The Man Who Sold The Eiffel Tower, Twice and A (bath) Room With A View

We've visited Messy Nessy a few times, most recently on Van Gogh's bedroom and then on the high-end German call-girl antecedents of the Barbie Doll.

This time she's just straight up showing off.
From Messy Nessy Chic:

Taking a Bath in Front of the Eiffel Tower

...If you’ve followed my adventures over the years in the city of light, you’ll know they haven’t included many trips up the Eiffel Tower (unless I’m time-travelling with Gustave Eiffel) and almost never involve feeling like a tourist; possibly one of my biggest phobias. Paris with Messy Nessy is a little less traditional, more off-the-beaten-path and avoids clichés like the French avoid soap– okay, okay, I promise that particular cliché really doesn’t have an ounce of truth to it, but it brought me so fittingly to this next part where I explain what lured me to the foot of the most visited tourist attraction in the world…

It was a bath tub. But not just any old tub....

...Behind the frosted sliding doors of a cozy bedroom inside a 5th floor Parisian apartment, draw the bath after dark and wait for the show to start…

Bath time will never be the same again....MUCH MORE

And from Smithsonian Magazine:

The Man Who Sold the Eiffel Tower. Twice.
“Count” Victor Lustig was America’s greatest con man. But what was his true identity? 

The air was as crisp as a hundred dollar bill, on April 27, 1936. A southwesterly breeze filled the bright white sails of the pleasure boats sailing across the San Francisco Bay. Through the cabin window of a ferryboat, a man studied the horizon. His tired eyes were hooded, his dark hair swept backwards, his hands and feet locked in iron chains. Behind a curtain of grey mist, he caught his first dreadful glimpse of Alcatraz Island.

“Count” Victor Lustig, 46 years old at the time, was America’s most dangerous con man. In a lengthy criminal career, his sleight-of-hand tricks and get-rich-quick schemes had rocked Jazz-Era America and the rest of the world. In Paris, he had sold the Eiffel Tower in an audacious confidence game—not once, but twice. Finally, in 1935, Lustig was captured after masterminding a counterfeit banknote operation so vast that it threatened to shake confidence in the American economy. A judge in New York sentenced him to 20 years on Alcatraz.

Lustig was unlike any other inmate to arrive on the Rock. He dressed like a matinee idol, possessed a hypnotic charm, spoke five languages fluently and evaded the law like a figure from fiction. In fact, the Milwaukee Journal described him as ‘a story book character’. One Secret Service agent wrote that Lustig was “as elusive as a puff of cigarette smoke and as charming as a young girl’s dream,” while the New York Times editorialized: “He was not the hand-kissing type of bogus Count—too keen for that. Instead of theatrical, he was always the reserved, dignified noble man.”

The fake title was just the tip of Lustig’s deceptions. He used 47 aliases and carried dozens of fake passports. He created a web of lies so thick that even today his true identity remains shrouded in mystery. On his Alcatraz paperwork, prison officials called him “Robert V. Miller,” which was just another of his pseudonyms. The con man had always claimed to hail from a long line of aristocrats who owned European castles, yet newly discovered documents reveal more humble beginnings.

In prison interviews, he told investigators that he was born in the Austria-Hungarian town of Hostinné on January 4, 1890. The village is arranged around a Baroque clock tower in the shadow of the Krkonoše mountains (it is now a part of the Czech Republic). During his crime spree, Lustig had boasted that his father, Ludwig, was the burgomaster, or mayor, of the town. But in recently uncovered prison papers, he describes his father and mother as the “poorest peasant people” who raised him in a grim house made from stone. Lustig claimed he stole to survive, but only from the greedy and dishonest.

More textured accounts of Lustig’s childhood can be found in various true crime magazines of the time, informed by his criminal associates and investigators. In the early 1900s, as a teenager, Lustig scampered up the criminal ladder, progressing from panhandler to pickpocket, to burglar, to street hustler. According to True Detective Mysteries magazine he perfected every card trick known: “palming, slipping cards from the deck, dealing from the bottom,” and by the time he reached adulthood, Lustig could make a deck of cards “do everything but talk.”

First-class passengers aboard transatlantic ships became his first victims. The newly rich were easy pickings. When Lustig arrived in the United States at the end of World War I, the “Roaring Twenties” were in full swing and money was changing hands at a fevered pace. Lustig quickly became known to detectives in 40 American cities as ‘the Scarred,’ thanks to a livid, two-and-a-half inch gash along his left cheekbone, a souvenir from a love rival in Paris. Yet Lustig was a considered a “smoothie” who had never held a gun, and enjoyed mounting butterflies. Records show that he was just five-foot-seven-inches tall and weighed 140 pounds.

His most successful scam was the “Rumanian money box.” It was a small box fashioned from cedar wood, with complicated rollers and brass dials. Lustig claimed the contraption could copy banknotes using “Radium.” The big show he gave to victims was sometimes aided by a sidekick named “Dapper” Dan Collins, described by the New York Times as a former ‘circus lion tamer and death-defying bicycle rider.’ Lustig’s repertoire also included fake horse race schemes, feigned seizures during business meetings, and bogus real estate investments. These capers made him a public enemy and a millionaire....MORE

A counterfeit $5 banknote that it is believed to be created by Lustig and Watts. (Courtesy of Jeff Maysh)

HT: Longform

I can see privately issued currency making a comeback should large denominations of the official stuff be scrapped, the demi-monde can usually be counted on to creatively fill a need.
And we've already got a resurgence of magic black-box deals populating Silicon (your choice on which syllable to emphasize) Valley, so, what was old is new again.

Running On Empty: Russia's Oil Future

Russia is currently producing flat out and looking at YoY declines.
They could use some infrastructure and some tech upgrades.
If only you could trust them.

From RT, March 9:

Russia may be running out of oil 

Oil production in Russia will inevitably decline by 2035 according to an Energy Ministry report seen by the Vedomosti business daily. The different scenarios predict an output drop from 1.2 percent up to 46 percent two decades from now. 

The document, obtained by the newspaper and confirmed by a source in the ministry, says by 2035 existing oil fields will be able to provide Russia with less than half of today’s production of about 10.1 million barrels per day.

The shortfall should be met by increased production from proven reserves, according to projections by the Energy Ministry.

In the best case for oil producers, short-term growth remains possible only until 2020, according to the report. After that, production will contract. The figures vary from 1.2 percent to 46 percent, depending on prices, taxation and whether or not anti-Russian sanctions will be in force.

A slight increase in production is possible only for smaller companies like Slavneft and Russneft, while the market leaders are facing the depletion of existing deposits. Added to an unfavorable tax environment, their production is set to fall by 39-61 percent.

To counter the decline in oil production, the Energy Ministry proposes giving private companies access to the Arctic shelf....MORE

Cash Escape Inhibitors or How Low Can Negative Rates Actually Go?

From Moneyness:

Central banks' shiny new tool: cash escape inhibitors

Negative interests rates are the shiny new thing that everyone wants to talk about. I hate to ruin a good plot line, but they're actually kind of boring; just conventional monetary policy except in negative rate space. Same old tool, different sign. 

What about the tiering mechanisms that have been introduced by the Bank of Japan, Swiss National Bank, and Danmarks Nationalbank? Aren't they new? The SNB, for instance, provides an exemption threshold whereby any amount of deposits that a bank holds above a certain amount is charged -0.75% but everything within the exemption incurs no penalty. As for the Bank of Japan, it has three tiers: reserves up to a certain level (the 'basic balance') are allowed to earn 0.1%, the next tier earns 0%, and all remaining reserves above that are docked -0.1%. 

But as Nick Rowe writes, negative rate tiers—which can be thought of as maximum allowed reserves—are simply the mirror image of minimum required reserves at positive rates. So tiering isn't an innovation, it's just the same old tool we learnt in Macro 101, except in reverse.
No, the novel tool that has been created is what I'm going to call a cash escape inhibitor. 

Consider this. When central bank deposit rates are positive, banks will try to minimize storage of 0%-yielding banknotes by converting them into deposits at the central bank. When rates fall into negative territory, banks do the opposite; they try to maximize storage of 0% banknote storage. Nothing novel here, just mirror images. 

But an asymmetry emerges. Central bankers don't care if banks minimize the storage of banknotes when rates are positive, but they do care about the maximization of paper storage at negative rates. After all, if banks escape from negative yielding central bank deposits into 0% yielding cash, this spells the end of monetary policy. Because once every bank holds only cash, the central bank has effectively lost its interest rate tool. 

If you really want to find something innovative in the shift from positive to negative rate territory, it's the mechanism that central bankers have instituted to inhibit the combined threat of mass paper storage and monetary policy impotence. Designed by the Swiss and recently adopted by the Bank of Japan, these cash escape inhibitors have no counterpart in positive rate land. 

The mechanics of cash escape inhibitors
Cash escape inhibitors delay the onset of mass paper storage by penalizing any bank that tries to replace their holdings of negative yielding central bank deposits with 0%-yielding cash. The best way to get a feel for how they work is through an example. Say a central bank has issued a total of $1000 in deposits, all of it held by banks. The central bank currently charges banks 0% on deposits. Let's assume that if banks choose to hold cash in their vaults they will face handling & storage costs of 0.9% a year. 

Our central bank, which uses tiering, now reduces deposit rates from 0% to -1%. The first tier of deposits, say $700, is protected from negative rates, but the second tier of $300 is docked 1%, or $3 a year. Banks can improve their position by converting the entire second tier, the penalized portion of deposits, into cash. Each $100 worth of deposits that is swapped into cash results in cost savings of 10 cents since the $0.90 that banks will incur on storage & handling is an improvement over the $1 in negative interest they would otherwise have to pay. Banks will very rapidly withdraw all their tier-2 deposits, monetary impotence being the result.  

To avoid this scenario, central banks can install a Swiss-style cash escape inhibitor. The way this mechanism works is that each additional deposit that banks convert into vault cash reduces the size of the first tier, or the shield, rather than the second tier, the exposed portion. So when rates are reduced to -1%, should banks try to evade this charge by converting $100 worth of deposits into vault cash they will only succeed in reducing the protected tier from $700 to $600, the second tier still containing the same $300 in penalized deposits. This evasion effort will only have made banks worse off. Not only will they still be paying $3 a year in negative interest but they will also be incurring an extra $0.90 in storage & handling ($100 more in vault cash x 0.9% storage costs). 

Continuing on, if the banks convert $200 worth of deposits into vault cash in order to avoid -1% interest rates, they end up worsening their position even more, accumulating $1.80 in storage & handling costs on top of $3.00 in interest. We can calculate the net loss that the inhibitor imposes on banks for each quantity of deposits converted into vault cash and plot it:

The yearly cost of holding various quantities of cash at a -1% central bank deposit rate

Notice that the graph is kinked. When a bank has replaced $700 in deposits with cash, additional cash withdrawals actually reduce its costs. This is because once the first tier, the $700 shield, is used up, the next deposit conversion reduces the second tier, the exposed portion, and thus absolves the bank of paying interest costs. And since interest costs are larger than storage costs, overall costs decline.
If banks go all-out and cash in the full $1000 in deposits, this allows them to completely avoid the negative rate penalty. However, as the chart above shows, storage & handling costs come out to $9 per year ($1000 x 0.9%), much more than the $3 banks would bear if they simply maintained their $300 position in -1% yielding deposits.  

So at -1% deposit rates and with a fully armed inhibitor installed, banks will choose the left most point on the chart—100% exposure to deposits. Mass cash conversion and monetary policy sterility has been avoided. 

How deep can rates go?
How powerful are these inhibitors? Specifically, how deep into negative rate territory can a central bank go before they start to be ineffective? 

Let's say our central banker reduces deposit rates to -2%. Banks must now pay $6 a year in interest ($300 x 2%). If banks convert all $1000 in deposits into cash, they will have to bear $9 in storage and handling costs, a more expensive option than remaining in deposits. So even at -2% rates, the cash inhibitor mechanism performs its task admirably. 

If the central bank ratchets rates down to -3%, banks will now be paying $9 a year in interest ($300 x 3%). If they convert all $1000 in deposits into cash, they'll have to pay $9 in storage & handling. So at -3%, bankers will be indifferent between staying invested in deposits or converting into cash. If rates go down just a bit more, say to -3.1%, interest costs are now $9.30. A tipping point is reached and cash will be the cheaper option. Mass cash storage ensues, the cash escape inhibitor having lost its effectiveness. 

The chart below shows the costs faced by banks at various levels of cash holdings when rates fall to -3%. The extreme left and right options on the plot, $0 in cash or $1000, bear the same costs.

The yearly cost of holding various quantities of cash at a -3% central bank deposit rate

So without an inhibitor, the tipping point for mass cash storage and monetary policy impotence lies at -0.9%, the cost of storing & handling cash. With an inhibitor installed the tipping point is reduced to -3.1%. The lesson being that cash escape inhibitors allow for extremely negative interest rates, but they do run into a limit....MORE 

Draghi As Britney Spears: Oops I Did It Again As Markets Begin To Doubt the ECB's Competence

A twofer From Barron's. First up, Stocks to Watch Today:

Oh No He Did It Again: Stocks Slip as Draghi Turns Lemonade into Lemons

Stock futures were pointing to a higher open this morning after the European Central Bank cut interest rates, increased the amount of bonds it would buy and even said it would purchase corporate debt. Since then, however, stocks have slipped into the red as, with one phrase, ECB chief Mario Draghi managed to undo the market’s positive reaction to those steps. 

The S&P 500 has dropped 0.4% to 1,981.42 at 11:20 a.m. today, while the Dow Jones Industrial Average has fallen 0.5% to 16,909.83. The Nasdaq Composite is off 0.7% at 4,643.07. The S&P 500 had been up as much as 0.8%. The euro has gained 1.6% against the dollar. 

Strategas Research Partners’ Mary Catherine Sinclair explains how Mario Draghi disappointed the markets once again: 

The ECB announced a kitchen sink easing package this morning that exceed the market’s expectations. In addition to lowering all three of its target rates this morning it also expanded its Asset Purchase Program (APP), and announced a new series of TLTROs (see pg. two for more details.) The market’s reaction was initially positive– the Euro depreciated versus the US dollar, European bond yields declined, gold declined, the Euro Stoxx Bank Index strengthened (as did the broader Euro Stoxx Index) – but all measures reversed their trend as ECB Chairman Draghi explained the changes further. In particular, the market reacted negatively to Draghi’s mention of an inevitable floor in negative interest rates and ruling out of a tiered deposit rate system; European banks were quick to criticize the ECB’s negative interest rate policy. It’s hard to see what else the ECB could have announced, but ECB Chairman Draghi appears to have lost the market’s trust. Banks are central to the ECB’s ability to stimulate growth and it remains to be seen whether the incentive of free loans through TLTROs will be enough to cushion the blow of negative interest rates tightening financial conditions....

....MORE

And from Focus on Funds:

Sic Transit Gloria: Post-ECB ‘Bazooka’ Rally Fades

Well, how do you like that? 

The European Central Bank delivered an aggressive series of interest rate cuts, some deeper into negative territory, and boosted the magnitude of its asset-purchase program. It also added new lending-friendly measures and expanded its purchase program to include corporate bonds. All of which seemed to reinforce ECB President Mario Draghi’snotion that the monetary authority will do “do whatever it takes” to snap the Continent’s economy out of its disinflationary torpor. 

Stocks surged! The euro plunged! Credit concerns at European banks eased! The Wall Street Journal, Financial Times and Reuters all used “bazooka” to desribe the mix of policy actions. 

And then, in a post-announcement question and answer session, Draghi said that he doesn’t anticipate more rate cuts. Hmm. That seemed to mix the message a bit, as well as raise fresh doubts about the wisdom of negative interest rates. 

What had been a 2.5% rally in the Stoxx Europe 600 has recently faded to a 0.4% advance. The euro/dollar has made a U-turn, now up to a nearly one-month high. The S&P 500 had shot over 2,000 but is now a bit higher at at 1,994....MORE

The Euro/dollar initially fell on ECB policy measures but then surged higher. (CLICK TO ENLARGE)

"Draghi Delivers, But Now What?"

Following up on "Trading Draghi", immediately below.

The writer is head of Global markets strategy at Brown Brothers, Harriman & Co.
From Marc to Market:

Draghi delivered.  He managed to get approval for everything.  Rate cuts, acceleration of purchases, including corporate bonds to the purchase program and new long-term repos were announced.   The knee-jerk reaction was favorable.  The euro fell over 1% and peripheral European bonds rallied.   

The deposit rate was cut 10 bp to minus 40 bp.  The asset purchases were increased by 20 bln euros a month to 80 bln.  Investment grade, non-financial corporate bonds would be included, easing concerns of a shortage of assets.    There will also be new long-term repo operations starting in June.  

The euro's sell-off is the biggest since November.  At the start of Draghi's press conference the euro slipped through last week's low near $1.0825.  A break of $1.08 would signal a test on $1.0750 and then $1.0710, the low from earlier this year.  

With today's actions, the ECB has unleashed its quiver, and it is unreasonable to expect it to do more until it sees the impact of today's action.  The new TLTROs (four year duration) do not begin until June....MORE

Trading Draghi

From FT Alphaville:

A Draghi day menu

A cut out and keep guide to trading the ECB, courtesy of Deutsche, do click to enlarge:

And, in a different note, DB’s Jim Reid asks: “Is today’s the most challenging central bank meeting in living memory?”...MORE

Sky News Says It Has The Personal Details On 22,000 ISIS Members

Give the whole cache to the Yazidis.

From Sky News:

Thousands of documents detailing phone numbers and family contacts are handed to Sky News by a disillusioned convert to the group.

Tens of thousands of documents, containing 22,000 names, addresses, telephone numbers and family contacts of Islamic State jihadis, have been obtained by Sky News.

Nationals from at least 51 countries, including the UK, had to give up their most personal information as they joined the terror organisation.

Only when the 23-question form was filled in were they inducted into IS.

A lot of the names and their new Islamic State names on the registration forms are well known.

Abdel Bary, a 26-year-old from London joined in 2013 after visiting Libya, Egypt and Turkey.

He is designated as a fighter but is better known in the UK as a rap artist.

His whereabouts are unknown.

:: Who Are The Britons In The Islamic State Files?

Another jihadi named in the documents, now dead after being targeted in a drone strike, is Junaid Hussain, the head of Islamic State's media wing who along with his wife former punk Sally Jones, plotted attacks in the UK.

Her whereabouts are unknown.

Reyaad Khan from Cardiff, who also entered in 2013, is also among those found among the registration forms.

He was well known for appearing in a highly produced Islamic State propaganda video.
He was later killed.

But the key breakthrough from the documents is the revealing of the identities of a number of previously unknown jihadis in the UK, across northern Europe, much of the Middle East and North Africa, as well as in the United States and Canada....MORE

Re the Yazidis:
Hundreds of Former Sex Slaves Take Up Arms To Do What Obama, Cameron Won't: Kill ISIS Pigs

Those women could probably figure out a use for the information.

Deloitte On Fintech: A Great Opportunity to Peddle Product

From Citywire's Wealth Manager: 

A 'once in a generation' opportunity for fund firms 
The asset management industry has a once in a lifetime opportunity to modernise its distribution model.

A study by the Association of the Luxembourg Fund Industry (ALFI) and Deloitte titled 'How can Fintech Facilitate Fund Distribution' highlights how technology can reshape the financial sector on a global scale.

'Fintech is more than a buzzword. It will have a fundamental impact on the operating model of asset managers, distribution intermediaries and service providers, who are also facing new investor behaviours,' ALFI chair Denise Voss said.

'The investment management ecosystem has not only to increase efficiency, but also to provide a better customer experience if it is to succeed in the future.'

According to the paper, successful asset management companies will adapt product management and marketing strategies to the mind set and habits of the new generation of investors, using fintech to make use of a wide set of available data sources, including external sources such as social media.
It also stated client profiling will be supported by data analytics. Key features of online platforms will be education, risk & performance metrics, account management functionalities, wealth reports vs investment goals and market insight....MORE

European Regulators Watching Closet Indexers

From Institutional Investor:

Authorities in Europe have turned their attention to funds that track the index while charging active management fees.

Since the 2008–’09 financial crisis, U.K. asset manager SCM Direct has been calling for a name-and-shame campaign against closet index funds. Such funds purport to be actively managed, but they hug their benchmarks so closely that returns often track the market, leaving investors with a high-priced index product. As investors and regulators demand more transparency, managers with a limited active share in their funds may see enforcement actions.

“In today’s investment landscape it is increasingly difficult to beat the market on a repeatable basis,” says SCM founding partner Gina Miller. “Active management is a dream, and these funds have been selling snake oil for far too long.”

The financial crisis prompted SCM to investigate the underlying holdings of several retail funds to which it had exposure. But the task was daunting, Miller recalls: U.K. regulations require mutual funds only to reveal their top-ten holdings.

In Sweden, national shareholders’ association Sveriges Aktiesparares Riksförbund sued Swedbank Robur, the country’s largest bank, after it admitted to hugging the index so closely with some products that their chances of success were extremely low. That landmark class action suit, which included 3,000 investors, was dismissed last July. Still, Swedish regulator Finansinspektionen (FI) released a consumer protection report that includes a plan for tightening regulation of closet indexers. FI found evidence of funds being marketed as active but exhibiting the kind of ultralow tracking errors common among index products....MORE

Unicorn Mania: Snapchat, With It's $16 Billion Valuation, Says It Can Do $300 Million Revenue This Year

From re/code:

Snapchat Thinks It Will Generate at Least $300 Million in Revenue This Year

Investors are buying into Snapchat’s massive $16 billion valuation because its business is growing significantly. Or at least expected to grow significantly in 2016.

Snapchat is targeting between $300 million and $350 million in revenue in 2016, according to multiple sources familiar with the company’s plans. That’s six or seven times the $50 million in revenue Snapchat projected last year.

Snapchat’s business is still new and evolving, and advertiser interest is still very experimental. Essentially that means it can be tough to predict incoming revenue with much accuracy, as most advertisers don’t have Snapchat as a staple of their advertising plans.

The company hit a $100 million revenue run rate in Q4, according to one source. Advertising is cyclical, and Q4 is usually a strong advertising quarter, but it’s worth noting because the run rate metric ​gives us a glimpse at how the business is growing.

Still, boosting projected revenue like that must mean the businesses is growing at a nice clip. We don’t know if the $16 billion valuation is pegged to this year’s expected revenue, but if it were, that would amount to more than 50 times this year’s sales. Facebook, by comparison, trades at a value of about 17 times its annual revenue.

A Snapchat spokesperson declined to comment....MORE

"Wheat futures gain, as Wasde 'less bearish' than thought"

Wheat is up a couple cents at 467-6 while corn is off 3/4 cent at 359-6.
From Agrimoney:

Wheat and corn futures turned a little higher, after a Wasde report that was, at least, less bearish than expected.

Soybean futures were down, as bearish US news for the soy-complex outweighed a cut to global stocks and an upgrade to Chinese demand prospects.

But overall reaction was muted, as stocks of all the grains remain very heavy.

"No change in overall 'plenty of everything' narrative," as Richard Feltes, at RJ O'Brien, put it....MORE

Also at Agrimoney:
PM markets: ags react somewhat tepidly to Wasde, real help

Earlier:
Corn, Wheat Turn Modestly Higher On "Damn With Faint Praise" Dept. Of Agriculture Report

Deloitte To Make Tax Attorneys Redundant With Artificial Intelligence

Via PR Newswire:

Deloitte Forms Alliance with Kira Systems to Drive the Adoption of Artificial Intelligence in the Workplace

Deloitte today announced an alliance with Kira Systems to bring the power of machine learning to the workplace, an innovation that could help free workers from the tedium of reviewing contracts and other documents.  

The alliance combines Deloitte's business insights in cognitive technologies with Kira Systems' advances in machine learning in creating models that quickly "read" thousands of complex documents, extracting and structuring textual information for better analysis. 

This capability holds broad applications for the marketplace, said Craig Muraskin, Deloitte LLP, managing director of Deloitte's U.S.Innovation group, as the extensive review of documents underpins many pressing business activities, including investigations, mergers, contract management and leasing arrangements. 

"Wading through miles of corporate jargon hunting for key words and patterns can consume considerable time and resources," said Muraskin. "By teaming with Kira Systems, we can help organizations reduce their review time while redeploying talent to higher value activities – let's save our eyes for more strategic matters." 

Noah Waisberg, CEO of Kira Systems, said recent innovations by his company, such as Kira Quick Study, are graduating machine learning to new levels of accomplishment. "Artificial intelligence has arrived to a point where machines can scale human expertise by extracting information from complex documents," said Waisberg. "It accurately identifies information by learning from examples versus just reflexively identifying pre-programmed clauses."...MORE

HT: Going Concern's News Roundup 

"Merkel's Challenge"

Mutti got played by Erdogan, there's no other way you can put it.

And NATO says Putin is weaponizing the refugees, ha.
From Marc to Market:

German Chancellor Merkel was right. As the Greek crisis was winding down last summer, she noted that the refugee problem would be even more difficult.  And indeed, it is. 

The refugee issue is challenging Merkel's leadership in Europe.  While her trademark has been her sensitivity to swings in sentiment, she hasseemed rather tone-deaf in dealing with the refugee crisis.  

Her move this week suggests she is still out of step with many of her European allies.  Reports suggest that Merkel struck a deal with Turkey without the consent of others.    Turkey realizes that it is the key to Europe's strategy.  Europe needs to control its external borders if it is going to be able to allow free movement within the region.    Many top European officials see the free-movement within the region as essential to European integration.  Without it, some fear that the EU faces an existential crisis.  

Turkey has its own agenda.  It needs funds to meet the needs of its refugees.  It previously asked for three bln euros and this week has asked for another three bln euros.  However, what Turkey wants is to be part of Europe, despite being shunned for years.  Turkey has demanded that its citizen can enter the EU without a visa.  This is controversial on substantive grounds.  Procedurally, one of the challenges is the Turkish passports are reportedly easy to forge.  

Turkey also wants to accelerate negotiations on EU entry.  These negotiations are broken down into areas, and Turkey has requested beginning talks on five chapters.  Turkey is a large, relatively poor country, and many, while explicit about it, may be concerned about its largely Islamic population.  In recent years, human rights issues have become more salient, and Turkey's treatment of journalists is notorious.  

The initial deal closed the western Balkan migration route, and Turkey agreed to take back all non-Syrian migrants.  However, Merkel had a bigger vision:  return every migrant reaching the Greece.  Turkey recognized the greater demand and raised its price of cooperation.    It looks like the final compromise was that all migrants would be sent back to Turkey.  Turkey would get "credit" for each Syrian refugee it took back from Greece and would get to send one back to the EU.  

It appears the respect for rules that German leaders often espouse may be jettisoned for political expediency.  The UN recognizes the human right to seek asylum.  The German plan seems to contravene this right.   Some fear that Merkel reached an agreement with Turkey without others consent, delivering a sort of fait accompli.    

Separately, last week, the European Court of Justice ruled against German efforts to spread the welfare costs of across the country to force refugees into certain areas.  The Court ruled that under certain circumstances the government can impose residency requirements to facilitate integration.  German policy is partly aimed at preventing the formation of refugee ghettos.  Reports indicate the refugees are directed to a rural area and the east, where housing is more available, and there is a death of working age people....MORE

Oil: Pakistan Prime Minister and Army Chief of Staff Join Egypt's Al-Sisi In Saudi Arabia

WTI is at $37.92 up $1.42 but decidedly below yesterday's high-for-the-run: $38.39.
We've assumed a geopolitical risk premium has been priced into world markets because of the presence of the 20-nation, 350,000 troops war games going on at Syria's southern border courtesy of the Saud clan.
With the mobilization expected to wind down starting tomorrow that risk premium should drop.

First up, Gulf News:

Northern Thunder to be concluded on Thursday
Saudi king and other regional leaders expected to oversee closing of military exercises

Northern Thunder, the largest joint military manoeuvres to be held in the region, will be concluded on Thursday amid expectations that Saudi King Salman Bin Abdul Aziz and other leaders will attend the final exercises.

The manoeuvres in northern Saudi Arabia were launched in the middle of last month with the participation of 20 Arab and Islamic countries, including the six member states of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE — and the Peninsula Shield, the military arm of the GCC.

Organisers said the international drills have been highly successful at the strategic, operational and tactical levels.

The participating forces have also succeeded in carrying out the second largest mobilisation of multinational military forces since Operation Desert Storm in 1990-1991.

The participating countries are Saudi Arabia, UAE, Bahrain, Kuwait, Qatar, Oman, Jordan, Senegal, Sudan, Maldives, Morocco, Pakistan, Chad, Tunisia, Comoro Islands, Djibouti, Malaysia, Egypt, Mauritania, and Mauritius.

And from DailyNewsEgypt:

Al-Sisi to attend final day of Raad Al-Shamal military training in Saudi Arabia
The manoeuvres included joint trainings on facing prospective threats in regular and irregular warfare

Egyptian president Abdel Fattah Al-Sisi will attend Thursday the final day of Raad Al-Shamal (North Thunder) military training exercise in Hafr Al-Baten in the northern military district of Saudi Arabia.

The manoeuvres included joint trainings on facing prospective threats in the context of regular and irregular warfare. Several Arab armies cooperated in these trainings to achieve their goals.

Egypt was keen to participate in such manoeuvres owing to its role in enforcing the security of the Arab region, read a statement from the Egyptian presidency....MORE

Finally, from Pakistan's Express-Tribune:
PM, army chief arrive in Saudi Arabia 

"German bank Berlin Hyp issues first sub-zero non-state bond"

May you live in interesting times.
From the Financial Times:

A German bank has become the first non-state borrower to issue euro denominated debt at a negative yield, another milestone as the continent’s financial system moves further into the world of sub-zero interest rates. 

The issuance comes ahead of a European Central Bank meeting this week when the effect of negative interest rates will be in the spotlight. 

Berlin Hyp issued €500m of covered bonds with no coupon and priced to yield minus 0.162 per cent on Tuesday, according to Bloomberg data. That means investors are guaranteed to lose money if they hold the bonds to maturity....MORE

Corn, Wheat Turn Modestly Higher On "Damn With Faint Praise" Dept. Of Agriculture Report

From Reuters:
USDA boosts U.S. soy stocks view; holds corn, wheat steady

The U.S. Agriculture Department on Wednesday raised its outlook for domestic soybean supplies by more than expected as it cut its estimate of the amount that will be crushed due to falling soymeal demand.

The government left its U.S. corn and wheat stocks estimates unchanged in its monthly supply and demand report. Analysts had been expecting a slight increase in domestic grain supplies.

On the global front, the wheat, corn and soybean supply outlooks were lowered, with world soy stocks falling below the range of market forecasts due to an increase in shipments to China. The global corn stocks figure also was below a range of trade estimates.

Soybean, corn and wheat futures all rose for five straight days heading into the report, with analysts attributing most of the gains to short-covering. Ample world supplies had sent corn and soybean prices to multi-month lows and wheat prices to multi-year lows by the start of March.

USDA boosted its U.S. soybean ending stocks view for the 2015/16 crop year by 10 million bushels to 460 million. It cut its outlook for domestic crushings by the same amount and lowered soymeal usage by 200,000 tons.

Analysts had expected U.S. soy end stocks of 452 million bushels, according the average of analysts' estimates given in a Reuters survey.

U.S. corn and wheat stocks were steady at 1.837 billion bushels and 966 million bushels, respectively. Both figures were below the average of analysts' estimates but within the range of market forecasts....MORE

USDA WASDE Home page

Here's corn via FinViz. After trading off three cents before the report it got a bit of a relief rally:

"Private Banks Boost Art Advisory Units"

Well duh.
Some of these guys are a little slow on the uptake.

From Penta:

Top wealth management firms have long had comprehensive art advisory units. Their bread-and-butter service: Using the artwork in their best client’s valuable collections as collateral, to lend them money, when the client momentarily needs extra cash to make a big purchase. But spurred on by the steroid-pumped growth of the art market over the past few years—with more collectors acquiring art for investment purposes and an increasing flux in prices—wealth management firms are hiring specialized talent to take their art advisory units to the next level.

“There’s a real race to find people who have a deep interest in art and banking knowledge, which is pretty rare and highly demanded,” says Gauthier Vincent, head of Deloitte’s wealth management practice, which compiles a comprehensive Art & Finance report annually. He says two talent pools are gravitating to the new positions: Bankers who have experience using art and other passion-driven collectibles as collateral, and bankers who are personally passionate about collecting art. Both are good matches for the fast-growing art advisory units. Art connoisseurs, who have accounting experience and handled grants at museums, are another subgroup getting poached by the private banks....MORE

Journalism (and more): "Facebook is eating the world" (FB)

And it is not good.
As noted in the intro to last November's "Intimacy and Facebook Creepiness (FB)"

We know Facebook's ultimate strategy is to convince their users that it is the internet, that there is no need to go anywhere else, and hey, why are you leaving so soon, but along the way it seems they also want to convince users that it is human.
Yuck...

Seriously, who has the time for a world that's Zucks?

From the Columbia Journalism Review:

SOMETHING REALLY DRAMATIC is happening to our media landscape, the public sphere, and our journalism industry, almost without us noticing and certainly without the level of public examination and debate it deserves. Our news ecosystem has changed more dramatically in the past five years than perhaps at any time in the past five hundred. We are seeing huge leaps in technical capability—virtual reality, live video, artificially intelligent news bots, instant messaging, and chat apps. We are seeing massive changes in control, and finance, putting the future of our publishing ecosystem into the hands of a few, who now control the destiny of many.

Social media hasn’t just swallowed journalism, it has swallowed everything. It has swallowed political campaigns, banking systems, personal histories, the leisure industry, retail, even government and security. The phone in our pocket is our portal to the world. I think in many ways this heralds enormously exciting opportunities for education, information, and connection, but it brings with it a host of contingent existential risks.

Journalism is a small subsidiary activity of the main business of social platforms, but one of central interest to citizens.

The internet and the social Web enable journalists to do powerful work, while at the same time helping to make the business of publishing journalism an uneconomic venture.

Two significant things have already happened that we have not paid enough attention to:

First, news publishers have lost control over distribution.

Social media and platform companies took over what publishers couldn’t have built even if they wanted to. Now the news is filtered through algorithms and platforms which are opaque and unpredictable. The news business is embracing this trend, and digital native entrants like BuzzFeed, Vox and Fusion have built their presence on the premise that they are working within this system, not against it.

Second, the inevitable outcome of this is the increase in power of social media companies.....MORE

HT: The Big Picture although he doesn't say where he saw it so I can't do a HT chain.

Related:
Content Wars: Publishing’s future is Facebook’s past.
"UPDATED--Journalism: Facebook Is About To Jump Into Content, Big Time".
Disintermediation and Reintermediation: "Life on the post-Facebook internet"
"Facebook Would Like a Monopoly on Your Entire Life" (FB; GOOG)
CJR: "The most concerning element of Facebook’s potential new power" (FB)
"Can Silicon Valley disrupt journalism if journalists hate being disrupted?"
Facebook To Decide Which News Sites Live, Which News Sites Die
On the web no one can hear you scream. 
"Guess what, journalism companies? Facebook is going to be your biggest competitor in the long run"
"May the Ox of Journalism Always Be Yoked To the Cart of Commerce."
and quite a few more, use the search blog box if interested.

Ransomware: In Which Izabella Goes All 14th Century Condottieri

Years ago I got into an online argument at what was then the Wall Street Journal's flagship blog, MarketBeat, with someone over the ineptitude of the behemoth pension fund CalPERS and I somehow took a meander into the mid-1300's:

8:28 am June 3, 2008  
Climateer wrote :
Re: Classical Economics,
Why only go back to Ricardo or Smith? 14th century Classical econ. says what’s yours that I can take by force of arms is mine.
Now that’s classical, baby.
Human society develops rules of conduct to facilitate the greater good.
The intellectual field was called “Political Economy” for a reason....

...

12:02 pm June 4, 2008
Climateer wrote :
Thanks for the econ lesson. Here’s one for you.
The use of force verbiage is short-hand for the evolution of economic thought in just the last 700 years. The economics of the 14th century was the econ of the Condottieri.
Force of arms trumped all.
In response societies developed rules of conduct, laws, to codify what constitutes acceptable (and unacceptable) commercial behavior....

CalPERS got crushed in the financial débâcle that was already apparent in 2007 (quantquake, Northern Rock), underperforming 90% of its peers and resorting to amateur behavior like selling liquid assets to maintain losing positions in the illiquid.

Anyhoo, I was reminded of John Hawkwood and his merrie band of freebooters by this at FT Alphaville:

On the economic power of ransom

Controlling something other people want gives you power over them.

Sometimes this control is considered “legitimate”, such as a tribe’s or family’s inherited influence over fertile land. Other times it’s thought of as “illegitimate”, because control comes from violence or threats of violence. The distinction is inherently subjective, and indeed, throughout history, the client-protector relationship has been defined by the deployment of such tactics, whether by common bullies, regional strongmen or hegemonic states.

As Augustine put it in Book IV, Chapter 4 of City of God:

Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity.
Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea, he answered with bold pride, “What you mean by seizing the whole earth; but because I do it with a petty ship, I am called a robber, while you who does it with a great fleet are styled emperor.”

But the wise oppressor — indeed, one such as Rome — never takes more than he needs out of fear of killing the client off completely or rendering the relationship uneconomic. To the contrary, he gives just enough back (roads, aqueducts, know-how) to ensure the relationship appears worthwhile to the subjugated party — the ultimate aim a form of Stockholm syndrome wherein the subjected party learns to love his oppressor. The relationship in that sense becomes more symbiotic and reciprocal (even if for a long time it remains socially engineered to favour one party more than another so as to be preserved as an economic interest).

Whether a party ends up the oppressor or the oppressed in the end comes down to one of two things: naturally having something of value to exert pressure with and being able to defend it (the legitimate model) or seizing that thing by force, cunning or manipulation and presenting the notion the victim will lose out if he fails to cooperate (the illegitimate model).

So how do these relationships translate into the modern computer era?

Not dissimilarly.

As per the age-old model, we find both legitimate and illegitimate mechanisms in play for exerting economic pressures on associated parties. The former involves the naturally endowed receiving tribute payments (in the form of free services) for rights to access their data (although there are questions as to whether those payments are substantial enough to make it a non exploitative arrangement). The latter illegitimate model, meanwhile, uses extortion, social engineering or outright theft to take the data forcefully for ransom purposes.

The former is supposed to benefit the naturally endowed on an extended basis — a consumer surplus of sorts. The latter, meanwhile, passes the advantage into the opportunist’s hands — the offsetting capitalist surplus.

Which is a long way of arriving at the following point from a new report by the Institute for Critical Infrastructure Technology flagging the structural similarities between the web and the organised civilised state, and their exposure to would-be predatory forces and toll extractors.

Ransomware is less about technological sophistication and more about exploitation of the human element. Simply, it is a digital spin on a centuries old criminal tactic.

They go on (our emphasis):...MORE

 Related, from a 2015 post:

Old school rent extraction device

"SHE Power: State Street Launches Gender Diversity ETF"

My first thought on seeing the headline was "The near-mythical lady lumberjacks of the Pacific Northwest"!*
From Barron's:

State Street Global Advisors on Tuesday launched an exchange-traded fund invested in shares of companies that promote women into positions of leadership, the latest in a string of social responsibility-themed offerings.

The SPDR Gender Diversity Index ETF (SHE) tracks an index of large-cap U.S. stocks ranked by “the presence of women at the CEO, board or senior leadership levels.” Its index is the first created in-house by SSGA and applied to an ETF, says Jim Ross, global head of State Street’s ETF business.

The project was created in conjunction with a large pension fund: California State Teachers’ Retirement System, or CalSTRS. Initially, Ross says that CalSTRS had approached State Street about developing a private account based on research that shows higher return-on-equity metrics at gender-inclusive companies. Ultimately, the two decided to launch an ETF that makes the strategy available to all investors, Ross told Barron’s.

Top holdings in the 140-stock ETF out of the gate are Berkshire Hathaway (BRK.B ), Home Depot (HD) and Oracle (ORCL). The ETF’s expense ratio is 0.2%, competitive in the context of non-conventional index ETFs....MORE

*We do have an abiding interest in timber as an asset class. And there are women in the roughneck end of the business. The Daily Mail in particular has written about les femmes de la forêt.
Additionally, Business Insider looked at an anthropological angle but missed a trick in their link-post by not expanding on the patriarchy-bias of The Atlantic's Paul Bunyanesque hipster naturalist lumbersexuality.
On a more amusing note, CalPERS sold off 20% of their timber holdings last year.
They should have sold in 2007 or held for eternity.

Russia Warns North Korea Over Nuke Talk, Threaten's Psycho Boy With Invasion

From The Guardian:

Russia warns North Korea over threats of nuclear strike 
One of Pyongyang’s few remaining allies says country is in danger of creating legal grounds for international military intervention. NK News reports 

Russia has warned North Korea that threats to deliver “preventive nuclear strikes” could create a legal basis for the use of military force against the country, suggesting that even Pyongyang’s few remaining friends are growing concerned about its increasingly confrontational stance.

The Russian foreign ministry statement, which follows a North Korean threat to “annihilate” the US and South Korea, also criticises Washington and Seoul for launching the largest joint military drills yet to be held on the peninsula.

“We consider it to be absolutely impermissible to make public statements containing threats to deliver some ‘preventive nuclear strikes’ against opponents,” the Russian foreign ministry said in response to North Korea’s threats.

“Pyongyang should be aware of the fact that in this way the DPRK will become fully opposed to the international community and will create international legal grounds for using military force against itself in accordance with the right of a state to self-defense enshrined in the United Nations Charter,” continued the statement, translated by Itar Tass news agency.

Washington and Seoul launched their annual joint military exercises on the peninsula on Monday, stepping up the manoeuvres in response to North Korea’s fourth nuclear test in January and rocket launch in February.

But while the statement said Moscow was opposed to the tone of North Korea’s response, it also said the scale of the American-South Korean joint exercise put “unprecedented … military and political pressure on Pyongyang”.....MORE

West Coast's Tallest Building Tops Out

Oops, wrong picture, wrong side of the ocean. That's Hong Kong
And some Bond villain's H.Q. or something; I prefer it plunked down near Singapore's bottle opener building.

Here's the Cali building story at the Los Angeles Times:

The West Coast's tallest building tops out: The view from 1,100 feet up

Hey up!” was a shout from the crowd as the cables grew taut on a 35-foot steel beam as it began to rise to the top of the Wilshire Grand hotel.

Workers, architects and engineers gathered Tuesday afternoon to celebrate a milestone in the construction of Los Angeles’ most notable skyscraper at the corner of Figueroa Street and Wilshire Boulevard. The ceremony, known as the topping out, marks completion of the building’s central core: a pillar of concrete that rises more than 892 feet from the foundation. The core will help support the project’s tower, which will rise another 200 feet.

Upon completion, the Wilshire Grand will rise 1,100 feet and be the tallest building west of Chicago. The hotel will have 900 hotel rooms and nearly 400,000-square feet of office space. An adjoining building will have ballrooms and convention space....MORE

Image via SkyRise Cities

Man vs. Machine: World Go Champion Takes On The AlphaGo Computer, In Under Two Hours

With less than three hours to go, are you ready for this?



From MetaFilter:

AlphaGo and AI progress

 The first game between AlphaGo and Lee Sedol is scheduled to begin at 23:00 EST tonight, in Seoul. There will be a livestream with commentary in english. Since the Deepmind Go-playing computer's previous victory against Fan Hui, Go professionals and AI researchers alike have had time to consider what it means.

Myungwan Kim 9p, with Andrew Jackson, provides a video review of the earlier games. British Go Journal has some comments (full article pdf). Everyone seems to agree that when AlphaGo played Fan Hui, it would not have been strong enough to defeat Lee Sedol. Nobody knows how much stronger it's gotten since then. Both sides seem confident of victory.

Demis Hassabis, CEO of DeepMind, gives the 2016 Strachey Lecture explaining further his company's approach to artificial intelligence. The second half of it, starting at 25 minutes, centres on AlphaGo....MORE

I understand "Let's Get Ready to Rumble" Pump Up Music probably isn't appropriate to the subject matter but it wasn't really relevant when I used it in "Let's Get Ready To Rumble II: Paul Krugman Responds to Cliff Asness" either.
What am I gonna do use Go your own way? Go now? Blink 182's Go? Pearl Jam, ditto?
I got nuthin' more, pump it up.

Recent Most And Least Efficient Thieves: Robbing The Fed and Chump Change

Our front runner for most efficient:

Bangladesh bank says hackers stole $100M from its New York Fed account

The Federal Reserve Bank of New York was hacked — and $100 million was swiped from the Bangladeshi government’s account, Bangladesh’s central bank charged Monday.

The Central Bank of Bangladesh said the cyberthieves laundered at least some of the funds through casinos in the Philippines.

And the Bangladeshi Embassy said investigators were working with Filipino officials to find the funds.

“It has been possible to recover a portion of the amount ‘hacked’ from Bangladesh Bank’s reserve account in the United States,’’ it said in a statement.

“Bangladesh Financial Intelligence Unit is engaged with the Philippines’ anti-money laundering authority to trace the destination of the remaining amount and recover the same....MORE

That's it boys, directly to the source, nine figures.

And from New York Magazine:

World’s Least Efficient Thief Steals $200,000 in Quarters

An inventive and presumably muscular employee of Brink’s — the armored-car company — has been charged with stealing almost $200,000 worth of quarters that the company was storing for the Federal Reserve. An FBI investigation found that Stephen Dennis, a money-processing manager in Alabama, swapped bags of quarters for similar bags he'd filled with beads disguised with a thin layer of coins, and hauled out $196,000 — nearly five tons' worth — over a couple of months in early 2014. Dennis pleaded guilty to the charges and pledged to repay Brink’s, which has already reimbursed the Federal Reserve Bank of Atlanta....MORE

Five tons.

ABN Amro Says Grain Prices Have Bottomed After Four Year Decline

We think ABN are early, there is just so much stuff around although we expect some late summer La Nina weather to give us a long trade.

For orientation here are the weekly chart:

FinViz

And the hourly:

FinViz

Corn     362-0 up 3-0
Wheat  465-2 up 2-4

From Agrimoney:

Some revival in grain futures is on the way, ABN Amro said, even as it cut its estimate for values near-term – saying that these low prices were having an impact in quelling growth in supplies. 

Some stabilisation in grain prices this year could be a sign that the drop in grain prices could – after nearly four years - be running out of steam.

"The fact that prices have been moving sideways for the last few weeks would seem to indicate that prices have now bottomed out," said ABN Amro analyst Frank Rijkers.

The flattening comes amid some signs that weak prices may be having an effect in curtailing farmers' enthusiasm for maximising production, with the bank highlighting an International Grains Council forecast for a drop of 1.4% in world wheat sowings in 2016-17.

"After three years of over-production, we are now seeing signs of a turnaround," Mr Rijkers said.

"Low prices… mean poor returns for farmers," who are "consequently starting to change their cropping plans, with the result that less wheat is forecast to come onto the market".

'Upward pressure on prices'Meanwhile, in corn, the bank noted that not all countries have enjoyed strong harvests, with South Africa gripped in a drought which "is triggering increasing fears of a food crisis", and dryness denting Indian and European Union results too.

"Reports of lower yields around the world are expected to translate into higher prices during 2016," Mr Rijkers said, flagging the potential too for support to values from the knock-on effects of an expected recovery in oil prices....MORE