"Inflation Data in the U.S. Is Built Around a Survey that People Increasingly Won’t Take "

From Real Time Economics:

Economists and market participants in the U.S. like to fixate on every wiggle in consumption and inflation data. A tenth of a percentage point increase in the Consumer Price Index can spark fears that the Federal Reserve will raise interest rates, not to mention lead to repricing of the $1 trillion market in Treasury Inflation Protected Securities.

Yet the foundation of this inflation data is a Bureau of Labor Statistics survey to which people increasingly do not respond.

The Consumer Expenditures Survey is the only federal survey that documents the full range of consumers’ expenditures and incomes, and is used to determine the weights in the CPI. The survey’s data is built around an interview survey where workers from the U.S. Census Bureau ask households about their expenditures on big-ticket items, and a diary survey in which people are asked to track all their purchases over the course of two weeks.

In recent years, the response rate has gone from slow deterioration to free fall. In 2011, more than 70% of people responded to both surveys, but as of 2013 the response has dropped to 66.7% for the interview survey and 60.8% for the diary survey, both the lowest on record.

Non-response to surveys has been a growing problem in social sciences — in 2004, the Office of Management and Budget said government surveys with response rates below 80% needed to study if the lack of response was biasing the survey — and the collapsing response rate to the expenditures survey has gone far below that threshold.

Why does this matter? If drinkers, for example, refuse to take the survey (presumably they’re out at the bars when census workers stop by), then the amount of alcohol consumed by the population would appear much lower than it really is. And then if the nation was hit with a bout of beer price inflation, the effects would be missed....MORE

Goldman Sachs: Corrupt Pals of A Billionaire Israeli Spy (GS)

If only half the stories are true, Maxwell was a filthy human being.
From FT Alphaville:

23 years later…

The American Life radio show and the Pro Publica investigative journalism service set an interesting debate a-blaze last week, detailing the 46 hours of secret recordings undertaken by Carmen Segarra, a specialist hired (and subsequently fired) by the New York Fed.

The recordings have painted a vivid picture of regulatory dithering in the face of a rapacious Goldman Sachs as the bank sought to gain clearance for a share warehousing operation that would allow Spain’s Santander to sidestep European capital requirements.

Subsequence criticism has centred on the NY Fed’s apparent impotence in the face of Wall Street muscle. But is it more the case that Matt Taibbi has been right all along? Does the bank actively help clients dodge (if not break) the rules?

Let’s examine a largely forgotten example of Goldman’s past behaviour in London…
—–
Back in 1991, a reporter on the Panorama investigative team at the BBC exercised their public right to examine something called a 212 Register held at the corporate headquarters of a company called Maxwell Communications Corporation (MCC). The company was the main corporate vehicle of Robert Maxwell, the publisher who was soon to go missing off the side of his yacht, somewhere off the Canary Islands. The register contained all the formal replies to 212 notices sent out by the company — disclosure notices that required the beneficial owner of stock registered as an MCC shareholder to reveal themselves....MORE

"Why Peak-Oil Predictions Haven't Come True"

To date the only resource that the world has run out of is guano..
We were probably getting close with whale oil though.
From the Wall Street Journal:

More Experts Now Believe Technology Will Continue to Unlock New Sources

Have we beaten "peak oil"?

For decades, it has been a doomsday scenario looming large in the popular imagination: The world's oil production tops out and then starts an inexorable decline—sending costs soaring and forcing nations to lay down strict rationing programs and battle for shrinking reserves.

U.S. oil production did peak in the 1970s and sank for decades after, exactly as the theory predicted. But then it did something the theory didn't predict: It started rising again in 2009, and hasn't stopped, thanks to a leap forward in oil-field technology.

To the peak-oil adherents, this is just a respite, and decline is inevitable. But a growing tide of oil-industry experts argue that peak oil looks at the situation in the wrong way. The real constraints we face are technological and economic, they say. We're limited not by the amount of oil in the ground, but by how inventive we are about reaching new sources of fuel and how much we're willing to pay to get at it.
"Technology moves so quickly today that any looming resource constraint will be nothing more than a blip," says petroleum economist Phil Verleger. "We adjust."

Whether peak oil exists is more than just a point of intellectual debate—although it certainly has proved to be a heated and divisive one for decades. The question—and how we think about it—also has a big potential impact for governments, oil producers and ordinary people across the globe, all of whom depend on the vagaries of oil production and would be threatened by soaring costs and shortages.

The peak-oil boosters argue that instead of plowing money into new ways to find oil, we should be conserving what we have and investing in alternative energy sources so that we're prepared when supplies run low and costs soar. Most of the naysayers agree that we shouldn't stick with oil forever. But they think it's wiser to invest in technology to keep expanding the available supply, until it gets too expensive to do so. At that point, they're confident, we'll be able to come up with an economical alternative.

The History of an Idea Peak oil was most widely popularized by M. King Hubbert, a brilliant—and egotistic, by some accounts—geologist who worked for years at Shell Oil. In a 1956 paper, he predicted that U.S. oil production would peak, probably in the early 1970s, and then decline. It would resemble a bell curve....MORE

Our coverage of Peak Oil tended toward "Peak oil theories 'increasingly groundless', says BP chief" or even Alinskyite ridicule: "Re-post: Peak Oil Stalwart to Shutter Forum/News Site, Persue Career as Astrologer".

Hedge Funds All Seem to be In the Same Crowded Trades

From AlphaBetaWorks:

Hedge Fund Crowding – Q2 2014

Extraordinary Popular Delusions and the Madness of Crowding

U.S. hedge funds share a few systemic and stock-specific long bets. These crowded bets are the main sources of aggregate long hedge fund relative performance as well as many individual funds’ returns. Two risk factors and six stocks are behind most of this herding. The crowded stocks may experience elevated volatility due to the congestion of their hedge fund investor base. The returns of these consensus bets may also disappoint.
Hedge fund crowding consist of:

1. High-beta bets,
2. Small-cap bets, and
3. A handful of individual stocks.

Combined, these account for two thirds of the aggregate long hedge fund risk relative to the market.

Identifying Crowding

We created an aggregate position-weighted portfolio (HF Aggregate) consisting of over 200 popular securities held by over 400 U.S. hedge funds with medium to low turnover: If at least ten funds owned a particular security, we included it in HF Aggregate. Within HF Aggregate, the size of each position is the dollar value of its ownership by the funds.

We then evaluated the risk profile of HF Aggregate relative to the U.S. Market (Russell 3000) using AlphaBetaWorks’ Statistical Equity Risk Model and looked for evidence of crowding. Finally, we analyzed risk and calculated the tracking error of each fund relative to HF Aggregate to see which funds most closely resemble it.

Hedge Fund Aggregate Risk

HF Aggregate has approximately 3% estimated future tracking error relative to the market. Risk is evenly split between factor (systemic) and residual (idiosyncratic) bets:

Sources of Relative Risk for U.S. Hedge Fund Aggregate

Source	Volatility (%)	Share of Variance (%)
Factor	2.48	55.51
Residual	2.22	44.49
Total	3.32	100.00

With a forecasted relative tracking error near 3%, HF Aggregate will have a very hard time earning a typical fee (1.5% management fee plus incentive). HF Aggregate is nearly passive. Even if one is not concerned with hedge fund closet indexing, investing in a broadly diversified portfolio of long-biased hedge funds is a bad idea.

Hedge Fund Factor (Systemic) Crowding

Below are HF Aggregate’s (red) most significant factor exposures relative to U.S. Market (grey).....MORE

HT: Market Folly

Sex and drugs boost UK economy

From The Telegraph:

Official figures expected to show Britain's economic recovery even stronger than previously thought, with illegal drugs and prostitution, which represent 0.7pc of GDP, fuelling faster growth 

£5.3bn of the UK's gross domestic product has been attributed to prostitution 

Britain's recent recovery was stronger than previously thought, official figures are likely to show this week, with the inclusion of prostitution and illegal drugs expected to boost the economy by around £10bn a year.

Experts expect a “substantial” upgrade of UK growth over the past 18 months as part of a major accounting overhaul that will bring Britain in line with European standards.

Revisions by the Office for National Statistics (ONS) up to the end of 2012 have already shown the UK’s recession was shorter and shallower than feared.

Figures this month showed the economy shrank by 6pc in the wake of the financial crisis and not the previous estimate of 7.2pc.

“The ONS has already announced that these changes will cause the year-on-year growth in real GDP between 2008 and 2012 to be revised by an average of 0.5pc per year, and we expect that recent growth rates will also be revised substantially higher,” said Michael Saunders, chief UK economist at Citi. Unrevised data currently show that the economy grew by 1.7pc in 2013, and 0.8pc per quarter in the first six months of this year. ...MORE

Big Money Moron Plans to Make Downtown Las Vegas Into Techtopia

He's a moron because, no matter how fancy the tech, it's still a desert.
From recode:
Downtown Las Vegas Is the Great American Techtopia

Tony Hsieh, the charismatic founder of Zappos.com, invested $350 million into turning Las Vegas into a startup. Buying 30 acres, setting up his own school, his own hospital, his own venture fund and restaurants, Hsieh is creating an innovation city in his own image. It is strange. And it is struggling. But it's the most ambitious experiment in building a 21st century utopian city in the U.S. In this Re/code special series, we explore what it means to live there -- and why its startups could flourish, or fail.

In the new downtown Las Vegas, the hospital is also a co-working space. The church knows to step in when founders lose funding. A men’s hotel is now offices, a Bikram yoga studio and an artisanal donut bakery. The rundown casino with seedy upstairs rooms is reborn as an entrepreneur dorm.

And in the new preschool, which took over a church that had been a senior service center, entrepreneurship training begins at 6 weeks old.

How does that work?
“It’s mostly about teaching them that it’s okay to fail,” said Connie Yeh, a former derivatives trader at Citibank, and now the founder of the 9th Bridge School in downtown Las Vegas. Yeh said that one of her preschoolers already has a website.

If all that seems strange — if it comes across as a startup fantasia straight out of science fiction — that’s because it is.

Tony Hsieh — the enigmatic, shy, but hard-partying 40-year-old founder of Vegas-based shoe-sales site Zappos, which he sold to Amazon for $1.2 billion — could have a lot of toys. He chose a city.

Since buying 28 acres and promising a $350 million investment in 2009, Hsieh has turned the downtrodden, recession-hit heart of Las Vegas, the 109-year-old town that is 10 minutes off the more-famous Strip, into an experimental startup city, where residents — from the school teachers to the startup founders — are venture-funded entrepreneurs.

In a mix of franchising and entrepreneurship, Hsieh’s Downtown Project has 300 projects going on simultaneously, from new restaurants to tech startups to social science experiments — his founders make a salary and then 50 percent of the profit after paying their loans back to him. He said his inspiration was, in part, the immersive computer game Second Life.

In 2012, Hsieh bought City Hall to headquarter Zappos.

There’s a whimsy but also a danger to the charismatic-leader-driven development that could fall anywhere between Google-ish playfulness to Howard Hughesian eccentricity — Hsieh bought the swath of land in the shape of a llama — at first accidentally, and then intentionally, because, hey, he likes llamas. But there’s been trouble. There’s been disappointment. And there have even been suicides....MORE

More on (see what I did there?) the desert thing:

UPDATED--"Las Vegas about to run out of water, go ‘out of business’"
Las Vegas Running Out of Water Means Dimming Los Angeles Lights
Clock is Ticking on Las Vegas' Water Supply and The Elvis Portfolio
Markets, Risk and Gambler's Ruin

"Virtual Reality May Become the Next Great Media Platform.....

.....But Can It Fool All Five Senses?"

We've remarked on nascent media corp. interest in VR, some links below.
From Singularity Hub:

Jason Silva calls technologies of media “engines of empathy.” They allow us to look through someone else’s eyes, experience someone else’s story—and develop a sense of compassion and understanding for them, and perhaps for others more generally.

But he says, while today cinema is the “the cathedral of communication technology,” looking to the future, there is another great medium looming—virtual reality.

Expanding on the possibilities embodied in the Oculus Rift, Silva envisions a future when we inhabit not virtual realities but “real virtualities.” A time when we discard today’s blunt tools of communication to cloak ourselves in thought and dreams.

It’s an electrifying vision of the future, one many science fiction fans have imagined. At present, we’re nowhere near the full digital duplication and manipulation of reality Silva describes. But if we don’t dream a thing, it’ll never come to pass.

Sometimes we can see the long potential of tech and are awed by it, even though we don’t know how to make it happen yet. All new technologies begin in the mind’s eye like this. “We live in condensations of our imagination,” Terence McKenna says.

Realization can take years; the engineering process can fizzle and reignite—go through a roller coaster of inflated expectations and extreme disillusion. Eventually, we get close enough to the dream to call it a sibling, if not an identical twin.

So, what will it take to get to Silva’s real virtuality? Let’s take a (brief) stroll through the five senses and see how close we are to digitally fooling them.

Sight
Two items crucial to immersive visuals are imperceptible latency (that is, no delay between our head moving and the scene before us adjusting) and high resolution.

With a high-performance PC and LED- and sensor-based motion tracking, the Oculus Rift has the first one almost nailed for seated VR. As you move your head, the scene in front of you adapts almost seamlessly—as it would in the real world. This is why the Rift is so exciting, it not only makes such immersion possible, it does so affordably.

But what about resolution? It’s acceptable, but could be better.

Currently, the Rift uses a high-definition display—the latest prototype is rumored to be about 2,600 pixels across. You can’t see the dark edges separating pixels (as you could in the first developer kit) but the graphics still aren’t as sharp as they could be.

Displays about 4,000 and even 8,000 (4K and 8K) pixels across are near, and they get us closer to ideal resolution—but even they won’t be enough....MORE

Related:
"Facebook, Oculus, And Businesses' Thirst For Virtual Reality"

One of the least talked about aspects is the use of VR in education. Because the mind has trouble distinguishing between virtual reality and the outside world you should be able to get people to believe almost anything you want them to accept, given enough repetition and an engaging story line. Whether the learner has deep understanding is pretty much immaterial.

Pearson, the edu/testing co. with the Financial Times and Economist attached will be moving in this direction.
Think deeply immersive multiplayer gaming as an example, then put on some virtual reality goggles.
Quite amazing.   

“Immersive Journalism” Using Virtual Reality to Put the Viewer In the Story
"The Inside Story of Oculus Rift and How Virtual Reality Became Reality"
Venture Capital: "Second Life Founder, Philip Rosedale, Is Quietly Creating a Next-Generation Virtual World"
Seinfeld, Virtual Reality and Mild Revulsion
The Paradox of Wearable Technology: Does this Computer Make My Butt Look Fat?
Annenberg's Edison Project--"Technology, Media and Culture - the Best of Times or the Worst of Times?"

How Decentralized Power, Not Democracy, Will Shape the 21st Century

Looking forward to the Greenland vote in 2021.
And 57 U.S. states at the U.N.
From The Atlantic via Defense One:

Last week, the world’s most globe-spanning empire until the mid-20th century let its fate be decided by 3.6 million voters in Scotland. While Great Britain narrowly salvaged its nominal unity, the episode offered an important reminder: The 21st century’s strongest political force is not democracy but devolution.

Before the vote was cast, British Prime Minister David Cameron and his team were so worried by voter sentiment swinging toward Scottish independence that they promised a raft of additional powers to Edinburgh (and Wales and Northern Ireland) such as the right to set its own tax rates—granting even more concessions than Scotland’s own parliament had demanded. Scotland won before it lost. Furthermore, what it won it will never give back, and what it lost it can try to win again later. England, meanwhile, feels ever more like the center of a Devolved Kingdom rather than a united one.

Devolution—meaning the decentralization of power—is the geopolitical equivalent of the second law of thermodynamics: inexorable, universal entropy. Today’s nationalism and tribalism across Europe, Africa, and the Middle East represent the continued push for either greater autonomy within states or total independence from what some view as legacy colonial structures. Whether these movements are for devolution, federalism, or secession, they all to varying degrees advocate the same thing: greater self-rule. 

In addition to the traditional forces of anti-colonialism and ethnic grievance, the newer realities of weak and over-populated states, struggles to control natural resources, accelerated economic competition, and even the rise of big data and climate change all point to more devolution in the future rather than less. Surprisingly, this could be a good thing, both for America and the world.
Woodrow Wilson brought his fierce anti-colonialism to the Paris Peace Conference after World War I, insisting on national self-determination as one of his famous “Fourteen Points.” But stubborn Western Europeans held on to their imperial possessions until World War II bankrupted them. The dismantling of the British and French empires over the course of the 20th century gave birth to more than 75 new countries within four decades. Decolonization was followed by the collapse of the Soviet Union, which created 15 independent states. All told, the jackhammer of devolution has more than tripled the number of countries around the world, from the 51 original member states of the United Nations to its 193 members today.
Strangely, international law as enshrined in the UN Charter appears to work against these trends, strongly privileging state borders as they are as if to freeze the world map in time. But to paraphrase Victor Hugo, there is nothing more powerful than an idea whose time has come. People can no longer be cheated (for long) out of their legitimate aspirations for self-rule.

Devolution helps to sensibly reorganize large and unwieldy post-colonial states. Take the example of India, where more than 60 years of independence have brought little development to peripheral and rural states in the east and northeast of the country. Rather than fostering economic growth outside the capital, New Delhi’s priority instead has been imposing either the Hindi (Mahatma Gandhi’s preference) or English languages across the country. But such malign neglect has only stoked devolutionary pressures. Since 1947, the number of states in the Indian federation has doubled, with the 29th (Telangana) created earlier this year. As state boundaries better conform to ethnic and linguistic boundaries, provincial units can focus more on their internal growth, rather than on having to defend themselves against the center. Notice how the second-largest contributor to Indian GDP besides Mumbai’s Maharashtra state is Tamil Nadu, the state that is geographically farthest from notoriously corrupt New Delhi....MORE

Milestones: Daily Mail Obituary of the Last of the Mitford Sisters, the Dowager Duchess of Devonshire

From the Daily Mail, 09:12 EST, 24 September 2014:

• Born Deborah Mitford in 1920, she was the youngest of the six Mitford girls
• Prince of Wales paid tribute to her 'unique personality' and 'original approach to life' 
• She had tea with Hitler, with whom her sister, Unity, was besotted, in 1937 
• Married Lord Andrew Cavendish in 1941 and moved into Chatsworth House
• Known as Debo, the Duchess had seven children of whom three survived
• Her son, Peregrine, 70, became the 12th Duke when Andrew died in 2004 
• They also had daughters Lady Emma, now 71, and Lady Sophia, now 57
• After her husband's death, she left Chatsworth, Derbys, for nearby vicarage 

The last of the famous Mitford sisters, Deborah, Dowager Duchess of Devonshire, has died at the age of 94, her son said this afternoon.

Deborah Vivien Freeman-Mitford and her siblings moved in the same circles as Winston Churchill, John F Kennedy and Evelyn Waugh - and even Adolf Hitler - and epitomised a privileged and glamorous aristocratic life that no longer exists.

But despite the glamour that came with being both a Mitford and chatelaine of Devonshire family seat, Chatsworth House,the Duchess, known as Debo, knew great tragedy, too.

Today a family spokesman issued a statement on behalf of her son, the 12th Duke of Devonshire, saying: 'It is with great sadness that I have to inform you that Deborah, Dowager Duchess of Devonshire, has passed away peacefully this morning.'

Scroll down for video 

Deborah, Dowager Duchess of Devonshire and last surviving Mitford sister has died at 94, her son said

Born Deborah Mitford in 1920 and known as Debo, she married Lord Andrew Cavendish in 1941, left 

A flag bearing the Devonshire family blazon was lowered to half mast at Chatsworth this afternoon

After the death was announced, the Prince of Wales also paid tribute to The Duchess, calling her 'a unique personality with a wonderfully original approach to life'.

The Dowager, know as Debo to family and friends, probably led the most normal life out of the famous sisters - Nancy, Pamela, Diana, Unity and Jessica - who were the It girls of their day.

Unity, who was six years older than Debo, was infamous for her right-wing politics and was a friend of - and became besotted with - Adolf Hitler.

She migrated to Germany where, in 1937, Debo and her mother had tea with Unity and Hitler in his Munich flat.

Noting that he had towels in his bathroom with his initials AH on them, Deborah said: 'The atmosphere was rather awkward because neither my mother nor I could speak German....MUCH MORE

"Mining Bitcoin with pencil and paper: 0.67 hashes per day"

From Ken Shirriff's blog:

I decided to see how practical it would be to mine Bitcoin with pencil and paper. It turns out that the SHA-256 algorithm used for mining is pretty simple and can in fact be done by hand. Not surprisingly, the process is extremely slow compared to hardware mining and is entirely impractical. But performing the algorithm manually is a good way to understand exactly how it works.

A pencil-and-paper round of SHA-256

The mining process

Bitcoin mining is a key part of the security of the Bitcoin system. The idea is that Bitcoin miners group a bunch of Bitcoin transactions into a block, then repeatedly perform a cryptographic operation called hashing zillions of times until someone finds a special extremely rare hash value. At this point, the block has been mined and becomes part of the Bitcoin block chain. The hashing task itself doesn't accomplish anything useful in itself, but because finding a successful block is so difficult, it ensures that no individual has the resources to take over the Bitcoin system. For more details on mining, see my Bitcoin mining article.

A cryptographic hash function takes a block of input data and creates a smaller, unpredictable output. The hash function is designed so there's no "short cut" to get the desired output - you just have to keep hashing blocks until you find one by brute force that works. For Bitcoin, the hash function is a function called SHA-256. To provide additional security, Bitcoin applies the SHA-256 function twice, a process known as double-SHA-256.

In Bitcoin, a successful hash is one that starts with enough zeros.[1] Just as it is rare to find a phone number or license plate ending in multiple zeros, it is rare to find a hash starting with multiple zeros. But Bitcoin is exponentially harder. Currently, a successful hash must start with approximately 17 zeros, so only one out of 1.4x10²⁰ hashes will be successful. In other words, finding a successful hash is harder than finding a particular grain of sand out of all the grains of sand on Earth.

The following diagram shows a block in the Bitcoin blockchain along with its hash. The yellow bytes are hashed to generate the block hash. In this case, the resulting hash starts with enough zeros so mining was successful. However, the hash will almost always be unsuccessful. In that case, the miner changes the nonce value or other block contents and tries again....MORE

Humphrey Davy and Laughing Gas

Party like it's 1799.
From The Public Domain Review:

“O, Excellent Air Bag”: Humphry Davy and Nitrous Oxide

The summer of 1799 saw a new fad take hold in one remarkable circle of British society: the inhalation of “Laughing Gas”. The overseer and pioneer of these experiments was a young Humphry Davy, future President of the Royal Society. Mike Jay explores how Davy’s extreme and near-fatal regime of self-experimentation with the gas not only marked a new era in the history of science but a turn toward the philosophical and literary romanticism of the century to come.

Detail from a satirical print from 1830 depicting Humphry Davy administering a dose of Laughing Gas 

to a woman while Count Rumford looks on, above the caption “Prescription for Scolding Wives

On Boxing Day of 1799 the twenty-year-old chemist Humphry Davy – later to become Sir Humphry, inventor of the miners’ lamp, President of the Royal Society and domineering genius of British science – stripped to the waist, placed a thermometer under his armpit and stepped into a sealed box specially designed by the engineer James Watt for the inhalation of gases, into which he requested the physician Dr. Robert Kinglake to release twenty quarts of nitrous oxide every five minutes for as long as he could retain consciousness.

The experiment was taking place in the lamp-lit laboratory of the Pneumatic Institution, an ambitious and controversial medical project where the young Davy had been taken on as laboratory assistant. It had opened the previous March in Hotwells, a run-down spa at the foot of the Avon Gorge outside Bristol. Originally developed to rival nearby Bath, Hotwells had dwindled to a downmarket cluster of cheap clinics and miracle-cure outfits offering hydrotherapy or mesmerism to those in the desperate last stages of consumption; but the Pneumatic Institution was a new arrival with revolutionary ambitions. Its founder, the brilliant and maverick doctor Thomas Beddoes, believed that the new gases with which he and his assistant were experimenting had the power to put the treatment of this most lethal of diseases onto a proper scientific footing for the first time, and in the process to transform the art of medicine....MORE

Also at the Review:
Darkness Over All: John Robison and the Birth of the Illuminati Conspiracy

"Eau de Chavez Banned in Cuba"

Yes, Hong Kong, Ukraine, Syria, Liberia and Brussels all have breaking news but this is serious.
From Walter Russel Mead:

A state-owned Cuban pharmaceutical company has been developing a set of perfumes named after Che Guevara and Hugo Chavez. As it turns out, the sweet smell of socialist triumph is… fruity:

Labiofam said Ernesto, the cologne named after the Argentine-born revolutionary who help Fidel Castro take over in Cuba in 1959, would be a woodsy and refreshing citric scent with notes of talcum powder.
Hugo, named after the late Venezuelan president, would offer a softer, fruitier fragrance with hints of mango and papaya.
“They will be very attractive colognes, but the names also mean a lot to us,” said Isabel Gonzalez, vice-president for research and development for Labiofam during the launch.

Cubans mocked the project on social media, while others felt that the project was disrespectful. Finally, the Cuban government was forced to act. It banned the products from going on sale.

“The details of this irresponsible action were discussed in detail on Friday with the company’s director and the employees who presented the products, which were still being developed,” read the statement of the Executive Committee of the Ministers’ Council, headed by Cuban President Raul Castro.
“The appropriate measures will be taken to deal with this serious error....MORE

Capitalism won, sucka!
$15.00

-Source

AQR's Cliff Asness on CalPERS Hedge Fund Decision

From AQR Capital Management's Cliff's Perspective blog:

Hotel California: You Can Never Leave, Until You’re Asked To

Everyone seems to be talking today about the recent decision by CalPERS to liquidate its hedge fund portfolio. So it seems like a good time to reiterate some of my (and my AQR colleagues’) general thoughts on hedge funds. Since at least 2000, with the paper “Do Hedge Funds Hedge?”, we’ve been arguing that, as a whole, hedge funds are too correlated to equity markets (too net long). Clearly, this correlation reduces their effectiveness as portfolio diversifiers. Furthermore, in a very related observation, we believe most hedge funds are too expensive (part of why they are too expensive is indeed that too much of their return comes from equity markets going up — an investment return available for far less than hedge funds charge).

We continued to examine hedge funds’ value proposition and role in portfolios in our articles “An Alternative Future Part I” and its even more cleverly titled sequel “An Alternative Future Part II.” There we first started talking about the idea, explored in many other pieces and presentations since then, that hedge funds, and active managers in general, do pursue some strategies that are very good (e.g., value investing, momentum investing, trend following, merger and convertible arbitrage; value, momentum, and carry applied to macro portfolios, etc.) However, more often than not, they charge too much for these straightforward, non-magic strategies and package them, again, with too much net long exposure.

We don’t dismiss that some fund managers may have real skill worthy of very high fees, and that some funds that aggressively pursue many of the strategies we list above, in diversified ways, also can justify high fees. But, all considered, we are not surprised that some have found that the broad universe of hedge funds, and thus likely any very large diversified portfolio of them, is not an attractive enough proposition.

Now, in some cases when hedge funds have been attacked we have indeed taken the other side (#7 here), defending hedge funds. For instance, while we believe, and were again very early to argue, that hedge funds should indeed be more hedged, this was generally known before 2008 (our first paper on it was from 2000!). So criticizing hedge funds for falling sharply in that crisis (generally a bit less than half the market) goes too far, acting as if we just learned from the GFC that hedge funds broadly have something like a 0.40 beta. No! We knew that, and many hedge fund investors accounted for this in their overall allocations. It’s absolutely fair to criticize hedge funds for their long-term net long exposure (like we do). But it’s not fair to act like 2008 was brand new shocking and embarrassing information and write histrionic stories about it! Similarly, it is not right to criticize hedge funds for lagging equities in bull markets (like we have experienced over the last few years). While they are more long the market than we think they should be, they still typically fall far short of a beta of 1.0 and shouldn’t be expected to keep up with a rapidly rising market. Of course, by picking a beta that’s not near 1.0 but not fully market-neutral (beta right around 0.0) they bring much of this confusion upon themselves, but that still doesn’t mean these criticisms make sense. Clearly, as you can probably tell, we think picking on hedge funds is our sole right, and if anyone else does, we take the other side….MORE

 HT: Daily Alts excellent "The CalPERS Decision: A Compilation of Industry Reactions".

Barron's Feature: "American farmers could lose money on corn, soy beans, and wheat for the first time in almost a decade." (DE; MON; POT; AGCO)

From Barron's:

Harvest Time for Farming Shares

The price of corn has fallen by two-thirds in two years. Justin Crownover sold half his crop in May, when a bushel traded at a still profitable level of five bucks. Four months later the season's corn supply is looming like a tsunami and the price is down around $3.25. While the Texas Panhandle farmer hopes for a rally, he's thinking of ways to spend less on machinery and fertilizer. 

"Are we concerned?" he mused earlier this month as he moved some cows down the road. "Definitely."

For the first time in almost a decade, American producers of corn, soybeans, and wheat might lose money on all three if prices don't rise. The downturn comes on the heels of the most profitable years in most farmers' lives. Coming into this year, every part of the farm economy was on a roll–from seeds and fertilizer to tractors and technology. Farmland had become a must-have asset for the smart-money investor. The same applies to the shares of companies lending a hand in feeding the world, as the population grows from seven billion to over nine billion by 2050. High commodity prices led to vast new acres of corn and soybeans. That spurred sales at machinery makers like Deere (ticker: DE), fertilizer vendors like Potash (POT), and seed and herbicide providers like Monsanto (MON). Eyeing this megatrend, you can understand why many folks stopped thinking that the farm business was cyclical.

Photo: Daniel Acker/Bloomberg

"I'm one of the people who said there is no more cycle," says Martin Richenhagen, the plain-spoken chief executive of AGCO (AGCO), the Duluth, Ga.–based maker of Challenger, Fendt, and Massey Ferguson farm machinery. "I stand corrected."

As bumper crop forecasts rose over the summer, Wall Street debated how long and deep the down cycle might be—and how fully it's priced into ag shares. Deere is down 12% since early May, to $83, and sells for barely nine times its recent earnings. Does that make it and the others value plays? Probably not. The floor for these stocks could be at least another 10% to 15% lower, if farmers put off investments in machinery and fertilizer beyond next year and Wall Street has to lower its estimates of what farm suppliers can earn across the agricultural cycle.

Historically, U.S. farmers are slow to downsize production in response to lower prices, says Purdue University agricultural economist Michael Boehlje. "So the not-so-good times last at least as long, if not longer, than the good times," warns the professor.

We're talking about farming, so no one knows if a frost or drought might winnow the harvest enough to revive crop prices, just as it was hard to anticipate the supply surge from what Deere Chief Executive Sam Allen wryly describes as the extreme weather event called: "It's great weather everywhere around the world."

THE LOWEST COMMODITY PRICES in seven years have resulted from the combination of extremely good growing weather with the more predictable effects of burgeoning crop yields and the better than 20% increase in U.S. corn acreage over the last decade–not to mention the creation of giant new farms in the Brazilian state of Mato Grosso. American corn yields will set a record of 171.7 bushels an acre this year, some 15% above the five-year average, according to the U.S. Agriculture Department's September estimate of world agricultural supply and demand. The soybean crop is also expected to have record yield and production globally. Inventories, the government says, are ample.

Supply has caught up because two big drivers of the last decade's growth in demand are spent. American gasoline already has the mandated 10% blend of ethanol. China has wasted little time in reaching Western levels of meat consumption, while developed countries–ironically–are eating fewer grain-fed cattle.

The 2015 prices forecast by J.P. Morgan's economic models would leave corn growers' incomes down by a third next year, with soybean profits down at least 15%, and wheat growers' incomes down by more than 40%. At Morgan Stanley, machinery analyst Nicole DeBlase summarized her worried outlook in an August report titled "AGpocalypse Now?"

Visiting Barron's, AGCO chief Richenhagen warned us not to get overly pessimistic. No one realistically expects a farm bust on the scale of the 1980s. Grain inventories are at reasonable levels. Interest rates are low. And farmers have used the recent years' prosperity to pay down debt on their balance sheets, according to studies by the Federal Reserve Bank of Kansas City. Many of those balance sheets boast highly appreciated farmland. ...

...MUCH MORE

Harvest Time for Farming Shares
 

Previous warnings: 

"Deere: Buy or Sell?" (DE)

Corn under four bucks does not inspire farmers to open the checkbook for big-ticket items. 

"U.S. corn, soybean crops will set record"
"Too Much Corn With Nowhere to Go as U.S. Sees Record Crop" (Buy storage)
"U.S. Corn Farmers Face a Cash Crunch"
What the Collapse of Crop Prices Means For Corporate America (DD; MON; DE; CAT)
Amount of Corn in Storage Sharply Bearish
Watch Out Deere: "Farmers face lower incomes - for years" (DE; AGCO; CAT; MON: MOO)
That gets us back to June 25. And then there's:
Iowa State's Worst Case Corn Prices: $2.89 By 2017
34 cents away.

Technical Market Report for September 27, 2014

From SafeHaven:

The good news is:
• New lows have risen to the level that will make it easy to determine when a bottom has been reached.

The negatives

There is no sign of a bottom....

....MORE

Oops: "Big Bang Signal’ Could All Be Dust"

From Quanta:

There was little need, before, to know exactly how much dust peppers outer space, far from the plane of the Milky Way. Scientists understood that the dimly radiating grains aligned with our galaxy’s magnetic field and that the field’s twists and turns gave a subtle swirl to the dust glow. But those swirls were too faint to see. Only since March, when researchers claimed to have glimpsed the edge of space and time with a fantastically sensitive telescope, has the dust demanded a reckoning. For, like a cuckoo egg masquerading in a warbler’s nest, its pattern mimics a predicted signal from the Big Bang.

Now, scientists have shown that the swirl pattern touted as evidence of primordial gravitational waves — ripples in space and time dating to the universe’s explosive birth — could instead all come from magnetically aligned dust. A new analysis of data from the Planck space telescope has concluded that the tiny silicate and carbonate particles spewed into interstellar space by dying stars could account for as much as 100 percent of the signal detected by the BICEP2 telescope and announced to great fanfare this spring.

The Planck analysis is “relatively definitive in that we can’t exclude that the entirety of our signal is from dust,” said Brian Keating, an astrophysicist at the University of California, San Diego, and a member of the BICEP2 collaboration.

“We were, of course, disappointed,” said Planck team member Jonathan Aumont of the Université Paris-Sud.

The new dust analysis leaves open the possibility that part of the BICEP2 signal comes from primordial gravitational waves, which are the long-sought fingerprints of a leading Big Bang theory called “inflation.” If the universe began with this brief period of exponential expansion, as the cosmologist Alan Guth proposed in 1980, then quantum-size ripples would have stretched into huge, permanent undulations in the fabric of the universe. These gravitational waves would have stamped a swirl pattern, called “B-mode” polarization, in the cosmic microwave background, the oldest light now detectable in the sky.

But beware the cuckoo....

...MORE

Izabella Kaminska on Artificial Intelligence

Yeah, pretty much the poster child for the term autodidactic polymath.
From Dizzynomics:
Brute force, trial and error systems vs imagination

From the New Scientist article Daydream Believers (from last week):

“I would love to know if chimpanzees can entertain the notion of a unicorn, but we have no idea,” he says. “As far as I can tell, we don’t even know whether they can entertain two possible scenarios to solve a problem.” In Call’s view, it is impossible to say whether the animals that solve problems without trial and error are consciously imagining different solutions, or subconsciously integrating information to come up with the correct solution. “I’m not saying animals can’t imagine two different scenarios,” he says. “I just don’t see the evidence for it.”

As I have been learning this week from AI experts, the ability to learn depends mostly on trial and error processes which strengthen neural pathways that lead to positive results.

But as I am also learning, the field of artificial intelligence is split between three different types of AI learning processes.

First there are big data systems. These aren’t really intelligent because they depend on pre-programming by intelligent agents. They’re effective only because of brute force approaches to problems, processing huge amounts of data. You can imagine the problem. It’s a very energy intensive way to achieve the optimum action, and it remains dependent on instructions on what to look for. Like finding a needle in a haystack by processing every single bit of hay and checking that it isn’t by chance a needle. This is brute force trial and error.

Then there’s proper AI which achieves intelligence through self-learning algorithms that reward the AI for reaching objectives of their own accord. These are a different type of trial and error process. You don’t have to know what the task is, you’re simply learning to deal with the environment you are faced with and every time you discover something exploitable you develop a neural pathway that teaches you this is a good way to approach that sort of problem....MUCH MORE

See also:
In Search of the Universal Algorithm: Jeff Hawkins on Why His Approach to Artificial Intelligence will Become THE Approach to AI
Google's Plan To Make Your Brain Irrelevant (GOOG; EVIL;)
"Elon Musk: I'm Worried About A 'Terminator'-Like Scenario Erupting From Artificial Intelligence"
Robo-journalists: Beyond the Quakebot
"Why strange loops could be an argument for artificial intelligence"
Pew Research: "AI, Robotics, and the Future of Jobs"
Artificial Intelligence: The Painting Fool
Google Launches the Quantum Artificial Intelligence Lab (GOOG)
The First Conscious Machines will Probably Be on Wall Street
'Deep Learning' as Applied to Investing
"Stephen Hawking Joins Anti-Robot Apocalypse Think Tank"
"Why Is Machine Learning (CS 229) The Most Popular Course At Stanford?"
And many, many more.

Felix Salmon Reviews Martin Wolf's "The Shifts and Shocks"

Tart, bordering on acidic. 
From the New York Times:

Martin Wolf is as grand and important as an economic journalist can ever become. A respected economist in his own right, Wolf has had top-level access to economic policy makers for decades now, seeing generations of finance ministers and central bank governors come and go. All of them care, deeply, about what he thinks and what he writes, and they tend to spend as much time as they can trying to persuade him of their point of view. The result is a classic virtuous cycle: He’s well informed because he’s extremely influential, and he’s influential because he’s extremely well informed.

In the wake of the financial crisis, Wolf has become an even rarer beast: the highly influential radical. His is the loudest and foremost voice saying that the global policy response to the crisis was far too timid; that it all but ensures we will have an even worse crisis down the road; and that unless we start implementing extreme measures today, we will be running headlong into catastrophe.

For his change of stance alone, Wolf, the chief economics commentator for The Financial Times, deserves a great deal of credit. Public intellectuals too often feel their views need to remain consistent over time; Wolf is honest and brave enough to say that his pre-crisis views were wrong. Even though he wholeheartedly embraced the financial-liberalization policies of the Thatcher years, and subsequently wrote a book entitled “Why Globalization Works,” he now concludes that “the interaction between liberalization and globalization has destabilized the financial system.” The crisis, Wolf says, “was no ordinary economic event”: “To pretend that one can return to the intellectual and policy-making status quo ante is profoundly mistaken.”

Wolf splits his new book, “The Shifts and the Shocks,” into three sections. The first is an economist’s history of the financial crisis (“the shocks”); the second is a broader view of the global economic conditions that helped cause the crisis (“the shifts”); the third is a series of prescriptions for how we might prevent such a calamity from ever happening again (“the solutions”). In all three sections, expect a lot of econo-­wonkery and almost no narrative: You’ll find precious few human protagonists here.

Wolf doesn’t tell a story so much as rattle off lists of economic phenomena, and the result is not easy to read. Here, for instance, is a typical sentence:

“With the eurozone in internal and external balance and creditor eurozone seeking internal balance via ever-­larger external imbalances in the form of current-­account surpluses, debtor eurozone could only attain internal balance with ever-­larger external imbalances in the form of current-account deficits.”

Wolf is very fond of such wonkish econo-­tautologies: “If domestic output is to be sufficient to generate full utilization of capacity, aggregate demand must exceed domestic output by the size of the current-­account deficit, at full employment,” he explains at one point....MORE 

"The companies vying to turn asteroids into filling stations"

From the BBC:

Private companies want to mine asteroids for fuel, and build filling stations in space. A bill now in front of the US Congress would help by allowing them to own what they discover - but it might, if passed, meet stiff international opposition.

Chris Lewicki is trying to get water from a stone. A really big stone thousands of miles from Earth.

The president of space mining firm Planetary Resources used to oversee robotic Mars missions at Nasa, but today he's betting big on asteroids.

The chunks of matter hurtling through the cosmos are rich in valuable minerals, he says, but finding water could be like striking liquid gold.

"We can tell from telescopes that look out from mountaintops here on Earth that certain types of asteroids can be relatively abundant in water and water-bearing minerals," he says.

But why is water, which covers much of our planet, so valuable in space?

According to Lewicki, it currently costs nearly $2bn (£1.2bn) per year to launch enough water - six tons per person - to sustain the six astronauts aboard the International Space Station.

But, in addition to providing drinking water, H20 can also be converted into breathable air, and into fuel - liquid hydrogen and oxygen form the most efficient rocket fuel known to man....MUCH MORE

(click to enlarge)

Previously:
Rocket Men: A unique gathering of 13 companies showcases a coming year of launches
Here Comes Another Asteroid Mining, 3D Printing, Robotic, Start-up
Dec. 27, 2012
Asteroid Mining: "A Start-Up Sees a Gold Rush Among the Stars"

April 22, 2012

"Are Ross Perot Jr. and Google's Founders Launching a New Asteroid Mining Operation?"

Feb 6, 2012

X Prize Founder Wants to Mine Asteroids

Oct. 21, 2011

Indian-born Entrepreneur and Billionaire Moves Forward on Plans to Mine the Moon

We've been following these plans at a distance, so to speak.

And many more, including:

Branson to Accept Bitcoins for Space Travel
Is Murder Legal on the Moon? and Other Questions Posed by the Current Space Land Grab
The new market space: billionaire investors look beyond Earth
The Top 10 Private Spaceship Companies
Swiss Space Systems (S3) and Their Pudgy Bantam Spaceplane

Behavior: We Are More Rational Than Those who Try To 'Nudge' Us

From Aeon Magazine:

We are told that we are an irrational tangle of biases, to be nudged any which way. Does this claim stand to reason?

Detail from The Ship of Fools 1510-1515 by Hieronymus Bosch. Musée du Louvre, Paris. Photo by Getty

Humanity’s achievements and its self-perception are today at curious odds. We can put autonomous robots on Mars and genetically engineer malarial mosquitoes to be sterile, yet the news from popular psychology, neuroscience, economics and other fields is that we are not as rational as we like to assume. We are prey to a dismaying variety of hard-wired errors. We prefer winning to being right. At best, so the story goes, our faculty of reason is at constant war with an irrational darkness within. At worst, we should abandon the attempt to be rational altogether.

The present climate of distrust in our reasoning capacity draws much of its impetus from the field of behavioural economics, and particularly from work by Daniel Kahneman and Amos Tversky in the 1980s, summarised in Kahneman’s bestselling Thinking, Fast and Slow (2011). There, Kahneman divides the mind into two allegorical systems, the intuitive ‘System 1’, which often gives wrong answers, and the reflective reasoning of ‘System 2’. ‘The attentive System 2 is who we think we are,’ he writes; but it is the intuitive, biased, ‘irrational’ System 1 that is in charge most of the time.

Other versions of the message are expressed in more strongly negative terms. You Are Not So Smart (2011) is a bestselling book by David McRaney on cognitive bias. According to the study ‘Why Do Humans Reason?’ (2011) by the cognitive scientists Hugo Mercier and Dan Sperber, our supposedly rational faculties evolved not to find ‘truth’ but merely to win arguments. And in The Righteous Mind (2012), the psychologist Jonathan Haidt calls the idea that reason is ‘our most noble attribute’ a mere ‘delusion’. The worship of reason, he adds, ‘is an example of faith in something that does not exist’. Your brain, runs the now-prevailing wisdom, is mainly a tangled, damp and contingently cobbled-together knot of cognitive biases and fear.

This is a scientised version of original sin. And its eager adoption by today’s governments threatens social consequences that many might find troubling. A culture that believes its citizens are not reliably competent thinkers will treat those citizens differently to one that respects their reflective autonomy. Which kind of culture do we want to be? And we do have a choice. Because it turns out that the modern vision of compromised rationality is more open to challenge than many of its followers accept.

For most of recorded thought it was taken for granted that rationality was what separated us from the beasts. Plato argued that hatred of reason (misology) sprang from the same source as hatred of humankind. Aristotle declared that man was ‘the rational animal’, and this seemed evident to Spinoza, too: just as ‘a dog is a barking animal’, so man was the beast who reasoned. Philosophers have, of course, long differed about the nature and limits of rationality. Kant argued against ‘rationalists’ such as Leibniz, who taught that pure reason could disclose the nature of reality. Hegel insisted that individual thinkers cannot escape their particular historical context, and Hume observed that reason alone cannot motivate action.

Nevertheless, until recently it was still largely assumed that rationality, whatever its character and limits, was a definitional aspect of humankind. Hence the despairing apotheosis of Romantic anti-rationalism in the later 20th century, when it seemed to many that the Enlightenment had led straight to the Gulag and the Holocaust: to decry the operation of reason was to take a pessimistic view of humanity itself. Today, however, we are told we can abandon the notion that rationality is central to human identity. But does the evidence show that we must?

Modern skepticism about rationality is largely motivated by years of experiments on cognitive bias. We are prone to apparently irrational phenomena such as the anchoring effect (if we are told to think of some arbitrary number, it will affect our snap response to an unrelated question) or the availability error (we judge questions according to the examples that come most easily to mind, rather than a wide sample of evidence). There has been some controversy over the correct statistical interpretations of some studies, and several experiments that ostensibly demonstrate ‘priming’ effects, in particular, have notoriously proven difficult to replicate. But more fundamentally, the extent to which such findings can show that we are acting irrationally often depends on what we agree should count as ‘rational’ in the first place.

During the development of game theory and decision theory in the mid-20th century, a ‘rational’ person in economic terms became defined as a lone individual whose decisions were calculated to maximise self-interest....MORE

Possibly of interest:
Investing: "Have the Behaviorists Gone Too Far?"

"Nudge Squad": White House Creating "Behavioral Insights Team" that Will Look for Ways to Subtly Influence People's Behavior to Get Us to All Act "Better"

Nudge Squad.
Sounds like a '70's chimera: Mod Squad meets Esalen Institute.*

*In the early '90's some graffiti artist sprayed the entry sign at Esalen with "Jive shit for rich white folk" which I think was a bit harsh. All you have to do is check the prices for the various retreats on offer:

accommodations	Weekend Workshops	Five-Day Workshops	Seven-Day Workshops
Point House Single	$1750	$3550	$4975
Point House Couple	$2500	$4850	$6750
Premium Room Single	$1300	$2450	$3430
Premium Room Couple	$2000	$3725	$5225
Standard (per person)	$730	$1215	$1700
Bunk Bed (per person)	$555	$935	$1300
Sleeping Bag (per person)	$405	$650	$900
Off-Site (per person)	$405	$650	$900

and you'll note they all have a sleeping bag option.