Saturday, February 18, 2017

Rating Agencies Put ISIS on CreditWatch: Negative

That headline is "fāke " or, in the words of Sheldon Cooper "A big fat whopper".
Most of the agencies remain neutral in their forecasts
Uh oh, that's another big fat whopper.

S&P, which I thought owned the mark on CreditWatch when written in CamelCase (no spaces, individual words capitalized) but may not, doesn't cover ISIS as either a corp. or a sovereign.
Ditto for Moody's and Fitch. 
Instead they do stuff like this, from 2008: "'Like A Gang of Clowns in a Pie Shop': S&P Puts Moody's on CreditWatch (Negative)"

Russia's ACRA--see post-sanctions post: Vladimir Putin Starts His Own Credit Ratings Firm--has had ISIS at junk for quite a while while China's Dagong Global Credit Rating Co., best known for 2010's "UPDATED: Chinese Credit Rating Agency Downgrades the Entire United States" is mum on the issue.
Now where was I?

From the New York Post:

ISIS is going broke
The Islamic State group is hemorrhaging money with every piece of territory it loses, according to a new analysis that found that the group’s “business model” is on the path to failure.

The analysis released Saturday by the International Centre for the Study of Radicalisation and Political Violence and the accounting firm EY found that the self-proclaimed caliphate’s financial resources have been drained substantially since the days beginning in mid-2014 when it captured banks, oil wells and entire warehouses of weapons as it amassed land.

The report found that Islamic State revenue has declined from up to $1.9 billion in 2014 to at most $870 million in 2016.

“One of the mistakes that’s been made in the past when we were talking about Islamic State was talking about it purely as a terrorist organization. It is a terrorist organization but it is more than that. It holds territory,” said Peter Neumann, director of the center at King’s College London. “That also means it has a lot more expenses. It needs to fix roads. It needs to pay teachers. It needs to run health services. It needs to pay for these things that al-Qaida never had to.”

But less money may not make the group less dangerous, the report said.

“We know from the attacks in Paris and Brussels and Berlin that none of them was expensive,” Neumann said.

Most of the recent attacks in Europe and the U.S. were self-financed by the people that carried them out, with little input or money from the IS leadership in the war zone of Syria and Iraq.

Among the top sources of revenue for the Islamic State group were taxes and fees, oil, ransoms, and looting or other extortion. All of those, Neumann said, required newly captured territory to be sustainable and to keep the group’s promise of a caliphate.

A federal lawsuit filed in December was a prime example of Islamic State’s revenues from a combination of seized land, taxes and extortion. According to the court filing, the group received at least 20 percent of the proceeds of items excavated from archaeological sites under its control and taxed antiquities sold in its territories. At one point, a child was kidnapped to force an antiquities merchant to pay, said the lawsuit, which sought the recovery of four ancient artifacts believed to have been put up for sale by the group....MORE 
Getting deathly serious for a moment, I think it only appropriate and right that when the receivers are called in, the appointment go to the Kurdish and Yazidi women.

Hundreds of Former Sex Slaves Take Up Arms To Do What Obama, Cameron Won't: Kill ISIS Pigs

The Battle to Retake Raqqa Syria From ISIS Is Being Led By A Kurdish Woman: Jihadis, Erdoğan Not Pleased

Internet of Things Banking: What Could Possibly Go Wrong?

Many years ago I was counseled: "Just because you can do something does not mean you should do something."
Good advice, it keeps you grounded when you catch yourself shifting into superhero mode.
From FinExtra:

Building a case for Banking of Things
The networked economy of devices could hold promise for accelerating both banking services and operations to the next level of seamlessness
On the one hand, rising operating costs have led banks to explore technologies that could reduce the cost of operations and increase revenue while minimising costs.

On the other hand – the consumer side - clamour for ‘super-convenience’ has already reached a crescendo with banks engaging customers in discussions around sharing data for personalised services. Location based offers, personal financial management, robo-advisory are instances of solutions that rely on customers’ willingness to share personal information in exchange for convenient, contextual, customised advice and services.

So why should ‘super-convenience’ draw any attention when digital has improved the convenience of banking?

Going beyond digital
Undoubtedly, digital banking heralded the era of accessibility. Digital levelled the playing field for both established and upstart players, paving the way to move beyond the Age of Information Asymmetry, where information was held under the control of a select few.

Admittedly, analytics has played a crucial role in furthering the evolutionary journey, generating insights delivered at the right time through the right channel with the right messaging. The blend of digital with analytics has thereby, helped shape the Age of Information Democracy.
But for banks aiming to move beyond the role of transaction facilitators to information brokers and advisory partners, there are newer frontiers to conquer. 

Here comes the Internet of Things
There’s a revolution brewing and it’s marching towards the bastion of financial services, so say the tech experts.

A lot of hype exists around the technology called Internet of Things or IoT. Turns out it’s not a technology. It’s a framework.

Still, what is it?

In a nutshell, IoT comprises sensors, actuators, software and electronics that can be embedded in physical objects or ‘things’ – think anything - from cars, homes, clothes, streetlights, to even human bodies – all connected through either wired or wireless networks and using the Internet Protocol to communicate with the Internet. At its simplest, IoT is the coordination and communication of the data generated by all such interconnected things.

Let’s take the retail or the consumer facing side – an average customer uses up to 3-5 devices (smartphones, smartwatches, IPTV, laptop, desktop) to connect to internet. Household devices such as refrigerators, washing machines, thermostats and so on, if connected, will generate thousands if not millions of data. Add automobiles and wearables to the mix - the volume only grows larger. Essentially the permutations and combinations of the range of ‘things’ that can be connected to spawn data are only bound by imagination.

So, can banking remain untouched by IoT? Should banks even bother given the security, privacy and interoperability challenges posed by IoT? Yet, is it wise for banks to remain immune to this technology?

Certainly, novelty of a technology shouldn’t be the reason for considering it. Given the pace at which new technologies are introduced, it’s easy to get blinded and side-tracked by the sheer dazzle of the variety.

The real benefits of any technology can only be evidenced through identifying practical use cases. And in looking at how IoT can transform banking, there are many scenarios where the coming together of the two, IoT and banking, will benefit not just the customers but banks themselves.

Banking + IoT = Banking of Things
Banking’s mainstay is lending and taking deposits, while managing risks. But increasingly a sophisticated and demanding customer base means banks must find ways to stay relevant by not just meeting customer expectations but also devising new experiences.

Banking of Things (BoT) could help create new products, services or business models. BoT could usher in an era where products are designed not by banks but led by customers. Customers would be incentivised to build a product or a service, say a home loan or savings account, and decide the interest rate, which in turn will be dependent on behavioural factors such as customers’ utility payment patterns or eating habits, new age indicators of characteristics such as prudence and health consciousness.

Additionally, BoT could give rise to unique partnerships forged between banks and industry players, from not just within but also outside the financial services ecosystem. These could simplify or enhance the value propositions besides addressing challenges banks typically grapple with – those of compliance, unified view of customers, and customer experience.

Here are some potential use cases for banking of things in consumer finance and banking operations, each designed to simplify or improve some aspect of banking:

Appliances-turned-POS Terminals
What if home appliances could signal when they are about to malfunction? What if the appliances could place orders for their replacements or schedule repair and also initiate payments, on behalf of customers? Effectively, BoT could transform any object such as a fused bulb or faulty thermostat into a point of sale terminal, placing orders and seamlessly connecting to online payment systems. Data, read by smart sensors embedded in all such objects, would be streamed continuously to a cloud based analytics platform. Banks could extract and combine this information with other transactional data to proactively alert customers to maintain adequate balance in their accounts in addition to recommending potential cost saving options.
Banks thus, could operate along the entire continuum, from facilitating payments to being real time advisory partners.

Thank you, Jeeves, er, refrigerator
Smart fridges are already here, alerting users to replenish their fridges when the food quantity levels decrease. The data generated by the fridges could be of interest to the banking providers, who can study the food consumption patterns of customers to tailor the right set of products and services such as offering ‘Amazon-like’ services – using data from the smart fridges to predict food ordering schedules, complemented by simplified payments....MORE
See also:
Putting your kettle on the Internet of Things makes your wifi passwords an open secret (plus Izabella Kaminska does a driveby
...From FT Alphaville:
Cybersecurity dispatches: Managing the IoT poltergeist threat
Imagine the scene in the not too distant future.

An Uber self-driving electric car has just dropped you home. Your front door has recognised your face, and your fingerprint has authenticated that it’s definitely you. You get into your house, not a key in sight, kick off your shoes, and happily discover that the 3D printing feature in your fridge has already printed the food you plan to consume for dinner. All the appliances you need are on. And everything you don’t need is off, nice and efficiently saving power.

You decide to treat yourself to a quick 30-minute Netflix holographic update, only to get a nudge from your wearable tech that you’ve still got a 10 minute exercise deficit to meet your daily exercise quota. It’s a problem because you happen to have signed up to the extreme health management option which shuts down ApplePay access — without which Netflix won’t work — if you fail to meet your objectives. You quickly get busy on your smart-grid connected treadmill (which conveniently sells off the energy produced by your system back into the grid).

When all of a sudden… your utility door flings open and your iRobot Roomba begins singing Daisy, Daisy....MORE....
"How Smart Houses And Big Data Will Change Real Estate Economics" (just wait 'til your house gets a virus) 

Climateer Line of the Day: Chimera Edition

From The Information:

The Information You Missed This Week
"Snap is going to market, trying to pitch itself as a unique blend of Silicon Valley and Hollywood. And no wonder: It has the losses of a tech startup combined with the anemic growth of a media company."
-The anonymous toilers known as The Information Staff

Biotech: "CRISPR’s Breakthrough Problem"

From Chemical & Engineering News:

If the CRISPR gene editing system is to live up to its disease-curing potential, researchers must devise a plan to deliver it into the body
In fewer than five years, an important new gene-editing tool called CRISPR has radically changed the face and pace of biological research. The ability to quickly and cleanly remove and replace stretches of DNA has already inspired thousands of publications featuring the technique and led to the creation of a slew of biotech businesses hoping to capitalize on CRISPR.

CRISPR’s power to effortlessly target and tweak any piece of DNA seems limitless. Thomas Barnes is the chief scientific officer of the CRISPR-centered Intellia Therapeutics, whose founders include one of the inventors of CRISPR, Jennifer Doudna. He says there is “an ever-growing backlog of well-understood rare genetic conditions with little that people can do about them.” Barnes hopes CRISPR will change that.

By tackling genetic disease at its roots—mutations in the DNA—CRISPR could end thousands of ailments, Barnes and others believe. Multiple research groups and companies are hot on the tracks of unleashing CRISPR on sickle cell disease, hemophilia, cystic fibrosis, Duchenne muscular dystrophy, genetic forms of blindness, and, of course, cancer.

The hype is partly about CRISPR’s broad applicability, but CRISPR’s true promise is its potential for a one-and-done cure. Changing your DNA is a permanent fix. CRISPR—short for the “clustered regularly interspaced short palindromic repeats” in the bacterial immune system from which the technology was derived—is a two-part system: a customizable guide RNA and a protein called Cas9. The guide RNA directs Cas9 to any desired segment of DNA for editing. The Cas9 enzyme then cuts the DNA at that precise location, allowing for genes to be turned on or off or for the removal or insertion of DNA.

But editing the DNA of cells in a petri dish—or even curing a mouse of a disease—is one thing; making the hot new technology work in humans is a whole other challenge. Sneaking the gene-editing complex into human cells is no easy task.

It will take some fancy molecular maneuvering to get the bulky Cas9 protein and the negatively charged guide RNA into humans. To work its magic, the unwieldy gene-editing system first needs to get into the body, skirt past the immune system, and infiltrate its target tissue. From there, it must sneak across cell membranes, escape the acidic environment of the cell’s endosomes to find the nucleus, and then home in on the correct location on the DNA. In other words, CRISPR has a drug delivery problem.

The Cas9 enzyme and the guide RNA composing the CRISPR complex cannot be swallowed in pill form or simply injected into the bloodstream. And a one-size-fits-all package is unlikely to work for every condition, so researchers are eagerly testing old strategies and creating new ones to achieve a CRISPR cure.

David Liu of Harvard University says this delivery dilemma isn’t unusual for a new gene-editing technology, but “researchers now feel this incredible urgency and excitement because of the promise of using CRISPR for therapeutic applications.” Since its inception as a gene-editing tool in 2012, nearly 5,000 papers mentioning CRISPR have been published in PubMed. The CRISPR craze is reeling in polymer chemists, drug delivery designers, and bioengineers all helping move CRISPR from the lab bench to the doctor’s office.
“I’ve just never seen any field that progresses at this pace,” says Niren Murthy of the University of California, Berkeley, who cofounded a start-up called GenEdit, dedicated to CRISPR delivery, in February 2016. “There is nothing comparable to the competitiveness of the CRISPR field,” he says....MUCH MORE

Jeremy Grantham: ‘Twas Capitalism That Killed Capitalism

Via Macrobusiness:
From the always essential Jeremy Grantham’s latest note:

An extraordinary, large exit poll run by Reuters/Ipsos in which 45,000 people participated took place in the early evening on election day in the US. To say this was a detailed poll is an understatement. The spreadsheet for each question in small print runs the length of a generous dining room table, 11 feet! It will tell you how the American Hindu sample of 172 voted. The poll’s early results of 9,0002 inputs also revealed on the night before the election, when the bookies’ odds 3 against Trump were 5 to 1, that the odds were wrong. The critical statement polled, in my opinion, was this: “America needs a strong leader to take the country back from the rich and powerful.”

From my perspective, the pushback against the rich and powerful for several decades has been very unexpectedly wimpy. “Occupy Wall Street” aside, the average voter had sat still for a series of major tax cuts for the higher tax brackets and on capital – capital gains and dividends. The lowerincome workers had paid the cost of outsourcing and labor-saving technology but had received no material help, while corporations and corporate officers and owners were the beneficiaries. In fact, money spent on worker training and education declined relative to foreign competitors. This shows up clearly in declining educational standards where today the US global rank is, to be friendly, mediocre.
Most scarily in this regard, the average Chinese 20-year-old now ranks 2 full years ahead of his American counterpart in math proficiency! So, all in all, we can say that global forces pushed wages down and politics pushed them deliberately lower. The combined result is shown in Exhibit 1: The share of GDP going to labor hit historical lows as recently as 2014 and the share going to corporate profits hit a simultaneous high. Similarly, Exhibit 2 shows that the share of all income going to the top 0.1% rose well beyond any previous record and approached 100% of all the recovery in total income since the lows of 2009!
The “rich and powerful” not only increased their share of income and capital at an unprecedented rate in recent decades, but they also increased their grip on politics through a rising tide of political spending, including lobbying and the new Super PACs, courtesy of the Supreme Court’s ruling in Citizens United. Even before this ruling, Princeton University Professors Gilens and Page had reported4 on the complete lack of influence that voter opinion had on the probabilities of any bill passing through Congress. If favored by the public the average 31% chance of passing rose to a dizzying 32%. If not favored, it fell to 30%, justifying the nickname given to the influence of the average citizen: “Gilens’ Flatline.” When favored by the richest 10%, bills passed at a 65% rate – there is inertia after all. But when opposed by the wealthier and supported by inertia, the passing rate was essentially nil. Those hoping that there is any life at all left in representative democracy have to hope that some critics of this work are right when they claim that the data is complicated to sort out and the conclusions may be overstated. Anecdotal evidence on such issues as the minimum wage and gun laws, though, suggests that majority opinion is, shall we say, easily offset. Scarily, Gilens’ work does not include the post Citizens United data on political spending that is shown in Exhibit 3. I could not resist throwing in political contributions from unions, which are often cited by right-wingers as somehow balancing the books. And once upon a time they did. But, as unions have been severely weakened by the same combination of global forces and politics previously described, political contributions from unions have become a rounding error, offsettable by a mere handful or less of billionaires....

Friday, February 17, 2017

Florida Man Conspires To Blow Up Target Stores To Crash Stock (TGT)

Frankly I think the stock gets hurt more for not being Amazon, or for the bathroom brouhaha than it would for exploding stores.

$65.72 up 0.52 (0.80%)

From Fortune:

A Florida Man Reportedly Tried to Blow Up Target Stores to Hurt the Company’s Stock
Buy low, sell high, so goes the investing adage.

But rather than waiting for markets to hit the right conditions, a Florida man allegedly tried to tank Target's stock by setting off homemade explosives in several of the superstore's East Coast locations. according to a Thursday criminal complaint filed by Department of Justice prosecutors in a federal court.

A registered sex offender, 48-year-old Mark Charles Barnett offered an unnamed affiliate $10,000 to place 10 operational homemade explosives in 10 Target stores in Florida, Virginia, and New York, the complaint alleges. The explosives, which were capable of causing "serious injury and death to nearby persons," were expected to be placed on shelves while disguised as food products.

"Once the boxes had detonated inside of Target stores, Barnett theorized that the company's stock value would plunge allowing him to acquire shares cheaply before an eventual rebound," the complaint read.

But instead of doing as instructed, the unnamed affiliate turned in the explosives to federal officials, and worked with law enforcement in the investigation.

At one point during the investigation, Barnett told the affiliate to "start at Syracuse and work your way back down [to Florida]," the complaint alleged, saying that Barnett added: "Put one in each state, I guess."....MORE
 And here's a story about Target's former parent, Dayton-Hudson, that I've told a few times, most recently in 2013's "Attention Commodities Speculators: Hoarding is Now a Stand-alone Mental Disorder":
...Even if committed all is not lost on the manipulation front.

If you get phone privileges while in hospital remember this enterprising fellow who called up the DJ newswire and gave them the scoop:

New York Times, June 24, 1987:

A bogus takeover offer for the Dayton Hudson Corporation caused the retailer's stock to shoot up $9 a share yesterday, but skepticism quickly deflated the gain, inflicting a $15 million loss on investors.The chain of events began yesterday morning with a telephone call from a Cincinnati securities analyst, Paul David Herrlinger, to the Dow Jones News Service, in which the offer was made on behalf of ''Stone Inc.'' It ended five hours later with an announcement by the Herrlinger family's attorney that ''this was not a bona fide offer and there is no such company as Stone Inc.'' He said Mr. Herrlinger had a nervous condition and had apparently been hospitalized.

In the interim, 5.2 million shares of Dayton Hudson's common stock changed hands, much of it in the early afternoon, before the credibility of the $70-a-share offer was shattered. Rumors of a Takeover Bid

At 9:49 in the morning, 19 minutes after the New York Stock Exchange opened, the Dow Jones ticker printed its first story on the purported offer. At 9:53 A.M., the New York Stock Exchange halted trading in Dayton Hudson stock to allow the news to be disseminated....MORE
And in other Florida Man news:

David Plouffe Hit With $90,000 Fine For Uber Lobbying

From the Chicago Tribune:

Former Obama aide fined $90,000 for illegally lobbying Emanuel on Uber's behalf
A former Uber senior executive who once served as Barack Obama's campaign manager has been fined $90,000 by the Chicago Board of Ethics for illegally lobbying Mayor Rahm Emanuel on behalf of the ride-sharing company.

The board voted 5-0 to find that David Plouffe violated city ethics rules by failing to register as a lobbyist after contacting Emanuel to help the company on regulations for picking up travelers at Chicago's two airports.

Plouffe's lobbying violation only became public after Emanuel in December released hundreds of personal emails related to public business under the pressure of two open records lawsuits alleging the mayor violated the state's open records law.

Included was a message Plouffe sent to the mayor Nov. 20, 2015

"Assume both of us thought the airport issue was settled and we would never have to discuss again, but unfortunately two significant new hurdles were introduced," wrote Plouffe, the political strategist who managed Obama's 2008 presidential campaign and in 2015 was Uber's senior vice president of policy and strategy. "Coming to you because of their severity that would prevent us from operating. We were all set to announce Monday we were beginning pickups."

Plouffe, who like Emanuel served in the Obama White House, went on to describe concerns Uber had about pickup fees and the requirement to display an airport pickup placard in Uber vehicles....MUCH MORE
David Plouffe Leaves Uber, Joins Chan-Zuckerberg Philanthropy
From the outro to  "Uber Hires A Bunch More Politicians":
For those playing along outside the U.S., Mr. Plouffe was the architect of President Obama's successful 2008 presidential campaign and continued working for the administration, first as an outside consultant and then as a highest-level advisor until he joined Uber in 2014.  

Now where will I go for set-ups like:
Uber Accuses NYC Of Snooping On Its Passengers: "They Want Full Details Of Every Trip You Ever Take"
I don't care who you are, David Plouffe, Kalanick, whoever, that accusation, coming from Uber, is funny.
Granted, not as funny as...
...“Plouffe said, ‘Well, you know we’re active in these markets and we’re providing a service and there is great demand in Oregon and blah blah blah,’ ” Mr. Novick said. “I said, ‘Mr. Plouffe, announcing that you’re going to break the law is not civil.’ ”

Media: Introducing Meme Insider

(not) a Henry Blodget production.

From Motherboard:

Redditors Made ‘Meme Insider,’ a Completely Insane Magazine About Memes
Day traders may have CNBC, but meme traders have 'Meme Insider.'
Do you want to know more about memes—like really know about them, in ways simply can't address?  Is Encyclopedia Dramatica too dramatically trollish for you, 4chan too poorly curated?

Then consider Meme Insider, a volunteer-run publication now in its second issue.  The magazine, available for free in .pdf format, is associated with Meme Economy, a section of Reddit where individuals discuss trends in meme usage.
The cover of the January 2017 issue of Meme Insider
Like the NASDANQ, a related Meme Economy production intended to eventually serve as a virtual stock market enabling users to track popular memes and bid up their value, Meme Insider appears both totally sincere and strangely apolitical.  An article on Pepe in the second issue, for example, focuses on the frog's "durability as a meme" rather than its association with the alt-right, and winds up projecting steady long-term returns for it in spite of a recent sharp decrease in usage.  Another piece suggests that meme aficionados buy low on "idiosyncratically undervalued" Sims memes....MUCH MORE*
A version of the cover of the first issue of Meme Insider

Natural Gas: EIA Weekly Supply/Demand Report

After breaking through $2.90 to the downside on yesterday's storage report (the pull was 114 Bcf versus the Platts consensus estimate of 126 Bcf) the front futures are up 0.0170 at $2.8710.
From the Energy Information Administration:
for week ending February 15, 2017   |  Release date:  February 16, 2017   |  Next release:  February 23, 2017
Prices fall virtually everywhere. This report week (Wednesday, February 8 to Wednesday, February 15), the Henry Hub spot price fell 13¢ from $3.05/MMBtu last Wednesday to $2.92/MMBtu yesterday. Nationally, weather was milder toward the end of the report period, except for on the Gulf Coast, where temperatures declined Tuesday and yesterday.

At the Chicago Citygate, prices decreased 18¢ from last Wednesday to $2.84/MMBtu yesterday. Prices at PG&E Citygate in Northern California fell 9¢ to $3.30/MMBtu yesterday. The price at SoCal Citygate decreased 1¢ to $3.05/MMBtu yesterday.

Northeast prices down as weather moderates. At the Algonquin Citygate, which serves Boston-area consumers, prices were down $1.49 from $5.51/MMBtu last Wednesday to $4.02/MMBtu yesterday. Prices began the week elevated, with cold weather, and peaked on Thursday as a winter storm moved through the region, knocking out power for over 80,000 customers, mostly in Massachusetts.
Similar to Algonquin, at the Transco Zone 6 trading point for New York City, prices decreased $1.39 from $4.50/MMBtu last Wednesday to $3.11/MMBtu yesterday.
Tennessee Zone 4 Marcellus spot prices decreased 15¢ to $2.46/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania fell 16¢ to $2.64/MMBtu yesterday.

March Nymex contract down. Following the Henry Hub price, the price of the March 2017 Nymex contract decreased 20¢ over the report period, closing at $2.925/MMBtu yesterday. Weather forecasts of warmer-than-normal temperatures in the coming days may be applying downward pressure on the futures price. The price of the 12-month strip, which averages March 2017 through February 2018 futures contracts, declined 14¢ to $3.248/MMBtu.

Supply increases slightly. According to data from PointLogic, the average total supply of natural gas rose by 1% compared with the previous week, driven by net imports. Dry natural gas production remained constant week over week, whereas average net imports from Canada increased by 9% over the report period.

Demand falls. Total U.S. consumption of natural gas fell by 4% compared with the previous report week, according to data from PointLogic. Outside of the Northeast, average temperatures for this report week were generally warmer than last report week. Week-over-week, power burn declined by 2%, industrial sector consumption decreased by 2%, and residential and commercial sector consumption declined by 7%. Natural gas exports to Mexico increased 3%.

U.S. LNG exports. Natural gas pipeline deliveries to the Sabine Pass liquefaction terminal averaged 2.0 Bcf/d for the report week, 6% lower than in the previous week. Four vessels (combined LNG-carrying capacity of 14.0 Bcf) departed Sabine Pass last week.
Unseasonable mild temperatures during the week contribute to smaller than average net withdrawals. Net withdrawals from storage totaled 114 Bcf, compared with the five-year (2012–16) average net withdrawal of 156 Bcf and last year's net withdrawals of 136 Bcf during the same week. Warmer temperatures throughout the week for most of the Lower 48 states contributed to decreased heating demand for natural gas and lower withdrawals from storage. Working gas stocks total 2,445 Bcf, which is 87 Bcf more than the five-year average and 303 Bcf less than last year at this time....

"Frenzied Betting, Sleeping Market: Something Must Give in Oil"

From Bloomberg:
As hedge funds and money managers place record trades on a rally in oil, the price itself has fallen asleep. Logic dictates that something should give. Here are five charts examining the unprecedented speculative build-up and what the market’s next turn might be.
1. Frenzied betting...
At the start of February, speculators were betting a net 865 million barrels of oil across the market’s two global benchmarks that prices would rise. As well as being a record, their bullish positioning expanded by 78 percent since just before the Organization of Petroleum Exporting Countries and 11 other producer nations pledged to cut global crude supplies. Benchmark prices rose about 20 percent over the same period.
2. ...sleeping market
Unfortunately for the bulls, the oil market itself has fallen asleep after an initial surge. As Standard Chartered analysts including Paul Horsnell pointed out this week, prices have been stuck around a dollar a barrel above or below $55.50 since mid-December. Meanwhile U.S. crude closed above $54 a barrel only once since OPEC’s Nov. 30 meeting, despite crossing that price level 14 times. “If crude prices are to break out of their recent range in the next few weeks, the risk is to the downside," JBC Energy GmbH in Vienna said Thursday.
3. Spreads still show glut
The shortest-term oil prices show that an oversupply endures. The nearest Brent and West Texas Intermediate contracts remain in a structure known as contango, which typically occurs when there is too much supply, depressing short-term prices....

HT: FT Alphaville's Further Reading post.

See also yesterday's "Why a NYMEX Veteran is Getting Nervous about Oil":
...The last few weeks of U.S. inventory builds would have knocked the futures down by 10-15% and the fact they didn't is cause to wonder: WTH, WTI? $53.96 up 0.36 today:

Thursday, February 16, 2017

Questions America Wants Answered: "Has the Large Hadron Collider Disproved the Existence of Ghosts?" (CERN)

Before we get into the headline story, a little mood music:

nerd, yo
From RealClearScience:
The Large Hadron Collider (LHC) might be the world's most incredible science experiment. A particle collider seventeen miles in circumference, it accelerates protons to velocities approaching the speed of light and slams them together. Enthralled scientists from all over the world watch the subatomic demolition derby and record what happens. Thus far, they've witnessed the creation of quark-gluon plasma (the densest matter outside of black holes), found key evidence against supersymmetry, and discovered the Higgs boson, a result which garnered the Nobel Prize in Physics.

Much of the general public probably isn't aware of these fascinating, yet unfortunately, esoteric discoveries at the LHC. Particle physics simply doesn't inspire as much interest as say, ghosts. At least four in ten Americans believe in ghosts, and it's likely that even fewer people are aware of the LHC. On that note, at least one physicist contends that the LHC has, in fact, disproved the existence of ghosts.

The physicist in question is Brian Cox, an Advanced Fellow of particle physics at the University of Manchester and a popular science communicator in Britain. On a recent broadcast of BBC Radio Four's The Infinite Monkey Cage centered around science and the paranormal, Cox had this to say on the topic:

"Before we ask the first question, I want to make a statement: We are not here to debate the existence of ghosts because they don't exist."
He continued:
"If we want some sort of pattern that carries information about our living cells to persist then we must specify precisely what medium carries that pattern and how it interacts with the matter particles out of which our bodies are made. We must, in other words, invent an extension to the Standard Model of Particle Physics that has escaped detection at the Large Hadron Collider. That's almost inconceivable at the energy scales typical of the particle interactions in our bodies."
Astrophysicist Neil deGrasse Tyson, who was also on the show, pressed Cox to clarify his statement.

"If I understand what you just declared, you just asserted that CERN, the European Center for Nuclear Research, disproved the existence of ghosts."

"Yes," Cox replied....

Previously on the LHC Channel:
February 2012
CERN: Light Once Again Faster then Neutrinos, Problem May Have Been a Loose Cable
Don't you hate it when that happens? A bad connection and all of a sudden you're calling Einstein a moron.
From CERN:...
March 2015
"Scientists at Large Hadron Collider hope to make contact with PARALLEL UNIVERSE in days" (time to dust off the 'end of the universe' puts)
In comparison I don't feel I've gotten a lot done today..... 
Oct. 2015
CERN Cranks LHC To 11 In Bid To Find Parallel Universes
December 2015 
After Turning Large Hadron Collider Up To 11, CERN May Have found A New Particle, End of the World Puts Trade Sideways

Regarding the puts, we have attempted to quote their action (reaction) with each CERN announcement since the machine was turned on back in 2008:

Should CERN have to really crank up the Large Hadron Collider we will make every effort to offer Long or Short Capital's proprietary "End of the Universe Puts":

Back when the LHC was supposed to fire up the first time, we mentioned Long or Short Capital's End of the Universe puts:
...That is why Long or Short is now offering LHC End of the Universe Puts. It’s a simple put option wherein the buyer retains the right to sell the Universe at a strike price of “Existing”. Based on our Black-Holes model used to value all “end of the world” options, the July 2008 vintage options are currently priced at $20....
Followed by "Large Hadron Collider Starts Up, Earth Suvives, End of the World Puts Plummet":
UPDATE: The marketers at LoS Capital* are still pushing product:
...We continue to reiterate the importance of LHC End of the Universe Puts.
“The LHC is a discovery machine,” said CERN Director General Robert Aymar
If this is true and you extrapolate it out, it is only a matter of time until they discover the end of the Earth and existence as we know it. Who is to say they won’t do that tomorrow? Again, not us. 
Recommendation: These securities do NOT benefit from the implicit guarantee of the US government, God or your locally relevant deity. Wink wink nudge nudge, but between you and me, they DO.
*At Long or Short LLC, we leverage our superior intellect and extensive investing experience to recommend explicit Long or Short positions and related abstract trades, which may or may not be possible with real world financial derivatives. We use science to improve the lives of the rich.
More About LoS
From -Baguette breaks Large Hadron Collider (End of the Universe Puts Trade Down)

And many, many more.

Ein Volk, Eine Welt, Ein Zuck: "Mark Zuckerberg’s full 6,000-word letter on Facebook’s global ambitions" (FB)

From Recode:
Facebook CEO Mark Zuckerberg thinks Facebook can help save the world, and he wrote almost 6,000 words on Thursday explaining how. His letter, which we’ve dubbed The Mark Manifesto, offers a glimpse into Zuckerberg’s global aspirations. Here it is in full.
Building Global Community
To our community,
On our journey to connect the world, we often discuss products we're building and updates on our business. Today I want to focus on the most important question of all: are we building the world we all want?

History is the story of how we've learned to come together in ever greater numbers -- from tribes to cities to nations. At each step, we built social infrastructure like communities, media and governments to empower us to achieve things we couldn't on our own.

Today we are close to taking our next step. Our greatest opportunities are now global -- like spreading prosperity and freedom, promoting peace and understanding, lifting people out of poverty, and accelerating science. Our greatest challenges also need global responses -- like ending terrorism, fighting climate change, and preventing pandemics. Progress now requires humanity coming together not just as cities or nations, but also as a global community. 

This is especially important right now. Facebook stands for bringing us closer together and building a global community. When we began, this idea was not controversial. Every year, the world got more connected and this was seen as a positive trend. Yet now, across the world there are people left behind by globalization, and movements for withdrawing from global connection. There are questions about whether we can make a global community that works for everyone, and whether the path ahead is to connect more or reverse course.

This is a time when many of us around the world are reflecting on how we can have the most positive impact. I am reminded of my favorite saying about technology: "We always overestimate what we can do in two years, and we underestimate what we can do in ten years." We may not have the power to create the world we want immediately, but we can all start working on the long term today. In times like these, the most important thing we at Facebook can do is develop the social infrastructure to give people the power to build a global community that works for all of us. 

For the past decade, Facebook has focused on connecting friends and families. With that foundation, our next focus will be developing the social infrastructure for community -- for supporting us, for keeping us safe, for informing us, for civic engagement, and for inclusion of all.

Bringing us all together as a global community is a project bigger than any one organization or company, but Facebook can help contribute to answering these five important questions:
  • How do we help people build supportive communities that strengthen traditional institutions in a world where membership in these institutions is declining?
  • How do we help people build a safe community that prevents harm, helps during crises and rebuilds afterwards in a world where anyone across the world can affect us?
  • How do we help people build an informed community that exposes us to new ideas and builds common understanding in a world where every person has a voice?
  • How do we help people build a civically-engaged community in a world where participation in voting sometimes includes less than half our population?
  • How do we help people build an inclusive community that reflects our collective values and common humanity from local to global levels, spanning cultures, nations and regions in a world with few examples of global communities?
My hope is that more of us will commit our energy to building the long term social infrastructure to bring humanity together. The answers to these questions won't all come from Facebook, but I believe we can play a role. 

Our job at Facebook is to help people make the greatest positive impact while mitigating areas where technology and social media can contribute to divisiveness and isolation. Facebook is a work in progress, and we are dedicated to learning and improving. We take our responsibility seriously, and today I want to talk about how we plan to do our part to build this global community....MUCH MORE
At least he didn't call the manifesto "My Struggle", know what I'm sayin'?
(not talking Knausgård, yo)

Zuckerberg says he has no plans to run for president: report (FB)
"Facebook investors yell at CEO: Get the Zuck out of our boardroom!" (FB)
Facebook Is Working On Technology To Read Thoughts (FB)
Well, at least it's non-invasive. 

eBay Co-Founder Plans to Give Thousands of Kenyans Free Income for 12 Years

From TIME magazine:
Pierre Omidyar, the billionaire co-founder of eBay, plans to donate approximately $500,000 to fund a project in Kenya that will give thousands of people a guaranteed regular income.

The program, called, GiveDirectly is being hailed as the most ambitious experiment yet in the concept of universal basic income, or UBI. It will make cash transfers to more than 26,000 people in 200 villages in Kenya, with about 6,000 of those people receiving a long-term basic income for 12 years. The payments of $0.75 per day  amount to 50% of typical adult income in rural Kenya.

The concept of a universal basic income has been gaining traction around the world as a way to equitably increase quality of life in a world where labor markets are being disrupted. The policy was recently the subject of a nationwide referendum in Switzerland—it didn't pass—and it's also being discussed in European countries, Canada, and the city of Oakland, to name a few.

The basic idea: Give people a strings-free weekly, monthly or yearly stipend, enough so that their basic needs are taken care of, whether they work or not.

"Cash transfer programs can potentially help to address bigger issues facing our society, such as rising income volatility, lack of secure benefits, social instability, and the changing nature of work," reps for the Omidyar Network wrote in a Medium post.

"Concerns around these themes have recently sparked growing attention to a particular form of cash transfer: the idea of universal basic income (UBI) — a transfer that would be regular, long-term, a meaningful amount, and available to everyone."...MORE

Attn. Deadheads: For Sale--Jerry Garcia's Stinson Beach Place

From Curbed:

Standing on Stinson Beach, the sea will part before you
Rock and Roll Hall of Famer Jerry Garcia’s house at 18 Ave Farralone, Stinson Beach in Marin County is for sale again, asking $4.35 million, down a bit from its previous listing asking nearly $4.6 million last June. 
That listing failed to secure a buyer, but maybe this time they’ll try just a little but harder, try just a little bit more. 
Compared to the remarkable refinement of Dead bassist Phil Lesh’s own North Bay home that listed last April, Garcia’s onetime crash pad looks a bit more humble and even a bit retro, which we suppose means the decor was built to last. 
Not many of them, though; Stinson Beach has a population of about 630. Love is like an April rain that makes the harvest grow, but most of what’s growing here is cypress and redwoods on an acre overlooking the sweet calm face of the sea.
Back in 2013 this retreat, which Garcia reportedly nicknamed "Sans Souci" (roughly, "No worries") sold for $3.6 million. 
Note that Garcia and his wife paid $20,000 for it in 1971, the equivalent of about $118,000 today, proving once again that it costs a lot to win and even more to lose....
The house is past the left end of the bridge, beyond the Marin headlands and up the coast. Nice hood.

Possibly Important Intelligence: "Meet The Man Behind The Market's Relentless Ramp"

It may just be coincidence that the day after the fund unwinds its problem trade the markets turn south.
Or it may not.

From ZeroHedge:

In an ironic twist of fate, it appears the catalyst for many of the biggest and most incomprehensible market ramps of the last few years is a fund called "Catalyst." With around $4 billion under management (before the latest collapse), the levered options fund is run by Edward Walczak who "uses options to create a better risk/return profile." 
The Catalyst Hedged Futures Strategy Fund is an open-end fund incorporated in the USA. The objective is capital appreciation and capital preservation in all market conditions. The Fund invests primarily in long and short call and put options on S&P 500 Index futures contracts and in cash and cash equivalents, including high-quality short-term (3 months or less) fixed-income securities.  
A 'great/lucky' year in 2008 and solid returns since...
Until recently...
  • 1 Week -14.07%
  • 1 Month -12.61%
  • 3 Months -16.96%
  • YTD -13.56%
  • 1 Year -10.11%
  • 3 Year -1.08%
Things have not gone well since the election...
As we noted previously, the melt-up in the S&P is the result of "a purported / murky melt-down over the past week in a large trade by a multi-billion Dollar (open-ended) futures fund which sells vol on S&P.  Without going into specifics, there is market speculation that the entity is effectively short upwards of ~$17B of SPX (deltas to buy) through selling February expiry upside 1x5 (or 1x4) call spreads." 
And here is the man that runs the show...
...As detailed previously, Edward Walczak began his trading career after 25 years in business operations and supply chain management. It was Walczak’s experience running Chicago-based candy manufacturer Brach’s commodity hedging operation in the late 1990s that got him deeply involved in the markets.
At one point, Walczak’s boss asked him about position limits and he had no idea what he was talking about, Walczak says. “You only get embarrassed once and I spent a week with my trader [learning] the business and became intrigued by it.” Walczak is a math guy with degrees in Physics and Economics from Middlebury College and an MBA from Harvard, so naturally he was drawn to options. By 2005 he was making more money trading than in his day job, so he began trading proprietary money full-time and set up a commodity pool for friends and family. In 2006 his proprietary trading returned 52.68% and in 2007 he added customer accounts to the Madison, Wis. based Harbor Financial LLC. Fortunate breaks come in all forms. For Walczak his biggest break may have been a painful February 2007  drawdown in his mainly option writing S&P 500 program. The drawdown was not fatal, 17.93% for the month, and the program was positive for the year, but it made Walczak rethink his overall approach. “Back in ’07, VIX was trading around 10 and all of a sudden the S&Ps dropped 50 handles in a day,” Walczak says. “A 50-point drop at the time was a big deal but historically was not that bizarre. It could have been a lot worse and I could have been wiped out, so I had to do something different.” He spent the next year researching. “How do I cover these other risks that are out there and how [do I] use options to have a better risk/return profile?” he asked himself...

Oil: A Longshot Potential Triple

The bet is priced right only if you can get a little regime change via color revolution going but I don't know if there's anyone in the State Department willing to fill the shoes of Victoria "Fuck the EU" Nuland and her merry band.
Otherwise one would have to demand a higher payoff.

From FT Alphaville:

Snap AV: Fancy a potential three-bagger? 
(Unfortunately it’s Venezuelan)
From Stuart Culverhouse at Exotix Partners…
We upgrade our view on the Venezuelan oil warrants to BUY from HOLD. This is based on our updated calculations for the upcoming payments. The warrants are indicated at US$6.25 mid-price basis (cob 14 February).

Warrants holders can receive payments twice a year if certain conditions are met. Each payment is however capped at a maximum of US$3 per warrant....MORE
Fortunately, Venezuela makes the lists at Euromoney:
Euromoney Country Risks Survey
Stratfor's Annual Forecast 2017 e.g. “European Union will eventually dissolve” (rincez et répétez)
and Eurasia Group:
Eurasia Group's Top Risks 2017: The Geopolitical Recession 

"Why a NYMEX Veteran is Getting Nervous about Oil"

From Wolf Street: 

Being long oil is a very “crowded trade,” but who’s on the other side of that trade, and what do they know that speculators don’t?
“Crowded trade” is an infamous phenomenon. It’s when traders are all betting on the same direction of a trade. But each trade must have someone else betting on the opposite direction. So who is on the other side of a “crowded trade?” And what do they know that these traders don’t?

And what happens when the traders in the “crowded trade” are all looking for an exit, and suddenly the entire psychology changes?

Oil markets may have reached that point, according to Dan Dicker, a 25-year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline, and heating oil futures contracts. In Oil & Energy Insider, he writes:
When I was standing shoulder to shoulder with all those other oil day traders on the floor of the NYMEX, once in a while I’d get a very funny feeling. All of a sudden, I’d realize that the position I’d built up for myself was largely shared by just about everyone around the ring – and I also sensed that every other trader had had the exact same realization.
That’d be a wary moment – staring around at each other like combatants in an old west quick draw. We’d all still be convinced still in our positions, of course. We, collectively, could be entirely right on the coming trend and just need some patience to all make some money. But we also knew that the first guy to flinch in panic could set off a complete avalanche of traders suddenly becoming less convinced and trying to get out.
I called this “the porthole effect”: The boat might or might not be sinking, and you couldn’t tell through the small hole that was available to you; but if one guy jumped into the porthole trying to escape, he was likely to cause a mob scene of panicked passengers all fighting to squeeze out of that entirely too small of an exit.
This is kind of what I’m seeing in the oil market today.
While “there is a lot to like” in the oil markets, there are also other dynamics at work. The Numbers Report of Oil & Energy Insider spells out some of them.

OPEC members have cut more than 1 million barrels per day (mb/d) in production. That’s less than their promised cuts of 1.2 mb/d made during their November meeting. The deal is further being undermined by some OPEC members, including Nigeria and Libya which are exempt from the deal:
  • Libya has added 162,000 bpd since the deal was announced;
  • Nigeria has added 12,000 bpd but might add a lot more (see below);
  • Iran has brought back 110,000 bpd.
With those additions, net OPEC cuts are “closer to 800,000 bpd,” according to the Numbers Report. Plus, Libya and Nigeria are trying to restore more idled capacity.

Nigeria’s oil production plunged from 2.2 mb/d in 2015 to a low point of 1.4 mb/d in the summer of 2016 due to the attacks by militant groups on oil targets. Production has since edged up to only about 1.6 mb/d. The government is struggling to restore output. It has reinstated a program to pay militants to lay down their weapons. If this improves security, pipelines and export terminals could be repaired, and about 500,000 bpd could come back on line, which would crush much of the OPEC production cut.

The 11 non-OPEC oil producers, including Russia, that had agreed to cut production along with OPEC, have only delivered 40% of the promised cuts in January, according to two OPEC sources cited by Reuters on Friday. The sources in turn cited OPEC calculations based on data from the IEA. Part of the lack of compliance is said to be due to the phased implementation of the cuts by Russia....MUCH MORE
In the bad old days the last few weeks of U.S. inventory builds would have knocked the futures down by 10-15% and the fact they didn't is cause to wonder: WTH, WTI? $53.96 up 0.36 today.: