Monday, November 20, 2017

"Timeline: How ‘Salvator Mundi’ Went From £45 to $450 Million in 59 Years"

From ArtNet:

The painting, marketed as the last Leonardo da Vinci in private hands, has a history fit for a feature film.
Leonardo da Vinci‘s Salvator Mundi just sold at Christie’s for $450.3 million, becoming the most expensive work of art ever sold. But not so long ago, an eagle-eyed buyer purchased it at auction for a mere £45. How did we get from there to here? We’ve compiled a handy timeline of the painting’s history below. You really can’t make this stuff up.

• 1500 – Around this time, Leonardo da Vinci paints Salvator Mundi, likely for King Louis XII of France and Anne of Brittany, shortly after the conquests of Milan and Genoa.

• 1625 – Believed to have been commissioned by the French Royal Family, the painting accompanies Queen Henrietty to England when she marries King Charles I.

• 1651 – King Charles I dies in 1649, and shortly thereafter the canvas is used to settle part of his massive debt. It covers a whopping £30 worth.

• 1763 – After remaining in the Royal family’s collection for years, the painting goes missing—and doesn’t surface again for 150 years.

• Late 19th century – The painting enters the collection of the Virginia-based Sir Frederick Cook.

• 1958 – Salvator Mundi pops up at a Sotheby’s London auction on June 25, 1958. Attributed to Boltraffio, who worked in da Vinci’s studio, it sells for £45 to someone named “Kuntz.”

...MUCH MORE 
Recently:
Nov. 17
Felix Salmon Talks Da Vinci: "Notes on $450,312,500 "
Nov. 16
ICYMI: Leonardo da Vinci’s ‘Salvator Mundi’ Sells for Record-breaking $450.3 Million

Factor Investing: Factors Hated and Loved

From Validea's Guru Investor blog:

The Most Hated (And Most Loved) Investing Factor
Factor investing requires a lot of patience. Despite the fact that research shows that many factors can produce outperformance over long periods of time, all of them will struggle at times in the short-term. And those struggles are typically long and difficult enough that most investors will abandon underperforming strategies in favor of what is working now. When that happens, that typically signals a bottom for the factor is near.

At Validea, we track several hundred factors in our guru-based models that run the gamut from value to growth to momentum. Our historical testing shows that mean reversion in factors, particularly value factors, can be a very powerful force. The longer and more a factor is out of favor, the stronger its performance tends to be when things reverse.

So I thought it would be interesting to take a look across the factors we follow to see what is the cheapest right now.

Value stocks have been underperforming for a decade now, so it’s no surprise that nearly all the cheapest factors are value related. The cheapest one, however, also has the distinction of being the most loved factor, and the most unloved factor, all at the same time, which makes the discussion of its future prospects an interesting one.

The Price/Book ratio is probably the most commonly used factor in value. When Fama and French published their three factor model in the early 90s, they found that a low Price/Book ratio was positively correlated with future stock returns. That led to a huge uptick in money following it.

Price/Book has more money following it than any other factor. It is the primary factor Russell uses when it build its value indices, which have a lot of capital invested in them. It is also the value factor used by Dimensional Fund Advisors, which manages over $500 billion, for its funds.
That huge pool of money following Price/Book makes it the most loved value factor in terms of the assets following it.

With that amount of capital following the factor, you would expect its effectiveness to be reduced. And data indicates that may be exactly what has happened. Since January of 1995, the Russell 3000 Value Index has returned 9.99% annually, while the Russell 3000 Index has returned 10.12%. So adopting a value tilt using Price/Book has not produced the outperformance predicted in the academic research for the last 20+ years.

There are a couple of arguments as to why this has happened. First, as previously mentioned, when you put a huge amount of capital behind a factor, and when that capital tends to be permanent (sticking with the factor through ups and downs), that factor should lose some or all of its effectiveness. Second, share buybacks have become more common as time has gone by. When a company buys back shares, it reduces both its market capitalization (by reducing shares outstanding) and its book value (since either cash is subtracted to buy the shares or debt is added). The net result of this is a higher Price/Book ratio.  This can have the effect of making a company look less attractive from a valuation standpoint, even though it is engaging in behavior that is beneficial to shareholders.

This combination of significant permanent capital tied to the Price/Book and the accounting basis for the reduction in its effectiveness has led to a transition. The best and most thoughtful minds in the quantitative investment business now almost universally hate the factor. They tend to prefer more advanced ratios like Enterprise Value to Operating Earnings or even different more common metrics like the Price to Earnings ratio. And those factors have all worked better in recent years. So despite being the most loved value factor in terms of money following it, the Price/Book has become the most hated one in the active management community....MORE

HT: Alpha Ideas, Nov. 17

Dear Elon, Batteries May Not Be the Answer For Trucks (TSLA)

From Inverse, Nov. 10:

Never Mind Electric Cars: Why Electric Roads are the Real Key to the Future
“Breathe in that smog and feel lucky that only in L.A. will you glimpse a green sun or a brown moon. Forget the propaganda you’ve heard about clean air; demand oxygen you can see in all its glorious discoloration.”
As is often the case, cult film director John Waters captured it more colorfully than anyone when he wrote about Los Angeles’s pollution in his book Crackpot. The smog of L.A. is as iconic as the Hollywood sign or the surf of Santa Monica.

There’s no single reason the haze of pollution defines Los Angeles more than any other American city. The second-largest city in the nation has been allowed to sprawl and stretch in a way New Yorkers could only dream of. Its location in a basin surrounded by mountains serves to trap more toxic air particles than might otherwise be the case.

But mostly, it’s the cars. No, scratch that: The millions of cars are a problem. The trucks are the problem. Nothing is responsible for more smog-causing emissions in southern California than the trucks that haul freight between the region’s cities and ports. And these trucks may just be too big to realistically run on electric batteries like the passenger cars built by Tesla and others.

One possible answer? Don’t electrify the trucks, electrify the roads. That process actually was revealed this week on a mile’s stretch of highway in Carson; located between the heart of Los Angeles and the main port of Long Beach. It’s called an eHighway, and its creators at Siemens, the electrification, automation and digitalization multinational, tell Inverse it can considerably lessen highway emissions.
“We know there’s so much noise and pollution in this area,” says Andreas Thon whose title is “head of Turnkey Projects & Electrification” in North America.
Thon oversees highway electrification projects for the power and industrial technology company Siemens, which is building the road in Carson and has tested similar highways in Germany and Sweden. 

“The advantages of this system is, first, it’s zero-emission,” Thons says. “So the noise level is really reduced. And furthermore you have economic benefits because the electric drive requires less energy than the diesel one.”

The road’s setup will be familiar to anyone who has seen a trolley or streetcar trundle through a city. Specially designed trucks run underneath electric lines, each equipped with an instrument called a pantograph that makes connection to the lines and draws power to propel the vehicle. Currently, three trucks — a battery-electric, natural gas and electric hybrid, and a diesel hybrid — are testing out the mile-long road, which cost $13.5 million to build.

That may sound like a lot, but Thon says the future cost should be closer to $5 million. That price would make it competitive with building more railroads, which are the only other option for the kind of heavy freight shipping that trucks can provide....MORE
Previously:
Siemens Is Building Germany's First Electrictrified Highway

China Energy Investment signs MOU for $83.7 billion in West Virginia projects

Memorandums are not money but still, this seems like a big deal.
From Reuters, Nov. 8:
China Energy Investment Corp, the world’s largest power company by asset value, has signed a memorandum of understanding (MOU) to invest $83.7 billion in shale gas, power and chemical projects in West Virginia, the U.S state said on Thursday.

The agreement was the biggest among a slew of deals signed during U.S. President Donald Trump’s state visit to Beijing. The total value of the deals done during Trump’s trip could be as much as $250 billion. 

The gas and power agreement marks the first overseas investment for newly founded China Energy, which formed from a merger of China Shenhua Group [SHGRP.UL], the country’s largest coal producer and China Guodian Corp [CNGUO.UL], one of its top five utilities. 

Beijing is supporting and encouraging its power companies to expand globally, and the agreement underscores China Energy’s ambition to diversify into natural gas and the refining sector. 

The touted investment would extend over a 20-year period, covering projects for power generation, chemical manufacturing and the underground storage of liquefied natural gas (LNG), West Virginia’s Department of Commerce said in its announcement....MORE

Mag Maven Tina Brown Is Pissed At Google and Facebook (GOOG; FB)

We're trying out a bit of tabloid style in the headline, it doesn't seem to work for us.
Additionally, just thinking of a "style" in that context (rather than, say, doin' it Tina Brown style) I think of this gruesome story from a few years ago: "4 Copy Editors Killed In Ongoing AP Style, Chicago Manual of Style Gang Violence".

On to recode:

Why magazine mogul Tina Brown is 'angry and upset' at Google and Facebook
It’s time for the most powerful companies in digital media to stop playing dumb, Brown says.
Starting in her 20s as the editor of Tatler Magazine in London, Tina Brown rode a wave of print magazines to become one of the most influential people in the media. She tells a good portion of that story in her new no-holds-barred memoir, “The Vanity Fair Diaries: 1983 - 1992.”

But after editing Vanity Fair, the New Yorker and the short-lived Talk magazine (which was financed by Harvey Weinstein), Brown moved her editing online, founding the Daily Beast in 2008. On the latest episode of Recode Decode, hosted by Kara Swisher, she explained why she left that publication after six years, and why the new power players in media — tech companies like Google and Facebook — have left her feeling frustrated.

“I am very angry and upset about the way advertising revenue has been essentially pirated by the Facebook-Google world, without nearly enough giveback — no giveback, really — to the people who create those brilliant pieces that are posted all over their platforms,” Brown said. “It’s high time they gave back to journalism.”

She proposed the creation of a “huge journalism fund” for local media, even though she doubts that that would ever happen.

“They have no interest, I realize that,” Brown said. “It’s like, ‘Oh, we’re not a media company, we’re a platform.’ Okay, well, guess what? When you don’t have human beings who have judgment, who have taste, who have a sense of responsibility, you can have any old Russian hacker dishing it out to the American public.”

“Opinion-forming, influential content, it’s very hard to find and support and have an impact with,” she added. “People don’t know what’s important or where to find it. So it doesn’t wash to say, ‘There’s so many transactions, everybody can find it.’ It’s a needle in a haystack for so many people....MUCH MORE, including podcast.

"Google and VW partner on quantum computing to improve electric car batteries"

Volkswagen is spending a lot of money on their futurecar projects. More on that later today.
From 9to5 Google, Nov. 7:
Volkswagen has been heavily investing in batteries in order to support its planned ramp-up of electric vehicle production starting next year.

Their efforts have so far been focused on actual battery production and securing the rarer raw materials needed, like cobalt, but they are also exploring more future-oriented options to improve batteries at the technological level.

Today, VW is announcing a partnership with Google to use quantum computers to improve electric car batteries and others parts of the future of transportation, like traffic optimization and new machine learning processes.

Quantum computing is still very much in its infancy, but Google has been an early leader in the field and earlier this year, it started offering AI researchers quantum computer access to drive application development.

Artificial intelligence and quantum computing are both seen as having a lot of potential to solve difficult problems in material science and help create new materials to optimize existing technologies, like batteries.

Earlier this year, Toyota announced a similar initiative to work on the next generation of batteries for electric cars.

Now it looks like VW is trying to do the same by securing this new partnership with Google.
Martin Hofmann, Chief Information Officer of the Volkswagen Group, commented on the partnership:
“Quantum computing technology opens up new dimensions and represents the fast-track for future-oriented topics. We at Volkswagen want to be among the first to use quantum computing for corporate processes as soon as this technology is commercially available. Thanks to our cooperation with Google, we have taken a major step towards this goal.”
The companies say that they will focus on research for “practical applications” and that specialists from the Volkswagen Information Technology Centers (IT labs) in San Francisco and Munich will “develop algorithms, simulations and optimizations together with the Google experts.”...MORE
Here's the Volkswagen U.S. press release:
VOLKSWAGEN GROUP AND GOOGLE WORK TOGETHER ON QUANTUM COMPUTERS

Related:
Volkswagen Using D-Wave Quantum Computer To Fight Beijing Traffic (plus the VW Level 5 autonomous vehicle)
Porsche [which produces cars profitability] admits EV investment to take on Tesla is an “enormous burden” (PAH3; TSLA)
Volkswagen To Invest Up To 10 Billion Euros In New Battery Factory

Russian Banking Sector Begins to Recover

From BNE Intellinews:

Russia’s banking sector is starting to recover after a catastrophic summer and is back in overall profit – just.
Russia’s banking sector earned an aggregate profit of just RUB18bn ($300mn) in the first 10 months. However, if you exclude state-owned retail giant Sberbank’s stellar third quarter results,  then the sector is actually still loss-making.

Until September monthly profits were running well ahead of last year’s results,  averaging between RUB100bn and RUB200bn for most of the year. But the sector was walloped in September when it booked an aggregate loss of RUB322bn because of the near-miss banking crisis in the summer caused by the collapse of Financial Corporation Otkritie, which the Central Bank of Russia (CBR) was forced to bail out at the end of August, followed by sister “Garden Ring” bank Binbank a few weeks later.

Among the biggest bailouts in Russia’s history, the clean up of the Russian banking sector is likely to take between one and two years, Elvira Nabiullina, chairwoman of the Central Bank of Russia (CBR), said on November 2.

Despite the slow return to health of the sector, banks are still operating in a toxic environment and more than half of Russian companies consider the sector to still be in crisis, a study found this week.
Companies are still unwilling to borrow from banks because of the high cost of money.  Loans to companies have fallen for a year and now are ticking over at a low level, as companies prefer to borrow cheaper for longer on the international capital markets if they can. A series of cuts to the monetary policy rate by the CBR this year has made domestic borrowing more attractive, but the rates are not expected to make a difference to the corporate borrowing volumes until next year, according to analysts. The corporate loan portfolio declined 3.6% y/y in October (and was down -1.2% y/y, if you exclude the FX factor, as the ruble strengthened 8.0% y/y), the CBR reported.
Retail lending, on the other hand has come back to life this year and expanded a robust 9.9% y/y in October, which has given economists some cause for optimism.
They speculate that consumption is slowly returning as an economic driver. So far this year’s increased retail spending, such as it is, has been largely fuelled by consumer credits as real disposable incomes are flat and retail turnover growth is still hovering just above zero....MUCH MORE

"Mayoral Powers in the Age of New Localism"

One of the problems with politics is that the people attracted to power are exactly the ones who should not be allowed anywhere near it.
Go figure.

We've been watching the mission-creep trend in municipal governance for a while now, trying to get in front of it—"Il faut bien que je les suive, puisque je suis leur chef"*—to make a bucko or two but, to date, have only come up with the tautology that these people would rather jet off to Buenos Aires during the Northern Hemisphere winter for the Global Parliament of Mayors** than stay home and fix potholes.
It was ever thus, or at least has been since 1967 when John Lennon noted "4000 holes in Blackburn, Lancashire"

*Ledru-Rollin, 1848—schoolboy French translation: "I must follow them for I am their leader."
**This year the get-together was actually held in Stavanger in late September. Nice 'hood, nice time of year.

From CityLab:

U.S. mayors are on the front lines of major global and societal change. It’s time for them to lead beyond the limits of their formal powers.

Last week, residents of more than 30 U.S. cities voted to elect their top leader. Whether four-term veterans like Cleveland’s Frank Jackson or first-time politicians like Helena’s Wilmot Collins, U.S. mayors are now more than ever on the front lines of major global and societal change. The world’s challenges are on their doorsteps—refugee integration, climate change adaptation, economic transition—yet the federal government has withdrawn and many state governments are actively opposing cities’ agendas. What do these new leaders need to do to succeed in a climate that is at worst hostile and at best indifferent to pressing urban priorities?

Mayors must first recognize that we are in the midst of a paradigmatic shift in urban governance and problem solving that is catching up to an established fact on the ground: Cities are networks of public, private, and civic institutions that power the economy and shape critical aspects of urban life. This “new localism” is pragmatic and solution-oriented, and by design includes exemplary leadership across sectors and segments of society. Yet mayors, as the top political and executive office in cities, have a special responsibility to set the vision and activate their networks to design, finance, and deliver everything from basic services to transformative infrastructure projects.


For such an important office, we know frustratingly little about the specific mechanics that make mayors effective. A new Brookings Institution report, “Leading Beyond Limits: Mayoral Powers in the Age of New Localism” examined the sources and uses of mayoral powers and the capacities they need to lead and govern. Though cities and governance contexts vary tremendously around the world, there are plenty of common challenges—fragmented governance environments, the need for increasingly technical skill sets to address complex problems—and some broader recommendations that could strengthen mayoral leadership in cities everywhere....MUCH MORE

Sunday, November 19, 2017

Real Estate: "Indian man declares himself king of ungoverned land between Egypt and Sudan"

Location, location, location.
From The New Arab:
Indian man declares himself king of ungoverned land between Egypt and Sudan
A man traveled nearly 200 miles to become king of a piece of ungoverned land between Egypt and Sudan and made his dad president of his new kingdom as a birthday present for him.

Suyash Dixit, an Indian national travelled from India to the land of Bir Tawil, an unclaimed area of land between the Egyptian-Sudanese border to claim it for himself and declare himself king of the new-found "Kingdom of Dixit".

"I call myself, King Suyash First from today. I declare this unclaimed land of Bir Tawil as my country from now to the eternity of time. I pledge to continue to work for the prosperity of my people of the country and this motherland," Dixit announced in a Facebook post.

"I travelled 319KM (to and fro) in far desert with no roads to claim this unclaimed land of Bir Tawil. This 800 square miles of land belongs to no country. It is the only place on earth where humans can live and survive but is not a part of any state/country.

"Following the early civilization ethics and rule, if you want to claim a land then you need to grow crops on it. I have added a seed and poured some water on it today. It is mine," he added.
He also claimed his new country's national animal as a lizard, but only because he did not see any other animal there....MORE
There is, at minimum, one prior claimant. Via Opinio Juris:
The Man Who Would Be King, Daddy’s Little Princess, and their Territorial Claim

Somehow related: this morning's "The Financial Times' Izabella Kaminska Examines Seasteading and Is Bemused".

"Scientists are about to test a devastating hypothesis: 2018 will suffer a lot of big earthquakes"

From Quartz:
Every so often, the Earth’s rotation slows by a few milliseconds per day. This is inconsequential to the average human, and causes only mild annoyance to the people whose job it is to measure Earth’s rotation with great precision.

That may be about to change, if the hypothesis set out by two geologists proves true. In a study published in Geophysical Research Letters earlier this year, Roger Bilham of the University of Colorado and Rebecca Bendick of the University of Montana predict that, because of Earth’s slowing rotation, the world will see a significant spike in large earthquakes in 2018.

To make this prediction, Bilham and Bendick studied every earthquake since 1900 that recorded more than 7.0 on the moment magnitude scale. They found that approximately every 32 years, there is an uptick in these large quakes. The only factor that strongly correlates is a slight slowing of the Earth’s rotation in a five-year period before the uptick.

“Of course that seems sort of crazy,” Bendick told Science. But think through it a little and it might not seem so outlandish. The Earth’s rotation is known to go through regular decades-long periods in which it slows down and speeds up. Even seasonal changes, like a strong El NiƱo, can affect the planet’s rotation.

But to have the kind of effect that would produce more severe earthquakes, we have to look deeper. Starting from its very center, the planet is made of a solid iron and nickel “inner core,” liquid iron and nickel “outer core,” a thick liquid mantle, and finally a thin solid crust. Earthquakes occur on the crust, but the crust floats on the mantle.

Though Bilham and Bendick don’t know for sure, they believe that every so often the Earth’s mantle might stick a little more to the crust. That could change how the liquid outer core flows. And because it’s all metal down there, the change in flow will affect planet’s magnetic field, which would ever so slightly affect the Earth’s rotation and thus change the length of the day by milliseconds. The Earth’s rotation has been slowing down for the past four years....MORE
Always remember that earthquakes can be tricky for equity analysts.
From August 08's "Long-time bear joins bulls: Controversial Joe Granville says Dow could rise 800 points":
Published: January 11, 1981
Joseph Granville doesn't use the word ''forecasting.'' He prefers to say that he applies to the stock market a ''theory'' that he declines to reveal but whose results he communicates to clients in a weekly investment newsletter.
Last week, as his latest bullish issue was still in the mails, Mr. Granville's theory suddenly turned bearish and advised selling. That advice, transmitted to about 3,000 clients in emergency telephone calls, triggered a selloff that drove the Dow Jones industrial average down 23.80 points and resulted in a new one-day volume record on the New York Stock Exchange. The next day, Mr. Granville predicted an earthquake of Richter magnitude 8.3 would hit Los Angeles in May.

From the New York Times:

NOTES ON PEOPLE; As a Seismologist, He's a Good Stock Analyst

At Gettysburg, November 19, 1863

The Gettysburg PowerPoint presentation with technical support from Peter Norvig:

Author: Abraham Lincoln
Email: president@whitehouse.gov
Home Page: http://www.whitehouse.gov
 
Download presentation: Gettysburg.ppt
And now please welcome President Abraham Lincoln.
Good morning. Just a second while I get this connection to work. Do I press this button here? Function-F7? No, that's not right. Hmmm. Maybe I'll have to reboot. Hold on a minute.

Um, my name is Abe Lincoln and I'm your president. While we're waiting, I want to thank Judge David Wills, chairman of the committee supervising the dedication of the Gettysburg cemetery. It's great to be here, Dave, and you and the committee are doing a great job.

Gee, sometimes this new technology does have glitches, but we couldn't live without it, could we? Oh - is it ready? OK, here we go: 
 
 slide 1 of 6

slide 2 of 6

 slide 4 of 6

...MORE

Speaker Notes

[Transcribed from voice recording by A. Lincoln, 11/18/63]
These are some notes on the Gettysburg meeting. I'll whip them into better shape when I can get on to my computer.
Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation or any nation so conceived and so dedicated can long endure.

We are met on a great battlefield of that war.

We have come to dedicate a portion of that field as a final resting-place for those who here gave their lives that that nation might live.

It is altogether fitting and proper that we should do this. But in a larger sense, we cannot dedicate, we cannot consecrate, we cannot hallow this ground.

The brave men, living and dead who struggled here have consecrated it far above our poor power to add or detract. The world will little note nor long remember what we say here, but it can never forget what they did here.

It is for us the living rather to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us--that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion--that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth.
This is a repost of our 150th-anniversary-of-the-speech post.

Related;
Newspaper Retracts Editorial on Gettysburg Address
A Cutting-Edge Second Look at the Battle of Gettysburg
"The Improbable Origins of PowerPoint"
Power Corrupts, Powerpoint Corrupts absolutely

The Financial Times' Izabella Kaminska Examines Seasteading and Is Bemused

More accurately, she comes down on the concept somewhere between bemused and dubious.
We've looked at the idea of islands or ships full of geeks, nerds and billionaire geek/nerds a few times over the years:

http://geographical.co.uk/images/articles/nature/geophoto/2017/LPOTY/web8.jpg

Oops that's Brighton Pier by Landscape Photographer of the Year, 2017 finalist Matt Cooper via Geographical.
How embarrassing, the roller coaster should have been a tip-off. 
Here's Izabella. I'll go look for the intended picture.

From FT Alphaville:

On the (non) viability of start-up islands
“Governments just don’t get better,” Mr. Quirk said. “They’re stuck in previous centuries. That’s because land incentivizes a violent monopoly to control it.”
So noted Joe Quirk, president of the Seasteading Institute to the New York Times this week.

For those who don’t know, the Seasteading Institute aims to liberate the world from the tyranny of governments by constructing dozens of self-governing floating islands by 2020. Initially, they will be based in and around French Polynesia and feature everything from homes, hotels, offices, restaurants (and no doubt casinos) for the bargain price of $60m.

The project is being part-bankrolled by Facebook investor and PayPal co-founder Peter Thiel, but also aims to raise funds through the hottest fundraising mechanism in town: the initial coin offering. (Because… well, even independent islands are better off on the blockchain apparently.)

But Quirk’s vision doesn’t stop there. He believes one day (c. 2050) there will be thousands of such islands offering different forms of governance options to would-be citizens from all around the world. What’s more, due to climate-change these islands may one day prove to be the Noah’s Ark-type solution for low-level lands threatened by rising sea levels.

It’s a nice utopian dream. But how do you go about forging it?

In the introductory video a good wedge of time is spent explaining that there’s a shortage of shallow waters to place such islands in, because, who could have anticipated, such territories are mostly already claimed by nation states. Darn it....
...MUCH MORE 

Although she doesn't go there I could envision a whole "Lord of the Flies" societal breakdown or at minimum something along the lines of 2015's "The Billionaire Battle in the Bahamas".
Or maybe "Sardinians Want Rome to Sell Them to the Swiss".

Previously:
November 2011
Genius Engineer/Can't Get an H-1b Visa? "Blueseed: A Startup That Plans to House Would-Be Immigrant Innovators 12 Nautical Miles from Silicon Valley"
January 2013
Blueseed (Bringing a Whole New Meaning to Offshoring) Gets an Initial Investor
October 2016
Silicon Valley Artificial Island Nears Government Backing
 
Ah, here we go, 2012's "Why Buy a Yacht When the Same Money Will Get You a Floating Island?":
Okay, maybe not exactly the same money. This 57,000 square foot beauty runs "hundreds of millions of euros to build.”
From GizMag:
Owning one's own yacht must surely be one of man's greatest indulgences. The ability to take your own tailored environment anywhere you want....MORE

Yacht Island Design creates tailored environment like no other. Following on from its "Streets of Monaco" design is the "Tropical Island Paradise", a 90 metre island with a top speed of 15 knots.
The main deck is a beach "cove" of cabanas surrounding a massive ocean view swimming pool, with a waterfall falling nearby from the volcano.
A bar area, outdoor dining, there's a private spa and four VIP suites for friends, all with their own private balcony.
There's also a helicopter landing pad so those friends can drop in....MORE 

Artificial Intelligence: "We build machines that read and write"

That pretty much cuts out the middle man.
It's also the sales pitch of a company called Primer:
Organizations today face a problem. The amount of data we are collecting is growing exponentially. At the same time the number of human analysts who can read it is at best growing linearly. We require new ways to close this intelligence gap and accelerate our understanding of the world.

Primer is a machine intelligence company that uses machine learning and natural language processing to automate the analysis of large datasets. We build systems that read documents, discover insights and automatically generate reports comparable to those of a human analyst....Primer homepage
_Technical Summarization
Intelligence Engines
Our products are built on top of a core set of computational engines. Their architecture is modular by design, allowing for continuous development on our analytic pipeline. These engines allow our customers to process a diverse set of document types across multiple languages. They do the work of extracting information, identifying key insights, performing analysis at scale, and generating output as human-readable text and graphics....MORE
In other news:

—University of Chicago Magazine

Saturday, November 18, 2017

On AI and Algos, Bayesian Optimal Portfolios and Bureaucracies and Culture

From Edge.org:

The Human Strategy
Alex "Sandy" Pentland [10.30.17]
The idea of a credit assignment function, reinforcing “neurons” that work, is the core of current AI. And if you make those little neurons that get reinforced smarter, the AI gets smarter. So, what would happen if the neurons were people? People have lots of capabilities; they know lots of things about the world; they can perceive things in a human way. What would happen if you had a network of people where you could reinforce the ones that were helping and maybe discourage the ones that weren't?

That begins to sound like a society or a company. We all live in a human social network. We're reinforced for things that seem to help everybody and discouraged from things that are not appreciated. Culture is something that comes from a sort of human AI, the function of reinforcing the good and penalizing the bad, but applied to humans and human problems. Once you realize that you can take this general framework of AI and create a human AI, the question becomes, what's the right way to do that? Is it a safe idea? Is it completely crazy?

ALEX "SANDY" PENTLAND is a professor at MIT, and director of the MIT Connection Science and Human Dynamics labs. He is a founding member of advisory boards for Google, AT&T, Nissan, and the UN Secretary General. He is the author of Social Physics, and Honest Signal. Sandy Pentland's Edge Bio page

THE HUMAN STRATEGY
The big question that I'm asking myself these days is how can we make a human artificial intelligence? Something that is not a machine, but rather a cyber culture that we can all live in as humans, with a human feel to it. I don't want to think small—people talk about robots and stuff—I want this to be global. Think Skynet. But how would you make Skynet something that's really about the human fabric?

The first thing you have to ask is what's the magic of the current AI? Where is it wrong and where is it right?

The good magic is that it has something called the credit assignment function. What that lets you do is take stupid neurons, these little linear functions, and figure out, in a big network, which ones are doing the work and encourage them more. It's a way of taking a random bunch of things that are all hooked together in a network and making them smart by giving them feedback about what works and what doesn't. It sounds pretty simple, but it's got some complicated math around it. That's the magic that makes AI work.

The bad part of that is, because those little neurons are stupid, the things that they learn don't generalize very well. If it sees something that it hasn't seen before, or if the world changes a little bit, it's likely to make a horrible mistake. It has absolutely no sense of context. In some ways, it's as far from Wiener's original notion of cybernetics as you can get because it's not contextualized: it's this little idiot savant.

But imagine that you took away these limitations of current AI. Instead of using dumb neurons, you used things that embedded some knowledge. Maybe instead of linear neurons, you used neurons that were functions in physics, and you tried to fit physics data. Or maybe you put in a lot of stuff about humans and how they interact with each other, the statistics and characteristics of that. When you do that and you add this credit assignment function, you take your set of things you know about—either physics or humans, and a bunch of data—in order to reinforce the functions that are working, then you get an AI that works extremely well and can generalize.

In physics, you can take a couple of noisy data points and get something that's a beautiful description of a phenomenon because you're putting in knowledge about how physics works. That's in huge contrast to normal AI, which takes millions of training examples and is very sensitive to noise. Or the things that we've done with humans, where you can put in things about how people come together and how fads happen. Suddenly, you find you can detect fads and predict trends in spectacularly accurate and efficient ways.

Human behavior is determined as much by the patterns of our culture as by rational, individual thinking. These patterns can be described mathematically, and used to make accurate predictions. We’ve taken this new science of “social physics” and expanded upon it, making it accessible and actionable by developing a predictive platform that uses big data to build a predictive, computational theory of human behavior.

The idea of a credit assignment function, reinforcing “neurons” that work, is the core of current AI. And if you make those little neurons that get reinforced smarter, the AI gets smarter. So, what would happen if the neurons were people? People have lots of capabilities; they know lots of things about the world; they can perceive things in a human way. What would happen if you had a network of people where you could reinforce the ones that were helping and maybe discourage the ones that weren't?

That begins to sound like a society or a company. We all live in a human social network. We're reinforced for things that seem to help everybody and discouraged from things that are not appreciated. Culture is something that comes from a sort of human AI, the function of reinforcing the good and penalizing the bad, but applied to humans and human problems. Once you realize that you can take this general framework of AI and create a human AI, the question becomes, what's the right way to do that? Is it a safe idea? Is it completely crazy?

What we've done with my students, particularly Peter Krafft, and with Josh Tenenbaum, another faculty member, is look at how people make decisions on huge databases of financial decisions, and also other sorts of decisions. What we find is that there's an interesting way that humans make decisions that solve this credit assignment problem and make the community smarter. The part that's most interesting is that it addresses a classic problem in evolution.

Where does culture come from? How can we select for culture in evolution when it's the individuals that reproduce? What you need is something that selects for the best cultures and the best groups, but also selects for the best individuals because they're the things that transmit the genes.
When you put it this way and you go through the mathematical literature, you discover that there's one best way to do this. That way is something you probably haven't heard of. It's called “distributed Thompson sampling,” a mathematical algorithm used in choosing the action that maximizes the expected reward over a set of possible actions.

It's a way of combining evidence, of exploring and exploiting at the same time. It has a unique property in that it's the best strategy both for the individual and for the group. If you select on the basis of the group, and then the group gets wiped out or reinforced, you're also selecting for the individual. If you select for the individual, and the individual does what's good for them, then it's automatically the best thing for the group. That's an amazing alignment of interests and utilities. It addresses this huge question in evolution: Where does culture fit into natural selection?...
...MUCH MORE, including video and/or audio  

To Create A "1%" In A Social Hierarchy You Don't Need An Economic Surplus, Just A Storable Form Of Wealth

This is a repost from January 2, 2017 which ties in to some ideas we'll look at next week.
Original post: 

So there I was, reading the abstract of "Hazelnut economy of early Holocene hunter–gatherers: a case study from Mesolithic Duvensee, northern Germany", thinking about Nutella and Frangelico when this grabbed my eye:
...High-resolution analyses of the excellently preserved and well-dated special task camps documented in detail at Duvensee, Northern Germany, offer an outstanding opportunity for case studies on Mesolithic subsistence and land use strategies. Quantification of the nut utilisation demonstrates the great importance of hazelnuts. These studies revealed very high return rates and allow for absolute assessments of the development of early Holocene economy. Stockpiling of the energy rich resource and an increased logistical capacity are innovations characterising an intensified early Mesolithic land use...
Stockpiling, storage, commodities, well that's right in our wheelhouse,* and if I can combine it with the last remnants of interest in Piketty's approach to inequality.....maybe I can synthesize something halfway original...

Yeah, it's already been done.

Here's VoxEU, September 2015:

Cereals, appropriability, and hierarchy
The Neolithic Roots of Economic Institutions
Conventional theory suggests that hierarchy and state institutions emerged due to increased productivity following the Neolithic transition to farming. This column argues that these social developments were a result of an increase in the ability of both robbers and the emergent elite to appropriate crops. Hierarchy and state institutions developed, therefore, only in regions where appropriable cereal crops had sufficient productivity advantage over non-appropriable roots and tubers. 
What explains underdevelopment?
One of the most pressing problems of our age is the underdevelopment of countries in which government malfunction seems endemic. Many of these countries are located close to the Equator.1 Acemoglu et al. (2001) point to extractive institutions as the root cause for underdevelopment. Besley and Persson (2014) emphasise the persistent effects of low fiscal capacity in underdeveloped countries. On the other hand, Diamond (1997) argues that it is geographical factors that explain why some regions of the world remain underdeveloped. In particular, he argues that the east-west orientation of Eurasia resulted in greater variety and productivity of cultivable crops, and in larger economic surplus, which facilitated the development of state institutions in this major landmass. Less fortunate regions, including New Guinea and sub-Saharan Africa, were left underdeveloped due to low land productivity.

In a recent paper (Mayshar et al. 2015), we contend that fiscal capacity and viable state institutions are conditioned to a major extent by geography. Thus, like Diamond, we argue that geography matters a great deal. But in contrast to Diamond, and against conventional opinion, we contend that it is not high farming productivity and the availability of food surplus that accounts for the economic success of Eurasia.
  • We propose an alternative mechanism by which environmental factors imply the appropriability of crops and thereby the emergence of complex social institutions.
To understand why surplus is neither necessary nor sufficient for the emergence of hierarchy, consider a hypothetical community of farmers who cultivate cassava (a major source of calories in sub-Saharan Africa, and the main crop cultivated in Nigeria), and assume that the annual output is well above subsistence. Cassava is a perennial root that is highly perishable upon harvest. Since this crop rots shortly after harvest, it isn't stored and it is thus difficult to steal or confiscate. As a result, the assumed available surplus would not facilitate the emergence of a non-food producing elite, and may be expected to lead to a population increase.

Consider now another hypothetical farming community that grows a cereal grain – such as wheat, rice or maize – yet with an annual produce that just meets each family's subsistence needs, without any surplus. Since the grain has to be harvested within a short period and then stored until the next harvest, a visiting robber or tax collector could readily confiscate part of the stored produce. Such ongoing confiscation may be expected to lead to a downward adjustment in population density, but it will nevertheless facilitate the emergence of non-producing elite, even though there was no surplus.

Emergence of fiscal capacity and hierarchy and the cultivation of cereals
This simple scenario shows that surplus isn't a precondition for taxation. It also illustrates our alternative theory that the transition to agriculture enabled hierarchy to emerge only where the cultivated crops were vulnerable to appropriation.
  • In particular, we contend that the Neolithic emergence of fiscal capacity and hierarchy was conditioned on the cultivation of appropriable cereals as the staple crops, in contrast to less appropriable staples such as roots and tubers.
According to this theory, complex hierarchy did not emerge among hunter-gatherers because hunter-gatherers essentially live from hand-to-mouth, with little that can be expropriated from them to feed a would-be elite.2
  • Thus, rather than surplus facilitating the emergence of the elite, we argue that the elite only emerged when and where it was possible to expropriate crops....
...MORE

*See, for example:
The Golden Age of Commodities Market Manipulation: Corners, Storage and Squeezes

These days however, to purloin that wealth, you don't even need to be dealing with storables:
How to Manipulate Non-storable Commodities Markets
From September's "The Paradox of Profit Margins and Another Look at the Theory of Everything":
...If you're interested in the effect of hoarding on commodities prices Janet Netz, PhD did a paper I liked, "The Effect of Futures Markets and Corners on Storage and Spot Price Variability". I'll see if we have an ungated copy.

Remember, the spectrum runs from storage to hoarding to market corners.
And corners in commodities refers to physical, you can't corner a commod by simply buying futures or forwards, you also have to take up the physical supply.
Conversely, squeezes are accomplished in the futures..

A couple decent papers on this aspect of the abundance theory are:
"Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners" and
"Market Manipulation, Bubbles, Corners and Short Squeezes"
The only way to combat abundance is with artificial scarcity, i.e. manipulation....
Well we don't have an ungated copy of the Netz but we do have a snappy little 66 page paper by Craig Pirrong who you may know by his nom de blog The Streetwise Professor. His is one of the few blogs that posts on Gazprom more than we do though we probably have more on Enron.

Via the University of Houston's Bauer College of Business and hosted at ScienceDirect:
On the other hand, storing electricity is pretty much the ultimate dream of venture capitalists:

Storage: How to Hoard Electricity (GE; SI)
Bill Gates: "It Is Surprisingly Hard to Store Energy"
Batteries: The Venture Capitalist's Holy Grail
And quite a few more, use the search blog box if interested.  

Somehow related:
Oil Tankers and Interest Rates and Scallywags and Time

Frontier Markets: Kyrgyzstan Stock Exchange

From Capitalist Exploits, October 25, 2017:

What Would You Do?
Kyrgyzstan: Does this place become Venezuela or Hong Kong?

Or something in between?

My buddy Kuppy was just there on his way through to look for opportunities in Greece. What he found was pretty interesting… not least because to a certain extent the question above matters less than you might imagine.

Here’s his take, and findings:

No pork tonight because this is a Muslim country, but don’t worry, we’ll drink twice as much vodka to make up for it.

Yup, I’m in Kyrgyzstan, checking off another box, on my long-postponed ‘Stan tour. Like all good adventures, this one started over drinks with some new-found friends.

Him: “You really should go visit our stock exchange.”

Me: “Sure, can you make an introduction to someone there?”

Him: “It’s not needed. Just show up. Don’t worry, they’ll be happy to see you”

The next morning, while shaking off my hang-over, I stumbled over to the Kyrgyz Stock Exchange—which isn’t the easiest place to find. I walked into a dimly lit atrium, past a fountain which hadn’t been used in years and started roaming around—doing my best impression of a lost foreigner who doesn’t speak Kyrgyz, while a security guard yelled at me, waving his arms emphatically to block me. After a few minutes of this, someone official came out and in broken English, motioned for me to come into his office.
Him: “Why are you here?”

Me: “I want to learn about your stock exchange”

Him: “Why?”

Me: “I’m an investor who’s invested in many frontier markets.”

Him: “There’s nothing to buy here.”

Me: “Isn’t this a stock exchange?”

Him: “Yeah, but too hard to buy anything.”

Me: “Huh?”

Him: “Not much trading.”

Me: “How much has traded so far today?”

Him: (scanning a 15 year old CRT monitor) “We haven’t had any trades yet today.”
Me: “What about yesterday?”

Him: “It was a huge day. Biggest in a while. There were 3 trades.”

Me: “That’s big?”

Him: “Huge!!”

Me: “How much dollar volume?”

Him: “Almost 200,000 Som.”

Me: “Wait, isn’t that less than US $3,000?”

Him: “Yea, it was a HUUUGGEEE day.”

Me: “What do you recommend that I buy?”
Him: “Nothing.”

Me: “Aren’t you supposed to attract investors to create volume?”

Him: “Maybe.”

Me: “What is the most popular stock on the exchange?”

Him: “The Manas Airport Company” (owner of all the country’s airports)
Having visited many frontier markets over the year, I’ve learned that earnings are an opinion, yet dividends are real. More importantly, dividends are what is left over after the local oligarchs have had their way with the company’s actual profits. It’s their way of sharing a bit of the wealth with their favorite friends who also own shares.

Dividends are also a way of showing the success of a business to the rest of the business community—hence they tend to stay constant or grow—rarely declining unless there’s an economic crisis. I tend to find them a useful benchmark for a company’s growth—however inaccurate the actual financials are.

Me: “So, what is the dividend yield?”

Him: “30%, but it is too low. By law, they have to pay out 25% of earnings as dividends, but we think they should pay out a higher percentage.”

Me: “Whoa!! Wait!! Your national airport is trading at less than one times cash flow and a 30% dividend yield? Your math must be wrong.”...
...MUCH MORE


 HT: ZH

"The Improbable Origins of PowerPoint"

Power corrupts
PowerPoint corrupts absolutely
—Edward Tufte, Wired Magazine, September 1, 2003 

From IEEE Spectrum, October 31, 2017:

Here’s the surprising story behind the software that conquered the world, one slide at a time 
Walking into the hall to deliver the speech was a “daunting experience,” the speaker later recalled, but “we had projectors and all sorts of technology to help us make the case.” The technology in question was PowerPoint, the presentation software produced by Microsoft. The speaker was Colin Powell, then the U.S. Secretary of State.

Powell’s 45 slides displayed snippets of text, and some were adorned with photos or maps. A few even had embedded video clips. During the 75-⁠minute speech, the tech worked perfectly. Years later, Powell would recall, “When I was through, I felt pretty good about it.”

The aim of his speech, before the United Nations Security Council on 5 February 2003, was to argue the Bush administration’s final case for war with Iraq in a “powerful way.” In that, he succeeded. While the president had already decided to go to war, Powell’s speech—inseparable from what would become one of the most famous PowerPoint presentations of all time—did nothing to derail the plan. The following month, the United States, United Kingdom, Australia, and Poland launched their invasion.

Powell’s speech dramatized how PowerPoint had become, by 2003, a nearly inescapable tool of communication and persuasion in much of the world. Since then, its domination has only become more complete. The same tool used by U.S. State Department and CIA officials to pivot an international coalition toward war is also used by schoolchildren to give classroom reports on planets, penguins, and poets. Microsoft rightly boasts of 1.2 billion copies of PowerPoint at large—one copy for every seven people on earth. In any given month, approximately 200 million of these copies are used, and although nobody’s really counting, our cumulative generation of PowerPoint slides surely reaches well into the billions. So profound is PowerPoint’s influence that prominent figures have decried the software’s effects on thinking itself. Edward Tufte, the guru of information visualization, has famously railed against the “cognitive style” of PowerPoint, which he characterizes as having a “foreshortening of evidence and thought” and a “deeply hierarchical single-⁠path structure.”

PowerPoint is so ingrained in modern life that the notion of it having a history at all may seem odd. But it does have a very definite lifetime as a commercial product that came onto the scene 30 years ago, in 1987. Remarkably, the founders of the Silicon Valley firm that created PowerPoint did not set out to make presentation software, let alone build a tool that would transform group communication throughout the world. Rather, PowerPoint was a recovery from dashed hopes that pulled a struggling startup back from the brink of failure—and succeeded beyond anything its creators could have imagined.

PowerPoint was not the first software for creating presentations on personal computers. Starting in 1982, roughly a half-dozen other programs [PDF] came on the market before PowerPoint’s 1987 debut. Its eventual domination was not the result of first-mover advantage. What’s more, some of its most familiar features—the central motif of a slide containing text and graphics; bulleted lists; the slideshow; the slide sorter; and even the animated transitions between slides—did not originate with PowerPoint. And yet it’s become the Kleenex or Scotch Tape of presentation software, as a “PowerPoint” has come to mean any presentation created with software.

With PowerPoint as well as its predecessors, the motif of the slide was, of course, lifted directly from the world of photography. Some presentation programs actually generated 35-mm slides for display with a slide projector. In most cases, though, the early programs created slides that were printed on paper for incorporation into reports, transferred to transparencies for use on overhead projectors, or saved as digital files to be displayed on computer monitors.

The upshot was that personal computer users of the 1980s, especially business users, had many options, and the market for business software was undergoing hypergrowth, with programs for generating spreadsheets, documents, databases, and business graphics each constituting a multimillion-dollar category. At the time, commentators saw the proliferation of business software as a new phase in office automation, in which computer use was spreading beyond the accounting department and the typing pool to the office elites. Both the imagined and actual users of the new business software were white-collar workers, from midlevel managers to Mahogany Row executives.
PowerPoint thus emerged during a period in which personal computing was taking over the American office. A major accelerant was the IBM Personal Computer, which Big Blue unveiled in 1981. By then, bureaucratic America—corporate and government alike—was well habituated to buying its computers from IBM. This new breed of machine, soon known simply as the PC, spread through offices like wildfire....MUCH MORE

Institutional Investing: "Yale's Swensen Sees Low Volatility as `Profoundly Troubling':"

From Bloomberg via Pension Pulse, Nov. 17:
Janet Lorin and Christine Harper of Bloomberg report, Yale's Swensen Sees Low Volatility as `Profoundly Troubling':
David Swensen, Yale University’s longtime chief investment officer, said the lack of market volatility in the current geopolitical environment is a major concern and warned that another crash is possible.

“When you compare the fundamental risks that we see all around the globe with the lack of volatility in our securities markets, it’s profoundly troubling,” Swensen, 63, said Tuesday during remarks at the Council on Foreign Relations in New York. That “makes me wonder if we’re not setting ourselves up for an ’87, or a ’98 or a 2008-2009,” he said, referring to previous market crises.

“The defining moments for portfolio management” came in those years, “and if you ignore that you’re not going to be able to manage your portfolio,” Swensen said.

The investment chief, who was interviewed by former U.S. Treasury Secretary Robert Rubin, also said he’s expecting lower returns for the university’s endowment, which he’s run for 32 years with a 13.5 percent average annual rate of return.

For the past 12 to 18 months, Swensen said he has been warning university officials to expect much lower returns in the future, as little as 5 percent annually, which would be down from previous assumptions of 8.25 percent.

“It’s not a very popular change,” he said. “We’re victims of our own success.”

‘Strategic Positions’

Swensen’s widely copied strategy of shifting away from U.S. stocks to alternatives including private equity has generated billions of dollars in gains for the school in New Haven, Connecticut. The fund reached a record of $27.2 billion as of midyear.

“We have to take strategic positions in the portfolio,” Swensen told an overflow crowd. “One of the most important metrics that we look at is the percentage of the portfolio that’s in what we call uncorrelated assets, and that’s a combination of absolute return, cash and short-term bonds. Those are the assets that would protect the endowment in the event of a market crisis.”

Asked why Yale’s uncorrelated assets are higher now than in 2008, he said, "I’m not worried about the economy so much, what I’m concerned about is valuation."
Janet Lorin of Bloomberg also reports that Mr. Swensen talked about China, quants, and manager selection:

Yale University chief investment officer David Swensen, in a rare public appearance, spoke Tuesday to former U.S. Treasury Secretary Robert Rubin at the Council on Foreign Relations.

During the hour-long session, Swensen, 63, disclosed that annualized returns over his 32-year tenure have been 13.5 percent, higher than the endowment’s assumption of 8.25 percent a year.

Swensen said he favors private equity and doesn’t like quants, and talked about his efforts to get university officials to lower expectations for future returns. The endowment has swelled to a record $27.2 billion, the second-largest in U.S. higher education.

During the interview, Swensen shared thoughts about investing and opportunities:

On where to invest: “The types of questions that you need to ask with respect to where you are investing are the bedrock for putting together your asset allocation. When I look around the world, there are places that we just won’t invest. Russia. If the rule of law does not follow, then do you know whether or not you own anything? And if you don’t know whether or not you own it, then why would you put your funds there? As we look around the world in spite of the problems we face in the United States, this is one of the best environments in which to invest. I think that the breadth of emerging markets that we were interested in 20 years ago has narrowed dramatically.”

On China: His level of concern about China has been “pretty constant” over the past 12 or 18 months. “China is an area that makes me incredibly nervous, but at the same time, we’re heavily committed there. I’ve had great relationships with a handful of managers in China that have produced extraordinary returns. The party commitment to capitalism doesn’t seem as steadfast as I might have thought five or ten years ago.” ...MORE

The New York Fed Is Puzzled By Low Volatility

From the Federal Reserve Bank of New York's Liberty Street Economics blog, Nov. 15:

The Low Volatility Puzzle: Is This Time Different?
As stock market volatility hovers near all-time lows, some analysts are questioning whether investors are complacent, drawing an analogy to the lead-up to the financial crisis. But, is this time different? We follow up on our previous post by investigating the persistence of low volatility periods. Historically, realized stock market volatility is persistent and mean-reverting: low volatility today predicts slightly higher, but still low, volatility one month and one year from now. Moreover, as of mid-September, the market is pricing implied volatility of 19 percent in one to two years’ time. This level contrasts with the pre-crisis period when the term structure of implied volatility was relatively flat, which suggests this time may indeed be different, at least as measured by market participants’ pricing of risk.

Realized Volatility Forecasts When Volatility Is Low
When realized volatility is low, does it tend to stay low the next month? What about twelve-months ahead? The chart below answers this question by plotting current realized volatility on the horizontal axis against realized volatility one-month and twelve-months ahead on the vertical axis. Realized volatility is computed as the sum of squared daily Center for Research in Security Prices (CRSP) value-weighted returns obtained from Kenneth R. French’s website, reported in annualized volatility units.

The chart shows that realized volatility is persistent and mean-reverting. To see this, note how low volatility today forecasts low volatility one-month and twelve-months ahead. The volatility forecasts are above the 45 degree line when volatility is low but below the 45 degree line when volatility is high. Moreover, there is no evidence of a nonlinearity when volatility is at the lower end of its historical distribution. On average, extremely low volatility today predicts low volatility in the future, not higher. This evidence weighs against the narrative discussed in the previous post that low volatility, in and of itself, may be a concern. 
http://libertystreeteconomics.typepad.com/.a/6a01348793456c970c01b8d2bcce17970c-500wi
Nonetheless, it may be that this analysis masks an increased probability of a jump in volatility when volatility is extremely low. To consider that possibility, the next chart shows the probability of moving into a high volatility state, defined as realized volatility above 16 percent (the seventy-fifth percentile of the historical distribution), based on the current level of realized volatility. Similar to the volatility forecasts, we find no evidence that being in a low volatility environment raises the probability of jumping to a high volatility state, as compared to a “normal” volatility environment of, say, 15 percent.


The Low Volatility Puzzle: Is This Time Different?


The Term Structure of Implied Volatility... 
...MUCH MORE

How to Write A Man Booker Prizewinning Novel In Four Weeks

And maybe set yourself up for a Nobel in Literature as well.


...Until that point, since giving up the day job five years earlier, I’d managed reasonably well to maintain a steady rhythm of work and productivity. But my first flurry of public success following my second novel had brought with it many distractions. Potentially career-enhancing proposals, dinner and party invitations, alluring foreign trips and mountains of mail had all but put an end to my “proper” work. I’d written an opening chapter to a new novel the previous summer, but now, almost a year later, I was no further forward.

So [my wife] Lorna and I came up with a plan. I would, for a four-week period, ruthlessly clear my diary and go on what we somewhat mysteriously called a “Crash”. During the Crash, I would do nothing but write from 9am to 10.30pm, Monday through Saturday. I’d get one hour off for lunch and two for dinner. I’d not see, let alone answer, any mail, and would not go near the phone. No one would come to the house. Lorna, despite her own busy schedule, would for this period do my share of the cooking and housework. In this way, so we hoped, I’d not only complete more work quantitively, but reach a mental state in which my fictional world was more real to me than the actual one. ...

This, fundamentally, was how The Remains of the Day was written. Throughout the Crash, I wrote free-hand, not caring about the style or if something I wrote in the afternoon contradicted something I’d established in the story that morning. The priority was simply to get the ideas surfacing and growing. Awful sentences, hideous dialogue, scenes that went nowhere – I let them remain and ploughed on. ...

I kept it up for the four weeks, and at the end of it I had more or less the entire novel down: though of course a lot more time would be required to write it all up properly, the vital imaginative breakthroughs had all come during the Crash.

I should say that by the time I embarked on the Crash, I’d consumed a substantial amount of “research”: books by and about British servants, about politics and foreign policy between the wars, many pamphlets and essays from the time, including one by Harold Laski on “The Dangers of Being a Gentleman”. I’d raided the second-hand shelves of the local bookshop (Kirkdale Books, still a thriving independent) for guides to the English countryside from the 1930s and 50s. The decision when to start the actual writing of a novel – to begin composing the story itself – always seems to me a crucial one. How much should one know before starting on the prose? It’s damaging to start too early, equally so to start too late. I think with Remains I got lucky: the Crash came just at the right point, when I knew just enough....
--Kazuo Ishiguro in The Guardian

Mr. Ishiguro has been nominated for the Man Booker Prize four times and won in 1989 for his novel The Remains of the Day.
On October 5 it was announced he had been awarded the 2017 Nobel Prize in Literature.

HT:The .Plan: A Quasi-Blog

Friday, November 17, 2017

Russia, China to set up $1billion fund for metal, mining projects

China and Russia sure seem to be doing a lot of deals. If I were in the Indian Government I'd possibly be tempted to enquire: "What up, dawg".

And if I were Japan I might ask: "Wasn't the Greater East-Asia Co-Prosperity Sphere simply a good idea that got a little bit out of hand?" (CIA.gov reading room link)

From Asia Times:
The investment push is part of China’s Belt and Road Initiative, and also of a program of economic cooperation the country has drafted with Russia

Russia’s Far East Development Fund and China’s state-owned gold mining company, China National Gold Group, are to sign an accord by the end of this year on setting up a joint US$1 billion investment fund targeting new projects in the metals and mining sector.

“Ourselves and China Gold are creating a fund in which private investors too can take part and turn a profit. Our first goal is to invest in projects to mine gold, precious metals and copper,” Far East Development Fund head Aleksey Chekunov told media.

The fund is slated to begin dispensing funds for projects next year and will have an initial capital of US$500 million to put to work. That will increase with contributions from both sides, as well as private investors.

The Far East Development Fund (FEDF) was established in 2011 to provide soft loans for the implementation of investment projects in Russia’s Far East. Its only shareholder is the state lender Vnesheconombank, whose mission is to aid in development projects and foreign economic relations. FEDF assets as of June 2017 stood at US$614 million.

China’s Metropoly Holdings and Sinohigh Investment have also expressed interest in establishing two joint Russia-focused investment funds, one in mining and metals and another for infrastructure and development projects....MORE

Paranoid? New Antipsychotic Drug Tracks and Reports Whether You Take It

Well that should take care of any paranoid delusions.
By turning them into paranoid realities.

From Forbes:

FDA Approves First Digital Pill That You (And Others) Can Track
"Did you take that pill?'
Response: "Yes."

"Are you sure?"
Response: "Absolutely. I'm fairly certain. I think so. Maybe. What was your question again?"

"Let's ask the pill."

Today the Food and Drug Administration (FDA) announced that they approved the first drug in the U.S. that can tell you and others that you swallowed it. Abilify MyCite are aripiprazole tablets with sensors embedded in them. Once the pill goes down your hatch, the sensor can then send a message to a patch that you wear, essentially saying that "the pill has landed. Houston, we've reached the stomach." The wearable patch can then transmit this information to an app on your smart phone.

From the smartphone, this information can go anywhere via the Interwebs, to, for instance, your family members or your doctors, granted that you give them permission to see this information. Otsuka Pharmaceutical Co., Ltd. makes the drug and Proteus Digital Health makes the sensor technology Abilify MyCite. And you thought a talking tablet was just Siri on an iPad.

While Abilify is a very specific medication, approved by the FDA in 2002 for the treatment of schizophrenia, approval of such a pill-technology combo opens up a whole new avenue of possibilities for many other types of treatments. As Marie T. Brown, MD from Rush University Medical Center and Jennifer K. Bussell, MD, from the University of Chicago described for the Mayo Clinic Proceedings, around half of patients fail to take their medications as prescribed, and there are many reasons why they don't. Some may not understand the directions. Others don't like the side effects. And others just forget or lose track. Remembering to take medications has become more and more challenging as more Americans are taking more pills. A study published in JAMA in 2015  found that from 1999–2000 to 2011–2012, the percentage of adults taking 5 or more prescription drugs rose from an estimated 8.2% to an estimated 15%. With so many pills, remembering to take the right pill at the right time can be quite a pill....MORE

"Bad news from Mashable, BuzzFeed, and Vice shows times are rough for ad-supported digital media"

We had gathered the three stories with the aim of putting a post together, starting with the Wall Street Journal headline:
BuzzFeed Set to Miss Revenue Target, Signaling Turbulence in Media 
which got me snarking (to myself) "That was the signal? BuzzFeed coming in 20% light in November 2017 was the signal?" which reminded me of a 2013 post "Huffington Post Doesn't Hit the Numbers, Gets a Pass From AOL" which naturally enough led to "Nation’s Journalists Remember Quaint Time When ‘Huffington Post’ Seemed Like Death Of News Industry"* when, thank goodness, NiemanLab staged an intervention before things had spun completely out of control.

From NiemanLab:

The rapid growth of Google and Facebook continues to take its toll on digital media companies. 
 
http://www.niemanlab.org/images/wall-street-journal-bad-700x525.jpg

Thursday was a rough day for digital media. Within hours, a series of reports, some unofficial and others confirmed, underscored a bitter reality that’s become increasingly harder to avoid: Not even the biggest digital media startups are immune from the seismic shifts in digital advertising affecting the whole industry. The upshot: Ad-supported digital media is hard, and getting harder. Meanwhile, the duopoly — Google and Facebook — continue to see their own ad businesses thrive.
Here’s a rundown:

More layoffs at Oath. Early in the day, Digiday’s Lucia Moses reported that Verizon’s Oath, which includes The Huffington Post, AOL, Yahoo, and some ad tech products, was laying off 560 staffers, around 4 percent of the company’s overall headcount. Those cuts were in addition to the 2,100 Verizon laid off when it acquired Yahoo in June.

Mashable sells low. Probably the most brutal news of the day came from The Wall Street Journal, which reported that Mashable, a one-time digital media darling, had agreed to sell itself to Ziff Davis to $50 million. For Mashable, that was a significant haircut from its 2016 valuation of $250 million. The low price suggests that, for potential buyers, digital media is an increasingly uncertain bet....
...MUCH MORE

*Nation’s Journalists Remember Quaint Time When ‘Huffington Post’ Seemed Like Death Of News Industry
NEW YORK—Laughing and smiling as they shared stories with one another about the deep-seated professional concerns they held at the time, the nation’s journalists reminisced Friday about the quaint bygone days when the The Huffington Post seemed like the death of the news industry, sources reported. “Gosh, I remember when The Huffington Post first appeared and its strategy of aggregating sensationalistic content and printing hyper-partisan drivel with no discernible editing or fact-checking seemed like the absolute nadir of this industry, but now, having to compete against sites that peddle wholesale fabrications and being beholden to secret Facebook algorithms that control the dissemination of everything we write, those early HuffPo days actually seem pretty wonderful,” said Reuters reporter Casey Sandoval, who explained....MORE