experimental vehicle

 img of the original Zoox concept
The original Zoox concept.
You wait for years for a self-driving taxi, then four come along at once.

Google and Uber’s efforts have been well publicized, and IEEE Spectrum broke the news in February that Nissan was also developing a robotic cab. Now we can reveal exclusive details about a startup that hopes to put fully autonomous taxis on the road by 2020.

The company is called Zoox, and it’s the brainchild of the Australian designer Tim Kentley-Klay and Jesse Levinson, an engineer who worked at Stanford University with Sebastian Thrun, the first director of Google’s self-driving car program. Their vision is for a sleek, modernistic, deluxe electric taxi with gullwing doors, in which four passengers face one another. The car is code-named L4, a play on the National Highway Traffic Safety Administration’s classification of full automation as Level 4. Unlike rival designs, it has no front or rear end but can drive equally well in either direction. It has no windshields facing either way, nor does it have a steering wheel or brake pedal.

Speaking at a conference in Berlin last year, Kentley-Klay said, “At the moment, mobility is crushing the soul: Don’t speed, don’t drink, don’t text. But what if we [ask], How can this stuff be awesome? What inspires me…is giving back people their lifestyles, so they can do what they want to do: texting, vegging out, drinking.” The Zoox test mule, which is currently being built in a garage in Menlo Park, Calif., is based on an innovative Swedish research vehicle with wheels that can be steered, driven, braked, and cambered independently.
img Zoox544
Zoox’s experimental robo-taxi in the garage at SLAC appears to have multiple lidar modules. 
The vehicle is conceived to have modules that drive, camber, and steer each wheel independently. So it will be able to drive in either direction.
Late last year, Zoox secured seed funding from a major venture capital firm and entered stealth mode to avoid tipping off rivals. It declined to comment for this story. Nevertheless, Spectrum has pieced together the tale of how a designer from Australia with no auto industry experience intends to revolutionize 21st-century transportation, including a first look at the technology Zoox is using to develop its vehicle, the venture-capital firm funding it, and exclusive photos of the car and workshop.

Kentley-Klay’s first career was in commercial media. He founded a successful animation studio, a digital media company, and a video production house, and he spent most of the past decade directing television commercials and building his businesses. Then, in 2013, he suddenly switched gears. Struck by the potential of emerging self-driving technologies, he sketched out concept designs and realized he was thinking about building the world’s first autonomous taxi.

“I know that sounds crazy,” he writes on his website. “But when you think through the mobility problems we face against the imagination of what autonomous technology allows, you would be crazy not to do it!”
Kentley-Klay formed a company called Zoox Pty. in his hometown of Melbourne and began talking with technology and car companies around the world. He visited the University of Sydney, Stanford, the MIT collaborative project in Singapore, and Singularity University, in California, to share his vision: “Zoox is not an automobile company. This is what comes after the car,” he wrote on his site. “I have in my head a concept design…so extreme it will have philistine giraffes gone wrong like [former Top Gear host] Jeremy Clarkson throwing back shots of Prozac to calm down.”...MORE

Signposts: Movie Producer/Developer Expects Spec Home to Fetch $500 Million

From Bloomberg: 

California Dreaming: Record $500 Million Tag on L.A. Home

Bel Air Mansion
Rendering of Niami's under-construction mansion in L.A.’s Bel Air neighborhood. Source: McClean Design via Bloomberg
One of the biggest homes in U.S. history is rising on a Los Angeles hilltop, and the developer hopes to sell it for a record $500 million.

Nile Niami, a film producer and speculative residential developer, is pouring concrete in L.A.’s Bel Air neighborhood for a compound with a 74,000-square-foot (6,900-square-meter) main residence and three smaller homes, according to city records. The project, which will take at least 20 more months to complete, will exceed 100,000 square feet, including a 5,000-square-foot master bedroom, a 30-car garage and a “Monaco-style casino,” Niami said.

“The house will have almost every amenity available in the world,” he wrote in an e-mail. “The asking price will be $500 million.”

Estates with views of the Los Angeles basin are the California counterpart to Manhattan’s penthouses or London’s Mayfair manors, drawing a global cast of financiers, technology tycoons and celebrities who collect trophy homes like works of art. Around the world, five properties sold for $100 million or more last year, and at least 20 others have nine-figure asking prices, Christie’s International Real Estate reported last month.

The priciest home ever sold was a $221 million London penthouse purchased in 2011, according to Christie’s. The most expensive properties on the market include a $425 million estate in France’s Cote d’Azur, a $400 million penthouse in Monaco and a $365 million London manor.

Whether Niami can get more than double the previous record for his mansion remains to be seen.
“I’m skeptical,” said Jonathan Miller, president of appraiser Miller Samuel Inc. and a Bloomberg View contributor. “My first reaction is laughter. But we’re in this perpetual state of surprise as new thresholds are broken.”

U.S. Records
The current highest U.S. asking price is $195 million for Palazzo di Amore, a Beverly Hills, California, estate being offered by billionaire real estate entrepreneur Jeff Greene. The record for a sale was the $147 million that Barry Rosenstein, managing partner at hedge fund Jana Partners, paid last year for an estate in East Hampton, New York.

Niami’s project, on a 4-acre (1.6-hectare) hilltop lot, will have 360-degree views of the Pacific Ocean, Beverly Hills, downtown Los Angeles and the San Fernando Valley.....MORE
HT: Economic Policy Journal

"First Solar shares down 6% after downgrade"

We've been asked "Why the lack of solar posts".
Right now it's a tough space for portfolio investments, maybe a turn at the bottom of the gap, maybe not, see chart below.
Please to remember, FSLR was pretty much our raison d'être from the $20.00 Nov. '06 IPO to the $317.00 May '08 top tick. $50.92 last.
From MarketWatch:
Shares of First Solar Inc. FSLR, -7.41% fell 6.2% on Tuesday as the stock got a downgrade from analysts at RBC Capital Market. "We believe First Solar earnings power is significantly lower than consensus and previous guidance," the analysts said in downgrading the shares to underperform. The RBC analysts also lowered their price target on the stock to $34 a share from $54 a share. RBC expects the solar-power company to earn $1.37 a share in 2016, compared with consensus of $3.48 a share and company guidance of $3.50 a share to $5 a share. Revenue growth for this year and the next will be "flattish," compared with the company's previous guidance of 19% growth in 2015 and 2.5% growth in 2016, RBC said. "Given the company's high exposure to utility-scale projects and the long lead-time and development cycle of those projects, we do not see upside surprise to our project revenue estimate."...
More at The Street.com

And from FinViz:

Oil: WTI Crude Prices Are Plunging (Again)

It's all about the buck. The spot dollar index is up 1.33% at 97.29, the euro is down to 1.0885.
NYMEX front month (Jul.) $58.46 down $1.26.
From ZeroHedge:
It appears the oil-spoofing machines are unhappy with the 'good' news this morning on orders and US housing - or perhaps they read this - but for now, WTI Crude front-month futures are back below $58.50, down over 2% on heavy volume...

As We Approach the Start Of Hurricane Season: Wunderblog's Summer Weather Watch

My M.D. great-aunts were bemused by meteorologists who introduced themselves as Doctor.
On the other hand, when arriving at some function together, they'd announced they were "a pair-o-docs", so not real sticklers for form.
Cute.
From Bob Henson at  Dr. Masters' Wunderblog:

Summer Weather Watch: Keep an Eye on These Five Possibilities
It’s Memorial Day weekend, the traditional start of the U.S. summer season, and millions are wondering what kind of weather the next three months will bring. Seasonal predictions have their limits any time of year, and that’s especially true in summer, when upper-level winds are weaker and local influences play a larger role. Moreover, the largest single influence on year-to-year climate variability--the El Niño/Southern Oscillation (ENSO)--is often at low ebb in the northern summer. Not so this year. An unseasonable El Niño event is now approaching moderate strength and is projected to continue intensifying through the summer, perhaps reaching record or near-record strength for the time of year by August. Instead of the typical lack of a summertime push from El Niño or La Niña, we’re thus left with a much different kind of prediction challenge: a summer setup so unusual that we have few analogs to go by. With that caveat, I’ll stick my neck out and offer a Top Five List (with apologies to David Letterman) of things I’ll be watching for as the lazy, crazy, and occasionally hazy days of summer unfold.



Figure 1. Departures from average temperature across the U.S. for the summers of 1982 and 1997, both of which led into strong El Niño events. Image credit: NOAA/ESRL/PSD.

Figure 2. The weather prediction firm WSI is calling for relatively mild conditions this summer across the bulk of the United States, with unusual heat confined mainly to the western U.S. and Florida. Image credit: WSI.

Cool, man, cool
The summers of 1982 and 1997, which preceded the two strongest El Niño events on record, were cooler than average across most of the United States (see Figure 1 above). No analog is perfect, but based in part on the patterns observed in those two years, “we expect the weakest nationwide cooling demand since at least 2009,” says WSI in its summer energy outlook for 2015 (Figure 2). Other years with at least a moderate Oceanic Niño Index value (at least +1.0) in Jun-Jul-Aug include 1972, 1965, and 1957; all but 1957 had widespread below-average summer temperatures. Precipitation signals for the summer are less straightforward, although during winter El Niño tends to bring wetter-than-average conditions across the southern half of the United States. The strong subtropical jet stream that’s fed much of the low-latitude U.S. rainfall over the last month may weaken as we get into summer, then restrengthen in the fall, but signals remain positive for widespread summer moisture. The average of a variety of climate models assembled through the North American Multi-Model Ensemble (NMME) suggests relatively wet conditions across much of the nation, with a cooler-than-average pocket in the nation’s heartland and relatively warm temperatures close to the coasts. These tendencies are reflected in the National Weather Service summer outlook (see Figure 3 below). The central U.S. already has a head start toward a fairly mild summer due to the extremely wet conditions across most of the Plains over the last month. Even when the rains abate and the summer sun kicks in, some of that energy will go toward evaporating surface-based moisture, rather than heating up the ground and the surface air.




Figure 3. Seasonal predictions from the National Weather Service (June-August) showing where the odds are leaning for temperature (left) and precipitation (right). “EC” denotes equal chances of above- or below-average conditions. Image credit: NWS/Weather Prediction Center.
For fire and heat, head northwest
Landscapes are parched from most of California up to the interior of Alaska, as well as adjacent northwest Canada. A major high-latitude heat wave sent temperatures on Thursday in Barrow, AK, up to 47°F, the warmest ever observed so early in the season and only the second time that temperature has been reached before June (more here from the Weather Channel’s Jon Erdman). The warm temperatures have triggered unprecedented flooding that’s closed more than 50 miles of the Dalton Highway, a key route through northern Alaska. It may be a particular rough season for wildfires across those higher-elevation forests where snow was extremely scant this past winter, from the Sierras north through the Cascades and into British Columbia.......MORE  

Which of These Historic Castles Has a Better Modern Staircase?

The general rule, if you expect swordplay, is to have all turns, spirals etc. go to the left as seen from below.
Because ~90% of the population is right-handed you want to keep the usurper's sword hand up against the wall as you retreat into your keep, while allowing yourself a fuller range of movement.

From Curbed:
house-in-greece_160515_05-800x534.jpg
[Left: Castle of Emporeios, Greece; Right: Medieval Italian Fortress]
The Interior Design Gods conspired today to bring us two different projects on design blogs Dezeen and Contemporist that attempt roughly the same thing: adding a modern staircase into a historic stone castle. In the rural Italian village of Villa d'Adda, architect Gianluca Gelmini added his staircase as part of his renovation of a dilapidated 12th-century fortress. And on the Greek Island of Nisyros, Giorgos Tsironis and Greg Haji Joannides added their staircase to a 17th century building perched at the top of a hill. So, we put it to you, the reader. Which do you think is the more successful staircase?
Torre-del-Borgo-Gianluca-Gelmini_dezeen_784_1.jpg
 [Medieval Italian Fortress]
house-in-greece_160515_01-800x534.jpg
[Castle of Emporeios, Nisyros, Greece]

 ...MORE

Also at Curbed:
Starter Castles, Staircase Houses, and Dogs Named Tesla

Notes From the 2015 London Value Investor's Conference

From Market Folly:

London Value Investor Conference Notes 2015: Woodford, Ruffer, Brandes & More
Neil Woodford – Woodford Investment Management
Q&A Session.  Neil Woodford is one of the UK’s most respected and successful fund managers. After 26 years at Invesco Perpetual where he managed £30bn in 2013, he left to set up his own fund management business. Woodford has a background in economics and finds it natural to combine bottom up stock picking with top down analysis. He focuses on the medium and long term. Trying to value a business without taking into account the macro and competitive environment is like music without instruments; it doesn’t work. He places emphasis on portfolio construction – not just the cheapest stocks. Trying to be scientific about the future is an inherently odd thing to do. Portfolio construction is not a science, more an art and involves lots of judgement. Valuation should always involve a range of intrinsic values and not an absolute number. He uses revenues, earnings and cash flows to value a business and spends a lot of time getting close to businesses including meetings with management.  Considering history and the past is important when making a valuation but they are only part of the judgement because companies, management and technology can change. He does not spend time worrying about what other managers are doing. 
On how to value early stage companies – he uses the same tools and valuation methods and flexes them. It is possible to value pre-revenue businesses. They project cash flows just as they would for established companies. 
On fund management - smaller scale boutique style fund managers have advantages as smaller teams are often more effective than large. Fund management lends itself to being a cottage industry. The industry generally charges too much in fees. The thing that offends him most is charging high fees for closet indexing. The industry needs to become more open and transparent. 
On the £18m fine that Invesco received after Woodford had left - he said the FCA report is pretty comprehensive and makes good reading. The fine related to disclosure rather than the use of excess leverage. He has learnt from the incident to keep his new fund’s model very simple. They will only use derivatives for currency hedging and nothing else.
On how to deal with underperformance - all investors go through difficult periods.  He underperformed in the tech bubble of the late 90s. It was a draining and emotional experience. Woodford said you must trust your discipline in good times and bad. You need investment anchors to stay consistent. 
On what he saw that made him sell out of Tesco at the same time that Warren Buffett was buying - he did not like the way Tesco were deploying capital and he became less convinced about future returns. “They were planting flags.” He thought that competition would increase in the sector but he did not foresee the rise of the discounters, Aldi and Lidl. After a 30-minute conference call with the new CEO, Philip Clarke, he thought the problems facing Tesco were structural and not cyclical and sold all of the stock within a few weeks.
Jonathan Ruffer – Ruffer LLP
“Value investor,” like “democrat,” is one of those words that it is hard to say you are not. Ruffer thinks of himself as value investor but in the negative sense that he is not a momentum investor.  Unlike some value investors, Ruffer believes we must grapple with and try to predict the future. The Romans distinguished between futurum and adventus. Futurum refers to events that roll away from us. For example, a turnip farmer was reasonably sure that he was going to eat boiled turnip for dinner but the further ahead one looks the harder it becomes to predict the future. Adventus refers to those events or shocks that come at us and hit us, things that we could not possibly have seen coming. The momentum investor concentrates on the futurum.  Unlike the Roman view of adventus (which sees the challenges that come at us as acts of god) it is the task of the value investor to spot the next crisis coming. This can be done by studying history, starting from the beginning of limited liability in 1840. Stock market crashes do not come out of a blue sky. The big question for investors now is how the huge amount of debt in the world will be resolved? Collateral is a crucial part of the lending process but today central banks have made too many gifts through QE and taken collateral out of circulation. Since 2009, the money supply in the US, Europe and Japan has been expanded. By keeping interest rates below the rate of inflation a new asset bubble has been created. There is a crisis on the way in which all asset classes will fall in value but it is hard to say exactly when. When the crisis does arrive “safe” investments will be the most dangerous. As in Britain in the 1970s, inflation of 10-20% is likely.
Tim Hartch – Brown Brothers Harriman
Looks for companies with: a loyal customer base, a sustainable competitive advantage, essential products and services, leaders in attractive markets, strong balance sheets, high returns on capital, disciplined capital allocation. Looks to own 25-35 stocks and invests with a 3-5 year horizon. He sells investments when they approach intrinsic value. How is intrinsic value calculated? Hartch takes into account revenue growth, margins, business mix, capital intensity, ROIC, acquisitions, discount rate and terminal value. He is looking for a 15% return per annum over five years....MORE

When Bots Collude: Can Algorithms Form Price Fixing Cartels?

From The New Yorker April 25, 2015:
On the day after Easter this year, an online poster retailer named David Topkins became the first e-commerce executive to be prosecuted under antitrust law. In a complaint that was scant on details, the U.S. Department of Justice’s San Francisco division charged Topkins with one count of price-fixing, in violation of the Sherman Act. The department alleged that Topkins, the founder of Poster Revolution, which was purchased in 2012 by Art.com, had conspired with other sellers between September of 2013 and January of last year to fix the prices of certain posters sold on Amazon Marketplace. Topkins pleaded guilty and agreed to pay a twenty-thousand-dollar fine. “We will not tolerate anticompetitive conduct, whether it occurs in a smoke-filled room or over the Internet using complex pricing algorithms,” Assistant Attorney General Bill Baer, of the department’s antitrust division, said. “American consumers have the right to a free and fair marketplace online, as well as in brick and mortar businesses.”

Casual observers might wonder why, for its first Sherman Act antitrust case against an online-sales executive, the Department of Justice targeted a relatively small-time retailer in the wall-décor industry. After all, Silicon Valley is no doubt replete with e-commerce executives who have colluded to bend rules and harm consumers. And the department’s case rested on allegations of fairly standard price-fixing behavior: according to prosecutors, Topkins and his co-conspirators, who were unnamed in the complaint, collected, exchanged, monitored, and discussed how much to charge for posters that were sold, distributed, and paid for on Amazon’s auction site from California to other states. Coupled with the details of the complaint, however, Baer’s statement suggests that prosecutors might have been interested in a tool underlying Topkins’s apparent misdeeds: an algorithm he had coded to instruct his company’s software to set prices.

The first section of the Sherman Antitrust Act, which was passed in 1890, amid the heyday of American oil, steel, and railroad monopolies, suggests the breadth of the activities that prosecutors and regulators have traditionally been able to challenge. “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal,” it states. Since the Sherman Act was bolstered, in 1914, with the passage of the Clayton Act, the country’s antitrust apparatus has allowed the federal government to go after all kinds of businesses, and has typically encompassed new industries as they have emerged. Algorithm-driven (or bot-driven) selling, however, poses a new and formidable challenge to existing antitrust laws. If the practice hasn’t yet become a full-blown conundrum for prosecutors and regulators, the Topkins case suggests that it soon might. In capturing a plea, the Department of Justice was apparently able to rely on evidence of a “meeting of the minds” among co-conspirators. Topkins’s algorithm wasn’t an impediment to prosecution, because the seller had otherwise demonstrated a will to collude with other parties and then coded the algorithm to carry out the agreement. But often there is no evidence of a prior agreement when computers are in play, which means that antitrust prosecutions involving algorithms could be harder to prove in the future.

It’s likely that bot-driven price-fixing is more prevalent than the lack of prosecutions suggests. Algorithms are in high demand, and robotic sellers can combine with other automated pricing and selling mechanisms to monitor human activity and mine data in retail, services, and other areas, with few or no people involved. They can also make pricing predictions and decisions, reacting seamlessly to changes in the marketplace. Uber’s infamous surge pricing, for example, uses an algorithm to push up prices or, as Uber would put it, to balance supply and demand when many cars are needed simultaneously. When such algorithms go deeply awry, we notice: recall when, in 2011, Amazon priced “The Making of a Fly,” a paperback biology textbook, at $1,730,045.91, and that, during a snowstorm in 2013, Uber charged Jessica Seinfeld, the wife of Jerry Seinfeld, four hundred and fifteen dollars to drop off her kids at a sleepover and a bar mitzvah.

In a working paper published by the University of Oxford Centre for Competition Law and Policy, the researchers Ariel Ezrachi and Maurice E. Stucke explain that Uber’s algorithm can lead to horizontal collusion if the algorithm gives rise to an “alternative universe” that pushes up prices based on the perceived market value of a ride, rather than its actual market value. A human need not be involved. When Uber was criticized for the rise in rates that led to Jessica Seinfeld’s expensive trip, the C.E.O. and co-founder Travis Kalanick argued that their algorithms, not the people working for the company, were responsible. “We are not setting the price. The market is setting the price. We have algorithms to determine what that market is,” he said.

Ezrachi and Stucke suggest other ways in which algorithms can behave as cartels. One of these would involve “predictable agents,” which are designed to deliver predictable outcomes in response to market conditions. According to Ezrachi and Stucke, these agents, when adopted by multiple actors, “more easily reach a tacit agreement, detect breaches and punish deviations.” The result is a “conscious parallelism” that leads to higher prices....MORE
HT: The Big Picture  and although I thought one of the Alphavilleins spotted it first I can't recall the link.

Monday, May 25, 2015

Memorial Day 2015

Fort Snelling National Cemetary
"...that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion--that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth." 
-Abraham Lincoln at Gettysburg, November 19, 1863

Sunday, May 24, 2015

Evans-Pritchard: "HSBC fears world recession with no lifeboats left"

Duh.
As mentioned in our intro to 2013's "Bracing for the Next U.S. Recession":
The big fear for policymakers is a recession happening before they have stopped fighting the last war.
With interest rates at the zero-lower-bound a deflationary depression would leave them with only one real option-print money. A buyers strike on U.S. debt would force the full Monty of monetization.
Back in 2008 when things were at their bleakest we linked to a couple Federal Reserve papers that laid out the "unconventional" measures. More after the jump....
From The Telegraph:
The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as economy falters 
The world economy is disturbingly close to stall speed. The United Nations has cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.
We are not yet in the danger zone but this pace is only slightly above the 2.5pc rate that used to be regarded as a recession for the international system as a whole.
It leaves a thin safety buffer against any economic shock - most potently if China abandons its crawling dollar peg and resorts to 'beggar-thy-neighbour' policies, transmitting a further deflationary shock across the global economy.
The longer this soggy patch drags on, the greater the risk that the six-year old global recovery will sputter out. While expansions do not die of old age, they do become more vulnerable to all kinds of pathologies.
A sweep of historic data by Warwick University found compelling evidence that economies are more likely to stall as they age, what is known as "positive duration dependence". The business cycle becomes stretched. Inventories build up and companies defer spending, tipping over at a certain point into a self-feeding downturn.

Stephen King from HSCB warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.

"The world economy is sailing across the ocean without any lifeboats to use in case of emergency," he said.
In a grim report - "The World Economy's Titanic Problem" - he says the US Federal Reserve has had to cut rates by over 500 basis points to right the ship in each of the recessions since the early 1970s. "That kind of traditional stimulus is now completely ruled out. Meanwhile, budget deficits are still uncomfortably large," he said....MORE

"Who owns London’s most expensive mansion?"

From The New Yorker:
House of Secrets
http://www.newyorker.com/wp-content/uploads/2015/06/150601_r26572-870.jpg
Witanhurst, London’s largest private house, was built between 1913 and 1920 on an eleven-acre plot in Highgate, a wealthy hilltop neighborhood north of the city center. First owned by Arthur Crosfield, an English soap magnate, the mansion was designed in the Queen Anne style and contained twenty-five bedrooms, a seventy-foot-long ballroom, and a glass rotunda; the views from its gardens, over Hampstead Heath and across the capital, were among the loveliest in London. For decades, parties at Witanhurst attracted potentates and royals—including, in 1951, Elizabeth, the future Queen.
In May, 2008, I toured Witanhurst with a real-estate agent. There had been no parties there for half a century, and the house had not been occupied regularly since the seventies. The interiors were ravaged: water had leaked through holes in the roof, and, upstairs, the brittle floorboards cracked under our footsteps. The scale of the building lent it a vestigial grandeur, but it felt desolate and Ozymandian. A few weeks later, Witanhurst was sold for fifty million pounds, to a shell company named Safran Holdings Limited, registered in the British Virgin Islands. No further information about the buyers was forthcoming.

In June, 2010, the local council approved plans to redevelop the house and five and a half acres of grounds, maintaining Witanhurst as a “family home.” It was the culmination of a long battle with other Highgate residents, who did not welcome such an ambitious project. Since then, Witanhurst’s old service wing has been demolished and replaced with the so-called Orangery—a three-story Georgian villa designed for “everyday family accommodation.” And beneath the forecourt, in front of the main house, the new owners have built what amounts to an underground village—a basement of more than forty thousand square feet. (The largest residential property in Manhattan is said to be a fifty-one-thousand-square-foot mansion, on East Seventy-first Street between Madison and Fifth, owned by Jeffrey Epstein.)

This basement, which is connected to the Orangery, includes a seventy-foot-long swimming pool, a cinema with a mezzanine, massage rooms, a sauna, a gym, staff quarters, and parking spaces for twenty-five cars. In late 2013, the local council approved plans for a second basement, beneath the gatehouse, which will connect that building to both the main house and the Orangery. Earlier this year, the owners also sought planning permission to extend an underground “servants’ passage.”

When the refurbishment is complete, Witanhurst will have about ninety thousand square feet of interior space, making it the second-largest mansion in the city, after Buckingham Palace. It will likely become the most expensive house in London. In 2006, the Qatari royal family bought Dudley House, on Park Lane, for about forty million pounds; after a renovation, its estimated resale value is two hundred and fifty million pounds. Real-estate agents expect that the completed Witanhurst will be worth three hundred million pounds—about four hundred and fifty million dollars.

If a vast and lavishly appointed house in Manhattan—a palace nearly double the size of the White House—were being redeveloped on the edge of Central Park, New Yorkers would want to know who lived there. Londoners are equally inquisitive, and concerted efforts have been made to uncover the identity of Witanhurst’s owners. Shortly after the house was sold, it became known—from local gossip and publicly accessible planning documents—that Witanhurst belonged to a family from Russia. Several newspapers speculated that the owner was Yelena Baturina, Russia’s richest woman, and the wife of Yury Luzhkov, then the mayor of Moscow. (Luzhkov and Baturina reportedly enriched themselves while he was in office, before Luzhkov clashed with the Russian government; she now lives in London.) Baturina denied owning Witanhurst, and in 2011 she sued the London Sunday Times for publishing an article titled “BUNKER BILLIONAIRESS DIGS DEEP.”

The Baturina lawsuit and the continued secrecy surrounding Witanhurst have intensified the guessing game. Generally, the names of homeowners in Britain are listed in the Land Registry, which can be read for a small fee. But listings for properties owned by offshore companies do not disclose individual beneficiaries. In the British Virgin Islands, records reveal merely the name of the “registered agent” of Safran Holdings—Equity Trust Limited, a local agency that holds several such positions and is connected to the company by name only—and the company’s post-office box, on the island of Tortola.

A recent investigation by the Financial Times found that more than a hundred billion pounds’ worth of real estate in England and Wales is owned by offshore companies. London properties account for two-thirds of that amount. Charles Moore, a former editor of the Telegraph, says that London’s property market has become “a form of legalized international money laundering.” For Highgate residents, however, worries about the lack of transparency in the purchase of Witanhurst have come second to a more English concern. People irritated by the construction noise and the traffic that have blighted their normally quiet neighborhood have no owner to complain to—only managers.

It might have been expected that the identity of Witanhurst’s owners would slip out, given the volume and the scale of work at the site, and the number of contractors involved. (Last year, I met a craftsman who said that he was on one of six teams of carpenters working there.) But few employees are told the owners’ names. Senior contractors who have dealings with the family or their agents have been required to sign confidentiality agreements. Guards protect the property, and cameras monitor the grounds. A woman who knows the owners advised me to “choose another story.” Stephen Lindsay, one of the real-estate agents who sold the house, spoke to me only after I agreed to leave my phone and bag in another room. He then put the family’s lawyer on speakerphone and announced that he would take the secret of Witanhurst’s ownership “to the grave.”

Witanhurst has always been an attractive place to park new money. In 1814, Joseph Crosfield, a twenty-one-year-old chemist, started a soap-and-candles business in Warrington, in the industrial northwest of England. The company was passed down to his son, George, and then to his grandson Arthur. By then, the company—now named Crosfield & Sons—was worth a fortune.
Arthur was no mere businessman: he was the 1905 amateur golf champion of France and a musician who composed many pieces for piano. In 1906, he won the parliamentary seat of Warrington, becoming a Liberal M.P. for four years. He eventually married Domini Elliadi, a fine tennis player who was the daughter of a Greek merchant. (She competed at Wimbledon and once won the Swiss ladies’ title.) In 1911, Arthur sold the family business. With the proceeds, he bought Parkfield, an elegant eighteenth-century house in Highgate.
Highgate had only recently been subsumed by London’s late-Victorian sprawl. Before then, the village of Highgate had abutted the Bishop of London’s hunting grounds to the north and Hampstead Heath to the southwest, and was situated on the main road from London to the North of England. (The notorious highwayman Dick Turpin hid out in a pub, The Flask, which faces Witanhurst.) Because of its elevation and its handsome views, Highgate became a favored place for rich families from London to build summer retreats....MUCH MORE

Swiss Mis(take?): Goats, Skiing, Chocolate and The Tallest Hotel In The World

From Drexel University's The Smart Set:

The Tower
In a spa town in the Swiss Alps, you'll find snow-capped mountains, chocolate, goats... and soon, the tallest hotel in the world.
THE TOWER
In a spa town in the Swiss Alps, you'll find snow-capped mountains, chocolate, goats... and soon, the tallest hotel in the world.
BY BERND BRUNNER
For as long as I can remember, I’ve been fascinated by skyscrapers. A poster with the skyline of Manhattan graced the wall of my childhood bedroom. And I belong to the slowly disappearing group of people who have gazed upon New York not only from the Empire State Building and the Rockefeller Center, but from the viewing platform of the vanished World Trade Center too.

Now a spectacular new project is underway in Switzerland that immediately drew my attention: a skyscraper in the middle of the mountains. The location is the village of Vals, in the canton of Graubünden. Even in multilingual Switzerland, Graubünden is remarkable: with native speakers of Swiss German, Italian, and Romansh, it is the country’s only trilingual canton. This spot in a beautiful arm of the Anterior Rhine valley is home to about 1,000 people. Approximately the same number of sheep are said to live there as well, but perhaps that’s just a rumor. The planned building will be 80 stories tall and soar 1,250 feet into the sky. That’s 23 feet higher than the Federation Tower in Moscow – which currently qualifies as Europe’s tallest building – and exactly as tall as the Empire State Building minus the antenna. However, a building now planned for St. Petersburg will come in at over 1,312 feet, reclaiming the top spot for Russia. Of course, all these structures are small potatoes compared to the world’s tallest building, which boasts 2,722 feet and is located in Dubai.


The Vals tower was designed by Thom Mayne, the principal architect of Morphosis. Mayne co-founded the firm in Los Angeles in 1972. He has taught at various Ivy League universities and at UCLA, and won the Pritzker Prize for architecture in 2005. Morphosis beat out seven other competitors for the Vals project.
As planned, “7132” – named for the town’s postal code – will be an unusually slender structure. Measuring just 101 feet long and 59 meters wide, it will stretch into the heavens like a transparent needle. A rendering of the finished building depicts a delicate, ethereal tower so barely visible against the sky that it almost appears to merge with the clouds. It’s likely that the style of illustration was chosen to make the building appear less dramatic than it will actually be in real life. In any case, it’s clear that the reflective, ultra-skinny tower will pose a real challenge for birds.

“7132” will house a hotel and about 100 luxury apartments that will command dizzying prices. Word has it that a double room will cost at least 590 Swiss francs (or $617). Some accommodations will stretch over the entire floor, providing guests with a 360-degree view. There will be a spa, gym, ballroom, library and gallery. The experience is meant to evoke the glory days of early Swiss tourism, with the legendary Badrutt’s Palace Hotel in St. Moritz. The tower will be the tallest hotel in the world – beating out the current record holder, the JW Marriott Marquis Hotel in Dubai, by 85 feet. And it is supposed to be one of the world’s five best hotels as well....MUCH MORE

Friday, May 22, 2015

The U.S. House Of Representatives Just Passed An Asteroid Mining Bill

From the Washington Post's The Switch blog:
For as long as we've existed, humans have looked up at the stars — and wondered. What is up there? Who is out there?

Now, to that list of questions we can add: And CAN I HAVE IT?

The United States has already shown its penchant for claiming ownership of space-based things. There are not one, not two, but six U.S. flags on the moon, in case any of you other nations start getting ideas. (Never mind that the flags have all faded to a stateless white by now.)

So it only makes sense that American lawmakers would seek to guarantee property rights for U.S. space corporations. Under the SPACE Act, which just passed the House, businesses that do asteroid mining will be able to keep whatever they dig up:
Any asteroid resources obtained in outer space are the property of the entity that obtained such resources, which shall be entitled to all property rights thereto, consistent with applicable provisions of Federal law.
This is how we know commercial space exploration is serious. The opportunity here is so vast that businesses are demanding federal protections for huge, floating objects they haven't even surveyed yet.
But it's actually important that we're talking about this now, because we don't want to wind up in a situation where multiple companies are fighting for the same patch of rock without having a way to resolve it. There are two key questions at stake: Who should regulate commercial space activity? And what rules should apply?

By default, the relevant authority could wind up being the Federal Aviation Administration....MORE
Mining.com has more.

Previously on the Space Cadet channel:

Dec. 9, 2014
"The Price of Gold in the Year 2160" 
Sept. 27, 2014 
"The companies vying to turn asteroids into filling stations"
May 14, 2014
Jan. 22, 2013
Here Comes Another Asteroid Mining, 3D Printing, Robotic, Start-up
Dec. 27, 2012
Asteroid Mining: "A Start-Up Sees a Gold Rush Among the Stars"
April 22, 2012
Feb 6, 2012
Oct. 21, 2011
We've been following these plans at a distance, so to speak.

A compilation image of mining equipment in space

For Sale: Long Island House Previously Owned By Zelda and F. Scott Fitzgerald

From Curbed:

F. Scott and Zelda Fitzgerald's Prohibition-Era Long Island Pad Asks $3.8M
Location: Great Neck, New York
Price: $3,888,888

It's not East or West Egg, nowhere near the same league as Gatsby's gilded mansion, but this Mediterranean home in Great Neck can lay claim to something a lot more substantial than the fictional millionaire's backstory. F. Scott and Zelda Fitzgerald called this stately 7-bed, 7-bath home from the fall of 1922 to April 1924 (Zelda nicknamed it her ""nifty little Babbitt house," a Sinclair Lewis reference poking fun at the bourgeois). Young and a bit reckless, cash-strapped yet renting a Rolls, the couple caroused as the early short stories that presaged The Great Gatsby sprung forth from a small office above the garage, inspired by the social behaviors and lavishness of Prohibition-era Long Island. Though Fitzgerald, flush from the success of This Side of Paradise, was living beyond his means, the Long Island move was meant as a money saver: their $300-a-month rent (roughly $4,000 today) was a lot cheaper than their previous stay in a Manhattan hotel suite....MORE
Proof that I make mistakes:
June 3, 2013
Our Last F. Scott Fitzgerald/Great Gatsby Post: "Living on $500,000 a Year"

"If you want people to believe your research, write it in Baskerville font?"

From Chris Blattman:
We have entered a new, unexpected landscape. Truth is not typeface dependent, but a typeface can subtly influence us to believe that a sentence is true. Could it swing an election? Induce us to buy a new dinette set? Change some of our most deeply held and cherished beliefs? Indeed, we may be at the mercy of typefaces in ways that we are only dimly beginning to recognize. An effect — subtle, almost indiscernible, but irrefutablythere. (“Mommy, Mommy, the typeface made me do it.”)

For every thousand respondents to the Times quiz, nearly five more people agreed with Deutsch’s statement when written in Baskerville’s typeface than they did when they read it in Helvetica. A typeface that nudges (to use the vernacular of experimental psychology) us to uncritical belief?...
...MORE

Reinsurance: Warren Buffett Is Pissed That You Kids Are Playing In His Sandbox (BRK)

For the first time in years we didn't present the liveblogs of BRK's annual meeting a few weeks ago.
It seems that everyone is doing it and frankly Warren's schtick is best appreciated in the portion size one would allow any insurance salesman from Omaha.

Who's piled up $72.3 Billion.

From Artemis:

Buffett bemoans reinsurance becoming a “fashionable asset class”
Warren Buffett is none too happy that reinsurance has become what he termed a “fashionable asset class”, as the fact that investors are increasingly attracted to the space has damaged his insurance and reinsurance businesses returns.

At the Berkshire Hathaway annual meeting held this weekend, Buffett discussed the difficulties that even his insurance and reinsurance empire has in the current, softened and competitive reinsurance market environment.

Competition on price has hit both of his main reinsurance companies, General Re and Berkshire Hathaway Reinsurance Group, with first-quarter results showing a pull-back on premiums written as the firms constrain themselves on underwriting of catastrophe risks.

General Re’s premiums written in property declined 16% in Q1 and the reinsurer actually fell to an underwriting loss, partly due to the impact of competition and falling prices, but also claims rates and currency effects.

“Insurance industry capacity to write business remains high and price competition for most property/casualty markets persists,” the Q1 earnings statement explains.

“We continue to decline business when we believe prices are inadequate. However, we remain prepared to write more business when appropriate prices can be attained relative to the risks assumed.”

Berkshire Hathaway Reinsurance, meanwhile, continues to constrain its capacity and volume for many property & casualty lines and especially for property catastrophe reinsurance underwriting.

“Rates, in our view, are generally inadequate,” the firm explained. “However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.”

So Berkshire clearly stands ready to increase its reinsurance underwriting if and when pricing rebounds or the firm can find the opportunities that it finds attractive and well-priced.

During the Berkshire Hathaway annual meeting shareholders, analysts and journalists get to ask Warren Buffett questions about the business, its investments and what might be coming in the future.

On reinsurance in particular Buffett was fairly negative and clearly showed that his firm is cognisant that it faces a threat from new entrants with lower-cost capital, including insurance-linked securities (ILS).
Reinsurance is “a business whose prospects have turned for the worse,” Buffett commented, adding that there’s “not much we can do about it.”...MORE
A couple of our BRK posts that may be of interest:
Insurance: "CEO FORUM: Gen Re's Tad Montross on model dependency" (BRK.A)
"Re/insurance. The engine of Berkshire Hathaway: Warren Buffett" (BRK) Plus a Special Bonus!

Insuring the Apocalypse: Warren Buffett on Global Warming (BRK.B)
In addition to See's Candies where cocoa would be a global warming canary in the coal mine, Mr. Buffett's Berkshire Hathaway owns a major property/casualty insurer, GEICO and the reinsurer of last resort, GenRe.

The utility operation owns the largest fleet of windmills in the U.S. while his railroad, Burlington Northern, is the largest hauler of coal in the country and the largest transporter of oil out of the Bakken field. There are a couple other tie-ins to climate that we've looked at over the years, some links below....

...Of the reinsurers Munich Re is the first to blame climate change for their weather related claims with industry #2 Swiss Re often following suit. The smaller Hannover Re doesn't do this. Zurich Re, along with the rest of the industry, is less vocal. Buffet's Re operations rank #3 in the world and is much better managed than Munich and Zurich so he often ends up taking risk off their hands or even lending them money.

Insuring weather over the last decade has been extremely profitable as premiums charged have been high-although declining as hedge funds and other non-traditional funders "want to get me some of that action"-and payouts on claims have been very agreeable....
And many more.

Thursday, May 21, 2015

Finance Behemoths Don't Like Volatility And Want To Regulate It Away

Volatility is great if you are halfway good at what you are doing.
On the other hand, incumbents love to use regulation to entrench their position vis-à-vis more nimble but less richly financed upstarts.

From the Washington Examiner:

Finance execs call for new regulatory tools to fight bubbles

A group of highly influential financial executives have expressed support for giving their regulators new authority to take preemptive action against potential speculative bubbles.

In a statement coordinated by the World Economic Forum, the Swiss nonprofit that coordinates the annual meeting of business leaders and politicians at Davos, 15 CEOs and other executives of top financial firms such as HSBC and BlackRock called on regulators to embrace "macroprudential" regulations.

Such rules are aimed specifically at preventing asset prices from rising out of line with economic fundamentals and risking a market crash, as happened with the U.S. housing market in 2007 and 2008. Macroprudential regulations are thought of as distinct from rules and oversight that apply to specific banks or other firms. 
While the proper use of macroprudential tools is a topic of ongoing consideration among U.S. regulators, the executives write that they have concluded that such tools are necessary "to help achieve the right balance between financial stability and economic growth."

"Macroprudential policies could support financial market stability and thus long-term investors' ability to provide risk capital to the real economy," Swiss Reinsurance Company CEO Michel Liès wrote.

The authors also acknowledged that "it is important to continue to monitor the possible unintended consequences of these regulations." The problem facing regulators is that it is difficult to distinguish bubbles from normal market movements, and that acting on the basis of limited information could harm innovation and growth....MORE

Which Came First, The Chicken Shortage or the Egg Shortage?

From Bloomberg: 

Are We Headed for an Egg Shortage?
Joe Greco, who’s been churning out cookies and cakes for 27 years, usually uses about 600 pounds of liquid eggs a week at his bakery near Chicago. Now, his freezer has seven times that amount because Greco worries that record prices are about to go even higher.

The cost of breaker eggs -- those cracked and sold in liquid form for use by wholesale bakers and restaurants such as McDonald’s Corp. -- have more than doubled in the past three weeks. The culprit behind the surge: the worst-ever American outbreak of the bird flu virus.

More than 33.5 million chickens, turkeys and other birds have been affected. Iowa, the top U.S. egg producer, was hardest hit, losing 40 percent of its laying hens. The disease prompted the government to forecast the first annual drop in egg production since 2008. Greco is concerned his 4,200-pound (1,900-kilogram) stash of liquid eggs won’t protect him from higher costs, and that he’ll have to start buying eggs still in shells to crack by hand.

“As soon as I heard about the bird flu, I knew this was going to happen,” said Greco, 47, who owns Palermo Bakery in Norridge, Illinois, near Chicago’s O’Hare Airport. He’s been racing to buy extra supplies over the past month and saw prices for the pails of liquid eggs he buys jump 28 percent last week. “After the Fourth of July, there might be another nightmare, so I’m still shopping around to see if there are better prices.”

Highly pathogenic avian influenza spread rapidly through parts of the Midwest in the past two months, and Iowa lost about 23 million hens. Post Holdings Inc. has warned that bird flu will hurt fiscal 2015 earnings at its food-service unit, while countries in the Middle East and Asia have placed restrictions on shipments of U.S. poultry.

Falling Output
The U.S. Department of Agriculture on Tuesday said that domestic egg production will drop this year, reversing an April forecast for an increase. Bird flu will also limit turkey supplies, though they’re still expected to climb from 2014. Total annual poultry and egg output is valued at about $48 billion....MORE
Previously in the ellipsoid series, in addition to posts on half the Imperial Russian Fabergé  eggs we have:

Mix Butter, Onions, Cheese and Eggs. Add Electricity...
For some reason, this post from Freakonomics got me thinking about the Chicago Butter and Egg board, the Butter, Cheese, and Egg Exchange of New York and Title 7, Ch. 1, § 13–1 U.S. Code*:...
The Chinese Egg Derivatives Roll Out
"Chart of the Day: Real Egg Prices, 1890-2011"
 What came first Egg or Chicken? Solution Through Granger Causality

and quite a few more.

Finally, here's King Oliver's Creole Jazz Band featuring Bessie Smith and Louis Armstrong.

Deflation: 3D Printed Houses For $5000

From ZeroHedge:

Chinese Firm Reveals World's First 3D-Printed Five Story Apartment Building
While China's stock market continues levitating at an ever more amusing pace, this is happening at the expense of China's far more important housing market, which sadly for three-quarters of China's population (in the US 75% of household assets are in financial products, in China: in real estate) continues to deflate at a rate faster than US housing in the aftermath of Lehman. And for better or worse, Chinese home prices are likely set to drop even more, and not due to something as arcane as glitches in fiscal or monetary policy, but something far more tangible: technological advances, and specifically - 3D printed houses.

Meet WinSun: the Chinese company has been documented to print 10 complete houses in 24 hours, using a proprietary 3D printer that uses a mixture of ground construction and industrial waste, such as glass and tailings, around a base of quick-drying cement mixed with a special hardening agent. But while this in itself is impressive, the punchline is the cost: the houses can be produced for under $5,000, which means that if adopted widely, 3D printing can lead to a collapse in prices of new home construction across China, which while good for new buyers could be catastrophic for the economy and the banking sector where nearly $30 trillion in commercial loans are collateralized almost entirely by China's overinflated housing sector.
Not content with building single-family houses (and WinSun's own office), WinSun recently made history when it demonstrated the world's first entirely 3D-printed five-story apartment building and a 1,100 square metre (11,840 square foot) villa, complete with decorative elements inside and out, on display at Suzhou Industrial Park....MORE