End of Earnings Season: "Drowning In Adjusted EBITDA!"

From footnoted*:

November 3, 2015 

We’re at the tail end of earnings season — the next Q deadline is on Monday, Nov. 9. What that means is that Team Footnoted has been reading an awful lot of filings. As we tweeted on Friday, 139 8-Ks and 95 10-Qs were filed after 4 pm last Friday. Any guess on how we spent our weekend? 

Yesterday, another 160 10-Qs came crashing on our electronic shore. While we don’t read all of those filings — after all, we’re not total masochists — one thing comes across loud and clear: the number of companies using the term “adjusted EBITDA” appeared to be swelling. Wetweeted this too, last week, and got some interesting responses. 

So we decided to run the numbers and here’s what we found: the bloat in adjusted EBITDA is real, even at the largest of large-cap companies. We searched for the term “Adjusted EBITDA” in 8Ks, 10-Qs and 10-Ks going back to the very first year that EDGAR was available, 1994. And we decided to limit it to large caps, which we defined as companies over $25 billion in market cap. What we found surprised even us: there were zero mentions between 1994 and 1997. But, then, all of a sudden…

Source: SEC filings/EDGAR

Now keep in mind that while there were 164 examples of companies using adjusted EBITDA in their SEC filings, that doesn’t mean that 164 companies over $25 B in market cap used the term. Often, we found the same companies using it over and over again. For example, American Tower used the term in 10 filings made so far this year (all numbers are through Nov. 2, to keep the numbers consistent over the years). Verizon mentioned the term in nine filings; 3M mentioned it in only two filings. 

What’s also interesting to us is the way the numbers change based on how well the market is doing. By 2007, there were 54 examples of adjusted EBITDA in filings for the period that we looked at. But in 2008 — when the market dropped sharply and there was more of an emphasis on real numbers — that number slipped to 36. 

It’s been growing ever since and has now tripled since the market returned to bull territory....

...MORE

*The asterisk is part of their name.

Bank America Merrill Lynch On Robotics and Artificial Intelligence

From FT Alphaville:

Signposts on the road to somewhere…

Sometimes you just have to print out the 300 odd page report* on robotic revolution that lands in your inbox.... 

Still though, we’re in good company… 

At 9:30 Tuesday morning, the online retail giant will open its first-ever brick-and-mortar retail store in its 20-year life, in University Village.
The store, called Amazon Books, looks a lot like bookstores that populate malls across the country. Its wood shelves are stocked with 5,000 to 6,000 titles, best-sellers as well as Amazon.com customer favorites.
- Seattle Times 

Brings us back to an old argument really, that the impact of new tech will be felt in ways that are hard to predict. The supposed decline of the physical book being a (limited) case in point. It could be that the Amazon bricks and mortar move is telling us that something is fundamentally wrong with the digital economy. Or it could just be telling us that physical books were understimated. We dunno. 

With that in minds, have some selected extracts and estimates (to be revisited in our ever more robotic futures) from that BofAML tome. Bring your own scepticism, ours is busy. 

We estimate the current robots & AI solutions market at US$153bn by 2020E including US$83bn for robots, and US$70bn for AI-based analytics. Disruptive technologies will yield US$14-33tn in annual economic impact by 2025E through cost reductions and efficiency gains.
…
There is a 50% chance of full AI (high-level machine learning) by 2040-50E and a 90% chance by 2075E according to AI researchers. Experts expect that systems will move on to super-intelligence in less than 30 years thereafter (source: Mueller and Bostrom 2014). The greatest impacts are likely to be felt as a result of knowledge work automation which has the potential to affect over 230mn knowledge workers globally and cUS$9tn in employment costs.
…
AV technology is likely to create a US$87bn solutions market for car manufacturers, parts suppliers, and technology companies by 2030E, of which software will take the largest share at 29% of the total (source: Lux Research). Up to 90% of new cars will be “connected” in developed markets by 2020E, reaching 20% total fleet penetration (source: McKinsey, Hitachi, Telefonica, Gartner). Cars with partial autonomous features will reach 12-13% penetration by 2025E, when the first fully autonomous cars will be commercial. By 2035E, penetration will reach 25%, with fully driverless cars comprising 9-10% of total sales (source: BCG). L4/L5 features are likely to cost an extra US$10,000 when first introduced in 2025 (source: BCG), declining to US$7,000 by 2030 (source: KPMG, IHS)....

(click to enlarge)

...MUCH MORE

Iran's Ayatollah Khamenei Orders Blockade On U.S. Products Into Iran

From Press TV:

Iran to implement blockade on US goods

Iran’s Ministry of Industry, Mine and Trade says it will block imports of American goods in line with an order by Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei to develop an “economy of resistance”.

“We will implement the blockade on imports of American goods in a directive,” Minister of Industry, Mine and Trade Mohammad Reza Nematzadeh said on Saturday.

The plan is in line with Ayatollah Khamenei's recent letter to President Hassan Rouhani, setting out the government's obligations on empowering national production, developing an “economy of resistance” and checking imports of US-made goods, he added.

The Leader wrote the letter more than a week ago to outline his conditional approval of the Joint Comprehensive Plan of Action -- Iran’s nuclear accord reached in July with the US, Europe, Russia and China.

The letter demanded that the government take seriously the "economy of resistance", focusing on self-reliance instead of basing Iran's economy on external sources.

The Leader also instructed the government to guard against "unbridled imports" and check the entry of all goods from the United States when sanctions are lifted.

President Rouhani wrote back to Ayatollah Khamenei, assuring that his government would observe the Leader's guidance and considerations.

American products often find their way into the Iranian marketplace through back channels. There are other routes such as licensing workarounds and direct trade for goods not covered by US sanctions which result in American products ending up in the Iranian market....MORE

"Henry Blodget’s big plans for Business Insider"

From Capital New York@Politico:

Henry Blodget spent the past eight years transforming Business Insider from a scrappy three-man show into a new-media heavyweight that has come to represent the potential for journalism startups in the digital age. 

He will spend the next five trying to make it a global financial-news powerhouse with a subscription component, regional editions throughout Europe and Asia, a headcount that could top 1,300 by the end of 2020, and maybe even a television presence. 

"The financial publication of record for the digital generation" is how Blodget described his vision to POLITICO during an interview recently at Business Insider's Manhattan headquarters. (Neither The Wall Street Journal nor The Financial Times had a comment when asked what they thought about that.)  

Business Insider these days lives in a 40,000-square-foot, two-story command center with a well stocked commissary and the requisite ping-pong annex—the type of modern, open-concept office where standing desks and transparent-glass dry-erase walls are conspicuous. 

That's a far cry from the series of cramped confines where the company essentially squatted during its first year of existence in 2007—a dim loading dock, then a windowless temp space, and so on. When this reporter worked at Business Insider for a stretch in 2010, the editorial staff of about two-dozen had just about maxed out a modest-sized room, with Blodget working at a small filing cabinet rather than be cloistered away from his journalists in a separate office. (Even today, Blodget's spot in the center of Business Insider's capacious bullpen is a nod to the new workplace egalitarianism, his laptop perched atop a miniature end-table perched atop a startup-sized desk.) 

Recently acquired by the Berlin-based European publishing conglomerate Axel Springer at an eye-popping valuation of $442 million, Business Insider has moved past the rebellious, sometimes awkward growing pains of its adolescence and has matured into something that's starting to look as fancy and formidable as the legacy media stalwarts it set out to disrupt....MORE

HT: Ritholtz@Bloomberg

Natural Gas: The Economics Weaken (COG; EQT; RRC; SWN)

Off a fraction of a penny, $2.25 on the front month. Here's the last couple week's action:

FinViz

From Barron's Income Investing:

Economics of Marcellus Shale Production Weaken

It’s not just crude.

Persistently low — and falling– natural gas prices are weakening business prospects for natural gas in the Marcellus Shale region, which includes parts of Pennsylvania, West Virginia, Ohio and New York. Big producers there are EQT (EQT), Southwestern Energy (SWN), Cabot Oil & Gas (COG), Range Resources (RRC), Antero Resources (AR).

A new report from Fitch Ratings finds that pricing remain weak, which is instigating companies to slow production growth forecasts for 2016. That should ultimately benefit the producers. Fitch analysts write:

At current economics, continued growth could heighten financial risk and limit future value creation, and supports producers move to slow production growth in 2016.
However, declining production means less volume for their infrastructure partners, often structured as master limited partnerships (MLPs).

Given strong liquidity, most producers aren’t going to suffer credit downgrades even as they reduce production. Plus, some like Antero, EQT, and Range Resources have hedged positions, which will help profitability. Fitch notes Antaro’s hedges are particularly strong.

Fitch concludes:

In the medium term, the combination of falling rig counts, improving takeaway capacity, and diminishing efficiency gains should provide pricing support for Marcellus producers. This will likely support credit profiles by improving reserve development prospects, encouraging volume growth, and ultimately, increasing cash flow.
Finally, here’s some of the pricing detail in the report:...MORE

Yesterday:
Natural Gas: EIA Weekly Supply/Demand Report

"Here's How Much QE Helped Wall Street Steamroll Main Street"

President Obama, Ben Bernanke and former Attorney General Eric Holder are the best friends Wall Street could have ever hoped for.
I'm deadly serious. I don't want it to ever end.
From Bloomberg:

Here's How Much QE Helped Wall Street Steamroll Main Street

Wall Street is counting its winnings from seven years of easy money. 

In a report sent to clients on Sunday, Bank of America Corp. strategists totted up the results of 606 global interest-rate cuts since the collapse of Lehman Brothers Holdings Inc. and the $12.4 trillion of central bank asset purchases following the rescue of Bear Stearns Cos.

The results represent a clear victory for Wall Street over Main Street, according to the team of Michael Hartnett, BofA’s chief investment strategist. 

For every job created in the U.S. this decade, companies spent $296,000 buying back their stocks, according to the New York-based bank.
An investment of $100 in a portfolio of stocks and bonds since the Federal Reserve began quantitative easing would now be worth $205. Over the same time, a wage of $100 has risen to just $114. 

For every $100 U.S. venture capital and private equity funds raised at the start of 2010, they are now raising $275, but for every $100 of U.S. mortgage credit extended five years ago, just $61 was extended and accepted this June, BofA said. 

‘Deflationary Expansion’
Meantime, prime commercial real estates gained 168 percent, compared to a 16 percent increase of all U.S. residential property. In the U.K., London accounted for 26 percent of the value of all housing sales last year even though it accounts for just 1 percent of the land. 

Such experiences have Hartnett and colleagues continuing to predict “deflationary expansion” in the world economy in the form of a slow, jerky transition to higher growth rates led by the U.S. 

“Zero rates and asset purchases of central banks have, thus far, proved much more favorable to Wall Street, capitalists, shadow banks, ‘unicorns,’ and so on than it has for Main Street, workers, savers, banks and the jobs market,” the BofA team wrote. 

The risk is that the bull markets driven by central banks swoon if further central bank monetary easing from outside the U.S. forces the dollar up and commodities down rather than spurs demand, they said....MORE

"Apple, Google and Others Form Coalition to Push Technology in Financial Sector" (AAPL; ABCD)

Alphabet.

From MacRumors:

A handful of technology giants -- including Apple, Amazon, Google, PayPal, and Intuit -- have announced a partnership in the formation of the Financial Innovation Now coalition (via Re/code). The group aims to promote tech-friendly policies and changes within the financial services sector in Washington, D.C. Those behind the group will work to alter the political debate on relevant issues like tech security, mobile payments, and fraud prevention in the favor of its partners. 

“A technological transformation is going to make financial services more accessible, more affordable and more secure,” said Brian Peters, executive director of Financial Innovation Now. “The challenge in Washington is making sure policy-makers understand that, and they’re comfortable with it, and they don’t apply old rules to new technology.”

Thanks to the growing popularity of mobile payments solutions like Apple Pay, Google Wallet, and PayPal, the companies behind such services are positioning themselves as part of the future in financial services discussions in Washington, since they're more part of the conversation than ever before. The partnership also intends to work together to achieve blanket improvements for each individual service in topics like user security and authentication, faster payment processing, and "access to basic financial services for the two billion people in the world who are underserved."  

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

"Amazon is opening its first physical bookstore tomorrow" (AMZN)

It was all a bright shining lie.

From The Verge:

Amazon got its start as an online bookseller, and now — over 20 years later — it's decided to sell books the old fashioned way. On Tuesday, Amazon will open a store in Seattle called Amazon Books. It's not only one of Amazon's first physical locations, but it appears to be Amazon's first actual bookstore. Amazon says that it won't entirely be doing things like a traditional store, however; it'll be relying on Amazon.com data — including customer ratings, sales totals, and Goodread's popularity — to decide which books to stock. Curators will have some say, too. 

In addition to selling books, Amazon is also going to be putting its devices on display. Visitors will be able to try Kindles, the Echo, the Fire TV, and Fire Tablets. This very much isn't a tech store, though. Photos show this to be a book store first and foremost; but like a Barnes & Noble, it also has an additional section for related (and not-so-related) technology. One thing that Amazon's store seems to be doing differently is putting all of its books face out, rather than spine out, and putting up a placard for each of them that contains their Amazon.com rating and an actual customer review. In-store prices will all match online prices, too (which means they'll probably change while you're holding them)....MORE

St. Louis Fed: "How Tight Is the Labor Market?"

From the Federal Reserve Bank of St. Louis' On the Economy blog:

By Stephen Williamson, Vice President and Economist 

This post is the first of a two-part series exploring slack in the labor market. The second post, “Labor Market Slack and the Insured Unemployment Rate” will appear on Tuesday, Nov. 3. 

In some discussions of the current state of the U.S. labor market, it is argued that there is more “slack” in U.S. labor markets than might be apparent. For example, some argue that the unemployment rate, which stood at 5.1 percent in September, does not fully reflect hidden unemployed, such as discouraged workers (those who have stopped searching for work and have dropped out of the labor force) and those who are working part time but would prefer to work full time. 

In modern models of labor market search,1 which help economists explain labor market behavior, a typical measure of labor market tightness is the ratio v/u, where v is the number of vacancies posted in the labor market and u is the number of unemployed. According to this measure, which is depicted in the following figure, the labor market is tighter the greater the number of firms seeking to fill jobs relative to the number of would-be workers looking for jobs.

By this measure, the U.S. labor market is as tight as it has been at any time between the past two recessions. 

Another way to look at labor market tightness is to plot the labor market vacancy rate against the unemployment rate. Such a scatter plot traces out what is known as the Beveridge curve, depicted in the next figure.

In this scatter plot, the line joins observations from December 2000 to July 2015, from the top left-hand corner to the lower right-hand corner, and back. A key feature of the scatter plot is the curve’s shift to the right that occurred during the Great Recession (December 2007 through June 2009). Some economists have argued that this shift is due to “mismatch unemployment.”2 The idea is that the Great Recession created a greater mismatch between the skills desired by firms and the skills offered on the market by would-be workers....MORE

San Francisco To Vote On Rules For Airbnb

From the Los Angeles Times:

San Francisco residents to vote on contentious Prop. F targeting Airbnb

It's not often a technology start-up — albeit one with a $25-billion valuation — makes it front and center in a city election. Then again, we are talking about San Francisco.

Tuesday, San Franciscans will head to the polls to vote on, among other things, Proposition F, casually known as the "Airbnb initiative."

The contentious proposition concerns regulation of short-term rentals in the city. It would toughen the rules that hosts and platform providers must follow, such as limiting the number of nights a unit can be rented each year to 75, and would require quarterly reports to the San Francisco Planning Department on how a unit is used.

It's an issue with which Angelenos are no doubt familiar. Santa Monica passed strict short-term rental rules in May, banning residents from renting out entire units, and Los Angeles announced it is considering similarly tough measures.

The difference here is that San Franciscans are turning to the ballot to decide how this should play out.

It may sound like a run-of-the-mill ballot measure, but in a city grappling with a housing crisis and the effect of a thriving tech hub, and with residents worried about privacy and wary of how their personal data are used, San Francisco is ground zero for a Proposition F freakout.

Over the last few months, residents have been bombarded with television commercials describing Proposition F as "unnecessary" and "extreme" while also receiving campaign literature that describes it as a "modest measure."

Billboards sponsored by the No on Prop. F campaign, largely bankrolled by Airbnb, allege Proposition F will lead neighbors to file frivolous lawsuits against one another, while proponents of the proposition have written op-eds in the San Francisco Chronicle saying that if it weren't for neighbors complaining, the city wouldn't do anything about rental violations....MORE

In other sharing economy news:

Woman Jumps From Car, Convinced Deaf Lyft Driver Was Kidnapping Her

 

Peak Unicorn

The word 'peak' in business communications is past its sell-by date, Unicorn is fast approaching same and sell-by is waving bye-bye in the rear-view mirror, along with rear-view mirror, oh dear Lord I've become a cliché spewing hack.
(cue existential angst music)

From ZeroHedge, who should also get the HT for the post immediately below.

Things are getting crowded in the once-exclusive unicorn club... 

This is all still-private unicorns since 2011 and charted them based on when they first joined the unicorn club....MORE

(click for  legible version)

San Francisco Fed Head: Something Going On That Maybe We Don't Understand

From Reuters, Oct. 30:

Fed's Williams says low neutral interest rates a 'warning sign'

San Francisco Federal Reserve President John Williams said on Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. 

"I see this as more of a warning, a red flag that there's something going on here that isn't in the models, that we maybe don't understand as well as we think, and we should dig down deep deeper and try to figure this out better," he said during a panel discussion at the Brookings Institute in Washington. 

Williams, who is a voting member of the Fed's policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace....MORE

That is NOT reassuring, Mr. Williams.

Get the Lead Out: The Monotonic Decline of the LME Inventory

Not sure what this means but it sure seems persistant.
From Kitco:

60 Day LME Lead Warehouse Stocks Level

A Look At The Estate of a Typical Centimillionaire

From Real Time Economics:

When the Superrich Die, Here’s What’s in Their Wallets

The superrich are different from the very, very rich. For one thing, they own more art. 

Estate tax data recently released by the Internal Revenue Service show what the wealthiest Americans possess when they die—and where the money goes. 

First, a few basics. The returns in the data sample were all filed in 2014, which means they came largely from the estates of people who died in 2013. That year, the tax applied to estates of individuals exceeding $5.25 million, with a top rate of 40 percent, up from 35 percent the year before. Estates can deduct charitable contributions and bequests to surviving spouses, who then pay up when they die.The most important thing to remember about the estate tax is that almost no one pays it anymore. Congress has bumped up the exemption and indexed it to inflation, ensuring that almost all of the 2.6 million people a year who die in the U.S. never have to worry about the estate tax. 

That leaves the very wealthiest sliver of the country. Fewer than 12,000 estate tax returns were filed in 2014, and more than half of those returns didn’t yield any tax for the federal government. 

The data break down what assets people hold at death, offering a glimpse into the holdings of the ultrawealthy. They don’t provide much information about all of the ways that wealthy individuals shift assets out of their ownership or all of the convoluted planning maneuvers that can reduce the size of estates before death. People who died with more than $50 million–the top category–were heavily invested in stock and closely held businesses.

Those who were rich enough to file an estate tax return–but not at the very top

...MORE

HT: The Big Picture

"Of Trading and the Perfect Trader" (and Izabella still writes like a boy)

If you are in search of tips and techniques.

The headline is clickbait.
This post has nothing to do with trading as it is usually covered on this blog.

In fact, the title is a poor translation of "Della Mercatura et del Mercante Perfetto", the first known work on double entry bookkeeping.
I was thinking of ...del Mercante Perfetto's author, Benedetto Cotrugli, because in the post we are about to visit, Izabella Kaminska mentions the more famous proponent of the double entry, Luca Pacioli.

There's a simple reason Pacioli is more famous: he was a better communicator with a better system. As The Accountant's Magazine said in 1906: "Cotrugli may have been most estimable as a man of affairs, but as a writer he was an old woman".*
That is one harsh review.

By comparison, Pacioli's "Summa de arithmetica, geometria, proportioni et proportionalita", of which his distillation and memorialization of the "Venetian method" of bookkeeping is a part, is a work of art.
Here's a good translation.

With that rather meandering introduction here's Izabella at FT Alphaville:

If you call it a blockchain, it’s not a single-entry system

Techies look upon the financial world and find its messy structures hard to reconcile with the physical reality around them. 

Which is why we’re going to propose that the blockchain fad is mostly about puttingfinance in terms that are understandable to techies — i.e. as something absolute – and having them learn for themselves through trial and error why that’s actually a flawed assumption in finance. 

Like their world, finance is full of numerical entries in databases, which are theoretically costless to replicate and propagate. Logically, like Lady Gaga MP3s, these entries should have no real-world value because people can’t be trusted to not steal, share or replicate the data. 

Yet, unlike their data world, in finance these numerical entries do retain value, and they do so mainly because — unlike Lady Gaga MP3s — there is a cost to oversharing the information. The more replicated money entries are the less useful they are to society. To the trust-suspicious techie who knows just how easy it is to share information on the internet or how to steal it, this might seem a naive way to store value in a digital era. 

But money isn’t like a Lady Gaga MP3, which provides utility to the user irrespective of how extensively it is copied. Its value lies in its ability to balance the system by way of trusted and verified relationships. 

Since the value of money is gone as soon as it is over-replicated, there’s only value in replicating it from the point of view of a hacker, a thief or a scammer if its copy somewhere else in the system can be erased. 

The value of financial information consequently doesn’t lie in the data. It lies in the trusted relationship between the payee and the payer who promises to delete his copy of the unit — the counterfoil — as soon as the value is transferred. 

Which is why in an effective financial network, simply copying information about an account holder isn’t valuable of its own accord. What’s valuable is persuading the network which guards or confirms the stake into thinking the copied information is legitimate, whilst the victim’s version is illegitimate. It’s about crediting one, whilst debiting the other. Most important of all, it’s about convincing the verifier to accept the illegitimate claim as the real one — much harder to do if there’s a manual back-up or if the verifier knows his customer extremely well. 

But these sorts of trust relationships look like single points of failure to techies.
Which is why the bitcoin blockchain addresses value transfer not from a trusted checks and balances point of view, but by turning money into a scarce resource, which can’t be easily replicated. That’s not because the counterfoils are reliably destroyed within the system, but to the contrary because they are deemed to have no value unless they’ve been accepted as legitimate by at least 50 per cent of the network. And since it costs to verify, it costs to manipulate the network. 

But what this really does is turn a relativistic system into an absolutist one. 

In terms of value control it’s a bit like going back in time to the days of single-entry accounting — when merchants were only interested in tracing tangible assets across space and time, without any relativistic context. 

As Luca Pacioli recognised in the 15th century it was the lack of relativistic balance in company accounts which compromised the ability of merchants to fully understand the value of their enterprises, exposing them to unexpected losses, frauds and errors. 

A quote to that effect from Wardhaugh Thompson in 1777 via Jane Gleeson-White’s book Double Entry:...MORE

*Speaking of gender, back in 2014 we posted "Alphaville's Izabella Kaminska Writes Like a Boy (but is kind to the elderly and robots)":

We ran Izabella's latest FT Alphaville post, "Behold the new, new economy?", through three different gender analyzers, being careful to remove the extended quote from Martin Wolf:

http://stealthserver01.ece.stevens-tech.edu/gendercreatetext?count=9885

http://genderanalyzer.com/?url=http%3A%2F%2Fftalphaville.ft.com%2F2014%2F02%2F12%2F1770302%2Fbehold-the-new-new-economy%2F

http://www.hackerfactor.com/GenderGuesser.php#Analyze

and received these results:

http://stealthserver01.ece.stevens-tech.edu/

The Gender Of The Author Who Wrote This File is: male 86.70% 

http://genderanalyzer.com/

We have strong indicators that http://ftalphaville.ft.com/2014/02/12/1770302/behold-the-new-new-economy/ is written by a man (96%). 

...MORE

Well, I just ran "If you call it a blockchain, it’s not a single-entry system" through hackerfactor, again being careful to exclude the quotes, and the results came back--for the informal bits: weakly male, for the formal: male.

Tropical Cyclone Chapala Hits Yemani Island, Approaches Mainland

From The Gulf Today:

Cyclone Chapala kills 3, injures 100 on Yemeni island

ADEN: A rare tropical cyclone packing hurricane-force winds killed three people and injured scores on the Yemeni island of Socotra on Monday, residents and officials said, and then headed for an Al Qaeda-controlled town on the mainland.

Amateur pictures and videos on social media, which could not be immediately verified, showed torrents of water washing through the streets of the Socotra provincial capital Hadibu.

"Three people were killed, around 100 have been injured," said a local official, without describing the causes of death.
Mohammed Alarqbi of the Socotra Environment Office said torrential rains had pounded impoverished coastal villages.

"Around 1,500 families have fled to the interior and to the mountains. There's absolutely no help coming from the outside."

Situated in the Arabian Sea and slightly larger than Majorca or Rhode Island, isolated Socotra is home to hundreds of exotic plant species found nowhere else on earth.

Its 50,000 residents speak their own language.

Long remote, the island has become especially cut off from mainland Yemen by a seven-month war there between rebels and a coalition of Arab states led by Saudi Arabia.

Yemen, generally arid and hot, receives relatively little rainfall and the infrastructure in the Arabian Peninsula's poorest country is ill-equipped built to handle large deluges....MORE

And from Wunderground (now with more IBM!):

 

Friday:
Tropical Cyclone Chapala Expected to Hit Yemen, Then Saudi Arabia 

Natural Gas: EIA Weekly Supply/Demand Report

From the Energy Information Administration:

...Nymex prices are down. The Nymex near-month futures price (November 2015) fell by 37¢ over the report period, from $2.404/MMBtu last Wednesday to $2.033 yesterday. The price fell by 22¢ (10%) on Monday alone. The current price level is noteworthy because it is the lowest that any near-month futures price has been since late April 2012, which is remembered as the summer of remarkably low natural gas prices.

In addition to relatively high storage levels and year-over-year production growth entering this winter, the anticipation that El Nino will moderate the upcoming winter temperatures may be contributing to the lower prices. The winter strip, which averages the November through March Nymex contracts, settled yesterday at $2.349/MMBtu. This is very low compared to previous years. Last year's winter strip price on October 28, for example, was $3.750.

The November futures contract settled on Wednesday, and December is now the prompt-month contract. On Wednesday, the December contract closed at $2.298/MMBtu, significantly higher than the November contract at expiration.

Supply decreases slightly. Total supply fell again this week, decreasing by 0.5% according to data from Bentek Energy. Although dry production was down by 0.2%, or about 0.2 Bcf/d, this week's supply decrease was driven by a decline in Midwest imports from Canada, which reduced supply by 0.4 Bcf/d. This was only partially offset by increased imports into the Northeast and West. LNG sendout this week was very close to flat.

Consumption decreases slightly. Week-over-week total consumption fell by 0.4%. Residential/commercial consumption drove the decrease, falling 2.2%, or 0.4 Bcf/d. The power sector had increased consumption, rising by 1.1%, or 0.3 Bcf/d, led by increased power burn in Texas and the Southeast. Exports to Mexico were down, and industrial consumption was essentially flat....MUCH MORE

...Temperatures during the storage report week are close to normal. Temperatures in the Lower 48 states averaged 57° for the storage report week, 1° warmer than the 30-year normal temperature and 1° cooler than the average temperature during the same week last year. There were 68 population-weighted heating degree days (HDD) during this report week, 9 HDD more than the five-year average and 8 HDD more than during the same period last year. There were also 10 population-weighted cooling degree days (CDD) this report week, 2 CDD more than the five-year average and 3 CDD more than this week last year.

Space Weather Forecast: (ALMOST CERTAIN) CHANCE OF STORMS

From SpaceWeather:

(ALMOST CERTAIN) CHANCE OF STORMS: NOAA forecasters estimate a 90% chance of geomagnetic storms on Nov. 2nd-3rd when a fast-moving stream of solar wind is expected to hit Earth's magnetic field. Solar wind speeds could exceed 800 km/s and spark a strong G3-class geomagnetic storm. Sky watchers in the USA should be alert for Northern Lights as far south as, e.g., Oregon and Illinois. Aurora alerts: text or voice

MONSTER SUNSPOT: So you thought Halloween was over? Think again. On the sun today there is a monster sunspot. AR2443 has more than quadrupled in size since it first appeared on Oct. 29th, and it now stretches more than 175,000 km from end to end. Philippe Tosi took this picture of the active region on Nov. 1st from his backyard observatory in Nîmes, France:

The sunspot has more than a dozen dark cores, many of which are as large as terrestrial continents--and a couple as large as Earth itself....MORE

Meanwhile SolarHam is focused not on 2443 but on the new area of sunspots that just popped up :

Tear Down That Paywall Mr. Murdoch

From The Guardian, who don't have to worry as much about readership and revenues as they are financed thanks to some superb tax avoiding trust work:

Can dropping the paywall and upping the story count boost Sun’s website?

Editor Tony Gallagher and internet convert Rebekah Brooks lead push to revitalise tabloid’s online presence

Rupert Murdoch, the media mogul previously known for his refusal to give editorial content away free, has bowed to the inevitable by dismantling the Sun’s paywall. It was a flawed decision at its inception in 2013 and has proved to be disastrous ever since. Even a partial lifting of the wall in July made little difference. Indeed, it tended to frustrate non-paying visitors to the website who were uncertain what was, and was not, freely available.

It was significant the Sun’s digital audience slipped backwards in September compared to August, suggesting opening the odd door in the wall had failed to keep stimulating interest. Meanwhile, the paper’s rivals have continued to prosper. Mail Online kept growing apace and the Daily Mirror, despite a somewhat clunky site, began to attract an impressively increasing audience. Although the revenue garnered from the Sun’s £7.99 monthly subscription for website access proved lucrative, it had the effect of locking the paper out from the online national conversation. That was unacceptable for a mass market newspaper that has always relied on the volume of its readership to provide it with political and social clout.

Three of the key Murdoch lieutenants who grasped that reality were the returning News UK chief executive Rebekah Brooks, the chief operating officer David Dinsmore, and the man who replaced him as Sun editor, Tony Gallagher. It was something of a U-turn for Brooks, who had previously been enthusiastic about the paywall strategy, but her message to staff last week suggested she has become an internet convert.

Gallagher needed no such conversion. As a former Mail Online executive who had witnessed the beginnings of that platform’s successful rise to become the world’s leading newspaper website, he arrived at the Sun in September with his mind made up: the paywall had to go and the website had to be totally redesigned.

To that end, it was he who was responsible for the recruiting of a former colleague, Keith Poole, the managing editor of Mail Online’s New York operation, as the Sun’s digital editor. He will join after three months of “gardening leave” and it is stressed that, like Gallagher, he is imbued with print sensitivities. This indicates that a similar ethos at the Sun will inform print and online content, unlike the Mail where the website has developed its own approach and agenda. Gallagher has been intimately involved with the Sun’s change of digital direction, which will include a restructure of its website. It is likely to be unveiled in February and will favour the paper’s coverage of news, celebrity and sport, in contrast to its current propensity for highlighting wacky human interest stories. One inside source says: “Don’t expect anything too radical. We’re giving up the jumble sale approach and introducing a straightforward, easy-to-access shop front.”

More journalists are expected to be hired to join the Sun’s digital team and to help boost the quantity of its content. Story count is something of a Gallagher obsession. In a message to staff he wrote: “We have a chance to make our outstanding journalism go further and reach more people than ever before.” News aside, it is known that he believed the Sun’s recent campaign against cuts to tax credits would have been greatly enhanced had there not been a paywall in place. It is obvious that a paper trying to put a government under pressure can benefit from maximising its reach....MORE

Now what about the Times, Ms. Brooks?

Arbitration: Outsourcing Justice

Following up on this morning's "The Pernicious Spread Of Arbitration Stacked Against The Individual (and the class)".
This is a pretty big deal.
A second piece from the New York Times' DealBook blog:

In Arbitration, a ‘Privatization of the Justice System’

Deborah L. Pierce, an emergency room doctor in Philadelphia, was optimistic when she brought a sex discrimination claim against the medical group that had dismissed her. Respected by colleagues, she said she had a stack of glowing evaluations and evidence that the practice had a pattern of denying women partnerships.

She began to worry, though, once she was blocked from court and forced into private arbitration.

Presiding over the case was not a judge but a corporate lawyer, Vasilios J. Kalogredis, who also handled arbitrations. When Ms. Pierce showed up one day for a hearing, she said she noticed Mr. Kalogredis having a friendly coffee with the head of the medical group she was suing.

During the proceedings, the practice withheld crucial evidence, including audiotapes it destroyed, according to interviews and documents. Ms. Pierce thought things could not get any worse until a doctor reversed testimony she had given in Ms. Pierce’s favor. The reason: Male colleagues had “clarified” her memory.

When Mr. Kalogredis ultimately ruled against Ms. Pierce, his decision contained passages pulled, verbatim, from legal briefs prepared by lawyers for the medical practice, according to documents.

“It took away my faith in a fair and honorable legal system,” said Ms. Pierce, who is still paying off $200,000 in legal costs seven years later.

If the case had been heard in civil court, Ms. Pierce would have been able to appeal, raising questions about testimony, destruction of evidence and potential conflicts of interest.

But arbitration, an investigation by The New York Times has found, often bears little resemblance to court.

Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, The Times found.

The change has been swift and virtually unnoticed, even though it has meant that tens of millions of Americans have lost a fundamental right: their day in court.

“This amounts to the whole-scale privatization of the justice system,” said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. “Americans are actively being deprived of their rights.”

All it took was adding simple arbitration clauses to contracts that most employees and consumers do not even read. Yet at stake are claims of medical malpractice, sexual harassment, hate crimes, discrimination, theft, fraud, elder abuse and wrongful death, records and interviews show....MORE

Our intro to the earlier DealBook piece:

In September's "As Three More New Economy Companies Are Sued For Employee Misclassification, Uber Thinks It Has the Golden Ticket" I mentioned the securities law case that seems to be the inspiration for all this. (Shearson v. McMahon, 1987)

Intellectual Property: "Piracy and Fraud Propelled the U.S. Industrial Revolution"

A repost from 2013:
In late December I found myself talking to a gentleman from Pakistan whose mission in life was to get a couple of his nephews into American manufacturing companies so they could memorize some mid-tech manufacturing machines and return to Pakistan to re-build the machines from memory.
He said his hero was Samuel Slater.

From Bloomberg's Echoes blog:

Francis Cabot Lowell's industrial empire was built, in part, on stolen intellectual property. 

Source: Library of Congress Prints and Photographs Division 

Although typically glossed over in high-school textbooks, as a young and newly industrializing nation the U.S. aggressively engaged in the kind of intellectual-property theft it now insists other countries prohibit.
In other words, the U.S. government’s message to China and other nations today is “Do as I say, not as I did.”

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

The U.S. emerged from the Revolutionary War acutely aware of Europe’s technological superiority. It aspired to catch up and rapidly close the technology gap. The prevailing hope was that the acquisition of new industrial technologies from abroad would help solve the country’s chronic labor shortage and enhance its self-sufficiency and competitiveness.

As the Pennsylvania Gazette put it in 1788: “Machines appear to be objects of immense consequence to this country.” It was therefore appropriate to “borrow of Europe their inventions.” “Borrow,” of course, really meant “steal,” since there was certainly no intention of giving the inventions back.

Hamilton’s Manifesto The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”

Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” -- meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.

The first U.S. Patent Act encouraged this policy. Although the law safeguarded domestic inventors, it didn’t extend the same courtesy to foreign ones -- they couldn’t obtain a U.S. patent on an invention they had previously patented in Europe. In practice, this meant one could steal a foreign invention, smuggle it to the U.S., and develop it for domestic commercial applications without fear of legal reprisal.

The most important limitation to smuggling machines was that they were useless unless one knew how to use them. After all, they didn’t come with instructions. Thus, almost as important as the machines themselves were machinists from the British Isles who knew how to operate them. British emigration laws prohibited the departure of skilled machinists, but thousands still made the clandestine crossing to the U.S.

Remarkable Espionage

The most celebrated was Samuel Slater. Slater had worked his way up from a teenage apprentice to middle management at the Jedediah Strutt mills in Milford, England. Enticed by stories of opportunity and success in America, he pretended to be a non- skilled laborer and boarded a U.S.-bound ship in 1789. Leaving tools, machines, models and drawings behind, all he brought with him was his memory....MORE

"When Luxury Turns Lewd and Laughable"

From Penta:

Enough already. We’re tired of tasteless luxury pitches that patronizingly assume that the wealthy are too dim to know when they are being conned. For this reason, Penta will periodically profile products or services targeted at the very rich that, at times, are so egregious they border on scams. Penta is all in favor of celebrating the joys of life – but never conspicuous consumption as a front for going mildly insane. Penta is all about finding good value for money. These products don’t qualify.

The $1,000 ice cream sundae. The Golden Opulence Sundae, served at New York’s Serendipity 3 restaurant, is bedecked with a golden leaf and eaten with a nacre spoon. Serendipity tells us that that the Golden Opulence Sundae’s customers range from parents celebrating their daughter’s law school graduation to Saudi princes.

The dessert was initially created for the restaurant’s 50^th Golden Anniversary back in 2004, and the parlor claims it receives one to two calls a month for the dessert that requires a 48-hour advance notice to prepare. That suggests the sweet-tooth hangout is ringing in some $20,000 annually from the gold-bedecked dish.

This over-the-top sundae is actually a more modest version of Serendipity’s Frrrozen Haute Chocolate ice cream sundae, which it launched a few years ago and cost $25,000. The ice cream made of the rarest cocoa sat atop a diamond, which made it the most expensive dessert in the world, according to the Guinness World Records. The dish was eventually dropped when Serendipity couldn’t find anyone actually foolish enough to order it.

The $1,000 Golden Opulence Sundae is served in a crystal goblet you get to take home. “You could drive a Chevrolet or a Maserati, but what are you going to enjoy more? It’s the intrigue of having the most expensive menu item,” claims Joe Calderone, Serendipity’s head   chef.                  

Well, not all of us are as titillated by the thought of overspending on a commodity item. For a quarter of the cost, we suggest picking up a $200 goblet from, say, Furstenberg or Feu de Beaumont, and then filling it with a $31 pint of Cappanari’s award-winning Chocolate Hazelnut Ganache ice cream.

The $40,000 a night villa. Laucala Island Resort’s Hilltop Estate is one of the many villas found on the island in Fiji. It offers 13,130 square feet of living space with its landscaped pool, private cook, chauffeur, and nanny. The owner of the island, Red Bull king Dietrich Mateschitz, according to The Wall Street Journal, handpicks his guests....MORE

The Pernicious Spread Of Arbitration Stacked Against The Individual (and the class)

In September's "As Three More New Economy Companies Are Sued For Employee Misclassification, Uber Thinks It Has the Golden Ticket" I mentioned the securities law case that seems to be the inspiration for all this. (Shearson v. McMahon, 1987)

Here's more from the New York Times' DealBook:

Arbitration Everywhere, Stacking the Deck of Justice

On Page 5 of a credit card contract used by American Express, beneath an explainer on interest rates and late fees, past the details about annual membership, is a clause that most customers probably miss. If cardholders have a problem with their account, American Express explains, the company “may elect to resolve any claim by individual arbitration.”

Those nine words are at the center of a far-reaching power play orchestrated by American corporations, an investigation by The New York Times has found.

By inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies like American Express devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices.

Over the last few years, it has become increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration. The same applies to getting a job, renting a car or placing a relative in a nursing home.

Among the class actions thrown out because of the clauses was one brought by Time Warner customers over charges they said mysteriously appeared on their bills and another against a travel booking website accused of conspiring to fix hotel prices. A top executive at Goldman Sachs who sued on behalf of bankers claiming sex discrimination was also blocked, as were African-American employees at Taco Bell restaurants who said they were denied  promotions, forced to work the worst shifts and subjected to degrading comments.

Some state judges have called the class-action bans a “get out of jail free” card, because it is nearly impossible for one individual to take on a corporation with vast resources.

Patricia Rowe of Greenville, S.C., learned this firsthand when she initiated a class action against AT&T. Ms. Rowe, who was challenging a $600 fee for canceling her phone service, was among more than 900 AT&T customers in three states who complained about excessive charges, state records show. When the case was thrown out last year, she was forced to give up and pay the $600. Fighting AT&T on her own in arbitration, she said, would have cost far more.

By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination, court records show.

“This is among the most profound shifts in our legal history,” William G. Young, a federal judge in Boston who was appointed by President Ronald Reagan, said in an interview. “Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach.”...MUCH MORE

A few days after our post Barry Ritholtz of The Big Picture and Bloomberg View weighed in on another aspect of the racket: 

A Corrupt Arbitration Process That Hurts Investors

The golden touch: Rolling with the lords of the craps table.

A game I've never really understood. As best as I can tell it is all about streak management which is far from precise.
Sure there are the whip shot (spin on a vertical axis without tumbling) and the drop shot (freeze the lower die) but they are more effective beating ten-year-old kids at Monopoly than making money at craps.

From Harpers, 2008 via the author's (Mattathias Schwartz) blog:

For the gambler, dice have long been the best machine with which to turn a small amount of energy into a large amount of uncertainty. For the philosopher, there is no handier piece of rhetoric with which to evoke the foggy relations between God and universe, universe and man, or man and his own affairs. And so as I watched two members of the Golden Touch Craps team construct a dice pit in a windowless conference room of the Hyatt Regency O’Hare, I could not help but feel as though I were witnessing the creation of a universe, a green, felt-covered, racetrack-shaped cosmos where the dice are subject to the will of man and the men, therefore, are gods.

The cosmos, in this case, was a bundle of hinges and planks that had emerged the same morning, ex ovo, from the back of Colonel Joe Fox’s Ford. The gods were milling around like Teamsters, lugging boxes and power tools and their own steak-fed bodies, gradually transforming the beige void of the Allegheny Room into a miniature casino, a school for the study of dice control. I myself felt moved to pitch in, holding one end of the scuffed rail as Colonel Fox unrolled the layout with its pass and come solicitations lettered in red and gold. He wore a gold crucifix and four gold rings and a gambling face like something out of the Old West, lines of stony indifference etched around his mouth and eyes. “I musta re-covered three hundred pool tables in my life,” he muttered as a GTC colleague plugged in a tiny vacuum cleaner and ran it over the felt.

The Golden Touch Craps team had scheduled one of their “Crap$ 101” courses to begin the following day. In Crap$ 101, novice players receive two days of hands-on instruction in Golden Touch betting systems, Golden Touch visualization techniques, and, most important, the Golden Touch “controlled throw,” a method of retaining influence over the dice after they leave the hand. Tuition is $1,495, which does not include room, board, or a ticket to Chicago O’Hare; but with eight coaches and sixteen students, the student-to- faculty ratio bests the Ivy League. For an additional $300, students can take home an instructional Golden Touch DVD and the Gripper, a block of green foam designed to enhance the muscle memory of the fingertips. As graduates, students are eligible to enroll in the $1,995 Advanced Course, though some of the school’s wealthier alumni opt for private instruction at up to $10,000 per day. Those who prove themselves capable dice controllers and clubbable personalities are sometimes invited to teach Crap$ 101 as assistants to the assistant instructors. The post includes a $400 honorarium, drawn from tuition receipts.

I spotted Frank Scoblete, the gray-bearded, potbellied Zeus of the Golden Touch, unpacking a box of Grippers. Frank spent more than thirty years teaching high school English on Long Island before reinventing himself as America’s Number One Best-Selling Gaming Author. In person he seemed easygoing, with rounded features and feathery white hair, but when we shook hands his eyes had the watchful opacity of security cameras. He began gambling during the Eighties on the weekends, counting cards in Atlantic City. “I wasn’t addicted to the gambling,” he told me; “I was interested in seeing whether we could beat the casinos, these monsters, this industry that relies on the stupidity of its clients.” On the table beside the Grippers lay a selection of Frank’s teachings: Forever Craps, The Craps Underground, Golden Touch Dice Control Revolution! and Beat the Craps Out of the Casinos! On the cover of this last book is a photograph of Dominic “Dominator” LoRiggio just after releasing the dice. The cubes hover in perfect alignment below his outstretched hand, like tiny kites guided by invisible strings. He is dressed conservatively, in a blue Oxford and rimless glasses, but his eyes shine with a mystical blaze....MORE