Thursday, September 29, 2016

Uh Oh: Internet Security Pro Hit By Botnet Made Of Internet-of-Things Connected Cameras

This is very bad.
From Motherboard:

How 1.5 Million Connected Cameras Were Hijacked to Make an Unprecedented Botnet
Last week, hackers forced a well-known security journalist to take down his site after hitting him for more than two days with an unprecedented flood of traffic.

That cyberattack was powered by something the internet had never seen before: an army made of more than one million hacked Internet of Things devices.

The hackers, whose identity is still unknown at this point, used not one, but two networks—commonly referred to as “botnets” in hacking lingo—made of around 980,000 and 500,000 hacked devices, mostly internet-connected cameras, according to Level 3 Communications, one of the world’s largest internet backbone providers. The attackers used all those cameras and other unsecured online devices to connect to the journalists’ website, pummeling the site with requests in an attempt to make it collapse.

These botnets were allegedly behind the staggering and crippling distributed denial of service attack (DDoS) to KrebsOnSecurity.com, the website of the independent journalist Brian Krebs, who has a long history of exposing DDoS-wielding cybercriminals. The digital assault surpassed 660 Gbps of traffic, making it one of the largest recorded in history in terms of volume.

Level 3 has been tracking one of the botnets used against Krebs for about a month, and last week the company saw that hackers used that botnet, along with another smaller one, against Krebs.

“They’re still using it against Krebs,” Dale Drew, chief security officer at Level 3 Communications, told Motherboard on Wednesday. “As of this morning.”
Security researchers and internet defenders are still looking into the attacks and trying to track who’s behind them, but people who’ve been working to protect websites against large denial of service (DDoS) attacks such as this one all agree this was was unprecedented both because of its shocking size and because of the use of what could be called a Botnet of Things. 
“This was the biggest attack we’ve ever seen,” Martin McKeay, the senior security advocate for Akamai, the company that was providing protection to Krebs when the attack started last week, told me.

At this point, however, it’s unclear if the attackers used the full power of the two botnets or just a portion of it. Drew said that the hackers used around 1.2 million nodes of the total 1.5 million-strong botnets against Krebs. But McKeay, who declined to go into the details of the attacks citing company policies toward customers, said that “nothing” Akamai saw suggests those numbers are “possible.” (Akamai, which was providing Krebs with pro-bono protection, decided to let him go when it became too costly to hold off the barrage of traffic.)...MORE

(Quantum Computer Maker) D-Wave Founder's New Startup Combines AI, Robots, and Monkeys in Exo-Suits

From IEEE Spectrum:

Kindred AI teleoperated robot
llustration: IEEE Spectrum; images: U.S. Patent Application US20160243701A1 via Google Patents
A new startup called Kindred, founded by a group of quantum computing pioneers, 
wants to develop an advanced AI system to control and train robots.
As if quantum computing wasn’t mind-bending enough, one of D-Wave Systems’ founders is now pursuing another futuristic idea: using artificial intelligence and high-tech exoskeleton suits to allow humans—and, at least according to one description of the technology, monkeys—to control and train an army of intelligent robots.

Geordie Rose is a cofounder and chief technology officer of D-Wave, the Canadian company selling machines that it claims exploit quantum mechanical effects to solve certain problems hundreds of millions times faster than traditional computers.

Now an IEEE Spectrum investigation has discovered that Rose is also CEO of Kindred Systems (aka Kindred AI), a stealthy startup he founded with others in 2014 dedicated to delivering advanced teleoperated and autonomous robots. The goal is making programming robots faster and less costly–and possibly revolutionize the world of work.

Kindred has so far received well over US $10 million in funding, according to Data Collective, the venture capital firm that led one of the rounds. Another Silicon Valley VC firm, Eleven Two Capital, also has a stake in the company. In a blog post, Data Collective described Kindred as using “AI-driven robotics so that one human worker can do the work of four.”

Kindred has kept a very low profile, issuing no press releases and maintaining only a very basic website. However, last November, Suzanne Gildert, a former D-Wave researcher who is a cofounder and CTO of Kindred, told an audience of technologists that the company was building personal robots that use machine learning to recognize patterns and make decisions. “Quantum mechanics is cool, but humanlike intelligence in robots is cooler,” she is reported as saying.

Kindred, based in Vancouver, B.C., Canada, recently filed a U.S. patent application revealing the extent of its ambitions. The document describes a system where an operator wearing a head-mounted display and an exo-suit of sensors and actuators carries out everyday tasks. Data from the suit and from other external sensors is then analyzed by computers in the cloud and used to control distant robots. The data could also be used to train machine learning algorithms that would allow the robots to imitate the operator’s actions autonomously.

“An operator may include a non-human animal such as a monkey,” says the patent, “and the operator interface may be…re-sized to account for the differences between a human operator and a monkey operator.” (This isn’t the first device to enable monkeys to direct robots, but previous research has focused on brain-machine interfaces, not robot control and autonomy.)...
...MUCH MORE

As that last line states this is coming perilously close to Doc Nicolelis’s turf:

Where In the World Is Izabella Kaminska?--"Scientist Hacks Into Another Scientist's Mind"
Here's The Most Advanced Human Brain-to-Brain Interface
Monkey Steers Wheelchair With It's Little Monkey Mind
July 2015
Mind-Meld: Neuroscientists Link Three Monkey Brains Into Living Computer

March 8, 2015
Apr. 23, 2014

"What’s the optimal tax for capital income?"

A subject near and dear to flinty hearts everywhere.
From our introduction to 2013's "Why Capital Gains Should be Taxed as Income":
Over the last few years I've come to believe that all income, earned and unearned, should be taxed at the same rate, that preferential taxation of capital no longer leads to the intended policy effects of job creation and increasing capital investment in plant. property and equipment but rather is a bought-and-paid-for scam perpetrated by the financier class.

On a related point, it's time to get rid of the carried interest loophole which taxes income at cap gains rates for private equity and hedge funds.
That carried interest should not be treated as a capital gain can be proven quite easily.
Show me one tax return where a carried interest capital loss was allowed.
[you won't be invited to any of the meetings ever again -ed]

At the lower end of the income scale there should be some minimum tax. Everyone should have some skin in the game.
I'll be coming back to all these topics throughout 2012, in the meantime here's the granddaddy of Econ papers for folks interested in this stuff, sincere thanks to the reader who turned my vague recollection of the thesis into an actual PDF copy. It is as pertinent and fresh today as the day it was written, 34 years ago....
And a different angle from Felix Salmon at Reuters last week:...
Here's the latest, from Washington Center for Equitable Growth:
How much should U.S. policymakers tax capital? It’s not a simple question. In fact, for some time there was a debate within the economics profession as to whether there should be a tax at all. A famous result from the Chamley-Judd model and other resultsled many economists to believe that the optimal tax rate on capital income was zero. The argument by these economists was that placing any tax on capital gains from investments would be incredibly distortionary and would come at a major cost to the overall efficiency of the economy. 
Recent research, however, shows that changing the (in some cases very unrealistic) assumptions underpinning these earlier models pointing to a zero optimal tax rate result in findings that there is a positive optimal tax rate on capital. A new paper might help policymakers understand this new way of thinking about taxing capital. 
The new working paper from the National Bureau of Economic Research is by University of California-Berkeley economist Emmanuel Saez and Harvard University economist Stefanie Stantcheva. In their paper, they try to do for capital taxation what economists have done for labor income taxation: build a simple model of optimal taxation. More specifically they are using a “sufficient statistics” approach, which allows them to feed a few specific parameters derived from empirical papers into a model to help get a broader understanding of the U.S. economy. 
First, the two economists build a model of the economy in which people aren’t going to live forever and don’t have perfect foresight—two obviously unrealistic assumptions in the prior models. That plus the new assumption they add to their model—that people like wealth for wealth’s sake, not just as a way to fund consumption—results in people who won’t stop saving as soon as capital is taxed. This is important as the prevailing view among economists who believe in an optimal zero tax rate is that higher tax rates result in very large changes in savings....
...MORE

HT: David Keohane at FT Alphaville's Further Reading post.

So, What's New With NVIDIA? (NVDA)

The stock set new all time highs Tuesday, yesterday and again this morning.
$66.59 -0.19, last.
Here are a couple September 28 pieces from Investor's Business Daily:

Nvidia Debuts New AI Supercomputer Chip For Self-Driving Cars
Nvidia CEO Jen-Hsun Huang introduces Xavier, a new AI supercomputer chip, designed for use in self-driving cars. (Nvidia)
 Nvidia CEO Jen-Hsun Huang introduces Xavier, a new AI supercomputer chip, designed for use in self-driving cars. (Nvidia)
Graphics chipmaker Nvidia (NVDA) on Wednesday introduced a new artificial-intelligence supercomputer chip, called Xavier, which is designed for self-driving cars. 
Xavier is a system-on-chip (SoC) that integrates a new GPU (graphics processing unit) architecture called Volta, a custom 8-core CPU (central processing unit) architecture, and a new computer vision accelerator. The processor will deliver 20 trillion operations per second of performance, while consuming just 20 watts of power, Nvidia said.

IBD'S TAKE: Nvidia stock has a best-possible IBD Composite Rating of 99, meaning it has outperformed 99% of stocks in key metrics over the past 12 months. To learn more about Nvidia, check out the IBD Stock Checkup.

"Because autonomous driving is an incredibly compute-intense process, the need for an efficient AI processor is paramount," Nvidia said in a blog post. "Xavier will bring self-driving car technology to automakers, tier 1 suppliers, startups and R&D organizations that are building autonomous vehicles, whether cars, trucks, shuttles or taxis." 
Nvidia expects to make Xavier samples available in the fourth quarter of 2017 to automakers and other groups developing self-driving cars. 
Nvidia already works with such automakers as Audi, BMW, Honda (HMC), Mercedes-Benz, Telsa Motors (TSLA) and Volvo, providing technology for infotainment, navigation, digital instrument clusters and advanced driver-assistance systems. 
On Aug. 31, Nvidia and China's Baidu (BIDU) announced a partnership to make an autonomous car platform....MORE
And:

Nvidia Could Provide Graphics Chips For Apple Mac Computers
A job listing at graphics chipmaker Nvidia indicates that the company is developing processors for upcoming Apple products. (Nvidia)
 A job listing at graphics chipmaker Nvidia indicates that the company is developing processors for upcoming Apple products. (Nvidia)
A job listing at graphics chipmaker Nvidia (NVDA) indicates that the company is developing processors for upcoming Apple (AAPL) products.

The listing points to Nvidia getting its chips in future Mac computers, where they haven't been for several generations of machines, Bloomberg and BGR reported. Advanced Micro Devices (AMD) currently provides graphics chips for Mac desktop and laptop computers.

IBD'S TAKE: Nvidia stock is the top-ranked company in IBD's Electronics-Semiconductor Fabless industry group. It also is No. 7 on the IBD 50 list of superior stocks.

A job listing for a software engineer at Nvidia said the successful applicant will "help produce the next revolutionary Apple products," Bloomberg reported. The job will require "working in partnership with Apple" and writing code that will "define and shape the future"' of graphics-related software on Macs. 
Apple is expected to unveil new Mac computers next month. But the Apple-Nvidia products likely won't arrive this year, BGR said.

Another area in which Nvidia hopes to dethrone AMD, besides Mac computers, is video game consoles. AMD supplies chips for Microsoft's (MSFT) Xbox One and Sony's (SNE) PlayStation 4 consoles. 
Nvidia reportedly is providing the main processor for Nintendo's (NTDOY) upcoming NX game console. Nintendo's current Wii U console gets its main processor from IBM (IBM) and a graphics processor from AMD....MORE
And from NVIDIA:

TomTom Selects NVIDIA DRIVE PX 2 for Real-Time HD Map Updating 
GTC Europe -- NVIDIA and TomTom (TOM2), the Dutch mapping and navigation group, today announced they are partnering to develop artificial intelligence to create a cloud-to-car mapping system for self-driving cars. The work combines TomTom's extensive HD map coverage, which already spans more than 120,000 km of highways and freeways, with the NVIDIA DRIVE™ PX 2 computing platform.

Together, the solution accelerates support for real-time in-vehicle localization and mapping for driving on the highway. NVIDIA co-founder and CEO Jen-Hsun Huang announced the collaboration at the company's inaugural GTC Europe, a regional version of its annual GPU Technology Conference in Silicon Valley, now in its seventh year. "Self-driving cars require a highly accurate HD mapping system that can generate an always up-to-date HD map in the cloud," said Rob Csongor, vice president and general manager of Automotive at NVIDIA. 
"DRIVE PX 2 for AutoCruise provides TomTom with a real-time, in-vehicle source for HD map updates." The NVIDIA DriveWorks software development kit now integrates support for TomTom's HD mapping environment. The open solution is available for all automakers and tier 1 suppliers developing autonomous vehicles. 
"This collaboration is an important step for TomTom," said Willem Strijbosch, head of Autonomous Driving at TomTom. "Combining our highly accurate HD maps with NVIDIA's self-driving car platform will enable us to propose new features to automakers faster, and therefore to make autonomous driving a commercial reality sooner."...MORE
Same 'ol, same 'ol.
Still no disruptive food delivery app though.

"Uber wants to let brands feed you content during your next ride"

From The Verge:

The road to ubiquity is paved with advertisements 
Uber is partnering with Yext, a New York-based startup that specializes in location data for businesses, to help online shoppers book rides to their favorite store or restaurant. The partnership will also allow corporations to serve up marketing material and ads to consumers on Uber’s platform. Depending on your point of view, that will either be super helpful or super annoying. 

The announcement is an extension of Uber’s decision to open its application program interface (API) software to third-party developers. Since then, a variety of businesses have taken advantage, including Google Maps, Open Table, and Trip Advisor. 

The partnership with Yext will allow national chains like Guitar World or footwear brands like Cole Haan to add a “Call me an Uber” button to their homepage or marketing emails. A customer shopping for a new Fender can click on the Uber button to book a ride to the closest Guitar World. Yext promises its location data ensures users are dropped off at the right spot, and not a mailing location or parking lot. 

But be forewarned, by clicking on that button, you’ll authorize Guitar World to serve up ads, discount offerings, and other content through the Uber app during your ride. Yext is calling this type of deluge of marketing “trip branding,” which may turn some consumers off — though probably not the type of person that would order an Uber through a retail store’s website. 

“If they open the Uber app in the car, [they will] see a banner across the bottom linking to content relevant to the place they're going — food menu, hotel concierge service, etc,” a Yext spokesperson said in an emailed statement to The Verge. “As this evolves, we're imagining options like a bar giving people the ability to buy a round while on their way....MORE

"Goldman Says OPEC Deal May Add Up To $10 To Price Of Oil, Two Days After Cutting Oil Price Target By $7"

After yesterday's big run-up both Brent and WTI are down pennies, $48.51 -0.18 and $46.97 -0.08 respectively.

From ZeroHedge:
Goldman has done it again. Two days after the central banker-incubator cut its year end price target from $50 to $43, admitting the previously anticipated rebalancing will take longer to achieve, and now expects "a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously", and followed the next day by a report in which it said that not even an OPEC deal would stop oil going lower, overnight the very same analyst, just 24 hours after saying the opposite, Goldman's Damien Courvalin said that the OPEC agreement will "likely provide support to prices, at least in the short term" and added that the announced production quota should boost the price of oil by $7/bbl - $10/bbl. Again: this is two days after cutting the 2016 price target by $7, and one day after saying an OPEC deal would have no impact.

Still, trying to avoid looking like a total flip-flopper, Courvalin adds that "at the historical average 4.8% production beat relative to quotas, this target would be 33.7 mb/d, above current production levels. It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth" and said that "we maintain our year-end $43/bbl and 2017 $53/bbl WTI price forecasts given: (1) uncertainty on this proposal until it is ratified, (2) likely quota beats if ratified, (3) potential for production above our cautious forecasts in areas of disruptions (as was the case today in Libya and KRG), and (4) our conservative supply forecasts outside of OPEC for next year."

Then again, the only thing that will be stuck in algos' random access memory is that Goldman now expects oil to rebound by up to $10/bbl, which may explain why oil is now rolling over.
Here is Goldman's full note for those who care:
OPEC buys time
OPEC members agreed to limit output today, although no quotas were formally set. This agreement is the first since the oil bear market started in 2014 and as such will likely provide support to prices, at least in the short term. However, we maintain our year-end $43/bbl and 2017 $53/bbl WTI price forecasts given: (1) uncertainty on this proposal until it is ratified, (2) likely quota beats if ratified, (3) potential for production above our cautious forecasts in areas of disruptions (as was the case today in Libya and KRG), and (4) our conservative supply forecasts outside of OPEC for next year.

OPEC members agreed today in Algiers to reduce production to a range of 32.5 to 33.0 mb/d, down from 33.2 mb/d in August (based on OPEC secondary sources). As of now there are no further details and the agreement is scheduled to be ratified at OPEC’s next official meeting on November 30. This agreement is the first since the oil bear market started in 2014 and as such will likely provide support to prices, at least in the short term. However uncertainty is set to remain high in coming months, with so far no comments from the Saudi minister. Further, the Iraq minister commented that secondary sources for oil production are too low, with his country’s output potentially 300 kb/d higher than such measure implies, a gap of nearly half of the proposed production cut.

If this deal follows the proposal made by Algeria as reported by Bloomberg this morning, it would leave Libya and Nigeria exempt, feature a production target for Saudi Arabia, allow for some growth in Iran and Venezuela and require a 1.6% production cut elsewhere relative to average January-August production levels.

Through 2017, such a proposal would keep production 480 to 980 kb/d on average below our forecast. Strictly implemented in 1H17 and all else constant, the production quotas announced today should be worth $7/bbl to $10/bbl to the oil price. However, at the historical average 4.8% production beat relative to quotas, this target would be 33.7 mb/d, above current production levels. It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth.

We reiterate our year-end $43/bbl and 2017 $53/bbl forecasts given: (1) uncertainty on this proposal until it is ratified especially as it relates to Saudi cuts and Iran caps, (2) likely quota beats if ratified, (3) upside surprises to disrupted production as announced today (Libya, KRG) with potential for more given our cautious forecasts in these countries, and (4) our conservative supply forecasts outside of OPEC for next year. Since we see risks to production from countries not targeted by today’s quota as skewed to the upside, we view a strict implementation of today’s OPEC proposal as normalizing the risks around our projected price path.
  • Today’s proposal does not impact our expectation for weaker fundamentals in the coming months: (1) the deal does not impact current production as it is scheduled to be finalized at the November 30 meeting, and (2) we learned today that production in Libya/Iraq is currently 180 kb/d above our expectation.
  • Longer term, we remain skeptical on the implementation of the proposed quotas, if ratified. Strict implementation of today’s deal in 2017 would represent 480 to 980 kb/d less output than we forecast. However, our forecasts assume little reversal in the c.1.0 mb/d of short-term disrupted production, with recent data for these countries already putting that forecast at risk. Further, we have remained cautious on the delivery of new projects outside of OPEC next year, with a combined 400 kb/d lower forecast vs. guided deliveries. The net of all these risks is close to zero, on our estimates, instead of skewed to higher production before today’s quota announcement. As a result, we reiterate our $43/bbl year-end forecast as well as our $53/bbl for next year.
  • Our conviction that OPEC production cuts will be ineffective long term is rooted in our view that the flattening of the oil cost curve created by shale will lead to a loss of pricing power by low-cost producers, leaving them with only volume growth to sustain fiscal revenues. As a result, if this proposed cut is strictly enforced and supports prices, we would expect it to prove self defeating medium term with a large drilling response around the world. This is what occurred following the January 1987 OPEC production cut which led to a rebound in non-OPEC onshore rigs before prices sold off again setting the stage for a decade long steady increase in OPEC drilling....
...MORE

Shipping: "Got an idle containership? Repurpose it as a salmon farm!"

More accurately-'NOT shipping'.
A fish farming flashback to a July, 2016 Bloomberg story that seems more pertinent today.

From DC Velocity, Sept. 27:
In the wake of Hanjin Shipping's collapse and with Panamax vessels being sold for scrap in a depressed market, it's not hard to find a cheap containership these days. But why would anybody want to buy a mammoth cargo vessel when shipping rates have dropped so low?

A Bergen, Norway-based company called Marine Harvest ASA answered that question recently when it applied to the Norwegian government for a license to grow and harvest fish inside a cargo ship.
Reversing the conventional wisdom that fisherman are usually happiest when they stay on the dry side of the boat and keep the fish on the wet side, the company sees the glut of empty ships as a business opportunity. "It's more or less kick-starting fish farming again in a new way," Marine Harvest CEO Alf-Helge Aarskog told Bloomberg News.

As the world's biggest producer of Atlantic salmon, Marine Harvest is struggling to meet demand for the fish, thanks to strict regulations designed to fight infestations of sea lice, a natural parasite that can be deadly to young fish. Instituted to protect fish stocks for future generations, the rules make it difficult to build traditional fish farms on Norway's open ocean....MORE

Wednesday, September 28, 2016

"No Need For Yield Curve Inversion, There Is Already Much Worse Indicated"

Following up on this morning's "Questions America Wants Answered: Is The Yield Curve Flattening? Does It Even Matter?".

From Alhambra Investments:
Though I highly doubt he will admit it, he’s just not the type, even Ben Bernanke knows on some level that bond market is decidedly against him, or at least his legacy. Economists have a funny way of looking at bonds, decomposing interest rates into Fisherian strata. To monetary policy, interest rates break down into three parts: expected inflation over the term of the security; the expected path of real short-term rates; and the residual term premium. Policymakers love to focus on the last one even as (or especially because) it is the most esoteric.

To gain monetary “stimulus”, officials believe that they must arrest and reduce term premiums. What is a “term premium?” It is what economists believe is the extra return a bondholder demands in order to hold a longer range fixed income instrument. In other words, all else being equal (as economists like to surmise) where the path of real short-term rates is the same as are inflation expectations, the term premium determines where an investor will buy a bond in maturity versus something shorter or longer. Economists like Bernanke argue that term premiums are high where risk is perceived to be high; in other words, you have to be compensated that much more for holding a bond for that much longer.

From that perspective, term premiums make sense in a monetary policy setting, as does the surface considerations for QE. If QE can affect long-term rates while holding the others equal or better, that suggests lower risk of investing overall.

The trouble for policymakers is that on this side of the Great “Recession” we don’t even need to account for the academic posturing. On March 20, 2006, new Federal Reserve Chairman Ben Bernanke discussed the unusual nature of low interest rates of that time. Alan Greenspan had left Bernanke his “conundrum” where he raised short-term rates considerably (in his view) but longer rates failed very conspicuously to follow. In a speech to the Economic Club of New York, Bernanke noted this disparity:
For example, since June 2004, the one-year forward rate for the period two to three years in the future has risen almost 1-1/2 percentage points. As the ten-year yield is about unchanged even as its near-term components have risen appreciably, it follows as a matter of arithmetic that its components representing returns that are more distant in time must have fallen. In fact, the one-year forward rate nine years ahead has declined 1-1/2 percentage points over this tightening cycle.
The question was about how to interpret the apparent inconsistency. To Bernanke, it was a matter of breaking down the constituent parts of rates:
To the extent that the decline in forward rates can be traced to a decline in the term premium, perhaps for one or more of the reasons I have just suggested, the effect is financially stimulative and argues for greater monetary policy restraint, all else being equal. Specifically, if spending depends on long-term interest rates, special factors that lower the spread between short-term and long-term rates will stimulate aggregate demand. Thus, when the term premium declines, a higher short-term rate is required to obtain the long-term rate and the overall mix of financial conditions consistent with maximum sustainable employment and stable prices.
This was not the only possibility (and again there are serious doubts as to just how realistic this view actually is). Juxtaposing that more hopeful condition against another scenario, Bernanke gives us his own answer to the current predicament delivered long before its appearance.
However, if the behavior of long-term yields reflects current or prospective economic conditions, the implications for policy may be quite different–indeed, quite the opposite. The simplest case in point is when low or falling long-term yields reflect investor expectations of future economic weakness. Suppose, for example, that investors expect economic activity to slow at some point in the future. If investors expect that weakness to require policy easing in the medium term, they will mark down their projected path of future spot interest rates, lowering far-forward rates and causing the yield curve to flatten or even to invert.
In terms of Fisherian decomposition of longer term interest rates, this means that where the expected path of short run real rates is low and gets lower then reduction in long-term rates is not helpful via lower term premiums but increased (perceived) risk accompanying that mark down. Typically we see this behavior where the UST curve inverts, but that is not the only way to observe it; and I would argue, given the state of short end activity, it is not the correct way.

In fact, there is an alternate method to derive what might be the expected path of short run rates, real or otherwise – the eurodollar futures curve. In the last nearly three years of this “rising dollar” and its preceding months, the eurodollar curve has not just flattened but done so in remarkable fashion. What it suggests about both the time value of money and overall risk/opportunity is nothing short of alarming. It qualifies in every way for Bernanke’s definition of “if investors expect that weakness to require policy easing in the medium term, they will mark down their projected path of future spot interest rates.” In the case of eurodollar futures, though they are not connected to spot rates but 3-month LIBOR, it is perhaps a more appropriate substitute (we could also use the OIS curve, as its history accomplishes the same result).
abook-sept-2016-eurodollar-futures-curve-rising-dollar
What was once a curve is now not. It has become a straight line that serves as a reminder of the death of money and time value, two key components that more than suggest risks and (lack of) opportunity. The yield curve doesn’t invert because current short rates are already near zero, so the decomposition of far forward expectations of spot rates indicates a huge increase in risk perceptions. From that view, falling longer-term rates simply confirm the worst regardless of inversion....MUCH MORE

Hurricane Watch: "Tropical Storm Matthew Forms in the Lesser Antilles Islands"

First up, Wunderblog:

By: Jeff Masters , 3:23 PM GMT on September 28, 2016
Tropical Storm Warnings are flying in the Lesser Antilles Islands thanks to newly-formed Tropical Storm Matthew. An Air Force hurricane hunter aircraft found on Wednesday morning that Invest 97L had finally developed a closed circulation, and had surface winds near 60 mph in a powerful cluster of thunderstorms that was located about 50 miles east of Martinique at 9:22 am EDT. These strong winds will move over the islands of Martinique and Dominica early this afternoon, given Matthew’s westerly motion at 20 mph. At 11 am EDT, Dominica reported sustained winds of 33 mph, gusting to 53 mph, and Martinique reported sustained winds of 28 mph, gusting to 40 mph. Radar imagery out of Martinique and Barbados on Wednesday morning showed plenty of rotation to the storm’s echoes, and an increase in their intensity and areal coverage. Satellite loops showed that Matthew was developing a well-defined surface circulation, and had an increasing amount of heavy thunderstorm activity that was growing more organized. Aiding development was moderate wind shear of 10 - 20 knots and warm ocean waters of 29.5°C (85°F). The 8 am EDT Tuesday SHIPS model output analyzed 50 - 55% relative humidity at mid-levels of the atmosphere over Matthew, which is lower than optimal for tropical cyclone formation, and water vapor satellite loops showed Matthew was butting into a region of dry air that lay just west of the Lesser Antilles Islands. Lack of spin from being too close to the equator was less of a problem for Matthew than before, as the system had worked its way northwards to a latitude of 13°N. This is far enough from the equator for the storm to be able to leverage the Earth’s spin and acquire more spin of its own. ...MUCH MORE
Here's the Cone of Uncertainty:

Tropical Storm Matthew

And from the Washington Post's Capital Weather Gang:

Tropical Storm Matthew’s forecast is eerily similar to Hurricane Hazel in 1954
 Hurricane Hazel took this track in 1954. It made landfall in the Carolinas as a Category 4. (NOAA/Angela Fritz)
Tropical Storm Matthew formed just east of the Caribbean Sea on Wednesday morning, and the storm’s future track is concerning. After this weekend, forecast models are honing in on a path north and toward the U.S. coast. Amazingly — maybe foreboding-ly — it’s the same track that Hurricane Hazel took in 1954, which raked through the Mid-Atlantic and Northeast after making landfall as a Category 4. 
Hazel was just one of three major hurricanes that struck the coast that year, but that storm in particular prompted large and lasting efforts to improve hurricane observations, forecasts and warnings. 
Tropical Storm Matthew is expected to track west into the middle of the Caribbean through early next week. That is a high-confidence forecast. Beyond Monday, though, two of our most-trusted forecast models, the European and the GFS, are suggesting the storm will strengthen into a hurricane and take a dramatic turn to the north....MORE
Please note: These images are not actual official forecasts. They are possible scenarios....

Shimon Peres Goes Job Hunting Is Funnier than Bill Gates' Last Day

I'm not sure who sent this but thank you.
In Hebrew with English subtitles.



For comparison, see the embed in this old post:
"Bill Gates’ Children Mock Him With ‘Billionaire’ Song"

"Ready to deal, Saudi Arabia waits on Iran"

Brent $47.26; WTI $45.18 up 51 cents.
From Petroleum Economist:
The kingdom is ready to ditch its laissez-fair market strategy and cut production. Iran needs to come on board, but an agreement is close

The guts of an Opec deal to remove up to 1m barrels a day of oil from the market are in place. It may take several weeks for the terms to be ironed out but Saudi Arabia has signalled that the period of Opec passivity is over.

Russia is on board with the deal and its energy minister Alexander Novak says it will freeze its output, “once Opec agrees”. Iran remains the final obstacle and is sticking to its wish to recover pre-sanctions production levels. But it is understood to be flexible and the mood within Opec is upbeat. Secretary-general Mohammed Barkindo is said to be “cautiously optimistic”. Khalid al-Falih, the Saudi oil minister, says the agreement “will give clarity to the market”.

The timing is not yet clear. In a closed briefing in Algiers on 27 September, Falih and Novak – who sat shoulder-to-shoulder – suggested it would be agreed by the Opec meeting on 30 November. It could come much sooner.

Although Falih said there “won’t be an agreement tomorrow”, meaning at another Opec meeting in Algiers on 28 September, several sources suggested this remained possible. Novak, who briefed the gathering alongside Falih in a show of unity, said Russia was waiting for Opec to agree, but Russia “will help make a swifter rebalancing of the oil market”. Senior Russian officials later told Petroleum Economist this was “open to interpretation” but Russia “will not put additional oil on the market in the short term”.

The significance of events in Algiers for oil cannot be underestimated. After almost two years of letting the market drift, Saudi Arabia is ready to ditch the policy. Domestic pressures – including a slumping stock market, the urge for higher oil prices ahead of an Aramco IPO, cuts to state salaries – are all in the background. The kingdom is also increasingly worried that the collapse in upstream investment risks damaging price spikes in the coming years.

Falih says the deal will involve “gentle adjustments and reassurances to the market” but added: “it will be called a freeze but involve individual cuts”.

It is understood that the terms of the deal are the following: Saudi Arabia and other Opec members, excluding Iran, Libya and Nigeria, would reduce production back to levels earlier in the year. January 2016 is the month that has been mentioned most. The three countries under special measures would be allowed to produce at “maximum levels that make sense”, says Falih.

In other words, the deal in its essence is the one that had been agreed in Doha in April, before being rejected at the last minute by Saudi deputy crown prince Mohammed bin Salman.

But those are hazy terms and the market, sceptical of Opec promises, will need much more detail. The month chosen for a baseline will be critical. January 2016 would bring a big cut from Saudi Arabia, but actually allow Iraq and Venezuela, on paper at least, to produce more compared with August. A different formula may be necessary.

Thus, excluding Libya, Iran, Nigeria (and Gabon), if the rest of the group returned to January production levels the combined cuts would amount to just 334,000 b/d. In that context, the “maximum that makes sense” from Libya, Nigeria and of course Iran is a fraught notion. Libya hopes to add up to 0.5m b/d more oil this year alone. Nigeria, the same. Either of them could more than wipe out the cuts made by others.

Iran’s ambitions remain the biggest problem. Its maximalist negotiating position has been that it wants to regain the 12.7% of Opec’s market share that it held in November 2011, before sanctions were imposed. At current Opec production, this would imply 4.173m b/d, it says.

Those are unacceptable terms for Saudi Arabia, because the kingdom would be left, as usual, shouldering the bulk of the cuts while its geopolitical rival gets a pass. So Iran will need to rein in its production target too. Word among several Opec watchers is that a plausible compromise could see Iran postpone the longer-term target and accept a freeze around 3.6m-3.8m b/d, while a formula be found that restores Saudi output to 10.2m b/d, implying a cut of 400,000-500,000 b/d, and involves others trimming output too, for a total of 0.8m b/d. Against August’s group-wide production of 33.237m b/d, this would imply production of around 32.5m b/d....MORE

Contra Merkel, "German government prepare Deutsche Bank rescue plan: Die Zeit"--UPDATED

From Reuters:
The German government and financial authorities are preparing a rescue plan for Deutsche Bank (DBKGn.DE) in case the lender would be unable to raise capital itself to pay for costly litigation, German weekly Die Zeit reported.

According to the draft plan, Deutsche Bank would be enabled to sell assets to other lenders at prices that would ease the strain on the lender and not put an additional burden on the bank, the paper said.

In an extreme emergency, the German government would even offer to take a direct stake of 25 percent, the paper added without saying where it got the information.

A Deutsche Bank spokesman referred to an interview Chief Executive John Cryan gave German daily Bild on Wednesday and denied the report.

"At no point did I ask the chancellor for support. Neither did I suggest anything like that," had told Cryan Bild in response to a different report that said he had asked German Chancellor Angela Merkel for her support with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities....MORE
Update d'Alphaville:

The Deutsche domino
Is there something particularly hubristic about a German bank being the bank to trigger a renewed eurozone banking panic? We think so. 
Here’s Deutsche’s share price as of pixel time (about €10.75 per share). It’s up about half a euro following news on Wednesday that it would be selling off its UK insurance business, the Phoenix Group, to Abbey Life Assurance for $1.2bn.... 
...The German finance ministry, meanwhile, denied a report in Die Zeit that the German government and financial authorities are preparing a rescue plan, which would involve the government taking a stake in the worst case scenario....MORE

"Two Years Into Oil Slump, U.S. Shale Firms Are Ready to Pump More"

From the Wall Street Journal, Sept. 27:

Shale industry has proved resilient despite low prices thanks to cost cuts, efficiency improvements
When oil prices began to plunge two years ago due to a global glut of crude, experts predicted U.S. shale producers would be the losers of the resulting shakeout.

But the American companies that revolutionized the oil and gas business with hydraulic fracturing and horizontal drilling are surviving the carnage largely unbowed.

Though the collapse in prices caused a wave of bankruptcies, total U.S. oil production has only fallen by about 535,000 barrels a day so far this year compared with 2015, when it averaged 9.4 million barrels, according to the latest federal data.

As the oil markets ponder where production will resume when prices pick back up, one clear answer has emerged: America. Goldman Sachs forecasts the U.S. will be pumping an additional 600,000 to 700,000 barrels of oil a day by the end of next year—making up for every drop lost in the bust.

Few predicted that in the fall of 2014, when Saudi Arabia signaled that it wouldn’t curb its output to put a floor under crude prices. Oil pundits concluded that a brutal culling would force higher-cost players known as marginal producers—a group that includes shale drillers—out of the market.

But the greatest consequence of the Saudi decision and subsequent price drop is that it has delayed costly oil megaprojects, from deep-water platforms off Angola to oil-sands mines in Canada.

Even if members of the Organization of the Petroleum Exporting Countries, which are meeting this week in Algiers, manage to strike a deal to cut oil production later this year, U.S. producers will step into that void.

“The U.S. isn’t the marginal barrel but the most flexible,” said R.T. Dukes, an analyst at Wood Mackenzie. “We’ll be the fastest to snap back.”

More than 100 North American energy producers have declared bankruptcy during this downturn, but even companies working through chapter 11 keep pumping oil and gas. Many exit bankruptcy stronger thanks to a balance sheet that has been wiped clean. SandRidge Energy Inc., which filed in May, will exit next month after erasing nearly $3.7 billion in debt.

Many shale operators are still struggling at current prices, drilling at a loss and tapping Wall Street for new infusions of cash. But the strongest producers, including EOG Resources Inc. and Continental Resources Inc., soon will be able to generate enough money to pay for new investments and dividends—as well as boost production—even at low prices, analysts say....MUCH MORE

Questions America Wants Answered: "Is The Yield Curve Flattening? Does It Even Matter?"

From The Capital Spectator:
You can find any answer you want by comparing the current curve to various points in its history. Over the past 30 trading days, for instance, the curve is more or less unchanged. But comparisons over longer periods reveal a modest flattening.

A flatter curve may be a precursor to an inverted curve, which would cast a bearish shadow over the economic outlook. As economists are fond of pointing out, inverted yield curves (short rates above long rates) tend to precede recessions. In other words, the normal state of the curve (higher rates for longer maturities) is turned on its head when the state of macro turns dark.

The question is whether the yield-curve signal for estimating business-cycle risk has been rendered null and void thanks to manipulation of short rates in the extreme by the Federal Reserve via extraordinary monetary policy? That’s an ongoing debate, and threatens to remain so for some time. Meanwhile, let’s take the curve at face value and ask: Is it flattening?

One way to keep the spin to a minimum is to look at the current shape of the curve in context with history. For example, the chart below shows the current set of yields (red line) as of yesterday, Sep. 27, based on daily data from Treasury.gov. The historical range of daily curve data since 2011 is depicted in gray. The main takeaway: short rates are near the top of this range while long rates are approaching the bottom.http://www.capitalspectator.com/wp-content/uploads/2016/09/t.curve_.history.2016-09-28.png
In sum, the curve is relatively flat compared with the last five years.

But that’s been true for some time. The question is whether it’s becoming even flatter compared with recent history? Let’s consider one example—90 trading days as the look-back window. By that standard, the curve has become a touch flatter, as shown above by the red line dipping below the blue line across the yield spectrum....MORE

Food Prices Are Plummeting

From Bloomberg via the Chicago Tribune:

Eight-cent eggs: Consumers gobble cheap food as grocers squirm 
Call it the Great Grocery-Store Giveaway of 2016.
In Austin, Texas, Randalls slashed prices for boneless beef ribs by 40 percent, to $3.99 a pound. Not to be outdone, the H-E-B grocer down the street charged $1 a pound less. Albertsons recently advertised a deal you don't normally see on your finer cuts of meat: "buy 1 get 1 free" specials on "USDA Choice Petite Sirloin Steak."

And what does $1 buy these days? In North Bergen, New Jersey, you could pick up a dozen eggs at Wal-Mart. (OK, the price was actually $1.14.) A mile away, check out Aldi, the German supermarket discounter, which can actually break the buck -- 12 eggs for 99 cents. A year ago you would have paid, on average, three times that price.

In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the U.S. It's the longest streak of food deflation since 1960 -- with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much. Their margins and, in some cases, their stock prices, are taking a hit.

Eggs and beef have have grown especially inexpensive, and it isn't only an American phenomenon: In England, Aldi recently offered its prized 8-ounce wagyu steaks from New Zealand for about $6.50 -- a little more than the price of a pint of beer.

"The severity of what we're seeing is completely unprecedented," said Scott Mushkin, an analyst at Wolfe Research who has studied grocery prices around the country for more than ten years. "We've never seen deflation this sharp."

Mushkin, who researches local markets, recently found that prices of a typical basket of grocery items in Houston had fallen almost 5 percent over the past year.

He credits, in part, the discerning behavior of shoppers like Manny Sinclair. On a weekday lunch break, the 43-year-old contractor stopped by a Wal-Mart in Secaucus, New Jersey, to pick up turtle food and paper towels.

Sinclair typically buys groceries at his local ShopRite but has recently noticed the steals he now finds at discounters. He glanced at the meat case, where a 12-pack of "Angus steak burgers" fetched $15.82 and grass-fed ground beef could change hands for $4.96 a pound.

Sinclair was intrigued but, in the classic logic of a shopper in an age of deflation, figured he might find even lower prices elsewhere. Along with two Wal-Marts, a Target and an Aldi, the area even offers a Family Dollar that features a small refrigerated section....MORE
This is not news to our long time readers but it does reflect what the ag commodities  markets have been saying for the last few years. Falling grocery prices are not news to the United Nations either although they have to be careful about recency bias in their reports; when things turn it could be fast and dramatic.
See, for example July 5's:

Commodities: 'Era of high ag prices quite likely over' - OECD, UN report
Gosh, I don't know. We're bearish, have been, unabashedly and out in public for what seems a long time but that is quite a statement.*
On the other hand, wheat prices collapsed (again), down 16.25 cents (3.65%) to hit generational lows:

...So we're now up to 26 consecutive years without a major weather problem in the U.S. and with only (relatively) minor disruptions in the rest of the world over that time. Knock wood.
January 2016
Deflation: "Food prices fall at fastest pace in 7 years amid 'timid demand'"
Sept. 2015
"World food prices hit lowest level in almost seven years, UN agency reports"
Remember, the rule of thumb is it takes around 10 crude oil calories to produce 1 row crop (mainly corn and soybeans) calorie.
Most other food prices are similarly dependent on their input costs.
One oft-cited bit of nuttines is the fact it takes 127 calories of aviation fuel to get a head of lettuce from California to London.... 
And many more. 

Dollar Mostly Firmer, but Going Nowhere Quickly

From Marc to Market, Sept. 28:
The US dollar is enjoying a firmer bias today, but it remains narrowly mixed on the week.  It is within well-worn ranges.   Of the several themes that investors are focused on, there have not significant fresh developments.  
In terms of monetary policy, both Draghi and Yellen speak today.  The former is behind closed doors with a Germany parliamentary committee.  While Draghi's prepared comments will likely be made available, this is a defensive venue.  No new policy insight can be expected.  Instead, Draghi can be counted on to offer a robust explanation for the easy monetary policy, which has had the support of the vast majority of the ECB.  
He may also reiterate that countries, such as Germany, who have fiscal space, ought to use it.  He may also note that part of the reason interest rates is low in Germany is that the country, in defiance of the EC, has excess savings relative to investment (i.e. large and sustained current account surplus).   Also, interest rates are low because monetary policy is being asked to do more than it should.  Governments, including Germany, have been slow to enact structural reform.  
For her part, Yellen is also unlikely to be breaking new ground in testimony before the House Panel on Bank Supervision.  This is not the forum in which monetary policy is the focus.  At least four regional presidents will be speaking through the day, though only two, Bullard and Evans speak during the market sessions.  They are speaking on community banking.  Later, after the markets close, two dissenters Mester and George speak.  
Earlier, Shafik, a Deputy Governor of the Bank of England spoke.  She suggested that even though the economy has performed a bit better than expected, further easing may still be needed.  This is not new news as the MPC had already indicated that this was likely.  
Another development that investors have been tracking is the pressure on Germany's largest bank.  Shares are Deutsche Bank recovered yesterday and are building on those gains today.  News that it agreed to sell its Abbey Life unit to a UK company was also seen as supportive.   One of the challenges that the bank is facing is that Chinese authorities may make it difficult for it to repatriate the full amount of the $3.9 bln sales in a local lender.  Ironically, as the yuan is about to formally join the leading currencies in the IMF's SDR, Chinese restrictions on capital outflows may pinch.  Reports suggest that the bank may be asked to repatriate the funds from the sale in several batches (over time) rather than in one go, for example.  
Investors have been monitoring developments within OPEC and today's meeting in Algiers.  An agreement is not likely today.  However, what many seem to be focusing on, however, is the prospects for an agreement before the end of the year.   One of the key hurdles has been Iran's efforts to return its output to levels seen before the embargo.  Saudi Arabia is reluctant to surrender market share to it.  Oil prices are consolidating at the lower end of yesterday's range.  During the first half of this week, the price of the Nov light sweet futures contract seems comfortable $44 and $46 a barrel....MORE

Tuesday, September 27, 2016

"Is an Editable Blockchain the Future of Finance?"

So the lady asked, "Inquiring minds want to know: can blockchain reconcile 200% institutional ETF ownership?".
Sure, why not.
Of course this is no longer blockchain, it's some sort of database combined with an eraser head. We'll call it 'blockhead'.

From MIT's Technology Review:
Designed to make the technology more attractive to large banks, the change doesn’t seem to be welcomed by purists—but they may have to tolerate it.

Blockchain, the technology that underlies the cryptocurrency Bitcoin, has been celebrated as a way to change the way transactions of all kinds are made. But a suggestion to make an editable version of the technology is now dividing opinion.

The consultancy firm Accenture is patenting a system that would allow an administrator to make changes to information stored in a blockchain. In an interview with the Financial Times (paywall), Accenture’s global head of financial services, Richard Lumb, said that the development was about “adapting the blockchain to the corporate world” in order to “make it pragmatic and useful for the financial services sector.”

Accenture aims to create a so-called permissioned blockchain—an invitation-only implementation of the technology, and the one currently favored by banks. That’s in contrast to permissionless blockchains, such as Bitcoin, which rely on the fact that they can’t be edited as a means of providing an immutable record of transactions. Accenture insists that the feature would be used only in "extraordinary circumstances," so that troublesome errors could be undone.

Blockchain purists, however, seem unimpressed by the idea. Speaking to Reuters, Gary Nuttall of the consultancy Dislytics, said, “An editable blockchain is just a database. The whole thing about blockchain is that it’s immutable, so this just defeats the object.”

It seems unlikely, though, that records of edits would be cast aside. Financial institutions are legally bound to keep complete records of transactions, so even if it were only held privately for the sake of regulatory requirements, the information would probably persist in one form or other.

It’s not the first time that corporate organizations have decided to put their own spin on the idea of a blockchain....MORE
Technology Review refers us to the Sept. 19 FT article: "Accenture to unveil blockchain editing technique" among others.

Grains- Traders Cover Shorts Ahead of Inventory Report:1-2% Upticks




Last Chg
Corn 331-6s+2-6
Soybeans 952-4s+7-2
Wheat 404-0s+8-0

From Agrimoney:

Traders cover grain market shorts as US stocks report looms

Grain futures rallied on short covering, ahead of this week's US stocks data, aided by news of slower-than-expected US harvest progress. 

And wheat gained support from wet weather worries in Australia, as well as good export demand in the US. 

Weekly harvest data from the US Department of Agriculture showed the corn harvest there was 15% complete, showing just how much rain has delayed the start to the harvest. 

Analysts forecast the harvest to be about 20% complete, compared to 25% at this time last year. 

Good harvest prospects this week
But the harvest is expected to continue mostly uninterrupted into the weekend. 

Kim Rugle, at Benson Quinn Commodities, said that "weather looks favourable for good harvest progress through the end of this week". 

"A large portion of the Corn Belt should get some decent weather which will help aid harvest," said Brent Hasbargen at CHS Hedging. 

"The eastern Corn Belt is expected to be drier that normal and the upper Midwest is looking to have above normal precipitation," he said. 

But weather is currently expected to turn wetter over the 6 to 14 day period. 

Stocks report
And markets are gaining from some short-covering ahead of the USDA grain stocks report, and small grains summery, which come out on Friday, particularly in wheat and corn where funds are heavily short. 

"Grain markets are higher as grain market bulls look for support from a 'turn around Tuesday'," said Paul Georgy, at Allendale. 

December corn futures finished up 0.9%, at $3.31 ¾ a bushel....MUCH MORE

Hedge Funds: "Tudor's Existential Moment"

Global macro is hard.

From Bloomberg Gadfly, Sept. 26:
In general, the hedge-fund industry is starting to stabilize after more than a year of severe withdrawals. But there's one significant exception: For a handful of large macro funds, the pain continues.
These strategies -- which bet on broad economic and market trends -- reported $3.4 billion of withdrawals last month, the most of any hedge-fund type, according to a Sept. 21 report from eVestment.

Among those feeling the heat is Paul Tudor Jones's Tudor Investment Corp., one of the oldest and most expensive hedge-fund firms. After suffering more than $2 billion of investor withdrawals this year, it has cut 15 percent of its staff, including the closure of its Singapore trading desk, and lowered fees to retain clients, according to Bloomberg News reports.

On one level, this isn't surprising given the fact that Tudor's macro funds have lost value this year, despite bonds and stocks both posting substantial rallies.

Down Time
Tudor's macro hedge funds have disappointed investors, posting losses this year
As a whole, macro funds reported average gains that were significantly lower than returns on broad indexes of stocks and bonds, making it hard to justify the higher fees charged more broadly throughout the hedge-fund universe.

The Laggards
Macro hedge funds have generally underperformed stocks and bonds this year on a total return basis...
But the problems within macro hedge funds go beyond just near-term performance.

It's getting harder to read economic tea leaves and determine the future path of markets. Some of the traditional gauges of market stress are increasingly dismissed as irrelevant or less accurate in an era of central-bank interference and new banking regulations....MORE 
Here's some of our commentary from a 2009 post repeated in 2016's "Global Macro: Paul Tudor Jones Interview at Institutional Investor":
...The advantage and disadvantage of global macro is It Is Not Easy. You have to pay attention and you have to understand the interrelationships of many markets and politics and weather and psychology and be facile in both words and numbers and in an ego-driven business be humble enough to learn the lessons the market will teach you.

It really helps to not take yourself too seriously, both to avoid the temptation to impose your will upon the market and to maintain enough perspective to spot opportunities ahead of the crowd.
Because global macro isn't easy the rewards can be tremendous.
Continuation of Paul Tudor Jones interview at Institutional Investor:...

Palantir Is Demanding The U.S. Army Give It Some Business

Interesting approach to business.

From Beyond Search, Sept. 25:

Bam! Pow! Zap! Palantir Steps Up Fight with US Army
Many moons ago I worked at that fun loving outfit Booz, Allen & Hamilton. I recall one Master of the Universe telling me, “Keep the client happy.” Today an alternative approach has emerged. I term it “Fight with the client.” I assume the tactic works really well.

imageI read “Palantir Claims Army Misled to Keep It Out of DCGS-A Program.” As I understand the Mixed Martial Arts cage match, the US Army wants to build its own software system. Like many ideas emerging from Washington, DC, the system strikes me as complex and expensive. The program’s funding stretches back a decade. My hunch is that the software system will eventually knit together the digital information required by the US Army to complete its missions. Like many other US government programs, there are numerous vendors involved. Many of these are essentially focused on meeting the needs of the US government.

Palantir Technologies is a Sillycon Valley construct. The company poked its beak though a silicon shell in 2003 and opened for “real” business in 2004. That makes the company 12 years old. Like many disruptive unicorns, Palantir appears to be convinced that its Gotham system can do what the US Army wants done. The Shire and its Hobbits are girding for battle. What are the odds that a high technology company can mount its unicorns and charge into battle and win?

Image result for comic book pow zapThe Palantirians’ reasoning is, by Sillycon Valley standards, logical. Google, by way of comparison, believes that it can solve death and compete with AT&T in high speed fiber. Google may demonstrate that the Sillycon Valley way is more than selling ads, but for now, Google is not gaining traction in some of its endeavors. Palantir wants to activate its four wheel drive and power the US Army to digital nirvana.

The Defense News’s write up is a 1,200 word explanation of Palantir’s locker room planning. I noted this passage:
The Palo Alto-based company has argued the way the Army wrote its requirements in a request for proposals to industry would shut out Silicon Valley companies that provide commercially available products. The company contended that the Army’s plan to award just one contract to a lead systems integrator means commercially available solutions would have to be excluded.
Palantir is seeking to show the court that its data-management product — Palantir Gotham Platform — does exactly what DCGS-A is trying to do and comes at a much lower cost.
I like the idea of demonstrating the capabilities of Gotham to legal eagles....MORE