Sunday, November 23, 2014

"The Illusion Machine That Teaches Us How We See"

A mathematician is using computers to manufacture award-winning illusions.
The man sprang onstage dressed as a miner, complete with headlamp and pickaxe. After swinging the axe a few times, he proclaimed to the audience that he had discovered a “supermagnet”—a substance so strong it could attract even wood. A video screen above him appeared to prove him right: It showed wooden balls rolling up four ramps, seemingly unbound by gravity.
The man was not in fact a miner, but a mathematician—Kokichi Sugihara, of Meiji University in Tokyo, Japan. He was competing in the 2010 finals of the annual Best Illusion of the Year Contest in Naples, Florida. And, as the video went on to show, the balls were not really rolling uphill. A look at the back of the ramp structure showed that pillars that from the front had seemed vertical were in truth anything but, and that the ramps were pointing downhill, not uphill. The demonstration (which won that year’s top prize) was an illusion, and Sugihara had designed it together with an unusual collaborator: a computer program.

Sugihara didn’t originally set out to become a master illusionist. As a young mathematician in 1980, he was interested in robot vision and computer-assisted design. With those applications in mind, he created a computer program that could take a line drawing of a polygonal shape and come up with a list of three-dimensional objects that would create that drawing when projected onto a flat plane—akin to working backward from a shadow to the possible objects that could have cast it.

To test his program, Sugihara fed it drawings of impossible-seeming objects, like M.C. Escher’s endless loop of stairs. He expected the program to reject the drawings, but to his surprise, in some cases it claimed to have found a solution: a three-dimensional object that looked just like the drawing. “I thought my software was incorrect,” Sugihara said.

On closer inspection, he realized that what was incorrect was his assumption that these “impossible” two-dimensional objects couldn’t exist in the three-dimensional world. He started making paper models of his program’s designs, and gradually, the robot and design applications fell by the wayside—his program wasn’t ideally suited to them, he discovered. Instead, he dedicated himself to exploring the strange constructions that came so easily to his program, and that appeared so baffling to human viewers. He had built an illusion machine.

Over the 34 years since then, Sugihara has used his illusion machine to create and build more than 100 illusions: impossible objects such as a solid model of Escher’s staircase, and intuition-defying motions such as balls rolling uphill. “Sugihara has come up with systematic ways of playing with what happens when the rules of the vision system fall apart,” said Arthur Shapiro, a neuroscientist at American University in Washington, D.C. Part scientist and part artist, his work is helping to elucidate the basic mathematics underlying how our brains construct our world.


Friday, November 21, 2014

"High-Frequency Traders Turn to the Online Ad Market"

From BusinessWeek:
In a red brick building in New York’s Chinatown filled with startups, a company uses custom computer programs to scout for opportunities, making millions of trades each day that generate tens of thousands of dollars in revenue. This company is not buying and selling stocks, bonds, or commodities: Its specialty is online ads.

High-frequency traders have found a new market to exploit. A growing percentage of the billions of display ads that pop up on computer screens are sold to the highest bidder at online marketplaces such as AppNexus, Microsoft Ad Exchange (MSFT), PubMatic, Rubicon Project (RUBI), and Yahoo! Ad Exchange (YHOO). Before the ads appear, they change hands in a complex volley of electronic trades among websites, ad space aggregators, exchanges, data analysts, and ad agencies. Real-time bidding “tends to be fabulously complicated,” says Ben Edelman, an associate professor at Harvard Business School who studies online advertising. “The number of intermediaries in a single ad placement can be just extreme.”

That web of transactions creates opportunities for arbitrageurs. Using computer algorithms, traders can scan the markets for price discrepancies, buying and reselling ads for small profits in a fraction of a second. “I see a lot of guys who buy from one exchange, and they sell to another exchange,” says Edelman. “Some buy from an exchange and sell it right back to that very same exchange.”

Here’s a simplified version of how the process works. Let’s say Ford Motor wants to advertise to consumers who had shown they were in the market for a luxury car—women age 35-60 who searched for Mercedes on Google (GOOG), “liked” a story about BMWs on Facebook (FB), or looked on’s luxury car page. In each of those cases, Ford or an ad agency it hired, such as Omnicom Group, could create profiles of the people it was looking for and connect to an online exchange where advertisers buy spots. Websites send information on available space and audiences to the exchange. When Ford sees the audience it is looking for, it can bid for the space. If it wins, the carmaker’s luxury sedan ad immediately pops up on the website spot. The whole transaction takes place in 100 milliseconds or less....MORE

Dogbert, Le Grand Fromage


The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

I must remember that line for the proper moment:
"I spend more than that on soft cheese"
No, needs more Gallic umbrage:
"You insult me, Monsieur. I spend more than that on soft cheese."
Add a soupçon of haughty and a pinch of supercilious with: Hah!
"Hah! You insult me, Monsieur. I spend more than that on soft cheese."

CJR: "Virtual reality is journalism’s next frontier"

From the Columbia Journalism Review's 'Behind the News' blog:

Why newsrooms need to consider telling stories in a different way 
Virtual reality is ascendant, and it’s time for media outlets to take notice. Why? Consumer access to VR devices is about to take off thanks to ambitious prototypes from Oculus Rift and, in the past year, several major projects have redefined immersion journalism.

In September, The Des Moines Register released Harvest of Change, a detailed tour of one family farm in Iowa. In January, Nonny de la Peña and the USC School of Cinematic Arts debuted Project Syria at the World Economic Forum. Project Syria is a full-body experience that places viewers at the scene of a bombing, then allows them to explore a refugee camp. And October’s round of Knight Prototype Fund grants included support for a blockbuster collaboration collaboration between The Tow Center for Digital Journalism at Columbia University’s Graduate School of Journalism, Frontline, and Secret Location, an interactive digital agency. These organizations are working together to produce a documentary work focused on the Ebola crisis and will share best practices and strategies for producing virtual reality-augmented journalism once they’ve finished.

These new forms of journalism are ambitious documentary enterprises, comprising many team members, cross-organizational partnerships, and potentially shocking prices to those familiar with prose journalism budgets. (Harvest of Change was produced for under $50,000.) But this work is also providing valuable, vital public services with remarkable emotional punch. Full-body journalism is a remarkable tool for encouraging empathy through what de la Peña calls “presence.”

“It’s a pretty wild thing, she says. “I’ve put thousands of people through these things now and have had extraordinary reactions.” Project Syria was recently exhibited at the Victoria and Albert Museum in London for five days. According to de la Peña, the exhibit was unadvertised and garnered more than 50 pages of guest book comments from visitors who donned the headset.

Wide consumer adoption of virtual reality is now the horizon. Oculus Rift, the crowdfunded VR headset that was acquired by Facebook for $2 billion in cash and stock, recently released Development Kit 2 at a price point of $350. That smaller up-front investment makes it easier than ever for developers to test virtual reality projects. The company is also taking steps towards hardware that is readily available to consumers, offering a sneak peek of the Crescent Bay prototype in September. In short, it’s time to start strategizing.

“Our reporters go to places where few venture or get inside,” says Raney Aronson-Rath, deputy executive producer at Frontline. “I’ve long held a curiosity about how we might take our viewers with us in a more visceral way, so that they can feel what it’s like to actually be there.”...MORE 

“Immersive Journalism” Using Virtual Reality to Put the Viewer In the Story
"Virtual Reality May Become the Next Great Media Platform.....
"The Inside Story of Oculus Rift and How Virtual Reality Became Reality"
Venture Capital: "Second Life Founder, Philip Rosedale, Is Quietly Creating a Next-Generation Virtual World"
Seinfeld, Virtual Reality and Mild Revulsion
The Paradox of Wearable Technology: Does this Computer Make My Butt Look Fat?
Annenberg's Edison Project--"Technology, Media and Culture - the Best of Times or the Worst of Times?"

On the Varieties of Capital Arbitrage

An oldie (June 19, 2012) but goodie from Deus Ex Macchiato:
There are only a few basic types of capital arbitrage trade. My first attempt at a taxonomy is:
  • The leveller. Here risk within the same category is treated unfairly, with some risk cheap or equitable, and some risk expensive. The leveller turns expensive risk into something cheaper. A typical example is the collateral swap. Say a counterparty has collateral which is good, but which doesn’t count for regulatory purposes. For a fee, that is swapped for something which does count. If the capital saving is sufficient, then the fee is worth paying even if the risk has not changed (or even has got worse).
  • The tranformer. Here something can be looked at in two different ways, with two different capital treatments. You turn the expensive one into the cheap one. A good example is doing a swap structured as a loan to avoid CVA capital.
  • The deconstructor. Here the parts of something are cheaper than the thing. Buy the thing and split it into parts. (The inverse trade, the constructor, is sometimes seen too.) CDO tranches fall into this category. The capital on the underlying assets in the CDO is often much smaller than that of all the tranches. If you own enough of the tranches, it can make sense to buy the rest and split the CDO apart.
  • The natural home. This is an arb between rules, where one set is expensive and the other is cheap (or non-existent). Most trades between banks and insurers fall into this category, as do banks offloading expensive risk, like CVA, onto hedge funds....

Sadly he hasn't posted since May 2014.

Société Générale's Albert Edwards: "Are We Entering Final Stage of the Ice Age?"

From Citywire's Wealth Manager:
Société Générale strategist Albert Edwards has questioned whether the last phase of the 'Ice Age' for the global economy is upon us as the US sinks into a 'deflationary quagmire'.

Edwards, a renowned uber-bear, points out that the Michigan Survey of inflation expectations has just collapsed for both one and five years, a level associated with extreme equity and bond market turbulence.
The Michigan survey posted a sharp fall in November to 2.6% for both one and five-years from 2.9% and 2.8%, but what really worries the strategist is the significant fall in mean inflation expectations for the year ahead, slumping from 3.5% to 2.8%.

Edwards explained: 'I have been warning for some time that policymakers have, until now, been pretty good at keeping inflation expectations elevated despite consistently undershooting their inflation targets at both the headline and core rates.

'I think the bond market and investors are sniffing out the same failed policies we saw in 2004-2007. We are seeing yet another financial bubble and another Ice Age ‘lower low’ of inflation in this cycle. Investors are reasoning that when this cycle ends, as it surely will, then outright deflation seems a near certain outcome in the US just as it now knocks loudly on the eurozone’s door.'

Edwards notes that 10-year implied inflation expectations, as measured in the bond market, have fallen to a three-year low of 1.85%, and he is very concerned that headline CPI inflation has run well below expectations for a considerable time....MORE
See also Institutional Investor's Daily Agenda.

Recently on Albert 24/7:

Société Générale's Albert Edwards: "Focus on Yen/Dollar As It Rises To 145; Not Euro"
Société Générale's Albert Edwards: There May Be Something Going On In China's Foreign Currency Reserves
"Albert Edwards Says Watch Japanese Yen and Be Very Afraid"
UPDATED--Société Générale's Albert Edwards Is ALIVE!

Truth be told it's not really 24/7. More like every couple weeks but "Albert Fortnightly" doesn't have the same ring to it.

The Coming Liquidity Implosion

A couple times per year I dust off a quote I first used on these pages during August 2007's quant quake:

Liquidity in Business and Markets
'Liquidity is expensive but illiquidity is much more so, because it destroys the very existence of a firm"
I don't remember if it was Johannes or Ernst, it was a long time ago that I read Manchester, quoting one of the Schroeder boys on the insolvency of Krupp. That line has stuck with me. Here's the book.
And here's FT Alphaville
The liquidity monster that awaits
Fears are growing that the next crisis, if it should manifest, won’t come from any of the areas that spawned the 2008 crisis. To the contrary, it will emerge from areas we’ve not really had to worry about to date.
The key areas those in high places are now worrying about: the taken-for-granted presumed liquidity of the system.

This is an easy assumption for the asset management industry to make. For years investment banks have made a business of carrying liquidity risk on their balance sheets, mainly by internalising the inventory nobody else is prepared to hold. This sort of “we’ll buying anything just to make money from making markets” service as a result conditioned the buy-side to presume liquidity risk is something that just doesn’t really manifest anymore.

As a consequence, liquidity — especially in the major asset classes like Treasury bonds and blue-chip stocks — is often taken for granted by the industry....

That 2007 post contained another interesting bit:
Alexander Campbell at Risk: Over the Counter brings us a timely paper:
According to this (fortuitously topical) paper, liquidity is hugely valuable: "a liquid asset can be worth up to 25% more than an illiquid asset, even though both have identical cash flow dynamics". Or, to put it another way, a sudden absence of liquidity could in effect mean a 20% drop in portfolio value, even if the assets - and their market prices - remain constant. Nasty.
For more on the quantpocalypse here's MIT's uberquant Andrew Lo via the New York Fed:

"What happened to the quants in August 2007? Evidence from factors and transactions data∗"
(77 page PDF)

If you want to take the other side, you can do a bit of intertemporal arbitrage and own the Warren Buffett holding period: "forever" or at least the old insurance investment line, "The only quarter to worry about is the next quarter-century":
Riding the Liquidity Premium: Liquidity As An Investment Style

Thursday, November 20, 2014

"The Karl Marx Credit Card – When You’re Short of Kapital"

From Open Culture, June 19, 2012:
Is it a tragedy? Is it a farce? In the land once called East Germany, in a town once called Karl-Marx-Stadta bank called Sparkasse Chemnitz ran an online poll letting customers vote for images to place on their credit cards. And the hands-down winner was Karl Marx, an ironic pick given that … well, you don’t need me to explain why.

In response to this selection, Planet Money has encouraged readers to post a tagline for the card on Twitter, using the hashtag #marxcard. Here are a few of our favorites so far:
  • There are Some Things Money Can’t Buy. Especially If You Abolish All Private Property.
  • From each according to their ability, to each according to his need. For everything else, there’s #Marxcard.
  • The Marx Card – Because Credit is the Opiate of the Masses.
  • The Karl Marx MasterCard – When You’re Short of Kapital

Questions America Wants Answered: Alphaville's Pub Quiz Edition

We'll just try to forget that I actually thought "Obese metropolitan oenophile punters" was a call for contestants.
From the electron-stained wretches toiling in nameless/unbylined obscurity at FT Alphaville:

Questions from last night’s New York pub quiz
Thanks so much to everyone who attended last night’s pub quiz at Ainsworth Park in New York. Below we post all the questions we used. The winning team, which styled itself Lower Expectations, scored 45/60 in the first three rounds, and then 7/10 in the tie-breaker.
See if you can beat them! The questions without the answers are first, followed by both the questions with the answers further down.
Finance in fiction, TV and the movies
1. In the movie “Margin Call”, the death of which character causes Sam Rogers, played by Kevin Spacey, to break down in tears?
2. In which movie that ISN’T Wall Street 1 or 2 did Michael Douglas play a character with a job in finance — in this case an investment banker in San Francisco? (Hint: this movie was directed by David Lynch.)
3. In Shakespeare’s “Hamlet”, what famous piece of financial advice did Polonius give to Laertes?...

...Economic and financial history
17. Alfred Winslow Jones was the inventor of which investment structure?
18. Which economist is famous both for the debt-deflation theory of recessions and for saying that the stock market had reached a permanently high plateau just before the crash of 1929?
19. Name the former Wall Street CEO who said to Michael Lewis, in reference to Liar’s Poker, “Your fucking book destroyed my career, and it made yours”. He is also the executive who said, according to the book: “One hand, one million dollars, no tears.”...

Don't Hate the Norwegians Just Because They're Better Than You: Passport and Currency Edition

From Foreign Policy's Passport blog:
Turns out Norway has more to offer the world than just melodramatic memoirists, stupid television, and really expensive beer. Also: pretty passports and currency.

Norwegian authorities recently unveiled new designs for their national currency and passports. Both are elegant, minimalist designs that play on Norway's design heritage and natural beauty.
The passport comes in three colors -- white, turquoise, and red -- for immigrant, diplomatic, and standard travel documents, respectively. A riff on the country's crest graces the cover.
The interior pages deliver spare takes on Norway's most famous natural feature: its magnificent fjords. The design is evocative in its simplicity.
And when put under a black light, the northern lights appear:


See also the first space cowboy.

Buffett Buddy 3-G Capital Has Coca-Cola In Its Sights (KO; BRK; HNZ; BKW)

From ValueWalk:

Private equity firm who has aligned with Warren Buffett in the past has commitments of $2.5 billion to start new fund
What often kept The Coca-Cola Co (NYSE:KO) investor David Winters of Wintergreen Advisors up at night was that a private equity company, one affiliated with Coca-Cola’s largest shareholder, Warren Buffett, would take Coke private, change management and engage in cost cutting to improve company profitability. Cutting costs was something Winters had advocated for, but he wanted current Coca-Cola management to do the job so that existing Coke shareholders could benefit.
Winter’s fears could be materializing.

3-G Capital’s prime target Coca-Cola
Well-known Brazilian private equity firm, 3-G Capital, who has affiliated with Buffett in the past on takeover deals, is in the process of creating a new fund to target companies in the food and beverage industry, according to a report in Veja magazine, Brazil’s leading news magazine.  And their primary target, according to the report: The Coca-Cola Co (NYSE:KO).

Veja’s business columnist, Geraldo Samor, citing sources, is reporting that 3-G Capital’s Brazilian billionaires, Jorge Paulo Leman, Marcus Herrmann Telles and Carlos Alberto Sicupira and their 3-G Capital team, have approached leading investment banks and have already received commitments of $2.5 billion for the fund, which has a goal to reach $4 billion to $5 billion.

In the past, 3-G Capital has had a taste for large U.S.-based food companies, including Anheuser Busch Inbev SA (ADR) (NYSE:BUD), as well as deals where they worked alongside Warren Buffett. This included the 2013 private equity purchase of H.J. Heinz Company (NYSE:HNZ), which Winters has cited as a potential model for a Coke acquisition. Buffett and 3G-Capital were again both involved as participants in the 2014 takeover of Burger King Worldwide Inc (NYSE:BKW), a tax inversion deal that moved the company to Canada....MORE

What's Mooving: "NZ dairy land values soar despite milk price slump"

See also "China's President Xi Visited New Zealand And Got A Very Warm Greeting".

From Agrimoney:
The price of New Zealand dairy land soared to its highest since the global financial crisis, despite the dent to farmers' income prospects from lower milk prices, although there is some evidence of a quality gap in demand.
A dairy farm price index compiled by the Real Estate Institute of New Zealand (Reinz) showed values last month 34% higher than in October 2013, hitting their highest since early 2009, as the world was emerging from the worst of the world financial crisis.
Even taking the August-to-October period, which covering three months is less prone to short-term volatility, the index was up 7.3% compared with the average for the July-to-September period, outperforming a flat performance for the country's farmland market overall.
The rise comes despite expectations of a sharp drop in the milk price that producers will receive in 2014-15, a reflection of tumbling values on world dairy commodity markets which are being blamed on a retreat by Chinese buyers to running down hefty stockpiles.
Prices at GlobalDairyTrade, the benchmark dairy auction run by New Zealand-based Fonterra, fell this week to a five-year low.
Fonterra, which processes the vast majority of milk in New Zealand, the top dairy exporting country, forecasts a 37% drop in farmgate milk prices this season....

Peter Boockvar Calls A Bottom In Gold (Again)

He's wrong.
From Barron's Focus on Funds:
Gold bulls are coming out of the woodwork as prices for the yellow metal rebound off four-and-a-half-year lows.
Market pundit Peter Boockvar, chief market analyst at The Lindsey Group, an economic advisory firm, is the latest to call a bottom for gold.

“I’ve tried to call the bottom in too many times over the past year plus. I’m doing so again today,”  he writes on Thursday morning.

Boockvar references the Nov. 30 vote in Switzerland that could force the Swiss National Bank to added to its gold holdings never sell. While a poll this week showed popularity for the referendum is flagging,

Boockvar insists that, regardless of the outcome, “the symbolism of the vote should not go unheeded.” ...MORE
It's 'effin Monty Python Does Finance:
Black Knight:     I am invincible!
King Arthur:      You're a loony! 
December futures $1190.30 down $3.60 after trading as low as $1176.20.
Black Knight:  The Black Knights always triumph! 
tip d'Chapeau: Rotten Tomatoes

Here's the Deal: Your New Job Is Chief Investment Officer at a $1.1 Trillion Pension Fund. Now What?

From Pension Pulse:

Will GPIF's New CIO Rise to the Challenge? 
 GPIF Names Private Equity Executive as Investment Head:

The world’s biggest manager of retirement savings named a private-equity executive as head of investment after the Japanese fund changed its strategy to seek higher returns.

Hiromichi Mizuno, 49, a partner at London-based Coller Capital Ltd., becomes the first chief investment officer at the $1.1 trillion Government Pension Investment Fund from Jan. 5, the fund announced late yesterday. Mizuno, who joined the fund’s investment committee in July, will lead moves to reduce domestic debt and boost equity holdings to half of assets.

The retirement manager overhauled its asset mix on Oct. 31, pledging to shift $182 billion into stocks as unprecedented quantitative easing by the Bank of Japan risks eroding the value of its bond-heavy portfolio. Mizuno’s appointment comes as a health ministry group debates changes to the fund’s governance, after a separate government panel called on it to move beyond a system in which decision-making power lies with the president.

GPIF set allocation targets of 25 percent each for Japanese and overseas equities last month, up from 12 percent each. The pension manager will cut local debt holdings to 35 percent from 60 percent and boost foreign debt allocations to 15 percent from 11 percent.

In Other U.S. Senate News: "Wall Street Bank Involvement With Physical Commodities (Day Two)"

Coincidentally following "Senator Franken's Letter to Uber".

From the Senate's Permanent Committee on Investigations:
Location: Dirksen Senate Office Building

Agenda The Permanent Subcommittee on Investigations has scheduled a two-day hearing, “Wall Street Bank Involvement With Physical Commodities,” on Thursday, November 20 and Friday, November 21, 2014.
After a two-year bipartisan investigation, the subcommittee will hold a hearing examining the extent to which banks and their holding companies own physical commodities like oil, natural gas, aluminum and other industrial metals, as well as own or control businesses like power plants, oil and gas pipelines, and commodity warehouses.
The hearing will begin on both days at 9:30 a.m. in Room 106 of the Dirksen Senate Office Building. A witness list will be available on Monday, November 17, 2014....MORE
Here's the extended press release:
Subcommittee finds Wall Street commodities actions add risk to economy, businesses, consumers
See also the Committee's "REPORT: Wall Street Involvement With Physical Commodities" (403 page PDF)
Wall Street Bank Involvement With Physical Commodities (Day One)

Corrected--Senator Franken's Letter to Uber

Correction--we apparently had a problem with the Scribd version not showing in some browsers. That should be corrected now.
Original post:

The Senator chairs the Subcommittee on Privacy, Technology and the Law.
If I had to guess I'd say he's trying to save Uber from itself.

Here's a PDF version hosted at (3 page PDF)

Uber To Alter Communication Strategy
After Car Attacked By Paris Taxi Drivers, Uber to Toughen Image With Umlauts
San Francisco, CA (PRwëb) January 13, 2014-
In a move designed to make Uber seem more "bad-assed and scary in a quasi-heavy-metal manner," the Goldman Sachs, Menlo Ventures and Bezos Expeditions-backed company officially changed it's name to Über on  Monday.
"Much like Mötley Crüe and Motörhead, Über is not to be messed with," said founder Gärrëtt Cämp, né Camp...
There are some others too, maybe not quite as light-hearted.

Wednesday, November 19, 2014

"The Theory Of Reflexivity: A Primer For Today’s Market"

This is where hard core bears, exemplified by David Rosenberg, got it wrong. Although they were probably right on where the markets would have gone absent fiscal stimulus and monetary machinations, when the stimulus came and the central banks acted they could not change their advice.

It's a dynamic system.

Rosenberg did finally, after four or so years, get bullish but there are guys like Bob Janjuah who still haven't.
Really crazy.

From See It Market:
The last two years of the U.S. stock market’s relentless bid has been, to say the least, at thing of wonder – especially for traders who have been around for more than a couple of decades. From the vantage point of many fundamental/macro analysts, it has repeatedly pushed the upper bounds of value and has yet to take time to even catch its breath. One can argue that the fundamentals looking forward combined with a very low interest rate environment and reduced share float through buybacks have efficiently discounted the risk premium.

That said, it’s hard to reconcile the momentum of this market in the context of 2% – 2.5% economic growth with virtually flat median household income and shallow consumer credit growth. The market has also walked straight through any and all geopolitical risks as “noise”. I cannot remember a market performing so strongly with such a backdrop. To the extent it is or is not supported by fundamentals, it seems appropriate to look to other theories which support the market’s recent momentum.

The basis of The General Theory of Reflexivity
Although Reflexivity Theory is widely attributed to George Soros, it was originally developed as a sociological construct by William Thomas in the 1920s, known as the Thomas theorem, and built upon by sociologist Robert Merton in the late 1940s. The outcome of their work was to define the idea of the “self-fulfilling prophecy” where in predictions often lead component actors to behave in ways that make the “prophecy” become true. As defined in Wikipedia:

“…that once a prediction or prophecy is made, actors may accommodate their behaviours and actions so that a statement that would have been false becomes true or, conversely, a statement that would have been true becomes false – as a consequence of the prediction or prophecy being made. The prophecy has a constitutive impact on the outcome or result, changing the outcome from what would otherwise have happened.”

In the 1950s, philosopher Karl Popper took up the idea in his treaties on fallibility (the uncertainty of knowledge) where the act of studying a scientific phenomenon can affect the outcome. That is where a young George Soros was introduced to the construct while Popper acted as his mentor at the London School of Economics....MORE

More Jeremy Grantham: "Calling the Next Market Top"

Following up on yesterday's "Jeremy Grantham's Bubble Watch Update: 'S&P To 2250 Before It Crashes'".
From Barron's "Wall Street's Best Minds":

Jeremy Grantham Calls the Next Market Top
The investing legend writes that the S&P 500 could gain another 10% before “crashing at it always does.”
Editor’s Note: Grantham is founder of GMO, a Boston-based money manager. This is an excerpt of his latest two market commentaries. The full version of this piece is available on the GMO Website. 
As you may remember, the January Rule serves as a kind of barometer for the behavior of the market in the coming year. Historically, when January was down, the rest of the year had over twice the declines than one would expect randomly, far more mediocre months, and a very sub average return. But it is far from perfect and it had the unusual problem this year of bumping into the positive signal from the presidential third year, which started for us on Oct. 1. 

For the statistically-minded, or the trivia-minded, the four previous such conflicts between the January Rule and the Presidential Cycle were inconclusive but the simple rule would have been to end the January Rule enterprise on Sept. 30. This year was flattish by then and the new Presidential Cycle has gotten off to a good start since Sept. 30. 

The Presidential Cycle Regular readers know the score: +2.5% a month for the seven months from Oct. 1 to April 30, in year three on average since 1932 (a total of +17%). This is now the 21st cycle. The odds of drawing 20 random seven-month returns this strong are just over 1 in 200 according to our 10 million trials. But 17 of the actual 20 historical experiences were up and the worst of the 3 downs was only -6.4%, so the odds of this consistency plus the high return would be much smaller. 

The remaining five months of the presidential year have a good but not remarkable record, over .75% per month, but the killer here is that the remaining 36 months since 1932 averaged a measly +0.2% a month!
With the seven months having returned over 10 times the average of the 36-month desert, it may seem like a no-brainer investment for those seven of us not intimidated by the obvious simplicity of the idea, but be advised that going into this particular cycle there appear to be more negatives than normal. 

(Though many of the previous 20 occurrences may well have seemed that way to investors at the time. Who knows?) The negatives this time include the ending of the Federal Reserve’s bond purchase program. There is also talk of a rate increase early next year, given the recent recovery of the U.S. economy reflected in the improved employment report of early October (5.9% unemployed) and positive adjustments to the previous month’s employment numbers. Other negatives include the potential for escalation of several minor but intractable wars and the recent Ebola outbreak. 

Some would mention the very substantial overpricing of the U.S. market (ticker: SPY ) at the top of the list but, surprisingly, overpricing has had no material effect on third-year returns or the particularly sweet seven-month subset: an average of 17% for seven months becomes 19% if cheap and 15% if expensive. Big deal. 

Value, however, is very important for the other three years in which the cheapest 25% have produced a respectable return of +12%, and the other three quartiles are absolutely not worth having, all three together averaging almost exactly nil! More disturbing to me than the obvious overvaluation is the large and growing number of other negatives – technical and psychological – put together by John Hussman and other market experts. 

Nevertheless, despite my nervousness I am still a believer that the Fed will engineer a fully-fledged bubble (S&P 500 over 2250) before a very serious decline. 

The Prudent Investor As always, the prudent investor (unlike the political year three) should definitely recognize overvaluation, factor in regression to the mean, and calculate the longer-term returns that result from this process. More easily, such prudent investors can use our seven-year numbers, which have a decent long-term record measured when we have viewed markets as overpriced, as we believe they are today, and a better record measured in the periods after bubbles break. The other necessary ingredients to the investment mix are suitable measures of risk, and when these are added to estimated returns we believe efficient portfolios can be produced. On our data, with U.S. large cap equities offering negative returns (-1.5%) except for high quality stocks (+2.2%), with foreign developed and emerging equities overpriced (+3.7%), and with bonds and cash also very unattractive, investors have to twist and turn to find even a semi-respectable portfolio....MORE

"Dark Energy Might Be Stealing the Glue Holding the Universe Together"

In other news: "Kim Kardashian on Nude Photo Shoot: 'I Did It For Me'".

If it's the Universe story you're after, it's at Motherboard.

"Top Icelandic banker jailed for role in 2008 financial collapse"

I still find it astounding that Attorney General Holder and his entire 113,000 employee Justice department found not one case they could charge criminally. Not one.
From Euronews:
The former head of the Icelandic bank Landsbanki has been sentenced to a 12-month jail term.

Sigurjon Arnason was on trial for his role in the collapse of the financial sector in 2008.
Two other of the banks executives received nine month sentences.

The Landsbanki three were accused of manipulating the bank’s share price by lending cash to investors on condition they purchase stocks...MORE
Throughout much of 2008 and 2009 we posted the rondo from Mozart's Horn Concerto No. 2 as "Music to Hunt Bankers By" often advising the brethren that outside of a few urban ecosystems, pinstripes make lousy protective coloration:

UPDATED--Here's the Real Problem With Uber: You Can't Trust Them

Update below.
Original post:
The first thing I thought of when I started digging into Uber:
"From all our legends, mythology, and history (and who is to know where mythology leaves off and history begins – or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom – Lucifer."
-Page ix of Rules for Radicals.
That's Alinsky seemingly quoting himself and the way I read it he's saying the Devil challenged authority and won his own kingdom.
That emulating the methods of Satan using any means fair or foul, including lying, cheating and stealing is the way to get riches and power.

And that was the moment when I stopped thinking of Uber as frat boys making stupid boob jokes and started thinking of them as nasty little political operatives.

If you're into this kind of stuff Rule 12 appears to be the approach Uber management favors:
RULE 12: Pick the target, freeze it, personalize it, and polarize it." Cut off the support network and isolate the target from sympathy. Go after people and not institutions; people hurt faster than institutions. (This is cruel, but very effective. Direct, personalized criticism and ridicule works.)
I should note we are fans of Alinsky's tactical brilliance, oftentimes struggling to resist employing rule #5:
#5 Ridicule is man’s most potent weapon. It’s hard to counterattack ridicule, and it infuriates the opposition, which then reacts to your advantage....
Jay Yarrow at Business Insider pointed out the real problem yesterday:
...However, in Smith's story, there was something that was more than just theoretical, and it's a good reminder of the scary power Uber has over its users.

Here's what Smith reported: "The general manager of Uber NYC accessed the profile of a BuzzFeed News reporter, Johana Bhuiyan, to make points in the course of a discussion of Uber policies. At no point in the email exchanges did she give him permission to do so."

If that's not clear, Smith is saying that Uber accessed the profile of a journalist to see where that journalist had traveled while using Uber. Uber did this without permission. For the thousands of people who use Uber, this should be the most alarming thing in Smith's report. 

Uber knows where its users are going and when they are going there. That is powerful, potentially damaging data to control.

An Uber spokesperson told Smith this was against Uber's policies: "Any such activity would be clear violations of our privacy and data access policies. Access to and use of data is permitted only for legitimate business purposes. These policies apply to all employees. We regularly monitor and audit that access."
Here's more from Buzzfeed:

“God View:” Uber Investigates Its Top New York Executive For Privacy Violations
In the wake of a BuzzFeed News story, the transit company is looking into the official’s tracking of a journalist’s location.
BuzzFeed News
Uber said Tuesday that it is investigating its top New York executive for tracking a BuzzFeed News reporter without her permission in violation of what the transit giant says has long been its privacy policy. The company also published its privacy policy for the first time on Tuesday, though it said the policy had always been in effect.

Uber took both actions in the wake of a BuzzFeed News story that revealed that the reporter’s ride had been tracked without her permission and that another Uber executive had suggested the company might smear journalists who wrote critically of Uber. The executive who suggested digging into the private lives of journalists, Emil Michael, said his comments were “wrong” and that he regrets them.

Tracking customers is easy using an internal company tool called “God View,” two former Uber employees told BuzzFeed News. They said God View, which shows the location of Uber vehicles and customers who have requested a car, was widely available to corporate employees. Drivers, who operate as contractors, do not have access to God View.

Early this November, one of the reporters of this story, Johana Bhuiyan, arrived to Uber’s New York headquarters in Long Island City for an interview with Josh Mohrer, the general manager of Uber New York. Stepping out of her vehicle — an Uber car — she found Mohrer waiting for her. “There you are,” he said, holding his iPhone and gesturing at it. “I was tracking you.”

Mohrer never asked for permission to track her....MORE
Finally, recovering V.C. Peter Sims in his viral September essay on trust, 'God View', information and Uber:
Can We Trust Uber?

Here's his Oct. 2 followup: 
The Immaturity and Arrogance of Uber 

Update: Senator Franken's Letter to Uber

Dogbert on Focus


The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

Splitting the Bonus Pool
The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

Tuesday, November 18, 2014

Uber To Alter Communication Strategy

The Getty Museum Digitizes Art Catalogues From The National Gallery of Art; The Tate; The Art Institute of Chicago and Six Others

From Open Culture:

Read Free Digital Art Catalogues from 9 World-Class Museums, Thanks to the Pioneering Getty Foundation
OSCI image ipad
We’ve previously featured the various pioneering efforts of the J. Paul Getty Museum — from freeing 4,600 high-resolution art images (and then 77,000 more) into the public domain, to digitally releasing over 250 art books. Now they’ve put their minds to those rare, beautiful, and highly edifying specimens known as art catalogues. “Based on meticulous research, these catalogues make available detailed information about the individual works in a museum’s collection, ensuring the contents a place in art history,” announces their site. “Yet printed volumes are costly to produce and difficult to update regularly; their potential content often exceeds allotted space. One could say they are like thoroughbred horses confined to stock pens.” But now the Getty has offered a solution in the form of the Online Scholarly Catalogue Initiative (OCSI), creating an online platform for free catalogues — and not just the Getty’s, but those of any art institution.
renoir catalogue
You can access the first set of art catalogues released under the OSCI initiative here. As you can see, where the Getty goes, other institutions follow: The Art Institute of Chicago has released catalogues on the work of Monet and Renoir.

"Jeremy Grantham's Bubble Watch Update: 'S&P To 2250 Before It Crashes'"

I may have gotten carried away in July's "If You Want to Make Serious Money Listen to GMO's Jeremy Grantham Right Now":
This is one of those moments in the market that, well, here's career counselor Billy S:

 There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.
Julius Caesar Act 4, scene 3, 218–224

From Barron's Wall Street's Best Minds column:
 GMO'S Jeremy Grantham Doesn't See a Bubble Just Yet...
That was reiterating the 2250 level Grantham had been talking about in May and was, because we happened to agree, one of the reasons we weren't too upset with the declines in early August and October.

S&P 500: 2,049.83 Up 8.51, today's new all-time high 2,049.98.

From ZeroHedge:
When GMO's Jeremy Grantham says that he is "still a believer that the Fed will engineer a fully-fledged bubble" what can one say but, yes: it did so a few years back.
Recall that back in May, Grantham so far accurately predicted that on the back of central bank liquidity, the overstretched market will stretch even further "at least enough to drive the market to its 2-sigma level of 2,250 and perhaps a fair bit beyond... And although nothing is certain in the market, this is exactly what I  believe will happen."
In fact, his prediction so far has been spot on in terms of not only magnitude but also timing, accurately calling for the recent swoon and subsequent rebound. Notably, he also offered his forecast for when the bubble would burst which he timed as follows:  "then around the election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse, depending on what new ammunition the Fed can dig up."
So here is how the legendary investor predicts the upcoming timing of events in the near future, with a focus on the presidential cycle:
The Presidential Cycle

Regular readers know the score: +2.5% a month for the seven months from October 1 to April 30, in year three on average since 1932 (a total of +17%). This is now the 21st cycle. The odds of drawing 20 random 7-month returns this strong are just over 1 in 200 according to our 10 million trials. But 17 of the actual 20 historical experiences were up and the worst of the 3 downs was only -6.4%, so the odds of this consistency plus the high return would be much smaller. The remaining 5 months of the Presidential year have a good but not remarkable record, over .75% per month, but the killer here is that the remaining 36 months since 1932 averaged a measly +0.2% a month!

With the 7 months having returned over 10 times the average of the 36-month desert, it may seem like a nobrainer investment for those seven of us not intimidated by the obvious simplicity of the idea, but be advised that going into this particular cycle there appear to be more negatives than normal. (Though many of the previous 20 occurrences may well have seemed that way to investors at the time. Who knows?) The negatives this time  include the ending of the Fed’s bond purchase program. There is also talk of a rate increase early next year, given the recent recovery of the U.S. economy reflected in the improved employment report of early October (5.9% unemployed) and positive adjustments to the previous month’s employment numbers. Other negatives include the potential for escalation of several minor but intractable wars and the recent Ebola outbreak....

See also Investment Week:
GMO's Grantham: Presidential cycle 'sweet spot' points to US bubble

"Uber has an asshole problem"

Following up on this morning's "Uber Executive Suggests Digging Up Dirt On Journalists".
I'd look for them to try a change in optics, this is really sleazy stuff but going forward, just because they don't act on their nastiness doesn't mean it isn't there, from the top down.
Matt Yglesias at Vox:
  1. Uber vice president Emil Michael mused aloud about the possibility of the company conducting opposition research on hostile journalists, reports Ben Smith of Buzzfeed.
  2. Michael was especially concerned about Sarah Lacy's coverage at Pando Daily.
  3. Smith also reports that "the general manager of Uber NYC accessed the profile of a BuzzFeed News reporter, Johana Bhuiyan, to make points in the course of a discussion of Uber policies."
  4. This is the latest in a long series of controversies for the company, whose basic business model often puts it in conflict with incumbent taxi companies and regulators.

Uber has an asshole problem

When Uber got off the ground as a company, its business had an unusual problem. In many markets where it was operating, it was violating the letter of the law. And in essentially all markets where it was operating, it was violating the spirit of the law. That's because the "spirit" of the prevailing taxi regulations was, almost everywhere, wrong and pernicious. Alongside regulations aimed at promoting public safety, almost every city and state is burdened with rules designed to protect the incomes of incumbent taxi license holders.
Uber's business was (and is) to destroy the value of those licenses by opening up the rides-for-hire market to a potentially unlimited supply of vehicles and drivers.

It's a perfectly good idea for the world, but you never could have gotten it off the ground by asking permission first. Even where Uber's business didn't violate existing rules, it undermined the (pernicious) purpose of those rules and rules could always be changed to exclude it. Consequently, the company benefitted enormously from a "shoot first, ask questions later" mindset.

But dispositions that are functional and useful in one context can become rancid in another. A conviction that the rules don't (or shouldn't) apply to you is fine when you're battling a taxi mogul who compares your business to ISIS. But it's extremely unattractive when you start talking about compromising customer user data for the purposes of blackmail. And it's completely insane when that kind of recklessness leads you to talk to journalists about the oppo tactics you're planning to deploy against other journalists.

Time for Uber to grow up

As Uber gets bigger and more established, its executives can look less like brash upstarts and more like assholes. Moves like hiring former top Obama advisor David Plouffe, show that the company is hardly on the outside looking in. It has a valuation of $18 billion, and clear aspirations to move beyond the ride business to a broader array of "urban logistics" operations....MORE

Solar: SunEdison Saves the Day (SUNE; FSLR; TSL; TAN)

With wind.
Yesterday we noted the solars were down hard, right to chart support, and:
If they can't hit the brakes very soon (today?) they are headed for multi-year lows....
Here's today's action:
FSLR    49.02 +1.07 (2.23%)
TSL        9.98 +0.45 (4.72%)
TAN     35.90 +1.29 (3.73%)
SPWR   28.02 +0.62 (2.26%)
And the reason for the activity? Sun Edison (SUNE $20.23 Up 3.62 or 21.79%)
Major Wind Acquisition Makes SunEdison World's Largest Renewable Energy Developer

I'm thinking this does not hold, there was no change in fundamentals but, as always that's just a guess.
Here are two of yesterday's charts:
First up the premier U.S. thin-film manufacturer:
And the largest U.S. silicon photovoltaic manufacturer:

McKinsey Quarterly Interview With Nobelist Robert Solow On Topics in Productivity Growth

From The Conversable Economist:

Robert Solow on Topics in Productivity Growth 
For the long-run future of the U.S. economy, and indeed, the global economy, no subject is more important than the likely course of productivity growth. The McKinsey Quarterly celebrated 50 years of publication with its September 2014 issue. That issue includes a short interview with Robert Solow, with Martin Neil Baily and Frank Comes as interlocutors.

Solow, of course, won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (commonly known as the "Nobel Prize in economics") in 1987 "for his contributions to the theory of economic growth." In a nutshell, Solow demonstrated that the accumulation of capital and of labor was not a sufficient explanation for the process of economic growth, and that a broad element of "technological progress" also needed to play a role. If that concept seems obvious now, it is Solow's pathbreaking work from more than half-century ago that helped to make it obvious. Solow is also one of the most gifted expositors in economics. Here are a few of his comments from the interview:

Solow on economic forecasting:
"As an ordinary macroeconomist, I have avoided forecasting as if it were a foul disease—as indeed it is. It’s very damaging to the tissues. So I don’t think one can say too much."

UPDATED--"Uber Executive Suggests Digging Up Dirt On Journalists"

Update: "Uber has an asshole problem"
Original post:

Part of our 'Stay Classy, Uber' series.
From BuzzFeed:
Emil Michael, senior vice president of business for Uber, in July

Senior vice president Emil Michael floated making critics’ personal lives fair game. Michael apologized Monday for the remarks.

A senior executive at Uber suggested that the company should consider hiring a team of opposition researchers to dig up dirt on its critics in the media — and specifically to spread details of the personal life of a female journalist who has criticized the company.

The executive, Emil Michael, made the comments in a conversation he later said he believed was off the record. In a statement through Uber Monday evening, he said he regretted them and that they didn’t reflect his or the company’s views.

His remarks came as Uber seeks to improve its relationship with the media and the image of its management team, who have been cast as insensitive and hyper-aggressive even as the company’s business and cultural reach have boomed.

Michael, who has been at Uber for more than a year as its senior vice president of business, floated the idea at a dinner Friday at Manhattan’s Waverly Inn attended by an influential New York crowd including actor Ed Norton and publisher Arianna Huffington. The dinner was hosted by Ian Osborne, a former adviser to British Prime Minister David Cameron and consultant to the company.

At the dinner, Uber CEO and founder Travis Kalanick, boyish with tousled graying hair and a sweater, made the case that he has been miscast as an ideologue and as insensitive to driver and rider complaints, while in fact he has largely had his head down building a transformative company that has beat his own and others’ wildest expectations....MORE
Probably related in a "top management sets the tone sort of way":
French Uber Promotion Pairs Riders With “Hot Chick” Drivers
"When Uber and Airbnb Meet the Real World"

"If you build it (revenues), they (profits) will come": Amazon's Field of Dreams! (AMZN)

The author, Stern School finance prof Aswath Damodaran famously pegged the value of Tesla at $67.12 just prior to the stock's run to $265 (the first time). To his credit the Professor posted a hemi-demi-semi mea culpa.*
In addition, gentle reader should note the title of our first link to him:
Sure, He Called the Top In Apple and He Called the Bottom in Facebook But Tesla Fair Market Value at $67.12? (TSLA)
From Musing on Markets, Oct. 29:
I have a long standing fascination with Amazon from its inception as a dot-com poster child in the late 1990s to its current standing as online retailer to the world. I have always liked the company's willingness to challenge established rules on how business should be done and admired Jeff Bezos for being to willing to leap into places where others only tip toe. As an investor, though, I have found the company to be cheap at times in the last 15 years and expensive at others, and the most recent earnings report led me to revisit it, partly to examine whether the market's negative reaction to the most recent earnings report was appropriate and partly because I may learn something.

A short history of Amazon
For those are twenty five or younger, it is hard to imagine a world without online retailing, in general, and Amazon, in specific, but it was just over 20 years ago (in July 1994), that Amazon was founded by Jeff Bezos in his garage, continuing the long tradition of garage-founded companies in the United States. The company caught the dot-com wave of the late 1990s and was listed on the NASDAQ in 1997. Initially focused on book retailing, the company remained small in operating numbers, relative to other retail giants, and generated only $1.6 billion in revenues in 1999, while reporting an operating loss of almost $600 million. Its market capitalization, though, rocketed up (with the rest of the dot-com sector), hitting $ 35 billion in early 2000. In fact, it was one of the companies that I used as a prop for a book I had on valuing young, technology companies. At the risk of gravely embarrassing myself, this was my valuation of Amazon in January 2000, close to its peak:
My valuation of Amazon in January 2000 (The Dark Side of Valuation)

It is never flattering to the ego to compare actual to forecasted numbers, especially for young growth companies but it is a process that has never bothered me, because it comes with the territory. I compare my forecasted revenues & operating income for Amazon (from my January 2000 valuation) to the actual revenues & operating income for the company (from 2000 to 2013) in the table below.
Comparison of my forecasts in 2000 to actual numbers

I will cheerfully confess that I did not have the foresight to predict the behemoth that Amazon would become in retailing and the tentacles that it put into other businesses (including media and cloud data) but my forecasted revenues were higher than the actual numbers every year through 2010. Since 2010, though, the company has blown the lid of my revenue forecasts but that outperformance has come at a price. I may have been pessimistic in my assessments of Amazon's capacity to scale up its revenues, but I was also overly optimistic in assuming that it would find a pathway to strong profitability. After mounting a steady improvement in margins in the first half of the last decade, the company seems to have relapsed in the last few years. 

A Field of Dreams company
A couple of years ago, James Stewart wrote an article in the New York Times, using Amazon to draw a contrast between short-term markets and long-term managers. The discussion about whether markets are short term and if so, why, is one well worth having, but I took issue with Mr. Stewart on his use of Amazon as an example of short term markets. In fact, I would argue that markets have been extraordinarily forgiving of Amazon's long loss-making history and have given Mr. Bezos breaks that very few companies have received through time. If anything, they have been too "long term" in their thinking, not too "short term"....

Yesterday AMZN closed at $323.05.

*Here's his March 25, 2014 post "The firing line: Revisiting Tesla".

And our follow-up to "Sure he called the top...":
Tesla: More on the $67.12 Valuation (TSLA)

Monday, November 17, 2014

"Elon Musk claims robots could kill us all in FIVE YEARS in his latest internet post… then deletes it shortly after"

It sounds like either Bored Elon Musk, the parody Twitter account or Drunk Elon Musk, the messin' with your head billionaire.
Or maybe it's Werewolves of London all over again. They laughed at Zevon but he was right.
And Elon's hair is perfect.

From the Daily Mail:
  • SpaceX and Tesla CEO has again warned of the dangers of AI robots 
  • In a comment he said he feared something 'dangerous happening' 
  • Musk says the rise of AI will be exponential and could spell disaster 
  • He cites a London-based company called Deepmind as an example of how rapidly artificial intelligence is improving  
  • Musk made the comment on futurology website Edge but then deleted it 
  • It follows numerous other such comments from the entrepreneur recently 
He may run some of the world's leading technology companies such as SpaceX and Tesla Motors, but in recent months Elon Musk has become increasingly wary of the growth of technology.

In particular, he has repeatedly expressed his concern at the rise in artificial intelligence, and he thinks it could pose a serious threat to the future of humanity.

In his latest comment he fears that the risk of ‘something seriously dangerous happening’ could be in as few as five years....MORE

"The bad economic news out of Japan: what does it mean?"

From Marginal Revolution:
Here is one version of the latest report, here is another. People, don’t be surprised by this bad news. Unemployment in Japan already had fallen to about three and a half percent. So how much of a miracle could Abenomics accomplish in the first place? Not much, not even for committed Keynesians.

Commentators have grown to expect so much of the Phillips curve these days, but still a mechanism for the output boost is required and the Phillips curve (at best) holds only in some contexts. Japan simply hasn’t had that many laborers to put back to work. Getting more women in the workforce, as Abe has tried to do, is a positive development, but that is not mainly about macro policy nor is it mainly about the short run. Some of you might be thinking “well, won’t inflation cause some kind of output rise, if only by stimulating demand?” People, there is still no mechanism specified in that sentence. And you may recall, the 1970s and early 80s saw the rise of a bunch of “monetary misperceptions” theories, often stemming from the work of Bob Lucas, postulating something to that effect...MORE
ZeroHedge has a slightly less sanguine take on matters:

Abenomics Officially Leads Japan Into A Triple-Dip Recession - Weather Blamed; Nikkei Drops 600 Points, Back Below 17,000

"World's top drugmaker Novartis takes aim at tech" (NVS; AAPL; GOOG)

Yeah that's gonna happen when large, well-funded, science-based corporations look to make a buck.
And I bet it's easier for NVS to do wearables than it is for The Goog to come up with a next-gen macular degeneration treatment.

Via the Thompson Reuters Foundation:
* CEO sees wearable technology as integral to healthcare
* Novartis already has Google contact lens, smart pill deals
* Seeking new ways to improve monitoring, data collection
* Push comes as tech companies seek health apps for devices

Talent spotters from Novartis AG , charged with bringing new ideas into the organisation, are casting their net beyond biotech into the wider pool of wearable, or even edible, technology.

It's not that the world's biggest drugmaker by sales wants to make the next smart watch. Rather, its researchers are seeking fresh ways to monitor exactly how the company's medicines are working and being taken by patients.

Chief Executive Joe Jimenez predicts this will be an integral part of running a big pharmaceutical company in the coming decade, as rising healthcare demand coupled with limited budgets force drugmakers to generate hard data to prove their drugs are delivering results.

The Swiss group has already taken tentative steps, signing a deal with Google Inc in July to develop contact lenses to help diabetics track blood glucose levels or restore the eye's ability to focus.

It also has an agreement with privately held Proteus Digital Health to develop tablets containing embedded microchips that can tell if patients have taken their medication.
Its ambitions, however, stretch a lot further.

"We've done more than most but certainly not enough. You're going to see a continued focus from this company that will be quite technology agnostic," Jimenez said in an interview during an FT pharmaceutical conference in London.

"It may be niche today but in the future I think it is going to be front and centre as to how diseases are managed."

The interest comes at a time when technology companies are increasingly pushing from the other direction in an effort to find new ways for patients to monitor their own health and track chronic conditions using smart devices.

Businesses such as Apple Inc, Samsung Electronics Co Ltd and Google are all trying to find health-related applications for their wearable products....MORE

Holy Crap Would You Look At the Solar Stocks (FSLR; TSL; TAN; SPWR)

The only part of solar we're interested in at the moment is the financing and even this offers lower expected returns than, say, shorting shiny rocks....*
-Climateer Investing November 6, 2014 
We know these beasties pretty well, having traded the group out in public on the blog for, in the case of First Solar, almost the entire run from the Nov. 17, 2006 IPO (happy anniversary) at $20 to the $317.00 top tick in May 2008 to $11.43 by June 2012 before they came back into favor, somewhat.

 *Major "See also": Gold holds near 2-week high after short-covering rally

First up the premier U.S. thin-film manufacturer:
The silicon manufacturer that the Chinese government has chosen to be a winner:
The Guggenheim Solar ETF:

And the largest U.S. silicon photovoltaic manufacturer:
If they can't hit the brakes very soon (today?) they are headed for multi-year lows.

FSLR   47.36 -1.13 (-2.33%)
TSL       9.35 -0.38 (-3.91%)
TAN     34.46 -0.49 (-1.40%)
SPWR  26.85 -0.67 (-2.42%)