Friday, July 25, 2014

Endpoints

From Dilbert.com:

The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

Greenlight's Einhorn Apparently Not a Fan of Dolores O'Riordan

From ZeroHedge:

David Einhorn On The M&A Bubble And "Dreams" As An Investment Thesis
Yesterday, we were beyond amused when we reported that the market's response to rumors of Zillow's $2 billion take over of Trulia was not only to push Trulia stock higher by $500 million but send the market cap of incomeless, EBITDAless Zillow higher by $1 billion. It appears we are not the only ones fascinated by the market's reaction to every M&A announcement, which is to send not only the target but the acquiror stock soaring. One other such person is David Einhorn who laments precisely this bubblyness in his just released letter to investors, saying that "takeover season has returned and in a new twist, the buyers’ stock prices are also advancing in response to announced deals, enabling companies, including some of our shorts, to see gains as acquirers – even of other troubled companies."

He proceeds to give several examples of how his shorts have worked against him, a trend which as we reported first in 2012 will continue indefinitely under a centrally-planned regime in which the Fed is the Chief Risk Officer of the market, and where no price declines are allowed, and thus the need to hedge (which means that going long the most hated, vile, worthless companies will, sadly, by and large continue to be a winning strategy).

Still, with a return of 5.2% in Q2 and 7.1% YTD, at least Greenlight is only barely underperforming the market, something that 90% of his hedge fund peers can only dream about....MORE
"At Greenlight, dreams do not form the basis of investment theses."
Taking the contra position, The Cranberries:

 

"Goldman Sachs Just Downgraded Stocks"

It's still a bull market.
DJIA down 137.84 at 16945.96; S&P 500 1977.22 down 10.76
From Business Insider:
Goldman Sachs has downgraded stocks.

"We downgrade to neutral over 3 months as a sell-off in bonds could lead to a temporary sell-off in equities," write Goldman Sachs' portfolio strategy team led by Anders Nielsen. "This makes the near-term risk/ reward less attractive despite our strong conviction that equities are the best positioned asset class over 12 months, where we remain overweight."

Over the next three months, Goldman expects equities to return 1.8%, but over the next 12 months stocks still appear poised to return 10.5%....MORE

Bear Stearns CEO Ace Greenberg Has Died

In "Ace Greenberg: 'never make fun of a millionaire, never hit a cripple, and never have sex with an idiot.'" I retold the story of a friend who cleared through Bear Stearns and who was just tickled pink when, in the middle of one of our Friday-after-the-close schmoozefests, who should call but Alan Greenberg.

My friend was so happy that I was there to hear him chat with "Ace" that he put the call on speakerphone.
Whereupon Mr. G. cuts directly to the chase and shouts, "Where's my fucking $10 million dollars?"
My friend took the call off speaker and asked if I would excuse myself for a few minutes.

From the New York Times:

Alan C. Greenberg Is Dead at 86; Led Bear Stearns Through Its Rise and Fall
Alan C. Greenberg, a risk-chasing Wall Street titan who built Bear Stearns into a global investment banking powerhouse and presided over its collapse as America slid toward a calamitous recession in 2008, died on Friday in Manhattan. He was 86. 

The cause was complications of cancer, his son, Ted, said.

Mr. Greenberg’s nickname was “Ace,” and he kept a deck of cards on his desk, ready to deal. He was a champion bridge player, a magician who conjured coins with sleight of hand, a show-off who could whiz-bang a yo-yo, an adventurer who played pool with sharks and stalked game in Africa. 

He was a cigar-chomping capitalist in shirt sleeves: balding, muscular, poker-faced — some said icy — and he enforced strict regimens among employees: no loafing or small talk, no big salaries but commissions based on performance, and no long meetings. 

He loved the trading room, with its maelstrom of shouts, jangling phones, desks overflowing with paper and high-speed transaction displays. In his office he kept a photo of himself crouching over an African antelope he had slain with bow and arrow.

That buccaneer spirit propelled him over five decades from Bear Stearns’s stock room, where he began as a clerk in 1949, to trading floors, where he mastered moneymaking skills, and into the executive suite, where he became chief executive in 1978, chairman in 1985 and chairman of the executive committee in 2001.
Mr. Greenberg led Bear Stearns on one of Wall Street’s legendary roller-coaster rides, a climb to dizzying heights as one of the country’s biggest brokerages, and a breathtaking free fall into bankruptcy. Stuck with billions in all-but-worthless mortgage securities as its clients made a run on the bank, Bear Stearns was taken over by JPMorgan Chase in a $270 million fire sale sanctioned by the Federal Reserve.

The failure, the first among several brokerages, helped ignite Wall Street’s collapse, which dragged the nation into the worst credit crisis since the Great Depression. Bear shareholders, whose stock had traded at $170 in 2007, got $10 a share. Most of the firm’s 14,000 employees lost their jobs, and some their life savings. Thirty percent of the equity was held by employees, including many senior executives who were wiped out.

But Mr. Greenberg, who had cannily cashed in his stake over the years and had sold $50 million in Bear Stearns shares since 2007, emerged almost unscathed. And he signed a lucrative contract with JPMorgan to stay on as vice chairman emeritus and take 40 percent of trading commissions he generated. In early 2010, JPMorgan discontinued the Bear Stearns name....MORE

Millions Spent on Faulty Orbital Lizard Sex

From the Washington Post:

There is a lizard sex satellite floating in space and Russia no longer has it under control

Space lizards, out of control. (EPA/Luong Thai Linh)
At this very moment, a Russian satellite full of geckos -- (possibly) having sex -- is floating around in space -- and mission control has lost the ability to control it.

The Foton-M4 research satellite launched on July 19 with five geckos on board. The plan: To observe their mating activities in the zero-gravity conditions of Earth orbit. Several other earthly creatures, including plants and insects, were also placed on board for experiments.

But shortly after the satellite made its first few orbits, it stopped responding to commands from mission control. The equipment on board, however, is still sending scientific data back to earth, a spokesman for Russia's Institute of Biomedical Problems said....MORE

Headline credit:
I can picture the Daily Mail headline now: MILLIONS SPENT ON FAULTY ORBITAL LIZARD SEX. As it completely overlooks that the crew can still see into the biosatellite via camera feeds and instrumentation.
posted by Slackermagee at 9:40 AM on July 25  
-MetaFilter

Why Are So Many Political Heavyweights On the Board of Theranos?

First up, some background from the Seattle Times:

Stanford dropout Silicon Valley’s latest phenom
The latest tech phenom is a 30-year-old Stanford dropout whose hatred of needles helped lead her to start a company aimed to help people better understand their bodies.

Silicon Valley, much like baseball, has its share of phenoms, those up-and-comers who demonstrate extraordinary promise.

Meet the latest: Elizabeth Holmes.
Elizabeth Holmes, founder and CEO of Theranos
The 30-year-old Stanford dropout turned paper multibillionaire has worked for 11 years on her startup, which aims to give all of us better information about our bodies in a quest to revolutionize how we manage our health.

“If people can really begin to understand their bodies, that can help them change their lives,” she said during a recent interview at the Palo Alto, Calif., headquarters of Theranos, a mix of the words “therapy” and “diagnosis.”

Over the past year, Holmes has embraced a more public profile, recently snagging the cover of Fortune magazine in what bore all the hallmarks of a carefully orchestrated media push. Her board includes former Secretaries of State Henry Kissinger and George Shultz, former Defense Secretary Bill Perry, a couple of former U.S. senators, a Marine general. Oracle Chief Executive Larry Ellison is one of her investors.
Holmes’ drive to change the world has a familiar ring here. She may actually do it — or not. It’s always hard to know in Silicon Valley whether the hype matches the reality.

The tech industry has seen phenoms before. They are typically young, bold and single-minded with boundless ambition. Think Steve Jobs, Bill Gates, Jeff Bezos, Mark Zuckerberg.

What often distinguishes great leaders are qualities like determination and persistence, but something else too, said Bob Sutton, a Stanford engineering-school professor and co-author of “Scaling Up Excellence.”
“They believe they are destined to do something special,” he said.

In that respect, Holmes is cast from the same mold as Jobs et al. She launched the company, she told me, after “thinking about what is the greatest change I could make in the world.”

Holmes, who hates needles, zeroed in on blood tests as a starting point. If blood tests were easier, cheaper and more convenient — Theranos aims to put a lab within a mile of any city dweller — people could take multiple tests over time and see signs of a disease or condition before it’s too late, Holmes argues....MORE

And from USA Today:

Change Agents: Elizabeth Holmes wants your blood
Elizabeth Holmes is tall, smart and single. Well, maybe not truly single. "I guess you should say I'm married to Theranos," Holmes says with a laugh. Only she's not kidding.
For the past 11 years, Holmes, 30, has been laboring incessantly to build a company whose mission is to overhaul the nation's $60 billion blood taking and analysis business, literally one drop at a time.

The diagnostic-lab industry has long been dominated by names such as Quest Diagnostics and LabCorp, whose satellites many of us visit when our doctors want to run standard tests that typically require three or four vials of blood. But Theranos – a blend of "therapy" and "diagnosis" – has developed hardware and software that allows for many such tests to be completed with just a pinprick's worth of blood stored in a minute vial called a nanotainer.

The benefits of this breakthrough to Theranos could be riches; Holmes, who owns more than 50% of the stock in her company, has raised $400 million for a current valuation of $9 billion. But while Holmes is a billionaire on paper, nothing seems to interest her less....MORE
HT on both links, Economic Policy Journal:
WOW: The Female Mark Zuckerberg?

What is Henry Kissinger and Gang Up To Now?

Here's the Fortune story that started the media blitz.

"U.S. Corn Farmers Face a Cash Crunch"

Probably time for a little bounce when the Journal starts paying attention.
Corn in storage-Sept. contract-$3.59'6 down 1'6, new crop-December-$3.68'4 down 1'0.
From the Wall Street Journal:

Prices Have Fallen Nearly 30% in Past Three Months

Tumbling corn prices are sowing fears that many U.S. farmers will suffer their first losses in years and the agricultural economy could face its first sustained slump in a decade.
Corn prices have plunged nearly 30% in the past three months to their lowest point since 2010 as near-perfect weather in the Midwest fuels expectations of a second consecutive bumper harvest. Prices of other crops have fallen sharply as well, with soybeans trading near 2½-year lows and wheat near four-year lows.
Iowa farmer Doug Adams said he and his partner likely will try to renegotiate their rent on about 400 acres 
they added to their operation last year. Stephen Mally for The Wall Street Journal
The price-depressing glut of corn is benefiting companies that depend on grain for animal feed and other uses, including meatpackers, livestock farmers and ethanol producers. Shares of Tyson Foods Inc. TSN -1.23% have soared 47% in the past 12 months, while rival chicken processor Pilgrim's Pride Corp. PPC +0.19% has gained 95%. Shares of Archer Daniels Midland Co. ADM -0.81% , which processes grain into ethanol, corn syrup and other products, are up 34%.

Lower global grain prices are helping consumers as well, especially in countries where the cost of bread and other staples accounts for a large share of spending. A monthly food-price index published by the United Nations Food and Agriculture Organization declined for a third month in a row in June to the lowest since January, largely due to a marked drop in grain and vegetable-oil prices. 

The lower commodity costs could temper inflation in U.S. grocery aisles for cereal, cookies and other products containing grain and soy, though few packaged-food companies are likely to cut prices, analysts said.
But the slide in corn prices is expected to cut sharply into overall incomes in the U.S. Farm Belt because corn is the country's largest crop, grown on 350,000 farms and yielding about $60 billion in farmers' revenue last year.

Now 57% off its record high in 2012, corn is trading well below the $4-a-bushel threshold generally required for farmers to earn profits. That means many growers this year likely will fail to cover their costs for the first time since 2006, according to agricultural economists....MUCH MORE 
HT: The Big Picture's 10 Friday AM Reads

Among hundreds of posts:
Iowa State's Worst Case Corn Prices: $2.89 By 2017 

Betting Big on Russian Bonds

Even the Czar's bonds evenually paid off, a little.
From City AM:
Why ACPI is betting big on Russian bonds
Why ACPI is betting big on Russian bonds
Intense scrutiny from the international community and the threat of far-reaching sanctions do not undermine the fundamental strength of the Russian bond market.

That is the view of Daniel Moreno, head of emerging markets fixed income at London-based boutique ACPI Investment Managers.

While other managers have either cut their Russian exposure or warned over ‘absurdly cheap’ valuations, Moreno has increasingly added to his Russian holdings over the past six months.

‘There is one thing that is a clear negative and that is the political situation, meaning the geo-political situation. Russia is at the forefront of lots of discussions because of criticism and pressure from the United States and the EU, which are trying to push Russia into a corner.’

‘Even though it is particularly hard to analyse the outcomes, we are thinking this will be seeing a stabilisation within six months or so.’

Moreno assumed responsibility for the ACPI Emerging Markets Fixed Income Ucits fund in January. He took over from Alia Yousuf, who subsequently joined ING IM.

Under Moreno’s stewardship, the fund has returned 8.19% over the six months to the end of June 2014. This compares to a 7.6% rise by its benchmark, the LCI ML HY/JPM EMLI+/JPM EMBI+ (1:1:1).

He attributes a large portion of this outperformance to the returns generated by exposure to Russia over a turbulent period. ‘We hold assets that we believe have value and, back in January, Russian bonds didn’t have value.’...MORE

"Amazon Drops 12% on ‘Huge Loss’ Projection; Three Downgrades" (AMZN)

Following up on last night's "Legendary Patience of Amazon Investors Being Tested (the stock is down 9% afterhours) AMZN".
The stock is now down $40.15 (11.20%) at $318.46.

From Barron's Tech Trader Daily:
Shares of Amazon.com (AMZN) are down $41. 31, or almost 12%, at $317.30, in early trading, adding to last night’s losses, after the company missed Q2 profit expectations with a much-wider-than-expected net loss per share, and said losses will be even deeper this quarter.

Among the surprises of the quarter, beyond just the lower profit, were announced price cuts in Amazon’s cloud computing service, Amazon Web Services, or AWS. Continued price chopping in AWS is expected to be one of the main causes of the deeper projected losses going forward.

The stock has gotten three downgrades this morning, that I can see, from Raymond James‘s Aaron Kessler, CRT Capital‘s Neil Doshi, and B. Riley & Co.‘s Scott Tilghman.

Kessler, cutting his rating oto Market Perform from Outperform, and stripping away his $391 price target, writes that “While we maintain a positive long-term view on Amazon, we believe shares are likely to remain range-bound near-term given continued high levels of investment combined with slowing unit growth (especially international growth).”

Kessler raised his 2014 revenue forecast to $91.36 billion from $91.25 billion, but cut his profit estimate to a loss of 16 cents a share from a profit of 79 cents a share.
There are also plenty of price target cuts.

Cowen & Co.‘s John Blackledge, reiterating an Outperform rating, cuts his price target to $390 from $410, writing that “We remain constructive, but were disappointed by the lower-than-expected AWS growth.”

Still, Blackledge sees things to like...MORE

Goldman on Gold: "Target $1,050 an Ounce, But $1,200 is the Real ‘Floor’"

$1293.60 last, up $2.80.
From Barron's:
Goldman Sachs’ commodity strategists write this week that they remain doubters of gold’s 2014 rally, sticking to their prediction that the metal will reach $1,050 in price by the end of the year. To come true, it would mean a slump in gold’s price of 19% or greater from current levels. That’s pretty bearish.
http://s.wsj.net/public/resources/images/BN-DV389_GSgold_P_20140724154700.jpg
But the GS’ strategists’ bearishness has a limit. In a note to clients this week, the strategists write that they expect the $1,200 level, or roughly 7% beneath Thursday’s prices, to function as “a good estimate of the floor price for gold.”

A price of $1,200, they write, is the 90th percentile of all-in sustaining costs in the gold-mining sector. Putting it more plainly, it’s the price below which more producers have to think about scaling back their gold output. Go appreciably below this level and the pressure builds. The result in that case should be lower output....MORE
And from Kitco, a story we'll be referring back to:

Mining Companies Need To Overhaul Business Models To Right Ship – Ernst & Young
According to Ernst & Young, the mining industry needs to revamp its business models if it wants to reverse a decade-long trend of decline in productivity.


In a mining report released Thursday, titled Productivity in mining: A case for broad transformation, EY notes mining companies chased production growth at the expense of productivity on a volume and cost basis.

“Companies caught in the race to capitalize on high commodity prices are now facing a number of business model challenges,” said Bruce Sprague, EY’s Canadian mining and metals leader. “Operation expansion and inefficient use of labor and equipment are all compromising productivity.”

Sprague added that there are no easy solutions; highlighting cost-cutting exercises, minimal process and technology improvements are not enough to circumvent the damage that has been done.

In the report, EY describes productivity as a gain that “should be measured as a form of optimization, i.e., the highest ratio of output to input, which could in fact mean achieving higher productivity with lower input.”
The report highlights labor productivity as a major piece to the decline, which they attribute in part to the increasing complexity of operations, but more so to inadequate skills brought on during the boom time.

Another issue is capital productivity, according to EY. Part of the list includes long lead times between investment and production, ineffective portfolio management, issues with capital allocation decision-making, resource nationalism, as well as others....MORE
Here's the EY press release and download site:
Business transformation needed to address mining productivity

EIA: U.S. Refiners Running At Record Levels

From the EIA's Today in Energy:

U.S. petroleum refineries running at record levels
graphic of weekly refinery inputs, as explained in the article text
Source: U.S. Energy Information Administration, Weekly Petroleum Status Report

U.S. refineries have been processing record volumes of oil recently. Refinery inputs hit a record-high 16.8 million barrels per day (bbl/d) in each of the past two weeks, exceeding the previous record from summer 2005. Refineries in the Midwest and Gulf Coast in particular pushed the total U.S. input volume upward, as these refiners' access to lower-cost crude oil, expansions of refining capacity, and increases in both domestic demand and exports contributed to higher refinery runs.

As discussed in This Week in Petroleum, refinery gross inputs in the Midwest have been higher than the five-year range since late April. Typically, Midwest drivers use more motor gasoline in the summer, and some of that has come from the Gulf Coast. However, recent and planned changes to pipeline infrastructure have altered both the type of products in the pipelines and direction of flow. These changes increase the incentive for Midwest refiners to boost their own gasoline production.

The Midwest's record-high runs of 3.8 million bbl/d for the week ending July 11 pushed the region's refinery utilization to 100.3%, the first time any of the Petroleum Administration for Defense Districts (PADDs) has exceeded 100% since EIA began publishing weekly PADD-level utilization in June 2010....MORE

AQR's Cliff Asness: "Be Realistic About 2.5% Real Returns"

From Alpha Architect:
Cliff Asness had a great interview with Steve Forbes back in April (a copy is here) that highlights the dilemma facing investors today: stocks and bonds are overpriced, so what do you do?

Forbes:

…Looking at stocks and bonds, are they both overpriced?
Asness on market valuations:
Yeah, they are…if you’re going to say, “what are the next 10 years going to look like?”…value has some power to forecast the next decade…right now my favorite measure of value…is Bob Shiller’s PE. It’s gotten very popular. I’ve been looking at it since the late 90s. And that’s about the 85th percentile expensive back to 1926, so only 15 percent of the time has it been more expensive. It’s occasionally been way more expensive, so percentiles…people can use them to be tricky. Statisticians have all kinds of tricks…We’re at 25 on the Shiller PE. The 100th percentile, hit in early 2000, was 45…I would not call this a bubble, I would just call this an expensive market.
Asness on real yields:
The real bond yield…that’s just the 10-year bond minus our best guess of what economists are forecasting for inflation. I say “our best guess,” because we have their actual guess for 20, 30 years, [but] databases don’t exist and we have to guess at what they were guessing before that, but that’s also about the 85th percentile. The difference between them is relatively normal. People focus on bonds because it feels much more measurable. And yields are [low]…[this is] not a commercial for bonds…85th isn’t so good.

Both [stocks and bonds] are very similar [at the 85th percentile]…For truly long term investors, I would not use this to time the market…I still think returns will be positive. So if you’re out of the market for the next 10 years, that’s not going to help, and I don’t think you’re going to get the exact timing right. But I would lower my expectations. Whether you’re a pension plan, or an individual with a sheet of paper trying to figure out, “how much do I need to retire?” if we are right that these higher than normal prices, [and] lower than normal yields, are going to lead to positive, but lower than normal returns, well, you have to use those.

We think a 60/40 portfolio of U.S. stocks and bonds has averaged about 5% over inflation historically. We think, even if valuations stay high -- and it could be worse if valuations fall, right? Regression to the mean. If those PEs come down, it could be worse -- but even if they stay high we think they…offer 2 to 3 percent over inflation...MORE
On April 22 the closing yield on the 10-year was 2.73%, today we're at 2.509%.
Today the S^P 500 looks to open at 1977.25 vs. 1,879.55 three months ago.

Thursday, July 24, 2014

Legendary Patience of Amazon Investors Being Tested (the stock is down 9% afterhours) AMZN

AH $323.95 down $34.66 (9.67%)
From City AM:

Amazon share price takes a dive as losses increase
More of the same from Amazon, as it continues its tradition of favouring growth over profits.
The e-commerce giant has just announced a loss of $126m, or $0.27 per share for the three months to the end of June, coming in significantly below Wall Street estimates of a $0.15 per share loss.

The second quarter has seen a significant widening of the company's losses compared to the same period last year, which were $7m, or $0.2 per share.

This is despite Amazon's revenues enjoying a rise of almost $4bn, climbing  to $19.3bn, from $15.7bn in the same period last year.

The revenue is exactly in line with what analysts were anticipating and constitutes an increase of 23 per cent year-on-year.

For the next quarter, Amazon's revenue guidance is between $19.7bn and $25bn,  again in-line with consensus estimates.

But are investors starting to get impatient?
The retailer's share price, which is often highly volatile in reaction to earnings reports given how little information the company releases about its strategic plans, has taken a dive on the latest results, down around six per cent in after hours trading.

As an indication of how explosive Amazon's stock is in the follow up to earnings, it averages a 9.5 per cent move either way, according to Bespoke....MORE
And from Barron's:
...Q3 Loss to Be Much Bigger than Q2

Perfect! Two Companies, Neither With Earnings, BOTH Go Up on Acquisition Announcement! (Z; TRLA)

A deal for the ages.
Because math.
From ZeroHedge:
Somehow this makes perfect sense: Zillow's stock is up over 22% on news that it will acquire rival real estate company Trulia for $2 billion. Trulia is up 32%, which is about half in absolute terms of the $1 billion Zillow's market cap has grown by in the past few moments to $6 billion. Imagine if it had paid even more for Trulia? And the piece de resistance: Neither company is currently profitable on an annual basis - the combined net income of the two companies is... zero. Two wrongs do not make a right, or rather didn't. And then the new normal came around... 

Wait, we know: Synergies (or at least infinite NOLs).


Upon announcing a $2bn acquisition of a money-losing competitor, Zillow "investors" added $1 Billion in market cap to the company... yeah yeah synergies...MORE

"Global Banks Appear to Cut Russia, Ukraine Exposure, But Not By Much "

From Real Time Economics:
Bankers tend to abhor risk. Especially geopolitical conflicts involving a nuclear power.

So risk managers around the world probably smiled Wednesday when the numbers came out showing their exposure to Russian creditors fell significantly in the first quarter, while Ukraine was facing the loss of its Crimea region and an escalating battle against pro-Russian fighters on its eastern border.

Internationally active banks reduced their outstanding lending to Russia to $209 billion at the end of March, from $225 billion at the end of 2013, according to the Bank for International Settlements. In the same period, international lending to Ukraine fell to $22 billion from $25 billion on an “ultimate risk” basis, according to the Basel-based institution.

But there’s a catch: Most of the decline in lending exposure to Russia in dollar terms was due to the collapse of the ruble against the dollar. The currency faced a massive exodus on the prospect of escalating sanctions and overall geopolitical risk.

According to another set of statistics from the BIS that adjusts for exchange rates, international claims on Russian borrowers barely budged at all in the first quarter, slipping by just $300 million.
And that could be a problem....MORE

"Johnson & Johnson partners with Organovo to consider 3D-printing living tissue" (ONVO; JNJ)

Well, that's a rather big name to be getting into 'print-living-tissue biz"
From GigaOm:
Janssen Research and Development, a Johnson & Johnson pharmaceutical company, is looking into 3D printing living tissue for drug research, according to a document filed with the SEC Thursday. The company will partner with Organovo, an expert in bioprinting.

Organovo has 3D-printed everything from blood vessels to thyroid tissue, and has long-term plans to print entire organs. Later this year it will begin offering liver tissue to drug companies for testing the toxicity of drugs — its first commercial product.

Janssen is more interested in using 3D-printed tissue to discover drugs. By exposing many different 3D-printed cells to many different early-stage drugs, it can determine which are the most effective. Janssen and Organovo did not disclose further details about the agreement.

Organovo announced a partnership with the National Institutes of Health in January that focuses on printing eye tissue for drug and disease studies....MORE
Organovo is up 6% at $8.11, JNJ is closing in on a $300 billion market cap on $73 billion ttm revenues, $102.20 last.

Tesla Motors: Catalysts Aplenty for Second-Half Gains, Baird Says

We're just voyeurs at the moment-we like to watch- but should the stock see enough exuberance to revisit the $265.00 all-time high this autumn I would definitely explore the short-side opportunity. $223.45, up 96 cents, last.
From Barron's Stocks to Watch blog:
Baird’s Ben Kallo and Tyler Frank are feeling good about Tesla Motors (TSLA) heading into its earnings on July 31, despite their belief that third-quarter estimates need to come down:
We reiterate our Outperform rating and $275 price target ahead of Tesla’s Q2 report. We believe production could be stronger than expected which should set Tesla up for a solid 2H:14, and are estimating 7,565 Model S deliveries. That said, we believe street estimates need to come down for Q3:14 to account for higher operating expenses and Tesla’s lease program....MORE
The action since the momentum-stockalypse via Yahoo Finance:
Chart forTesla Motors, Inc. (TSLA) 

"Hackers try to extort European Central Bank after email theft"

Via Kitco:
Frankfurt ( Alliance News ) - Hackers tried to extort money from the European Central Bank (ECB) after they stole about 20,000 email addresses from one of the bank's databases, it said Thursday.

The hacking of the bank's distribution lists for journalists and those participating in events organized by the Frankfurt -based bank emerged after it was contacted by someone asking for money for the return of the addresses.

"The theft came to light after an anonymous email was sent to the ECB seeking financial compensation for the data," the bank said in a statement....MORE 
Journalist's contact info? Ummm... good luck with all that.

Dublin Property Prices Up 24% Year-on-year

From True Economics:
Irish Residential Property Price Index for June is out today. Headlines are burning hot with

  • 12.5 hike in prices nationwide (y/y);
  • June m/m rise of 2.9% - faster than 2.3% in May
  • Dublin property prices up 3.3% m/m and 23.9% y/y
  • Dublin House prices up 3.1% m/m and 24.4% y/y
There is no avoiding the talk about a 'new bubble'.
In the past, I clearly said that in my view:
  1. Current levels of prices are not signalling bubble emergence in Dublin
  2. Rates of increases in Dublin prices are concerning, but levels are yet to break away from the national historical averages
  3. Trend-wise, we are way below the levels of Dublin prices consistent with normal long-term behaviour in the series.
Here are updated charts on long-term trends...MORE

Real Estate Investment Trusts Down On The Farm: Farmland Partners Looks to Buy $100 Million Worth of Land (FPI; LAND)

Gladstone Land is the other publicly traded vehicle. There a a few private partnerships that let in outsiders.
In February 2011 I noted:
...We've been following this trend for the last three years and have been asked when will it top?
One sign will be when Optima Fund Management brings their American Farmland Company public, still a few years away....
Optima have not yet made the move, and have been correct to keep the cash flow and cap gains to themselves but I have a feeling we are getting close.
From Agrimoney:

Farmland Partners has sights on $100m of farmland
Farmland Partners revealed a $100m shopping list of US farms as its unveiled plans to raise cash from a further share sale, only three months after raising some $50m at its stockmarket flotation.
The farmland investment group said its staff had "identified, and are in various stages of reviewing" more than 10 potential farm purchases, covering a total of 20,000 acres, and with an estimated aggregate price of $100m.
"We have engaged in preliminary discussions with some of the owners and commenced the due diligence process on certain of these farms," the group said.
However, it said that it did not expect to seal a deal until the completion of an offering of 3.71m shares, with the option to underwriters to sell a further 557,620.
Warchest
That would make the offering larger, in share terms, than the group's initial public offering of 3.80m shares completed in April, at which it raised $48.0m, net of costs.
It forecast net proceeds of $54.4m from the latest offer, assuming underwriters exercise the opportunity to sell the extra shares.
Although that sums falls well short of the price needed to acquire all the land in its sights, Farmland Partners said that it was to borrow a further $30.0m from state-backed Farmer Mac Mortgage Securities, and had extra firepower from selling partnership interests.
This scheme allows farmland owners to defer the crystallisation of capital gains on land sales.
'Economies of scale'
Farmland Partners has announced four farm acquisitions since its April flotation, taking its portfolio from 7,300 acres to nearly 25,000 acres, and expanding out of Midwest row crop land....
...MORE

A Model For the Price of Gold

Nothing new as far as the inputs to model but laid out in a smart, straightforward fashion.
From Crossing Wall Street: 

The Gold Model Revisited
Four years ago, I wrote a post discussing my thoughts on how to build a model for the price of gold. That post received by far the most attention of anything I’ve written. I still get emails about it today.
Over time, I’ve thought more about this issue, and I’ve altered my thinking somewhat. I also want to clarify some points from my original post. Instead of writing an addendum to it, though, I thought it would be clearer to rewrite the whole thing. What follows is the updated version.
******************************************************************
One of the most controversial topics in investing is the price of gold. Fifteen years ago, gold dropped as low as $252 per ounce. The yellow metal then enjoyed a furious rally as it soared above $1,920 per ounce, easily outpacing the major stock-market indexes. Over the last three years, however, it has sunk back down to $1,300.

Like Linus in the pumpkin patch waiting for the Great Pumpkin, many gold bugs hold out hope. They claim that any day now, gold will resume its march upward to $2,000, then $5,000 and then $10,000 per ounce. But my question is, “How can anyone reasonably calculate what the value of gold is?”
For stocks, we have all sorts of ratios. Sure, those ratios can be off, but at least they’re something. With gold, we have nothing. No assets or liabilities. Not even a dividend. After all, gold is just a rock (OK, OK, an element). How can we even begin to analyze gold’s value? There’s an old joke that the price of gold is understood by exactly two people in the entire world. They both work for the Bank of England, and they disagree.

In this post, I want to put forth a possible model for evaluating the price of gold. The purpose of the model isn’t to say where gold will go but to look at the underlying factors that drive the price of the precious metal. Let me caution you that as with any model, this one has its flaws, but that doesn’t mean it isn’t useful. More importantly, I’ll explain why our model makes theoretical sense, rather than just mashing up numbers and seeing what correlates.

The key to understanding the gold market is understanding that it’s not really about gold at all. Instead, it’s about currencies, and in our case that means the U.S. dollar. Properly understood, gold is really the anti-currency. It serves a valuable purpose in that it keeps all the other currencies honest—or exposes their dishonesty.

This may sound odd, but every major currency has an interest rate tied to it. It doesn’t matter if it’s the euro, the pound or the yen. In essence, that interest rate is what the currency is all about.
Before I get to my model, we need to take a slight detour and discuss a fascinating paradox known as Gibson’s Paradox. This is one the most puzzling topics in economics. Gibson’s Paradox is the observation that interest rates tend to follow the general price level and not the rate of inflation. That’s very strange, because it seems obvious that as inflation rises, interest rates ought to keep up. Similarly, as inflation falls back, rates should move back as well. But historically, that hasn’t been the case. Instead, interest rates have risen as prices have gone up, and only fallen when there’s been deflation.

This paradox has totally baffled economists for years. Yet it really does exist. John Maynard Keynes called it “one of the most completely established empirical facts in the whole field of quantitative economics.” Milton Friedman and Anna Schwartz said that “the Gibsonian Paradox remains an empirical phenomenon without a theoretical explanation.”

Even many of today’s prominent economists have tried to tackle Gibson’s Paradox. In 1977, Robert Shiller and Jeremy Siegel wrote a paper on the topic. In 1988 Robert Barsky and none other than Larry Summers took on the paradox in their paper “Gibson’s Paradox and the Gold Standard.” It’s this paper that I want to focus on. (By the way, in this paper the authors thank future econo-bloggers Greg Mankiw and Brad DeLong.)

Summers and Barsky agree that the Gibson Paradox does indeed exist. They also say that it’s not connected with nominal interest rates but with real (meaning after-inflation) interest rates. The catch is that the paradox only works under a gold standard. Absent that standard, the Gibson Paradox fades away....MORE

Wednesday, July 23, 2014

"Be Careful What You Tweet For"

From re/code:
Joy of Tech 2025
Here's The Joy of Tech at GeekCulture

"United Arab Emirates Plans to Create Space Program, Land Mars Probe"

From Mashable:
Mars2

An image from the NASA Mars rover shows rocks on the surface of the planet.

The United Arab Emirates has jumped into the international space race at a full sprint, announcing plans on Wednesday to create a space program and send an unmanned probe to Mars by 2021.

"The UAE Mars probe represents the Islamic world’s entry into the era of space exploration," UAE President Sheikh Khalifa bin Zayed Al Nahyan said, according to Reuters. "We will prove that we are capable of delivering new scientific contributions to humanity."

The proposed space program is the latest costly project for the country, which has one of the top 10 GDP per capita income in the world. It previously constructed the world's tallest skyscraper and recently announced plans to create a climate-controlled city.

In the statement announcing the space program, officials said they are seeking to foster growth in the country's technology sectors and diversify its economy. According to the National, the UAE has already invested 20 billion dirhams (approximately $5.9 billion) in space technology, and plans to launch the Mars probe in 2021 in tandem with its 50th anniversary....MORE
See also the WaPo:
U.A.E. plans Arab world’s first mission to Mars
...The oil-rich Gulf state is never short on hubris. It's home to the next iterations of global museums like the Louvre and the Guggenheim in Abu Dhabi and the world's tallest building and busiest airport for international travelers in Dubai. The royal family in Abu Dhabi has even plowed national wealth into owning and improving the reigning English soccer champions, Manchester City....MORE

Who the Hell Is Rima Senvest Management LLC? Up 11% in the First Half After an 80% Return In 2013

Make everyone else look bad...
From ValueWalk:

Senvest also explains the rationale behind adding YRC Worldwide as a core position in its latest letter
Richard Mashaal and Brian Gonick’s Rima Senvest Management LLC beat the market in June, gaining 3.7% against the S&P 500 (INDEXSP:.INX)’s 2.1%, putting it up 10.6% through June versus 7.1% for the S&P 500 over the same period. The hedge fund’s June gains made up for its losses the previous month and put it back on track to maintain its 20.7% annualized returns since inception in 1997. The star Canadian hedge fund returned a whopping 80% in 2013.
senvest partners june earnings 0714
Senvest explains its investment in YRC Worldwide
In this month’s investor letter Mashaal and Gonick gave a more detailed explanation of why they added less-than-truckload (LTL) trucking company YRC Worldwide, Inc. (NASDAQ:YRCW) as a new core holding. They initially took a short-term position on YRCW at the beginning of the year because a combination of labor union negotiations and debt refinancing were depressing its stock price....MORE
Here's the March 31, 2014 13F via NASDAQ: 

RIMA SENVEST MANAGEMENT, L.L.C
110 EAST 55TH STREET, NEW YORK, New York, 10022, (514) 281-8082
Report Date: 03/31/2014
Position Statistics
Total Positions 104
New Positions 18
Increased Positions 59
Decreased Positions 32
Positions with Activity 91
Sold Out Positions 9
Total Mkt Value (in $ millions) 1,162

Institutional Holdings information is filed by major institutions on form 13-F with the Securities and Exchange Commission.
Sector Weighting
Basic Materials
Capital Goods 0.16%
Conglomerates
Consumer Cyclical 1.82%
Consumer/Non-Cyclical 2.63%
Energy 7.44%
Financial 7.19%
Healthcare 13.56%
Services 20.34%
Technology 35.51%
Transportation 5.01%
Utilities 0.33%
 
...MORE

"If Your Firm Appoints a Chief Happiness Officer, You Should Definitely Run Away"

Run fast, run far.

Adrienne at GC seems unhappy with this latest bit of management mysticism.
From Going Concern:
Beyond the typical grunt and senior grunt titles -- associate, manager, partner -- there are a group of people employed within public accounting firms whose sole job it is to get quoted in the New York Times, push mythical work/life balance arrangements, make sure the firm has enough "other" people so as not to appear to be racist or sexist or homophobic, and manage sugary sweet social media accounts. So far, we haven't seen a Chief Happiness Officer pop up yet but as it's starting to catch on in Corporate America, don't be all that surprised if one shows up at your firm in a couple years.
From New Republic:
Happiness isn’t something you find, or work towardit’s something you buy and have delivered. Or at least that’s the premise of one of the newest jobs over in the C-suite. Now, alongside the CEO, CFO, and their ilk, we have the CHO, or chief happiness officer. As the name clearly suggests, the CHO is responsible for the contentment of individual employees, sort of like an h.r. manager, but on steroids; the theory goes that happy workers are productive workers, so happiness turns out to be in the company’s best interest. Perhaps unsurprisingly, many CHOs reside in Silicon Valleyboth at start-ups and more blue chip tech companies. But it’s starting to spread: Southern restaurant company Hopjacks created the position in 2012 and the Quality of Life Foundation, an education nonprofit, created one in 2010.
This is really supposed to be management's job, best achieved by creating a work environment that doesn't feel like an episode of Oz but hey, whatever.

Delivering Happiness, according to CEO and CHO Jenn Lim, devotes its time to measuring the contentment of clients and to laboring to improve their working conditions. So how exactly does one create joy? “We take a snapshot of all the employees, and basically identify their happiness levels,” Lim says. “And using [the Happy Business Index], we can see, what are the key points of unhappiness?”...MORE

What the Collapse of Crop Prices Means For Corporate America (DD; MON; DE; CAT)

Agriculture, being the base of pretty much every civilization since 8,000 B.C., probably bears watching.
Here's corn over the last few years via FinViz:
From Agrimoney:

DuPont highlights threat from crop price falls

DuPont restated its long-term faith in the agriculture market despite acknowledging the threat to prospects from the tumble in crop prices, particularly of corn, a key earner for its seeds business.
The chemicals-to-healthcare conglomerate, whose agriculture assets include seeds company Pioneer, is "closely watching the development of [US] corn and soybean crops, and the impact on commodity prices", said Jim Borel, executive vice-president of DuPont's agriculture division.
"Another strong harvest in North America, if realised, will continue to pressure overall economics for corn and soybean farmers.
"If the current supply dynamics persist and corn planted area remains under pressure, it will temper short-term growth rates for the agriculture segment, particularly in our seed business."
'We comprehended the trend'
Elle Kullman, the DuPont chairman and chief executive, said that the group had already taken action in response to soft corn seed sales behind a drop of 11.2% to $836m in agriculture sector operating profits in the April-to-June quarter, as announced separately on Tuesday and heralded in a profits warning last month.
"If you take a look at the restructuring charge that we announced in the second quarter, you will see an ag component on that, so obviously we comprehended the trend and are taking steps," she told investors.
DuPont announced a $263m pre-tax group restructuring charge for the quarter, of which $48m were attributed to the agriculture division.
'Committed to continued investment'
Nonetheless, Mr Borel said that DuPont retained faith in the agriculture sector, and the support to the sector's prospects for a growing world population and increasing consumer prosperity....MORE

The depression of the '30's actually began in the '20's with the collapse of grain prices. Here's wheat from way back when:

Wholesale-wheat-graph

Can Algorithms Replace Politicians?

From The Guardian:
The rise of data and the death of politics
Tech pioneers in the US are advocating a new data-based approach to governance – 'algorithmic regulation'. But if technology provides the answers to society's problems, what happens to governments?
US president Barack Obama with Facebook founder Mark Zuckerberg
Government by social network? US president Barack Obama with Facebook founder Mark Zuckerberg. 
Photograph: Mandel Ngan/AFP/Getty Images
...In this context, Google's latest plan to push its Android operating system on to smart watches, smart cars, smart thermostats and, one suspects, smart everything, looks rather ominous. In the near future, Google will be the middleman standing between you and your fridge, you and your car, you and your rubbish bin, allowing the National Security Agency to satisfy its data addiction in bulk and via a single window.

This "smartification" of everyday life follows a familiar pattern: there's primary data – a list of what's in your smart fridge and your bin – and metadata – a log of how often you open either of these things or when they communicate with one another. Both produce interesting insights: cue smart mattresses – one recent model promises to track respiration and heart rates and how much you move during the night – and smart utensils that provide nutritional advice.

In addition to making our lives more efficient, this smart world also presents us with an exciting political choice. If so much of our everyday behaviour is already captured, analysed and nudged, why stick with unempirical approaches to regulation? Why rely on laws when one has sensors and feedback mechanisms? If policy interventions are to be – to use the buzzwords of the day – "evidence-based" and "results-oriented," technology is here to help.

This new type of governance has a name: algorithmic regulation. In as much as Silicon Valley has a political programme, this is it. Tim O'Reilly, an influential technology publisher, venture capitalist and ideas man (he is to blame for popularising the term "web 2.0") has been its most enthusiastic promoter. In a recent essay that lays out his reasoning, O'Reilly makes an intriguing case for the virtues of algorithmic regulation – a case that deserves close scrutiny both for what it promises policymakers and the simplistic assumptions it makes about politics, democracy and power.

To see algorithmic regulation at work, look no further than the spam filter in your email. Instead of confining itself to a narrow definition of spam, the email filter has its users teach it. Even Google can't write rules to cover all the ingenious innovations of professional spammers. What it can do, though, is teach the system what makes a good rule and spot when it's time to find another rule for finding a good rule – and so on. An algorithm can do this, but it's the constant real-time feedback from its users that allows the system to counter threats never envisioned by its designers. And it's not just spam: your bank uses similar methods to spot credit-card fraud....MUCH MORE

Venture Capital: "It’s Worth What!? Pressure-Testing Companies with Sky-High Valuations"

From Knowledge@Wharton:
Are the sky-high valuations that have put companies like Uber and Airbnb constantly in the headlines proof of their staying power? Not necessarily, says Derek Lidow (Twitter: @DerekLidow), author of Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas into Successful Enterprises, who teaches entrepreneurship, innovation and creativity at Princeton. 

In this opinion piece, Lidow, who was the founder and former CEO of iSuppli Corporation, offers a four-part test for how companies can evolve from “top draft picks” to “wily veterans.” 

Uber recently set a record when it was valued at $17 billion. The transportation start-up both disrupts and leverages the incumbent infrastructure of taxis and town cars. Airbnb, the home room rental start-up, was recently valued at $10 billion, giving it a greater worth than most of its larger traditional hotel rivals. Sky-high valuations have become commonplace. The question is: Are these companies really worth it?

Some start-ups hit upon the right idea at the right time — though almost all must iterate several times before they perfect their offering. Some get the imprimatur of a savvy investor with a strong track record. Others catch the fancy of the media. Each of these can boost a firm’s valuation; but none is a guarantor of ultimate long-term success.
The most critical factors to assess in a start-up and its long term potential for success are what stage it has reached on the journey, and whether its leaders are likely to navigate each of the remaining transitions successfully.
As an entrepreneur, investor, and professor of entrepreneurship, I have learned that every start-up must traverse four distinct stages as it matures. No stage can be skipped and each has its own leadership and strategy imperatives. The most critical factors to assess in a start-up and its long term potential for success are what stage it has reached on the journey, and whether its leaders are likely to navigate each of the remaining transitions successfully. Few entrepreneurs have the natural gifts to excel at all four stages; they can, however, learn how to master them either through personal development or by supplementing their skills through other members of their team.

These four stages must each be navigated in turn as a company evolves from what the founders think to what they know. Stage One is customer validation. The entire focus is to find a customer willing to try your minimum viable product or service. Stage Two is operational validation. In this stage, your strategy focuses on execution to satisfy that customer and find more people willing to try the product. You begin to understand who will buy your product, on what terms and what it will take to deliver it. Stage Three is financial validation, when you discover if your business can survive in the hurly-burly of a competitive market place. Your strategy focuses on scaling. Stage Four is self-sustainability. At this stage, the strategy focuses on innovation as you introduce new products to attract new customers. Your business demonstrates that it is viable beyond the original concept....MORE

Technician Who Called Gold Bust Predicts $700 gold

We aren't looking for that big a drop ($875) but we're betting sooner rather than later.
From CNBC, July 15, 2014:
When Yoni Jacobs' book "Gold Bubble: Profiting from Gold's Impending Collapse" was published in April 2012, gold was trading around $1,650 per ounce. Now gold is below $1,300. But Jacobs, the chief investment strategist at Chart Prophet Capital, doesn't think the gold plunge is over just yet.
"The long-term target is still $700, which sounded a lot more ridiculous a few years ago" Jacobs said on Tuesday's "Futures Now."

"If you look at the long-term chart, you'll see that we reached $800, around $700 in the late '70s, in the '80s bubble of gold. In the 2008 recession, gold bottomed right around $680, which is around $700. So there's a clearly defined trend line there," he said.
Gold suffered two tough days on Monday and Tuesday, as the metal lost $40 over the course of two sessions.

Still, Jacobs doesn't think it will be a straight path down.

"Obviously, nothing falls dramatically that fast. It has to take some pauses on the way down," he said.
Currently, he sees support levels at $1,000 and $1,200, and notes that gold could bounce higher from there. But over the long-term, the picture is clear....MORE
The August contract is trading at $1307.3, up a buck.

About All that Spyware Apple Puts In Your iPhone (AAPL)

From arstechnica:

Undocumented iOS functions allow monitoring of personal data, expert says
Apple has endowed iPhones with undocumented functions that allow unauthorized people in privileged positions to wirelessly connect and harvest pictures, text messages, and other sensitive data without entering a password or PIN, a forensic scientist warned over the weekend.

Jonathan Zdziarski, an iOS jailbreaker and forensic expert, told attendees of the Hope X conference that he can't be sure Apple engineers enabled the mechanisms with the intention of accommodating surveillance by the National Security Agency and law enforcement groups. Still, he said some of the services serve little or no purpose other than to make huge amounts of data available to anyone who has access to a computer, alarm clock, or other device that has ever been paired with a targeted device.

Zdziarski said the service that raises the most concern is known as com.apple.mobile.file_relay. It dishes out a staggering amount of data—including account data for e-mail, Twitter, iCloud, and other services, a full copy of the address book including deleted entries, the user cache folder, logs of geographic positions, and a complete dump of the user photo album—all without requiring a backup password to be entered. He said two other services dubbed com.apple.pcapd and com.apple.mobile.house_arrest may have legitimate uses for app developers or support people but can also be used to spy on users by government agencies or even jilted ex-lovers. The Pcapd service, for instance, allows people to wirelessly monitor all network traffic traveling into and out of the device, even when it's not running in a special developer or support mode. House_arrest, meanwhile, allows the copying of sensitive files and documents from Twitter, Facebook, and many other applications.

"Apple really needs to step up and explain what these services are doing," Zdziarski told Ars by phone on Monday. "I can't come up with a better word than 'backdoor' to describe file relay, but I'm willing to listen to whatever other explanation Apple has. At the end of the day, though, there's a lot of insecure stuff running on the phone giving up a lot of data that should never be given up. Apple really needs to fix that."...MORE

As Google Energy Czar Argues For Public Funding of R&D, Salon Calls For the Nationalization of Google and Amazon (GOOG; AMZN)

The problem with centralized funding schemes boils down to who hands out the funding.
In the arts world you end up with cliques shoveling money to their in-clique buddies.
In the social-thought-leader world you end up with a daisy-chain of crony foundation folks funding crony NGO pals.

If you think it's any different with science you haven't spent enough time observing academics in their natural habitat.

It was ever thus when people hand out other people's money because you run into the same problem you encounter with representational democracy: the people who are attracted to the job are precisely those who are pathologically hooked on power and are thus eminently corruptible.

Fortunately, I'll be long dead before the worst of the ill-effects take root.
Go get 'em, kids.

From FT Alphaville:
Safeguarding the future with public endowments​ for research
This is a guest post by Arun Majumdar, former founding director of ARPA-E and undersecretary of energy (acting), US department of energy; Jay Precourt Professor, Stanford University (starting August 1, 2014); Vice President for Energy, Google (until July 31, 2014), in which he argues that a public endowment dedicated to transformational technology is essential for safeguarding the interests of our children and grandchildren in the future.
You can watch a livestream of today’s speakers, including Arun Majumdar, at the Mission-Oriented Finance Conference here.

We routinely use our smart phones without realizing the research and development that produced it: the transistor, integrated circuits, wireless communication, the laser and optical communication, the internet, the Unix operating system, and so on. None of these existed during World War II. But four decades of post-war research created the foundation for today’s products (as Mariana Mazzucato has shown in her book The Entrepreneurial State).

Can we learn any principles about research and how it should be funded as a result of this example?
Here are some observations.

Basic and applied research should not be separated.
Basic research, which tries to understand “how nature works”, is often inseparable from applied research, which is focused on “can we do something useful with it.” There isn’t one-way traffic between basic to applied, but rather a feedback loop in which applied research generates questions that stimulates basic research, and the cycle keeps on going.

Both basic and applied research take time to mature.
The first paper on the protocols used in today’s internet was published by Kahn and Cerf in 1974 and they were implemented on the ARPAnet in 1983, nine years later. It took another 9-10 years of persistent funding and advocacy for it to become the internet. Transformative technologies for which industries do not even exist at the early stages often take 15-20 years for new industries to be created.

R&D is not a straight line
While the development of the smart phone may seem obvious to some, its historical path was far from it. The first transistor was a point contact transistor made of germanium, which no one uses today. The idea of a field-effect transistor, the workhorse of the integrated circuit, and silicon as the material of choice, came much later. Did Kahn and Cerf ever think the internet would develop to take on the shape and form it is has today? I seriously doubt it. There is plenty of serendipity involved and the paths to successful technologies and products contain many twists and turns. Some humility regarding the ability to predict the direct business impact of research is much needed....MORE
And from Salon:

Let’s nationalize Amazon and Google: Publicly funded technology built Big Tech
They're huge and ruthless and define our lives. They're close to monopolies. Let's make them public utilities

Let's nationalize Amazon and Google: Publicly funded technology built Big Tech 
Jeff Bezos (Credit: AP/Reed Saxon/Pakhnyushcha via Shutterstock/Salon)
They’re huge, they’re ruthless, and they touch every aspect of our daily lives. Corporations like Amazon and Google keep expanding their reach and their power. Despite a history of abuses, so far the Justice Department has declined to take antitrust actions against them. But there’s another solution.
Is it time to manage and regulate these companies as public utilities?

That argument’s already been made about broadband access. In her book “Captive Justice,” law professor Susan Crawford argues that “high-speed wired Internet access is as basic to innovation, economic growth, social communication, and the country’s competitiveness as electricity was a century ago.”

Broadband as a public utility? If not for corporate corruption of our political process, that would seem like an obvious solution. Instead, our nation’s wireless access is the slowest and costliest in the world.
But why stop there? Policymakers have traditionally considered three elements when evaluating the need for a public utility: production, transmission, and distribution. Broadband is transmission. What about production and distribution?

The Big Tech mega-corporations have developed what Al Gore calls the “Stalker Economy,” manipulating and monitoring as they go. But consider: They were created with publicly funded technologies, and prospered as the result of indulgent policies and lax oversight. They’ve achieved monopoly or near-monopoly status, are spying on us to an extent that’s unprecedented in human history, and have the potential to alter each and every one of our economic, political, social and cultural transactions.
In fact, they’re already doing it.

Public utilities? It’s a thought experiment worth conducting.

Big Tech was created with publicly developed technology.
No matter how they spin it, these corporations were not created in garages or by inventive entrepreneurs. The core technology behind them is the Internet, a publicly funded platform for which they pay no users’ fee. In fact, they do everything they can to avoid paying their taxes.
Big Tech’s use of public technology means that it operates in a technological “commons,” which they are using solely for its own gain, without regard for the public interest. Meanwhile the United States government devotes considerable taxpayer resource to protecting them – from patent infringement, cyberterrorism and other external threats.
Big Tech’s services have become a necessity in modern society.
Businesses would be unable to participate in modern society without access to the services companies like Amazon, Google and Facebook provide. These services have become public marketplaces.
For individuals, these entities have become the public square where social interactions take place, as well as the marketplace where they purchase goods.

They’re at or near monopoly status – and moving fast.
Google has 80 percent of the search market in the United States, and an even larger share of key overseas markets. Google’s browsers have now surpassed Microsoft’s in usage across all devices. It has monopoly-like influence over online news, as William Baker noted in the Nation. Its YouTube subsidiary dominates the U.S. online-video market, with nearly double the views of its closest competitor. (Roughly 83 percent of the Americans who watched a video online in April went to YouTube.)...MORE
Salon is owned by the publicly traded Salon Media Group.
Finally, a lot of folks who would regurgitate the term 'military-industrial complex' at the drop of a lobbyist's hat haven't read the rest of the speech it came from:
...Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.
In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.
Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.
The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present--and is gravely to be regarded.
Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite....
-President Eisenhower's Farewell Address to the American People, January 17, 1961.