Monday, August 3, 2015

Commodities: "Bloodied hedge funds return to ag selling with a vengeance"

Corn     376-4 down 4-6
Wheat  499-0 down 0-2

From Agrimoney a belated Quote of the Day:
Hedge funds, having been bloodied by buying grains as the market tumbled, followed up with widespread selling in ags, turning more bearish on soft commodities and livestock as well as the likes of corn and wheat.

Managed money, a proxy for speculators, slashed its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by nearly 135,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.

The cut in the net long - the extent to which long positions, which profit when values rise, exceed short bets, which benefit when prices fall – was the second largest over the past two years.
And it came as hedge funds reversed their optimism on grains which appears to have caught them out dearly, in raising long positions even as corn, for instance, earlier this month suffered its worst week in a year.
Investors 'astonished'
Indeed, the extent to which speculators were wrong-footed surprised many investors.

"There have been times over the last 10-12 years when the professional investors have picked up on signs of large market movements way before the commercial trade, but this last two or three months has not seen them at their finest," said traders at a major European commodities house.
...MORE

Knowledge@Wharton: "How Much Is Web Traffic Changing the News You Read?"

From K@W:
If you’ve ever thought that the quest for more clicks is affecting the sorts of articles that get published in the media, Wharton marketing professor Pinar Yildirim wants you to know that you’re right. But it’s not quite the overarching impact that you might expect.

In this interview with Knowledge@Wharton, she talks about a new paper, “Clicks and Editorial Decisions: How Does Popularity Shape Online News Coverage?” The paper, which was co-authored by Ananya Sen, a doctoral candidate in economics at the Toulouse School of Economics in France, teases out the differences in how high-traffic stories get treated in terms of longer-term coverage.
An edited transcript of the conversation appears below.

Searching for a Bias toward Profit:
In this study, what we are interested in is documenting any sort of bias that might be happening in newspapers related to the availability of digital data and big data. Consumers often wonder what goes through an editor’s mind when they look at newspapers: How do news stories make it to the newspaper that they read or the TV that they watch? Are they selected based on some sort of particular agenda of the newspaper, or are they sorted based on their importance?

Now, if you ask a journalist, up until recently, at least, they would give you the answer that, “Yes, news stories are selected based on their newsworthiness, their importance, and the novelty — how important they are, how new they are, to the public.” However, if this is the case, consumers may also wonder, “Why is it that we see so many cat pictures?” or “Why is it that we see so many quizzes on the news media?”

We had an alternate hypothesis: Perhaps there are other concerns in an editor’s mind, especially these days, when the editors are fed so much information about how the individual stories on online news websites are doing.
 “When we looked at whether traffic that’s received by articles influenced the coverage of stories, we found that the effect is present only for the hard news.”
In particular, we were thinking that there might be a relationship between the traffic that individual articles receive and how long stories and particular topics are covered in a newspaper Twitter . We tested this hypothesis using data from a large online version of a reputable Indian newspaper. We wanted to see if those stories whose first articles received a high number of clicks for various reasons were somehow covered for a longer period of time in the newspaper. We also tested various additional measures of resources that an editor might allocate to the story.

What we found was interesting. We indeed found that there is a relationship between the number of clicks that are received by the article and the amount of time that a story is essentially covered by follow-up articles that are repeating on multiple days. Those two are positively correlated.

Key Takeaways:
There are a couple key takeaways from our research. First, there is indeed a relationship that whenever a news article receives a higher number of clicks, there is a higher level of editorial resources allocated to the particular story. This is something that makes sense at a correlational level. But you would wonder, “To what extent is this relationship also causal?” What I mean by that is, to what extent is it the case that, just because a news story is receiving a higher number of clicks, you see a longer period of time that is allocated to it?...MORE

"Dow Down 166 and Still Falling"

We're looking for around a 3% decline in the S&P this week to ~2040, just enough to scare some stock out. From last week's "Blackstone's Byron Wein On The Current Investment Climate: Dark Clouds Clearing":
Despite this morning's feeble GDP report there are some underlying strengths, one of the reasons I figured I wouldn't look like a total idiot calling for market grey skies to clear up by August 10th or so:...
S&P 500: 2,088.76, down 15.08 but bouncing a bit, for now.
From Barron's Stocks to Watch:
U.S. stocks were already falling Monday when the Institute for Supply Management’s closely watched manufacturing survey for July came in weaker than expected, pushing the Dow into a triple-digit decline during lunchtime market action.
The Dow Jones Industrial Average fell 166 points or 0.9% to a recent 17,524.77.
Oil prices continued to fall Monday and investors sifted through weak economic data. Ahead of the opening bell, data from the Commerce Department showed personal spending rose slightly less than expected in June, while income was slightly above forecasts.
The S&P 500 fell 13.17 points, or 0.6% to 2,090.6 and the Nasdaq Composite dropped 36.5 points, or 0.7% to 5,091.8.
As the Wall Street Journal reported earlier:
…investors digested a slew of data released on Monday related to the U.S. economy. The data was mixed. On the one hand, consumer spending rose 0.2% in June from a month earlier, in line with expectations, the Commerce Department said, and consumer prices rose slightly in June, according to the Federal Reserve’s preferred inflation gauge. But the increase in consumer spending was the smallest since February, a sign that weak wage growth may be weighing on consumers. Also, the Institute for Supply Management’s manufacturing index declined, casting some doubt on the Fed raising short-term interest rates earlier than later....
...MORE

See also CNBC via Yahoo:
Dow falls 150 points as energy weighs; data eyed 

Former Chesapeake Honcho Aubrey McClendon's New Empire Fights For Survival As Oil Slump Deepens

From Forbes, July 31:

Aubrey McClendon’s second chance at building an oil and gas empire is showing cracks.
The billionaire founder and former CEO of Chesapeake Energy launched a half dozen new energy companies from scratch immediately after resigning from Chesapeake early 2013. His new ventures, housed under the American Energy Partners (AEP) umbrella, garnered generous backing from industry private equity stalwarts Energy Minerals Group (EMG) and First Reserve, which collectively contributed billions of dollars.

The ventures also proved popular in the high yield bond market. Last year, bond investors eager to wager on McClendon’s track record supplied billions of dollars to finance acquisitions and development of hundreds of thousands of acres of oil and gas fields.

A year later, with oil prices at just over $48 per barrel, there appears to be steep downside attached to that wager. Some of McClendon’s companies are struggling just to survive.

The $1.6 billion in bonds backing American Energy–Permian Basin, one of the AEP silos, trade at depressed levels around 59 cents on the dollar, after they were issued at 100 cents on the dollar last July. The bonds have attracted interest from some of the biggest names in vulture investing, such as Apollo Global Management, Centerbridge Partners, and Oaktree Capital, which have taken positions in Permian’s debt by buying in at discounted prices, sources told Debtwire.

 Unless someone is willing to put more cash behind the company, the Permian project will likely have to scale back its capital spending for the year ahead – after already slashing 2015 spending plans by more than half versus its forecast in mid-2014 for around $1 billion. And that’s after the company already tapped investors for an additional $295 million in funds just last month when it raised a second lien bond to provide much-needed liquidity....MORE 

Oil Price: 'E's Not Dead, He's Restin'

So I walk by a monitor and this is on the screen:
WTI is retesting $45
But I somehow read it that oil is resting at $45 which sparks a couple reactions: 1) astonishment that we've set a new low for the day so quickly and 2) a compulsion to begin reciting the Monty Python Dead Parrot sketch, to the mixed (horror/amusement) reaction of the assembled.
Then I re-read the story.
From FT Alphaville:
WTI prices were sliding again on Monday:
And we’re probably going lower due to a glut of Saudi and Middle Eastern crude entering the market.

Here’s the latest from JBC Energy:
Total OPEC crude production remained at elevated levels in July as Middle Eastern heavyweights such as Saudi Arabia and Iraq continue to pump near record levels. According to our SuDeP assessment, July production stayed largely on par with our revised June figures at 31.4 million b/d. That is about 1.1 million b/d more than in the same month last year, with Saudi Arabia and Iraq contributing the most to y-o-y growth (see chart).
Iraq output in July was seen increasing further by some 50,000 b/d m-o-m to a new record high of 4.15 million b/d. Reportedly, exports from the South averaged over 3.05 million b/d in the first 3 weeks of July. The introduction of the new Basrah Heavy grade is helping overcome infrastructure constraints and producers have been able to ramp up production which had been held back before. On top of this, additional output is coming from Gazprom Neft’s Badra field for example , as a new well came online with some 10,000 b/d as of mid-July.
Also worth putting into the mix are reports (from fringe media) of Opec nations shorting the oil market directly, with the Kuwait Investment Authority and Saudi Arabia’s SWF SAMA cited specifically.

What to make of this?...MORE
$45.98, down $1.14 last.
So not resting, rather dynamic actually, although the Norwegian oil guys are blue.

See also:
Mummified 200-year-old monk 'NOT dead' but in 'very deep meditation'

North Korea's Kim Jong-un To Join Gandhi, Mandela as Recipient of the Sukarno Peace Prize

The next thing you know the U.N. will make Libya Chair of the Human Rights Commission.
Oh wait.
Never mind

From The Sun (Malaysia):

Indonesian foundation defends awarding Kim Jong-Un peace prize
JAKARTA: A daughter of Indonesia's founding president has defended honouring North Korean leader Kim Jong-Un with an award for statesmanship, dismissing criticisms of his human rights record as "Western propaganda".

Rachmawati Sukarnoputri confirmed the leader would receive an award from her organisation, the Sukarno Education Foundation, in September for his "peace, justice and humanity".

The decision to award the autocrat such an accolade — handed in the past to such freedom icons as Mahatma Gandhi and Aung San Suu Kyi — has made headlines and triggered an outpouring of ridicule and disbelief.

But Sukarnoputri brushed aside questions of Kim's suitability for the award, saying the young leader "should be honoured for his fight against neo-colonialist imperialism".

"The allegations about human rights abuses are untrue," she told AFP.

"That's all just Western propaganda. Those Western governments like to put ugly labels on North Korea."
Her father, Indonesia's first president Sukarno, established early ties with North Korea back in the 1950s....MORE

Oil: "End Of The Line For Buffett's Burlington Northern" (BRK)

Burlington Northern is the largest hauler of crude out of the Bakken.
Should this scenario play out, and knowing Warren's almost chameleon-like promotional abilities, I would expect him to begin buffing his already-verdant green credentials and in particular those of the former Mid-American Energy division, now renamed Berkshire Hathaway Energy, which, under disgraced former heir-apparent David Sokol, became the owner of the largest wind turbine fleet in the U.S. and which, under current head Greg Abel, will become the largest single owner of utility-scale solar operations.
Just don't mention the coal.

From RBN Energy:
The End of The Line - Could Bakken Crude-by-Rail Shipments Disappear?
Bakken crude-by-rail (CBR) volumes are down this year and pipeline shipments are increasing as production levels off in the wake of last year’s price crash. The trend is encouraged by lower price differentials between domestic and international crude as well as new pipelines coming online. Since 2012 a combination of rail and pipeline has given Bakken producers ample crude takeaway capacity but pipelines alone have not had sufficient capacity on their own. However, with production slowing down, pipeline capacity is catching up and by 2017 there should be enough pipelines to carry all North Dakota’s crude to market. Today we start a two part series asking whether pipelines can replace CBR from North Dakota.

We’ve covered the transportation of Bakken crude out of the prolific Williston Basin in North Dakota quite extensively in the RBN Blogosphere. Back in 2012 Bakken production quickly outstripped available pipeline capacity – much of which had to be shared with crude from Western Canada. The result - that we now look back on as a familiar story in the shale era – was pipeline congestion and price discounting while producers tried to figure out alternative routes to market. As described in our Crude Loves Rock’n’Rail series in the first quarter of 2013 the solution was to build a plethora of CBR load terminals in the Bakken - transforming a famine of pipelines into a feast of rail. As long as the price differentials between discounted domestic crude stranded in the Midwest and coastal crude priced at higher international prices stayed wide enough – rail was an ideal option for Bakken producers – especially to the East and West Coasts where there is no pipeline capacity (see On The Rails Again). As soon as price differentials – especially between domestic benchmark West Texas Intermediate (WTI) and international benchmark Brent – narrowed then barrels shifted back to pipelines to take advantage of their cheaper tariff rates. Yet significant crude volumes continued to be transported to market from North Dakota by rail because pipeline capacity could not handle the demand. More recently we have described the planning and build out of a series of new pipelines out of North Dakota that (if they are all built) should increase capacity enough to provide space for all the barrels currently travelling to market from North Dakota by rail (see Watching the Defections – Energy East). In this blog we speculate as to when that day might come and whether it is likely.

The chart in Figure #1 shows the changing balance between rail (blue line) and pipeline (red line) percentages of crude carried out of the Williston Basin since February 2012 (against the left axis). The data is from the North Dakota Pipeline Authority (NDPA) that publishes monthly estimates of the balance between crude takeaway modes in percentage terms – based on crude production from the Williston Basin as a whole. We also included the monthly Williston Basin production history as a reference (grey shaded area against the right axis) – that comes from the Energy Information Administration’s (EIA) Drilling Productivity Report (see Every Rig You Take). There are two big takeaways from this chart. The first is that crude production – and therefore the amount of crude that needs to be transported out of North Dakota is growing throughout the period – although that growth has leveled off this year in response to falling crude prices and lower drilling rates. The second big takeaway is the change in the relative positions of rail and pipeline takeaway percentages over the period. Pipelines (red line) started out in the lead back in February 2012 at 56% but fell rapidly after that to 23% in May 2013 before beginning a gradual recovery in December 2013 back to 41% in May 2015 (the latest data). Rail started out at 28% in 2012 but zoomed up to 75% by April 2013 – falling back to 61% in August 2013 when crude differentials narrowed before recovering to 73% in December 2013. Since then rail percentages have been on a steady decline – leveling off some at about 60% in the second half of 2014 but falling again so far this year to 52% in May (2015) – their lowest level since October 2012. This year through May the trend of increased pipeline and lower rail is quite pronounced as the two lines converge on the chart.
Figure #1; Source: North Dakota Pipeline Authority, RBN Energy, EIA (Click to Enlarge)
The trend in favor of pipeline transportation out of the Bakken since 2014 has primarily been prompted by the narrowing of price differentials between Brent and WTI – that averaged $18/Bbl during 2012 reducing to $11/Bbl in 2013 and $6.50/Bbl in 2014 (averaging $5.94/Bbl so far in 2015). These narrower differentials reduce the incentive for CBR because they make it harder to justify the higher cost of rail freight to coastal markets. If getting to market by rail does not increase netbacks and pipeline alternatives are available then shippers will use them first unless they have an obligation to use rail. The 60% fall in crude prices since June 2014 has amplified rail shipper’s cost concerns since they are getting less money from their crude to start with....MUCH MORE

A Look At Potential Trouble In The Eurozone

From Foreign Policy:

Who’s Nexit?
As many as five other eurozone countries are flirting with trouble. Could one of them be the first to leave the common currency?
Which will be the next eurozone domino to fall? With Greece enjoying a temporary lull in its apparently permanent crisis, we can take a moment to look around its neighborhood at other candidates for trouble. There are several — and the euro’s future looks far from bright.

Greece ran into trouble mainly because it should never have been in the eurozone in the first place. Its governments couldn’t balance their budgets, and its economic cycle was far out of sync with those of the eurozone’s leading lights. When Germany grew, Greece shrank, and vice versa. Using the same monetary policy in both countries made no sense at all.

The more proximate cause of the Greek crisis was its inability to service its debts on time. In the midst of a deep depression, taxes and other government revenue started to slip away, eventually falling 15 percent between 2007 and 2014. Without control of the currency, the government couldn’t print money to stimulate the economy and devalue its debts. It had to choose between repaying its lenders and doing everything else: paying pensions, providing public services, protecting its citizens, etc.

What other countries in the eurozone might soon face this choice? To hear the credit-rating agencies tell it, the first in line are Portugal, whose government bonds are rated as junk by Standard & Poor’s, and Italy, which receives the lowest investment-grade rating of BBB-. Each country’s government is carrying a debt bigger than its GDP, something the IMF doesn’t expect to change any time in the next five years. Spain, whose debt-to-GDP ratio is below 70 percent but may rise in the coming years, is rated BBB.
Not far behind are Ireland, whose debt burden of 86 percent of GDP is supposed to decline rapidly now that economic growth has resumed, and France, at 89 percent, where growth rates may struggle to crack 2 percent in the coming years. Both of them receive reasonable grades from Standard & Poor’s — AA for France and A+ for Ireland, with AAA being the safest of all.

But it’s important to take these ratings with a grain of salt. After all, Standard & Poor’s gave Greece’s debt a grade of A- until December 2009, when the fiscal writing was already on the wall. Partly because of the rating, Greece had no trouble borrowing at reasonable interest rates as late as November of that year, just as Portugal can today. Yet at the end of 2009, all of the countries above except France were once again being called by their pejorative acronym: the PIIGS.

Going forward, the primary risks for these countries are dips in government revenue (mostly likely stemming from disappointing economic growth) and the buildup of other fiscal obligations. Either one could force a decision like the one that faced Greece: to pay or not to pay.

Government revenue in France and Italy has trended gently upward ever since the introduction of the euro in 1999, with few fluctuations along the way. By contrast, revenue in Ireland and Spain spiked dramatically just before the global financial crisis, suggesting that their governments relied more on volatile sources like corporate income taxes. (Because companies pay taxes only when they’re profitable — as opposed to households, which pay them when they have revenue — collections from corporate income taxes tend to be much more correlated with the ups and downs of the economic cycle.) Portugal landed somewhere in between:

Of course, collecting revenue is one thing; what a government chooses to do with it is another. During those heady high-revenue years from 2005 through 2007, Ireland paid down almost 30 percent of its debt, but Spain shrank its liabilities by only about 13 percent. Yet Portugal took the brass ring for most profligate fiscal policy, with its debt load rising sharply every year — despite a growing economy and rising tax revenue — for a total increase of 36 percent. If any of these events reflects long-term tendencies, then Portugal is one to watch.

Another risk for these countries is the possibility that their economic cycles will fall out of sync with the rest of the eurozone or, more pertinently, with Germany. The PIIGS and France rely much more on tourism, for instance, than Germany; as a result, trends in their exports may depend on demand from wealthy households in China, Japan, South Korea, and the United States more than on industrial activity in the eurozone.
If the countries at risk fall out of sync, then the European Central Bank (ECB) will be raising interest rates when they’re already in recession or lowering rates when the countries are growing apace. In this situation, monetary policy will have the opposite of its intended purpose; it will only serve to amplify the countries’ booms and busts.

As the chart below shows, the rates of economic growth in these five countries were most similar to Germany’s during the worst years of the global financial crisis. Then, in the past few years, all five fell behind Germany. As Germany recovered more quickly, driving the ECB toward a more hawkish stance on inflation, the other countries were left without the monetary support they needed to escape recession. And most recently, Irish growth has exceeded German growth by more than 2 percentage points; Ireland may eventually need higher interest rates to avoid overheating, but the ECB is unlikely to provide them anytime soon....MORE

Oil: "WTI Crude Crashes To $45 Handle - Lowest Since March"

September futures $46.17 down 95 cents, low so far $45.96. There appears to be quite a bit of Saudi crude washing up on U.S. shores ahead of the rumored September cutbacks.
We're going lower.

From ZeroHedge:
Spending and Income data appears to have been the trigger sending WTI and Brent crude prices dramatically lower. WTI has now broken to a $45 handle, its lowest since mid-March..

WTI $45 handle...

Copper is also joining the party...

Charts: Bloomberg

Sunday, August 2, 2015

"Beyond Just “Big” Data"

I'm not sure there is value in the whole-lotta-yotta-byte thing, time will tell.

I have to warn gentle reader that the computers may have already risen and have taken over the Institute of Electrical and Electronics Engineers. I've had my suspicions for a while but some recent articles seem to be nothing more than propaganda put out by our wannabe silicon overlords, links below.
I'm jus sayin'...

From IEEE Spectrum:

We need new words to describe the coming wave of machine-generated information
When Gartner released its annual Hype Cycle for Emerging Technologies for 2014, it was interesting to note that big data was now located on the downslope from the “Peak of Inflated Expectations,” while the Internet of Things (often shortened to IoT) was right at the peak, and data science was on the upslope. This felt intuitively right. First, although big data—those massive amounts of information that require special techniques to store, search, and analyze—remains a thriving and much-discussed area, it’s no longer the new kid on the data block. Second, everyone expects that the data sets generated by the Internet of Things will be even more impressive than today’s big-data collections. And third, collecting data is one significant challenge, but analyzing and extracting knowledge from it is quite another, and the purview of data science.

Just how much information are we talking about here? Estimates vary widely, but big-data buffs sometimes speak of storage in units of brontobytes, a term that appears to be based on brontosaurus, one of the largest creatures ever to rattle the Earth. That tells you we’re dealing with a big number, but just how much data could reside in a brontobyte? I could tell you that it’s 1,000 yottabytes, but that likely won’t help. Instead, think of a terabyte, which these days represents an average-size hard drive. Well, you would need 1,000,000,000,000,000 (a thousand trillion) of them to fill a brontobyte. Oh, and for the record, yes, there’s an even larger unit tossed around by big-data mavens: the geopbyte, which is 1,000 brontobytes. Whatever the term, we’re really dealing in hellabytes, that is, a helluva lot of data.

Wrangling even petabyte-size data sets (a petabyte is 1,000 terabytes) and data lakes (data stored and readily accessible in its pure, unprocessed state) are tasks for professionals, so not only are listings for big-data-related jobs thick on the ground but the job titles themselves now display a pleasing variety: companies are looking for data architects (specialists in building data models), data custodians and data stewards (who manage data sources), data visualizers (who can translate data into visual form), data change agents and data explorers (who change how a company does business based on analyzing company data), and even data frackers (who use enhanced or hidden measures to extract or obtain data).

But it’s not just data professionals who are taking advantage of Brobdingnagian data sets to get ahead. Nowhere is that more evident than in the news, where a new type of journalism has emerged that uses statistics, programming, and other digital data and tools to produce or shape news stories. This data journalism (or data-driven journalism) is exemplified by Nate Silver’s FiveThirtyEight site, a wildly popular exercise in precision journalism and computer-assisted reporting (or CAR).

And everyone, professional and amateur alike, no longer has the luxury of dealing with just “big” data. Now there is also thick data (which combines both quantitative and qualitative analysis), long data (which extends back in time hundreds or thousands of years)....MORE
When you see teasers like this on the front page of Spectrum:

Why Automated Cars Need New Traffic Laws

They don't always need to come to a full stop, and
they sometimes should exceed the speed limit




We Should Not Ban ‘Killer Robots,’
and Here’s Why
29 Jul

You have to wonder when the robots roll out the "Silicon-based-life-forms good, carbon-based, bad" phase of the propaganda campaign.

"Understanding Apple's Car Strategy" (AAPL)

From recode:

Understanding Apple’s Car Strategy
 A version of this essay was originally published at Tech.pinions, a website dedicated to informed opinions, insight and perspective on the tech industry. (Insider Exclusives registration required for this one.)
Not long after the original iPhone came out, I had a friend who was close to a major luxury-brand auto maker. He also knew Steve Jobs well. My friend asked Jobs if he was interested in talking to this company about finding a way to connect an iPhone to its entertainment system. From what I know of this meeting, I understand that, once Jobs talked to this company, a lot of lights went on in his head about how Apple could work with auto makers to integrate Apple’s technology into future cars.

Indeed, I suspect the roots of CarPlay can be traced to this meeting between Jobs and this auto company and, since then, Apple has courted and won support from just about every car maker to connect or integrate an iOS-based device and their services into their current and future models.

Over the last few months, there has been a lot of chatter in the tech world about the idea that Apple is building a smart or driverless car, and they have hired a series of top auto-industry execs and engineers that would seem to bolster that rumor. The basic word on the street is Apple has a secret lab, and has various car prototypes they are working on with the idea of creating an actual car that would have an Apple logo on it.
While this speculation is interesting, count me as one of the serious skeptics on Apple actually making a branded car and selling it as a standalone vehicle, regardless of how smart it could be. If they really wanted to get into the smart-car business, just buy Tesla and work with them to add Apple’s intelligence and services to this vehicle. Clearly, they have the money to do this if it was strategic to their future.

I believe Apple’s plans are much grander than doing its own car. I keep coming back to that meeting. I can imagine that, as Jobs thought through the original deal, he started formulating a big picture concept around a “what if” Apple could do more with car companies. Getting them to support the iPhone was a good first step, but over time, as iOS became an important OS in its own right and could handle music, entertainment, apps, sensors, cameras, etc., why not create the technology to make all cars smart and tie them to Apple apps and services?
I do believe Apple has car prototypes in its labs, as some have suggested. But I believe they are there to help the company create a radical smart/intelligent connected-car architectural design that could be licensed to all car companies or be part of an integrated solution.
I do believe Apple has car prototypes in its labs, as some have suggested. But I believe they are there to help the company create a radical smart/intelligent connected-car architectural design that could be licensed to all car companies or be part of an integrated solution. Apple would work with car companies to customize future models that would be smarter and perhaps safer than any car on the market today.

The operative word here is “safer.” In my talks with car companies, it has become clear that, while they want to create smarter and safer cars, one of the challenges is to have a rich operating system that would allow them to handle all types of cameras, sensors and, perhaps equally important, is an operating system that can be tied to apps and services. For each company to try and create its own OS and convince developers to support it would be a difficult proposition....MORE
And from Reuters:

Apple, BMW in courtship with an eye on car collaboration
BMW (BMWG.DE) and Apple (AAPL.O) may rekindle a courtship put on hold after an exploratory visit by executives of the world's top maker of electronic gadgets to the headquarters of the word's biggest seller of premium cars.
Apple Chief Executive Tim Cook went to BMW's headquarters last year and senior Apple executives toured the carmaker's Leipzig factory to learn how it manufactures the i3 electric car, two sources familiar with the talks told Reuters.

The dialogue ended without conclusion because Apple appears to want to explore developing a passenger car on its own, one of the sources said. 
Also, BMW is being cautious about sharing its manufacturing know-how because it wants to avoid becoming a mere supplier to a software or internet giant.

During the visit, Apple executives asked BMW board members detailed questions about tooling and production and BMW executives signaled readiness to license parts, one of the sources said. News of the Leipzig visit first emerged in Germany's Manager-Magazin last week.

"Apple executives were impressed with the fact that we abandoned traditional approaches to car making and started afresh. It chimed with the way they do things too," a senior BMW source said.

The carmaker says there are currently no talks with Apple about jointly developing a passenger car and Apple declined to comment. However, one of the sources said exploratory talks between senior managers may be revived at a later stage.

It is too early to say whether this will be a replay of Silicon Valley's Prometheus moment: The day in 1979 when Apple co-founder Steve Jobs visited Xerox's Palo Alto Research Center where the first mouse-driven graphical user interface and bit-mapped graphics were created, and walked out with crucial ideas to launch the Macintosh computer five years later....MORE
HT on the second article: The Big Picture

Previously:

"Project Titan, SixtyEight & SG5: Inside Apple's top-secret electric car project" (AAPL)
"Why You Won't Be Able To Buy An Apple Car"
Apple Is Not Going To Buy Tesla (AAPL; TSLA)
"Apple hiring automotive experts to work in secret research lab" (AAPL)
Watch Out Google/Uber Alles: "Mysterious Apple Car Spotted Roaming Bay Area Streets"
The End Of Mass Car Ownership Is Coming Mr. Ford
What Happens When Your Smart Phone Tells Your Auto Insurer Everything? (AAPL; GOOG)

McKinsey & Co.: "Pursuing the global opportunity in food and agribusiness"

Long time readers know most of this stuff but for newbies this is a decent primer.
And for their cognitively declining elders it's a handy aide-mémoire.

From McKinsey & Company, July 2015:

Pursuing the global opportunity in food and agribusiness
Satisfying the world’s food needs opens the door to investment throughout the value chain.
Satisfying the world’s food needs opens the door to investment throughout the value chain. July 2015 | byLutz Goedde, Maya Horii, and Sunil Sanghvi
 
Food and agribusiness have a massive economic, social, and environmental footprint—the $5 trillion industry represents 10 percent of global consumer spending, 40 percent of employment, and 30 percent of greenhouse-gas emissions. Although sizable productivity improvements over the past 50 years have enabled an abundant food supply in many parts of the world, feeding the global population has reemerged as a critical issue. If current trends continue, by 2050, caloric demand will increase by 70 percent, and crop demand for human consumption and animal feed will increase by at least 100 percent. At the same time, more resource constraints will emerge: for example, 40 percent of water demand in 2030 is unlikely to be met. Already, more than 20 percent of arable land is degraded.1 Moreover, food and energy production are competing, as corn and sugar are increasingly important for both. Such resource scarcity could lead to political unrest on a large scale if left unaddressed. Agricultural technologies that raise productivity even in difficult conditions and the addition of land for cultivation in Africa, Eastern Europe, and South America may ease the burden, but meeting the entire demand will require disruption of the current trend.

Sensing an opportunity, strategic and financial investors are racing to capture value from technological innovation and discontinuities in food and agriculture. Since 2004, global investments in the food-and-agribusiness sector have grown threefold, to more than $100 billion in 2013, according to McKinsey analysis. Food-and-agribusiness companies on average have demonstrated higher total returns to shareholders (TRS) than many other sectors: the TRS of more than 100 publicly traded food-and-agribusiness companies around the world increased an average of 17 percent annually between 2004 and 2013, compared with 13 percent for energy and 10 percent for information technology.

However, finding the right investment opportunity is not easy. Food-and-agribusiness investing requires a deep understanding of specific crops, geographies, and complex value chains that encompass seeds and other inputs, production, processing, and retailing. Many of the relevant investment opportunities are in geographies unfamiliar to some investors, and their profitability rests not only on crop yields but also on how different parts of the value chain perform (Exhibit 1). In this article, we examine the main trends that will likely influence the future of food and agribusiness, identify promising investment opportunities, and offer a view of how players might successfully pursue them.

Exhibit 1

Major trends in food and agribusiness
The food-and-agribusiness value chain comprises a wide range of companies, from suppliers of agricultural machinery, seeds, chemicals, animal-health tests and vaccines, and packaged foods to data providers for precision agriculture.2 Filling the global gap between supply and demand requires more resources—technical, human, and financial—for the majority of these companies. Investors have a critical role to play in meeting this challenge—and opportunities to benefit.
To identify attractive opportunities across geography, crops, and parts of the value chain, we first analyzed seven trends that will likely influence food and agribusiness economics over the next decade.

Population growth, urbanization, and increased income in emerging markets
By 2020, more than half of global GDP growth is expected to come from countries outside of the Organisation for Economic Co-operation and Development; over half the world’s urban population also will be in emerging economies. Not only is demand for food in emerging markets expected to rise dramatically because of population and income growth, but also these regions are likely to adopt a rich-country diet—more calories, protein, and processed foods.

A projected surge in demand for protein in emerging markets, especially pork in China, would create opportunities for companies to grow in core production and supporting industries such as breeding, animal-health testing, feed, and vaccines. For example, beef and other livestock production in Argentina and Brazil is expected to grow strongly to meet global demand. Making feed conversion more efficient so that animals produce more meat while consuming the same amount of feed as they do now could be profitable for companies with unique intellectual property in additives such as probiotics, enzymes, and acidifiers.

With opportunity come risks. Rising protein prices in emerging markets, government intervention, and environmental concerns could slow demand. Moreover, not every part of the protein value chain is doing well; livestock producers are struggling because of a poor feed-to-meat/dairy price ratio, and primary processors are suffering from high feedstock costs and low capacity utilization. Also, consumer behavior and preferences can change faster than many companies and investors can handle. Successful investment strategies will address the risks by finding opportunities to capture value (for example, technology or processing that improves feed performance or reduces feed-production cost) or by mitigating the risks (for example, vertical integration within the protein value chain).

Demographic and behavioral change in mature markets
In addition to greater demand for protein, we anticipate a trend toward healthier diets. Consumers are increasingly health conscious and place greater importance on environmental sustainability, most visibly in developed countries but more and more in emerging markets. In response, governments are tightening standards for food production. As a result, demand is rising for healthier functional foods (those that offer benefits beyond basic nutrition, such as lowering cholesterol) and for traceable and certified foods that are guaranteed to meet a certain level of safety and environmental or corporate social responsibility....MORE

Probability Is A Fluid Beast

From Quanta:

The Slippery Eel of Probability
 
How do you solve probability problems that appear to have more than one correct answer?
n school, we are trained to think that math problems always have one correct answer. But this is not necessarily true for problems dealing with probability, if the method used to reach the described situation is not fully specified. Surprisingly, the same problem can then have many different answers, all apparently equally valid. Take, for example, our new puzzle:
An art collector who loves pictures of sea creatures, especially eels (there’s no accounting for taste!), commissions an art project. In his living room, he arranges a set of six blank canvases in an L-shaped configuration, with four in a vertical column and three in a horizontal row (the corner canvas is part of both). He hires an artist, with these instructions: “You can paint a single sea creature of your choice on each of these canvases, with one condition. I would like to see a picture of an eel when I move my gaze vertically or horizontally. So there must be at least one eel in the vertical column and at least one in the horizontal row.” The artist does this, following her own preferences when they do not conflict with the instructions.
What is the probability that the corner canvas has a picture of an eel?
To make this concrete, if your friend offered to pay you $2 if the corner canvas did not have a picture of an eel, and you had to pay her just $1 if it did, would you take the bet? Assume that your friend knows exactly what you do about the situation.
The first possible naïve answer that may come to mind is that the probability is one in four because there are four vertical pictures, or perhaps one in three because there are three horizontal ones. Is either answer correct? Are both?

The last question is not facetious. There is a famous problem in probability known as Bertrand’s paradox whose statement is simple: What is the probability that a random chord of a circle is larger than the side of the equilateral triangle inscribed in the circle? To do this you have to determine the density of such chords by “counting” how many are larger than the side of the triangle and dividing that by the total number of chords. The answer can be ¼, ⅓ or ½, depending on how the chords are counted. All of these answers are correct in different circumstances.

“Wait a minute,” you might say, “that’s because there are an infinite number of chords in a circle, and counting infinities is always problematic. It can’t happen when the numbers are finite.” But it can when, as above, the method of accomplishing a task is not clearly specified to a T (or L!). Probability is a fluid beast, slippery as an eel, one that can appear in many different places at the same time if all the avenues of ambiguity are not completely nailed down....MORE

Saturday, August 1, 2015

"Jimmy Page and the Pre-Raphaelites"

From FT Weekend Magazine:

Interview: Led Zeppelin’s Jimmy Page
The Led Zeppelin founder is one of rock’s guitar greats — but he’s also a serious fan of Victorian art
T
he summons arrives. I am to make my way to the splendid house in west London where the 19th-century artist Frederic Leighton lived. Jimmy Page will be there.

The Led Zeppelin guitarist had so enjoyed being asked about his fascination for Victorian art and design on a previous encounter that he’d suggested we might meet to discuss the subject further. I assumed that nothing would come of it. Oh ye of little faith! Leighton House, the venue for our meeting, is a red-brick palazzo in Kensington. Built for the immensely wealthy Leighton as a home and studio in the 1860s — he called it a “private palace of art” — it is now a museum.

A stuffed peacock greets visitors in the turquoise-tiled hallway, the avian equivalent of Page in his strutting, preening prime. Through a pair of Doric columns a passage leads to a spectacular gold-domed room with Syrian tiles, an Arabic inscription from the Koran and a Moorish fountain in the centre, inspired by Leighton’s travels in the Near East. “It’s absolutely glorious. Anyone who comes here can’t help being amazed by the whole scale of it, the beauty of it,” marvels Page as we inspect Leighton’s Arab Hall. “We can see his vision: he has been to Turkey, he’s been to Damascus, he has brought back all these tiles.”
Jimmy Page photographed at Leighton House, London
 
In contrast to the sumptuous decor, Page is dressed in black, with long white hair tied in a ponytail. But an aura of exoticism surrounds him too. At 71, he is among the most celebrated of all guitarists, a player who elevated the instrument to intoxicating heights of artistry in the 1970s. Under his leadership, Led Zeppelin became the definitive rock band, a perfect balance of musicianship and decadence. The band’s exploits — immense three-hour stadium concerts, lurid tales of groupies and black magic, Caligulan goings-on aboard private aircraft — have become the stuff of legend, as mythic as the statues of Pan or painted scenes from antiquity in Leighton House.

Page knows the museum well, having lived around the corner since 1972. His interest in 19th-century art goes back even further, to when he was a teenager in Epsom, a market town in Surrey, where he grew up in a solidly middle-class household, the son of a personnel manager.

As we stand in the Arab Hall, the fountain plashing in the background, I produce a photograph of Page with his first electric guitar in 1958. It shows a serious-looking 14-year-old practising in a suburban living room. “That wasn’t my house,” Page says, peering at the photo, “but everyone’s houses looked similar in those days. An electric fire, brass plaques on the wall.” His tone is not nostalgic....MUCH MORE

Tracking Inflation In Russia: The Value Of A Bribe Has Been Cut In Half

From NBC News:

Average Russian Bribe Doubles in Value Amid Country's Currency Crisis
MOSCOW — The average bribe paid to officials in Russia has more than doubled to the equivalent of $3,500, a pro-government newspaper reported Friday.

Citing government figures, the average cost of greasing the wheels of the state went from 208,000 rubles to 109,000 rubles since this time last year, according to the Izvestia newspaper.

However, because failing oil prices and Western sanctions have halved the value of the ruble against the dollar, the average bribe in the equivalent dollar amount has not changed since 2014.

The newspaper said that the bribe-takers generally prefer dollars and euros over their home currency.
Izvestia said the data was provided by the Russian Interior Ministry's in-house data center. The department was not immediately available when contacted by NBC News...MORE

"Silicon Valley is Going to Retrench in 2016"

Lifted in toto from Conor Sen:
There’s just not enough “stuff” to go around.
Yelp stock got hammered in part because it said it can’t find enough salespeople to meet its revenue projections.
Airbnb’s calling the talent war insane.
Twitter can’t seem to figure out how to grow usage.
Everybody knows about how scarce and expensive Bay Area housing and office space has gotten.
Good companies like LinkedIn and Tableau are trading down heavily on good earnings reports. Same to a lesser extent for Facebook – multiples are coming down as valuations shift from revenue multiples to EBITDA and earnings multiples.
If 80 unicorns all wanted to go public now, it’s not clear if there are enough I-bankers and underwriters to work the roadshows and make the deals all happen in a short period of time (the whole liquidity problem), to say nothing about prospective investor demand in the public markets.
The Bay Area is basically experiencing a mini-1970′s runaway inflation cycle – excess demand for talent and real estate and constrained supply is making costs grow faster than revenues, at a time when revenue growth is slowing and investors seem like they’re starting to get concerned about cash flows (or lack thereof), runaway spending/stock-based compensation, and so forth. For those of us too young to remember, the 1970′s was a great time for nominal wage and real estate growth, less so for equities and “capital” more generally.
Some companies may welcome the reprieve (easier for the winners to hire/retain people). But the gravy train is coming to an end
Permalink

HT: Abnormal Returns' "The tech IPO conundrum"

Also at Conor Sen's tumblr:
Calling Bullshit on Silicon Valley Culture

Actually, You Can Prove A Negative

As much as you can prove anything.
An oldie but goodie.
From Professor Steven Hales, Bloomsburg University:
A principle of folk logic is that one can’t prove a negative. Dr. Nelson L. Price, a Georgia minister, writes on his website that ‘one of the laws of logic is that you can’t prove a negative.’ Julian Noble, a physicist at the University of Virginia, agrees, writing in his ‘Electric Blanket of Doom’ talk that ‘we can’t prove a negative proposition.’ University of California at Berkeley Professor of Epidemiology Patricia Buffler asserts that ‘The reality is that we can never prove the negative, we can never prove the lack of effect, we can never prove that something is safe.’ A quick search on Google or Lexis-Nexis will give a mountain of similar examples.
But there is one big, fat problem with all this. Among professional logicians, guess how many think that you can’t prove a negative? That’s right: zero. Yes, Virginia, you can prove a negative, and it’s easy, too. For one thing, a real, actual law of logic is a negative, namely the law of non-contradiction. This law states that that a proposition cannot be both true and not true. Nothing is both true and false. Furthermore, you can prove this law. It can be formally derived from the empty set using provably valid rules of inference. (I’ll spare you the boring details). One of the laws of logic is a provable negative. Wait… this means we’ve just proven that it is not the case that one of the laws of logic is that you can’t prove a negative. So we’ve proven yet another negative! In fact, ‘you can’t prove a negative’ is a negative - so if you could prove it true, it wouldn’t be true! Uh-oh.

Not only that, but any claim can be expressed as a negative, thanks to the rule of double negation. This rule states that any proposition P is logically equivalent to not-not-P. So pick anything you think you can prove. Think you can prove your own existence? At least to your own satisfaction? Then, using the exact same reasoning, plus the little step of double negation, you can prove that you aren’t nonexistent. Congratulations, you’ve just proven a negative. The beautiful part is that you can do this trick with absolutely any proposition whatsoever. Prove P is true and you can prove that P is not false.

Some people seem to think that you can’t prove a specific sort of negative claim, namely that a thing does not exist. So it is impossible to prove that Santa Claus, unicorns, the Loch Ness Monster, God, pink elephants, WMD in Iraq, and Bigfoot don’t exist. Of course, this rather depends on what one has in mind by ‘prove.’ Can you construct a valid deductive argument with all true premises that yields the conclusion that there are no unicorns? Sure. Here’s one, using the valid inference procedure of modus tollens:
1. If unicorns had existed, then there is evidence in the fossil record.
2. There is no evidence of unicorns in the fossil record.
3. Therefore, unicorns never existed.
Someone might object that that was a bit too fast - after all, I didn’t prove that the two premises were true. I just asserted that they were true. Well, that’s right. However, it would be a grievous mistake to insist that someone prove all the premises of any argument they might give. Here’s why. The only way to prove, say, that there is no evidence of unicorns in the fossil record, is by giving an argument to that conclusion. Of course one would then have to prove the premises of that argument by giving further arguments, and then prove the premises of those further arguments, ad infinitum. Which premises we should take on credit and which need payment up front is a matter of long and involved debate among epistemologists. But one thing is certain: if proving things requires that an infinite number of premises get proved first, we’re not going to prove much of anything at all, positive or negative.

Maybe people mean that no inductive argument will conclusively, indubitably prove a negative proposition beyond all shadow of a doubt....MORE (4 page PDF)

"Scientists Think They Know the Exact Year Computers Will Render the Human Brain Obsolete"

From Mic:
This week, the greatest minds in science and technology pleaded with the world to prevent an artificial intelligence "arms race" — an apocalyptic scenario in which terrorists would have access to highly advanced weapons like killer robots.

The issue arose back in April when representatives from Human Rights Watch and Harvard Law School wrote a paper calling for the United Nations to ban "killer robot" production until regulation and legal stipulations — for instance, who's at fault when a robot shoots an unassigned target — could be put in place.

We should be listening when some of the most trusted minds in tech, including Elon Musk, Steve Wozniak and Stephen Hawking, are warning the world about letting AI weapons go off the rails. But history and science demonstrate that their predictions for hyperintelligent computers aren't as far-fetched as they sound. Computers could soon "think" faster than human beings too.

Computers of the future: A principle called Moore's law predicts that computing will increase in power while simultaneously grow exponentially cheaper and smaller. A perfect example: In 1956, IBM needed a forklift to put a 5-megabyte hard drive, then the size of two refrigerators, on an airplane. Today, for $20, you can buy a 16-gigabyte flash drive that fits on your keychain. That's 3,200 times more data capacity than the aforementioned behemoth.
Source: Ray Kurzweil: 'The Singularity is Near: When Humans Transcend Biology'
Ray Kurzweil's 2005 book The Singularity Is Near: When Humans Transcend Biology (available as a Google PDF) charts our modern era's computational power and compares it to a mouse brain. But in order to reach human-brain levels of processing, the way we approach the technology may need to be approached differently. Kurzweil anticipates optical computing, which operates extremely fast but needs much less power.
Thanks to a Duke University research team, which developed an "ultrafast spontaneous emission source" to set a new speed record, that technology could be closer than expected.

The $1,000 brain: Engineer Peter Diamandis used the now 50-year-old Moore's law to make eight predictions about where technology will go in the next decade. His very first prediction is that we'll have a $1,000 "human brain" — that is, a computer that can perform 10,000 trillion calculations every second, or the same as a human....MORE

Friday, July 31, 2015

Ummm, Remember When I Said "Milestones: 'Natural Gas Overtakes Coal for Electricity Production'"? Here's the Rest Of the Story

July 13, 2015: "Milestones: 'Natural Gas Overtakes Coal for Electricity Production'"
July 31, 2015: "Electricity from natural gas surpasses coal for first time, but just for one month"

From the Energy Information Administration's Today in Energy:

graph of U.S. net electricity generation, selected fuels, as explained in the article text
Source: U.S. Energy Information Administration, Electric Power Monthly and Short-Term Energy Outlook, July 2015

In April, traditionally the month when total electricity demand is lowest, U.S. generation of electricity fueled by natural gas exceeded coal-fired generation for the first time since the start of EIA's monthly generation data in 1973. However, EIA's latest Electric Power Monthly shows that coal's generation share once again exceeded that of natural gas during May. Total generation from coal and natural gas in May increased 14% from its April level, with increased coal generation accounting for 65% of the combined increase.

Total generation from coal- and natural gas-fired generators is seasonal: higher during summer and winter months when electricity demand is highest, and lower in the spring and fall when electricity demand is lower. Many units take advantage of these months of low demand to schedule maintenance. As demand increases towards its summer peak level, the utilization rates for both coal- and natural gas-fired units tend to rise.
In April 2012, the last time monthly natural gas generation came close to surpassing coal-fired generation, spot prices for natural gas were near $2 per million Btu ($/MMBtu) on a monthly average, before returning to about $3.50/MMBtu in the last months of 2012. Low natural gas prices make gas-fired generation economically attractive during periods of low demand when operators in many parts of the country have more flexibility to choose between coal- and natural gas-fired units based on their dispatch cost.

On an annual average basis, coal has lost generation share to natural gas and, to a lesser extent, renewables. The current downward trend in coal-fired generation began in 2007, when increased U.S. production of natural gas (particularly from shale) led to a sustained downward shift in natural gas spot prices and increased generation from natural gas-fired generators.
graph of U.S. net electricity generation, selected fuels, as explained in the article text
Source: U.S. Energy Information Administration, Electric Power Monthly and Short-Term Energy Outlook, July 2015

Monthly coal-fired generation is expected to continue exceeding natural gas-fired generation for the remainder of 2015, as natural gas prices slowly rise from their April average price of $2.61/MMBtu to about $3.30/MMBtu by December....MORE
September's $2.715 down 5.3 cents.
I don't know if that price call is going to pan out, what with El Niño and all. It appears we are about to break the trendline of higher lows from the late April lows. If that happens the market may be telling us something about expected demand this winter.

Google Just Defied France Big Time (GOOG)

Time to find out if the Nation-state or the Trans-national Corp. is more powerful.
My money's on the trannies, the can buy governments.
From Fortune:

Google defies France over "right to be forgotten"
Google finally said enough is enough when it comes to Europe censoring its search results. It issued a bold challenge to France.

Google made a dramatic gesture to oppose censorship of its search results on Wednesday, telling French regulators in a blog post that it will not heed demands to implement so-called “right to be forgotten” requests on a worldwide basis. The move, which sets the stage for further confrontations between Google and France, also highlights a growing legal crisis for the internet.

The issue at stake relates to a controversial European Court of Justice decision from 2014 that forces Google to strip certain links from its search results. The decision provided a way for people to ask Google GOOG -0.57% to remove “irrelevant” or “inadequate” search results, and has already led to more than a quarter million requests flooding into Google. But the rules for processing the requests are far from clear.
The biggest concern for Google right now is not just determining if a request meets the court’s “irrelevant” criteria, but deciding how far it must go to delete the requests. According to France’s data regulator, it is not sufficient for Google to remove a result from its European search pages (Google.fr, Google.de and so on). The regulator also insists the company must scrub the links worldwide by deleting them from its “Google.com” website too.

In its statement, published on the Google Europe Blog, the company said it will refuse to do that:
This is a troubling development that risks serious chilling effects on the web. Because while the right to be forgotten may now be the law in Europe, it is not the law globally … As a matter of principle, therefore, we respectfully disagree with the CNIL’s assertion of global authority on this issue and we have asked the CNIL to withdraw its Formal Notice.
The blog post also points out that 97% of Google searches in France take place on the European versions of the site (rather than Google.com), meaning the “right to be forgotten” is almost entirely in effect for practical purposes....MORE

"Exxon Mobil Earnings Cut in Half" (XOM)

There's a pithy little headline.
From the Wall Street Journal:

Energy giant’s revenue falls 33%, hurt by weak exploration and production results
Exxon Mobil Corp. , the biggest and richest U.S. oil company, reported its lowest earnings in six years on Friday as bigger profits from refining couldn’t offset plunging earnings in its exploration and production business.

Shares of Exxon Mobil tumbled as much as 5% on Friday to their lowest level since mid-2012. Recently, shares were down 4.7% to $79.11.

Exxon also said it would again scale back its share buybacks during the current quarter to a level of $500 million. Exxon bought back $1 billion in shares in the second quarter, which was down from its previous level of about $3 billion in buybacks each quarter. Stock repurchases are popular with investors because they shrink the number of shares available to the public and tend to make them more valuable.

 n a news release, Chief Executive Rex Tillerson said results in the latest quarter “reflect the disparate impacts of the current commodity price environment.”

Profit in the exploration and production, or upstream, business plunged 74% to $2.03 billion in the latest quarter, as its U.S. division swung to a loss....MORE
The stock is down 4.6% ($3.80) at 79.20. That decline is weighing on both the DJIA and the XLE in which it is an outsized component.
Earlier:
Buying Oil Stocks: It's Still Too Early (XLE; XOP)

Nikkei and the Financial Times: A Love Story

I have to note up front, the hat -forgotten-tip on the post immediately below, "Commodity Investors And the Kübler-Ross Model of Grief (or why gold could go lower than our $875 target)" and this link:
...The New York Times, as usual, dug deeper and highlighted how the management of Nikkei always adored the Financial Times and how much more successful Nikkei has been in terms of popularity and finances compared to its acquisition.
are from the CFA Institute's Enterprising Investor's Weekend Reads post.

From the New York Times:

Nikkei Vies for Global Clout With Splurge on The Financial Times
TOKYO — Not long after he took over as president of Japan’s dominant business newspaper in April, Naotoshi Okada delivered a message to his 1,300 reporters and editors. It was time, he said, for Nikkei, the muscular but domestically focused broadsheet, to attain the global influence it had long craved.
The model he envisioned: the British newspaper The Financial Times.

“I want us to stand side by side with newspapers in Europe and America,” Mr. Okada, a career Nikkei journalist, said in a private address to the staff, according to two employees. Adding that he wanted columnists “whose advice is sought by the world’s central bankers,” he named The Financial Times’s respected economics editor, Martin Wolf, as an example....MUCH MORE
Of course adoration can be unrequited.
When Springer said  "Je t'adore" with their German accent, Pearson heard the order "Zhut de door", so they zhut it and locked it.

Thanks, I'll be here all week.

Commodity Investors And the Kübler-Ross Model of Grief (or why gold could go lower than our $875 target)

We've been targeting the 1980 Hong Kong high (it only hit $850 in the U.S.) since FT Alphaville's Izabella Kaminska published a December 2012 post, "Capping the gold price" which begins modestly:
The following chart, we propose, has the potential to inspire a whole new way of looking at the gold and Treasury market...
That was posted five days before gold hit an intermediate term high of $1715, which it hasn't seen since, and probably won't see for some while.

When I got around to reading her piece a month later I reasoned, with the mental acuity of a bright six-year-old, "Saaay, if it can't go up any more..."
Of course in subsequent posts I'd write something to the effect: "Now if you cut out the upside (...Capped) you are left with the semi-variance which means you can design extremely high reward bets...."

Anyhoo, this article is based on the work of Claude Erb who has graced these pages a few times, links below.
Front futures $1097.60, up $9.20.
From Hulbert@MarketWatch:

Opinion: Study predicts gold could plunge to $350 an ounce
Gold bugs, who have just begun to digest bullion’s more than $100 drop over the past month, need to prepare for the possibility of an even bigger decline.

That, at least, is the forecast of Claude Erb, a former commodities manager at fund manager TCW Group, and co-author (with Campbell Harvey, a Duke University finance professor) of a mid-2012 study that forecast a plunging gold price. They deserve to be listened to, therefore, since — unlike many latter-day converts to the bearish thesis — they forecast a long-term gold bear market when it was only just beginning.
You might think that, with gold now trading more than $500 lower than when the study was released, Erb would declare victory and leave well enough alone. But Erb is doing nothing of the sort. Earlier this week, he told me that the gold community now needs to consider the distinct possibility that gold will trade for as low as $350 an ounce.

Erb bases this particularly chilling prospect on two premises. The first is gold’s fair value, which is currently $825 according to the formula proposed in Erb and Harvey’s study. The second is the likelihood that, whenever gold does eventually drop to fair value, it will overshoot and drop to a much lower value. He calculates that, if gold drops below fair value to the same extent it did in the mid-1970s and the late 1990s, bullion would trade around $350 an ounce.

Erb acknowledges that gold’s true believers will find such a prospect outrageous, if not simply incomprehensible. But, he asks, why should gold behave differently than any other asset, each of which fluctuates markedly from the extremes of over and under value?

Erb uses the five well-know stages of grief to characterize where the gold market currently stands. Those stages are denial, anger, bargaining, depression and acceptance, and he argues that the gold-bug community currently is in the “bargaining” stage.

He argues that, in mid-2012, the gold bugs were in the denial phase. His and Harvey’s forecast of gold around $800 an ounce was met with almost total incredulity. Today, in contrast, with gold more than $500 an ounce lower and forecasts of sub-thousand-dollar gold now relatively common, the gold bugs have progressed through the anger phase and are now “bargaining with God.”

Erb imagines them saying the functional equivalent of: “So long as gold stays above $1,000 an ounce, I’ll go to church every Sunday.”...MORE
Previous posts Mr. Erb shows up in:
April 2008 
Classic Paper: Returns from Commodity Futures
November 2010
"The financialisation of commodities"
June 2013
Barron's on Gold and Real Interest Rates
May 2014
AQR's Cliff Asness: "Fact, Fiction and Momentum Investing"

Here's Erb and Harvey: "The Golden Dilemma" and Erb "Betting on 'Dumb Volatility' with 'Smart Beta'", both at SSRN.

Buying Oil Stocks: It's Still Too Early (XLE; XOP)

We use the ETF's as our snapshot proxies and there is still more downside in the ETF's.

Here are the energy components of the S&P 500:
XLE Energy Select Sector SPDR ETF daily Stock Chart

Here are the smaller Exploration and Production companies:
XOP SPDR S&P Oil & Gas Explor & Prodtn ETF daily Stock Chart
And Here Is MarketWatch:
Buying oil stocks at these prices is just spilling money 
6 reasons why the energy sector is no bargain
About a month ago, some traders were trumpeting that the worst was over for oil. Prices normalized around $60 after a snap-back in spring, with energy seemingly on solid footing once more as we neared the end of the second quarter.

In July, though, all bets were off as crude tumbled sharply to near six-month lows, shedding about 20% in a matter of weeks. That once again puts oil prices within spitting distance of their 2009 lows.

It may be tempting to think you can find a bargain in oil stocks on this pullback, or even that you can play the supposed rebound in crude via commodity futures or related exchange-traded products.

But the pain in oil is far from over, and energy stocks are no bargain.
Here’s why:

1. The U.S. is a major oil producer: Supply gluts persist despite the recent cutbacks in domestic oil production. Consider that, according to the U.S. Energy Information Administration, U.S. crude oil production will average 9.5 million barrels a day in 2015 — up significantly from 8.7 million in 2014. And while cutbacks will drop that output to 9.3 million barrels daily in 2016, according to EIA projections, that’s still well above 2014 levels.

2. Oil is abundant worldwide: OPEC has refused to curtail production despite low prices and increased supplies from the U.S. That’s partially because of nations including Saudi Arabia that want to punish U.S. shale oil companies, which are now competitors in a big way on the global stage, but also because OPEC really has no other options but to keep pumping.

Member states of the cartel need revenue to fund their governments, so cheap oil paradoxically requires nations to sell more in such an environment to make budgets work. Furthermore, a serious change in production would validate fears that the global energy markets are no longer in their control — an idea that Middle East plutocrats cannot allow their citizenry to entertain. That all adds up to record global crude inventories in May (the latest data) that covered roughly 31 days of forward demand — even if another drop of oil isn’t taken out of the ground....MORE