Saturday, March 24, 2018

Matt Levine's Meow Culpa—CryptoKitties, An Exegesis

Following up on Thursday's "Matt Levine Writes About CryptoKitties ("this column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners")."

FT Alphaville's Matthew Klein directs our attention to Mr. Levine's Friday Bloomberg View column.
If  you are having trouble with the twitter embed format here's an excerpt from

Too Convenient to Fail
...The crypto.
So a bit of a mea culpa. Yesterday I wrote about Union Square Ventures' investment in CryptoKitties, and expressed a certain amused skepticism. And Union Square partner (and excellent tech/venture-capital blogger) Fred Wilson tweeted at me to acknowledge my skepticism but suggest that I read this post by his colleague Nick Grossman. That post confronts the skepticism that many people have about CryptoKitties, but explains that it is actually a profound technological development:
Because each kitty is a token on Ethereum, that means that anyone else (aside from the original developers of Cryptokitties) can view that asset and integrate it into other systems, without anyone’s permission.
For example, on Kittyhats — developed independently from CryptoKitties — you can buy a hat for your kitty.
Look: They are right, and I was wrong, and I am sorry. I thought that CryptoKitties was just a game that allows you to buy cartoon cats on the blockchain, and I thought it was silly. But I completely missed the point. CryptoKitties is actually a game that allows you to buy cartoon cats on the blockchain, and put little hats on them.

I'm sorry, I'm sorry, I have tried, but I am only human and there is absolutely no way to write about this that is not sarcastic. But Grossman's post is smart and worth reading! The interesting, ambitious vision of token/blockchain technology involves thinking of new ways to build decentralized tools on the internet, and CryptoKitties and their hats might actually give some useful pointers in that direction. Grossman:
The (original) internet brought us a world where any site could link to any other site, and they could all be accessed from anywhere in the world.  This was the first interoperability revolution.  The next one will be with data and digital assets.  For a long time, data has been the property of platforms — with cryptonetworks and cryptoassets, data can live outside of any one platform, under the control of users.  This has the potential to open up a lot of innovation.
It does. You could put little socks on the kitties. The future is amazing....
As is par for the course, reality is one step ahead. NorwayCatGuy is offering for sale:

Kitty #478394 - Stovner
They are named for some of the tougher neighborhoods in Oslo, that's Stovner above.

Finally, for some reason, reading all of the VC blather I am reminded of an A16Z investee advisor:

As Far As Whores Go, Larry Summers Seems To Have Become....
...the Whore of Babble-on.

Seriously, what does this crap even mean:
“The 21 chip adds a whole new dimension to bitcoin’s potential utility. At first we will be struck by the presence of a technology like embedded mining; eventually we may be struck by its absence...."
Long time readers may remember Larry from such hit posts as...MORE

"Does psychographic marketing really work?"

Probably not as well as its promoters would have you believe.

There was a reason Proctor & Gamble was able to cut ad spending on digital platforms by $100 million/quarter with no drop-off in revenues last July. Although P&G's motivation was the fact that so much of their Facebook advertising was 'read' by bots and that the 40% of 'impressions' that weren't bots suffered from "banner blindness" (additional concern: placement/brand protection issues); had FB been able to counter with psychographic data to make their case, the world's largest advertiser ($10.5 billion) would have been more than happy to continue or even increase the ad spend.
See also the (somewhat) related "Neuromarketing", below.

Following up on "Alexander Nix, a fake Bond villain obscuring the real mastermind".

From American Public Media's Marketplace-Tech:
With enough data, could a company predict what you want? That’s the idea behind psychographic advertising: A company builds a profile of each customer and uses it to manipulate their emotions through marketing. This type of advertising is at the heart of a scandal involving Cambridge Analytica, which used Facebook to get this type of personal data. But how far can this type of advertising go? Marketplace Tech host Molly Wood spoke with Alexandra Samuel of the Harvard Business Review about what psychographic marketing really is and what its limits are.   
Click the audio player above to hear the full interview.


July 10, 2015
Attention Knaves and Varlets: Get Into Neuromarketing While the Getting Is Still Good
Always, always have an eye for the Main Chance:
"It's easy to make money in this market,"
"We'd better get in before they pass a law against it."
-Joseph P. Kennedy before becoming the first S.E.C. Commissioner
as quoted by Michael Beschloss

With the right attitude, opportunity is everywhere....

Japanese Use AI to Analyze Draghi’s Face to Predict Policy Changes

21st century headlines.
From Reuters:

Japanese researchers seek to unmask Draghi's poker face to predict policy changes
If European Central Bank chief Mario Draghi appears slightly more downbeat at his regular news conference than before, it could foreshadow a possible move by to the bank to trim its monetary policy stimulus. 

That’s the conclusion of two Japanese researchers who’ve used artificial intelligence software to analyze split-second changes in Draghi’s facial expressions at his post-policy meeting press conferences. 

The findings follow a similar analysis by the same researchers of Draghi’s Japanese counterpart, Haruhiko Kuroda, last year, which claimed to have identified a correlation between patterns in his facial expressions and subsequent policy changes....MUCH MORE 

Signposts: "Global Art Market Worth $63.7 Billion in 2017, Up After Two-Year Decline"

From Barron's Penta (as in 5+ mil. net worth), March 15:
A Masterpiece By Jean-Michel Basquiat Jean Michel-Basquiat, Untitled Illustration: 2017 The Estate of Jean-Michel Basquiat / ADAGP, Paris / ARS

“After two years of uncertainty and decline, the market turned a corner in 2017 with growth in the auction and dealer sectors, as well as at art fairs and online,” wrote the report’s author, Clare McAndrew. “Despite some remaining political volatility, robust growth in high-end global wealth, accelerating financial market returns, stronger consumer confidence and increased supply led to a much more favorable environment for sales.”

However, McAndrew noted that the activity last year was largely driven by sales at the top end of the market.

McAndrew, a leading art market economist, recently joined Art Basel and was commissioned to write the report by Art Basel and UBS.
Some of the key data presented in the 175-page report include:
  • The U.S. retains its position as the market leader, with a sales increase of 16% last year compared to 2016 and 42% of total sales by value.
China moved into second place with 21% of total sales, and the U.K. is in third place with 20% of total sales
  • In aggregate, dealers claimed 53% of the total $63.7 billion in sales, compared to auction houses with 47% of the share.  Dealers at the very high end, with sales over $50 million, had a growth rate of 10%....

I remember thinking, when the Basquiat was hammered down for $110 million, "Where would you put it?" 
It's not the sort of thing you want to see on a late night bathroom run or first thing on the way to breakfast.

"Alexander Nix, a fake Bond villain obscuring the real mastermind"

The transcript of the conversation reads in spots as though 007 is the plodden, heavy, Sean Connery Bond whereas anyone with half a brain knows the real Bond was Roger Moore.

That quibble aside, this is genius.
From the Financial Times:

Cambridge Analytica’s éminence grise is really just an adman bigging up his firm

There does seem to be more than a touch of the Bond villain about Alexander Nix, the perfectly turned-out figure at the centre of the Facebook data row.
Ah, 007. Our target is this man, chief executive of Cambridge Analytica, Alexander Nix.

Is that Dr Nix?
Er, no. Just Mr Nix.

Pity. Dr Nix sounds more sinister. So what’s Little Nix done?
He’s inserted himself into the world’s most powerful data engine and is using it to change election outcomes.

I see. How do we know this? 
He’s been telling everyone.

Telling everyone? Isn’t this the kind of thing you do secretly? Probably from a bunker hidden inside a volcano on an island in the Pacific which doesn’t exist on radar.
He seems to be operating mainly out of an office off Oxford Street. Wired called him one of 25 geniuses making the future happen now.

Who else was on the list?
There was a guy who makes movies for Amazon and a woman in charge of documentaries for Netflix.

So he’s hiding in plain sight. Clever. 
He’s not exactly hiding. He goes to conferences and does interviews about how his firm won it for Trump.

 I see. What do they do? 
They use programmatic campaigning on social media augmented with linear optimised data.

You mean targeted advertising.
 Not just targeted advertising, Bond. We think he’s developed a powerful new tool he calls psychographics. It fuses demographic data with personality traits.

OK, so it’s very targeted advertising....

Re: Plodden, I think I just came up with a neologism. Or at minimum a portmanteau of plodding and leaden.
Or maybe it's a malamanteau:

Lord knows I've tried:
The White House Is Searching for the NextGen Futurecow (MOO)
Nextgen futurecow is probably as close to a neologism as I'm ever going to get....
(cue deep mournful lowing)
For a discussion of neologisms we have on offer:
Sodom, LLC: The Marquis de Sade and the Modern Office Novel
On second thought it might be best to just follow the FT link.

Intermental – A Glossary of (Possible) Tech-Induced Mental Disorders [INTERACTIVE]

From Information is Beautiful:
Smart Tick
Compulsion to fill any momentary lull in stimulus or social contact with smartphone activity.
(like when a companion briefly leaves you alone at the dinner table, you instantly reach for your phone). 

Dopamine vacuum in the brain’s pleasure centres drives a restless need for more information / novelty / stimulation. You’re the cocaine lab rat, clicking on the reload lever. 

Subtle feeling of heaviness and cognitive bloat caused by over-storage of ‘read-later’ items on Instapaper, Pocket etc. Delayed metabolisation leads to a discomforting feeling of being mentally ‘backed-up’. 

Abundance Wormhole
Mental paralysis caused by the excess of choices generated by “best of” ranking apps for cafes, transport routes, cheap flights, bars etc.
Typically ended by a row with one’s partner & a tense, tasteless meal at a no-reviews 2-star slophole.

The Largest Landholders In the United States: The Land Report 100

We've visited the Land Report a few times over the years, here's the latest:
The Land Report 100

No. 1 John Malone

2,200,000 acres
Leslie and John Malone acquired Florida’s historic Bridlewood Farm in August 2013. More than 100 stakes winners have been bred and raised under the Bridlewood name, including the 2004 Kentucky Derby and Preakness Stakes winner Smarty Jones. That tradition not only continues under the Malones stewardship but was embellished when Tapwrit won the 2017 Belmont Stakes. Not only did the Tapit colt train at Bridlewood, but the Malones own a share of the stakes winner. “We’re approaching retirement age, and we were originally thinking of a retirement place. And the thrill and excitement of the Thoroughbred industry, coupled with the opportunity to preserve such a famed operation, was an opportunity too good to pass up,” John Malone told The Blood-Horse.
1. John Malone
2. Ted Turner
3. Emmerson Family (up 9,666 acres)
4. Stan Kroenke
5. Reed Family
6. Irving Family (up 236 acres)
7. Brad Kelley (up 150,000 acres)
8. Singleton Family
9. King Ranch Heirs
10. Pingree Heirs
11. Peter Buck  NEW TO LIST
12. Ford Family (up 158,000 acres)
13. Wilks Brothers (up 30,000 acres)
14. Briscoe Family
15. Lykes Heirs
16. Hamer Family NEW TO LIST
17. O’Connor Heirs (up 7,000 acres)
18. Martin Family
19. Thomas Peterffy  NEW TO LIST
20. Stimson Family (up 52,000 acres)
21. Holland Ware  BACK ON LIST
22. Westervelt Heirs (up 41,000 acres)
23. D.R. Horton
24. McDonald Family (up 64,000 acres)
25. Simplot Family

LandLeader has the individual stories:
LandLeader is once again proud to present The Land Report 100, the 2017 annual survey of America's top land owners. In our second year of sponsoring this exclusive list, LandLeader continues to reinvent land and ranch marketing and is growing at a tremendous rate.

Since 2013, LandLeader jumped into the land marketing market with immediate growth, innovative marketing strategies, exceptional land sales, and welcomed the best land brokers to join our exclusive partnership across the country. In just three quick years our members have collectively sold over $3 billion in real estate in over 35 states.

The network that our owner members have created gives landowners and buyers the most trusted and wide spread group of land professionals in America. Our team of agents and brokers loves the great outdoors, believes in strong family values and are purveyors of conservation and wildlife management.

In an effort to support land stewardship and ownership, LandLeader and all of our members are honored to host the digital version of The 2017 Land Report 100 below. Enjoy!...
See also the field notes:
No. 4 Stan Kroenke
1,380,000 acres
One of the greatest opportunities awarded to private landowners is the restoration and enhancement of the lands they steward. At Kroenke Ranches, this includes initiatives at Montana’s Broken O Ranch and Texas’s Waggoner Ranch. On the Broken O, focal points include upland bird enhancement as well as stream and wetland restoration. Given the Broken O’s 40-plus miles of spring creeks, the latter is a massive undertaking that incorporates a survey and engineering design team to guide the construction efforts. On the Waggoner, wildlife enhancement was initiated with hiring a quail biologist and wildlife staff. The focal point on the Waggoner is the reduction of Mesquite density to 20 percent to create ideal quail habitat through water retention and vegetative diversity. Helicopter surveys have indicated that quail populations are already on the rise as a result of the enhancement work.

No. 6 Irving Family
1,246,236 acres (up 236 acres)
Founded in 1882, privately held J.D. Irving Company owns some 3.2 million acres in Canada, where it is based in New Brunswick, and manages an additional 2.8 million acres. Seed production and yield are the focus of the Northern Maine division of Irving Woodlands, which includes 1.246 million acres; all are certified under the Forest Stewardship Council program. In addition, the US operations are regularly and independently audited according to ISO 14000 environmental standards and are certified under the Sustainable Forestry Initiative program. Last year, Irving Woodlands planted some 2.9 million trees. All told, the company has planted over 960 million trees. In addition to land, J.D. Irving Limited ranks as one of Canada’s largest privately owned enterprises and has wide-ranging operations, including hydropower, shipbuilding, consumer products, transportation, and logistics.

No. 7 Brad Kelley
1,150,000 acres (up 150,000 acres)
Kelley’s Calumet Farm continues its return to glory. Since acquiring it in 2013, the Kentucky native has been burnishing the reputation of the legendary breeding and training facility on the track and in the barn. This year, three contenders in the Run for the Roses wore Calumet’s colors. Although neither Hence nor Patch nor Sonneteer finished in the money, the presence of the trio in the starting gates speaks volumes about Kelley’s commitment to the sport of kings. Earlier this year, Kentucky Derby-winning trainer Todd Pletcher told the Lexington Herald-Leader, “I think Mr. Kelley, as you can see, is putting together a pretty powerful stable. He’s carrying on that Calumet tradition in a big way. It looks to me like it’s only going to get bigger.”

No. 16 Hamer Family
600,000 acres (NEW TO LIST)
 Fourth Generation of West Virginia Foresters Cracks Land Report 100 at No. 16
Starting with just one sawmill in 1976, West Virginia native Jim Hamer (1937–2011) grew his timber holdings exponentially. His heirs own 600,000 acres of timberland, run 5 sawmills, and produce 50 million board feet of green lumber per year and 25 million board feet of kiln-dried lumber in the Mountain State annually. Jim C. Hamer Companies have long been recognized as a pioneer in converting sawdust into densified fuel pellets and creating a novel fuel source.

Priorities, Focus and Interest as Seen through the Eyes of George Orwell

From Peter Moore's blog:

On Robert FitzRoy and misremembering history
I’ve been listening to George Orwell’s The Road to Wigan Pier on my daily walks recently. Something that he wrote reminded me of the tendency of big events to overshadow everyday history.

He was, he pointed out, visiting Yorkshire in 1936 when Adolf Hitler ordered his troops into the Rhineland. “Hitler, Locarno, Fascism, and the threat of war aroused hardly a flicker of interest locally” he explained, “but the decision of the Football Association to stop publishing their fixtures in advance (this was an attempt to quell the Football Pools) flung all Yorkshire into a storm of fury.”

This is a typical Orwellian fact – favouring a plain reality over a grand historical moment. It’s a similar story to another I heard recently from a former teacher of mine. She said that they had found an old journal under the floorboards of a family house. It turned out that it belonged to a great uncle who had died during the Second World War. This journal spanned the years 1937-9 – the terrifying years of Hitler’s rise and the spread of Fascism across Europe. Of course the journal neglected any mention of these events and instead concentrated on the uncle’s love of motor cars, which were then becoming more common in London....MORE

Friday, March 23, 2018

Meet The Guy Who Taught Bill Gates About Energy

We are fans, more after the jump.
The only other person I can think of who was as clear-eyed about the subject was David J.C. MacKay, more on him after the jump as well.

From the journal Science, March 21:

Meet Vaclav Smil, the man who has quietly shaped how the world thinks about energy
As a teenager in the 1950s, Vaclav Smil spent a lot of time chopping wood. He lived with his family in a remote town in what was then Czechoslovakia, nestled in the mountainous Bohemian Forest. On walks he could see the Hohenbogen, a high ridge in neighboring West Germany; less visible was the minefield designed to prevent Czechs from escaping across the border. Then it was back home, splitting logs every 4 hours to stoke the three stoves in his home, one downstairs and two up. Thunk. With each stroke his body, fueled by goulash and grain, helped free the sun's energy, transiently captured in the logs. Thunk. It was repetitive and tough work. Thunk. It was clear to Smil that this was hardly an efficient way to live.

Throughout his career, Smil, perhaps the world's foremost thinker on energy of all kinds, has sought clarity. From his home office near the University of Manitoba (UM) in Winnipeg, Canada, the 74-year-old academic has churned out dozens of books over the past 4 decades. They work through a host of topics, including China's environmental problems and Japan's dietary transition from plants to meat. The prose is dry, and they rarely sell more than a few thousand copies. But that has not prevented some of the books—particularly those exploring how societies have transitioned from relying on one source of energy, such as wood, to another, such as coal—from profoundly influencing generations of scientists, policymakers, executives, and philanthropists. One ardent fan, Microsoft co-founder Bill Gates in Redmond, Washington, claims to have read nearly all of Smil's work. "I wait for new Smil books," Gates wrote last December, "the way some people wait for the next Star Wars movie."

Now, as the world faces the daunting challenge of trying to curb climate change by weaning itself from fossil fuels, Smil's work on energy transitions is getting more attention than ever. But his message is not necessarily one of hope. Smil has forced climate advocates to reckon with the vast inertia sustaining the modern world's dependence on fossil fuels, and to question many of the rosy assumptions underlying scenarios for a rapid shift to alternatives. "He's a slayer of bullshit," says David Keith, an energy and climate scientist at Harvard University.
Give Smil 5 minutes and he'll pick apart one cherished scenario after another. Germany's solar revolution as an example for the world to follow? An extraordinarily inefficient approach, given how little sunlight the country receives, that hasn't reduced that nation's reliance on fossil fuels. Electric semitrailers? Good for little more than hauling the weight of their own batteries. Wind turbines as the embodiment of a low-carbon future? Heavy equipment powered by oil had to dig their foundations, Smil notes, and kilns fired with natural gas baked the concrete. And their steel towers, gleaming in the sun? Forged with coal.

"There's a lot of hopey-feely going on in the energy policy community," says David Victor, an expert on international climate policy at the University of California, San Diego. And Smil "revels in the capability to show those falsehoods."

But Smil is not simply a naysayer. He accepts the sobering reality of climate change—though he is dubious of much climate modeling—and believes we need to reduce our reliance on fossil fuels. He has tried to reduce his own carbon footprint, building an energy-efficient home and adopting a mostly vegetarian diet. He sees his academic work as offering a cleareyed, realistic assessment of the challenges ahead—not as a justification for inaction. And he says he has no ax to grind. "I have never been wrong on these major energy and environmental issues," he says, "because I have nothing to sell."

Despite Smil's reach—some of the world's most powerful banks and bureaucrats routinely ask for his advice—he has remained intensely private. Other experts tap dance for attention and pursue TED talks. But Smil is a throwback, largely letting his books speak for themselves. He loathes speaking to the press (and opened up to Science only out of a sense of duty to The MIT Press, his longtime publisher). "I really don't think I have anything special to say," he says. "It's out there if you want to know it."...MUCH MORE
HT:  FT Alphaville's Further Reading post, March 22

Back in 2012 GMO's Jeremy Grantham was warning about the impending civilization-destroying shortage of fertilizers, specifically phosphorus and potash. His argument was published in the journal Nature, just about as prestigious a platform as one is likely to mount, save maybe Proceedings of the Royal Society—A, but that's for physics and engineering. Anyhoo. Mr. Grantham said the world was going to run out but that is not the way commodities work. A commodity's price will ration supply to the highest use (although in cases like corn the allocation function is distorted by government ethanol policies). Additionally, price will incentivize both increased production and substitution.

To date the only commodity the world has run out of is, oddly enough, a fertilizer in the form of guano. We were pretty close on whale oil before Mr. Rockefeller's mass production of kerosene saved the whales. And then there's menhaden but that's a whole 'nother story.
If we are going to run out of anything in the foreseeable future it is probably helium and because of that, in the spirit of conservation, I no longer say "That's as funny as three helium atoms, HeHeHe"

The fert fight starred in a couple posts including "Vaclav Smil Takes on Jeremy Grantham Over Peak Fertilizer" in which our hero came out swinging from the opening bell:
We posted the whole of Mr. Grantham's Nov. 15 Nature piece for fear it would go behind Nature's paywall.
To date it hasn't. Also to date I haven't come through on my assurance in Nov. 24ths "Jeremy Grantham "On the Road to Zero Growth" as His Co-head of Asset Allocation Does the Full Monty". I promise I'll get to it.

We have almost as many posts on Professor Smil as we do on Mr. Grantham. This is the first time they've been together. I feel very uncomfortable being on the opposite side of Mr. G on just about anything but in this case Smil is right.
From The American:
Jeremy Grantham, Starving for Facts
 A column by legendary asset manager Jeremy Grantham is more suitable for the tabloids than for one of the world’s oldest and most prestigious scientific weekly magazines....MORE.
Some of our posts on Mr. Smil:
Vaclav Smil: Planet of the Cows
Our readers may know Mr. Smil as a big deal in the Thinking-about-Energy biz. Here he is thinking about bovines....
...Previous Smil at Spectrum:
Vaclav Smil: "Advanced Economies Must Still Make Things"
Vaclav Smil: "Cellphones as a fifth-order elaboration of Maxwell’s theory"
Calories In, Kilowatts Out: Apparently Sweating Is Important
"Happy Birthday to Moore’s Law" (plus party pooper Vaclav Smil)
And non-Spectrum Smil:
Vaclav Smil On Energy: "Revolution? More like a crawl"
Bill Gates on The Most Astounding Statistic In Vaclav Smil's New Book

Bill Gates Summer Reading List (Vaclav Smil has two entries)
Energy--'Vaclav Smil is Correct: Never Forecast'
Energy: "The man who’s tutoring Bill Gates … "
Vaclav Smil: "In energy matters, what goes around, comes around—but perhaps should go away"
Vaclav Smil: "The Manufacturing of Decline"
Serious Thinking on Energy: An Interview With Dr. Vaclav Smil
A Major Piece: "Why the tech revolution isn’t a template for an energy revolution"
Bill Gates Reviews Vaclav Smil's "Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines"
The other genius level thinker about energy died a couple years ago this April: 
Energy and Artificial Intelligence Expert Professor Sir David J.C. MacKay Has Died, Age 48 
When people want to talk with me about energy I usually start by asking if they have read his book yet.
It's a really good book, see the links in the above story if interested.

And if you don't read his book, you have no excuse. He put it on the internet for free download.

"Ozzy Osbourne Makes The Economics News"

From The Dangerous Economist:
See Ozzy Osbourne Brings Antitrust Lawsuit Against AEG for Tying London and L.A. Venues by Eriq Gardner of The Hollywood Reporter. Excerpt:
"On Wednesday, the heavy metal musican filed an antitrust lawsuit against AEG, alleging the entertainment industry giant is illegally tying its venues in London and Los Angeles.

"The tying arrangement at issue is so explicit and brazen that AEG has given it a name: the 'Staples Center Commitment,'" states the complaint filed in California federal court. "Through the Staples Center Commitment, AEG requires that artists and musicians cannot play London’s most essential large concert venue—the O2 Arena —unless they agree to play the Staples Center during the part of their tours that takes place in Los Angeles. Both the O2 and Staples are owned by AEG."

Osborne, represented by lawyers at the top firm of Latham & Watkins, explain that O2 is a "must have" venue for touring musicians because of its popularity and environment....

While we're at it, here's a version of Crazy Train that dropped last year: 
With Earth, Wind and Fire!

From the mind of DJ Cummerbund:
It's the zeitgeist. 

Gasoline Volume Sales and our Changing Culture

From Advisor Perspectives, March 21:
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-January, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

Because the sales data are highly volatile with some obvious seasonality, we've added a 12-month moving average (MA) to give a clearer indication of the long-term trends. The latest 12-month MA is 1.0% below its all-time high set in August 2005 and well off its -8.9% interim low set in August 2014.
The next chart includes an overlay of real monthly retail gasoline prices, all grades and formulations, adjusted for inflation using the Consumer Price Index (the red line). We've shortened the timeline to start with EIA price series, which dates from August 1990. The retail prices are updated weekly, so the price series is the more current of the two.


"What Do The Best-Performing Stocks in 2018 Have In Common?"

A twofer, first up the headline story.
From Ivanhoff Capital, March 13:
20 stocks have more than doubled year-to-date.

Many are biotech, but this is a cyclical, not a structural reason. A structural reason is one that persist; one that shows over and over again. 

All of them had a market cap of under $1 Billion on January 1st. 

All of them have a float of under 100 million shares. Most have a float of under 50 million shares...MORE
And pulling back for a longer term view, again Ivanhoff Capital, January 24:

The Three Best Performing Stocks for the Past 15 Years Will Surprise You
Netflix recently hit new all-time highs and it ended up on the first page of many newspapers. 10,000 invested in Netflix’s IPO in 2002 is worth about $2.3 Million today. This amounts to about a 40% average annual appreciation.

As impressive as NFLX’s return is, it is not even the best-performing stock for the past fifteen years. Here are the top three. They are all consumer stocks – a Chinese video game maker, a U.S. energy drinks producer, and a U.S. video content creator and distributor.
NTES +11,706%
MNST +77,230%
NFLX +23,467%

"China’s Surveillance State: AI Startups, Tech Giants Are At The Center Of The Government’s Plans"

So, same question we asked yesterday:

Is It Ethical To Deal With Facebook? "Facebook Advertisers Start Pulling Out" (FB)
(in Edward G. Robinson Voice) Where's your ESG now, see?*
Just as we saw with the hubbub surrounding Harvey Weinstein and his predations, in Facebook we have an open secret that was convenient to ignore as long as the money was slopping around and the stock was heading up.

And nary a peep out of the Environmental, Social And Governance (ESG) crowd about how Facebook earns its money....
From CB Insights:
In part 1 of our China in AI series, we dig into patents, earnings transcripts, startup data, and government documents to detail the growth of surveillance tech in China.

Facial recognition technology is penetrating deep into China. Cameras track passengers at railway stations, identify homeless people on the streets, and even monitor worshippers in state-approved churches.
China’s nation-wide surveillance project, named Skynet, began as early as 2005. But recent advances in artificial intelligence have given the state’s surveillance efforts a boost.

The government’s ambitious plans hinge on three legs: support from big tech giants like Alibaba and Tencent, strong startup partnerships, and elaborately crafted government policies favoring national security over privacy.

In part 1 of our China in AI series, we dig into patents, private market activity, government documents, and public company data to detail the growth of surveillance tech in China.

Table of Contents

China’s plan of action

Unlike the US, China has been vocal about its plans to become an AI-first state — and particularly vocal about how it will put the tech to use to monitor its citizens.

A 2017 documentary co-produced by the Communist Party claimed the country had the largest network of CCTV cameras – 20M – in the world.

Last year, around 55 cities were part of a plan called Xio Liange or “sharp eyes.” Footage from surveillance cameras in public and private properties will be processed centrally to monitor people and events.

Media reports suggest that intelligence collected from the video footage may eventually power China’s Social Credit System, a government plan announced in 2014 to rate the “trustworthiness” of its citizens.

A simple keyword search on worldwide patent database Espacenet shows how much emphsais China has put on surveillance. Over 530 patents related to video surveillance and surveillance cameras were published in China in 2017 alone, compared to just 96 in the United States (based on keyword searches of title and abstract).

China has also seen a rise in facial recognition patents, with 900+ patents published last year. Applicants included government-supported academic institutions like Shandong University and South China Tech, as well as big tech companies and startups whose clientele includes government agencies.
(Note: The patent filing process involves a significant time-lag before the publishing of patent applications.)

Deep govt-startup ties

As the government adds a layer of artificial intelligence to its surveillance, startups are playing a key role in providing the government with the underlying technology.
For instance, facial recognition is already at use in many railway stations for ID verification. Now, AI-enabled smart glasses developed by startup LLvision will be used to help authorities spot criminals.

LLvision builds smart glasses that resemble Google Glass. In 2018, it launched a new product, GLXSS ME, for industrial AI applications.
Using Intel’s Movidius Myriad vision processing chip, LLvision matches faces with a database of known and wanted criminals stored on the device. By storing images at the “edge” (aka on the device), as opposed to sending images to a central server on the cloud, the device can make IDs faster.

A simple keyword search on the CB Insights platform for computer vision deals in China shows the sudden explosion of interest in 2017.

The most well-funded computer vision companies are SenseTime, Face++, and CloudWalk.
CloudWalk received a $301M grant from the Guangzhou Municipal Government in Q4’17. Its facial recognition technology is deployed across several banks and airports, including the state-owned Agricultural Bank of China.

Startup Megvii (which develops the Face++ facial recognition platform) raised a $460M round – the largest to a computer vision startup in 2017 – led by the Chinese state government’s venture capital fund, with participation from the Russian government as well....MUCH MORE

"Real-Estate Agency Turns Apartment Viewing into Exciting ‘Escape Room’ Game"

From Oddity Central:
Evidence Immobilier, a real-estate agency in Montpelier, France, has become the first in the world to revolutionize the apartment viewing experience by turning it into an exciting “Escape Room” game where potential buyers have to look for clues and solve puzzles, while at the same time discovering the layout of the place.

Whether you’re looking to rent or buy a new apartment, the initial viewing is a very important part of the process. However, for most people – youths in particular – it’s just another chore that has to be completed, not something they are overly excited about.  One real-estate agency in France wants to change that, and their first attempt has been attracting a lot of attention from French media. They’ve teamed up with an Escape Room game designer in Montpelier to turn one of their available apartments into an interactive experience for potential buyers.

Instead of being walked through all the different rooms and having to listen to a real-estate agent talk about all the amenities and characteristics of the apartment in an overly positive way, the ‘Escape House’ viewing lets you discover everything yourself, while keeping you entertained.

First off, you and your partner are blindfolded and locked in one of the apartment rooms....MORE

Nestlé Backs New European AgriFood Tech VC Fund

From AgFunder:
Five Seasons Ventures, a new European VC focusing on agrifood tech investments has launched its first fund, announcing a first close on €60 million ($74.3m). Backers include Nestlé, the European Investment Fund, Fondo Italiano d’Investimento, Bpifrance, and selected family offices and entrepreneurs. 

“Food and agtech is a new story and an exciting one. There are not many LPs who have heard of a fund focused on food and agtech,” said cofounder Niccolo Manzoni, who told AgFunderNews that the firm is targetting €70 million ($86.6m) for a final close after receiving more enthusiasm than expected from investors, causing the firm to raise their target from €50 million. 

The cofounders of the firm, which is based in Paris,  are Ivan Farneti and Manzoni. Farneti was founding partner of Doughty Hanson Technology Ventures and a board member of Seedcamp. Manzoni previously managed a European family office where he invested in  Impossible Foods, Perfect Day Foods, Beyond Meat, Clear Labs, and Memphis Meats. The two were introduced by a common acquaintance who would become one of their first investors. 

The firm is taking a wide view of agrifood tech, focusing on every inch of the supply chain from startups aiming to satisfy shifting consumer preferences like plant-based proteins and personalized nutrition, to supply chain traceability and packaging technologies, to increasing yield on farms and reducing waste....MUCH MORE

"ANALYSIS: Money flees Saudi Arabia at rapid pace"

Ya think?
From Middle East Eye:

Cash is leaving Saudi Arabia at an exponential rate because of the country's struggling economy, report shows
A torrent of money has fled Saudi Arabia as a result of its struggling economy.
It’s bad news for a country that is desperately trying to shed its dependence on the energy business and refashion its economy for a post-oil world.

New research shows the kingdom saw tens of billions of dollars of capital leave the kingdom each year from 2012 up to and including last year. Next year there will be more of the same, states the March-dated report from the DC-based think tank, the Institute of International Finance (IIF).
As much as $64bn in core capital left Saudi Arabia in 2017 based on data through the third quarter
“Core capital flows ran at a substantially negative pace last year... with little sign of improvement in the data through Q3 2017,” the report stated.

Capital refers to cash and other economic assets. In the case of the study, IIF analysts removed overseas borrowing made by the kingdom. The result is the so-called “core capital flow”.
“Prior to recent years, Saudi didn’t borrow externally, so we wanted to strip that out to see whether there are outflows or inflows,” says Greg Basile, senior research analyst at IIF.
What they found was a substantial and consistent outflow of capital.

As much as $64bn in core capital left Saudi Arabia in 2017 based on data through the third quarter, the report estimates. That’s up from $55bn the year before. This year the outflow is set to continue with a projected $26bn to leave the country. 

Why the exodus?
Did the financial seizures of princes and other royals get taken into account in the IIF report? Probably not.

“Chances are we won’t see the effect of the capital outflow from that until this year,” says Marcus Chenevix, a Middle East-North Africa analyst at the financial firm TS Lombard in London.
The reason is simple. The princes were detained and therefore were not free to arrange to move assets out of the Kingdom, says Chenevix.

“Did capital immediately leave the country? Probably not,” he said....

"Why Reuters should exit the financial news business"

 That's the headline TalkingBizNews used to tease this story by Felix Salmon at recode, March 16:

Reuters just got $10 billion to build a sustainable news business. How should it spend it?
Reuters News just won the lottery. What will it do with all that money?
It’s the biggest assignment in journalism: Take a set-in-its-ways 167-year-old news organization and reconfigure it radically so that it can compete on the global stage against countless young digital upstarts. If it’s done right, billions of people could end up with trusted, independent, impartial news they would never otherwise have had access to. On the other hand, if it’s done wrong — or if it’s not assigned at all — then one of the world’s most storied newswires might be entering its final years.
Welcome to Reuters, the news agency which faces, today, the most epochal decision in its history. If it doesn’t scale back, radically and quickly, its core financial-news offering, then in 30 years’ time it will be on life support. If it does make the change, however, then it can not only save itself; it might even be able to help transform billions of people’s access to trusted news.

Opportunities like this don’t come along very often — indeed, to a first approximation, they never come along. But now, thanks to a $17 billion M&A deal in which private equity giant Blackstone is taking over the Thomson Reuters financial-terminal business, Reuters News (which is not part of the deal) has found itself in possession of an astonishing $10 billion lottery ticket. The catch: This lottery ticket is timed to self-destruct. 

Reuters, from its very beginning in 1851, made its name by delivering fast and accurate information to both newspapers and the financial markets. Over the years, the financial data part of the business grew to dwarf the news business, and the billions of dollars in revenue thrown off by financial terminals have helped to pay for a global news operation that now employs more than 3,000 journalists in some 200 locations around the world. 

But once the terminal business becomes controlled by Blackstone, led by Stephen Schwarzman rather than by Thomson Reuters, that business has much less incentive to pay Reuters hundreds of millions of dollars a year for its news. After all, Thomson Reuters had significant control over what Reuters covered. By contrast, Reuters will and must have complete editorial independence from Blackstone.
The result is that if Schwarzman wants to rely on a news operation, he’s either going to build one of his own, like his fellow billionaire Mike Bloomberg did, or else he’s going to contract with a news provider who will let him specify exactly what he wants to pay for. The days when Reuters could rely on financial data terminals to pay for its global newsgathering are now numbered.

That would be bad news indeed for Reuters, were it not for one thing: As part of the deal, Blackstone has agreed to pay Reuters at least $325 million a year for its news. Better yet, that payment is guaranteed for at least 30 years. That’s a minimum of $9.75 billion in total — the kind of money most news organizations can only dream of. (To put that number in context, the Washington Post was bought by Jeff Bezos for $0.25 billion.)...MUCH MORE
Why Reuters should exit the financial news business

"US Threatens Sanctions For European Firms Participating In Russian Gas Pipeline Project"

It's not just U.S. self-interest (selling some LNG) in play here, although that is part of the U.S. rationale, rather, there are actual security concerns.
Especially as the northern hemisphere winter of 2017 - 2018 enters its 15th month.
From ZeroHedge, March 22:
As previewed overnight, the U.S. State Department is warning European corporations that they will likely face penalties if they participate in the construction of Russia's Nord Stream 2 gas pipeline, on the grounds that "the project undermines energy security in Europe", when in reality Russia has for decades been a quasi-monopolist on European energy supplies and thus has unprecedented leverage over European politics, at least behind the scenes.

As many people know, we oppose the Nord Stream 2 project, the US government does,” said State Department spokeswoman, Heather Nauert at a Tuesday press briefing. “We believe that the Nord Stream 2 project would undermine Europe's overall energy security and stability. It would provide Russia [with] another tool to pressure European countries, especially countries such as Ukraine.”

And speaking of Ukraine, recall that in 2014, shortly after the US State Department facilitated the presidential coup in Ukraine, Joe Biden's son Hunter joined the board of directors of Burisma, Ukraine's largest oil and gas company. Surely that was merely a coincidence.
The project which began in 2015 is a joint venture between Russia's Gazprom and European partners, including German Uniper, Austria's OMV, France's Engie, Wintershall and the British-Dutch multinational Royal Dutch Shell. The pipeline is set to run from Russia to Germany under the Baltic Sea - doubling the existing pipeline's capacity of 55 cubic meters per year.

Nauert said that Washington may introduce punitive measures against participants in the pipeline project - which could be implemented using a provision in the Countering America's Adversaries Through Sanctions Act (CAATSA). 
“At the State Department, we have spent a lot of time speaking with our partners and allies overseas to explain to them the ramifications of CAATSA and how an individual or a company or a country can run afoul against CAATSA and fall into sanctions," Nauert said. "We don't tend to comment on sanctions actions but we've been clear that firm steps against the Russian energy export pipeline sector could – if they engage in that kind of business – they could expose themselves to sanctions under CAATSA.”

Several EU nations, particularly Germany, have repeatedly expressed interest in participating in Nord Stream 2, however the pipeline has been opposed by several minor bloc nations, including Poland, Latvia, Lithuania, Romania and Hungary. Ukrainian authorities are also staunchly against the project, as it bypasses Ukraine and would impact them monetarily....MORE
"Germany’s Pivot From Russian Gas Will Be Costly"

Thursday, March 22, 2018

"Calm Down, Turkey’s Not Going To Invade The Balkans"

That's why the market is trading down, right?
From Oriental Review, March 21:
President Erdogan’s regular addresses to the Muslim and Turkish people of the Balkans are a soft power tactic that isn’t any functionally different from the transnational outreach attempts that other forces engage in elsewhere across the world and on different ideological-identity pretexts.
The Alt-Media Community has once again been thrown into hysteria after one of President Erdogan’s latest speeches where he addressed his fellow Muslim co-confessionalists and ethnic Turkish kin in the Balkans on the eve of what ended up being his country’s monumental military victory in the northwestern Syrian town of Afrin. His words were reported on widely in the press and ominously framed in such a way as to imply that a similar operation might be commenced in Southeastern Europe one of these days as well, though nothing could be further from the case. The Balkan people are psychologically scarred by the centuries of Turkish occupation and have a reason to fear Ankara’s aggression against them, but their historical experiences over the previous centuries might be blinding them to how much the world has changed since then....MUCH MORE
Over the years we've only linked to Oriental Review a couple times as their bias is readily apparent from a quick look at their headlines. That said, O-R's response to the linked EurActiv story:
Bulgaria reacts to disturbing statement by Turkey’s Erdogan
seems measured and correct. Erdoğan isn't moving west, rather his follow-up to invading Syria appears to be:

—Middle East Eye, March 20
See? No worries.

Real Estate: It Doesn't Look Like Turkey Will Be Leaving Syria Any Time Soon 

Now about that U.S. stock market...
March 1
Uh Oh: "When To Sell In a Bull Market" Revisited,124603&p=d1&rev=636573331453897635
January 25, again just before the first leg down:

In 2016 We Had the #1 Stock In the S&P 500, In 2017 We Had the Top-Performing Commodity, In 2018 We've Got....
So here's a little victory dance 'til we figure something out.
And after that, a pretty good Warren Buffett story....

News You Can Use: "What to Bid on at the Historic Ritz Paris Auction"

From Messy Nessy Chic, March 21:
When they closed the Ritz Paris for a four year renovation in 2012, my mind often went to that place where I imagine I can walk through walls and suddenly, I’m roaming empty hallways and rooms with the ghosts of the city’s most storied hotel. Sometimes I wandered into the secret Ritz warehouse (yes, such a place exists), where thousands of pieces of furniture and decorative objects lived during much of the renovation and redesign. It would be just like walking through the warehouse of treasures from the final scene of Citizen Kane....

....As it turns out, the reality isn’t that far off. In 2017, a team of 10 lucky people were “locked inside” the secret Ritz furniture warehouse for 6 months to inventory 10,000 items in preparation for their auction this Spring. From Hemingway-era bar stools and beds from the Coco Chanel suite to minibars and the signature hotel bathrobes, it’s all there, and it’s all about to go up for sale. Take a look inside the warehouse…MUCH, MUCH, SO MUCH MORE
Previously from Messy Nessy;
Now It Can Be Told: Mohammed bin Salman Was the Mystery Buyer of the $300 Million French Château
Some Airbnbs Are Better Looking Than Others
There's Realism, There's Hyperrealism, There's Photo-Realism and Then There's This
Construction Used to Be More Labor Intensive (and other pictures you may not have seen before) CMB
Picasso Pics For Sale, Cheap (chateau included)
The Man Who Sold The Eiffel Tower, Twice and A (bath) Room With A View
Art Institute of Chicago Recreates Van Gogh's Bedroom, Puts it On Airbnb
Huh, Apparently The Barbie Doll Began Life As a High-end German Call Girl Named Lilli 

"The forgotten history of free trade: the Medici dynasty and Livorno"

From the Oxford University Press blog, March 20:
The Medici had everything, almost. They got immensely rich as bankers during the fifteenth century. As patrons of the arts they assembled some of the finest collections in Italy. They placed two scions on the papal throne as Leo X and Clement VII. They won political control over the city of Florence—first as informal rulers and, after 1530, as hereditary dukes. The Medici lacked only one thing to render their earthly felicity complete: they lacked a port city.

The Medici dynasty had big ambitions for their little state, and they turned to the malaria-ridden village of Livorno to realize them. The alchemically-inclined Francesco I (r. 1574-87) began the process of planning a new port in Livorno. His brother Ferdinando I (r. 1587-1609) put aside his cardinal’s cap to take up the grand duchy when Francesco died, perhaps by poison. It was Ferdinando who turned Livorno into “one of the most famous places for trade in all Christendom,” as one English merchant put it.

But, what did a Mediterranean port city mean during the long seventeenth century?

In an earlier age, commercial powers such as Venice had tried to control trade, with violence if necessary; they sought to capture commerce for their own ports and deny their rivals access to the richest routes. But such designs were increasingly out of place by the sixteenth century. The expansion of global trade and the entrée of new powers such as the Dutch and the English made the pursuit of monopoly in the Mediterranean a fruitless endeavor. A program of hospitality toward people and goods was a more profitable avenue for commercial expansion.

In 1591, Grand Duke Ferdinando invited foreign merchants of any religion or nationality to settle in his port of Livorno. There they would enjoy security of person, property, and conscience—unlike elsewhere in Europe, where rulers enforced religious orthodoxy throughout their territories, and happily seized the assets of merchants when it suited their interests. Such policies earned Livorno a reputation as “a continuous fair of foreigners,” recalling the freewheeling fairs of the Middle Ages.
The Medici grand dukes also relaxed rules governing goods. In most cities during the Middle Ages, wares were subject to high taxes and a welter of bureaucratic controls—international trade occurred under strict supervision. By contrast, merchants in Livorno enjoyed a package of incentives for the warehousing, transit, and exchange of their wares. These measures culminated in a decree in 1676 that eliminated import/export dues entirely. The 1676 reform instantiated the principle that trade was to be taxed only for the provision of commercial services; that is, only to defray the cost of infrastructure such as harbor and warehouse facilities. “You know exactly what you have to pay, you pay it, and you’re done,” wrote one admirer,” without those annoying inspections that one so often finds in other places.”...MUCH MORE

Sometimes This Investing Thing Seems Easy: Consumer Packaged Goods Edition (GIS)

But first, a bit-o memento mori:
We're all victims of our own hubris at times. 
—Kevin Spacey
Hubris is one of the great renewable resources. 
—P. J. O'Rourke
Every time I get accustomed to low volatility, like we were towards the end of the Greenspan era, and we think we have all the levers under the control... something erupts to remind us that the idea that anybody is in control of everything is hubris. 
—Lloyd Blankfein 
All via BrainyQuote

We've been talking for a while now about what a lousy business consumer packaged goods (ex-Nestlé) has become, some links after the jump.

Yesterday one of the poster boys, General Mills - Kellogg Co, is the other one we use as a proxy for the business - yesterday GIS reported earnings and management's view of the future which elicited a negative reaction in the stock:

GIS General Mills, Inc. daily Stock Chart

The stock price is down there in the lower right of the chart. They teach us in chart reading school "upper right good, lower right bad". It was the worst performer in the S&P yesterday, down 8.9%.
From MarketWatch this morning:

General Mills price target cut at least three times as analysts express surprise, concern after earnings 
General Mills Inc. GIS, +0.71% shares saw its price target cut at least three times with analysts expressing surprise and concern after third-quarter earnings were announced. RBC Capital Markets analysts cut their price target to $52 from $60 "primarily due to an unexpected increase in supply chain and commodity costs." They continue to rate General Mills shares sector perform. Analysts think General Mills will be "disproportionately impacted" by freight costs compared with other companies in the food sector because of volume growth and more "facility-to-facility shipments." Stifel cut General Mills' price target to $48 from $57 after a "surprisingly weak" third quarter. They maintain their hold stock rating. And J.P. Morgan lowered its price target to $44 from $54 because they don't think General Mills management gave investors enough information to rule out that some of the problems in the third quarter were non-recurring....MORE
Roger that, not enough information, over.
The stock is at  $45.85 down from $59.00 a year ago, during one of the bigger equity bull markets in history.
The risk of course was that some private equity group or Warren Buffett (do I repeat myself?) would swoop (see below) and wreck our fun in the short term but maybe set up a bigger and better opportunity down the road, sort of an intertemporal no-lose deal,

October, 23, 2017
Trouble In Packaged Food Land (K; GIS; MDLZ; NESN)
This is becoming a series, more after the jump.... 
October 3, 2017
The David Says Eat More Packaged Food (and short the stocks)
Note: that's The David, not some guy named Dave:

He's lonely and wants more people to look like him.
The big guy was last seen in "If You Want To Be Happy, Listen Up. Now! alternative title: The FT's Izabella Kaminska Is..." wherein Ms. K interviewed Robert Lustig, a pediatric endocrinologist at UCSF on neurotransmitters and the difference between happiness and pleasure and metabolic pathways and all kinds of stuff. And that's the hook for this quick post....
May 25, 2017
Nine of the World's Biggest Packaged Food Companies Have Launched Venture Capital Units
March 7, 2017
M&A In European Food
I'm not sure that consumer packaged goods is the area to be in, at least not in the U.S. and not based on names like Kellogg or General Mills.
For a quarter-century those manufacturers ratcheted prices as though they were tobacco companies but people find it easier to give up their Cheerios than their cigarettes.

The managements milked that approach for pretty much all it was worth so, as operating entities, they aren't all that attractive but someone will decide the only thing left to do is to asset strip or dividend recap the life out of the former cash cows.

Top o'the market to ya.... 

Matt Levine Writes About CryptoKitties ("this column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners").

While we haven't heard Mr. Bloomberg explicitly state that he is in favor of CryptoKitties, it is difficult to see how he could argue with the comfort they bring as an antidote to the hurley-burley of daily life.*
Not to mention the "CryptoKitties as an asset class" angle.

From Bloomberg View, March 22:
...The crypto.
Look, I am not a knee-jerk crypto-skeptic. I write a lot about the rubes and hucksters and scams in the cryptocurrency sector, but there are also sophisticated investors, many of whom have deep experience in traditional technology venture-capital investing, who are bringing that sophistication and experience to the crypto space. These investors aren't chasing pointless fads; they understand the transformative power of blockchain technology, and are investing in the revolutionary infrastructure that will underpin the future of the internet, the financial system, and the world as a whole. Here, for instance, is a blog post from Union Square Ventures about how it is investing in ... oh, wait ... oh it's CryptoKitties, never mind:
At USV, we think digital collectibles is one of many amazing things that blockchains enable that literally could not be done before this technology emerged.
We also think digital collectibles and all of the games they enable will be one of the first, if not the first, big consumer use cases for blockchain technologies.
So, one, I am not convinced that there were no pre-blockchain digital collectibles -- I think a lot of gamers would disagree with that -- but more importantly, "X literally could not be done before blockchain" is not an especially good argument for X. The question is: Should X have been done before blockchain? Were people really sitting around back in the dark ages of 2006 saying "sure I can get an animated cat on my computer screen but so can anyone else; what I need is a rare animated cat"? Maybe? I don't know anything anymore.

Elsewhere here is "Buy Bitcoins Without Risk of Losing Money:...MUCH MUCH MORE (margin loans, enhanced stablecoins, Elon Musk's compensation and bond ETF liquidity)
*You can see the evolution of our thinking from November 2017's "Kittens On the Blockchain Is NOT the Future I Was Promised" to March 7's "The Blockchain Is Just Another Way To Make Art All About Money":
At least I'll always have my CryptoKitties. Besides being cute as can be, I was told:
CryptoKitties Sales Hit $12 Million, Could be Ethereum’s Killer App After Al
Through March 11's "Elaine Thinks About Signaling and Destroys My CryptoKitties Dreams":
Her piece was written a couple weeks ago i.e. at least two cryptocurrency price tumbles ago.
Think of a waveform, but not the smooth, soothing shape of a sinusoid. Rather think of a faux quasi-periodicity with just enough regularity to trigger a mirage of pattern recognition, just enough to suck you in, across the event horizon of speculation into the madness of Hunter S Thompson:...

Is It Ethical To Deal With Facebook? "Facebook Advertisers Start Pulling Out" (FB)

(in Edward G. Robinson Voice) Where's your ESG now, see?*
Just as we saw with the hubbub surrounding Harvey Weinstein and his predations, in Facebook we have an open secret that was convenient to ignore as long as the money was slopping around and the stock was heading up.

And nary a peep out of the Environmental, Social And Governance (ESG) crowd about how Facebook earns its money.

Everybody knew. Hell we've been posting on the privacy/security issues since the IPO (at $38) and there are a lot of smarter people who had even deeper insight but looked the other way as the stock went from the Sept. 4, 2012 bottom tick $17.55 (as the various lock-ups were expiring) to the $193 top-tick last month.

But now we've got everybody and their brother clutching their pearls and tut-tutting.
Here are a few lines from ZeroHedge's "Facebook Advertisers Start Pulling Out":
...Meanwhile, Facebook shares remain under rising pressure - falling approximately 8.6% in three trading sessions and down again on Thursday premarket as investors - particularly "ethical" investment funds - reconsider their decision to hold the increasingly radioactive company.
Nordea, the largest bank in the Nordic region, which manages about £283 billion (~$400 billion USD), said that it had put some of its Facebook investments in “quarantine” while it assessed the scandal. Union Investment, a German group that manages about £255 billion ($360 billion USD), said that it was reviewing its holding of Facebook shares. -The Times
*This is the second time in a week we've had Rico "Little Caesar" Bandello in the inro. to a post.

I know Edward G. Robinson didn't add the "see" to his great line in The Ten Commandments: "Where's your Messiah now?"
But with Easter approaching the cross-wiring of the Robinson movies has begun. And it's not just me:

"Considering Skewness Of Returns As A Risk Metric"

Another tool in the toolbox.
Intech Investment Management recently published a primer on monitoring market stress by way of several risk metrics, including skewness of returns (SoR). In the grand scheme of quantifying risk, SoR is relatively obscure, but Intech makes a good case for paying more attention to this data.

Applied to financial markets, skewness measures the degree of return asymmetry in terms of the probability distribution around the mean. In English, skewness tells us if returns have been extreme or not. A relatively high positive skewness reading indicates returns deep in the right tail of the distribution. A negative number equates with a loss in the left tail. In short, skewness offers a straightforward tool for quantifying and monitoring tail risk.

Intech advises that “when investors become irrationally exuberant, market returns tend to become less negatively skewed or, even briefly, positively skewed (e.g., beginning of 1987 and mid-1990s), which supports the potential for an increased likelihood of a significant market dislocation. Conversely, very low levels of skewness often coincide with the market shock itself, and eventually manifest themselves as increased market dislocation with positive outcomes (e.g., early 2004 and following the Global Financial Crisis in 2009).”

Measuring return skewness for, say, the US stock market offers a useful lens for quantifying the degree of exuberance, or the lack thereof. A chart in the Intech research note shows the ebb and flow of market sentiment through time.
Another way to use skewness is by comparing markets. Consider, for instance, how the US stock market stacks up against the US bond market in recent history. Let’s use two ETFs as proxies to crunch the numbers: SPDR S&P 500 (SPY) for equities and iShares Core US Aggregate Bond (AGG) for fixed-income securities. For easier comparison, the data in the chart below is shown as Z-scores, which reflect how the skewness values rank in terms of standard deviations above or below their means. For this example, the results are based on a rolling 30-day window of daily returns.
Note the negative relationship between stock and bond skewness values. The correlation for the two data sets in the time period shown in the chart above is -0.46. That’s a key clue for expecting that when the crowd is relatively bullish in one market, the opposite will be true in the other. No one should be surprised by that relationship, but it’s valuable to have hard data for tracking the stock/bond connection in real time, perhaps with an eye on a tactical asset allocation application....MORE

Re/insurance "Business as usual is not sustainable, says Lloyd’s Chairman"

From Artemis, March 21:
If you thought that the Lloyd’s of London insurance and reinsurance market had changed in the last decade, it’s likely nothing compared to the change we will see over the coming years, as the world’s oldest re/insurance market accepts the fact its model has become unsustainable.

This morning the Chairman of Lloyd’s, Bruce Carnegie-Brown, admitted as much as in the annual results pack, which revealed the market fell to an aggregated pre-tax loss of £2 billion in 2017.
The underwriting loss was significant, at £3.4 billion for the year, as the results were driven down by the impact of the major losses from hurricanes and catastrophes in the second-half of the year which delivered a major loss bill of £4.5 billion to the Lloyd’s market and its underwriters.
While the impact of the catastrophes was significant last year, the fact remains that Lloyd’s remains an expensive place to do business and as a result losses can tip it into unprofitability relatively easily.
Which led Carnegie-Brown to explain, “The market’s 2017 results are proof, if any were needed, that business as usual is not sustainable.”

Lloyd’s operates on an expense ratio of around 30%, with 2017’s results showing acquisition expenses contributing 27% to the combined ratio and administration expenses 12.5%. The combined ratio in 2017 rose to 114%, but the goal going forwards will be to bring that down, through greater efficiency.

“The market is embracing new ways of working, and I am confident the combination of our strategic focus and the market’s proven ability to respond to challenging conditions will ensure Lloyd’s continues to offer innovative and competitive solutions across all lines of business,” Carnegie-Brown said.

The fact is that for years now Lloyd’s has been urged to open up, modernise, accept more efficient capital and risk transfer models, but it is only in the last few years that this has truly been heard and steps are now being taken to leverage the state of the market, the advancement of technology and of course the entry of efficient capital, to attempt to drive change.

Lloyd’s, like all other traditional insurance and reinsurance players, has to find a way to be able to sustainably operate in an environment where risk pricing is lower and competitors are bringing increasingly efficient capital to market through increasingly streamlined business models.
Here Lloyd’s should actually have an advantage, being a marketplace into which risks are placed and then syndicated among the capital and capacity providers.

Think of a market-based model for the future of reinsurance.
Risks are placed into the marketplace through technology based distribution channels, here we mean open channels developed specifically for their efficiency, not owned by bits and pieces of the market itself.

Capital providers (syndicates) get to see all of the data on the risks, analyse them, then place bids to underwrite them (a bit like an auction), with the risks eventually being placed through algorithms that know the preferred markets, the most efficient capital and the most sustainable way to syndicate the risk around that marketplace.

Sitting atop this efficient risk transfer structure is Lloyd’s itself, providing the oversight for the market but also perhaps facilitating following markets, with their efficient capital, to take the lead from the best underwriters in a class of business, augmenting the leads capacity and benefiting from their expertise. Perhaps the lead even gets a commission fee, for ‘introducing’ their underwriting of a risk to the followers.

As we’ve said before, and no doubt will again, every market player in insurance and reinsurance needs to identify the models that allow them to monetise their expertise, while increasing efficiency and leveraging the lowest-cost capital.

The above is but one way Lloyd’s could do this, although questions over the necessary size of Lloyd’s and whether it needs an enormous building (or even such a physical presence as it has today) to achieve this will remain.

Efficiency is just one of the levers that Lloyd’s has at its disposal and its likely we’ll see the market drive down the digitalisation route towards modernity, but hopefully not at the expense of getting locked into systems developed only for a segment of the broader global risk market and avoiding vendor lock-in as well....MUCH MORE