Friday, April 17, 2015

"The End of Asymmetric Information"

Cowen and Tabarrok at Cato Unbound:
Might the age of asymmetric information – for better or worse – be over?  Market institutions are rapidly evolving to a situation where very often the buyer and the seller have roughly equal knowledge. Technological developments are giving everyone who wants it access to the very best information when it comes to product quality, worker performance, matches to friends and partners, and the nature of financial transactions, among many other areas.

These developments will have implications for how markets work, how much consumers benefit, and also economic policy and the law. As we will see, there may be some problematic sides to these new arrangements, specifically when it comes to privacy. Still, a large amount of economic regulation seems directed at a set of problems which, in large part, no longer exist.

Used Cars
Let’s start with a simple and classic illustration from the economics literature, namely George Akerlof’s pioneering paper from 1970 about asymmetric information and the market for used cars. In the core version of this model, sellers have better information than buyers: sellers know the value of their car but buyers know only the value of used cars on average. Since buyers don’t know the quality of a seller’s car they will be willing to pay only the average value. But if buyers are only willing to pay for average quality, why would anyone want to sell a car that is of above average quality, a plum? When the plums exit the market, the average value of the used cars for sale falls even further and buyers are willing to pay even less. Following the logic, we end up with a situation where only a few lemons are bought and sold, thus the moniker “the market for lemons.”

The market for used cars, however, has been one of the earlier examples where market institutions largely (albeit not completely) solved the problem of asymmetric information. Even in 1970, the market for used cars was extensive, and some institutions existed to make information more symmetric. Perhaps the most important of these was the odometer. First used by Alexander the Great to measure distances between cities, modern odometers were standard on almost all cars by 1925. The odometer reading is the single most important piece of information about a specific car that determines its value, and that is why used car prices are adjusted for mileage. The law contributes to this solution by making odometer tampering illegal and successive state and federal laws have increased the penalties and enforcement over time. In 1972, for example, the Federal Odometer Act made tampering a federal felony. As with other crimes, punishment doesn’t eliminate tampering but it does reduce it quantity thus making odometer readings more trustworthy and quality information more symmetric. Even more importantly, the Truth in Mileage Act of 1986 requires that sellers disclose and record the odometer reading on the title at every transfer of title. The 1986 Act greatly reduced the benefits of tampering because the odometer could not be rolled back prior to the reading from a previously recorded sale.

Since the 1986 Act, odometer readings and recordings have become more frequent. Odometer readings, for example, are now made at emission inspections and safety inspections. In many states such readings are made once per year. Services such as CarFax collect and report odometer readings from title transfers and inspections, making the information easily available for a small fee. In the future, states or the private sector could provide this information online for free. In addition to odometer readings, services such as CarFax collect information from service stations and insurance companies about repairs and accidents. The information collected is incomplete but it can be very useful in the important cases, such as when a car has been flooded or totaled.[1]

Perhaps the most telling fact is that the market for used cars is already some three times larger than the market for new cars (as measured by unit sales, see Bureau of Transportation Statistics). In 2012, for example, there were 40.5 million used car sales compared to 14.5 million new car sales (NIDIA 2013). On average, used cars sell for about a third the price of new cars, so the total size of the two markets is similar with both around $330 billion in sales. There just aren’t that many lemons to sustain such a high transactions volume. In fact both high-quality and low-quality used cars are available in fairly liquid, fairly transparent markets.

Information symmetry about the quality of automobiles is very likely to increase. Almost all vehicles today have “event data recorders” aka “black boxes,” similar to those found in airplanes. Event data recorders record data on vehicle performance and diagnostic checks but also speed, braking, seatbelt use and other information relevant to safety and car crashes. Some car companies, most notably Tesla, can collect such information remotely or stream it in real time. Tesla, for example, collects information on a vehicle’s odometer, service history, speed, location, battery use, charging time, braking, starting and stopping times, air bag deployment—even radio and horn use.[2] When a vehicle is sold the data transfers with the vehicle. It is now possible to prove that a used car really was driven by a grandma just on Sundays.[3]
Asymmetric information is no longer a plausible description of the used car market and, as a result, we should not be surprised that these markets are thriving, whether in terms of volume, diversity of product, or their ability to deliver a reliable purchase at a reasonable price.

What about the adverse selection argument as it applies to health insurance?  There too it seems that we are seeing a rapidly increasing symmetry of information.

Black boxes for people are not yet standard, but wearable sensors can monitor movement, heart rate, and heart rhythm, blood pressure and blood-oxygen levels, and glucose levels and other health-related statistics. Such information can be recorded and reported through smartphone apps, watches, and other wearable devices. Life insurance firms already have enough information from actuarial tables to make a good guess about an individual’s health. In the data we see that life insurance rates decline with the purchase of larger policies, which is the opposite of the prediction of the adverse selection model, namely that rates should increase with purchases (Cawley and Philipson 1999).

The actual problems with health insurance markets have less to do with information asymmetry and adverse selection than with too much information. That can make some people’s insurance very expensive at actuarially sound rates. For instance if you have a cancer of a given kind, this is verifiable to the outside world, and if the treatment costs are $200,000, the cost of an insurance policy will in turn be about $200,000. Buying the policy won’t be cheaper than buying the treatments, and in that sense the market for insurance is not always present. That is a very real public policy problem, but it is not well understood by invoking standard theories of asymmetric information.

The cheap sequencing of the genome may accelerate and intensify these issues. Science still is not able to infer so much from a sequenced genome, but to the extent this changes medical information and indeed information about the person more generally will become more public. Even if privacy legislation is in place, the market equilibrium may induce a lot of disclosure, because employers and others (potential dating partners?) will infer negative information from a lack of disclosure (Tabarrok 1994). In the limiting case we can imagine that each person will carry indicators of genetic information and also of environmental upbringing, allowing other parties to evaluate that individual much more accurately than before.

Moral Hazard
Moral hazard is another kind of asymmetric information problem which very often can be tolerably overcome with cheap, ubiquitous information. By moral hazard we mean the tendency of a better informed party to exploit its information advantage in an undesirable or dishonest way; for instance it is moral hazard when a worker shirks on the job or when a business enterprise takes too much risk at the possible expense of its bondholders....MORE
HT: Abnormal Returns 

And a couple responses.

Chartology: Euro

1.0794 up 0.0031 (.29%)
From Nifty Charts:

http://4.bp.blogspot.com/-_D5L11663r8/VTErkdhnU4I/AAAAAAABI9c/qKF_ZTfUBhI/s1600/EURUSD%2BResistance%2Bline.png
...MORE

IRS Says Texas Billionaire & Late Brother Owe $3 Billion

Mr. Wyly may have a case against his advisers should the Federales prevail.

From CBS-Dallas:
The IRS wants $3.2 billion to cover back taxes that it says are owed by a prominent Texas businessman and his late brother who the IRS says hid income by setting up overseas trust funds.

The Internal Revenue Service detailed its claim in documents filed Wednesday in U.S. Bankruptcy Court in Dallas. It seeks to recover more than $2 billion in unpaid income taxes, interest and penalties from Sam Wyly and more than $1.2 billion from the estate of his brother, Charles Wyly.

The late Charles Wyly, who died in a 2011 car wreck in Aspen, Colorado, was the billionaire who donated $20 million to build the landmark theater bearing his and his wife’s namesake in the AT&T Performing Arts Center in Dallas.

Stewart Thomas, a lawyer for the Wylys, called the IRS claims “unfair and absurd.”

“The IRS has known about these transactions for over 20 years, but they never informed the Wylys that they owe a penny of additional tax,” Thomas said.

Sam Wyly filed for bankruptcy in October, five months after a civil jury in New York found the brothers had engaged in a 13-year fraud that involved creating a web of offshore trusts and subsidiaries to hide stock sales.

A federal judge in February approved Securities and Exchange Commission fines of $198 million against Sam Wyly and $101 million against the estate of his brother, who died in a car crash in 2011.

At the time of the bankruptcy Sam Wyly listed assets of $100 million to $500 million, but his lawyers said he needed to file for bankruptcy protection “due to the massive costs of investigations and then litigation” by the SEC and the collection of the court judgment.

The Wylys built, grew and sold several companies including Sterling Software, which they sold for $4 billion just before the dot-com bubble burst in 2000, and Michaels Stores, which was sold in 2006 for $6 billion....MORE

Los Angeles Schools Eliminate Pearson Curriculum, Pearson Says You'll Miss Us (PSO; AAPL)

The story thus far, via AppleInsider:

Pearson, not Apple, to blame for failed L.A. schools technology program
Though the Los Angeles Unified School District's demand for a multi-million dollar refund from Apple has grabbed headlines, the failure of the $1.3 billion program to create a new digital curriculum for Los Angles students appears to lie primarily with educational publishing company Pearson.
 
In addition to threatening litigation against Apple and Pearson — the two primary contractors on the project —  the district has also asked for refunds from Chinese PC manufacturer Lenovo and California computer distributor Arey Jones, according to the Los Angeles Times. Pearson's unusable software was cited in those requests as well.

In March, project director Bernadette Lucas told LAUSD staff in an internal memorandum that just 2 of 69 schools use Pearson's materials regularly, thanks to technical or other issues. The balance "have given up on attempting regular use of the app," she wrote.

Under the terms of Apple's contract with the district, the company was responsible for provisioning one iPad per student with a number of apps, including Pearson's digital curriculum, on board. Pearson acted as a subcontractor for Apple, and was slated to deliver the new curriculum in three phases.

According to a Pearson scope-of-work document attached to the project, the curriculum was to be a "unique digital design created expressly to make use of the Apple iPad."

Critically — and despite being listed in workflow documents as a prerequisite — Pearson's software was not ready prior to the start of the project. District administrators were only provided with samples.

This means that in effect, the district bought iPads to run software that did not yet exist.

"I believe that it is time for Pearson to either deliver on its promises immediately or provide us with a refund so that we can purchase curriculum that actually works for our students," board member Monica Ratliff said....MORE
Pearson disagrees:
“First of all, I think it’s a brilliant product,” said Sir Michael Barber, the chief education advisor at Pearson. Barber called the Pearson system innovative and explicitly tied to new learning standards adopted by California and 42 other states.

“It’s got that emphasis on depth of learning as well as coverage,” he said. “You have to learn the ideas and then apply the ideas.”

We've been interested in Pearson because of what they're doing in virtual reality, as noted in "Facebook, Oculus, And Businesses' Thirst For Virtual Reality":
One of the least talked about aspects is the use of VR in education. Because the mind has trouble distinguishing between virtual reality and the outside world you should be able to get people to believe almost anything you want them to accept, given enough repetition and an engaging story line. Whether the learner has deep understanding is pretty much immaterial.

Pearson, the edu/testing co. with the Financial Times and Economist attached will be moving in this direction.
Think deeply immersive multiplayer gaming as an example, then put on some virtual reality goggles.
Quite amazing.  
And:
“Immersive Journalism” Using Virtual Reality to Put the Viewer In the Story
We've noted that Pearson PLC, owner of the Financial Times was interested in VR for the classroom.
Here's another angle they may be looking at. 

The Most Expensive Pineapples Are Grown In England

From Lucky Peach:

Food & Consequences: Pineapple Expre$$
Some of the most expensive fruits in the world are the £10,000 pineapples grown at the Lost Gardens of Heligan, in Cornwall, England. They aren’t actually for sale; £10,000 is what gardeners estimate each one might fetch at a charity auction. The high price is a function of high latitude. Cornwall has mild winters, but it’s a lot closer to the Arctic Circle than it is to the Tropic of Cancer. The Lost Gardens sit at fifty degrees north—the same latitude as Kiev and northern Newfoundland, farther north than any point in the contiguous United States—and yet the pineapples are grown without space heaters or humidifiers, or any electricity at all.

The English have led the world in pineapple appreciation ever since they first encountered the fruit in the Caribbean. In his mid-seventeenth-century travel narrative, A True and Exact History of the Island of Barbados, Richard Ligon devotes a long, rapturous passage to the “Pine,” which contains “all that is excellent in a superlative degree, for beauty and taste.” But pineapples are tropical fruits, and before the age of steam there was no way to get them across the ocean before they rotted. Since the plants take about eighteen months to bear fruit, they can’t be grown as annuals in cold climates. And so, in order to grow the fruit at home, the English adapted an exceptionally clever Dutch method called the “pineapple pit” (or pineapple stove, or pinery-vinery). One of these structures was unearthed at the Lost Gardens of Heligan in 1991, and today it is the only active pineapple pit in the world....MORE

lp-cross
Illustration by Kaye Blegvad

EIA: Weekly Natural Gas Supply/Demand Report

Front futures $2.663 down 2.1 cents. We've been betting lower since last December and with the market solidly in the shoulder season don't expect much change for at least the next 4 minutes.
 
From the Energy Information Administration:
...Prices/Demand/Supply:
Mild temperatures lead to modest price declines. Prices remained relatively low at most market locations during an uneventful week with mild temperatures and relatively low demand from both the heating and cooling sectors in most regions. Henry Hub spot prices fell from $2.67/MMBtu last Wednesday to $2.58/MMBtu yesterday, and price movements across much of the country were similar. At the Chicago Citygate, prices fell from $2.60/MMBtu last Wednesday to $2.54/MMBtu yesterday, hitting a weekly low of $2.48/MMBtu on Friday. At the PG&E Citygate in San Francisco, prices fell from $2.91/MMBtu last Wednesday to $2.86/MMBtu yesterday.

Northeast prices fluctuate. Prices in the Northeast fell week over week, dropped more than other areas, and traded in a broader range. Prices at the Algonquin Citygate, which serves Boston, began the week at $3.58/MMBtu last Wednesday, rose to $3.82/MMBtu the next day, then ended the week at $2.60/MMBtu. At Transcontinental Pipeline's Zone 6 trading point for New York City, prices began the week at $2.73/MMBtu, fell to $1.83/MMBtu on Friday, then ended the week at $2.26/MMBtu....
...MUCH MORE
Deviation between average and normal (°F)
7-Day Mean ending Apr 09, 2015
Mean Temperature Anomaly (F) 7-Day Mean ending Apr 09, 2015

Climateer Line of the Day: Words As A String Of Pearls Edition

I guarantee you my brain does not run fast enough to have ever had the sequence of thoughts represented by these pixels:
...Can Etsy grow that fast? 
Maybe it has unleased the hobbyist instincts of a new generation of interconnected micro-entrepreneurs wagging the long tail of demand for individualised consumption....
-Dan McCrum at FT Alphaville's The artisanal of valuation

So I Asked the Twitter For #weatherdongs

The blogger is a Professor at Duke who sometimes posts on matters economic.
From Kids Prefer Cheese:

The Culture that is Oklahoma: #Weatherdong edition 
Tornado season has kicked off right on queue, with Moore taking a glancing blow, but for savvy Okies everywhere, the fun is watching the local news folks go absolutely crazy and in looking for #weatherdongs on the TV radar.

Here's some examples (apologies in advance to the LMM):



...MORE

The Global Risks Landscape 2015

I missed this when the Davos gang released it.
Via What's Next Top Trends (Mar. 18, 2015)
http://toptrends.nowandnext.com/wp-content/uploads/2015/03/Screen-shot-2015-03-18-at-09.50.15.png
Darn, no robot uprising….
Source: World Economic Forum
Screen shot 2015-03-18 at 09.50.32

Thursday, April 16, 2015

For Sale: Big House In Alpine New Jersey

From Homes of the Rich:

The Stone Mansion In Alpine, NJ Re-listed For $49 Million
http://homesoftherich.net/wp-content/uploads/2015/04/Screen-Shot-2015-04-14-at-10.24.38-PM.png
Location: 1 Frick Drive, Alpine, NJ
Square Footage: 30,000
Bedrooms & Bathrooms: 12 bedrooms & 19 bathrooms
Price: $49,000,000
The incomparable “Stone Mansion” estate, located at 1 Frick Drive in Alpine, NJ, has been re-listed yet again. Situated on 6 acres in the “Estates At Alpine” section of Alpine, the mega mansion first hit the market in 2010 for a whopping $68 million. It then went down to $52 million, shot back up to $56 million and then lowered to $49 million…where is has been on and off the market for that price for awhile now.

The breathtaking stone home was designed by architect James Paragano and features approximately 30,000 square feet of living space on 4 floors with 12 bedrooms....MORE
Your booze would be very happy here:
http://homesoftherich.net/wp-content/uploads/2015/04/Screen-Shot-2015-04-14-at-10.31.58-PM.png

Signposts: "Etsy’s Surging IPO Shows Losing Your Indie Cred Pays Off"

The artisanal schtick had gotten so mockable that "Ye Olde Artisanal Stock Pickery & Son" (or 'Equity investing as a luxury good')" was damn near non-fiction.
And then there's Etsy.
From Wired:
Etsy began its life as a publicly traded company today, entering a new and apparently lucrative era for the online marketplace that once crafted an identity as an artisanal alternative to mainstream marketplaces.
Shares opened at $31, a huge 94 percent surge from its initial public offering price. With stock now trading at over $34 a share, that values the company at close to $4 billion. The company raised $267 million in total.

For many of Etsy’s 1.4 million sellers and 19.8 million buyers, today’s IPO success is likely bittersweet. It represents the culmination of a protracted period of hand-wringing and sometimes bitterness among Etsy’s community of crafters and artists as the company made moves into the mainstream. In the fall of 2013, in a bid to increase revenues, Etsy changed its terms of service to let sellers offer goods outsourced to massive manufacturing partners rather than made by their own hands. This offended some of the site’s early users, who saw the deed as Etsy selling its soul. Some even moved their operations off the site.

But the decision paid off, boosting revenue from $125 million in 2013 to $195 million in 2014. And judging from today’s successful IPO, investors like that trajectory. Yes, $4 billion is still a far cry compared to the valuations of its bigger competitors: eBay ($69 billion), Amazon ($178 billion), and Alibaba ($210 billion). By those comparison, you might even still call Etsy “niche.”

Still, going corporate could still create strain as Etsy tries to negotiate the expectations tied to its original brand identity while satisfying its obligation to all its new shareholders. Signs of that tension appeared even before the IPO. In an unconventional move, the company allotted five percent of its shares to its sellers and other smaller investors, giving them the opportunity to buy as much as $2,500 in stock before the company’s public debut. That reportedly frustrated some institutional investors because it shrunk the pool of shares available to them....MORE
Previously:
Artisanal Pencil Sharpener Considers Career Change  
"The Economics of Artisanal Chocolate" (Here at Zero-bound Chocolates, We Believe...)
"Why Does This Bar of Chocolate Cost $260?"
Talking to New York’s First, and Only, Mustard Sommelier
 The Future Will be Artisanal Everything (HAIN; AHFP)
I'm in the Wrong Business Part 625: "$20 for a bottle of water? Your water sommelier will bring the menu right away" 
The World is Going Artisanal-- Caffeine: The Magazine
Testing Small-batch Artisanal Portfolio Construction With Cliff Asness and Grantham, Mayo's James Montier

"About that US Dollar strength…."

Following up on "Dollar Dump Sends Oil, Bonds & Stocks Surging".
The cash dollar index is down a bit more, 97.40 versus 97.52 when the above was posted.

From Dragonfly Capital:
The US Dollar strength has been a major focal point in the financial markets. Since it took off in July the Dollar Index has risen 25%. That will get some attention. No matter if it is caused by weak global currencies or strength at home. With the consolidation since it peaked over 100 in March, many are wondering if the strength is over. Only time will tell. But there are some interesting clues playing out in the chart of the price action.

The chart below shows that rise. A very orderly stair step fashion. That is until it hit 100.71 in early March. Since then it has been a broad messy consolidation with a bizarre intraday sell off two days after the peak. But on close inspection that mess reveals itself as a harmonic pattern. And that spike down is significant. The 2 triangles outline the ‘W’ shape of a bearish harmonic Bat. That pattern completed Monday with a touch at the 88.6% retracement of the initial downward leg on the spike.
usd d
The reversal has now met its first target at 98.44, a 38.2% retracement of the entire pattern. It can easily reverse higher here or continue to the next target at 97.03, a 61.8% retracement. Either one would show continued strength and have no impact on the uptrend from July....MORE


"The Rockefeller Family Offloads Its Oil Holdings" (and we should start taxing foundations)

Personally I think it's time to tax foundations (and carried interest) and just do away with these multigenerational wealth (and power) transfer entities. More after the jump.

From Penta:
The Rockefeller Brothers Fund—the $866 million-asset foundation started in 1940 by John D. Rockefeller Jr.’s five sons—announced in September that the family would divest itself of all their coal, tar-sands, and fossil-fuel investments held in the fund’s endowment. The eight Rockefeller family trustees and nine outside board members decided the fund needed “to better align its endowed assets with its mission” of combating climate change.

The irony of Standard Oil’s heirs shedding fossil fuels wasn’t lost on the media. “Rockefeller Brothers Fund forsakes its legacy,” screeched the tabloid headline of normally polite NPR. The fund holds less than 5% of its portfolio in fossil fuels, down from 7% when it began divesting in 2014, and it has reduced its coal and tar-sands assets to just 0.8% of the overall endowment. RBF hopes its endowment will be fossil-fuel free in the next three years.

Seven months after the announcement, Penta circled back with a pointed question: Where are the Rockefeller heirs reinvesting their former “dirty” money? The answer: clean technologies like solar and wind energy. Some readers might roll their eyes, but we’re giving them a pass. The Rockefeller family foundation is shrewdly leveraging its asset base, not just its grants, to have more impact in the family’s chosen field of battling climate change. “If we’re only using the 5% we’re required to pay out each year in grants,” reasons Stephen Heintz, president of RBF, “we’re underutilizing our assets.”

Clean-energy investments will eventually make up as much as 10% of the fund’s overall endowment. But earning healthy returns from a portfolio is rather important, too. Will their squeaky-clean investments fare better than fossil fuels? It’s too soon to tell, concedes 35 year-old Justin Rockefeller, RBF trustee and son of John D. the fourth. “But it’s obviously helped us that the price of oil dropped,” he says, before dryly adding that there are “some conspiracy theories out there.”...MORE
A 2012 post: "TAXES, CAPITAL AND JOBS":

Over the last few years I've come to believe that all income, earned and unearned, should be taxed at the same rate, that preferential taxation of capital no longer leads to the intended policy effects of job creation and increasing capital investment in plant. property and equipment but rather is a bought-and-paid-for scam perpetrated by the financier class.

On a related point, it's time to get rid of the carried interest loophole which taxes income at cap gains rates for private equity and hedge funds.
That carried interest should not be treated as a capital gain can be proven quite easily.
Show me one tax return where a carried interest capital loss was allowed.
[you won't be invited to any of the meetings ever again -ed]

At the lower end of the income scale there should be some minimum tax. Everyone should have some skin in the game.

I'll be coming back to all these topics throughout 2012, in the meantime here's the granddaddy of Econ papers for folks interested in this stuff, sincere thanks to the reader who turned my vague recollection of the thesis into an actual PDF copy. It is as pertinent and fresh today as the day it was written, 34 years ago.


TAXES, CAPITAL AND JOBS
By Mason Gaffney
A paper delivered to the National Tax Association, Chicago, August, 1978.
Adapted for use in a course in Macro-economics, Winter, 1996.

INTRODUCTION
We hear a lot these days about the need for more capital to make jobs. Some of what we hear and read we may discount as self-serving, lobbying for more preferential tax treatment of profits. Yet there is a case argued by sincere and public-minded people on objective grounds which we must take seriously.

It had better be a good case, because it goes far toward destroying the progressivity case, the one on which the American public has bought the income tax concept. Preferential income tax treatment of property income cuts off the top brackets of income receivers from tax liability, especially when we exempt capital gains. Preferential treatment exempts or favors the unearned increment to land values, especially again when we favor capital gains. The thrust of proposals being seriously advanced today is to convert the income tax into simply another payroll tax, socializing a large share of personal effort while eliminating the public equity in the land and capital resources of the nation.

Preferential tax treatment for property also destroys the neutrality or uniformity argument for income taxation. It encourages substituting capital and land for labor. It forces higher rates on personal effort, thus weakening the incentive to work while maximizing the incentive to lobby in legislatures and the Congress for public works and other federal outlays which create unearned increments to land values....MUCH MORE

"Dollar Dump Sends Oil, Bonds & Stocks Surging"

Concerned reader may have wondered why no oil posts today.
Well..., oil is trading captive to the dollar and despite opening lower the futures seem bound and determined to trade higher.
$56.82 last off of a low of $55.07. The Dollar Index is now down about .80% at 97.52.

From ZeroHedge:
The sudden decision to buy EUR and dump USDs (after a slew of Fed speakers spewed their usual spew) has sparked a buy everything trade across markets as bonds, stocks, and crude are surging...

As EURUSD nears 1.08...

Charts: Bloomberg

Very Large Landowner Puts Empire Up For Sale

From Reuters:
Australia's largest private land owner will sell its cattle operations, including the world's largest ranch and an area equivalent in size to South Korea, to raise cash for other businesses and investments.

S. Kidman & Co said it will sell its privately owned 11 cattle stations and a feedlot, complete with more than 200,000 head of cattle and more than 100,000 sq km (25 million acres) of land spread across Western Australia, the Northern Territory, Queensland and South Australia.

The announcement of the sale - which is expected to attract significant foreign interest - comes a month after the government said it would clamp down on foreign ownership of agricultural land.

The cattle stations on offer include Anna Creek, the world's largest cattle farm at more than 23,000 sq km.
S. Kidman & Co managing director, Greg Campbell, said the sales decision by the Kidman family was driven by a desire to capitalise on demand for Australian agricultural assets....MORE
Meanwhile, Canada's National Post highlights one of the ranches:

Screengrab
ScreengrabThis page from the S. Kidman & Co. website shows the Anna Farm property, which is larger than New Jersey.

"A Grand Theory of Wrinkles"

From the Simons Foundation's Quanta Magazine:

A collaboration between mechanical engineers and mathematicians has revealed universal rules for how wrinkles form.


Under pressure, curved surfaces transition from a regular, dimpled pattern to one with irregular wrinkles.
Norbert Stoop
Under pressure, curved surfaces transition from a regular, dimpled pattern to one with irregular wrinkles.
Pedro Reis, an engineer at the Massachusetts Institute of Technology, had long been interested in how things wrinkle. For example, a dimpled surface like that of a golf ball offers less air resistance than a smooth sphere. If a flying object could dimple or wrinkle on command, Reis thought, it could alter its own aerodynamics midflight.

Reis constructed silicone test spheres and sucked air out of them. He noticed that under pressure, some of the spheres formed the dimples he wanted, but some formed squiggly, labyrinthine patterns instead. Some had both dimples and labyrinths. When a member of his group shared the puzzle with mathematicians at MIT, they were intrigued: The wrinkling patterns resembled the stripes and swirls that appear when you heat a thin layer of oil, a phenomenon called Rayleigh–BĂ©nard convection. Those phenomena had simplified, calculable equations — so why shouldn’t wrinkles have a simplified equation too?

Earlier researchers had worked backwards from specific wrinkling effects to create simulations that worked in single cases, but nobody had simplified the full elastic equations from the ground up to describe all wrinkling behavior — there was not yet a universal theory of wrinkles. It had been unclear which of the many variables were important.

Reis and the mathematicians started to go over the detailed body of experiments that Reis’s group had assembled. When they examined the data from the rubbery spheres, the researchers found that just two factors controlled the formation of patterns: the curvature of a lower layer as compared to the thickness of the wrinkling layer on top, and the stress applied to that wrinkling layer. Films over less-curved surfaces would quickly transition to hybrid or labyrinth forms when put under stress. Setups that were more curved with a thicker layer on top would form a hexagonal layout of dimples and then, if stressed enough (as when Reis pulled air from inside the spheres), would eventually go labyrinthine as well. Releasing the stress would transition the surface back. “What’s interesting is not just that these two parameters are important, but that all the other parameters are not important,” said Norbert Stoop, one of the MIT mathematicians. The researchers found that the stiffness of the wrinkling layer, for instance, has no effect on the outcome. “Our theory you could basically apply to the surface of the moon or Mars, or the surface of a grape.” ...MORE
Also at Quanta:
A mathematician who has analyzed card shuffling for decades is tackling one final nemesis: “smooshing.”

Wednesday, April 15, 2015

"UPDATE 8-Oil surges after lower than expected U.S. inventory rise"

Not the stuff sweet (or sour) dreams were made of.
From Reuters:
* U.S. crude futures hit 2015 peak, May Brent contract expires
* EIA says U.S. crude stocks up 1.29 mln bbls, less than expected
* U.S. gasoline stocks fell much more than expected - EIA (Adds Iran nuclear talks news in paragraph 12, updates prices to settlement)
By Robert Gibbons
NEW YORK, April 15 (Reuters) - Oil prices rallied and U.S. crude jumped nearly 6 percent to a 2015 peak on Wednesday after government data showed crude oil inventories in the United States rose less than expected last week.
Though hitting a record level for a 14th consecutive week, U.S. crude inventories rose only 1.3 million barrels to 483.69 million, the smallest build since the week ending Jan. 2, the Energy Information Administration said on Wednesday.

That build was below expectations for a 4.1 million barrel rise in a Reuters survey of analysts.
U.S. May crude rose $3.10 to settle at $56.39 a barrel, highest of the year. The $56.69 session peak was the highest front-month crude price since Dec. 24.

The Brent and U.S. futures spread LCO-CL1=R narrowed to $3.34 before closing at $3.93. It was more than $13 in early March.

Expiring front-month May Brent rose $1.89 to settle at $60.32. Brent hit its 2015 peak at $63 in February. 
The more heavily traded June Brent rallied $3.51 to settle at $63.32 and pushed its premium to May Brent LCOc1-LCOc2 to $3.37 intraday.

Both Brent and U.S. crude pushed above their 100-day moving averages on Tuesday.

"The smallish crude oil build and the drop in gasoline inventories pushed prices up and also attracted some technical buying," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut....MORE

Earlier:

"WTI oil futures rally to 4-month high after bullish supply data"

UPDATED--Yikes! Oil Is Again At the Top Of The Recent Trading Range
This is the sixth time this year the price has gotten to ~$54 and stopped.
One of these days we'll get to the top of the channel, position for the downmove  and, in the words of market strategist Jennifer Anniston: "That's a risky little game"
But for now $54.16 up 87 cents off the day's high of $54.42...
$55.96 up $2.67 last, $56.69 high:



EIA Annual Energy Outlook 2015 With Forecasts to 2040

Next Big Future does the heavy lifting:

EIA predicts energy to 2040 with more a bit more oil, gas and renewables and moderate prices
The Annual Energy Outlook 2015 (AEO2015), prepared by the U.S. Energy Information Administration (EIA), presents long-term annual projections of energy supply, demand, and prices through 2040. The projections, focused on U.S. energy markets, are based on results from EIA’s National Energy Modeling System (NEMS). NEMS enables EIA to make projections under alternative, internally-consistent sets of assumptions, the results of which are presented as cases. The analysis in AEO2015 focuses on six cases: Reference case, Low and High Economic Growth cases, Low and High Oil Price cases, and High Oil and Gas Resource case.

• Through 2020, strong growth in domestic crude oil production from tight formations leads to a decline in net petroleum imports and growth in net petroleum product exports in all AEO2015 cases. In the High Oil and Gas Resource case, increased crude production before 2020 results in increased processed condensate exports. Slowing growth in domestic production after 2020 is offset by increased vehicle fuel economy standards that limit growth in domestic demand. The net import share of crude oil and petroleum products supplied falls from 33% of total supply in 2013 to 17% of total supply in 2040 in the Reference case. The United States becomes a net exporter of petroleum and other liquids after 2020 in the High Oil Price and High Oil and Gas Resource cases because of greater U.S. crude oil production.

• The United States transitions from being a modest net importer of natural gas to a net exporter by 2017. U.S. export growth continues after 2017, with net exports in 2040 ranging from 3.0 trillion cubic feet (Tcf) in the Low Oil Price case to 13.1 Tcf in the High Oil and Gas Resource case.

• Rising costs for electric power generation, transmission, and distribution, coupled with relatively slow growth of electricity demand, produce an 18% increase in the average retail price of electricity over the period from 2013 to 2040 in the AEO2015 Reference case. The AEO2015 cases do not include the proposed Clean Power Plan


Brent crude oil price reflects the world market price for light sweet crude, and all the cases account for market conditions in 2014, including the 10% decline in the average Brent spot price to $97/barrel (bbl) in 2013 dollars.

n the AEO2015 Reference case, continued growth in U.S. crude oil production contributes to a 43% decrease in the Brent crude oil price, to $56/bbl in 2015 (Figure ES1). Prices rise steadily after 2015 in response to growth in demand from countries outside the OECD; however, downward price pressure from continued increases in U.S. crude oil production keeps the Brent price below $80/bbl through 2020. U.S. crude oil production starts to decline after 2020, but increased production from non-OECD countries and from countries in the Organization of the Petroleum Exporting Countries (OPEC) contributes to the Brent price remaining below $100/bbl through 2028 and limits the Brent price increase through 2040, when it reaches $141/bbl....MORE
In case you missed it here's the Annual Energy Outlook 2015 (154 page PDF)
Also at Next Big Future:
EIA predicts little change in US carbon emissions to 2040

EIA predicts how many hybrid and electric cars there will be by 2040

"A 1,000 Mile Stretch Of The Pacific Ocean Has Heated Up Several Degrees And Scientists Don’t Know Why"

Ever since a physics prof told me, some (many) years back: "To heat the ocean, top to bottom, by one degree takes as much energy as heating the atmosphere by 1000 degrees" I've been watching the oceans.

That's one of the reasons that for the first few years of this blog's existence we was one of the few (only?) generalist sites that talked about the Atlantic Multidecadal Oscillation or the Pacific Decadal Oscillation in conjunction with global warming.

Now, from the same school that discovered the PDO back in 1996 comes another oddity.
From the University of Washington:

‘Warm blob’ in Pacific Ocean linked to weird weather across the U.S.
The one common element in recent weather has been oddness. The West Coast has been warm and parched; the East Coast has been cold and snowed under. Fish are swimming into new waters, and hungry seals are washing up on California beaches.

A long-lived patch of warm water off the West Coast, about 1 to 4 degrees Celsius (2 to 7 degrees Fahrenheit) above normal, is part of what’s wreaking much of this mayhem, according to two University of Washington papers to appear in Geophysical Research Letters, a journal of the American Geophysical Union.
Picture graph
“The blob” in April 2014, as shown in the July 2014 newsletter where it got its evocative name. The scale is in degrees Celsius.NOAA

“In the fall of 2013 and early 2014 we started to notice a big, almost circular mass of water that just didn’t cool off as much as it usually did, so by spring of 2014 it was warmer than we had ever seen it for that time of year,” said Nick Bond, a climate scientist at the UW-based Joint Institute for the Study of the Atmosphere and Ocean, a joint research center of the UW and the U.S. National Oceanic and Atmospheric Administration.

Bond coined the term “the blob” last June in his monthly newsletter as Washington’s state climatologist. He said the huge patch of water – 1,000 miles in each direction and 300 feet deep – had contributed to Washington’s mild 2014 winter and might signal a warmer summer.

Ten months later, the blob is still off our shores, now squished up against the coast and extending about 1,000 miles offshore from Mexico up through Alaska, with water about 2 degrees Celsius (3.6 degrees Fahrenheit) warmer than normal. Bond says all the models point to it continuing through the end of this year.
The new study explores the blob’s origins. It finds that it relates to a persistent high-pressure ridge that caused a calmer ocean during the past two winters, so less heat was lost to cold air above. The warmer temperatures we see now aren’t due to more heating, but less winter cooling....MORE
See also the Washington Post: California’s drought and the weird warm ‘blob’ in the Pacific that may be fueling it

HT for both and headline from ZeroHedge.

From our May 2014 post "A Very Good Drought Prediction":
...Historic and current AMO readings
Historic and current PDO readings

And from Unisys, the Sea Surface Temp anomalies. Of special note are
1) the warm blob off the Pacific Northwest, that is the PDO measurement area, currently warm but with seriously cold water to its west.
2) the warm spots along the equator west of South America: that's the El Nino 1, 2 region. Watch to see if it connects with the 3.4 region further west.
3) the very warm spot in the Atlantic off Maryland-through-Maine

Current Sea Surface Temperature Anomaly Plot

"Hedge fund money going to venture-backed startups is skyrocketing"

Alpha, alpha, who's got the alpha?
From Yahoo Finance:
The amount of venture capital startup companies are raising from hedge funds, mutual funds and others beyond the traditional venture capital community is skyrocketing, fueling fears of another tech bubble.

While venture capitalists poured $11.3 billion into startups in the first quarter, up only 11% from a year ago, non-traditional funds invested $6.4 billion, a 167% increase, according to a report on Tuesday from CB Insights, which tracks the market. Two years ago, the outsiders contributed less than $1 billion.

Hedge funds and mutual funds have been getting more involved in venture capital investing as fast-growing startups stay private longer. Some also blame the Federal Reserve's low interest rate policy, which may be prompting funds to take more risk to achieve acceptable returns.

The flood of hedge fund and mutual fund cash is helping push up the valuations of private companies, a clear trend in the CB Insights data as well as earlier reports on the growing number of so-called unicorns, or venture-backed firms valued at $1 billion and up. There were seven companies that reached the $1-billion-or-higher valuation level in the first quarter, CB Insights reported, after 24 gained that status in all of 2014.

While many unicorns are well-known companies like Uber and Pinterest, the newly designated unicorns in the first quarter included much smaller companies such as Nextdoor, a neighborhood-focused social network, the name-that-tune service Shazam and Farfetch.com, a clothing e-commerce site, according to data from Dow Jones VentureSource. More than 80 companies in total are now valued at $1 billion or more, Fortune Magazine reported in January in a story titled "The Age of Unicorns."...MORE
And the accompanying graphic? Approaching perfection:
There are so many $10 billion startups that there’s a new name for them: ‘decacorns’

Gates, Pritzkers vs. Musk: "The $5 Billion Race to Build a Better Battery" (TSLA)

We've been tracking the progress of the science for a couple decades now and can report, from hard won experience, there ain't no Moore's Law for batteries.
From Bloomberg:
Young companies staked by big backers are challenging fossil fuels with new ways to hold sun and wind power in the $50 billion energy storage market.

Professor Donald Sadoway remembers chuckling at an e-mail in August 2009 from a woman claiming to represent Bill Gates. The world’s richest man had taken Sadoway’s Introduction to Solid State Chemistry online, the message explained. Gates wondered if he could meet the guy teaching the popular MIT course the next time the billionaire was in the Boston area, Bloomberg Markets magazine will report in its May issue.  “I thought it was a student prank,” says Sadoway, who’s spent more than a decade melting metals in search of a cheap, long-life battery that might wean the world off dirty energy. He’d almost forgotten the note when Gates’s assistant wrote again to plead for a response.

A month later, Gates and Sadoway were swapping ideas on curbing climate change in the chemist’s second-story office on the Massachusetts Institute of Technology campus. They discussed progress on batteries to help solar and wind compete with fossil fuels. Gates said to call when Sadoway was ready to start a company. “He agreed to be an angel investor,” Sadoway says. “It would have been tough without that support.”

Sadoway is ready. He and a handful of scientists with young companies and big backers say they have a shot at solving a vexing problem: how to store and deliver power around the clock so sustainable energies can become viable alternatives to fossil fuels.  How these storage projects are allowing utility power customers to defect from the grid is one of the topics for debate this week at the Bloomberg New Energy Finance conference in New York. Today’s nickel-cadmium and lithium-ion offerings aren’t up to the task. They can’t run a home for more than a few hours or most cars for more than 100 miles (160 kilometers). At about $400 per kilowatt-hour, they’re double the price analysts say will unleash widespread green power. “Developing a storage system beyond lithium-ion is critical to unlocking the value of electric vehicles and renewable energy,” says Andrew Chung, a partner at Menlo Park, California–based venture capital firm Khosla Ventures.

The timing for inventors—and investors—may finally be right. Wind turbines accounted for 45 percent of new U.S. power production last year, while solar made up 34 percent of fresh capacity worldwide. Storing this energy when the sun isn’t shining or a breeze isn’t blowing has remained an expensive hurdle. Battery believers say that’s changing. They’ve invested more than $5 billion in the past decade, racing to get technologies to market. They’re betting new batteries can hold enough clean energy to run a car, home, or campus; store power from wind or solar farms; and make dirty electricity grids greener by replacing generators and reducing the need for more fossil fuel plants. This market for storage capacity will increase almost 10-fold in three years to 2,400 megawatts, equal to six natural gas turbines, Navigant Consulting says.

Gates made good on his pledge to Sadoway with an undisclosed investment in 2011. The money helped form Ambri, a nod to the company’s roots in Cambridge, Massachusetts. (Gates declined to comment for this story.) Billionaire Nick Pritzker and his son Joby are backing Pittsburgh-based Aquion Energy through their Prelude Ventures and Tao Invest funds. At Aquion, a Carnegie Mellon University professor is repurposing a factory that made Volkswagens and Sony TVs to fashion batteries for residences and hotels. Technology from California’s Lawrence Berkeley National Laboratory has support from VC Vinod Khosla. The top three U.S. automakers are testing the lab’s lithium polymer product, which powers cars and homes. Sales are expected next year....MORE
Related:
Batteries: The Venture Capitalist's Holy Grail
Metamaterials May be the Next Big Thing: Gates, Allen Bet On Echodyne
The Dream of Next-Gen Batteries All Hangs On an Apple Watch
The most intractable problem in tech. As is also true in the fusion energy biz "We're just ten years away from a breakthrough"
For the last fifty years.

"Boston-Power Aims to Rival Tesla With Gigawatt Battery Factories" (TSLA)
Short Seller Muddy Waters Goes Long a Battery and Electric Vehicle Play
A123 IPO Roundup (AONE)
Batteries: A123 Stock Hits New All-time Low (AONE)
The Future of Batteries (2009)
Technology Review: "A Guide to Recent Battery Advances" (2010)
"A Quantum Leap in Battery Design" 10 Times the Energy Density of Lithium-ion
In search of the perfect battery (JCI) (2008)
Besides Using All the Lithium In the World, "Will Tesla’s $5 Billion Gigafactory Make a Battery No-One Else Wants?" (TSLA)
The status quo of electric cars: better batteries, same range
http://krisdedecker.typepad.com/.a/6a00e0099229e88833013480522e53970c-pi

Electric Vehicles: Same Range as 1908, Wheee!
Stimulus Big Winner: Battery Manufacturing
Researchers predict 'nanobattery' performance
"A Contrarian's Take On Goldman's Advanced Battery Report" (AONE; ENS; HEV)
"A Nation Sized Battery"

And hundreds more

"WTI oil futures rally to 4-month high after bullish supply data"

Via NYMEX:
$54.96 last


And from Investing.com:
West Texas Intermediate oil futures rose to the highest levels of the session on Wednesday, after data showed that oil supplies in the U.S. rose less than expected last week.

On the New York Mercantile Exchange, crude oil for May delivery rallied $1.68, or 3.15%, to trade at $54.97 a barrel during U.S. morning hours, the highest level since January 2. Prices were at around $54.06 prior to the release of the inventory data.

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories rose by 1.3 million barrels in the week ended April 10, below expectations for an increase of 4.1 million barrels.
Total U.S. crude oil inventories stood at 483.7 million barrels as of last week, the most in at least 80 years, underling concerns over a supply glut.

The report also showed that total motor gasoline inventories decreased by 2.1 million barrels, compared to expectations for a drop of 0.2 million, while distillate stockpiles rose by 2.0 million barrels....MORE
Earlier:
Yikes! Oil Is Again At the Top Of The Recent Trading Range