Sunday, May 29, 2016

Memorial Day 2016

Fort Snelling National Cemetary
"...that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion--that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth." 
-Abraham Lincoln at Gettysburg, November 19, 1863

Saturday, May 28, 2016

Iceland Is Full (and stop with the offshore fund flows too)

From Curbed:

Iceland Is Full
The country of 330,000 had 1.26 million tourists last year
Iceland, population 330,000, had 1.26 million tourists last year as a combined result of it being home to various Game of Thrones filming locations and also being so beautiful as to have drawn Game of Thrones to film there in the first place. Now, essentially, the country is worried that it is full: overcrowding is a problem, along with a massive strain on infrastructure not built to accommodate so many people, as well the fact that tourists keep doing rude tourist things like trampling all over/ruining the natural environment. So for now, next time you consider a trip to Iceland, just take that beautiful pristine landscape you're imaging and fill with a whole bunch of other people just like you who can't find a bathroom.

Is Tourism Spoiling Iceland? [City Lab]
And from the Wall Street Journal:

Iceland Puts Freeze on Foreign Investors 
New law offers foreign holders of about $2.3 billion worth of krona-denominated government bonds a tough choice
Iceland has spent eight years locking down its financial markets to keep foreign investors in. Now some are complaining the island nation is trying to shove them out.
A law passed May 22 by Iceland’s parliament offers the foreign holders of about $2.3 billion worth of krona-denominated government bonds a Hobson’s choice: Sell out in June at a below-market exchange rate, or have the money they receive when their bonds mature impounded indefinitely in low-interest bank accounts.

Investors, including Boston-based mutual-fund companies Eaton Vance Corp. and Loomis Sayles & Co., a unit of Natixis SA, don’t want to go. They say they will reject the government’s offer.

–– ADVERTISEMENT ––
“We would like to stay invested,” said Patrick Campbell, a global bond analyst at Eaton Vance.
The dispute is the result of a wholesale turnaround in Iceland’s relationship with foreign investors.
The country became synonymous with financial alchemy after its banks ballooned by borrowing in bond markets and attracting foreign depositors with high interest rates. That system imploded in 2008 when depositors made a run on the banks just as their bonds fell due, causing the krona to sharply devalue against the euro.

Yet a growing number of fund managers are now buying Icelandic government bonds, including those that were marooned on the island when it applied capital controls. The country is now one of the few offering a combination of high interest rates and strong economic growth prospects.
Eaton Vance and another holder of the legacy debt, also called “offshore” debt, hedge fund Autonomy Capital LP, have been courting the government for months to allow them to keep their cash on the island, even offering to swap their holdings into long-term bonds that they would pledge to hold on to.

But the country isn’t interested. Instead, officials behind the law say they aim to keep the $16.7 billion economy of the island with a population of 327,386 from being swamped anew by the ebb and flow of offshore funds.

“We don’t need the money,” said Mar Gudmundsson, governor of Iceland’s central bank. “These are remnants from the last boom and bust, and we are not going to repeat that mistake.”...MORE

News You Can Use: Smiling Faces Edition

"I never smile if I can help it. Showing one's teeth is a submission signal in primates. When someone smiles at me, all I see is a chimpanzee begging for its life."
From Althouse
 
"But in Japan, India, Iran, South Korea, and... Russia, the smiling faces were considered significantly less intelligent.... In countries such as India, Argentina, and the Maldives, meanwhile, smiling was associated with dishonesty...."

At the link — to "Why Some Cultures Frown on Smiling/Finally, an explanation for Bitchy Resting Face Nation" in The Atlantic — there are some charts arraying the countries from one extreme to the other....
 

Today in Whack Ungulate News: "Welsh sheep go on rampage...

...after eating cannabis plants."

From United Press International:
SWANSEA, Wales, May 25 (UPI) -- Officials from a city in South Wales are warning that a group of sheep could have ingested cannabis causing them to stir up trouble in nearby towns.

Swansea County Councillor Ioan Richard feared that sheep in the area could ingest cannabis plants that were dumped from an illegal cannabis factory.

"I dread to think what will happen if they eat what could well be cannabis plants -- we could have an outbreak out of psychotic sheep rampaging through the village," he said.

Richard added that one flock of sheep had already been seen roaming about a Welsh village and intruding on people's homes.

"There is already a flock of sheep roaming the village causing a nuisance," he said.
"They are getting in people's gardens and one even entered a bungalow and left a mess in the bedroom."...MORE

"Inside Silicon Valley's Culture of Spin"

As Elizabeth Holmes at Theranos is finding out, healthcare is different from food delivery apps.
From Fast Company, May 16:

Founders have learned that they need to embellish to get funded, but at what point does making bold claims become an outright lie?
"I get lied to by entrepreneurs every day," says Bob Kocher, a venture capitalist who specializes in health IT.

Kocher is regularly confronted by sky-high revenue projections in pitch decks for customers that are currently enrolled in a free pilot; "advisors," who the founders actually met once for coffee; or a pitch deck that lists a well-known hospital as a customer when the reality is that a lone physician, who happens to be a family friend, is playing with the product.

Kocher says he expects hyped-up marketing to a certain extent as part of the job, but it occasionally crosses the line. "Founders are trying to convince you of their vision, I get it," he says. "But that often leads to [them] getting loose with knowable facts."

Exaggerating claims. Glossing over failures. Fudging numbers. Getting loose with knowable facts. These things are all commonplace in Silicon Valley and other tech hubs, where dozens of startups are selling a dream to investors and the press in the hopes of breaking through the pack. Health-tech entrepreneurs, who raked in more than $4 billion in 2015 alone, are among the worst offenders.

But entrepreneurs say they have good reasons for doing it. Many founders use buzzwords like "Internet of Things" or "patient experience," as they have seen investors flocking to trendy categories. Others have seen their competition exaggerate or cherry-pick the facts, so why shouldn’t they? As one health-tech entrepreneur, who requested anonymity, puts it: "Being honest in Silicon Valley is like being the one member of an Olympic team that isn't on steroids."

I interviewed a dozen operators at health-tech startups and investors to understand the culture of hyperbole: Is it helping or hurting founders? And at what point does making bold claims or fudging facts become an outright lie? For startups in the medical industry, this can result in real or perceived patient harm, as well as investigations and/or regulatory oversight For this reason, I focused on the health-tech space but recognize that hype isn't "sector agnostic," as they say. Here's what I learned.

Where Is The Pressure To Exaggerate Coming From?
Kocher maintains that he’s far more likely to take a second meeting with an entrepreneur that levels with him. After all, he’ll find out anyway about the missteps and challenges if he agrees to finance the company and join the board. And it's far better to hear it from the entrepreneur up front than find out later, which often results in an atmosphere of mutual distrust.

Fellow health investor Lisa Suennen is also on the hunt for straight-shooters. She’s usually able to see through the marketing and hype after decades of investing, but not always. On one occasion, she showed up to an initial board meeting for a portfolio company and saw an unfamiliar data set on the whiteboard. "These numbers were different than the ones I had seen on the pitch deck," Suennan recalls. "They told me that I had obviously been given 'investor data' rather than the 'real operating data'."

But entrepreneurs who have tried being honest with investors say they have been burned. "VCs will give you points for honesty, but they won’t give you money," says one entrepreneur who requested anonymity, as they are currently raising a round. "So we all pick and choose data to show growth."

A twentysomething biotech founder, who also asked to remain anonymous, recalls an angel investor taking the team out to lunch to rewrite all of their bios before a VC pitch. That same founder was also turned down from a financing round for having "too much integrity."....MORE
It was at this point I began laughing uncontrollably 

HT: The Big Picture

What To Read At Your Hamptons Vacation Rental

Following up on "Questions America Wants Answered: Is It Possible To Snag A Last-Minute Vacation Rental In the Hamptons?".
From Capital Spectator:

 
Book Bits | 28 May 2016

What They Do With Your Money:
How the Financial System Fails Us and How to Fix It

By Stephen Davis, et al.
Summary via publisher (Yale University Press)
Each year we pay billions in fees to those who run our financial system. The money comes from our bank accounts, our pensions, our borrowing, and often we aren’t told that the money has been taken. These billions may be justified if the finance industry does a good job, but as this book shows, it too often fails us. Financial institutions regularly place their business interests first, charging for advice that does nothing to improve performance, employing short-term buying strategies that are corrosive to building long-term value, and sometimes even concealing both their practices and their investment strategies from investors.
Only Humans Need Apply: Winners and Losers in the Age of Smart Machines
By Thomas H. Davenport and Julia Kirby
Review via FT
An IBM executive told a recent conference that when supercomputer Deep Blue was halfway through its 1997 chess match with Garry Kasparov, it made a random move, due to a software bug. Assuming the machine was smarter than it was, Kasparov later made a strategic error that helped hand Deep Blue victory in the match.
Thomas Davenport and Julia Kirby warn that humans could, like Kasparov, cede the future to machines too easily. “Many knowledge workers are fearful,” they write. “We should be concerned, given the potential for these unprecedented tools to make us redundant. But we should not feel helpless in the midst of the large-scale change unfolding around us.”
Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America’s Central Bank
By John Tamny
Summary via publisher (Encounter Books)
The Federal Reserve is one of the most disliked entities in the United States at present, right alongside the IRS. Americans despise the Fed, but they’re also generally a bit confused as to why they distrust our central bank. Their animus is reasonable, though, because the Fed’s most famous function—targeting the Fed funds rate—is totally backwards. John Tamny explains this backwardness in terms of a Taylor Swift concert followed by a ride home with Uber.
Age of Discovery: Navigating the Risks and Rewards of Our New Renaissance
By Ian Goldin and Chris Kutarna
Summary via publisher (Bloomsbury)
Age of Discovery explores a world on the brink of a new Renaissance and asks: How do we share more widely the benefits of unprecedented progress? How do we endure the inevitable tumult generated by accelerating change? How do we each thrive through this tangled, uncertain time? In Age of Discovery, Ian Goldin and Chris Kutarna show how we can draw courage, wisdom and inspiration from the days of Michelangelo and Leonardo da Vinci in order to fashion our own Golden Age. – See more at: http://www.bloomsbury.com/uk/age-of-discovery-9781472936387/#sthash.5gFRhwhe.dpuf
...MORE

Questions America Wants Answered: Is It Possible To Snag A Last-Minute Vacation Rental In the Hamptons?

From Penta:

Dream House: This 12-bedroom East Hampton rental property is equipped with a pool house surrounded 
by stone courtyards, covered arbors, and idyllic gardens. The price: $650,000 for the summer.
Still looking for a summer rental in New York’s Hamptons? The wise way to approach the rental market on Long ­Island’s South Fork is, of course, to scout out options in January and secure your dream property early on. But life isn’t ­always tidy, and sometimes last-minute scrambling is a necessity.

The good news is that the late onset of spring delayed many rental decisions, so the available inventory is pretty good. But that doesn’t necessarily translate into a bargain when it comes to the manicured lawns, shingled mansions, and oceanfront villas of iconic Hamptons locales such as Southampton, Amagansett, and East Hampton.

The choicest rental properties in those villages cost “anywhere from $750,000 to $1 million for the summer,” says Paul Brennan, a broker at Douglas Elliman Real Estate. According to brokers’ data, there are about 50 rental properties still available in East Hampton and Southampton appropriate to the high-end Hamptons summer experience.

The best offerings we could find: A 12-bedroom East Hampton Cotswold-inspired estate with horse stables, sunken spa, and mature trees, available for $650,000 for the season—which traditionally stretches from Memorial Day weekend through Labor Day weekend—and an eight-bedroom Southampton cottage with pool and tennis court, still available at $560,000, where, as the listing says, you can “entertain to the sound of the ocean waves.”

Don’t despair. Chances of bagging a pleasant rental at a more reasonable price improve in the hamlets of Water Mill, Bridgehampton, Sagaponack, and Wainscott. Rentals there range from $50,000 to $750,000 a summer, with anything south of Montauk Highway commanding higher prices.

We found two properties at opposite ends of the spectrum that we thought offered good value for the money: an 1812 Wainscott schoolhouse within walking ­distance of the beach for $190,000, and a secluded Ocean Road home in Bridgehampton with a gym, theater, and wine room for $475,000.
North of the highway are Sag Harbor, gathered around a harbor dense with yachts and sailboats, and nearby Shelter Island, with its woods and water views. “Sag Harbor is more of a boaters’
community,” says Dana Trotter, a broker at ­Sotheby’s International Realty, “with rentals that are usually not as expensive.”

Shelter Island, accessible by ferry, “is more of an understated, family-oriented community with quiet money,” notes Douglas Elliman’s Brennan. “You don’t get the overwhelming crowds you do in the Hamptons. It’s much more the way it used to be.”

Hamptons rental prices are determined both by square footage and amenities, which can mean the amount of privacy, the style of the home, and its proximity to golf courses, tennis courts, and the ocean.
“Do you want it to feel like a home or a vacation rental?” Trotter usually asks renters. Beach homes that offer the latest Park Avenue luxuries quickly rise in price.

While summer rentals in the Hamptons are always tight, this year appears to provide marginally more choice than normal. “There is certainly a lot more inventory than there used to be,” says Trotter, largely because the slowdown in sales has many homeowners temporarily renting out homes they want eventually to sell (see “Luxury Second-Home Prices Up 11% in 2015,”Barron’s Penta, March 26)....MORE

"eBay founder backing Gawker’s appeal of Hulk sex tape verdict"

From the New York Post:

Two Silicon Valley billionaires with a history of bad blood are squaring off over Gawker.
Pierre Omidyar, an eBay co-founder, is leading the charge to support Gawker in its appeal of a $140 million judgment awarded to Hulk Hogan, whose lawsuit was bankrolled by rival billionaire and PayPal co-founder Peter Thiel, The Post has learned.

Omidyar’s First Look Media, the online news venture that includes The Intercept, is reaching out to other media organizations to file friend-of-the-court briefs in support of Nick Denton’s Gawker, which could be bankrupted by the Hogan judgment.

“First Look Media is looking into organizing amicus support for Gawker in its legal fight and appeal against Hulk Hogan,” Lynn Oberlander, First Look’s general counsel, exclusively told The Post.
By filing the amicus briefs in support of Gawker, First Look could effectively elevate the trial into a First Amendment rights case by pitting Thiel against dozens of media organizations — many of which are owned by other billionaires.

First Look has expressed support before for Gawker, but that was before Thiel’s involvement in the case was revealed this week in a Forbes story. Now there is renewed interest on Omidyar’s part, sources said.

The history between the two billionaires goes back more than a decade, when Omidyar’s eBay first purchased PayPal, which Thiel co-founded with Elon Musk, the Tesla Motors entrepreneur....MORE
We haven't yet posted Denton's open letter to Thiel which reads as though Denton has lost it, nor have we posted any of the erudite commentary floating around on press freedom, billionaire plutocrat psychology and differences between libel and invasion of privacy claims in U.S. law.
Stay tuned.
Thursday:
For Sale: 1 Gawker Media With Attached Lawsuit Judgement

Friday, May 27, 2016

Yellen Says Rate Hikes Soon As Need More Ammo "In Case Of Shock"

From ZeroHedge:
...Live Feed (The event started at 1030ET with Yellen is due to speak at 1315ET.. though it appears they are running late)...
  • *BERNANKE SAYS WE'RE LUCKY TO HAVE YELLEN LEADING THE FED
Headlines:
  • *YELLEN: AMERICA OWES BERNANKE ENORMOUS DEBT OF GRATITUDE
  • *YELLEN: CAPITALISM IS BEST ECONOMIC SYSTEM BUT CAN BREAK DOWN
  • *YELLEN: WE WANT TO DO EVERYTHING TO HEAD OFF A FINANCIAL CRISIS
And this happened...
  • *YELLEN: FED'S HANDLING OF FINANCIAL CRISIS WAS MAGNIFICENT
  • *YELLEN: QE, FORWARD GUIDANCE HAVE HELPED ECONOMY RECOVER
  • *YELLEN: WE DIDN'T SEE HOW HOUSING BUBBLE CREATED SYSTEMIC RISK
  • *YELLEN: WE ARE TRYING NOW TO DO BETTER JOB OF SEEING RISKS
  • *YELLEN: WE ARE FOCUSED ON SYSTEMIC RISK, FINANCIAL STABILITY
  • *YELLEN: WE'RE BRINGING NEW MINDSET TO HOW WE OVERSEE BIG FIRMS
  • *YELLEN: QUANTITY, QUALITY OF BANK CAPITAL HAS IMPROVED
And then she said...
  • *YELLEN: ECONOMY IS CONTINUING TO IMPROVE
  • *YELLEN: WITH GAINS, HIKE IN COMING MONTHS MAY BE APPROPRIATE
  • *YELLEN: DON'T HAVE TYPICAL SCOPE TO CUT RATES IN CASE OF SHOCK
And this happened...

And so admitting that The Fed needs to raise rates to be able to cut rates has sent stocks lower...

...MORE

Doctor Uses Heimlich Maneuver, Saves Life

From the Cincinnati Enquirer:
When he heard that a resident was choking, Perry Gaines, maître d’ for the Deupree House dining room, ran toward the table.

Gaines has been trained in the Heimlich maneuver and has performed it at least twice in the two years he has worked at the Hyde Park senior living facility.

When Gaines arrived at the table, Dr. Henry Heimlich, a 96-year-old resident of the Deupree House who invented the famous technique for clearing a blocked airway, was standing behind the woman, ready to perform it.

Typically, a staff member would do it. “But,” Gaines said, pausing, “it is Dr. Heimlich....
...MORE

HT: MetaFilter

Although the Cincinnati.com story says this was Heimlich's first use of the Heimlich one of the MetaFilter commenters dug up a 2003 story from the BBC that said he had already used it once. The BBC story also said that in some parts of the world the good doctor is known for something else.

EIA Weekly Supply/Demand Report

July futures: $2.172 +0.021
The report quotes June prices which have rolled off.
From the Energy Information Administration:
Overview:
(For the Week Ending Wednesday, May 25, 2016)
  • Natural gas spot prices fell at most locations outside of the northeastern United States this report week (Wednesday, May 18, to Wednesday, May 25). The Henry Hub spot price fell by 14¢, from $1.91 per million British thermal unit (MMBtu) last Wednesday to $1.77/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the June 2016 contract price fell slightly from $2.001/MMBtu last Wednesday to $1.992/MMBtu yesterday.
  • Net injections to working gas totaled 71 billion cubic feet (Bcf) for the week ending May 20. Working gas stocks are 2,825 Bcf, which is 37% above the year-ago level and the five-year (2011-15) average for this week.
  • According to Baker Hughes data, for the week ending May 20, the natural gas rig count decreased by 2 to 85 and oil-directed rigs remained flat at 318. The total rig count now stands at 404.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 8.5% to $5.49/MMBtu for the week ending Friday, May 20. The prices of all of the fuels making up the composite price increased. Ethane rose by 3.5%, natural gasoline rose by 8.4%, butane rose by 8.8%, isobutane rose by 9.3%, and propane rose by 10.6%....
...MUCH MORE
Nymex near-month prices down. At the New York Mercantile Exchange (Nymex), the June 2016 contract price declined by less than a penny, from $2.001/MMBtu last Wednesday to $1.992/MMBtu yesterday. On the other hand, the 12-month strip, which averages the June 2016 through May 2017 Nymex contracts, rose from $2.535/MMBtu to $2.641/MMBtu over the report week. While the near-month contract price declined, all other prices in the 12-month strip rose during the report week. 
Supply flat. According to data from PointLogic, average total supply for the report period remained flat this week. Dry production was flat, averaging 74 billion cubic feet per day (Bcf/d) for the week, while net imports from Canada declined 1% and accounted for 6 Bcf/d of supply. 
Consumption falls. Average consumption for the period declined by 4%, according to data from PointLogic. This decline was driven by a decrease in residential/commercial consumption, which fell 23% week on week, likely the result of warmer weather. Power burn rose 6% week over week, exports to Mexico remained flat at 3.5 Bcf/d, and industrial consumption fell by 2%....
Mean Temperature Anomaly (F) 7-Day Mean ending May 19, 2016

"Have You Ever Tried to Sell a Diamond?"


Common sense tells us that the only way to increase the value of 
diamonds is to make them scarce, that is to reduce production.

Nothing is forever.
Except, maybe, Neil Diamond.

A topic of endless fascination, a major piece from The Atlantic, February 1982:

An unruly market may undo the work of a giant cartel and of an inspired, decades-long ad campaign
The diamond invention—the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem—is a relatively recent development in the history of the diamond trade. Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of gem diamonds amounted to a few pounds a year. In 1870, however, huge diamond mines were discovered near the Orange River, in South Africa, where diamonds were soon being scooped out by the ton. Suddenly, the market was deluged with diamonds. The British financiers who had organized the South African mines quickly realized that their investment was endangered; diamonds had little intrinsic value—and their price depended almost entirely on their scarcity. The financiers feared that when new mines were developed in South Africa, diamonds would become at best only semiprecious gems. 
The major investors in the diamond mines realized that they had no alternative but to merge their interests into a single entity that would be powerful enough to control production and perpetuate the illusion of scarcity of diamonds. The instrument they created, in 1888, was called De Beers Consolidated Mines, Ltd., incorporated in South Africa. As De Beers took control of all aspects of the world diamond trade, it assumed many forms. In London, it operated under the innocuous name of the Diamond Trading Company. In Israel, it was known as "The Syndicate." In Europe, it was called the "C.S.O." -- initials referring to the Central Selling Organization, which was an arm of the Diamond Trading Company. And in black Africa, it disguised its South African origins under subsidiaries with names like Diamond Development Corporation and Mining Services, Inc. At its height -- for most of this century -- it not only either directly owned or controlled all the diamond mines in southern Africa but also owned diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland. 
De Beers proved to be the most successful cartel arrangement in the annals of modern commerce. While other commodities, such as gold, silver, copper, rubber, and grains, fluctuated wildly in response to economic conditions, diamonds have continued, with few exceptions, to advance upward in price every year since the Depression. Indeed, the cartel seemed so superbly in control of prices -- and unassailable -- that, in the late 1970s, even speculators began buying diamonds as a guard against the vagaries of inflation and recession. 
The diamond invention is far more than a monopoly for fixing diamond prices; it is a mechanism for converting tiny crystals of carbon into universally recognized tokens of wealth, power, and romance. To achieve this goal, De Beers had to control demand as well as supply. Both women and men had to be made to perceive diamonds not as marketable precious stones but as an inseparable part of courtship and married life. To stabilize the market, De Beers had to endow these stones with a sentiment that would inhibit the public from ever reselling them. The illusion had to be created that diamonds were forever -- "forever" in the sense that they should never be resold. 
In September of 1938, Harry Oppenheimer, son of the founder of De Beers and then twenty-nine, traveled from Johannesburg to New York City, to meet with Gerold M. Lauck, the president of N. W. Ayer, a leading advertising agency in the United States. Lauck and N. W. Ayer had been recommended to Oppenheimer by the Morgan Bank, which had helped his father consolidate the De Beers financial empire. His bankers were concerned about the price of diamonds, which had declined worldwide. 
In Europe, where diamond prices had collapsed during the Depression, there seemed little possibility of restoring public confidence in diamonds. In Germany, Austria, Italy, and Spain, the notion of giving a diamond ring to commemorate an engagement had never taken hold. In England and France, diamonds were still presumed to be jewels for aristocrats rather than the masses. Furthermore, Europe was on the verge of war, and there seemed little possibility of expanding diamond sales. This left the United States as the only real market for De Beers's diamonds. In fact, in 1938 some three quarters of all the cartel's diamonds were sold for engagement rings in the United States. Most of these stones, however, were smaller and of poorer quality than those bought in Europe, and had an average price of $80 apiece. Oppenheimer and the bankers believed that an advertising campaign could persuade Americans to buy more expensive diamonds. 
Oppenheimer suggested to Lauck that his agency prepare a plan for creating a new image for diamonds among Americans. He assured Lauck that De Beers had not called on any other American advertising agency with this proposal, and that if the plan met with his father's approval, N. W. Ayer would be the exclusive agents for the placement of newspaper and radio advertisements in the United States. Oppenheimer agreed to underwrite the costs of the research necessary for developing the campaign. Lauck instantly accepted the offer. 
In their subsequent investigation of the American diamond market, the staff of N. W. Ayer found that since the end of World War I, in 1919, the total amount of diamonds sold in America, measured in carats, had declined by 50 percent; at the same time, the quality of the diamonds, measured in dollar value, had declined by nearly 100 percent. An Ayer memo concluded that the depressed state of the market for diamonds was "the result of the economy, changes in social attitudes and the promotion of competitive luxuries." 
Although it could do little about the state of the economy, N. W. Ayer suggested that through a well-orchestrated advertising and public-relations campaign it could have a significant impact on the "social attitudes of the public at large and thereby channel American spending toward larger and more expensive diamonds instead of "competitive luxuries." Specifically, the Ayer study stressed the need to strengthen the association in the public's mind of diamonds with romance. 
Since "young men buy over 90% of all engagement rings" it would be crucial to inculcate in them the idea that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship. 
Since the Ayer plan to romanticize diamonds required subtly altering the public's picture of the way a man courts -- and wins -- a woman, the advertising agency strongly suggested exploiting the relatively new medium of motion pictures. Movie idols, the paragons of romance for the mass audience, would be given diamonds to use as their symbols of indestructible love. In addition, the agency suggested offering stories and society photographs to selected magazines and newspapers which would reinforce the link between diamonds and romance. 
Stories would stress the size of diamonds that celebrities presented to their loved ones, and photographs would conspicuously show the glittering stone on the hand of a well-known woman. Fashion designers would talk on radio programs about the "trend towards diamonds" that Ayer planned to start. The Ayer plan also envisioned using the British royal family to help foster the romantic allure of diamonds. An Ayer memo said, "Since Great Britain has such an important interest in the diamond industry, the royal couple could be of tremendous assistance to this British industry by wearing diamonds rather than other jewels." Queen Elizabeth later went on a well-publicized trip to several South African diamond mines, and she accepted a diamond from Oppenheimer. 
In addition to putting these plans into action, N. W. Ayer placed a series of lush four-color advertisements in magazines that were presumed to mold elite opinion, featuring reproductions of famous paintings by such artists as Picasso, Derain, Dali, and Dufy. The advertisements were intended to convey the idea that diamonds, like paintings, were unique works of art. 
By 1941, The advertising agency reported to its client that it had already achieved impressive results in its campaign. The sale of diamonds had increased by 55 percent in the United States since 1938, reversing the previous downward trend in retail sales. N. W. Ayer noted also that its campaign had required "the conception of a new form of advertising which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea -- the eternal emotional value surrounding the diamond." It further claimed that "a new type of art was devised ... and a new color, diamond blue, was created and used in these campaigns.... " 
In its 1947 strategy plan, the advertising agency strongly emphasized a psychological approach. "We are dealing with a problem in mass psychology. We seek to ... strengthen the tradition of the diamond engagement ring -- to make it a psychological necessity capable of competing successfully at the retail level with utility goods and services...." It defined as its target audience "some 70 million people 15 years and over whose opinion we hope to influence in support of our objectives." N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country. "All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions," the agency explained in a memorandum to De Beers. The agency had organized, in 1946, a weekly service called "Hollywood Personalities," which provided 125 leading newspapers with descriptions of the diamonds worn by movie stars. And it continued its efforts to encourage news coverage of celebrities displaying diamond rings as symbols of romantic involvement. In 1947, the agency commissioned a series of portraits of "engaged socialites." The idea was to create prestigious "role models" for the poorer middle-class wage-earners. The advertising agency explained, in its 1948 strategy paper, "We spread the word of diamonds worn by stars of screen and stage, by wives and daughters of political leaders, by any woman who can make the grocer's wife and the mechanic's sweetheart say 'I wish I had what she has.'"
De Beers needed a slogan for diamonds that expressed both the theme of romance and legitimacy. An N. W. Ayer copywriter came up with the caption "A Diamond Is Forever," which was scrawled on the bottom of a picture of two young lovers on a honeymoon. Even though diamonds can in fact be shattered, chipped, discolored, or incinerated to ash, the concept of eternity perfectly captured the magical qualities that the advertising agency wanted to attribute to diamonds. Within a year, "A Diamond Is Forever" became the official motto of De Beers. ...
...MUCH MORE

HT: Alpha Ideas

Related:
Making OPEC and DeBeers look like glee clubs, the tinsel trade maintains a brutal price discipline that would be the envy of the Sinaloa or the Worldwide Parsley Producers cartels....
9331 100C Purple Front

Dollar climbs, traders await Yellen speech for Fed clues

Commodities as a whole are fractionally weaker.
From Reuters:
The dollar index rose on Friday, on track for its strongest monthly performance since last November amid expectations the Federal Reserve may raise rates in coming months and investors awaiting fresh guidance from the head of the U.S. central bank.

The index .DXY was up 0.1 percent at 95.259, having pulled back from Wednesday's two-month peak of 95.661, with month-end rebalancing flows by asset managers likely to limit the gains, traders said. Holidays in Britain and the U.S. are likely to curtail volumes on Monday.

The dollar is still up 2.3 percent this month, among the top performing currencies, after a string of Fed officials raised expectations for a hike in interest rates as early as June.

"We will see some consolidation in the dollar after the recent gains with expectations of a June hike still in play," Nomura currency strategist, Yujiro Goto, said.

"Next week is a big one with U.S. non-farm payrolls and ISM (Institute for Supply Management) data, so investors are awaiting for more data," Goto said.

Fed Chair Janet Yellen is due to speak at an event hosted by the Harvard University at 1715 GMT. Her speech comes after a slew of Fed policymakers from John Williams to Bill Dudley and James Bullard all sounded relatively hawkish.

"I'm not sure how concerted this whole thing has been. If it's all kind of planned or if it's just individual members speaking," Nordea Bank head of trading, Jesper Bargmann, said, referring to the Fed officials' comments....MORE 

Volkswagen To Invest Up To 10 Billion Euros In New Battery Factory

From The Telegraph:

VW 'to invest £8bn in battery factory' in a bid to reinvent itself as electric carmaker 
Volkswagen is reportedly to invest up to €10bn (£7.6bn) in a major new battery factory as it attempts to reposition itself as a leader in the electric car market.

The move is part of a bid by VW to reinvent itself in the wake of the damaging emissions-rigging scandal.
The company had already announced ambitious plans to sell one million electric and hybrid vehicles a year by 2025 and to invest more in batteries.

It is now understood that Matthias Müller, the chief executive of VW Group, is to put plans for a massive new battery factory before the company’s supervisory board next month.

“We want a big hit, which will put us at the forefront of the industry,” a company source told Germany's Handelsblatt newspaper.
A spokesman for VW described the report as “speculation”.

But there is no doubting VW’s drive to corner a major share of the electric market as it tries to restore its image after the diesel emissions sandal, which will cost the company billions in recalls, fines and litigation fees.

Earlier this year, Mr Müller vowed to “make electric cars one of VW’s new hallmarks”.
If it goes ahead with plans for a battery factory, VW will be following the lead of the US electric carmaker Tesla, which is currently building its own “Gigafactory” in Nevada.

Together with Panasonic, Tesla is investing up to $5bn (£3.4bn) in the facility. Once operational, Elon Musk, the Tesla chief executive, says it will produce more batteries a year than were made worldwide in 2013.

The rationale behind car makers building their own battery factories is to give them independence from the Asian manufacturers which currently dominate the market....MORE
However, as we saw yesterday the battery makers are very dependent on Asian supply chains:
Why the CIA Reads The Financial Times (and you should too) Tesla and Cobalt

Thursday, May 26, 2016

Wannabe Asteroid Miner Planetary Resources Raises $21.1 Million In Series Alpha Round

From Next Big Future:
Planetary Resources, Inc., the asteroid mining company, announced today that it has secured US$21.1 million in Series A funding. The capital will be used to deploy and operate Ceres, an advanced Earth observation business that features the first commercial infrared and hyperspectral sensor platform to better understand and manage humanity’s natural resources. The funding was led by Bryan Johnson and the OS FUND; and joined by Idea Bulb Ventures; Tencent; Vast Ventures; Grishin Robotics; Conversion Capital; The Seraph Group; Space Angels Network, a syndication of investors from Angel.co; and Larry Page. Earth observation will be another aspect of Planetary Resources’ operations in addition to prospecting and mining asteroids.

Conceived from the company’s vision for the exploration and utilization of asteroid resources, Ceres will leverage Planetary Resources’ Arkyd spacecraft to deliver affordable, on-demand Earth intelligence of our natural resources on any spot on the planet. While typical satellite imagery provides only a picture, Ceres will provide actionable data with higher spectral resolutions – going beyond what the human eye can see – by measuring thermographic properties and detecting the composition of materials on Earth’s surface. The midwave-infrared sensor is the first ever commercial capability from space to offer thermographic mapping and night-imaging, and the hyperspectral sensor includes an unprecedented 40 color bands in the visible to near-infrared spectrum....MUCH MORE
Somehow related:
"Luxembourg’s Asteroid Mining Plan"
"It is Now Legal to Own an Asteroid in the U.S."
The U.S. House Of Representatives Just Passed An Asteroid Mining Bill
Here Comes Another Asteroid Mining, 3D Printing, Robotic, Start-up
Asteroid Mining: "A Start-Up Sees a Gold Rush Among the Stars"
"Are Ross Perot Jr. and Google's Founders Launching a New Asteroid Mining Operation?"
 X Prize Founder Wants to Mine Asteroids
 Rocket Men: A unique gathering of 13 companies showcases a coming year of launches
"We Are About to Start Mining Hydrothermal Vents on the Ocean Floor" (now with added alchemist's fallacy"
"Asteroid a MILE wide to hurtle past Earth in 48 HOURS - as experts warn of MASS EXTINCTION"
"The companies vying to turn asteroids into filling stations"


A compilation image of mining equipment in space
Artist's depiction, not actual asteroid mining

For Sale: 1 Gawker Media With Attached Lawsuit Judgement

From the Wall Street Journal:

Gawker Media Looking at Possible Sale of Company
Digital media company in the middle of costly legal battle with professional wrestler Hulk Hogan
Gawker Media has hired an investment banker to explore strategic options including a potential sale, according to a person familiar with the matter, as the digital media company fights a costly legal battle with professional wrestler Hulk Hogan.

The digital publisher has hired banker Mark Patricof of Houlihan Lokey as it reviews its options, Gawker confirmed Thursday.

Terry Bollea, known in the wrestling world as Hulk Hogan, sued Gawker for violating his privacy by posting a clip of Mr. Bollea having sex with the ex-wife of a former friend.

In March, a jury awarded the wrestler $140 million in damages. Gawker is appealing the ruling.

Late Wednesday, Silicon Valley billionaire and investor Peter Thiel acknowledged that he has been providing financing for Mr. Bollea’s legal fight and other such battles involving people who Mr. Thiel feels have been targeted unfairly by the media company....MORE
Recently:
Gawker 24/7: Judge Denies Gawker Motion, Upholds $140 Million Trial Awards
Adventures In Lawsuit Funding: Mission Destroy Gawker
Related:

"Walgreens Reportedly Struck Theranos Deal Without Verifying the Tech" (WBA)

Very troubling. 
Except to the plaintiffs attorneys.
From Fortune:
 Walgreens  WBA -1.13%  reportedly failed to adequately verify that embattled blood lab startup Theranos’ proprietary Edison finger prick testing technology worked as advertised, saddling the pharmacy giant with a business partner staring down mounting troubles. 
The drugstore chain struck its Theranos deal in 2013 under the leadership of former CEO Greg Wasson, who was reportedly eager to invest in a potentially revolutionary new technology to grow sales prior to the completion of Walgreen’s merger with Switzerland’s Alliance Boots. The partnership was a big win for Theranos, which was seeking a respected pharmacy ally to boost its brand and technology. 
Less than three years later, Walgreens has halted its expansion plans for using Theranos’ blood testing services beyond the 41 “Wellness Centers” in Arizona and California where they currently operate and is reportedly looking to dump its partner altogether in the wake of reports that its technology doesn’t work as advertised and growing scrutiny from both federal regulators and federal prosecutors. Walgreens operates about 8,000 pharmacies across the country. 
According to the Wall Street Journal, researchers at Johns Hopkins University who were paid to test the Edison device on Walgreens’ behalf back in 2011 were unable to do so because Theranos never delivered it to them. ...MORE

Ex-Goldman Sachs Structured Products Head Gets A Quarter-Billion Investment From Blackstone

From Artemis:

Hudson Structured secures $250m anchor investment from Blackstone
Hudson Structured Capital Management, the insurance, reinsurance and transportation linked investment firm set up by ex-Goldman Sachs structured products leader Michael Millette, has closed on and secured its $250m anchor investment from Blackstone, Artemis has learned. 
Hudson Structured Capital Management launched in the second-half of 2015 as an investment management firm operating one fund offering insurance and reinsurance linked investments, and another fund offering transportation finance investments, with Millette a founding managing partner. 
Since then Hudson Structured has been in the market with a private offering, seeking to raise launch funds for both of its fund. On the insurance linked investing side, the firm has now hired a team of experienced insurance-linked securities (ILS) and reinsurance executives to underwrite for and manage the re/insurance linked fund offering. 
Part of the capital raise involved an anchor investment arrangement with one of the world’s leading investment groups, Blackstone, an asset manager with $336 billion under management at the end of 2015. 
The anchor investment has now been secured, Artemis can reveal, as a source explained to us that Hudson Structured closed on the investment late last week. 
We understand that this injection of capital from Blackstone is for around the expected $250m mark and will be allocated relatively equally across the Hudson Structured re/insurance and transportation investment funds. 
The work now begins to deploy capital, we understand, and Hudson Structured is expected to target being fully invested as soon as it can. The timing works well for the firm’s insurance and reinsurance linked fund, with the key renewal period of June/July just around the corner....MORE

Climateer Line of the Day: 'Au Contraire Young Man' Edition

A (apparently) young reader commenting at FT Alphaville took Izabella Kaminska to task for the phrase "unviable for private interests." and used an unfortunate example to hammer home his point:


...There's never been any big concern that the U.S. airline market is "unviable for private interests."
Unfortunate because an insurance guy from Omaha Nebraska has already plowed this ground:
...Move on to failures of airlines. Here’s a list of 129 airlines that in the past 20 years filed for bankruptcy. Continental was smart enough to make that list twice. As of 1992, in fact--though the picture would have improved since then--the money that had been made since the dawn of aviation by all of this country’s airline companies was zero.

Absolutely zero.


I like to think that if I’d been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough--I owed this to future capitalists--to shoot him down. I mean, Karl Marx couldn’t have done as much damage to capitalists as Orville did.
-Warren E. Buffett, Fortune Magazine, November 22, 1999 
and repeated on the 2003 centenary of that first flight

Momo Mamas Bored With Dollar, Chasing New Scam Dogs

I'm dating myself.
The headline is a take off on the title of the year 2000 book by Wall Street Journalist John Emshwiller.

From Marc to Market:


The US dollar is trading with a softer bias today after the momentum stalled yesterday.  The pullback is shallow but could be extended a bit more in the North American session.  The US reports weekly jobless claims, durable goods orders and pending home sales.   However, the market already appeared to take on board that the US economy is rebounding strongly in Q2 and that the prospects of a Fed hike have increased, but a June/July hike is still not a done deal.    The next important step regarding market psychology is not today's data but tomorrow's speech by Yellen.  
Recall in that in March several regional Fed presidents talked up the prospects of a rate hike as early as April.  Yellen effectively closed the door on this line at her March speech in NY.  Dudley's comments last week, after the FOMC minutes, likely reflected the views of the Fed's leadership, and should be reiterated by the Chair.  
The interest rate adjustment has stalled alongside the greenback.  The August Fed funds futures contract, which offers the clearest view of a June or July hike has stalled at an implied yield of 55 bp or about a 72% chance.  As recently as May 16 the implied odds were closer to 20%.  The US two-year premium over Germany widened from 125 bp after the US employment figures on May 6 to 143 bp yesterday.   
In addition to the dollar's consolidation, the other feature continued recovery in oil prices.  Brent rose above $50 a barrel today, six-month high.    The driver is supply.  The larger than expected draw down of US inventories, coupled with disruptions in Nigeria, Venezuela and Libya are taking a toll.   OPEC meets next week, but reports suggest attempts to freeze output have been largely abandoned.   Although Iranian output is increasing, it will likely take several more months at least before pre-embargo levels are reached.  Reports suggest the partial sanctions that have continued, the ease of alternative business, and a purposeful campaign by Saudi Arabia slow the Iran's recovery.  
The higher oil prices are helping energy sector equities and sensitive currencies, like the Norwegian krone (0.9%), Canadian dollar (0.3%), Malaysian ringgit (0.5%), Mexican peso (0.3%).  The MSCI Asia-Pacific Index extended its recovery from two-month lows.  The regional index has risen in four of the past five sessions, despite the Fed tightening and the weakening of the Chinese yuan.  Europe's Dow Jones Stoxx 600 is about 0.2% lower though the materials and energy sector are up (1.0% and 0.7% respectively near midday in London).   
The details of the UK's Q1 GDP were reported Growth was unchanged at 0.4%, but the year-over-year pace slipped to 2.0% from 2.1%.  The composition of the growth was a bit different than expected.  Consumption was stronger, but capital investment and services were weaker, and trade was a bigger drag.   Sterling extended its recent gains to $1.4740.  Sterling has only been higher briefly on May 3 (when its staged a key reversal lows) since the very start of the year.  
Many attribute the sterling's gains to some polls that suggest the "remain" camp is moving ahead of Brexit.  While there may be something there, we note that one-month implied volatility is surging today.  It was around 11.7% yesterday, and now indicative prices suggest it is closer to 16.4%.  It is the biggest jump in nearly two decades....MORE