Oracle's Larry Ellison Is Getting Into Farming In A Big Way (automated, hydroponic, greenhouses)

From the Honolulu Star-Advertiser:

Tech billionaire Ellison sees potential for agriculture on Lanai

Manele Bay, Lanai >> For much of the last century, Lanai was the world’s premier supplier of pineapple. Now, there’s a new plan to make the island a model that changes agriculture for the world by growing the freshest, most nutritional produce and profitably selling it for less than mass-produced imports.

Larry Ellison, the tech industry billionaire who bought 98 percent of Lanai five years ago, announced the detailed endeavor Saturday in a Honolulu Star-Advertiser interview on the island.
The ambitious plan, which involves automated, computer-­driven hydroponic cultivation inside giant greenhouses, is part of what can be viewed as Stage 2 of Ellison’s vision to make the island a sustainable community.

“We’ve looked at agriculture, and it is one of the few industries that has not been transformed by modern technology,” he said at the Four Seasons Resort Lanai at Manele Bay.

If the $15 million high-tech greenhouse slated to be running by the middle of next year is successful, it could be reproduced far and wide with a global impact on farming and people who would be able to eat better produce that costs less.

“Lanai is step No. 1,” Ellison said. “We think we can transform agriculture.”

Ellison added that his venture, which relies on renewable energy and little transportation costs, should be profitable in its first year.

The crops grown initially at what will be known as Lanai Farms are expected to include tomatoes, leafy greens, cucumbers and herbs but could expand in a future phase with more vegetables and possibly fruits, according to Kurt Matsumoto, chief operating officer of Pulama Lanai, the Ellison company managing Lanai operations.

Ellison said scientists and computers will measure and maximize nutrition, and that resulting crops should cost “a fraction” of what Hawaii consumers pay for what’s on store shelves today.
If you have the highest quality and the best nutrition, you have to be willing to pay less,” he said with a smile. “It’s economic and health benefits all rolled into one. The highest-quality food at the lowest prices.”

Other parts of Ellison’s Lanai 2.0 plan include a $75 million transformation of the Lodge at Koele in Lanai City into a resort where people go to improve themselves with meditation, yoga, serene image immersion and luxurious spa treatments, among other things....MUCH MORE
 

Some might think Mr. Ellison to be in need of some serene image immersion himself with his 1.16 billion shares of ORCL down $6.57/share over the last eight days but should push come to shove ol' Larry should be ok.  he always has Musashi to get away from it all:

SYF

Travis Kalanick: The Musical

I'm sorry, I lied. That headline is "fāke™ " or, in the words of Sheldon Cooper "A big fat whopper".
However, 'Brilliant Jerks' is a play! 

From PitchBook:

What 'Brilliant Jerks' can teach us about Travis Kalanick's rise and fall

As the net closes in on Tyler Janowski, the CEO of the unnamed ridehailing app at the heart of the new play "Brilliant Jerks", he faces two board members trying to convince him to leave, as reports of harassment and sexism converge on the company he founded.

Unrelenting, he launches into a tirade defending his business, its culture and himself. "We have 1,500 first-time managers," spits Janowski. "I can’t be responsible for 1,500 people!"

The show, written by journalist Joseph Charlton and playing at the VAULT Festival in London, takes its name from a 2017 speech by Uber board member Arianna Huffington, in which she said the company would no longer tolerate "brilliant jerks." But the play isn't just a fictionalised take on the fantastical up-and-down journey of Uber and its former CEO, Travis Kalanick. It is about the responsibility—and on occasion the lack of it—of three main characters: Mia, one of the app's drivers, who works in the North of England and has a troubled past; Sean, a savvy if sometimes naïve coder with his own secret; and, of course, Tyler, the all-powerful serial entrepreneur who watches as the empire he has built slowly comes to consume him.

The trio of actors who play these characters, as well as various other parts, keep the action moving with short, sharp dialogue interspersed with their own inner monologues. The play is mainly narrated by the three main characters, with telling the story directly to the audience prioritized above conversation. The effect is to heighten the sense of legend in the rise and fall of the company, mimicking Uber itself.

The show doesn't pull punches when it comes to highlighting the toxicity and sexism rife among the app's offices. Although the play does not mention Uber by name, there are scenes dedicated to several infamous episodes in the company's history, such as the alleged work trip to a karaoke-escort bar in Seoul and, as Susan Fowler described, the leather jacket fiasco. Elsewhere, an odious line manager encourages Sean's female boss to wear high heels, while Mia deals with drunk, leering men whom she is charged with driving home.

"Brilliant Jerks" shows that, for things to change, it must begin from the very top.

....MORE

Back in a bit with the PitchBook story I was actually going for but for now a couple more in what appears to be becoming a series:

Piketty, The Musical
Martin Shkreli, The Musical Set To Debut June 19

It's a niche, and I thought it was mine but as noted elsewhere:

I am coming to accept it's a race with no winners, hell I even got beaten to "Enron, the Musical" by one Lucy Prebble who took it to the West End.
As the young people say: bitch.

Oh well, here's some background on the Enron zeitgeist from Generic Theater who did the southern-U.S. premier of the show:...

Re/Insurance: Axa May Have Made A Giant Mistake With Its Purchase of XL Group

Former FT Alphavillein David Keohane, now in Paris, has a couple intriguing stories this week.

From the Financial Times:

Axa chief defends controversial XL Group deal

Oliver Ralph and David Keohane in Paris

March 26

Thomas Buberl vows to convince investors over €12.4bn acquisition

The chief executive of French insurer Axa has admitted that it may take more than a year to convince investors that his €12.4bn acquisition of Bermuda’s XL Group is a positive move.

Thomas Buberl told the Financial Times that he understood investors’ concerns about what he described as a “strategic decision”.

When the French insurer announced the deal earlier this month its share price fell by a tenth, wiping almost €6bn off its market capitalisation. Its share price has struggled to recover since.

James Shuck, analyst at Citi, said the deal “looks expensive, increases earnings volatility, . . . raises financial risk and undermines management credibility”.

Some investors had expected the company to use the capital generated by the planned listing of its US business to fund small acquisitions of €1bn-€3bn and share buybacks, rather than to do big deals.

Mr Buberl said: “I understand the disappointment of investors from two perspectives. Despite the fact that I have always positioned share buybacks as the last option, a lot of investors thought [there would be] share buybacks.” He added: “On the deal size we did indicate that we were looking at smaller deals and when we indicated that . . . we clearly did not have XL in mind. It was a year or more ago. But when your ideal hits the reality, you sometimes have to take a strategic decision.” Mr Buberl said he would eventually convince investors that the deal was worthwhile: “Talking people around is difficult. You need to prove people around. It’s probably 12-18 months . . . When we spoke about this deal, it was clear that the market would not react positively.”...MORE

The other piece that seems to be highlighting an opportunity is March 27's:

EDF to invest €8bn to bolster electricity storage in renewable push

Capital Markets: "Three Developments Shaping Month-End"

From Marc to Market:

Today may be the last day of full liquidity until next Tuesday, after the Easter holidays. We identify three developments that are characterizing the end of the month, quarter, and for some countries and companies, the fiscal year. Equity market sell-off, bond market rally, and the continued rise in LIBOR.

The sell-off in stocks at the end of last week amid what we think was exaggerated fears of a trade was subsided and stocks rallied on Monday, but US stocks slumped yesterday, which is dragging global markets lower today. Last year's low volatility seems a distant memory. Since last month's swoon, the VIX has mostly held above 15 and below 25. It is near 23 now, which is a little more than twice last year's average.

Technology shares, which had led the global rally are in retreat. Privacy issues and problems with self-driving cars may be the proximate triggers. The information technology sector in the US lost nearly 3.5% yesterday, twice the loss of the S&P 500. The MSCI Asia Pacific Index slumped 1.35%, giving back most of the gains of the past two sessions. Information technology and telecoms appeared to be a major weight. It is a similar story in Europe. The Dow Jones Stoxx 600 is off about 1.25% in late morning turnover, while information technology is off 2.7%.

In Japan and Europe, the only sector that is higher on the day are utilities, and that seems to be a function of lower bond yields. That is the second development characterizing the capital markets. The US 10-year yield fell through the recent floor around 2.80% yesterday and is now slipping below 2.75%. It is the lowest yield since February 6, when it briefly spiked to 2.65% amid the equity market meltdown. Australian and New Zealand's 10-year benchmark yields fell 6-7 bp, while the UK Gilt yield is five basis points lower at 1.37%, which is the lowest since January 24. Core yields in Europe are lower, while peripheral yields are a little firmer. The 10-year German bund yield is slipping below 50 bp for the first time since January 9.

The third characteristic of the capital market is the continued relentless increase in dollar LIBOR. It appears to have fallen in only five sessions here in Q1 18 and ICE three-month LIBOR has not fallen in over a month.....

...MORE

"A Little-Known Cobalt Miner Wants to Out-Produce Everyone Except Glencore"

Little known, waddya talkin.?

From Bloomberg, March 26:

• Closely held Chemaf plans to compete with biggest producers
• Congo accounted for two-thirds of global supply in 2017

A little-known cobalt miner in the Democratic Republic of Congo plans to ramp up output so fast it will soon be out-produced only by industry leader Glencore Plc.

Chemaf Sarl, a closely held Lubumbashi-based company, and several other firms are capitalizing on a boom in demand that’s transforming small copper miners into major cobalt players, as refiners and automakers scramble to secure long-term supplies. Prices for the metal, used to make rechargeable batteries in electric vehicles, have more than tripled in the past two years.

New output from Congo means the supply of cobalt could exceed demand for a few years, as it did narrowly in 2017, Guildford, U.K.-based metals trader Darton Commodities Ltd. said in a February report. This surplus will become a deficit when an expected surge in electric-vehicle sales kicks in after 2020 because no new “meaningful” cobalt assets are expected to enter production in that period, according to Darton.

Chemaf is building a processing plant at its Mutoshi mine in Lualaba province that will open in September 2019 and six months later be capable of producing 20,000 metric tons of cobalt a year, Chairman Shiraz Virji said by email. Added to output from its existing Etoile mine, which was about 5,000 tons last year, that could make Chemaf the world’s second-largest producer.

Global Heavyweight
Congo dominates output of the metal. Last year, the central African nation produced two-thirds of global supply, or 81,000 tons, according to Darton. Half of that amount came from the country’s two largest copper mines: China Molybdenum Co.-controlled Tenke Fungurume Mining and Glencore-owned Mutanda Mining.

The predicted rise in electric-vehicle production will require annual cobalt production of 314,000 tons by 2030, Glencore Chief Executive Officer Ivan Glasenberg said in December.

Congo’s market share is set to climb in coming years as both new and upgraded projects come on stream. Glencore will be responsible for much of the increase after investing in new processing facilities at its Toronto-listed Katanga Mining Ltd., which restarted production in December after a two-year hiatus. Katanga’s output will be as much as 34,000 tons a year from 2019, according to the Swiss commodity giant, making it the world’s largest cobalt mine.

ERG, Pengxin
Other miners also expect to start producing soon. Luxembourg-based Eurasian Resources Group Sarl’s Metalkol Roan Tailings Reclamation project is set to begin output later this year, eventually reaching a capacity of 21,000 tons a year. Shanghai-based Pengxin International Mining Co.’s Shituru Mining will also open a plant at the end of this year where capacity will reach 7,000 tons annually, according to a stock market filing....MORE

Nvidia: Does the Whole Self-Driving Timeline Have to Be Reassessed? (NVDA)

The headline is a bit over-dramatic but the issues are real.
Additionally there are a half-dozen pup chip companies that are looking to take on the big dog in AI. More on that later this week.
The stock closed down $18.96 (7.76%) at $225.52.

From Barron's:

Nvidia shares dropped by as much as 10% Tuesday after it said it would suspend self-driving car testing on the road in the wake of last week's facility incurred by a self-driving Uber car. Analysts ponder how seriously the move will affect Nvidia's self-driving car tech ambitions.

Shares of Nvidia (NVDA) ended the day down $18.96, or almost 8%, at $2,225.52, [sic] and at one point fell as low as $219.85, a 10% drop, after the company said it would suspend its test of self-driving car technology, casting a pall over what was supposed to be the focus of the day, the company’s "GTC 2018” conference in California, and the accompanying analyst day meeting.

The question is whether the whole timeline for how fast autonomous vehicles will be entering the mainstream, something Nvidia has talked about extensively, will have to be re-assessed as a result of the suspension.

Among today’s announcements were a new chip for workstations, the “GV100,” which Nvidia boasts will bring “real-time ray tracing” to “millions of artists and designers.” It also unveiled enhancements to its “Tesla V100” chips for things such as "deepmachine learning."

But the company’s discussion of simulation by computer of autonomous driving—testing inside a computer rather than on the road—seemed to put a fine point on the suddenly glum attitude around self-driving cars.

Among responses this afternoon, Mitch Steves of RBC Capital, who has an Outperform rating on the stock, writes that he liked the GV100 announcement, but "the keynote is being overshadowed by automotive concerns at this time."

He wonders if the "timeline will be pushed out” for what Nvidia had said would be a 2020 time frame for a lot of self-driving products on the market.

“The pause will likely cause a reassessment of timelines,” writes Steves.

SunTrust Robinson Humphrey’s William Stein reiterates a Buy on the stock, urging investors to “buy the weakness."

He sees no hit to Nvidia’s auto business right now, because self-driving chips aren’t yet a big part of auto revenue for the company:...MORE

Uber Killing Pedestrians: There's More to the Story

I know it's not plural "Pedestrians" yet but apparently there is a real risk there are other potential victims.

A week ago we took at face value the comment of Tempe AZ police chief Sylvia Moir:

“It’s very clear it would have been difficult to avoid this collision in any kind of mode (autonomous or human-driven) based on how she came from the shadows right into the roadway.” 

Well, yesterday Ars Technica relayed:

Uber told to stop testing driverless tech in Arizona
The state welcomed self-driving cars with open arms and minimal regulation.

Uber was told on Monday evening to suspend its autonomous car-testing program in Arizona. The move follows the death of Elaine Herzberg, a pedestrian who was struck and killed by one of the company's self-driving vehicles on March 18. According to the Associated Press, Governor Doug Ducey told Uber CEO Dara Khosrowshahi that public safety should be a top priority, and that "[t]he incident that took place... is an unquestionable failure to comply with this expectation."

In recent months, Arizona has become a hotbed of autonomous-vehicle testing. In contrast to California, the state has very little in the way of oversight, and both Waymo and Uber have been testing extensively, along with other, smaller self-driving programs. Beyond carrying liability insurance, autonomous vehicles are free to drive and aren't subject to the crash or disengagement reports required by Arizona's neighbor to the west....MORE

And today Ars is headlining:
Why it’s time for Uber to get out of the self-driving car business

There is just one problem with that editorial:
April 18, 2017
"Uber isn't sure if it can 'remain a viable business' without building self-driving cars"

If I were a late round Uber investor this would be a bit concerning.
We've posted on Kalanick and his "existential" quote, which is one thing, but this is a statement to a Federal Court....

Re: Kalanick, he has a lot of repulsive qualities but he isn't stupid and he knew full well he was running a "Create-a-corp." fraud on the investors. He had to get to autonomous because the business model does not work if they have to pay drivers (thank you Izabella Kaminska, wherever you are).

On the legal liability issue Bloomberg reported yesterday: 
Uber Disabled Volvo SUV's Safety System Before Fatality

Uber Technologies Inc. disabled the standard collision-avoidance technology in the Volvo SUV that struck and killed a woman in Arizona last week, according to the auto-parts maker that supplied the vehicle’s radar and camera.

“We don’t want people to be confused or think it was a failure of the technology that we supply for Volvo, because that’s not the case,” Zach Peterson, a spokesman for Aptiv Plc, said by phone. The Volvo XC90’s standard advanced driver-assistance system “has nothing to do” with the Uber test vehicle’s autonomous driving system, he said.

Aptiv is speaking up for its technology to avoid being tainted by the fatality involving Uber, which may have been following standard practice by disabling other tech as it develops and tests its own autonomous driving system. Uber’s system failed to slow the vehicle as 49-year-old victim Elaine Herzberg crossed the street pushing a bicycle. Police in Tempe, Arizona, and the National Transportation Safety Board are investigating the incident....MORE

Additionally this all ties into the LIDAR technology Levandowski pilfered from Waymo. After the settlement of Waymo's suit Uber is bending over backward to not infringe on Waymo's patents.
And Uber chose not to use optical systems from MobilEye which Intel paid $15 Billion to acquire.

Seeing the PR opportunity both Waymo and MobilEye had comments:

From Bloomberg via the Los Angeles Times:

Waymo executive claims his driverless technology would have seen the pedestrian killed by an Uber car

And from Intel's newsroom:

Experience Counts, Particularly in Safety-Critical Areas

Now Is the Time for Substantive Conversations about Safety for Autonomous Vehicles

By Prof. Amnon Shashua

Society expects autonomous vehicles to be held to a higher standard than human drivers. Following the tragic death of Elaine Herzberg after being hit last week by a self-driving Uber car operating in autonomous mode in Arizona, it feels like the right moment to make a few observations around the meaning of safety with respect to sensing and decision-making.

First, the challenge of interpreting sensor information. The video released by the police seems to demonstrate that even the most basic building block of an autonomous vehicle system, the ability to detect and classify objects, is a challenging task. Yet this capability is at the core of today’s advanced driver assistance systems (ADAS), which include features such as automatic emergency braking (AEB) and lane keeping support. It is the high-accuracy sensing systems inside ADAS that are saving lives today, proven over billions of miles driven. It is this same technology that is required, before tackling even tougher challenges, as a foundational element of fully autonomous vehicles of the future.

To demonstrate the power and sophistication of today’s ADAS technology, we ran our software on a video feed coming from a TV monitor running the police video of the incident. Despite the suboptimal conditions, where much of the high dynamic range data that would be present in the actual scene was likely lost, clear detection was achieved approximately one second before impact. The images below show three snapshots with bounding box detections on the bicycle and Ms. Herzberg. The detections come from two separate sources: pattern recognition, which generates the bounding boxes, and a “free-space” detection module, which generates the horizontal graph where the red color section indicates a “road user” is present above the line. A third module separates objects from the roadway using structure from motion – in technical terms: “plane + parallax.”

This validates the 3D presence of the detected object that had a low confidence as depicted by “fcvValid: Low,” which is displayed in the upper left side of the screen. This low confidence occurred because of the missing information normally available in a production vehicle and the low-quality imaging setup from taking a video of a video from a dash-cam that was subjected to some unknown downsampling....MORE

Professor Amnon Shashua is senior vice president at Intel Corporation and the chief executive officer and chief technology officer of Mobileye, an Intel company.

And regarding the Eyes Wide Open scam the VC's willingly jumped into like crazed racetrack gamblers running to the mutual windows waving cash in both hands, here's the bullet point summary of what transpired:

...Uber bait and switch. Stages of which:

– Uber has a nice business as a status product (Uber Black Car ~ 2010)

– Uber Black may not be profitable, but Uber will displace taxis and be hugely profitable because of technology-driven efficiencies (UberX: 2014-2015)

– UberX may not be profitable, but UberPool will lead to new efficiencies in mass transit (2015-2016)

– UberX may not be profitable, but Uber is a logistics company and will rewrite the rules of delivery (UberEats, various speculative stories, 2013-2015)

– UberPool may not be profitable, but when Uber displaces car ownership the scale of the market will make it profitable (2016)

– Uber with drivers may not be profitable, but driverless cars will make Uber profitable (2014-)

– Driverless cars may not be profitable, but Uber is looking into flying vehicles (2016) The Uber makes losses while maintaining credibility for bringing “the future” in some form or other. Sweet. 

And just so you know, we were on top of the flying vehicles:

That's from a commenter called Slee at Brad DeLon's Grasping Reality recounted in 2017's:

Uber's Master Plan, The Short Version

Finally, the backstory on Uber leaving California for Arizona, recounted in "Uber Self-Driving Car Kills Pedestrian In Arizona" contains this prescient headline on a Mercury-News story:
Arizona’s Uber gain is not necessarily California’s loss

Tesla's Stock Is In A Very Dangerous Spot (TSLA)

We've noted the $300 line on the price chart a few times, not because of the "psychologically important" big fat round number but because it has been the spot where buyers have come in (for their own quasi-mystical reasons),
The thing is, each test of support sucks up more and more of the money those so inclined are willing to part with until that time there is no more money that wants to commit to the long side, at which point, whoosh!

The stock can drop to the last major support which in the case of TSLA is around the $240 level where the run to the $389.61 all-time high began.

Whoosh! It's a technical term.

Finviz

$301.10  down $3.08.

Here's the latest from Dan McCrum at FT Alphaville:

Tesla the most shorted stock on the US market, again

Tesla has always been a rage stock, prompting boggle-eyed incredulity from investors who can't believe Elon Musk will keep dancing towards the horizon on a trail of broken production promises.
It has been a tough one to sell short, historically, but on Monday Tesla's share price dipped below $300 for the first time since November, and it could be a long way down from there: 

Earnings aren't due until the start of May, when we'll find out the latest news on cash burn and progress towards mass production of the Model 3 electric car. Speculators betting the price of Tesla's debt will drop further are holding firm, according to IHS Markit.

The green line and left hand axis shows the balance for shorted bonds:...MUCH MORE

Recently from FT Alphaville:
Tale of the Tape: "Tesla's debt price is deteriorating" (TSLA)

"Two Centuries of Momentum"

Our five word introduction to last month's "Alice In Factorland: Can Momentum Investing Be Saved?—Arnott et al":

Possibly the last persistent factor.

With a huge hidden risk, see the last link below.
From Flirting With Models:

A momentum-based investing approach can be confusing to investors who are often told that “chasing performance” is a massive mistake and “timing the market” is impossible.

Yet as a systematized strategy, momentum sits upon nearly a quarter century of positive academic evidence and a century of successful empirical results.

Our firm, Newfound Research, was founded in August 2008 to offer research derived from our volatility-adjusted momentum models.  Today, we provide tactically risk-managed investment portfolios using those same models.

Momentum, and particularly time-series momentum, has been in our DNA since day one.
In this Foundational Series piece, we want to explore momentum’s rich history and the academic evidence demonstrating its robustness across asset classes, geographies, and market cycles.

1. What is momentum?

Momentum is a system of investing that buys and sells based upon recent returns.  Momentum investors buy outperforming securities and avoid – or sell short – underperforming ones.

The notion is closely tied to physics.  In physics, momentum is the product of the mass and velocity of an object.  For example, a heavy truck moving at a high speed has large momentum.  To stop the truck, we must apply either a large or a prolonged force against it.

Momentum investors apply a similar notion.  They assume outperforming securities will continue to outperform in absence of significant headwinds.
2. The Two Faces & Many Names of Momentum

2.1 Relative Momentum

The phenomenon of relative momentum is also called cross-sectional momentum and relative strength.

Relative momentum investors compare securities against each other’s performance.  They favor buying outperforming securities and avoiding – or short-selling – underperforming securities.
Long-only relative momentum investors rotate between a subset of holdings within their investable universe. For example, a simple long-only relative strength system example is “best N of.”

At rebalance, this system sells its current holdings and buys the top N performing securities of a basket. In doing so, the strategy seeks to align the portfolio with the best performing securities in hopes they continue to outperform.

 

2.2 Absolute Momentum

Absolute momentum is also referred to as time-series momentum or trend following.

Absolute momentum investors compare a security against its own historical performance.  The system buys positive returning securities and avoids, or sells short, negative returning securities....

...MUCH MORE
A topic of endless fascination. from the flippant:

Momo Mamas Bored With Dollar, Chasing New Scam Dogs

I'm dating myself.
The headline is a take off on the title of the year 2000 book by Wall Street Journalist John Emshwiller.

To the academic:

Momentum As The Only Reliable Market Anomaly
Whoa! Has The Small-Cap Premium Disappeared? That Would Leave Only Momentum in the Tried-and-True Anomaly File!
UPDATED--Cliff Asness' AQR Capital: A Century of Evidence on Trend-Following Investing; Since 1903
UPDATE--More on "A Century of Evidence on Trend-Following Investing"
AQR Capital's Cliff Asness on Market Efficiency
Attention All Mo-mo Mamas: The Huge Hidden Downside Risk in Momentum Trading
Alpha Persistence & A Simple Momentum System For Beating the Market
The Last Word On Asness' Alpha, Buffet's Beta and The Failure of Commodity Quants (and how to turn hyperlinks into footnotes)
Testing Small-batch Artisanal Portfolio Construction With Cliff Asness and Grantham, Mayo's James Montier
AQR--"Demystifying Managed Futures" (Returns and Anomalies)
Improving on the Four-factor (beta, size, value, momentum) Asset Pricing Model
"Two centuries of trend following"
Because momentum is one of the very few equity market anomalies that holds up under scrutiny, trend following actually does work. And in the case of futures, trend following has become the default quasi-mystical survival strategy for midlevel Commodity Trading Advisors.
(default, dear Brutus, is not in our stars but in ourselves, that we are underlings)... 

The Giant Caveat:
Attention All Mo-Mo Mamas: The Huge Hidden Downside Risk in Momentum Trading

Apparently when issues lose their momo mojo they lose it big.
From Marginal Evolution:

Momentum trading produces outsized losses, paper
Piling in on the hot stock can be all too exciting not just because of the exuberance from outsized gains but also because of the pain of outsized losses such trading strategy can bring and which one of these possibilities happens depends on when such trading strategy is employed, says the latest paper from a triplet of professors.

It has been well documented that price momentum strategy – long position in past winners and an equal short position in past loser – produces outsized gains but based on data from July 1927 to December 2010, authors Kent Daniel, Ravi Jagannathan and Soohun Kim, find that such strategy inflicts staggering losses suggesting that the strategy has a hidden bias in it....

Questions the Bank of England Is Asking: "Can central bankers become Superforecasters?"

From Bank Underground:

Tetlock and Gardner’s acclaimed work on Superforecasting provides a compelling case for seeing forecasting as a skill that can be improved, and one that is related to the behavioural traits of the forecaster. These so-called Superforecasters have in recent years been pitted against experts ranging from U.S intelligence analysts to participants in the World Economic Forum, and have performed on par or better by accurately predicting the outcomes of a broad range of questions. Sounds like music to a central banker’s ears? In this post, we examine the traits of these individuals, compare them with economic forecasting and draw some related lessons. We conclude that considering the principles and applications of Superforecasting can enhance the work of central bank forecasting.


Setting the scene
It is helpful to begin by considering the purpose of forecasting in central banks, and how the process works in practice.  This speech by Gertjan Vlieghe explains how forecasting is an important tool that helps policymakers diagnose the state and outlook for the economy, and in turn assess – and communicate – the implications for current and future policy. So achieving accuracy is not always the sole aim of the forecast. However, forecasts are also a means to provide public accountability of central bank actions, and the presence of persistent or significant forecast errors may damage the credibility of the policy making institution amongst key stakeholders (individuals, governments and financial and capital markets).

A typical forecast set-up at a central bank is (see here) supported by two pillars: i) statistical frameworks underpinned by specific (for example, New Keynesian General Equilibrium) economic concepts, which can be supported by tools that process a range of economic and financial data, and ii) monetary policymakers’ judgements and deliberations that overlay these strict model-based forecasts – all of which form part of the deliberation process.

The accuracy of such forecasts has come under much scrutiny (see here) since the financial crisis, resulting in a great deal of effort to improve their performance. Several reviews and studies (see Stockton (2012), BoE IEO (2015), FRBNY Staff Report (2014) and ECB WP 1635 (2014)) have evaluated forecast performance across many major central banks and suggested improvements in calibrating economic models (e.g. to reduce bias), challenging prior conventions more and learning more from other central banks/economic forecasters.  The BoE’s MPC for example has also started commenting on its own ‘key judgements’ in its quarterly Inflation Report.

This is all welcome progress. But this iterative process from inside the central banking community over time leaves us with an impression that improving forecast performance could benefit from further considering the successes of forecasting  in other fields (similar to taking an “outside view” when forecasting as described by Kahneman). We may then move forward from this process of gradual evolution… to a potential revolution.

Enter Superforecasting
Superforecasters have been described as “unusually thoughtful humans on a wide spectrum of problems”. They are drawn from necessarily diverse backgrounds, and include amateurs and experts in a given field. They compete in tournaments which test their judgements on a range of questions about economic or geopolitical events. And through making these predictions they are expected to hone a range of forecasting skills. They are judged on several measures (including a daily average ‘Brier score’ – a measure of forecast accuracy originally proposed to test weather forecasting), and they receive their title by consistently outperforming a top percentile of their peers.

Superforecasters were first identified on the back of The Good Judgement Project (now a private enterprise), which was part of a US Intelligence Agency program in 2011. The GJP’s testing team included renowned advisors from psychology, statistics and economics. Their work used personality trait tests and training methods to reduce cognitive biases and improve the forecasting abilities of their volunteer forecasters. They then identified individuals who consistently out-performed their peers. Subsequent studies of this experiment found that when these top forecasters were placed in teams with other such forecasters  (described here as ‘group of average citizens doing Google searches in their suburban town homes’), they performed around 30% better than the average for intelligence community analysts who had access to confidential intercepts and other relevant data. Pretty Super-ising results one might say!

Can central banks become this ‘super’?
The story so far could imply that the answer simply lies in replacing central bank forecasters with these Superforecasters and leaving them to it. However, central bank forecasting is as much about forming a coherent economic narrative (the preserve of economists) as it is about numerical accuracy (for which the traits that make these individuals outperform the ‘experts’ matter). Central bankers may have a comparative advantage in the former, but their forecasting can be enhanced by considering key behavioural traits of those responsible for forecasting....MUCH MORE

We have been following Tetlock since the CIA days, here's the results page from a search of the blog, if interested.

"What Your Fund Management Job Will Look Like in a Decade"

From Bloomberg Gadfly:

Forget about picking stocks. Mining data will matter more. 

Asset managers are being squeezed as increased regulation drives up costs and investors shift more money into lower-cost investment products.

The solution? The greater use of technology and data-mining to defend margins, reduce expenses and win more client business. For anyone contemplating their career in fund management, the message is clear.

The annual industry study published by Oliver Wyman and Morgan Stanley this month makes for bleak reading. While assets under management rose last year, that growth was flattered by rising asset valuations. As a whole, the industry has seen outflows in the past three years, with smaller players suffering more than their larger peers.

One way big asset managers have been able to avoid some of the outflows inflicted on their smaller peers is by being more nimble in expanding their offerings of alternative investment products -- things such as private equity, for example.

While alternatives still only account for about a tenth of assets, they contribute about 30 percent of revenue, and Oliver Wyman sees that growing to about 40 percent by 2025. That trend will continue to benefit the bigger players able to offer a wider range of investment strategies.

What's more worrying for the industry as a whole is that the growth in assets under management isn't translating into an equal increase in revenue. Costs, meantime, are rising at almost the same speed as income. Looking ahead, the picture isn't much better.

In the report's most bearish case, accelerating inflation leads to central banks tightening policy, driving down asset prices and putting active managers under even more cost pressure. Even under Oliver Wyman's bull case, with asset prices benefiting from growing economies, passive strategies will underperform and fees will be under pressure....MORE

Re: the bolded bit, yesterday's "Now the Important Stuff: How to Name Your Hedge Fund" touched on not being able to retain investors with performance:

There are a number of hard problems in investing, for instance:

1) Finding alpha.
2) Finding clients and assets — especially if you can’t 1) consistently find alpha.
3) Finding an awesome name for your fund....

"If you dollar cost average into low-fee index funds, you'll have more time to screw around on Twitter $STUDY"

Chart via StockCats:

Now the Important Stuff: How to Name Your Hedge Fund

Umlauts.
It is hard to go wrong if your name contains umlauts, diaeresis, or other diacritics.*

With the widespread adoption of Artificial Intelligence for just about every purpose—"Mäÿönnäisë, now with AI", etc. (note liberal use of diacritics, don't they just 'pop' on the page?)— it is time to update 2014's "The Hedge Fund Name Generator", which used a simple algo:

You've done your homework:
"How to Start a Hedge Fund" and "Budding Gordon Gekkos Get Tips on Ponzi Scams in 'History of Greed'"

You've decided on the type of investing you will pursue:
"Asset International's Periodic Table of Hedge Fund Strategy Returns"

 You have set your personal goals:
"The Top 25 Highest Earning Hedge Fund Managers"

You have searched your soul:
"More on The Top Earning Hedge Fund Managers and The Metaphysics of Moolah"

You have begun to spread the word that you are serious:
"Dogbert on Hedge Fund Marketing, Structured Products and Virtual Currency"

There's one last thing to do which may be critical to your success:
Pick a name!
Stumped for ideas? There's always the Hedge Fund Name Generator

Don't use one of these:
Most disliked names

Top 10 Hedge Fund names, the Hedge Fund Name Generator users seem to be trashing. If you like them ... well you might be the only one :) 

Hedge Fund name	Average Rating
YellowMount Partners	1.00
SummerTree Brothers	1.00
OakBay	1.00
BrownField Holdings	1.00
StateView Sons & Co	1.00
YellowView Funds	1.00
SpringRoad Sons & Co	1.00
BrownStream Markets	1.00
YellowCrescent Sons & Co	1.00
StateVille Advantage	1.00

Rather, keep spinning until you see something like this:

Most liked names

Top 10 Hedge Fund names favoured by the Hedge Fund Name Generator users. If you like them too, you'd better hurry up as some other traders might already be running with the name. 

Hedge Fund name	Average Rating
OakStone Holdings	5.00
RedHill Sons & Co	5.00
OakHill Advisors	5.00
SolidMount Advantage	5.00
BrownTree Trust	5.00
SilverRock Advisors	5.00
StateStreet Funds	5.00
FallStream Funds	5.00
WinterStream Partners	5.00
BlackCity Partners	5.00

Fame and fortune await.
 
And the 2018 update from StreetEye, February 19:

Quantitative Fun With Fund Names

There are a number of hard problems in investing, for instance:

1) Finding alpha.
2) Finding clients and assets — especially if you can’t 1) consistently find alpha.
3) Finding an awesome name for your fund.

The investing blogosphere is all over the first two. Now, for something completely different, we help you with the last one! Inspired by Sloane Ortel’s post, we’ll run some analytics on a dataset of investment firm names, culminating in our very own algorithmic fund name generator.
Assembling data from various sources, scrubbing and deduplicating, we built a set of about 20,000 names.

As a warmup, here are the most frequent words found in company names:...MUCH MORE

*We have a few hundred posts on the mystique of the umlaut from Spın̈al Tap:

“It’s like a pair of eyes. You’re looking at the umlaut, and it’s looking at you.”
-David St. Hubbins

to an excellent primer on the subject, Jon Udell's video on the evolution of the Wikipedia Heavy Metal Umlaut page.
(seriously, first rate)

For advanced studies we've looked at gratuitous umlauts and improbable/impossible diacritics:

Die Ärzte used a triple umlaut (which I can't reproduce) in their name on one of their albums, Geräusch.
If interested use the 'search blog box and find stories such as:
After Car Attacked By Paris Taxi Drivers, Uber to Toughen Image With Umlauts

"How to Make Big Money in Small Markets: Commodities"

Following up on the post immediately below, "Catching The Big Trends: "Four Decades Of Disinflation"", a repost from December 2013:

How to Make Big Money in Small Markets: Commodities

Small that is compared to forex or treasuries.
There is no magic secret, just bet the multi-year trends and be right.
From October's "Commodity hedge funds face bleak future":

The thing I don't get about these whiny little commod (no 'e', yet) artists is the apparent failure to understand the words hedge or macro.

Dudes, you can go long or short. And do it in multiple, disparate commodities anywhere in the world.
Unless of course the folks who were proclaiming commodities an asset class were simply full of it and were nothing more than longside trend followers charging alpha sized 2-and-20 for what was actually leveraged beta....

The directional trade for most commodities has been down for at least two years so price action alone would have guided you. Stepping up to the junior analyst level of granularity, a look at mining company (for example) capital expenditures over the last decade tells you to beware of supply/demand imbalances.

The next level, analyst or assistant fund manager, has you looking at global macro: Worldwide demand for most everything is satiated.

Finally, at the really old guy level you do the pattern recognition thing, "Say this reminds me of the agricultural depression of 1920" and go take a nap.

Well there you go. There is no magic secret, just bet the multi-year trends and be right.
And recognize the change when it happens.

Catching The Big Trends: "Four Decades Of Disinflation"

Pretty important stuff.
One of our comments in December 2013's
Intertemporal Arbitrage: "Winning Big by Playing Long-Term Trends" (CNI; PNR)

...The point is, you don't have to be at the market every second You are afforded the luxury of just waiting for the perfect pitch.

Now for a fund manager it get's tricky writing the quarterly report and saying "We didn't do much in Q3, we're waiting for Mr. Market to give us the high hanging curve ball" but if you've been honest with the investors that the tactic you've pulled from the toolbox is akin to the military's hurry-up-and-wait sense of time it is doable.

As a side note anyone who considers a move that is measured in weeks to be a trend is nuts. A trend is John Templeton going into the Japanese markets at 2 times earnings and catching a 40-fold move 1965-1989....

And today's headline story from The Dangerous Economist, February 28:

Four Decades Of Disinflation

Disinflation is when the inflation rate falls. Prices rise each year or time period, but the rate of increase falls. The table below shows the annual  average inflation rate for decades starting with the 1950s. The 1970s had the highest average of 7.41%.

Decade	AVG	HIGH	LOW
1950s	2.25%	6.00%	-0.70%
1960s	2.53%	6.20%	0.70%
1970s	7.41%	13.30%	3.30%
1980s	5.14%	12.50%	1.10%
1990s	2.92%	6.10%	1.60%
2000s	2.54%	4.10%	0.10%
2010s	1.68%	3.00%	0.70%

Starting with the 1980s, each decade has had a lower average than the previous decade...MORE

Related:
July 2011
“What should one do: predict specifics, or forecast broad trends that necessarily miss specifics?”
December 2015
Demographics and Deflation II: Longer Lives, Lower Interest Rates

"Craft Oil: The Lesser-Known Side of America’s Energy Industry"

Artisinal, small batch, hand crafted...

From Visual Capitalist:

Go back a decade, and America’s energy industry was quite the hot button issue.

Oil prices were soaring past $100/bbl, the country was still reliant on OPEC for imports, and a lack of energy independence was becoming a costly issue. Meanwhile, the United States was being outclassed on the energy production front by both Saudi Arabia and Russia.

However, in the short span of eight years – and thanks to the use of technologies like horizontal drilling and hydraulic fracturing – the United States quickly went from having a questionable energy future to being in a clear position of strength. Today, even with lower prices, U.S. field production of crude is at a 43-year high.

America’s Independent Oil Producers

Since 2016, the U.S. has produced close to the equivalent of 30 million bpd in oil and natural gas, making the United States a champion of global energy production.

Today’s infographic from Jericho Oil focuses on a key part of the turnaround in the U.S. energy sector that often gets overshadowed by Big Oil players like ExxonMobil or Royal Dutch Shell. It covers the role of “Craft Oil” in the industry, an umbrella that includes many small, independent, and focused companies across America that produce oil and gas on a domestic basis.

The thousands of companies in this group, many which are community-driven or family-owned, actually drill 95% of the country’s oil wells to yield 54% of onshore oil and 85% of onshore gas production.

Comparing Big Oil to Craft Oil

Below is a comparison of ExxonMobil to the profile of an average Craft Oil company:

	Big Oil	Craft Oil
Employees	71,300	12
Years in Business	108 years	23 years
Annual Gross Revenues	$218.6 billion	$9.25 million
Ownership	Publicly traded	75% private, 25% public
Level of Integration	Typically fully integrated, combining upstream and downstream activities to get the most out of the value chain	Usually a pure play, focused upstream on oil exploration and production
Focus	Produce, transport, refine, and market oil products	Develop new plays, and drive upstream trends such as technological innovation
Production	Domestic and international	Mostly domestic

Most Craft Oil companies are very small in comparison – but together, they contribute to a very significant portion of U.S. production, as well as the economy....MORE, including the visual bit.

Dropbox Is The First Y Combinator Investee To Go Public

There have been M&A exits, with Twitch probably the most notable, and some of companies YC put early money into have basically chosen to bide their time, Airbnb, Stripe and Coinbase could go public any time they choose to but Dropbox is the first IPO.

From the YCombinator blog:

Congrats Dropbox!
By Jessica Livingston , March 23, 2018

I wrote Dropbox their first investment check on June 26, 2007. What strikes me as I look at a copy of the check is that Drew and Arash must have been fairly effective at getting all their incorporation paperwork completed. I often had to chase startups well into July.

Little did I know back then what a momentous check this one would be: that 11 years later, Dropbox would be the first Y Combinator company to go public.

I wish I could say that Paul, Robert, Trevor and I knew this would be one of the big ones when we interviewed Drew and Arash on April 21, 2007. They were the first interview of the day, at 8:30am. Though it was a long time ago, I remember we all agreed that they seemed good, and it was an easy decision to fund them. Trevor had already looked at the software and was impressed by it.

We’d met Drew the year before. He’d been Adam Smith’s big brother in MIT’s Phi Delta Theta fraternity. Adam was a founder of Xobni, which was in the Summer ’06 batch, and he’d brought Drew with him as a guest to a YC dinner. We also met Drew at YC’s Startup School in California in March 2007. He came to the afterparty at our house and showed us an early prototype of Dropbox. I remember him being likeable, earnest, and very energetic.

When Drew applied to YC, he applied as a single founder. After we invited him to interviews, Paul sent him an email suggesting he’d be better off with a cofounder. By interviews, a few weeks later, he’d found Arash. That worked out well....MUCH MORE

The Agricultural Economy MAY Have Bottomed: Creighton University's Rural Manstreet Index

We are usually more timely about getting the index report out, our apologies.
From KTIC Radio, West Point Nebraska:

Rural Mainstreet Index Remains Positive
March 19

The Creighton University Rural Mainstreet Index slipped in March but remained above growth neutral for a second-straight month. Those results come from the monthly survey of bank CEOs in rural areas of a 10-state region that depends on agricultural.

It’s the first time since the middle of 2015 that the index has shown two straight months of readings above growth neutral. The index dipped slightly from 54.8 in February to 54.7 in March. The index range is zero through 100, with 50 representing growth neutral.

Ernie Goss oversees the index and says, “Surveys over the past several months indicate that the rural economy is trending upward with improving, but slow economic growth.”...MORE

Here's Creighton's Mainstreet Index homepage.

"Equity Meltdown Aborted, Dollar Eases"

From Marc to Market:

After a poor start in Asia, equities recovered. The MSCI Asia Pacific initially extended last week's losses and fell to its lowest level since February 12 before recovering to finish near its highs, 0.4% above last week's close. European markets followed suit. They did not have to take out last week's lows. The Dow Jones Stoxx 600 is up about 0.4% in late morning turnover. Health care, energy led the wave, though consumer staples and retail lagged. The S&P 500 is trading a little more than 1% higher.

Bond yields are firmer, with the US 10-year yield up three basis points to almost 2.85%. European bond yields are mostly firmer. Spain is a notable exception; the yield is slightly softer following S&P's decision before the weekend to match Fitch and upgrade Spain's credit rating to A- from BBB+. S&P cited the strong economic performance, the current account surplus, and fiscal consolidation for the upgrade. In contrast, Italy's stocks and bonds are underperforming as the prospect of a coalition between the Five Star Movement and the Northern League weighs on investor sentiment.

What appeared to have stopped the equity meltdown was signs that a trade war could in fact be averted. We have argued that the market, egged on by the media, had exaggerated risks of trade war, just like it exaggerated the prospects of a currency war.

First, the US and Korea have reportedly struck an agreement that will modify the Korea-US free-trade agreement and exempts Korea from the steel tariffs. Still, Korea agreed to reduce the amount of steel it exports to the US (by ~30% of its three-year average), while increasing the quota of US autos to 50k per producer compared with 25k now. Korea is the third largest supplier of steel to the US and it is the largest importer of Chinese steel. GM and Ford exporter less than 10k vehicles each to Korea last year. Korea also agreed to extend the ban on pick-up truck exports to the US by another 20 years to 2041. Korean shares were among the best performers in Asia. The KOSPI advanced 0.85%, while the KOSDAQ rallied 2.9%.

Second, the US and China are reportedly engaged in extensive discussions that Treasury Secretary Mnuchin suggest could result in an agreement that would avert the tariffs announced at the end last week. Recall that last week, the US proposed tariffs on at least $50 bln of Chinese imports, intended on proposing new investment restrictions on Chinese investment, and sought a quantitative reduction of the bilateral imbalance (~$100 bln). China announced tariffs on $3 bln of US imports (in response to the steel and aluminum tariffs, but planned a different response to the new actions).

Some participants suspect that any agreement between the US and China will likely include more yuan appreciation. The offshore yuan rose 0.80% today, the most in two months. The onshore yuan is up 0.7%. Separately, China launched its yuan-denominated oil futures contract. China provided incentives to attract foreign participation by waiving taxes on oil futures trading profits. About a dozen and half foreign institutions registered to trade the contracts, but it is unclear whether it will become a key benchmark. There have been other attempts in Asia, including in Singapore and Japan, to create an Asian benchmark with little luck.

The dollar is on its back foot. It is only stronger against the yen, and there it is trying to re-establish a foothold above JPY105 that was violated at the end of last week....MORE

Insurance-Linked Securities: "Risk to pandemic cat bond creeps up as Lassa fever deaths rise in Nigeria"

From Artemis:

The number of confirmed deaths from the Lassa fever outbreak in Nigeria has risen according to the latest information available from the World Health Organisation (WHO), which means that the risk posed to investors in the World Bank’s pandemic swaps and catastrophe bonds has crept up slightly.

As we reported a fortnight ago, the lassa fever outbreak in Nigeria was confirmed by the World Bank as an “Eligible Event” under the terms of the Class B pandemic swaps and pandemic catastrophe bonds that were issued to support the financing of the Pandemic Emergency Financing Facility (PEF).

Lassa fever is one of the pandemic risks covered under the terms of the Class B tranches of pandemic swaps and cat bonds issued under the PEF transaction by the World Bank’s International Bank for Reconstruction and Development (IBRD) last year.

That deal consists of $320 million of IBRD CAR 111-112 capital at risk notes and $105 million of pandemic risk linked swaps (derivatives), which were sold to investors to provide emerging economies with insurance linked protection against outbreaks of diseases.

A $95 million Series 112 Class B tranche of pandemic cat bond notes and an unknown sized Class B set of pandemic swaps cover a range of pandemic perils including, Coronavirus, Crimean Congo Hemorrhagic Fever, Filovirus, Lassa Fever and Rift Valley Fever.

These Class B notes and swaps are the ones exposed to the Nigerian Lassa fever outbreak and the World Health Organisation (WHO) is the all-important reporting agency for the pandemic catastrophe bonds and swaps.

When we reported a fortnight ago on this, the outbreak had resulted in 1081 suspected cases and 90 suspected deaths, according to the WHO, and the number of confirmed deaths, which is an important metric for the parametric trigger of the pandemic bonds and risk swaps, sat at 72 out of 317 confirmed cases of Lassa fever.

Now, according to the WHO, the number of suspected cases has risen to 1495 and suspected deaths to 119, while the number of those confirmed is now put at 95 deaths out of 376 confirmed cases....MORE

We pointed out the World Bank/Swiss Re venture last year.
Related:
Complex Systems: How the Internet Grows, How Viruses Spread, and How Financial Bubbles Burst
"The Unforgiving Math That Stops Epidemics"