Monday, September 30, 2013

Former Xstrata Chief Returns to Haunt Glencore (GLEN)

From City AM:

Davis returns to haunt Glencore with $3bn miner 
FORMER Xstrata chief executive Mick Davis reinforced his comeback into the mining sector yesterday, with the announcement that his new mining venture has raised $1bn (£618m).

Private equity firm TPG and commodities trading house Noble have invested $500m each in X2 Resources, which aims “to create a new mid-tier diversified mining and metals group by…identifying and acquiring assets and businesses at an opportune time in the cycle”.

Noble will be X2’s preferred marketer and provider of supply chain management and logistics services.

South African-born Davis left Xstrata with a £15m payout at the time of its mega-merger with commodities trader Glencore in May. An array of his ex-Xstrata colleagues form the executive team at X2, including former finance chief Trevor Reid and Andrew Latham, previously head of group business development....MORE

"Latest robot can pick strawberry fields forever"

It appears the machine vision problem has been solved.*
From the Japan Times:

"Driverless Carts Are Coming Sooner Than Driverless Cars"

Bryant Walker Smith, guest-blogging at the Volokh Conspiracy:
I’m delighted to be spending this week committing overt acts in furtherance of the Volokh Conspiracy. Since joining Stanford in 2011, I’ve been studying the increasing automation, connectivity, and capability that promise to dramatically change our lives, institutions, and laws. My posts this week will focus on one key example: self-driving vehicles (or whatever you want to call them). The timing is fortuitous, since any remaining legal or technical issues that we fail to collectively solve in the comments section of this blog can be remedied at next week’s U.S. House hearing on “How Autonomous Vehicles Will Shape the Future of Surface Transportation.”

A number of other government bodies are already shaping the legal future of autonomous driving. Nevada, Florida, California, and the District of Columbia have enacted laws expressly regulating these vehicles, California’s Department of Motor Vehicles is currently developing more detailed rules, and a number of other states have considered bills. The U.S. National Highway Traffic Safety Administration (NHTSA) released a preliminary policy statement earlier this year, and Germany, Japan, the United Kingdom, and the European Union have also taken initial domestic steps. Meanwhile, parties to the 1949 Geneva and 1968 Vienna Conventions on Road Traffic are discussing how to reconcile language in these treaties with advanced driver assistance systems....MUCH MORE
Here's the writer's Stanford Law School page:
Bryant Walker Smith is a fellow at the Center for Internet and Society at Stanford Law School, a fellow at the Center for Automotive Research at Stanford (CARS), and a lecturer in law at Stanford Law School who writes, speaks, and teaches on the legal and policy aspects of increasing automation. He is a member of the New York Bar and a former transportation engineer who has worked on infrastructure issues in the United States and throughout Europe. Bryant also chairs the Emerging Technology Law Committee of the Transportation Research Board of the National Academies and the planning task force for SAE International's On-Road Automated Vehicle Standards Committee...
He used to have a blog but I can't find it in the bookmarks.

Daniel Kahnman's Favorite Paper: "On the Psychology of Prediction"

From Lakewood-Views:

Daniel Kahnman's favorite paper
I heard this story from a Credit Suisse seminar held by Michael Mauboussin. He is excellent investment thinker who ahs written a numbe rof provocatiev books on decison-making. Make time for Mike.

The great behavioral psychologist and Noble Prize Winner in Economics stated that of all the papers that he wrote the one that was his favorite was On the Psychology of Prediction written in 1973. In this work, Kahnaman with his co-author Amos Tversky discuss the difference between intuition and statistical prediction. They discuss the problem of representative bias and how there are three types of information for any prediction. There is the base case or outside view, there is the specifics about the particular case or inside view and finally the relative weights you assign to each....MORE
Here's an ungated version of the paper via the University of Washington (15 page PDF)

Also at Lakewood-Views: Wharton's Phil "Ignore confident forecasters" Tetlock:
Professor Christensen's paper "The Process of  Theory Building" is available from him at
We have five links to Christensen's thinking.

Today in the Financial Crisis, Tuesday September 30, 2008: Relief

Following the prior day's record 777 DJIA point drop we got a bounce, an emergency spending measure on the budget, the promise of a second vote on the stimulus and an illusory Citi/Wachovia shotgun wedding.
Here's what we were posting:
11:55 a.m.
Jim Cramer Admits: "I Screwed Up" In Recommending Wachovia Stock Two Weeks Ago Because I Liked The CEO
8:18 a.m.
The Financial Times Sings Praise of Gold. They're wrong.
I was wrong. Alphaville was right and although I'm fairly savvy regarding commodities I, in the words of President Bush, misunderestimated the safe harbor attraction of gold.
I reversed the order of this post and the one immediately above to show that although Cramer could make a mistake, I could make a bigger one. We didn't hold the errant conviction very long being of the belief that if the market is telling you that you are a moron the market is probably correct and you shouldn't fight reality, yes, I are a maroon. So we reversed course but we did make that call, in the headline no less.
12:02 p.m. 
The green bubble bursts
12:21 p.m.
Bailout: "Oh Come On. What's the Worst that Could Happen if Congress Does Nothing?"
William Buiter was a member of the Bank of England's Monetary Policy Committee, 1997-2000. He is currently Professor of European Political Economy at the London School of Economics. He tells scary stories as well as Stephen King. From the Financial Times:
Those whom the gods would destroy, they first make mad...
And in another "Hey would you look at that" moment:
If You Can't be Lucky, Be Right. And: Climateer's Quote of the Day
Kids, don't try this at home. Yesterday, in "Get Ready For a Relief Rally. And: How Bad Can it Get" we said:
...A sixty percent retracement of today's (and tomorrow's?) decline is well within the bounds of possibility (I won't go all Fibonacci on you)....
60% of 777.68 is 466.62 points. We closed up 485.21, an overshoot of 18 points. I'll lay it all off to luck. Here's our "Quote of the Day"...
The quote was Washington Mutual up 141% to 8.2 cents.

That's a wrap for our nostalgic look back at September 2008 and I think this is a good place to stop with the serial "Today in the Financial Crisis" posts.
We'll have more, October 2008 in particular was pretty amazing from the perspective of an equities participant but it won't be every day.

The market was only down 5.78% for the month although it had felt like a lot more and looking at the DJIA, the 666 point decline would have seemed a bit ominous had anyone noticed.
The Ramones' 'I Wanna be Sedated' had been the theme song for the month but by the 30th everyone was just worn out and feeling old.
We started playing this version of the song:

Young @ Heart - Clip - I wanna be sedated by MyMovies_International

Oil: Hey Look at That

From this morning's "Oil Continues Decline, Approaches Psychologically Important $101.13 Level":
Just kidding about the psychologically important bit. Oil is going down because there is a lot of it around.
Here's today's action, note the gap just after 5 a.m. Sept. 28:

The low over the past 24 hours has been $101.16 and if I were a betting man I'd wager that we fill or at least enter the gap before resuming the downtrend and going through that big fat round number, $101.37 last....
Top tick $102.76, close enough for our purposes.

"Highbrow betting: gambling on cultural events is on the up"

From the Guardian:

Will you be taking a flutter on the Man Booker? Or the Mercury music prize? Bookmakers are reporting a rise in 'highbrow' betting, especially online
david bowie
Worth a punt? You can get odds of 9-2 on David Bowie winning this
year's Mercury music prize. Photograph: Larry Busacca/WireImage
This week, Ladbrokes bookmakers announced an increase in what has been called "highbrow" or "cultural" betting. The firm's Alex Donohue says: "This kind of betting has been around for a while, but it's burgeoning, and stakes are rising." He gave me some examples: betting on the Man Booker prize with Ladbrokes is up from £4,000 in 2005 to £15,000 so far this year. Betting on the Nobel prize for literature is up from just over £1,000 in 2005 to approaching £20,000. I asked about the Nobel peace prize, because, having long considered Chelsea (formerly Bradley) Manning a shoo-in, I now think Putin's in with a shout, after his impressive showing over Syria, but Donohue says: "We don't do the Peace prize. I think we probably should." I told him I heartily agreed. After all, if the 2.15 at Haydock Park justifies running a book, then so does the quest for world peace....MORE
HT: Marginal Revolution who also has a link on Ladbrokes and the Literature Nobel
"How Bookies Pick the Literature Nobel, Without Actually Reading"

"How Bookies Pick the Literature Nobel, Without Actually Reading"

From the Atlantic Wire:
How exactly can author Haruki Murakami be the odds-on favorite to win the Nobel Prize in Literature if his book is only available in Japanese? For the most accurate Nobel oddsmaker Ladbrokes, reading the books is irrelevant — and the bookies openly made the prediction without any intentions to do so.

Given the Swedish Nobel Committee's intense secrecy, discussion of the future winner is active and open for debate among prognosticators. But they should just look to Ladbrokes, which has correctly predicted the Nobel Prize winner with 50 percent accuracy over the past eight years, according to the Boston Globe, making it far more accurate than most pundits or literary critics.

The secret to their success? Psychology. Most reporters writing on the coming Nobel decision are what one popular betting site's spokesman calls "lazy journalists," and they like to cite the bookies' odds — such as 3/1 favorite Haruki Murakami (right) — in their early stories on potential winners (guilty as charged). But by setting the early terms of the debate, Ladbrokes and other oddsmakers create a bandwagon-type effect where the bettors' favorite becomes the actual favorite. And this effect then builds its way up to the pundits and, potentially, to the Committee itself....MORE

Financial Crisis Five Years On: "Buffett Poised to Get $2 Billion Goldman Stake" (GS; BRK.a)

From Bloomberg:
Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) is poised to get more than $2 billion in Goldman Sachs Group Inc. stock through warrants acquired during the depths of the 2008 financial crisis.

Berkshire may receive about 13.2 million shares in New York-based Goldman Sachs, according to an agreement that uses the average closing price on the 10 trading days through today to calculate Buffett’s stake. The number of shares is an estimate based on the nine trading days through Sept. 27 and may change based on fluctuations in the stock price today. The bank closed at $159.85 last week.

Goldman Sachs turned to Omaha, Nebraska-based Berkshire in 2008 to bolster capital and shore up market confidence when shares plunged following the collapse of Lehman Brothers Holdings Inc. Buffett, Berkshire’s chairman and chief executive officer, invested $5 billion for a preferred holding and got warrants to buy $5 billion of stock for $115 a share. ...MORE
As we said at the time:
So Why No Climateer Investing Comment On the Buffett Goldman Deal? (BRK.A; GS)

Long time CI readers know that we've been stalking Warren for a while (I didn't understand BKHT at $800, he said shame-facedly).
This $5 bil. deal has some very intriguing ramifications for both financiers and policymakers. It also contains insight for investors that I want to think through.
In the meantime, use of the 'Search Blog' box for Buffett or Berkshire is good fun. Possibly rewarding too.
Or try 'Munger', not nearly as many results but not bad. The first hit is:
The 5 a.m. Buffett Breakfast Club
They’re rich. They’re cheerful. They’re morning people.
a few results later, the best senior management 'all purpose turn-around' I've ever seen:
"Think about it a little more and you will agree with me because you're smart and I'm right."
-Charlie Munger, Vice-Chairman, Berkshire Hathaway
See also:
Goldman Sachovia Would’ve Happened If Warren Buffett Hadn’t Stepped In And Pointed Out The Obvious (BRK.A; GS)

"Warren Buffett Cell Phone Skills: Did They Doom Lehman?"

"Corn price hits 3-year low on US stocks upgrade"

Corn is lower since this piece was published, $4.4425 last.
From Agrimoney:
Corn futures tumbled to a three-year low, while soybeans slumped back below $13 a bushel, after the US revealed that its inventories of both crops were far bigger than had been thought.
Corn futures for December dropped 1.7% to $4.46 ½ a bushel, the lowest for a spot contract since September 2010.
Soybeans for November delivery plunged 2.4% to $12.88 ¼ a bushel, their lower in more than a month.
The falls followed the release by the US Department of Agriculture of its latest quarterly stocks report, a series which has gained a reputation for causing large price moves.
Extra supplies
The report estimated corn stocks as of September 1, the close of 2012-13, at 823.6m bushels, a number far higher than the 661m-bushel figure that the USDA had been working with, and to which investors foresaw only a small upgrade.
 The USDA highlighted lower use of the grain than last year over the June-to-August period, flagging that "disappearance is 1.94bn bushels, compared with 2.16bn bushels in the same period last year".
Stocks estimates are viewed as particularly price sensitive in commodity markets, with larger supplies seen limiting the need for buyers to pay up....MORE
We've been posting on this price weakness since  December 2012: 
Corn Hammered Limit Down on Stocks/Intentions Report
Corn: Deutsche sees potential for price below $4
Macquarie Calling For Corn in the Low $4's 
4 Reasons Why Corn Could Get Cheaper Still
Corn Futures Resume Normal Service, Collapse
Iowa State's Worst Case Corn Prices: $2.89 By 2017

And many more. It's almost depressing how monotonic the declines have become.

Climate: "The accepted Final Draft of the full Working Group I report, comprising the Technical Summary, 14 Chapters and three Annexes, has been released ..."

As with the Summary for Policymakers, just a bookmark for now.
This is the final draft, the actual report will be released sometime in 2014. For those who think it's funny that the Summary for Policymakers (see below) is published before the completed report is released, that's just the way the IPCC rolls.
From the Intergovernmental Panel on Climate Change:

Climate Change 2013: The Physical Science Basis
Here's the Working Group 1 link page.
IPCC home.
The Intergovernmental Panel on Climate Change: Summary for Policymakers September 27, 2013

Monkeys Beat Cap Weighted Indices

They also beat Cramer, but that's a different post.
From the Cass Business School, City U., London, April 4, 2013:
Researchers at Cass Business School have found that equity indices constructed randomly by 'monkeys' would have produced higher risk-adjusted returns than an equivalent market capitalisation-weighted index over the last 40 years.

A study based on monthly US share data from 1968 to 2011 found nearly all 10 million indices weighted by chance delivered vastly superior returns to the market cap approach - a discovery likely to come as a blow to investors that have billions of dollars worldwide invested on a market cap-weighted basis.

The finding comes from two papers* published by Cass Business School's Cass Consulting, and sponsored by Aon Hewitt, which investigated alternative methods of constructing equity indices.

Co-author Professor Andrew Clare, explained: "We programmed a computer to randomly pick and weight each of the 1,000 stocks in the sample; we effectively simulated the stock-picking abilities of a monkey. The process was repeated 10 million times over each of the 43 years of the study.

"The results of this experiment showed that many of the monkey fund managers would have generated a superior performance than was produced by some of the alternative indexing techniques. However, perhaps most shockingly we found that nearly every one of the 10 million monkey fund managers beat the performance of the market cap-weighted index."...MORE
...Out of the alternative indices, the Sales-weighted index performed the best, beating 99 per cent of the monkeys' randomly constructed indices.
* 'An evaluation of alternative equity indices. Part 1: Heuristic and optimised weighting schemes' and 'An evaluation of alternative equity indices. Part 2: Fundamental weighting schemes' by Professor Andrew Clare, Dr Nick Motson and Professor Steve Thomas of Cass Business School. The study was conducted by Cass Consulting for Aon Hewitt.
Download Paper 1
Download Paper 2
See also:
Commodity traders superior to chimpanzees, research shows
I made a serious career track mistake.
Years ago a counselor pointed out that I seemed to have an affinity for animals (It's true. Kids and dogs like me. So do drunks and folks suffering from various psychopathologies).
Had I followed up on her thinking I would now be tenured, trading outside my species and living the grant-proposal dream....
 ...chimpanzees in nature do not store property and thus would have little opportunity to trade commodities...
Jim Cramer beats Monkey in Stock Picking Contest!
(for one week only, the monkey is ahead on performance: see below)
"...You know what – I don’t work for Murdoch”

Cramer; Aug. 20 show. Then he said let Cramer be Cramer or something, I wasn't paying attention, I was reading Warren Buffett's story about arbitraging cocoa beans against an equity.

Turns out Cramer was responding to the Barron's story
"Shorting Cramer" which had this line:
When we asked Cramer and CNBC for their own records of Mad Money's stock-picking performance, they had more excuses than a Tour de France cyclist dodging a blood test. They complained that the list from contained some stocks from the program's "Lightning Round," in which Cramer gives a quick analysis and a buy or sell decision on stocks phoned in live by viewers. These, they argued, shouldn't count in our tally.

"'Sharing economy' is here to stay, so get used to it"

From the Los Angeles Times:
Add these personality quirks to the qualities that mark you as a social dinosaur:

You're not comfortable renting out a room in your house or turning over the keys to your car for hours or days at a time to total strangers. When you travel you prefer to stay at a hotel with a predictable level of guest service rather than racking out on someone's couch.

When you rent a car, you prefer that you're dealing with a company that has a corporate reputation to protect, rather than a person who may or may not have had the brakes checked sometime in the last decade.
What Paul likes most about the PUC regulations is that they don't try to shoehorn ride-sharing services into a format of traditional transportation businesses like taxis, but focus instead on making sure that the new companies meet reasonable safety standards.

Ride-sharing services such as Sidecar and Lyft enable passengers seeking a ride to plug in their needs to a mobile phone app. They're matched with drivers who are planning or willing to go their way. Driver and passenger meet and work out a price. At the end of the trip the rider pays the ride-share service, which takes out its fee and passes the balance on to the driver....MORE
HT: The Big Picture

I'm pretty sure the various manifestations have not yet reached their final form, see for example Google and Uber Could Change the World (if only we get taxi regulation right).

Oil Continues decline, Approaches Psychologically Important $101.13 Level

Just kidding about the psychologically important bit. Oil is going down because there is a lot of it around.
Here's today's action, note the gap just after 5 a.m. Sept. 28:
The low over the past 24 hours has been $101.16 and if I were a betting man I'd wager that we fill or at least enter the gap before resuming the downtrend and going through that big fat round number, $101.37 last.

Oil: "WTI heading for its third weekly decline in a row"
See also Sept 24's  "What an Iranian olive branch could mean for oil" (Kaminska wins):
...Today WTI settled at $103.13 and Brent at $108.64. We would be willing to entertain prop bets at $90 and $95 respectively.

Sunday, September 29, 2013

"Are product spreads useful for forecasting the price of oil?"

From VoxEU:
Recent work on forecasting oil prices raises the question of whether oil industry analysts know something about forecasting the price of oil that academic economists have missed. This column presents evidence that they do, but economists know how to improve further on these practitioners’ insights.

Petroleum products such as gasoline and heating oil are produced by refining crude oil. Many oil market analysts believe that the prices for these petroleum products contain useful information about the future evolution of the price of crude oil. In particular, changes in the product price spread – defined as the extent to which today’s price of gasoline or heating oil deviates from today’s price of crude oil – is widely viewed as a predictor of changes in the price of crude oil. For example, in April 2013 Goldman Sachs cut its oil price forecast citing significant downward pressure on product price spreads, which it interpreted as an indication of reduced final demand for products. Likewise, in 2011 energy consultant Kent Moors predicted higher oil prices based on widening gasoline and heating oil-price spreads.
Although energy economists have made great strides in recent years in forecasting the price of oil at short horizons, the forecasting ability of product spreads has never been formally analysed to date. Our recent work asks whether academic economists have missed something about forecasting oil prices that oil industry analysts know. The answer is that they have, but so have practitioners. Based on a rigorous real-time out-of-sample evaluation of numerous oil price forecasting models, we find that not all product spread forecasting models are useful in practice. Some forecasting models used by oil market analysts lack a solid foundation, but there are alternative product price spread models that greatly improve our ability to forecast the real price of oil. We develop forecasting models based on the gasoline-price spread that are systematically more accurate in real time compared with conventional no-change forecasts.
Such models work particularly well at forecast horizons between one and two years, far beyond the short horizons for which earlier oil-price forecasting models based on economic fundamentals have been shown to work well. We obtain even more accurate results with a model that allows the predictive power of gasoline price spreads and heating oil spreads to evolve over time.

Predicting with spreads
Our study is based on the proposition that that the price of crude oil can be expressed as a weighted average of product prices. This proposition has a long tradition in energy economics. For example, oil analyst Philip K. Verleger popularized the idea that the demand for crude oil ultimately derives from the demand for refined products, with refiners buying crude oil only if they can generate a profit at prevailing product prices. Our forecast analysis does not depend on this economic interpretation; all that is required to motivate the forecasting models in question is that the price of oil and the product prices share a common trend.

The study considers four basic forecasting models based on spreads with futures prices as well as spot prices for gasoline and heating oil:
  • Models of individual product spreads such as the gasoline-price spread or the heating oil price spread.
  • Models based on weighted product spreads.
  • Models based on the crack spread, and
  • Equal-weighted forecast combinations of gasoline spread and heating oil-spread models.
The evaluation period extends from early 1992 until September 2012. The study evaluates the out-of-sample accuracy of each of the forecasting models in terms of the recursive mean-squared prediction error (MSPE) relative to the no-change forecast and based on their ability to predict the direction of change in the real price of oil.

We find that not all product spread models are useful for out-of-sample forecasting, but some models perform well. The best single-spread forecasting model is a model based on the gasoline spot spread alone which yields MSPE reductions as large as 15% and directional accuracy as high as 63% at the two-year horizon. Heating oil spot spreads are far less accurate predictors than gasoline spot spreads. Weighted product spread models are never more accurate than gasoline spread models. Perhaps surprisingly, there is no evidence of forecasting models based on the commonly cited 3:2:1 crack spread having out-of-sample forecasting ability....MUCH MORE

Today in the Financial Crisis, Monday September 29, 2008: BOHICA!!! BOHICA!!!

BOHICA= Bend Over Here It Comes Again

The government brokered a deal for Citigroup to take over Wachovia that was doomed to fail.
The House of Representatives did not pass the Administration's bail out bill.
The Dow Jones Industrial Average closed at 10,365.45, down 777.

From the Los Angeles Times:
How bad will it get without a bailout?

House rejects historic rescue as markets take a record dive
Leaders scramble to regroup after deal crumbles under partisan rancor
WASHINGTON — The historic effort to rescue the U.S. financial system was thrown into doubt Monday after the House rejected a $700-billion emergency plan, causing the most devastating stock market collapse in 21 years and the deepest one-day point dive ever by the Dow.
Stunned leaders of both parties and the White House scrambled to put together a new remedy after the legislation that was widely expected to pass the House fell victim to partisan acrimony....MORE 
Dow plunges a record 777
...Prices of oil and other commodities, already down early Monday on fresh concern about the global economy, accelerated their slides after the House vote. Crude futures tumbled $10.52, or 9.8%, to $96.37.

The day began with global stock markets falling on the new signs of financial stress in Europe and fears that the rescue package wouldn't quickly ease a logjam in the credit markets or stave off a deep economic downturn....
Grand jury probes Fannie, Freddie
'No' vote could hit you in your 401(k)
Apple shares fall 18% on consumer spending fears
Asian stocks follow Dow

What we were posting:

7:49 a.m.
Bailout: House Republicans Dig in Heels, Ask Paulson for Receipt
8:30 a.m.
Wachovia Roundup (WB)
10:41 a.m.
Iceland: Bailout and Failure
On a lighter note:
Iceland on High Alert
..MARAUDING polar bears could cause terror on Iceland after experts claimed global warming could bring the killer beasts across the sea....

...Climate expert Thor Jakobsson said: "Since two have reached the shore, more could be on the way."Thor is calling for aerial surveillance of the ice, as well, to protect the Icelandic population:
“Since two bears have already reached the shore, more could be on the way, but there’s no telling whether this trend will continue in the coming years....
 The Viking Kittens sail forth to battle the marauders:
10:47 a.m.
Solar Stocks Clobbered; No ITC Extension Before Election
11:49 a.m. 
House Votes Down Bailout Bill; Dow Down 701. AND: The New Biggest Risk of All – DEFLATION
11:46 a.m.
Bailout: Cantor Blames Pelosi, Boehner Blames Jews
12:49 p.m. 
"Don't panic - just a temporary crash floe problem."
Overheard on the Titanic.
2:37 p.m. 
Get Ready For a Relief Rally. And: How Bad Can it Get
Today's 777 point loss on the DJIA is the largest point loss ever. I don't think it is in the top ten largest percentage losses, I haven't looked. However, as Tech Trader Daily points out, the Nasdaq's losses definitely are. A sixty percent retracement of today's (and tomorrow's?) decline is well within the bounds of possibility (I won't go all Fibonacci on you). Then lower....
6:04 p.m. 
How bad was Monday, really?
6:21 p.m. 
Lehman's Demise Triggered Cash Crunch Around Globe
7:55 p.m. 
Ireland becomes first euro-zone nation in recession (New Zealand First in Pacific)
8:13 p.m. 
Homeowners with Negative Equity
8:29 p.m. 
Fed Pumps Further $630 Billion Into Financial System
8:44 p.m. 
Bailout: "Climateer Sure Was Wrong on His Congressional Bet"
Just five days ago we posted:
Odds Of Government Bailout By End of Month at 80%

DO NOT make investment decisions based on this factoid. (that said, I think the odds are closer to 100% and should probably get a bet down on the mispricing)
Today Bespoke Investment Group shows us how the contract performed...MORE

Who Owns America's Farmland?

This is just foreign/domestic ownership. There has never been a national land census but there are ways to get more granular. If I get around to it, it might be worth a post.

From Modern Farmer:
Who Owns U.S. Agricultural Land?
The USDA released a report today detailing foreign holdings of U.S. agricultural land as of December 2011, and it’s pretty fascinating stuff. “Foreign persons” are defined as individuals who are not citizens of the U.S., foreign businesses and governments that have their principal place of business in a foreign country and U.S. entities in which there is a significant foreign interest.

Below are some of the more eye-opening facts:
So, How Much Land is Foreign Held?
Foreign investors held an interest in 25.7 million acres of U.S. agricultural land (forest land and farmland) as of December 31, 2011. This is an increase of 1,490,781 acres from the December 31, 2010 report, and represents 2.0 percent of all privately held agricultural land in the United States.
Forest land accounted for 54 percent of all foreign held agricultural acreage, cropland for 19 percent, and pasture and other agricultural land for 27 percent.

Foreign persons have reported acreage holdings in all 50 States and Puerto Rico.

The state of Texas has the largest amount of foreign held U.S. agricultural land with 2,894,563 acres. This figure represents only 1.9 percent of privately owned agricultural land in Texas.

Maine has the second largest amount of foreign held agricultural acres with 2,877,965 and Washington has the third largest amount of foreign held agricultural land with 1,671,102 acres, which is 7.6 percent of its privately held agricultural land.

16 percent of Maine’s of Maine’s privately held agricultural land is held by foreign investors; this is approximately 11 percent of the reported foreign held agricultural land in the United States.

Hawaii has the second largest percentage of foreign held U.S. agricultural land, 158,887 acres, which is 8.8 percent of the privately held agricultural land in the state. Washington, Alabama and Florida follow.
Kansas, Washington and Wisconsin showed the biggest increases in foreign-held agricultural acres in 2011.

The increases were primarily due to the execution of long-term leasehold interests by wind energy companies.
Screen Shot 2013-09-27 at 12.48.02 PM
Who Owns It?
Canadian investors own the most reported foreign held agricultural and non-agricultural land, with 28 percent, or 7,250,834 acres. Foreign persons from the Netherlands own 19 percent, Germany owns 7, the United Kingdom owns 6 and Portugal owns 5. Together, 9,511,437 acres or 36 percent of foreign-held acres are owned by individuals or entities from these countries....MORE

Key Inflation Indicator Goes Negative: What You Need to Know Right Now

The writer is more sanguine than I but still a nice catch by Economonitor:

Inflation Indicator Goes Negative, but Don’t Panic, Deflation is NOT on the Way 
There was an interesting nugget of data buried deep in yesterday’s GDP report from the Bureau of Economic Analysis: The rate of change of the deflator for personal consumption expenditures fell to an annual rate of -0.1 percent from the 0.0 percent rate reported earlier. An even broader measure of inflation, the GDP deflator, was also revised downward, although it remained positive. The PCE deflator, rather than the more widely publicized Consumer Price Index, is the Fed’s preferred indicator of price trends.
The downturn in the PCE deflator prompted University of Michigan professor Justin Wolfers to ask, in a blog post on, Where is the Panic over Deflation? To be fair, Wolfers was quick to say that he himself was not panicking at a one-quarter downturn in a single inflation indicator. Still, it is a good question. Is this the time to begin worrying about deflation, or is it not?

 It is not. Before reading too much into the downtick in the PCE deflator for the second quarter, we should check some forward-looking inflation indicators. One of the best is the inflation expectations measure published by the Cleveland Fed. It draws on price trends for Treasury Inflation Protected Securities (TIPS), bonds that carry inflation protection linked to the CPI. The spread between the TIPS price and the price of ordinary Treasury bonds of similar maturity indicates how much investors are willing to pay for inflation protection. The Cleveland Fed decomposes that spread into a measure of inflation expectations and a risk premium. As the next chart shows, after reaching record lows earlier this year, both the Cleveland Fed’s 5-year and 10-year expected inflation rates have moved up. Clearly, the upturn points to a reduced probability of deflation....MORE
One thing to keep an eye on is the spread between seasoned and newly issued TIPS, it went positive during and after the Lehman blowup as deflation fears took hold. I am not convinced that TIPS are that good a forecaster of deflation.

Société Générale's Albert Edwards '"Is the Fed blowing bubbles to cover up growing inequality... again"' (September 27, 2013)

I've been asked why we continue to run pieces by Mr. Edwards, especially in light of our disparagement of fellow bear David Rosenberg.
The flippant answer is Albert amuses, Rosenberg doesn't.

More seriously, 1) Edwards made three calls in 2008 that were quite amazing, links below. 2) He has been more correct on interest rates (sub 2% 10-year) than anyone which is helpful because if you can get interest rates right you can pretty much figure out everything else.
(he is currently looking for sub 1%!)

I still don't understand this from a year ago but may have to just suck it up and move on.
Via ZeroHedge:
When Bubbles Fail: Albert Edwards Explains What Happens When The Fed Can No Longer Contain The Fury Of The "99%"

The premise in Albert Edwards' latest letter "Is the Fed blowing bubbles to cover up growing inequality... again" is simple: the unprecedented social inequality in the US (and the rest of the world - as pointed out here), and what it will ultimately lead to. Regarding what it will lead to, Edwards believes, is that "growing inequality drains the swimming pool dry. The crunch, when it comes, will be ugly." Simple enough.
Digging a little deeper.

It is ironic that nearly five years ago, we first posited that the only result QE would achieve as a result of reflating asset prices to astronomical levels, while transferring (in)finite wealth from the middle class to the 0.1%, would be an inevitable tear in the social fabric resulting, eventually, in outright conflict and/or war (and, ultimately, hyperinflation because the Fed will stop at nothing to reflate the debt, especially in a rising rate environment - even paradropping money from helicopters, something even Deutsche Bank agrees with now). Back then everyone called this (as so often happens) a naive conspiracy theory. Now, even respected strategists are starting to see things our way. From Edwards:
Some argue that central banks had no choice in the face of under-consumption, while conspiracy theorists might even conclude there has been some sort of unspoken collusion among policymakers to "rob" the middle classes of their rightful share of income growth by throwing them illusionary spending power based on asset price inflation. We will never know. But now it all makes more sense!
Naturally, economists being the last to voice concerns about the status quo (and their sanctity of their tenures of course), are even more muted. But even they are starting to admit the underlying threat.
Set aside any moral or political concerns you may have about rising income inequality - worries about poverty, justice, undue political influence or even social mobility. According to Mr. Dervis, co-author of the book, the research collected in “Inequality in America,” shows that a growing number of economists suspect that once inequality passes a certain point it may jeopardize economic stability and economic growth. As the book argues, "rebalancing of the distribution of income may play a role in unlocking the U.S. economy's growth potential in a sustainable way."

That is exactly the point Warren Buffet, Bill Gross and Stanley Druckenmiller make. You don’t have to be a communist to conclude that high levels of inequality not only adversely affects long-term growth, but also increases the economy’s vulnerability to recession.
Edwards then goes on to observe if in a world of record income inequality, all that matters is one's "starting point", i.e., being born with a silver spoon in the mouth. His conclusion: why certainly....MORE
That conspiracy theorists bit is funny in that back in 2010 Albert was saying "Albert Edwards, Societe Generale: "Theft! Were the US & UK central banks complicit in robbing the middle classes?". I think the psychologists call that projection. That said he is remarkably on message. From 2011: "Société Générale's Albert Edwards on Income Inequality and Serial Bubble Blowers (Nov. 23, 2011)".

Anyhoo, here's the string of calls he made in 2008:

June 26, 2008
Société Générale: “We see a y-shaped global recession. We are going down before looping backwards”
May 8, 2008
This Week’s Advice: Canned Food, Guns and a Ham Radio

On September 5, 2008 we posted "Meltdown"-Société Générale" which linked to Albert's research note of a couple days earlier:

***Alert****Economic and equity market meltdown imminent****Alert***
A good call.

On September 7, 2008 Fannie Mae and Freddie Mac were placed into conservatorship.
On September 14, 2008 Merrill Lynch agreed to be acquired by Bank of America.
On September 15 Lehman filed their bankruptcy petition.
On September 16 AIG became a 79.9% subsidiary of the U.S. Treasury.

Within 10 more days the Nation's largest thrift, WaMu was seized and five days later Wachovia gobbled up.

Good times, good times.

Finally he foresaw the emerging markets bubble but too early (2010) leaving some chips on the table
It's hard to hate the big lug for that, we were also early, August 2010:
Climateer Quote of the Day: Hot Money and Emerging Markets Edition
"Emerging market speculation tends to appear at a juncture in the economic cycle when 
declining yields on domestic bonds combine with an excess of capital to make 
foreign investments particularly attractive."
-Edward Chancellor
Chapter 4, Fool's Gold: The Emerging Markets of the 1820's
What was old is new again.
That passage came to mind when I saw this headline at Clusterstock:
The U.S. Slow-Down Is Sending Investors Overboard Into Emerging Markets
One of these days I'll get around to telling the story of National City Bank and their early adventures in securitizing sub-prime loans back in the 1920's.
National City is now Citigroup.
What was old is new again.

FAQ: All About The New Google “Hummingbird” Algorithm (GOOG)

From Search Engine Land:

Google has a new search algorithm, the system it uses to sort through all the information it has when you 
search and come back with answers. It’s called “Hummingbird” and below, what we know about it so far.

What’s a “search algorithm?”
That’s a technical term for what you can think of as a recipe that Google uses to sort through the billions of web pages and other information it has, in order to return what it believes are the best answers.

What’s “Hummingbird?”
It’s the name of the new search algorithm that Google is using, one that Google says should return better results....

...What type of “new” search activity does Hummingbird help?
Conversational search” is one of the biggest examples Google gave. People, when speaking searches, may find it more useful to have a conversation.

“What’s the closest place to buy the iPhone 5s to my home?” A traditional search engine might focus on finding matches for words — finding a page that says “buy” and “iPhone 5s,” for example.
Hummingbird should better focus on the meaning behind the words. It may better understand the actual location of your home, if you’ve shared that with Google. It might understand that “place” means you want a brick-and-mortar store. It might get that “iPhone 5s” is a particular type of electronic device carried by certain stores. Knowing all these meanings may help Google go beyond just finding pages with matching words.

In particular, Google said that Hummingbird is paying more attention to each word in a query, ensuring that the whole query — the whole sentence or conversation or meaning — is taken into account, rather than particular words. The goal is that pages matching the meaning do better, rather than pages matching just a few words....MUCH MORE
HT: naked capitalism

Friday, September 27, 2013

"Pimco shook hands with the Fed - and made a killing"

From Reuters:
Special Report:
Through the second half of 2011, debate raged in financial markets over whether the U.S. Federal Reserve would embark on a third round of massive bond purchases, known as "quantitative easing," to shore up an anemic economy. Pacific Investment Management Co wasn't waiting to find out.

The giant fund-management firm, led by co-founder Bill Gross, started buying tens of billions of dollars in mortgage-backed securities guaranteed by federally sponsored agencies like Fannie Mae and Freddie Mac. In the third quarter of 2011 alone, Pimco's flagship Total Return Fund, the world's largest mutual fund, doubled its holdings of these securities to $80 billion, according to a Reuters review of trading and other data.

While Pimco was building its hoard, the Fed, in a surprise move long before any word on quantitative easing, said it would start buying more of the same kind of debt, known in the trade as "agency MBS." The U.S. central bank would acquire as much as $30 billion of the securities a month by reinvesting proceeds from its earlier purchases. Prices rose.

As 2011 slid into 2012, Pimco started enjoying big gains on its agency holdings. Even better, the Fed in September 2012 finally announced a third round of quantitative easing, nicknamed QE3. To keep supporting the U.S. housing market, it would buy even more agency MBS. Pimco's Total Return Fund posted billions more dollars in gains.

Pimco's winning bet unfolded like this:

* In December 2008, the Fed hired Pimco, along with three other big Wall Street firms, to implement enormous purchases of agency MBS to keep interest rates low and spur the U.S. economy.
* Over the next few years, Pimco repeatedly invested heavily in those same securities - far more than other big investors, even considering its size.

* Pimco's mortgage plays in 2009 and 2012 - when Fed buying was heavy - handed the firm and investors in the Total Return Fund a gain of $10 billion, excluding net investment flows, according to Reuters estimates.

There is no evidence of illegality or impropriety in Pimco's actions. Pimco says that it kept its employees who were helping the Fed at arm's length from those investing for its funds, and that its bond-buying bet was conceived before the Fed's program was begun. The Fed says it implemented and enforced strict controls over the trading done by the firms....MUCH MORE

10-Year Yield Continues Decline, Gold Should Be Rockin'

But it's not really.
Here's the 5-day chart, the yield drops each day, morning to evening:
 Chart forCBOE Interest Rate 10-Year T-No (^TNX)
and drops over 0.100 for the week
2.6190% last off 0.0240.
and gold over the last couple weeks:

 1,337.40 settle, up $13.30
The big spike on non-taper day was pretty much the action.
We were able to catch some of the twists and turns. The decline from the spike:
Sept 18 
$1357.40: What a Lovely Price to Sell Some Gold At

Sept 19 
Goldman Sachs attempting to thwart my plans for world domination:
"Goldman Flip-Flops: Sees Near-Term Upside In Gold"

Sept 20
Waffling at the high end of the range Friday morning:
Lines on Charts: Gold Buyers Not Very Enthusiastic

Sept 20  
Commentary Friday afternoon:
Today's Selling Cascade in Gold'...time....
Sept 22 
Weekend yucks
JPMorgan Says "Buy Gold", Conspiracy Theorists Dazed, Confused

 Sept 23
Long term projection $875 Q3 2014
UPDATED--Gold is Going Much Lower

 Sept 24
A short term reversal
UPDATED--"Gold Miners: Which Miners Can Weather Lower Gold Prices?" (GDX; ABX; GC; NEM)
As of right now we're seeing a slowdown in the rate of decline in the futures so we'd guess they stabilize or even tick higher over the next couple days.

Sept 24 
The ride up begins
Major Decline in 10-year Yield Favors Gold
Sometimes you get lucky.

And today, Sherlock Holmes in Silver Blaze:
Gregory (Scotland Yard detective): "Is there any other point to which you would wish to draw my attention?"
Holmes: "To the curious incident of the dog in the night-time."
Gregory: "The dog did nothing in the night-time."
Holmes: "That was the curious incident."
So, why isn't gold at $1400?

Jim Grant of Grant's Interest Rate Observer: "No Fed Taper This Year"

From The Daily Ticker:
As the government prepares for worker furloughs starting Tuesday if Congress doesn’t avert a shutdown and as Washington gets ready for a debt ceiling fight that could follow -- markets are a snooze.

The Dow (^DJI) has gained more than 3% this month, 10-year Treasury yields have fallen since the Fed’s “no taper” news after briefly hitting (gasp) 3% and gold hasn’t been doing much of late.

But Jim Grant, founder and editor of Grant’s Interest Rate Observer, reminds The Daily Ticker that unlike 2010, when the memory of 2008 was fresh in investors’ minds and we had a “bull market in fear,” we are now in a “bear market in fear.”

He says experts can read this in the depths of the options markets, where people are no longer buying derivatives to protect themselves agains 'tail risks, but are "getting in the swim of things going up."
So this moment may be a fairly good one in which to begin fretting (though he advises against being a permanent worry wart), according to Mr. Grant.....MORE

75 Years Ago Today: "Peace For Our Time"

I was thinking of this when John Kerry almost breathlessly announced a deal with Russia on Syria a couple weeks ago.
From the BBC:
September 30, 1938: 'Peace for our time' - Chamberlain
The British Prime Minister has been hailed as bringing "peace to Europe" after signing a non-aggression pact with Germany. 

PM Neville Chamberlain arrived back in the UK today, holding an agreement signed by Adolf Hitler which stated the German leader's desire never to go to war with Britain again. 

The two men met at the Munich conference between Britain, Germany, Italy and France yesterday, convened to decide the future of Czechoslovakia's Sudetenland. 

Mr Chamberlain declared the accord with the Germans signalled "peace for our time", after he had read it to a jubilant crowd gathered at Heston airport in west London....MORE

A year later the German leader derided the agreement as just a "scrap of paper" and invaded Poland on 1 September 1939.

EIA Weekly Natural Gas Supply/Demand Report

Wondering where all the gas for yesterday's big storage injection came from?
From the Energy Information Administration:
...Consumption declined during the report week. According to data from Bentek Energy LLC, total consumption fell 5.6%, driven by a steep decrease in consumption for power generation in every region of the country. With weather moderating, air conditioning loads have dropped off. Consumption of gas for power generation in the Southeast, Texas, and the Northeast, the three largest consumers of natural gas in this sector, decreased by 12.1%, 25.7%, and 12.5%, respectively. Industrial and residential/commercial demand both increased, rising by 1.0% and 2.7%, respectively. Pipeline exports to Mexico rose by 16.6% over the report week, but accounted for a relatively small component of natural gas disposition.

Supply declined during the report week, but less steeply than consumption. Bentek reported that total supply fell 1.3%, driven by a production decline of 1.2%. Northwest and Midwest reductions in gas imports from Canada led to a decline in total gas imports from Canada of 4.4%. Canadian flows to the U.S. Northeast were flat at near zero. Imports of LNG were up for the report week, with shipments arriving in the Sabine Pass Terminal in the Gulf Coast on Tuesday and Wednesday, but totals remained close to historical lows....MORE
New (October) contract, $3.5600 last. As it turned out that $3.4020 was indeed the low for yesterday.
EIA Natural Gas Storage Report: A Big Build, Gas Drops, Sticks the Landing at $3.4020

Home for Sale: One of New York City's Greatest Townhouses

From Curbed:
Location: New York, N.Y.
Price: $46,000,000
The Skinny: This 40-foot-wide Neoclassic French townhouse on Manhattan's Upper East Side possesses a level of grace, charm, and sophistication that only a residence custom-built for a woman who redesigned the White House Rose Garden for her friend Jacqueline Kennedy could achieve. Bunny Mellon (famed horticulturist, member of the International Best Dressed List, granddaughter of the inventor of Listerine) and her husband Paul (heir to the Mellon banking fortune, one of five national designated "Exemplars of Racing") had the 11,000-square-foot, 14-room mansion built in 1965, to—and this is something of an understatement—exacting standards. The house, which features three exposures, and a garden with a reflecting pool, last sold in 2006 for $22.5M and now finds itself back on the market for $46M, because sure, why not. Thankfully, not much seems to have changed, save, perhaps, an updated kitchen, since the Mellons' heyday....MORE

Creating Art Derivatives: "A New Financial Metric for the Art Market"

Not derivative art, that's a whole different concept.
Some folks buy books by the pound, kilo whatev, no reason not to value art by the square-foot or cubit ² or...
From the Social Science Research Network:
This paper introduces a new financial metric for the art market. The metric, which we call Artistic Power Value (APV), is based on the price per unit of area (dollars per square centimeter) and is applicable to two-dimensional art objects such as paintings. In addition to its intuitive appeal and ease of computation, this metric has several advantages from the investor’s viewpoint. For example, it makes it easy to: (i) estimate price ranges for different artists; (ii) perform comparisons among them; (iii) follow the evolution of the artists’ creativity cycle overtime; and (iiii) compare, for a single artist, paintings with different subjects or different geometric properties. Additionally, the APV facilitates the process of estimating total returns. Finally, due to its transparency, the APV can be used to design derivatives-like instruments that can appeal to both, investors and speculators. Several examples validate this metric and demonstrate its usefulness.
Free download (36 page PDF)

Some People Can See the Future: "Fed faces trap as it frets over withdrawal from QE"

We collect prognostications but this is one I missed. The writer is US Markets Editor for the Financial Times in New York.
From Michael Mackenzie at the Financial Times, January 9, 2010:
...No matter how bulled up the equity market becomes, should data improve, the Fed is likely to remain very cautious, mindful that it needs to keep the bond market happy.
Becoming the buyer of last resort in the past year resulted in the Fed crossing an important line in the bond market.
The exit from QE is always going to be messy, unlike the relatively simple act of raising the overnight target interest rate. It leaves policymakers hoping that talk of extending QE will help contain rates from rising too quickly and save them the trouble of actually buying more bonds.
The danger, however, is that the bond market seeks a resumption of buying. A lot of easy money was made on Wall Street bond desks last year thanks to the Fed's buying. Can you blame dealers for not wanting to see that party end?
This potentially leaves the Fed trapped, for any sign of a recovery in the economy will be accompanied by rising rates, which in turn threaten sustainable growth and could well shake the equity market.

To prevent such a scenario, it is very likely that the Fed will reinforce its role as the buyer of last resort.

All which entails that the eventual end of QE will be a messier affair than perhaps many investors care to think. And one that bodes ill for the dollar and US fiscal policy down the road.
HT to ZeroHedge for the link. 

BlackRock’s Thiel Sees Negative Fixed-Income Returns for Years

From Bloomberg:
Investors face losses from fixed-income securities “for the next couple of years,” according to BlackRock Inc. (BLK), the world’s biggest money manager.

“Overall returns of the market will continue to be negative as monetary policy shifts,” Scott Thiel, deputy chief investment officer for fundamental fixed income, said at a media briefing in London today....MORE

Oil: "WTI heading for its third weekly decline in a row"

Here is this week's action via FinViz:

$103.16 last. Brent $108.73 down 48 cents.
From the CME:
The oil complex is heading for a mixed performance for the week with WTI lower for the third week in a row while Brent and HO are around unchanged with the spot RBOB contract still showing a gain for the week. The week has been driven by a cautiously changing sentiment on the geopolitical front offset a bit by the ongoing and massive quantitative easing program in the US.

Yesterday the UN Security Council permanent members passed a resolution requiring Syria to surrender their chemical weapons. If Syrian does not comply a new resolution will have to be passed imposing enforcement which Russia currently opposes. For the moment Syria will continue to move to the background insofar as acting as an upside price driver for the oil complex.

The much talked about high level meeting between the west (P5+1) and Iran also took place yesterday in NYC. As a sign of possible progress yesterday's meeting was the highest level meeting with Iran and the West since prior to the 1979 Islamic revolution. Reportedly it was a constructive meeting with some saying a window of opportunity has opened for a peaceful resolution to the Iran's nuclear situation. Whether or not this is the beginning of a quick resolution is still a big question mark. For now about 1.1 million bpd of Iranian oil remains shut-in but the negative rhetoric from both side seems to have stopped.

On the economic front mixed data out of the US yesterday as initial jobless claims dropped by 5,000 to the lowest level since 2007 but the updated Q2 GDP came in unchanged at 2.5 percent versus many in the market expecting an upward revision. The economic data out of the US yesterday as well as over the last week or so still supports the US Federal Reserve continuing with their massive QE program for now.

The November Brent/WTI spread has remained in a widening pattern and within the $4.50/bbl to $6.70/bbl trading range. The spread has mostly discounted the conciliatory comments from Iran and comments that a new deal resolving the nuclear stand-off will come about soon. All signs still suggest that it will take time for any deal to be negotiated. In addition if a deal is negotiated it is still going to take Iran some time to restore its crude oil production & exports to the level that was in play prior to the sanctions.

As such the Brent/WTI spread is still trading with a geopolitical risk premium even as Cushing crude oil stocks continue in a steady destocking pattern. With Cushing stocks continuing to decline and with additional takeaway capacity coming on stream over the next 3 to 6 months the likelihood of another huge surplus in Cushing is a low probability event....MORE
There's a lot of oil out there and if Libya and Nigeria get their acts together there will be a lot more.
July 9
The Set Up For a Collapse of Oil Prices
From Petroleum Economist:
Replay of 1986 price collapse looms
03 June 2013
Chatham House warns that the price of oil is heading for a crash similar to the one in the mid-1980s, when world oil prices fell by over 50%, writes Damon Evans 
August 23
Looking For a Major Move in Oil
Crude is up $1.74 at $106.77.
Our medium term mental map is a fake-out shake-out, i.e. higher to suck in some buying and then a 10-15% drop, back under $100.
There is a lot of oil sloshing around and Asia isn't going to be needing it for a while....
August 30
Chartology: "This Pattern Often Leads to Lower Crude Oil Prices"

September 5
Libyan Anarchy Has Taken 1.2 Million Barrels/Day Off the World Market
September 11
Oil: Goldman Says Lower Syrian War Risk Offset By Rising Backwardation
September 24
"What an Iranian olive branch could mean for oil" (Kaminska wins)
September 25 
Goldman Sachs: "Bakken shale production will surprise Wall Street" and Carl Icahn does a drive-by (CLR; OAS; ARII; TRIN)