Tuesday, October 31, 2017

Apparently Russian Accounts Buying American Political Ads With ROUBLES Was Not a Tip-Off For Facebook (FB)

And using the cleverly named Internet Research Agency [what, Amtorg was taken?] as the front was enough to trick the Facebook bots, despite the Russian IP addresses.

The Senators didn't get around to asking the Facebook general counsel if it was at all suspicious the ad-buyers kept referring to the American candidates as "Moose and Squirrel ."

From Fortune:

[Senator] Al Franken to Facebook: How Could You Not Connect the Dots on Russian Election Interference?
...Looking to explain how the technology companies didn’t uncover the misuse of their systems sooner, Franken used his allotted time to question Facebook’s general counsel, Colin Stretch.

“Mr. Stretch, how did Facebook, which prides itself on being able to process billions of data points and instantly transform them into personal connections for its users, somehow not make the connection that election ads, paid for in rubles, were coming from Russia?” asked Franken. “Those are two data points: American political ads and Russian money, rubles. How could you not connect those two dots?”...
Earlier, Gizmodo had reported:
...In opening remarks, Facebook’s representative, Colin Stretch, expressed shock and disgust over how the company’s platform had been used to spread malicious propaganda throughout the election. Facebook’s internal investigation, he said, revealed that over a two year period, Russian-bought accounts had created ads and posts he described as both “inflammatory” and “downright offensive.”... 
Which is too close to our parody headline for Monday's Fast Company story on the platforms to even be funny:
Alphabet's Eric Schmidt is "Shocked—Shocked—to Find That".... (throws Twitter under the bus) GOOG
no-goodnik Fearless Leader was not available for comment, dahlink.


If r < g, bond-finance is like currency-finance REPOST

There was a problem in the transmission of this post.
Apologies for the gobbledygook.

From Worthwhile Canadian Initiative
A world where the interest rate on government bonds is (permanently) less than the growth rate of GDP ("r<g") is a weird world. The government can run a Ponzi scheme, where it borrows (sells more bonds) to pay for the interest on the existing bonds, so the stocks of bonds grows at the rate of interest. But since r<g, the economy is growing faster than the stock of bonds, so the debt/GDP ratio is falling over time. So unlike the real Mr Ponzi's scheme, it's sustainable. The government would actually need to borrow more than is needed to pay the interest on the bonds, if it wanted to keep the debt/GDP ratio constant over time.

In a weird world, where r<g, government bonds aren't really a government "liability" in the normal sense of the word. Having a positive debt/GDP ratio, and keeping it constant over time as the economy grows, is instead a source of revenue for the government. It's like the government owning an asset, not owing a liability.

But if you think about the currency in your pocket, there's nothing weird about it at all. It's all very familiar. If r<g, financing government deficits by selling bonds is just like financing government deficits by printing currency. Because currency pays the owner 0% nominal interest (and minus 2% real interest if the central bank targets 2% inflation), which is less than the growth rate of the economy. So r<g for currency.

In our familiar world, where r<g for currency, currency isn't really a government "liability" in the normal sense of the word. Having a positive currency/GDP ratio, and keeping it constant over time as the economy grows, is instead a source of revenue for the government. It's like the government owning an asset, not owing a liability. The government-owned central bank is a profit-centre for the government. Printing currency is a profitable business. We even have a special name for those profits: "seigniorage".

Revenue from printing bonds is like revenue from printing currency, if r<g for bonds. But there's a limit to how much revenue the government can sustainably earn by doing them.

All economics students are familiar with the idea that printing money is a source of government revenue. But slightly more advanced students also know there is a limit to how much revenue, in real terms (adjusted for inflation), the government can sustainably get by printing money (and Zimbabwe is what happens when the government tries to go past that sustainable limit). Because the faster the government prints money and spends it, the higher the rate of inflation. And the higher the rate of inflation the more negative the real rate of interest on money (the higher the opportunity cost of holding money), and the quicker people will get rid of money they earn, and so the smaller their money/income ratio....MORE

Whoa: "Domain Spoofing Costs Business Insider 10M Fake Impressions -- in 15 Minutes - AdvertisingAge"

This is some serious scamma-jamma.

From AdAge:
During a test that lasted just 15 minutes, Business Insider flagged some 10 million to 30 million phony impressions on various exchanges. Essentially, millions of ads purporting to be for Business Insider were sold by bad actors passing as the publication.

The findings left Jana Meron, VP of programmatic and data strategy at Business Insider, livid.

"I was pissed," she tells Ad Age. "The reality is there is a great injustice that is being done and the more we can talk about transparency and openness then the better it is for the industry."

Meron is a no-nonsense ad exec known for saying what's on her mind. She's also widely regarded by her peers as the biggest advocate for ads.txt, an industry-wide effort that aims to stamp out domain spoofing by labeling a publisher's inventory as "authentic."

It will officially roll out for the first time this Tuesday.

In one example of detected fraud, a Business Insider advertiser thought they had purchased $40,000 worth of ad inventory through the open exchanges when in reality, the publication only saw $97, indicating the rest of the money went to fraud....MORE

SEC Employees Earn Insider-Trading-Like Returns—Study

From Institutional Investor, October 30:
Employees at the Securities and Exchange Commission may benefit from divesting companies ahead of investigations, research shows.

Employees at the U.S. Securities and Exchange Commission earn investment returns similar to the insider traders they prosecute, according to new research from Columbia University and Arizona State University.

A portfolio mimicking trades made by SEC employees between 2009 and 2011 earned excess risk-adjusted returns of about 4 percent a year for all securities, with abnormal gains jumping to 8.5 percent when only stocks of firms based and registered in the U.S. were tracked, found Shivaram Rajgopal, a professor of accounting and auditing at Columbia’s business school, and Roger White, an assistant professor at Arizona State University’s W.P. Carey School of Accountancy, in a paper published this month.

Rajgopal and White said the excess returns seemed to be primarily due to employees selling stocks ahead of bad news revelations. SEC employees, they explained, are required to divest their holdings in companies they are assigned to investigate....MUCH MORE
Harking back to 2011:
Trading for Fun and Profit--"Congress insiders: Above the law?"
A Congressional Insider Trading ETF (SCUM)
UPDATE: Short the Congressional Insider Trading ETF (SCUM) 

A year earlier it was the lawmakers' employees:
"Congressional Staffers Gain From Trading in Stocks"

Cave-in killed more than 200 at North Korea nuke test site—Japanese Television

From the Asia Times:

Pyongyang appears unwilling to abandon site and impede nuke program 
Word is reportedly seeping out of North Korea that a tunnel collapse in a mountain test facility following the country’s sixth nuclear test in early September has killed more than 200 people.
Japanese channel Asahi TV cites North Korean sources as saying that the deadly collapse took place in October during the construction of an underground tunnel at the Punggye-ri key nuke test facility at Mt. Mantap, which is about 80km from the Chinese border.

The geology of the test site was said to have been badly disturbed by the explosion of what’s believed to be a 100-kiloton hydrogen device said to be seven times more powerful than the A-bomb dropped on Hiroshima in 1945.

Asahi TV said about 100 workers were initially trapped underground during the cave-in. A group sent to rescue them was buried in another collapse, killing a total of about 200.
International seismologists have reported a series of small earthquakes at Mt. Mantap since the underground detonation on September 3.

If true, the ill-fated attempt to construct a new tunnel at the site hints that North Korean authorities are unwilling to abandon the site and disrupt their nuke weapons program.

38 North, a respected specialist website on North Korea, said in an analysis last month that the Mt. Mantap test site is unlikely to be abandoned. It noted that earth disturbances at the site are consistent with those that have taken place at other underground test sites outside Korea and are manageable.....MORE
 Saturday: "Chinese scientists warn North Korea about disaster threat at nuclear test site".

The Economics of Attention (how big is the attention economy?)

From Marginal Revolution,  October 24, 2017:
David Evans on the economics of attention:
In 2016, 437 billion hours, worth $7.1 trillion dollars, were exchanged in the attention market in the US based on conservative estimates reported above. Attention platforms paid for that time with content and then sold advertisers access to portions of that time. As a result, advertisers were able to deliver messages to consumers that those consumers would probably not have accepted in the absence of the barter of content for their time. Consumers often don’t like getting these messages. But by agreeing to receive them they make markets more competitive.
The economics of attention markets focuses on three features. First it focuses on time as the key dimension of competition since it is what is being bought and sold. Second, it focuses on content since it plays a central role in acquiring time, embedding advertising messages, and operating efficient attention platforms. And third it focuses on the scarcity of time and the implications of that for competition among attention platforms.
The $7.1 trillion estimate for the value of content seems too high....MORE

PwC: Connected car report 2016: Opportunities, risk, and turmoil on the road to autonomous vehicles

This report was mentioned but not linked in October 17's "Brookings: Autonomous Vehicle Investments Hit $80 Billion".

From PwC:

Executive summary
The race to build the fully connected car, and ultimately the completely autonomous vehicle, is already under way. Who will cross the finish line successfully, and where exactly that finish line is, remains to be seen. In this report — based on extensive market research, interviews with auto industry experts, and engagement with auto manufacturers, suppliers, and technology companies across the globe — the automotive practice of Strategy&, PwC’s strategy consulting group, addresses these questions.

Today, 70 percent of global connected service sales come from premium brands. By 2022, that number will fall to 50 percent, at the expense of falling margins. Although connected services will generate sales of US$155 billion, most of this value will be offset by falling sales from legacy features such as navigation, entertainment, and safety systems. These trends will contribute to a squeeze in profits for OEMs and suppliers. Higher R&D expenses will not convert into higher overall sales. On the supply side, by 2030, profits available to traditional automakers and suppliers may drop from 70 percent to less than 50 percent of the industry total. The balance of $120 billion may be captured by new entrants, including suppliers of new technology, mobility services, or digital services. Many of today’s manufacturers and suppliers lack the skill, agility, and boldness to turn their companies digital quickly enough to take advantage of this change.

The report is divided into seven sections, each of which focuses on one key question about the opportunities and risks to be found in the industry’s business models, ecosystem, market growth, geographic distribution, and technologies involved in developing the connected car:
  • How does technological change affect the distribution of value in the rapidly restructuring automotive industry?
  • How can automakers recoup their investments in connected and autonomous vehicles?
  • How quickly will the market for connected car packages grow, and how will the revenue opportunities break down in terms of region, car segment, and type of package?
  • How will suppliers be transformed by this industry-wide change, and what will it take for them to succeed?
  • How will China move into the connected car market, and how will those efforts, abetted by its digitally sophisticated car buyers and broad range of innovation, affect the car of the future?
  • How will connected car technology be protected against cyber-attack, and how can automakers effectively meet the related organizational and technical challenges?
  • How will autonomous vehicle technologies, now in the early stages of development, transform the driving experience of tomorrow?
Automakers, suppliers, and technology companies are beginning to jockey for position. Our goal here is to provide you with a deep understanding of where your company stands, and what it will take for you to win.

Introduction: Industry profits at risk

by Dietmar Ahlemann, Evan Hirsh, Alex Koster,
Felix Kuhnert, and Richard Viereckl

Introduction:  Industry profits at risk
Drivers around the world are getting used to the increasing amount of digital technology in their cars. Many of the normal features of the car — monitors of performance data like speed, fuel efficiency, and gas tank levels; heating and air conditioning; and the audio system — all have been digitized in hopes of providing the driver with easier operation and better information. And the car — including smartphones and other devices carried onboard by drivers and passengers — now reaches out to the surrounding world for music streamed from the cloud, real-time traffic information, and personalized roadside assistance. Recent innovations allow automobiles to monitor and adjust their position on the highway, alerting drivers if they are drifting out of their lane, and slowing down if they get too close to the car in front of them. All in all, the car of today is a technological marvel....

Oct. 24
Autonomous Vehicles: First, Do No Harm
Oct. 19
Autonomous Vehicles: The King of LiDAR

USB Stick with Heathrow Security Plans, Queen’s Travel Details Found In Street

It's probably nothing.
From the Daily Mirror, Oct. 28:

Terror threat as Heathrow Airport security files found dumped in the street
Britain’s biggest airport launched a “very, very urgent” investigation after the Sunday Mirror alerted them to the frightening security lapse
Heathrow chiefs are reeling after a memory stick crammed with confidential information was found in the street – posing “a risk to national security”.

Britain’s biggest airport launched a “very, very urgent” investigation after the Sunday Mirror alerted them to the frightening security lapse.

The USB stick – containing 76 folders with maps, videos and ­documents – was not encrypted and did not require a password.

The man who found it plugged it into a library computer and was alarmed at what he saw. It revealed:
  • The exact route the Queen takes when using the airport and security measures used to protect her.
  • Files disclosing every type of ID needed – even those used by covert cops – to access restricted areas.
  • A timetable of patrols that was used to guard the site against suicide bombers and terror attacks.
  • Maps pinpointing CCTV cameras and a network of tunnels and escape shafts linked to the Heathrow Express.
  • Routes and safeguards for Cabinet ministers and foreign dignitaries.
  • Details of the ultrasound radar system used to scan runways and the perimeter fence.
The scare comes just weeks after Britain’s terror threat stood at critical following the Parsons Green Tube bomb bid. It is still at severe....MUCH MORE
Also at the Mirror:
ISIS 'threats to kill Prince George at school' spotted on secret messaging service

If you can't quite recall which one is George:


"Morgan Stanley: Demand for graphics chips, video game consoles will slow in 2018" (AMD; NVDA)

From Ars Technica:

AMD, which lost over $2.8B in 5 years, takes a hit after new report
On Monday, AMD’s stock price plunged nearly 9 percent after a report by Morgan Stanley, a major investment bank, which found that "microprocessor momentum" has slowed.

According to CNBC, a new report by analyst Joseph Moore found that "cryptocurrency mining driven sales for AMD's graphics chips will decline by 50 percent next year or a $250 million decline in revenue. He also forecasts video game console demand will decline by 5.5 percent in 2018."

Once a veritable competitor to Intel, AMD has struggled in recent years, although it has had some modest successes—as measured by a rise in its stock price—in 2016 and 2017....MORE

"There’s precedent for Amazon competing with so many companies. It doesn’t end well" (AMZN)

Although we've used a half-dozen pictures of Mr. Bezos over the years, this, from last July is my new fav and I have to resist using it in every post on Amazon:

"Now I am become Death, the destroyer of worlds."*


And the headline story, from Quartz:
Perhaps no other company in history has sold so many different products (354 million) while competing against so many other companies (hundreds). In the past, that power hasn’t lasted. Amazon is betting it will be different.
Amazon today is a retailer, a logistics network, a book publisher, a movie studio, a fashion designer, a hardware maker, a cloud services provider, and far, far more. The private equity firm Pitchbook estimates the company Jeff Bezos founded in 1994 competes head-to-head with at least 129 major corporations just in major markets. That number grows higher as it adds new business units such as fashion, food, and analytics.
The company so far has escaped serious antitrust scrutiny by US regulators in part because it can point to so many commercial adversaries with a piece of the market. Even in its primary business—e-commerce—Amazon only took in 23% of the $395 billion Americans spent online last year, and far less when that spending is broken down into individual markets. The one exception is books, where it controls about 65% of the e-book market.

But Amazon’s unprecedented logistics and delivery infrastructure, paired with access to personal data about Americans’ purchasing habits, means it is unique in the history of global commerce. No company has ever wielded this combination of consumer insight and infrastructure, say historians and legal analysts, which means the company grows stronger and less assailable with every purchase.
The seed of Bezos’s vision of a store that could sell everything was planted long ago. Bezos told shareholders (pdf) in 1998 that Amazon “may make decisions and weigh tradeoff differently than some companies…At this stage, we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model.” Not much has changed. This year’s $13.7 billion Whole Foods acquisition, and Bezos’s personal purchase of The Washington Post in 2016, are merely stepping stones in Bezos’ globe-spanning ambitions.
Regulators are starting to size up whether Amazon is on the verge of becoming a monopoly. Amazon may find it doesn’t like the answer.

Everyone is a competitor
In industry after industry, Bezos is playing a ruthless game. The Amazon CEO charges into unsuspecting markets, slashes prices and waits for others to adjust or perish. The retail industry is a case in point. Out of 350 global retailers surveyed by JDA Software and PwC this year, only 10% say they have figured out how to make money off orders that involve both the web and their physical stores, thanks to high labor and logistical costs.

The Bezos adapt-or-die strategy is stressing out his fellow executives. In this year’s second quarter, 10% of all earnings calls in the US mentioned Amazon, including McDonald’s, Johnson & Johnson, and 3M, reports Reuters. The German drugmaker Bayer, which saw its profits fall 17% in the third quarter of 2017 as pharmacies closed, even has a name for it: “the Amazon Effect.”...

*Robert Oppenheimer's thought upon the successful detonation of the first atomic bomb, using the Christopher Isherwood-Swami Prabhavananda translation of the Bhagavad Gita.

Recent use of the image:
"Sears + Amazon=Bad News for Whirlpool, Home Depot?" (AMZN; SHLD)

Graphic: U.S. Military Presence In Africa

ZeroHedge has had a half-dozen posts on Africa in the past month and except for a fondness for sources framing things, rather simplistically, as neo-colonialist, the series is actually pretty good.

Here's an example from October 26:

Authored by Robert Gore via Straight Line Logic blog,
Empires get stupider and more corrupt as they age..

Why are US Green Berets, four of whom were recently killed, in Niger? Why does the US have at least 36 bases, outposts, and staging areas in Africa, located in 24 countries? Why does a website, TomDispatch, have to file a Freedom of Information Act request to get that information, which contradicts years of assurances from AFRICOM, the US’s African military command, that the US has only one base in Africa, in the Republic of Djibouti? Why is AFRICOM headquartered in Stuttgart, Germany? How does anything that happens in Niger, or most of the rest of Africa for that matter, affect anyone’s way of life in the US? Why do we say the dead were heroes protecting our way of life when the country where they died poses no threat?
From the AFRICOM website:
The United States and Niger have a long-standing bilateral relationship. Our militaries have been stalwart allies focused on working together to deter and to defeat terrorist threats in the West African nation and across the Sahel region.
A war on a tactic, terror, can provide the rationale for anything. Terror is ubiquitous, it can be fought anywhere. Anyone who uses or threatens to use violence in furtherance of political or economic ends can be deemed a terrorist. Any “terrorist” who yells, “Death to the United States!” can be deemed a threat to Americans. Terrorism will never be eradicated, so the war against it is perpetual. President George W. Bush even arrogated the right to wage that war preemptively, before terrorists actually struck the US or its citizens. And that’s how the US finds itself in Niger, its “long-standing” and “stalwart” ally that 999,999 out of a million Americans can’t find on an unlabeled map.
The noninterventionist counsel in George Washington’s Farewell Address and John Quincy’s “In Search of Monsters to Destroy” speech has been relegated to the historical dustbin. The latest in a long line of justifications for America making the world safe for democracy, liberty, global order, or some other good thing came from John McCain. It might have come from McCain’s hero, Theodore Roosevelt (except that Roosevelt made no attempt to hide his disdain for those he regarded as inferior races). Or it might have come from Woodrow Wilson, either of the Bushes, or John F. Kennedy.
Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty.

-President John F. Kennedy’s Inaugural Address, January 20, 1961
When a nation has 36 military outposts on the least developed continent and over 800 around the globe, its running an empire, not Kennedy’s altruistic crusade. 

It’s an empire for which the US can no longer afford to “pay any price,” if it ever could. The proponents and many beneficiaries of America’s imperial power recoil at mundane accounting considerations. However, the US government has over $20 trillion in debt, a fair proportion of which funded its empire, and over $200 trillion in unfunded pension and medical-care promises. Its biggest adversary may one day be the credit markets.....


To partly answer the "Why are Green Berets in Niger" here's GovTrack:

H.R. 3833 (114th): To require a regional strategy to address the threat posed by Boko Haram.
Oct 26, 2015
114th Congress, 2015–2017
Enacted Via Other Measures
Provisions of this bill were incorporated into other bills which were enacted.
This bill was enacted as:
S. 1632: A bill to require a regional strategy to address the threat posed by Boko Haram.
Enacted — Signed by the President on Dec 14, 2016. (compare text)
Frederica Wilson
Representative for Florida's 24th congressional district
Photo of Rep. Frederica Wilson [D-FL24]

Read Text »
Last Updated: Oct 26, 2015
Length: 5 pages

Combine that with CNN reporting on Oct. 23 that Senator Lindsey Graham, warhawk and Senatorial BFF of John McCain, also wants U.S. troops in Africa:
Graham: 'The war is headed to Africa'

Monday, October 30, 2017

Alphabet's Eric Schmidt is "Shocked—Shocked—to Find That".... (throws Twitter under the bus) GOOG

Of course, the part of the headline in quotes isn't Mr. Schmidt, it's Captain Renault in Casablanca but it was the first thing I thought of while reading this first-rate piece on the GOOG.
A couple pull-quotes on the power of the big platforms:
The sub-head:
“One of the things I did not understand,” says Schmidt, “was that these systems can be used to manipulate public opinion in ways that are quite inconsistent with what we think of as democracy.” 
Schmidt, likewise, references the dangers of “mechanized” fake content on YouTube (say, a video of Hillary Clinton with manipulated audio and visuals to make it sound and look as if she’s confessing to one of the many conspiracy theories orbiting her), and warns of the increasing role bots might play in the national discourse as their interaction skills improve.
“How many Twitter accounts are real people versus non-real people? It’d be useful to know if the thing tweeting at and spamming you was a person or not,” he says. “And in Facebook’s case, they’re working hard on this, but how would you know that it was a computer that was spreading viral fake news?”
Here's Fast Company's:
Oct. 29, 2017
Alphabet’s Eric Schmidt On Fake News, Russia, And “Information Warfare”
“One of the things I did not understand,” says Schmidt, “was that these systems can be used to manipulate public opinion in ways that are quite inconsistent with what we think of as democracy.”
Ever since the 2016 presidential election, Alphabet, the tech giant that owns Google, has been under intense scrutiny to acknowledge its role in trafficking the Russia-backed disinformation campaign that potentially helped shape the outcome. In some of the most unequivocal comments yet, the company’s executive chairman, Eric Schmidt, recently acknowledged to Fast Company that the search giant didn’t do enough to safeguard its services against Russian manipulation.
“We did not understand the extent to which governments–essentially what the Russians did–would use hacking to control the information space. It was not something we anticipated strongly enough,” Schmidt said. “I worry that the Russians in 2020 will have a lot more powerful tools.”

Schmidt’s comments, from an August 30 interview published as part of a new Fast Company feature about how Alphabet is grappling with digital threats such as fake news and disinformation, offers a preview of how Google may frame its testimony before the Senate Judiciary and Intelligence Committees this week.

Public criticism and government scrutiny of leading technology companies is mounting, and they are being asked to deliver a full accounting of the ways Russia leveraged their services, in addition to how they, directly or indirectly, assisted in those efforts. Yet inside Alphabet, there is a sense among some top executives focused on these challenges that the company does not owe the public a mea culpa....

Sprint, T-Mobile Plunge: SoftBank Calling Off Merger, Will Use Cash to Buy Canada

From ZeroHedge:
Sprint stock plunged, and was halted by the exchange volatility trigger, when the Nikkei reported moments ago that Japan's SoftBank Group plans to break off negotiations on the long-awaited merger between its subsidiary Sprint and T-Mobile US due to a failure to agree on ownership of the combined entity, "dashing the Japanese technology giant's hopes of reshaping the American wireless business."

According to The Nikkei, SoftBank is now expected to approach T-Mobile owner Deutsche Telekom as early as Tuesday to propose ending the negotiations. The pair had reached a broad agreement to integrate T-Mobile and Sprint - the third- and fourth-largest carriers in the U.S. - and were ironing out such details as the ownership ratio....MORE
Just joking with the Canada bit, SoftBank has bigger plans:

SoftBank In Talks To Acquire U.S. Treasury
In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, SoftBank confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to SoftBank spokesperson Jonathan Hestron, the merger between SoftBank and the Treasury Department is "a good fit" because "they're in the business of printing money and so are we."

The SoftBank spokesman said that the merger would create efficiencies for both entities: "We already have so many employees and so much money flowing back and forth, this would just streamline things."...
I apologize, that is fāke news, I couldn't help myself.
It's actually a rewriting of a 2009 bit of genius from Andy Borowitz, then scribing for the Huffpo and now at the New Yorker.... 

"Real estate blockchain by start-up from Ukraine"

I see no downside.

From Hackernoon:
Blockchain has much more to it than cryptocurrency. One of its most important features is the absolute transparency of the transactions, leaving no place for bribery and corruption.

Real estate and investments into it are one of the industries that can benefit from using Blockchain the most.
Propy, a US-based start-up, created by a group of prominent American real estate businessmen and experienced Ukrainian developers, begins the pilot project that will allow people invest into real estate and buy it abroad in a much more secure, convenient and fast way than ever before. Founded in 2015, Propy aims to create a decentralized marketplace for buying real estate internationally and processing these cross-border payments using the power of blockchain.

This project caused some traction in the media and was covered in Forbes, Huffington Post, and real estate-centered Inman.... 

Well, if it was covered in the HuffPo and it has a graphic...WTH, you only live once, right?

Questions America Wants Answered: Is Eating Lab Grown Human Flesh Cannibalism?

Combining a couple themes from the weekend's posts:
Seven Startups Creating Lab-Grown Meat 
Soylent Banned In Canada
Thanks (I think) to a reader.

From Gizmodo, October 16:

Is Eating Synthetic Human Flesh Cannibalism? 
A disgusting factor which separates consuming human flesh from consuming muscle tissue of non-speaking animals is that you can’t separate eating dead humans from eating live humans. In the way that you call a baby cow “veal” or a pig “pork,” human flesh is just human flesh—you wouldn’t think about eating Dave’s “rounds” or his “snout,” you would think about eating Dave’s ass and face.
But what about consuming cloned, lab-grown human flesh? The very idea is fictional (specifically, in Brandon Cronenberg’s 2013 sci-fi horror Antiviral, for example) and we are far from the future where this is possible. But is eating cloned human tissue technically cannibalism?

And, hypothetically, what about synthetic human meat, grown without a genetic human donor? Even lab-grown animal meat hasn’t reached that goal yet. As of this summer, lab-grown beef still originates from “fetal bovine serum”—the blood of cow fetuses removed live from their slaughtered mothers and have their blood drained from their beating hearts until they die. (Hampton Creek claims it is attempting to approximate meat cells from its “plant library.” Mark Post, co-founder of Mosa Meats famous for introducing the first cultured hamburger, tells Gizmodo cryptically that researchers are looking at “harmless cells,” for example cells from feathers. “My guess is that they we will gradually move towards an animal-free way of producing meat, but thus far this is not possible with the current state of technology without using gene technology.”)

But imagine that lab-grown human calf muscle appears in a petri dish without involving a human fetus. Is consuming a synthetic human burger cannibalistic? Or does it become just a burger?
William Miller
Author of Anatomy of Disgust, professor of law, expert in Icelandic studies
I think a real cannibal would be appalled at eating such crap. A cannibal has to, or wants to, or is obliged to eat flesh from a real human. That’s what we call a cannibal. At least, I’m thinking of two cultural types of cannibalism recorded in the anthropological literature: One where you kind of take in the soul of your enemy [a wartime custom practiced by various peoples], and the other where you actually eat your relatives as part of a religious obligation and it would be rather ritualized [such as the Wari’ from Brazil].
In either case, there’s a reason for you doing it that gives sense to what you’re doing that is not just of the cheap thrill variety, you know? This test tube human flesh you propose to serve up is just a kind of moral cop-out, It’s [a moral cop-out] like using potato flour for Passover to make pastries that mimic fully the very food you are not supposed to eat.
One of the reasons that your question creeps me out is you’re just faced with the fact that you’re somehow taking yourself out of the natural world by eating that... A lot of the things that I find kind of gut-wrenchingly disgusting are sci-fi futures that are kind of a restructuring what the normal is in human existence because medical and biological science has gotten so sophisticated that it can do things that we were never meant to be able to do and really should not be done.
...I think it’s like what people sneer at as first world problems. These are the kind of very trivial moral issues that too bored, too rich produce, because our technological know how has outstripped, or is even harming, our already decaying moral sensibility. That said:
It’s not like people didn’t worry about what they ate once they had enough to eat. I mean, culture itself, our first cultural rules, are basically to regulate who you can screw and what you can eat, right?
Jacob Appel
Bioethicist and author of The Man Who Wouldn’t Stand Up

The question of whether or not such a practice would be cannibalism is probably best left to a linguist or a culinary authority....MORE, actually quite a bit more. 
Previously in Cannibal Studies:

News You Can Use: "In a Heated Negotiation? Try Eating Like Your Opponent"
I initially misread the headline as "Try eating your opponent" an error I ascribe to the current political climate and the memory of Alferd Packer, Colorado's most famous cannibal, about whom the sentencing judge said:
"Stand up yah voracious man-eatin' sonofabitch and receive yir sintince. When yah came to Hinsdale County, there was siven Dimmycrats. But you, yah et five of 'em, goddam yah. I sintince yah t' be hanged by th' neck ontil yer dead, dead, dead, as a warnin' ag'in reducin' th' Dimmycratic populayshun of this county. Packer, you Republican cannibal, I would sintince ya ta hell but the statutes forbid it."
This is not the first time Alferd has graced our pages. He was an endnote to 2015's "Trapped In the Snow With That Brother-In-Law Who Won't Stop Talking? Consider the Cannibal Lifestyle" where we pointed out the University of Colorado-Boulder student center was home to the Alferd Packer Restaurant & Grill.

Prior to that he showed up in a 2007 post on global warming:
UFO science key to halting climate change: former Canadian defense minister
Anyhoo, here's the headline story, our second of the day from ChicagoBoothReview...

Trapped In the Snow With That Brother-In-Law Who Won't Stop Talking? Consider the Cannibal Lifestyle

"Bite Me: An evolutionary case for cannibalism

"Ghost Ship Filled With Cannibal Rats Could Crash Into British Coast" (oh, and the rats are diseased)

History’s warning about the price of money - or -Things I learned from the Financial Times

First posted October 30, 2007:

From the Financial Times*:
...We have sympathy for Ben Bernanke, Fed chairman, and company. The job of a price fixer is never easy. What should money cost? For most of human history this was easy: once you fixed a conversion factor with gold, you just sat back and let the forces of supply and demand do their stuff. But since the collapse of the Bretton Woods currency regime (the last vestige of thousands of years of commodity money), discretion has been the watchword. Nine smart folks at the Fed board have taken over the job of deciding what the price of money should be. If the hagiography and hatred showered on Mr Bernanke’s predecessor, Alan Greenspan, is any indication, that price should be wisely wiggled down to make jobs, up to prick bubbles and now, apparently, back down to offset losses on millions of bad credit decisions.
...As one of the great monetary economists of the last century, Jacques Rueff, pointed out in the late 1960s, people react to the “growing insolvency” of a reserve currency, such as the dollar, by acquiring “gold, land, houses, corporate shares, paintings and other works of art having an intrinsic value because of their scarcity”. Sounds familiar? Indeed, this is the story of our present decade, one in which alternatives to the dollar as a store of value have soared even while the CPI has remained subdued.

This phenomenon is well-known in developing countries, where asset booms combined with low CPI inflation have preceded monetary and financial crises. In Mexico, for example, share prices rose 12-fold between January 1989 and November 1994, while inflation fell from 35 per cent to 7 per cent. Inflation then soared as the Tequila crisis exploded.

Prices of shares and real estate more than doubled from 1993 to 1996 in Indonesia and South Korea while CPI inflation rates were declining. In May 1997, just weeks before the currencies collapsed, inflation was only 4.5 per cent in Indonesia and 3.8 per cent in South Korea....MORE
*Manuel Hinds is a former Salvadoran finance minister and author of ‘Playing Monopoly with the Devil’. Benn Steil is director of international economics at the Council on Foreign Relations and co-author of Financial Statecraft

Manafort Indictment: I Should Have Been Long Antique Rugs Instead Of Stripper Poles

Usually these guys go in for stripper poles. So you try to have some inventory should they ever cross your path. But noooo....

From 2013's "How to Spot a Hedge Fund Fraudster":
Bombast. In my experience they are all bombastic.
And stripper poles. You would not believe the number of stripper poles that crooks collect....

...Some of the varlets who have graced our pages:
More Strip Clubs, Private Jets and Ponzis
...“Credit card and bank records show that Martin spent more than $1 million at a strip club and restaurants, nearly $1 million at elite hotels and another $1 million renting flight time on private jets,” prosecutors said.  “He purchased a fleet of luxury vehicles, donated hundreds of thousands of dollars to celebrity charity events, and hired personal security guards to accompany him in public.”...
The Dénouement: Perpetrator of $190 Million Minneapolis Foreign Exchange Ponzi Scheme Sentenced
...According to court documents made public, Cook purchased a Rolls Royce Silver Spur, a Maserati Quattroporte, a Hummer H2, a Jaguar S-Type, a Mercedes-Benz, a heavily customized Audi S8, a 60-foot houseboat (complete with a brass stripper pole), an island in Canada and a two-person submarine....
The Stripper and the Ponzi Schemer
A Holly Golightly for the Stripper-Embezzlement Age...

And today's story, from Emptywheel: 

Paul Manafort Indicted for Laundering 50 Times as Much Through Rugs as Through Household Labor
One of the nifty things Robert Mueller did with his indictment of Paul Manafort was to lay out all the extravagances he used to launder his money into the US. The most amazing was his $1M antique rug bill.
Mueller also listed $1.4 million laundered through two different clothing stores.
Compare that with the mere $20,000 Manafort spent on the people who clear his NY property.
Admittedly, Manafort appears to have redone his Hamptons and FL properties routinely to launder more money. But it basically means he shorted his staff while spending big on magic carpets.
Which will make Trump’s efforts to give rich shits like Manafort more tax benefits this week even more difficult.

The money laundering through luxury goods isn’t the key crime in Manafort’s indictment. That has to do with serving as an unregistered foreign agent with regards to work from 2012. Importantly, that means Mueller got to point to Tony Podesta’s corruption prominently as one of these two unnamed firms.
The allegation is that by having one Republican and one Democratic lobbyist firm to do the work of pro-Russian Ukrainians, Manafort hid what was really going on.

Just as interesting, Mueller slapped a false statements charge onto the failure to report being a foreign agent, tied to these claims (they carry onto a second page)....

"The Big Macro Play Ahead"

From Notes From the Rabbit Hole:
At NFTRH, we are about major macro turning points above all else. Of course, it is often years between these turning points or points of significant change so we are also about the here and now, and managing the trends, Old Turkey style.*

Since we are all learning all the time, I have no problem admitting to you that while right and bullish on commodities and stocks in 2009, after becoming bullish on the precious metals in Q4 2008, I completely ignored Old Turkey due to my inner biases. The result has been that after taking excellent profits from the precious metals bull, personally, I have greatly under performed the stock market bull despite holding a bullish analytical view for the majority of the post-2012 period.

Undeterred and ever plucky, we move forward. Currently, I play the bullish stock market like millions of other casino patrons, but this is as a trader and portfolio balancer, with the goal always to be in line with the macro backdrop of currency moves (I’ve been very long the US dollar for a few months now) and Treasury/Government bond yields and yield relationships.

This week something happened that has gotten me geeked out like at no other time since Q4 2008, when it was time to put the real precious metals fundamental view (as opposed to commonly accepted gold bug versions) to the test and go all-in. This week, assuming it is confirmed by remaining active through the FOMC next week, we got a short-term signal in Treasury bond yields that starts the clock ticking on a big macro decision point, which may include an end to the stock mania and the beginning of a sustained bull phase in the gold sector, among other things.

But first, we need to understand that the macro moves at an incredibly slow pace and one challenge I have had is to manage what I see clearly out ahead with the extended periods of intact current trend that seem to take forever to change. We as humans (and quants, algos, black boxes, casino patrons and mom & pop) are increasingly encouraged to try to compute massive amounts of information in real time and distill a market view from that at any given time, all at the behest of an overly aggressive financial media that wants to harvest your over exposed, bloodshot eyeballs on a daily, no hourly basis.

I’d only argue that you try not to get swept up in the noise; that you try to consider the much slower big picture, especially when it is on the verge of indicating changes. So, long preamble behind us let me show you what is going on in bonds, which is where the markets have been routinely manipulated by the Federal Reserve (through QE 1-3, plus Operation Twist and 7 years of ZIRP) and thus, is ground zero for coming events.

As noted earlier in the week, 10 and 30 year yields have made bullish breakouts on the daily charts. These patterns target 2.8% on the 10yr and 3.2% on the 30yr.

....[30-year chart omitted]
Now dialing out to the bigger picture, we have our limiters (to speculation) that have been in place for decades. To review, this chart noted the “Yamada trend line” back in December of 2016 in order to cast derision upon the Bloomberg headline R.I.P. Bond Bull Market as Charts Say Last Gasps Have Been Taken as a celebrity TA drew a single line on a long-term chart and Bloomy fell all over itself to turn it into a sensational headline. Bonds then went up for the better part of a year.

What is actually important on this chart are the limiters at the red dotted monthly EMA 140, the channel top and lateral resistance from the late 2013 high when the media were busily honking the “Great Promotion Rotation”. The TNX limiter is at 2.9% (+/-), which is in essence, the measured target of the daily chart pattern above! [I hardly ever use ‘!’ in my writing, but this warrants an exception].


"Social Structure And The Determination Of Interest Rates"

Speaking of Reformations...

From Bond Economics, Oct. 29:
In The Reformation of Economics, Philip Pilkington argues that societal structure determines the power of creditors and therefore interest rates. He then attacks mainstream financial and economic theories about interest rate formation. Although I agree that institutions matter for the determination of the power of creditors, I see mainstream theories of interest rate formation as adequate within the current institutional structure of developed countries. (Link to my review of The Reformation in Economics.)

My Summary of Pilkington's Arguments
This article is based on some of the contents of Chapter 9 of the book -- Finance and Investment. As an initial disclaimer, I want to emphasise that I am going to summarise some of the points that Philip Pilkington makes there, but I am not attempting to discuss the entirety of his arguments.

He is highly dismissive of mainstream economics and finance, and the use of the Efficient Markets Hypothesis with respect to interest rate formation. I agree with some of his criticisms, but I rely upon the efficient market hypothesis in my analysis of interest rate determination (rate expectations theory). The divergence in views can be viewed as the result of looking at different questions.

Firstly, the discussion of interest rates in classical economic theory is utterly worthless. My disagreement with Pilkington on that score is that I think the entire topic should be ignored as an intellectual embarrassment, whereas he argues that "Wicksell is no relic" (page 253). I come from an academic background where we do waste time on dead theories; for example, I could find no mention of optimal control in a quick scan of the standard robust control theory textbook Feedback Control Theory, by Doyle, Francis, and Tannenbaum. This is despite the fact that there is an obvious mathematical linkage between optimal and robust control. (The Kalman Filter is one of the few relics left behind from optimal control theory.) As an ex-academic, I understand the concerns regarding originality, but at the same time, we cannot cripple our ability to advance economic theory by wasting time worrying what Wicksell -- or Keynes -- really meant.

Modern financial theory argues that we can decompose the interest rate of any instrument into three components (assuming there is no embedded optionality, such as the ability to prepay, convert, call, or put the instrument back to the issuer):
  1. The expected "average" of the short-term credit risk-free rate (usually the policy rate) over the maturity of the instrument. (Technically, a geometric average.) 
  2. The term premium for credit risk-free instruments (e.g., Treasury bonds in the United States) associated with the term of the instrument.
  3. A credit spread.
(If you want to get finicky, there are second-order effects, such as the effect of being able to fund a bond cheap at a special repo rate, as well as benchmark or liquidity premia. The liquidity premium is a particularly confusing concept in this context, as Philip Pilkington prefers Keynes' liquidity preference theory. His concept of a liquidity premium is what I would call the term premium; the liquidity premium under my definition is how much more expensive a benchmark bond is relative to a fitted curve.)
In my view, modern mainstream models (i.e., Dynamic Stochastic General Equilibrium) are largely consistent with this version of financial theory, although they contain other elements that are the source of problems (the embedded assumption how interest rates affect economic dynamics).
Conversely, Philip Pilkington argues that borrower's interest rates are determined by two factors.
  1. Institutional structure of the economy.
  2. Liquidity preferences of investors.
I will discuss these in turn.

Institutional Factors
The modern financial theory decomposition of interest rates makes sense in the modern institutional context, where we have large dedicated fixed income investors and a well-defined bond market. It would probably be of little use in analysing lending in ancient Rome. 
Pilkington argues that interest rates depend upon the power of creditors. This is arguably true; we no longer have debt slavery or debtors' prisons (although some political groups seem to be sneaking debtors' prisons back under the door). Therefore, I have no argument that the "total cost" of borrowing (when we take into account the risk of being thrown into prison) depends upon institutional factors. However, does this have much to say about market interest rates in the developed economies over the past few decades? It is very hard to see trajectory of interest rates from the post-war lows, to the early 1980s peak, and back to the current lows as being the result of changes to the power of creditors as a class.
He raises the question of loan sharks....  MORE

Currencies: "Dollar Slips in Consolidative Activity"

Now Mr. Chandler is a sharp guy, I mean there's a reason Brown Brothers Harriman keeps him around, but when I saw 'consolidative' I thought "that can't be right". But is is, it's a real word.

From Marc to Market:
The markets are mixed, mostly responding to idiosyncratic developments, as the week's large events loom ahead. These BOJ, BOE, and FOMC meetings, eurozone flash CPI and US jobs reports. In addition, US President Trump is expected to announce his nomination of the next Fed chair, and the initial House tax bill will be unveiled.

Technically, the dollar was overextended and the mostly heavier tone today ought not be surprising. The New Zealand dollar remains under pressure. Although it bounced into the end of last week, comments by Finance Minister Roberson that the changes in the central bank's mandate would potentially lead to lower rates, are weighing today. Of course, this was the implication that the market responded to on news that the RBNZ's mandate was going to be changed to include a full employment charge, like the Federal Reserve. Before the weekend, the Kiwi had approached the year's low set in May near $0.6820. It has not made a new low, and it is beginning to look as if the selling has been exhausted. A move above $0.6915 would help confirm a low is in place.

The euro is correcting higher. It was oversold at the end of last week when it hit $1.1575. After a slow start in Asia, it rose through initial resistance in Europe near $1.1625 and looks poised to challenge the $1.1660 area. The news stream is light, but the economic reports will help shade views ahead of this week's first estimate of Q3 GDP and October flash CPI.

Spain was the first EMU country to report Q3 GDP. It was an impressive 0.8% quarter-over-quarter, in line with expectations and slightly slower than the 0.9% pace reported for Q2. The year-over-year pace was steady at 3.1%. For its part, Germany reported a 0.5% rise in September retail sales, while the August series was revised to a 0.2% contraction rather than a 0.4% fall. The 4.1% year-over-year increase compares with a 1.1% last September. The market expects that the eurozone economy expanded at around 0.5% in Q3, down from 0.6% in Q2. It is above trend, which means the output gap continues to close.

Separately, Spain reported EU harmonized CPI rose 0.6% in October, the same as September, but a bit faster than expected. Still, the year-over-year rate eased to 1.7% from 1.8%. Meanwhile, German states are showing softer inflation figures. A slightly lower EU harmonized measure from the 1.8% it reported in September would not be surprising. Draghi warned that due to energy prices, the pace of inflation might temporarily slow in the period ahead. There seems to be downside risk to the Bloomberg median forecast that October eurozone CPI was unchanged at 1.5% and 1.1% core rate. Both the GDP and CPI for the region will be reported tomorrow.

There is no sign that Catalonia's secessionist movement and the attempt by Madrid to invoke Article 155 to suspend the local autonomy is scaring investors. From the market's point of view, the crisis is over except for the precise details. Spain's 10-year is off six basis points, and at 1.50%, it is the lowest since a couple of weeks before the Catalan referendum was held. At 115 bp, Spain's premium is two basis points above the eve of the referendum. Spanish stocks are leading the European bourses higher today with a 1.4% rally near midday compared with a flat performance by the Dow Jones Stoxx 600. In Spain, financials, real estate, and telecommunications are the leading sectors....MORE

HBR: "Bologna Shows How a Business Cluster Can Stay Vibrant for Centuries"

From the Harvard Business Review:
Today when we talk about business “clusters,” we’re usually talking about the technology industry in Silicon Valley, the financial sector in London or New York, or automakers in southern Germany.
But clusters go back much further than these examples. “Businesses have clustered into networks of various sorts throughout history,” writes the U.S. National Commission on Entrepreneurship. “The medieval guild system was a primitive networking exercise.”

The most successful, enduring clusters are not stagnant. A look back at long-lasting clusters highlights the importance of adaptation to keeping a cluster vibrant, and the catalysts that keep it moving forward.

“He that will not apply new remedies must expect new evils; for time is the greatest innovator,” stated Francis Bacon. Nowadays, when a multitude of businesses are confronted with the leap from “dumb” products to creating smart, connected ones, and cities and regions are trying to make the leap from manufacturing to services, relying too heavily on past successes will only lock those clusters in the past.

An example of a cluster that has avoided what I call this “lock-in syndrome” is Bologna, Italy, one of the most remarkable and long-lasting clusters of history. Though many people know it for its packaging machinery cluster, they may not realize the deep historical roots of this industry, or how much it has evolved over time.

As with many clusters, a university sits at its center: founded in AD 1088, the Studium of Bologna was the major educational innovation of Europe’s second millennium. Europe’s first academic university was the epicenter of the guilds of wandering students (clerici vagantes). Spanning geographical barriers and shrinking the world of education, the resulting exchange of ideas between students and professors in a climate of freedom generated interactive spaces for knowledge creation, dissemination, and sharing. Those spaces were reservoirs rich in memories from which lessons for cluster formation would be extracted later.

About two hundred years later, towards the end of the thirteenth century, we start to see the first Bolognese silk mills, which became a major industry.  The major innovation lay in an extraordinary machine already in use in Lucca, about 150 kilometers southwest of Bologna. This round, mechanical spinning machine was capable of twisting dozens and dozens of threads at the same time. The innovation of the Bolognese silk makers was to operate the Lucca machine with a hydraulic wheel, instead of by hand. Thanks to this technological innovation—made possible by Bologna’s canals and ample supply of water—by the 15th century, Bolognese mills had expanded from small-scale production to busy factories that took up three or four floors. Long before the Industrial Revolution,

Bologna used this combination of hydraulic power and technology to bring silkworm farming to Europe at scale. Bolognese yarns were sold to the doges of Venice or exchanged for spices and salt, and they were also exported to the large international markets, to France, Germany, England and even to the East.

But when Industrial Revolution did arrive, it shook the Bolognese silk industry. In Bologna at the end of the 18th century, changing consumer tastes, labor costs, and production technologies all led to the contraction of the industry. The result was a deep and prolonged recession.
Nonetheless, today, the Bolognese “Packaging Valley” stands out internationally for its ability to meet the specialized needs of manufacturers throughout the world....MUCH MORE

Executive Perks - Immelt Hypocrisy Style (GE)

Remember all that 'green' talk in the mid-oughts? We have a couple hundred posts on GE and Immelt and very, very few of them are positive takes on either. As noted when the company got the regulatory okey-dokey to purchase oil services giant Baker-Hughes:
Long-time followers of GE may remember "Ecoimagination".
It was all B.S., just rent-seeking gussied up in verde:
"GE's Immelt wishes he had soft-pedaled green talk" (GE)
From the twisted accountants at Going Concern:
Yesterday, The Wall Street Journal reported that the General Electric’s new CEO, John Flannery, is busy making changes. They include axing one of his predecessor’s bizarre travel practices:
For much of Jeff Immelt’s 16-year run atop one of the world’s largest conglomerates, an empty business jet followed his GE-owned plane on some trips to destinations around the world, according to people familiar with the matter. The two jets sometimes parked far apart so they wouldn’t attract attention, and flight crews were told to not openly discuss the empty plane, the people said.
The second plane was a spare in case Mr. Immelt’s jet had mechanical problems. A GE spokeswoman said that “two planes were used on limited occasions for business-critical or security purposes.” Mr. Immelt didn’t respond to requests for comment.
When Mr. Flannery took over on Aug. 1, one of his first belt-tightening moves was to ground GE’s entire fleet of six business jets, and that’s just the beginning.
And from the "No, tell us what you really think" file a 2015 post re-referencing a 2007 event:
General Electric Threatens to Leave Connecticut (GE)
Ungrateful bitches.
It was just eight short years ago that the company took the state's money in "GE gets grant to install GE solar panels on GE headquarters".*
The asterisk went on to a bunch of prior posts including:
These are the kind of people you have to stay away from. As I mentioned in 2014's "General Electric: ‘A Generation of Portfolio Managers Has Been Rewarded For Staying Underweight’" (GE)"
Monday, September 10, 2001 was the day that Mr. Immelt took over at GE. The stock closed that day at a split adjusted $32.86. Today it is changing hands at $26.88.

I haven't owned the stock since '99. I was fortunate to not own this stock for the last decade-point-five. In the late '90's a very wealthy and very smart investor said to me:
"GE's phony-baloney earnings smoothing is going to have to end, it's approaching the level of a joke, in addition to violating the '33 act".
Sometimes you get lucky....
Sometimes you get lucky.
And sometimes you recognize crapola when you see it.

The stock closed at $20.79 on Friday.

Norwegian Mining Company Launches First Asset-Backed ICO

From ZeroHedge:
While the world debates whether blockchain-based Initial Coin Offerings are a fraudulent pyramid scheme, meant to take advantage of gullible investors who are desperate to get rich quick, or a revolutionary "post-equity" way of raising capital, a Norwegian mining company, Intex Resources ASA, has taken the next step in the latter, and last week announced it was issuing the world's first asset-backed Initial Coin Offering, with the resulting tokens being exchangeable for the physical collateral.

Although Intex is not the first corporation to approach ICOs as a means of raising capital, with Overstock revealing last week that it will launch an ICO on Nov. 1 using its proprietary tZERO platform, a strategy that will allow Overstock to raise capital without diluting its common equity float, Intex approach is somewhat different: the Company intends to issue asset-backed tokens which are backed by the Company's metal reserves; currently Iron Ore  and Nickel Ore.

Where Intex' approach is unique, is that the newly issued Tokens will be based on blockchain technology and will be exchangeable into the physical product, i.e. Iron Ore, Nickel or products derived  thereof. As a result, the company's Tokens are being pitched as an alternative tool for investors who are looking for Iron Ore or Nickel exposure/hedging or investors who simply want exposure in digital Tokens which have the security of underlying value assets (as opposed to Bitcoin and other unsecured and un-asset backed crypto currencies).

Commenting on the new capital raise, Lars Beitnes, Chairman of the Company, said the "the new world of secure digital currencies and tokens opens up a whole new way for listed companies to raise capital. We believe our ICO would be the first of many to come from other companies in Norway and internationally."

While it remains to be seen how accepted it is, by effectively pledging collateral behind the ICO, the company eliminates of the biggest concerns the rightfully skeptical investing public has regarding ICOs: the fact that they have no "fair value."  However, once pegged to an underlying asset, that argument loses much of its potency.

What exactly is the collateral behind the new ICO? The answer, according to the press release, are the iron ore assets in the company's Ambershaw mine in Canada:
As the Iron Ore asset owned by Ambershaw Metallics Inc. (AMI) is the closest to production the parties anticipate initial development of a Token with Iron Ore (or products derived thereof) as the underlying asset, in cooperation with AMI. The Company has 5% direct ownership and an option to acquire majority control in AMI. AMI expects to start concentrate production in Q2 2018. AMI estimates that in the initial mining phase it can produce approx. 330,000 tonnes of concentrate annually. The current sales price for 65% Fe concentrate is estimated to approximately USD 93 per tonne, with production cost of USD 35 and estimated freight cost of USD 15-20 per tonne.
Beitnes pointed out what Overstock CEO Patryck Burne noted last week, namely that "one of the great benefits with raising capital through an ICO is that there is no dilution for the shareholders, in addition to the benefits of transparency, the asset backing and it being attractive compared to traditional capital funding."

Beitnes then notes the interest in digital currencies by other international companies - such as BP, BNY Mellon, Credit Suisse, Deloitte, Intel, J.P. Morgan, MasterCard, Microsoft and UBS, among others - and notes that "seeing these great companies taking interest in this new world of financing, gives us comfort that this is the future for corporate capital raising. They are all members of the Enterprise Ethereum Alliance, where we also plan on becoming a member."

As for the chief reason for the company's decision to use an ICO to raise capital - besides euporic investors who are more than eager to allocate capital to the new platform despite repeat warnings by regulators that these may be fraudulent - Beitnes writes that the Tokens could offer "interest-free financing to the Company and its mining subsidiaries by selling future production in advance"...MORE

Sunday, October 29, 2017

A Look At Some of Fed Governor Jerome Powell's Thinking

Mr. Powell is in the running (front runner?) to be the next Fed head. Here's his October 18 speech "At the 41st Annual Central Banking Seminar, sponsored by the Federal Reserve Bank of New York, New York, New York."

From the Federal Reserve Board: 

Financial Innovation: A World in Transition
Governor Jerome H. Powell
We live in a world defined by the rapid pace of technological change. Four of the five largest U.S. companies by market capitalization are classified as "technology companies," where the term describes the products that these companies sell and how they operate. Thanks to decades of investment in information technology, especially in electronic communication networks, consumers now expect services to be available instantly at their fingertips. This statement is true for almost every industry and every aspect of daily life, including financial transactions.

This evening, I will consider how technology is changing the delivery of retail banking and payments services. I will discuss the roles of banks, fintech companies, and other stakeholders in moving the United States forward to a better payment system. I will also review the Federal Reserve's collaboration with these payment system stakeholders in pursuing that goal. I will argue that, for policymakers as well as the private sector, the challenge is to embrace technology as a means of improving convenience and speed in the delivery of financial services, while also assuring the security and privacy necessary to sustain the public's trust. As always, the views I express here are my own.

Retail Banking Innovation
As with so many sectors of the economy, technology is transforming the retail banking sector. The banking industry has traditionally been characterized by physical branches, privileged access to financial data, and distinct expertise in analyzing such data.1 But in today's world companies need not be bound by physical infrastructure and related overhead expenses. For example, companies can take advantage of an explosion in available data, and leverage advances in computing power, via cloud computing, analytical tools, and off-the-shelf machine learning tools, to make sense of those data. The banking industry is adjusting to this world, and facing significant challenges to traditional banking business models.

For example, today financial technology can support access to credit through innovative approaches to gathering and analyzing data. Historically, a customer seeking a loan has provided financial statements to a bank or other traditional lending institution. More recently, the use of a fintech platform may allow a lender to quickly monitor and analyze more up-to-date data from a broader range of sources, including those outside of the traditional lending process, to verify an applicant's identity and make inferences about the applicant's overall financial health. For example, a business loan applicant could submit information such as shipping data or customer reviews as additional input to more traditional data sources. With this additional information, the bank would have a more complete picture of an applicant's day-to-day activity and overall financial capacity, and potentially a greater ability to provide credit to customers, including some who might have been otherwise denied a loan based on traditional data.

Fintech firms are also finding ways to use banks' data, in some cases without entering into an explicit partnership with the bank. With customers' permission, fintech firms have increasingly turned to data aggregators to "screen scrape" information from financial accounts. In such cases, data aggregators collect and store online banking logins and passwords provided by the bank's customers and use them to log directly into the customer's banking account. This information can be used to provide consumers with convenient real-time snapshots of their financial information across multiple banks and accounts.

These examples highlight that there is a balance that needs to be achieved in this innovative environment.2 On the one hand, new technologies have enabled banks and other firms to find different ways of meeting consumers' demand for speed and convenience. On the other hand, these same technologies raise new considerations about data security and safety, as well as consumer privacy and protection. Policymakers and the financial industry must assure that enhanced convenience and speed in financial services do not undermine the safety, security, and reliability of those services.

Retail Payments Innovation
Technology is also shaping changes in retail payments. As with retail banking, retail payments will need to evolve to meet consumer expectations of constant connectivity and instant access while assuring security and privacy....MORE

"Mark Twain’s Get-Rich-Quick Schemes"

From the Paris Review:
Like most of us, Mark Twain hated writing checks to other people. But there were times when he happily paid out large sums. Issuing a check for $200,000 drawn on the United States Bank of New York on February 27, 1886, for example, made him almost giddy. The check was made out to Julia Dent Grant, the widow of Ulysses S. Grant, the former president of the United States and commanding general of the Union Army, who had died of cancer the summer before, just after completing his remembrances of the Civil War. That payment represented the first profits from sales of volume one of the Personal Memoirs of Ulysses S. Grant, published only a few months earlier by Charles L. Webster and Company, a start-up publishing house Twain had established two years before. He had installed a nephew, Charles “Charley” Webster, as its business manager. Webster got his name on the letterhead and a salary, but that’s about all he got out of the position, besides aggravation. Twain made all the business and financial decisions, except when he didn’t feel like it.

Twain would have been pleased to have published Grant’s memoir even if it had not broken all American publishing records for sheer profitability. Just landing the contract had required Twain to persuade General Grant to break a handshake deal with another publisher. The other publisher had offered Grant a 10 percent royalty. Twain countered by offering a royalty share unheard of then, or since: 75 percent. The other publisher offered no advance against royalties. Twain said he would pay $25,000 upfront.

This was a bold gamble—some might say a reckless investment—but it paid off. At that time, the $200,000 royalty check to Grant’s widow was the largest ever paid by an American publisher. In the months to come, Webster and Company wrote additional royalty checks to Grant’s family, bringing their earnings to $450,000, which again broke publishing records. Twain himself pocketed $200,000 for Grant’s memoirs. In our own time, that’s about $11,000,000 for Grant’s widow and $4,800,000 for Twain.

This sounds like a lot of money—and it was. Back then, a coal miner made $1.50 a day and paid $6 a month to rent a house for his wife and five children. The family’s annual food bill was $80 a month, a pound of butter cost 35 cents and a dozen eggs, 40 cents. For the urban sophisticate, a man’s suit cost $4.85, a piano could be bought for $125, and a three-bedroom apartment in Manhattan rented for $80 a month.

By the age of fifty, Mark Twain had achieved something he had dreamed of and worked for his entire life: he was rich. Raised in genteel poverty in small towns in Missouri (when Missouri was still the West), Twain as a grown man, had rubbed elbows with the greatest business tycoons of the time. As the author of The Innocents Abroad, Roughing It, Life on the Mississippi, The Adventures of Tom Sawyer, and The Adventures of Huckleberry Finn, he had seen the world, or much of it. Russian princes and English lords fawned over him. Hundreds of thousands of people bought his books and lined up to hear him speak. With his earnings—and his wife’s inheritance—he had built a startlingly opulent, twenty-five-room mansion in high-toned Hartford, Connecticut. Justin Kaplan, the author of Mr. Clemens and Mark Twain, called the house “part steamboat, part medieval stronghold, and part cuckoo clock.”

And now, as head of his own publishing firm, making money for other authors, he felt like a great philanthropist. He could see himself as one of the true benefactors of the age. And it was an age he had named when he chose the title of one of his own best sellers: The Gilded Age....MUCH MORE
HT: Digg

Like Mark Twain, P.T. Barnum became a bankrupt and like Mark Twain he resolved to repay his creditors and come back bigger than before.
So he did.
If interested see: "How P.T. Barnum Gave The Public What It Wanted (and made a fortune in the process)":
...Phineas had made quite a bit of money before he started the circus (at age 61) but had guaranteed the debts of a failed company, which combined with his own debts, made him a bankrupt.
Among the things he did to recover was go on a lecture tour talking about boozing and money.

After he had repaid his debts ($450K ~$12 million in 2017) he wrote a book, the table of contents of which showed just how much the bankruptcy had scarred him.
Here's the copy maintained by John Walker, founder of Autodesk, at his Fourmilab, Switzerland website:....