Sunday, October 4, 2015

To Mark The 65th Anniversary Of 'Peanuts' The Lancet Looks At Psychology

On Oct. 2, 1950, the Peanuts comic debuted in nine newspapers nationwide. 
From The Lancet: 
The madness of Charlie Brown
Sigmund Freud has his promoters; but the best-known psychiatrist of the 20th century was probably Lucy van Pelt. From her first clinical session in 1959 (Charlie Brown: “I have deep feelings of depression…What can I do about this?” Lucy: “Snap out of it! Five cents, please.”), this little girl ministered to the children of her neighbourhood from a lemonade stand emblazoned with “PSYCHIATRIC HELP 5¢. THE DOCTOR IS IN.” (Asked by a bewildered visitor, “Are you a real doctor?” Lucy replied, “Was the lemonade ever any good?”) Her adventures were documented by the artist Charles Schulz in Peanuts, a comic strip that was syndicated in more than 2600 newspapers, in 75 countries, and is still reprinted today. The first Peanuts cartoon was published on Oct 2, 1950, and the last on Feb 13, 2000—the morning after Schulz died.

Lucy is very much the modern doctor. Early on, she worked in general medicine, persuading the neighbourhood children to lie down on the sidewalk and cough, in an attempt to literally “stamp out” the common cold: “No germ has ever been able to build up a defence against being stepped on!” She will “treat any patient who has a problem and a nickel”, and once charged Charlie Brown US$143 for an unsolicited slide-show of his faults. She did research on her own younger brother, Linus, by withdrawing his security blanket from him and documenting the consequences: she won first prize in a science fair, leaving Linus, as the exhibit, on the laboratory bench overnight; asked by Charlie Brown about her medical ethics, she replied, “I won, didn't I?”

Like most psychiatrists—indeed, most people—Lucy is a broken person. Early childhood promise as an athlete disintegrates, as she becomes possibly the worst baseball player ever. She pines for Schroeder, a musician who would not marry her “for all the beagles in Beagleland”, and will kiss her only if “the kiss will be supplied by my representative”. She is ferociously aggressive to Linus, and to anyone who stands in her way; every year, trusted by Charlie Brown to hold a football for him to kick, she pulls it away at the last moment. But she lacks self-doubt: Lucy, in her blinkered determination, is (almost) always right.

In her years of practice, Lucy treats several neighbourhood children, a dog, and the occasional bird, but her most frequent patient is Charlie Brown. Charlie comes from a loving home, and is decent, considerate, and reflective: but his life is a mess. Despite obvious intelligence, he is a mediocre student. He invests much emotional energy in managing and playing for his baseball team, which habitually loses by ridiculous scores. He yearns for the Little Red-Haired Girl, but never has the courage to approach her; when her family moves away, he stands in the street, paralysed and silent, as his life collapses around him; days later, woken by a scream, his sister Sally muses, “Before she moved away, he never cried out during the night.” The neighbourhood girls casually despise him.
Asked, at around 7 years of age, how long “this period of depression has lasted”, Charlie Brown replies, “Six years!” One summer, he develops a psychosomatic rash and has to spend weeks with his head in a sack. Another time, haunted by the meaninglessness of his losses, he decides to spend the rest of his life lying in a dark room, only to emerge, stooped and shattered, when he realises he has to feed the dog.

Charlie Brown's dog, Snoopy, is ostensibly a success. He is appointed Head Beagle; excels at baseball and figure skating; and is often so happy he can't help but dance. He is an art lover who, on losing his van Gogh in a house fire, replaces it with an Andrew Wyeth; despite being unable to talk, he studies a college course in anthropology, and reads widely, favouring Leo Tolstoy, Hermann Hesse, and Miss Helen Sweetstory, author of the Bunny-Wunny books. Yet his life also features tragedy. He is removed from his post as Head Beagle after taking a stress-related break; cannot skate in competition because of stage fright; and, through nerves and Charlie Brown's ineptitude, misses his opportunity to break Babe Ruth's all-time record for home runs before Hank Aaron gets there. He spends some nights paralysed with fear at his own vulnerability. He retreats into fantasy, pretending to be, for instance, a World War 1 flying ace, or Joe Cool, a student who rarely attends classes because they “can ruin your grade average”. His personal life is a disaster: his first girlfriend is forbidden to marry him because he is an obedience school dropout, prompting him to try to forget her by eating: “You try for a little happiness, and what do you get? A few memories and a fat stomach.” A subsequent girlfriend elopes on the morning of their wedding with his brother, before running off with a coyote....

How bad are the neuroconsequences of sleep deprivation?

From the Public Library of Science's PLOS Neuro blog:

That All-Nighter is not without Neuroconsequences
As you put the finishing touches on your paper, you notice the sun rising and fantasize about crawling in bed. Your vision and hearing are beginning to distort and the words staring back at you from the monitor have lost their meaning. Your brain … well, feels like mush. We’ve all been there. That debilitating brain fog that inevitably sets in after an all-nighter prompts the obvious question: what does sleep deprivation actually do to the brain?
Neuroscientists from Norway set out to answer this question in their recent PLOS ONE study, examining how a night forgoing sleep affects brain microstructure. Among their findings, sleep deprivation induced widespread structural alterations throughout the brain. The lead author shares his thoughts on the possible biological causes of these changes, and whether they may be long-lasting.
Inducing sleep deprivation
The researchers assessed a group of 21 healthy young men over the course of a day. The participants underwent diffusion tensor imaging (DTI; a form of MRI that measures water diffusion and can be used to evaluate white matter integrity) when they first awoke, at 7:30 am. They were free to go about their day as normal before returning for a second DTI scan at 9:30 pm. They remained in the lab for monitoring until a final scan at 6:30 am the following morning, for a total period of 23 hours of continued waking. Since we’re now learning that anything and everything can influence brain structure on surprisingly short time-scales, the researchers finely controlled as many confounding factors as possible. The participants were not allowed to exercise or consume alcohol, caffeine or nicotine during the study, or to eat right before the scans. Since DTI measures water diffusion, hydration was evaluated at all sessions and accounted for in their analysis.

Rapid microstructural changes to waking
The researchers were interested in two main questions: How does the brain change after a normal day of wakefulness and after sleep deprivation? They focused on three DTI metrics to probe how different features of neuronal tissue may change with waking. Radial diffusivity (RD) measures how water diffuses across fibers, whereas axial diffusivity (AD) measures diffusion along the length of a tract. Fractional anisotropy (FA) is the ratio of axial to radial diffusivity and therefore measures how strongly water diffuses along a single direction.

From morning to evening, FA increased and this was driven mostly by reduced RD (Figure, left). From the evening to the next morning – after the all-nighter – FA values decreased to levels comparable to the prior morning, and this drop was coupled with a decrease in AD (Figure, right). Thus, over the course of a full day of wakefulness FA fluctuated, temporarily rising but eventually rebounding. In contrast, both RD and AD declined but at different rates, RD dropping by the end of a normal day, and AD dropping later, only after considerable sleep deprivation. These changes were non-specific, occurring throughout the brain, including in the corpus callosum, brainstem, thalamus and frontotemporal and parieto-occipital tracts.
Throughout the brain, FA values increase from morning to evening (left) and decrease from the evening to the next morning after a night without sleep (right). Elvsåshagen et al., 2015.
Throughout the brain, FA values increase from morning to evening (left) and decrease from the evening to the next morning after a night without sleep (right). Elvsåshagen et al., 2015.

How bad are the neuroconsequences of sleep deprivation?
Other studies have corroborated these reports that wakefulness alters the brain, including reduced diffusion with increasing time awake, and altered functional connectivity after sleep deprivation. How this plasticity reflects the consequences of waking on the brain, however, isn’t clear. Sleep is known to be essential to tissue repair and is particularly important for promoting lipid integrity to maintain healthy cell membranes and myelination. The question remains, therefore, how detrimental the structural reorganization from sleep deprivation really is. Does the plasticity reported here and elsewhere persist for days, weeks or longer, or can a long night of deep catch-up sleep reverse any detriment that all-nighter caused?
“My hypothesis,” says first author Dr. Torbjørn Elvsåshagen, “would be that the putative effects of one night of sleep deprivation on white matter microstructure are short term and reverse after one to a few nights of normal sleep. However, it could be hypothesized that chronic sleep insufficiency might lead to longer-lasting alterations in brain structure. Consistent with this idea, evidence for an association between impaired sleep and localized cortical thinning was found in obstructive sleep apnea syndrome, idiopathic rapid eye movement sleep behavior disorder, mild cognitive impairment and community-dwelling adults. Whether chronic sleep insufficiency can lead to longer-lasting alterations in white matter structure remains to be clarified.”


Chasing Yield: September Was the Worst Month In History For Master Limited Partnerships

We have not been fans of 'yield' investments for quite a while. As an example, former king of the MLP's (before the roll-up) Kinder Morgan, which was up over 5% on Friday, is still down 27.7% since the Financial Times' Izabella Kaminska posted "Kinder Morgan, MLPs and the sell case", linked in our "The "Kinder Morgan Is a House of Cards" Theory and the Pros and Cons of Going Short (KMI)".

First up, 24/7 Wall Street:

September Worst Month in History for Energy MLPs: 3 to Buy Right Now
Needless to say, the past six weeks have been gut-wrenching for investors. What could possibly be worse? The month of September for energy master limited partnership (MLP) investors. According to a new research report from the MLP analysts at Merrill Lynch, depending on the final tally, September was possibly the worst month in history for the MLP sector. They also pose the question, “Could sentiment possibly get more negative?”...MORE
Barron's Current Yield column looked at the carnage on Friday:
Wild Swings Buffet MLP Investors
Many factors contributed to the 26% drop in these energy infrastructure companies over the past year. Unfortunately those factors aren’t going away any time soon.
Master limited partnerships (MLPs) have long been prized by income investors for their attractive yields, favorable tax treatment, and relative stability. But not only have these energy-infrastructure companies fallen 26% so far this year; in the past week they’ve traded with volatility akin to money-losing Internet stocks.
The benchmark Alerian MLP Index fell by 6% on each of two consecutive days early last week, reminding some portfolio managers of the worst days of the 2008 financial crisis. At Tuesday’s close, the index was down nearly 50% from its 2014 highs. It rebounded in the remaining three days of the week as value buyers stepped in, but September was still off a punishing 15%. 

Volatility is here to stay for MLPs. That doesn’t mean there aren’t opportunities in the sector, which is much cheaper than usual and currently yielding near 8%. But investors should beware that as energy prices stay low, and maybe go lower, the risk profile for the sector has gone up.

“We don’t think the coast is clear from here,” says Matt Sallee, a portfolio manager at Tortoise Capital Advisors. “We expect it to remain pretty choppy for the rest of the year.”

A major catalyst for last week’s selloff was the announced merger of two midstream giants, Williams Companies (ticker: WMB) and Energy Transfer Equity (ETE). The terms of the deal weren’t as favorable as investors expected. Williams fetched a lower price, and Energy Transfer will have to take on $6 billion in new debt, which worried investors. More MLP consolidation is expected, thanks to lower crude-oil prices, and investors may not love the terms.

September’s decline was exacerbated as retail investors exited mutual funds, forcing managers to sell to meet redemptions. Plus, because prices fell so much so fast, some closed-end MLP funds ran up against leverage limits and had to sell assets to pay down debt. “We had funds selling into a very thin market,” says Charles Earle, head of closed-end fund research at Gates Capital.
Lower oil (even if it doesn’t directly affect an MLP’s revenue stream), trouble in the high-yield market (MLPs are heavy borrowers), and a weak stock market also added to the selling pressure. Those factors may be here for a while, too. Crude has to settle down for MLPs to return to more normal prices, says Marcus McGregor, who runs the MLP equity strategy for Conning. 

AN ARTICLE QUESTIONING the viability of some MLPs that was widely circulated on the Internet didn’t help, say fund managers. It highlighted dynamics facing mainly exploration and production companies, known as upstream MLPs, several of which have had to cut distributions to investors. But midstream MLPs (pipeline, storage, and transportation companies), where most investor interest lies, mostly promise stable distributions that they can cover with current cash flows. “Midstream companies have different economics,” says Greg Reid, president of the MLP Complex at asset management firm Salient Partners. “People are lumping them all together.”...MORE
KMI Kinder Morgan, Inc. daily Stock Chart
The week the 2014 roll-up was announced the stock jumped and then settled around $41.
No hurries, no worries.

"Google's 'Don't be evil' creed disappears as company morphs into Alphabet" (GOOG)

From The Verge:

Alphabet employees should still 'do the right thing'
For Google, with a new parent company comes a new code of conduct, and there's a pretty noticeable change. The search company's famous creed — "don't be evil" — is absent from Alphabet's new code of conduct.

The new code of conduct was published on Friday after Google officially completed its transformation into one of several organizations within a parent company, which is called Alphabet.
"Don't be evil" has been part of Google for over a decade, and it's the very first line of the search company's code of conduct. While Alphabet isn't using the well-known phrase in its new code of conduct, the intention is arguably still there. The first line instead now reads: "Employees of Alphabet and its subsidiaries ... should do the right thing — follow the law, act honorably, and treat each other with respect."

Also missing is some of the stronger language around how the company should operate, including the line: "everything we do in connection with our work at Google will be, and should be, measured against the highest possible standards of ethical business conduct."...MORE

Saturday, October 3, 2015

Paying For Solar: SolarCity's GigaFactory (SCTY)

This trip down memory lane was prompted by yesterday's SCTY announcement (link below) of new panels that hit 22.04% conversion efficiencies.

The company is in a race against its cash burn rate and in this race the lawyers and lobbyists are as important as the engineers and salespeople. And finance guys.

From MIT's Technology Review, August 2015:

Paying for Solar Power
SolarCity’s massive new manufacturing plant in Buffalo, New York, reflects a booming demand for solar power. Is it sustainable?
The rail cars that once carried iron ore around Republic Steel’s sprawling plant at the edge of downtown Buffalo, New York, were plowed under when the steel company abandoned the location in 1984. They were recently discovered when excavation began for the so-called gigafactory to be operated by SolarCity, the country’s leading supplier of solar panels. Now the rusted cars and a scattering of other relics from the days of Republic Steel greet visitors to the construction site, a reminder of the city’s past manufacturing might and a testament to the dream that North America’s largest solar-panel manufacturing facility can help revive it.

Buffalo is attempting an economic comeback fueled by the state’s Buffalo Billion initiative, a multi-year redevelopment plan spearheaded by Governor Andrew Cuomo. Included in the funding is support for a new genomic research center and an information technology center, but at the heart of the city’s ambitions is the solar factory, which New York is spending $750 million to build and equip. SolarCity, based in Silicon Valley, will lease it, essentially for free, and has committed to spending $5 billion on its Buffalo operations over the next decade. For Buffalo, it’s an attempt to reimagine its future around solar manufacturing. For SolarCity, it will solidify its position as one of the country’s most aggressive and fastest-growing solar companies.

The plan to build the massive manufacturing facility comes at a time when demand for solar power is booming in the United States. In 2008, the nation had about 1.1 gigawatts of photovoltaic power, the dominant type of solar energy; by the end of 2014 it had 18.3 gigawatts. Last year, homeowners, businesses, and energy companies added about 6.2 gigawatts, and they are expected to install another eight gigawatts this year. Much of that is in California, but solar power is taking hold in other states, boosted by a mix of federal tax credits and state and local incentives. Roughly a third of the electricity generation capacity added last year in the United States was solar, second only to natural-gas plants. (Even so, solar power still provides less than 1 percent of the country’s electricity.)

SolarCity has played a large part in the rapid expansion. By offering innovative financing schemes, it has spurred strong demand for rooftop panels on homes, the fastest-growing sector of the solar market. Instead of buying the expensive solar panels and paying for their installation, homeowners participating in one of SolarCity’s offerings can lease the system for 20 years, paying a monthly fee. Because it owns the panels, SolarCity benefits from the generous 30 percent federal investment tax credit for solar power; the homeowner is credited at retail electricity rates for any surplus power fed back to the grid. SolarCity is still unprofitable, but its revenue doubled from 2012 to 2014 as its leasing program proved attractive for homeowners—especially in locations with high electricity rates and lots of sunshine, such as California. The company expects to install enough panels this year to produce a gigawatt of power.

Not coincidentally, a gigawatt will be the capacity of the Buffalo factory when it is fully up and running, which is scheduled for the beginning of 2017. Until now, the company’s business has been built around marketing, financing, and installing solar systems. Instead of producing solar panels, it buys them, mostly from Chinese manufacturers. The Buffalo factory changes all that. “Our aspiration is to build many more of these factories over time,” says Peter Rive, the chief technology officer, who founded SolarCity with his brother nine years ago (their cousin Elon Musk is the company’s chairman). And though Rive says the company doesn’t want to “take its eye off the ball” in getting the Buffalo plant built and operating, he adds that shortly after that’s accomplished, “we want to create the largest solar facility in the world, never mind the Western Hemisphere.” Indeed, SolarCity stated earlier that its plan is to add “one or more significantly larger plants” with annual production capacity an order of magnitude greater than that of the Buffalo facility.

The company will make a new type of photovoltaic technology in Buffalo. The solar cells use crystalline silicon—the material used in conventional cells—with a thin film of another form of silicon and a layer of a semiconductor oxide. The hybrid solar-cell design, which SolarCity got when it bought a small company called Silevo in 2014, is designed to be more efficient than standard silicon cells in converting sunlight to electricity, as well as relatively cheap to make. But while SolarCity operates a 32-megawatt plant in Hangzhou, China, that Silevo built to make the solar cells, quickly scaling up those operations to the far larger plant in Buffalo will be an engineering feat.
Even if all goes well, the gigafactory could be facing a dramatically different solar-power market. At the end of 2016, the federal tax credit for solar power is due to drop from 30 percent to 10 percent for businesses and to disappear altogether for consumers who buy their own solar panels. By making residential solar power less affordable, the change could be devastating to the industry. And it will come just as the Buffalo factory is ramping up its manufacturing capacity.

True costs
Fears about what will happen when the tax breaks decrease are fueled by an unfortunate reality: in most locations and under most conditions, unsubsidized solar power is still far too expensive to compete with other sources of electricity. And rooftop solar is especially expensive. Subsidies and other government incentives are the reason the solar market is booming. If technologies were chosen purely on the basis of what it costs to produce power, “there isn’t a market for residential solar,” says Severin Borenstein, a professor at the Haas School of Business at the University of California, Berkeley, and an expert on electricity economics. Without government incentives for clean energy like solar, he says, “natural gas wipes everything else away.”...MUCH MORE
Also at Technology Review:
SolarCity Shows Off Its New Modules; Now It Has to Manufacture Them

Here's the stock action over the last couple years:
SCTY SolarCity Corporation weekly Stock Chart

We've been following this one for a while:
More Elon Musk: "5 things to know about SolarCity’s IPO (and it’s not all good)"
"SolarCity postpones initial public offering, according to report" (SCTY)
After Price Cut Elon Musk's SolarCity Trades, Soars (SCTY)
The stock was priced at $8.00, down from the $13-15 range the underwriters were throwing out earlier this week.
It is currently trading at $11.60, up 45%.
And many, many more.

Like most of the old pros we pine for a return of the speculative glory days.
The  2005-2008 mania was probably best exemplified by First Solar:

Nov. '06 IPO at $20, $317.00 top tick in May 2008, $11.43 by June 2012. 
Yeah baby!

$30m Google Lunar X-Prize To Land A Privately Funded Robot On the Moon Now in Play

From The Register:

Moon miners book Kiwi rockets for 2017 lunar landing
 Moon Express MX-1
Moon Express, one of the teams competing for the $30m Google Lunar X-Prize, has booked five rockets that will be ready for a 2017 attempt to get to the Moon.

The deal with New Zealand firm Rocket Labs will see Moon Express' MX-1 lander make an attempt at the first commercial lunar landing for the Google Lunar X-Prize. To win the cash, the lander will have to travel at least 500 meters across the Moon's surface and send back high-definition video of the feat.

"The holy grail of our company is to provide, to prove, a full-services capability – not just landing, but coming back from the moon," Moon Express CEO Bob Richards, told
"We're going to be inspired to try a sample-return. I don't know if we'll do that on the second mission, but I sure hope we're trying it by the third mission, if all is going that well."

Although there are 16 teams currently in the running for the X-Prize, Moon Ventures is one of the front runners, and the company has big plans for the Moon. The company wants to become the first extraterrestrial mining company and harvest platinum group metals, rare earth elements, and Helium 3 from what it calls the "eighth continent."

That's not going to be possible with the MX-1; it's a lightweight test platform. The coffee table-sized spaceship will be boosted into orbit by the Rocket Labs delivery vehicle. It will then use hydrogen peroxide fuel to make it to the Moon and land safely.

Moon Express calls the probe the "iPhone of space,"...MORE

"The Trouble with Theories of Everything" (with a Feynmann cameo)

From' Scaling issue:
There is no known physics theory that is true at every scale—there may never be
henever you say anything about your daily life, a scale is implied. Try it out. “I’m too busy” only works for an assumed time scale: today, for example, or this week. Not this century or this nanosecond. “Taxes are onerous” only makes sense for a certain income range. And so on.
Surely the same restriction doesn’t hold true in science, you might say. After all, for centuries after the introduction of the scientific method, conventional wisdom held that there were theories that were absolutely true for all scales, even if we could never be empirically certain of this in advance. Newton’s universal law of gravity, for example, was, after all, universal! It applied to falling apples and falling planets alike, and accounted for every significant observation made under the sun, and over it as well.

With the advent of relativity, and general relativity in particular, it became clear that Newton’s law of gravity was merely an approximation of a more fundamental theory. But the more fundamental theory, general relativity, was so mathematically beautiful that it seemed reasonable to assume that it codified perfectly and completely the behavior of space and time in the presence of mass and energy.
The advent of quantum mechanics changed everything. When quantum mechanics is combined with relativity, it turns out, rather unexpectedly in fact, that the detailed nature of the physical laws that govern matter and energy actually depend on the physical scale at which you measure them. This led to perhaps the biggest unsung scientific revolution in the 20th century: We know of no theory that both makes contact with the empirical world, and is absolutely and always true. (I don’t envisage this changing anytime soon, string theorists’ hopes notwithstanding.) Despite this, theoretical physicists have devoted considerable energy to chasing exactly this kind of theory. So, what is going on? Is a universal theory a legitimate goal, or will scientific truth always be scale-dependent?

The combination of quantum mechanics and relativity implies an immediate scaling problem. Heisenberg’s famous uncertainty principle, which lies at the heart of quantum mechanics, implies that on small scales, for short times, it is impossible to completely constrain the behavior of elementary particles. There is an inherent uncertainty in energy and momenta that can never be reduced. When this fact is combined with special relativity, the conclusion is that you cannot actually even constrain the number of particles present in a small volume for short times. So called “virtual particles” can pop in and out of the vacuum on timescales so short you cannot measure their presence directly.

One striking effect of this is that when we measure the force between electrons, say, the actual measured charge on the electron—the thing that determines how strong the electric force is—depends on what scale you measure it at. The closer you get to the electron, the more deeply you are penetrating inside of the “cloud” of virtual particles that are surrounding the electron. Since positive virtual particles are attracted to the electron, the deeper you penetrate into the cloud, the less of the positive cloud and more of the negative charge on the electron you see.

Then, when you set out to calculate the force between two particles, you need to include the effects of all possible virtual particles that could pop out of empty space during the period of measuring the force. This includes particles with arbitrarily large amounts of mass and energy, appearing for arbitrarily small amounts of time. When you include such effects, the calculated force is infinite.
We know of no theory that both makes contact with the empirical world, and is absolutely and always true.
Richard Feynman shared the Nobel Prize for arriving at a method to consistently calculate a finite residual force after extracting a variety of otherwise ambiguous infinities. As a result, we can now compute, from fundamental principles, quantities such as the magnetic moment of the electron to 10 significant figures, comparing it with experiments at a level unachievable in any other area of science.

But Feynman was ultimately disappointed with what he had accomplished—something that is clear from his 1965 Nobel lecture, where he said, “I think that the renormalization theory is simply a way to sweep the difficulties of the divergences of electrodynamics under the rug.” He thought that no sensible complete theory should produce infinities in the first place, and that the mathematical tricks he and others had developed were ultimately a kind of kludge.

Now, though, we understand things differently. Feynman’s concerns 
were, in a sense, misplaced. The problem was not with the theory, but with trying to push the theory beyond the scales where it provides the correct description of nature....MORE
Here are Feynmann's Nobel Lecture and banquet speech.

More interesting, I think, is his 1974 Caltech commencement address.

If interested, Bill Gates bought the rights to a bunch of Fenymann's lectures and other ephemera and put them online.

See also:
How to Tell Crazy From Brainpower Intensive

Equities Through The Looking Glass

As I was posting yesterday's "Headlines You Don't Want If Long: "Bank stocks rocked by weak jobs data"n (XLF; BKK)" I was thinking "But aren't weak jobs reports what we all want?"

Corey at Afraid to Trade captured the new reality with his first line in "Oct 2 Bad Jobs Report Bull Market Update and Stock Scan":
The Jobs Report was worse than expected so let’s buy stocks because the Fed won’t raise rates!!!
All I had was "I'm guessing there won't be a rate hike this year."
The Dow Joneses had a 459 point reversal from the bottom, closing 4/10 point off the daily high.

"Superforecasting: The Art and Science of Prediction"

From Inverse:
The Ability to Predict the Future Is Just Another Skill 
Psychologist Phil Tetlock on learning to deduce what's going to happen next.
Phil Tetlock believes we can predict the future — we, us, anyone. In his new book, Superforecasting: The Art and Science of Prediction, the Wharton management professor and psychologist makes the case that futurists are skilled, not special. Normal people can make boggling accurate predictions if they just know how to go about it right and how to practice.

Tetlock backs up his crystal ball populism with data: He’s spent the better part of the last decade testing the forecasting abilities of 20,000 ordinary Americans in The Good Judgment Project on topics ranging from melting glaciers to the stability of the Eurozone, only to find that the amateur predictions were more accurate — if not more so — than those of the pundits and so-called forecasting ‘experts’ the media so often defers to.

When it comes to superforecasting, it isn’t what you think, it’s how you think. Tetlock talked to Inverse about how intelligence is overrated, the failures of media pundits, and why the best superforecasters need a healthy dose of doubt....MUCH MORE
Edge Magazine's Master Class In Forecasting With Phillip Tetlock
Dec. 2012
"How To Win At Forecasting" (Philip Tetlock and the Intelligence Advanced Research Projects Agency)
We've linked to Edge a few times. The Observer called it "The World's Smartest Website" but sometimes they're a bit too precious for my taste. This isn't one of those times.
"IARPA: It's like DARPA but for spies!" 
"IARPA's mission [is] to invest in high-risk/high-payoff research programs that have the potential to provide the United States with an overwhelming intelligence advantage over future adversaries."
FBI National Press Release, 2009
Sept. 2013
Daniel Kahnman's Favorite Paper: "On the Psychology of Prediction"

June 2014
Elite Forecasters and The Best Way to Predict the Future 

Sept. 2014 
"U.S. Intelligence Community Explores More Rigorous Ways to Forecast Events"

"Pseudo-Mathematics and Financial Charlatanism...."
“What should one do: predict specifics, or forecast broad trends that necessarily miss specifics?”
"Thinking Clearly About Forecasting"
How to Predict a Nation's GDP per Capita at r=.97 Using "Economic Freedom and average citizenry IQ -- plus slight tweaks from trading block membership and oil"

And many more.               

Friday, October 2, 2015

"Elon Musk elaborates on his proposal to nuke Mars"

From The Verge:
"He wants to create two tiny pulsing suns over the Martian poles"
Well there you go.

"The Internet of Trust"

As noted in the intro to last month's "Marketing--'Trust me for God’s sake'":
That's Turkey's Minister of Economic Affairs reassuring citizens that things are fine and makes a nice jumping off point for this piece.
With a nod towards FT Alphaville's Izabella Kaminska, who's dug deeper into this stuff than I have...
From Motherboard:
Last night was Motherboard's publisher's birthday, and standing in a bar surrounding by a bunch of people whom I very much care for and many other people I've never seen in my life and probably will never know, I, a person who's dealt with as much social anxiety as any of us, felt more at ease than I have in awhile. Why? Well, regardless of whether or not we'd ever actually shoot the shit, I could at least rely on the fact that—barring some sort of They Live situation—everyone in the room was real.

The internet is very real, an existent space where we work and love and no longer have to preface any of those things with "cyber" to denote that they're only half-real. The internet is a real enough space for us to colonize, real enough to lay siege to. But as we further accept the internet as an actual venue in which we visit and live (for better or worse), a little problem that's licking at the edges of our metaverse is only getting bigger: The internet as a whole may be very real, but it's virtually impossible to know just how real its constituent parts actually are.

It's not some grand metaphysical problem, it's just little stuff. Some people spend a little more time honing their tweets to be funnier than they are in real life, others have figured out the perfect angle to contort their faces for more attractive selfies. Lots of people fudge their LinkedIn just a little bit; many many more say things they'd never say face-to-face.

Humans are incredibly subjective creatures who happen to be piss-poor at perceiving reality in any sort of uniform fashion, and data sets (even enormous ones) based on human experiences are extremely messy. This will change.

There's an off chance you heard about Peeple this week, a so-called "Yelp for People" that aims to answer the question of how shitty we all are. Laying aside the issues of spamming and vote rigging and reputation hacking inherent to a network where you can review anyone, regardless of whether or not they have a profile, I think our own Jordan Pearson hit the nail on the head: Peeple is for employers more than anything else.

This, of course, assumes that Peeple will actually take off. Jason Koebler argues that it won't, which is fair. It's certainly not the first attempt. But it's equally fair to guess that Peeple is just hoping its reputation-verification system gets acquired by LinkedIn, or perhaps Facebook, which very much is interested in ensuring all of its users are just as real as they are in real life....MUCH MORE

"Mapping the 25 Most Expensive Homes for Sale in San Francisco"

From Curbed SF:
It has been some time since we've updated our map of the most expensive homes currently for sale in the city, so it's no surprise that the list has almost completely overturned, although the Lumina penthouse continues to reign supreme at $49 million. There are currently nine homes up for sale in the eight-figure range, and, of course, Pacific Heights is the most popular neighborhood for very expensive homes. What is surprising is how many of these homes have taken price cuts in their time on the market. Nine of the houses have dropped their price at some point....MUCH MORE 
3800 Washington, Presidio Heights
Halsey Minor, a technology entrepreneur whom you may know as the guy who founded CNET in 1993, bought this "modified copy" of Marie Antoinette's Petit Trianon in 2007. The 8-bed, 7-bath, 18,000-square-foot mansion comes with the adjoining 2,618-square-foot guest home at 3810 Washington and a vacant lot (125 Maple) that's currently being used as a backyard. The three must be sold together. When Curbed SF toured the property in 2012, it was in really bad shape—holes in the ceiling, water damage to the original silk wall coverings, outdated everything. The whole place will need a complete restoration. Hence the serial price chops over the years, from $25M down to $21M and now $17.995M. If it ever does sell and get the renovation it deserves, we sincerely hope the spectacular ballroom becomes wedding central.

Zacks Downgrades Halliburton to "Get Out While You Can" (HAL)

Hmmmm. Haven't seen that one before.
The stock is up 58 cents on a generally down day.
From Zacks, Sept. 26:
Halliburton Down to Strong Sell: Get Out While You Can 
Back in August 2007 we noted

Best Analyst Calls
One of my recent favorites was Lehman's downgrade of
Weight Watchers to "underweight".

Today we learn there may be problems at Liquidation World:

...“In our view, the initial strategy to turn the company around is not panning out.”
The retailer has had three disappointing quarters in a row and
“we think the outlook is uncertain,” Mr. Caron said.
As Wikipedia explains, by 2007 the company was on its way from 1200 to 3 stores.
The Spokane Spokesman-Review wrote the epitaph in 2010
In brief: Liquidation World closing its doors
Well, it was called Liquidation World.

In 2009 we posted "Laughingstock: Fitch to California-"F2" and S&P Downgrades to "Lower than Louisiana".

"Economists React to the September Jobs Report: ‘Nothing Good to See Here’"

From Real Time Economics:
Nonfarm payrolls increased a seasonally adjusted 142,000 in September, far below the trend over the past 18 months and short of analysts’ expectations. Job growth was also weaker earlier this summer than previously thought. The data is sobering for Federal Reserve officials as they contemplate raising interest rates for the first time since 2006. Here’s what economists had to say about Friday’s report:
“Nothing good to see here….Beyond the headline number, we see broad-based weakness in U.S. labor markets, with the past month’s revisions now showing a decidedly softer trend growth in jobs….We retain our view that rate hikes will be deferred past year end and we believe this employment report substantially reduces the probability of a rate hike from the Federal Open Market Committee this year.” —Michael Gapen, Rob Martin, and Jesse Hurwitz, Barclays Research

“The weaker employment growth over the past few months is a surprise given recent solid economic data….It could be that businesses have turned cautious in the wake of the recent financial market turmoil. But job growth should rebound through the rest of this year on the back of consumer spending and housing. In summary, the 142,000 rise in September payroll jobs, along with a 59,000 downward revision to job growth in July and August combined, declines in household employment and the labor force, and flat average hourly wages, constitute a disappointing jobs report for September. This likely rules out an increase in the fed funds rate when the FOMC next meets in late October, and a mid-December rate increase now looks less likely. Financial markets are now pricing in the first increase in the funds rate in March.” –Gus Faucher, PNC

We are struggling to find much silver lining in the September jobs report, which delivered downside surprises in the headlines, details, and revisions….The private-sector job profile was even gloomier than the top line….Public Fed commentary (even from Fed ‘doves’) has been guiding the market strongly towards a rate hike by year-end.  And there are still two jobs reports between now and the December FOMC meeting. Our central call is still for a December liftoff, but today’s disappointing jobs data do little to support the case for a higher policy rate this year.” –Jay Feldman, Credit Suisse

“The U.S. economy added a very meagre 142,000 jobs in September, marking the slowing pace of jobs growth since March. This comes on the heels of the equally disappointing 136,000 gain in August. Net revisions were particularly weak at -59,000, while the sharp drop in the labor force underscores some souring in the outlook for the labor market. There is no redeeming quality to this report and it does point to a germane weakening in U.S. labor market momentum. No special factors were at play here.” — Millan Mulraine, TD Securities

“Given good household real income growth and rates at zero our assessment is this is a soft patch, though clearly the tightening in financial and monetary conditions and external demand weakness is a factor. We expect the economy to continue to grow above trend. At this stage we pushed the date of lift off to March. Our concern is that the data is reflective of something more worrying about the underlying health of the U.S. economy, but at this point it is a bit too early to tell. A more sustained soft patch or weather disruptions could alter the Fed’s plans in [the first quarter] and push liftoff back yet another quarter.” –BNP Paribas

“This is dovish for the Fed, but bearish for equities….Today’s employment report is much weaker than had been expected, and although it should push the probability of October Fed action to zero, the slowed pace of job gains is disconcerting. Today’s report is likely to dampen expectations of a Fed rate hike for December.” –Jason Schenker, Prestige Economics

“The stock market is hopelessly confused. Fed zero rates are going to continue for longer, but I guess this Fed stimulus is not going to help if the U.S. economy tanks. The jobs market struck out in September as far as the Fed’s concerned.  No rate hike in October now certainly, and 2015 looks increasingly impossible.  If the committee was looking for more improvement, this isn’t it.” –Chris Rupkey, Bank of Tokyo-Mitsubishi

Also at RTE:
The September Jobs Report in 11 Charts

Headlines You Don't Want If Long: "Bank stocks rocked by weak jobs data"n (XLF; BKK)

I'm guessing there won't be a rate hike this year.
If the market is to have any chance of advancing, the financials must participate.
And today they sure aren't. The ETF for the finacial stocks in the S&P 500, the XLF, is down 2.78%.
DJIA down 214 (1.32%) at 16057; S&P down 24.34 at 1899.

From MarketWatch:
Bank stocks turned sharply lower in premarket trade Friday, as disappointing jobs data suggested the Federal Reserve may delay interest rate increases. The SPDR Financial ETF XLF, -2.82% swung to a loss of 1.9%, after trading up 0.7% just prior to 8:30 a.m. ET, when the jobs data was released. Among some of the XLF's more active components, shares of Bank of America Corp. BAC, -4.89% shed 2.4% after being up 0.5% just before the data; Citigroup Inc. C, -3.68% swung to a 2% decline from a 0.3% gain; J.P. Morgan Chase & Co. JPM, -3.64% slumped 1.9%, after being up 0.5%; and Wells Fargo & Co. WFC, -3.38% slid 2%, after trading up as much as 0.6%. Banks tend to benefit from rising interest rates because it increases the spread between the interest rate they charge on longer-term loans and the shorter-term rate they pay to fund those loans. Bank investors appear to be worried that the Fed may be wait a little longer to start raising rates, after September nonfarm payrolls grew by just 142,000, below expectations of 200,000....MORE

Natural Gas: EIA Weekly Supply/Demand Report

From the Energy Information Administration:

(For the Week Ending Wednesday, September 30, 2015)
  • Natural gas prices declined in most market locations, falling from already generally low levels, over the report week (Wednesday, September 23, to Wednesday, September 30). The Henry Hub spot price fell from $2.59 per million British thermal units (MMBtu) last Wednesday to $2.47/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the October contract expired on Monday at $2.563/MMBtu, and the November contract moved into the near-month position. Over the report week, the November contract fell from $2.638/MMBtu last Wednesday to $2.524/MMBtu yesterday.
  • Working natural gas in storage increased to 3,538 Bcf as of Friday, September 25. A net injection into storage of 98 Bcf for the week resulted in storage levels 15% above a year ago and 5% above the five-year average for this week.
  • The total rig count declined by four units from the previous week, with 838 units in service as of September 25, according to data released by Baker Hughes Inc. This was 1,093 units below the number of rigs during the same week last year. The oil rig count decreased by four units to 640, while the gas rig count declined by one unit to 197. The natural gas plant liquids composite price at Mont Belvieu increased by 3.1% to $5.01/MMBtu for the week ending September 25. Butane and isobutane prices both increased by 5.7%, and propane and ethane prices increased by 4.4% and 2.5%, respectively. The natural gasoline price fell by 0.9%.
  • Hurricane Joaquin strengthened to a Category 4 storm on Thursday, which includes winds of up to 156 miles per hour. The storm's path is uncertain but could make landfall on the East Coast this weekend, when power outages are a possibility.

Prices decline at most areas outside the Northeast. The Henry Hub spot price fell 12¢ from $2.59/MMBtu last Wednesday to $2.47/MMBtu yesterday. Similarly, at the Chicago Citygate, spot prices fell from $2.65/MMBtu last Wednesday to $2.56/MMBtu yesterday. Prices moved in similar patterns at most market locations other than the Northeast.

Northeast prices fluctuate. At the Algonquin Citygate, which serves Boston-area consumers, prices began the week at $2.00/MMBtu before falling to $1.66/MMBtu on Friday. Prices closed the report week at $1.95/MMBtu. At Transcontinental Pipeline's Zone 6 delivery point into New York City, prices began the week at $2.31/MMBtu, hit a weekly low at $1.53/MMBtu on Friday, and settled at $2.44/MMBtu yesterday....MUCH MORE
Front futures $2.4310 down 0.002 and looking bullish vs. yesterday.

Thursday, October 1, 2015

Hurricane Watch: "Category 4 Joaquin Pounds the Bahamas; a U.S. Landfall Unlikely" (ACE; TRV; ALL; HIG; SIGI)

The symbols are some of the largest East Coast property/casualty insurers. They get a reprieve.
As to the rain, in most of the country p/c coverage is for wind perils, not flooding which is separately insured by the federal flood insurance program.
From Wunderblog:
Dangerous Hurricane Joaquin has intensified to a Category 4 storm with 130 mph winds and a 936 mb pressure, making it the strongest Atlantic hurricane in five years. The last stronger storm was Hurricane Igor of 2010, which bottomed out at 924 mb on September 15, 2010. Joaquin is now the second major hurricane of 2015 in the Atlantic, joining Hurricane Danny, which peaked as a Category 3 storm with 115 mph winds on August 21. Joaquin's motion has slowed to a 5 mph westward crawl over the Central Bahamas, which are receiving an epic pounding from the mighty hurricane. David Adams of Reuters told me this afternoon that he has been calling down to the Bahamas, and no phones are being answered on Aklins Island--but Reuters' Nassau correspondent informed him that flooding was bad on Aklins Island and Long Island. The last hurricane hunter aircraft departed the storm after a 12:47 pm EDT eye fix, and new plane will be in the storm early this evening. The Hurricane Hunters found that Joaquin's eye had shrunk from 41 miles in diameter early this morning to 27 miles in diameter this afternoon. Shrinkage of the eye is common in intensifying major hurricanes, and eyewall replacement cycles that lead to temporary weakening of the storms typically occur when the eye diameter gets down to about 10 miles. Wind shear continued to be in the moderate range, 10 - 20 knots, on Thursday afternoon, and visible and infrared satellite loops showed that Joaquin was a moderate-sized hurricane with impressive organization, with a solid core of intense eyewall thunderstorms surrounding a clear eye. Upper level wind analyses from the University of Wisconsin show that the hurricane has maintained an impressive upper-level outflow channel to the southeast, and it appeared a new outflow channel was ready to open up to the northwest, which would support continued intensification. Ocean temperatures in the region remain a record-warm 30°C (86°F), but may start to cool due to Joaquin's slow motion. This cooling of the waters could well put the brakes on further intensification by Friday morning.... 
...Joaquin likely to miss the U.S.Confidence is growing that Joaquin will move out to sea this weekend, although a U.S. landfall still cannot be ruled out. Among the 12Z (8 am EDT) Thursday operational runs, three models--the Canadian GEM and the U.S. GFDL and NAVGEM models—continue to call for a landfall on the U.S. East Coast. Other models, including the four that performed the best for three-day outlooks during the 2014 Atlantic hurricane season (GFS, ECMWF, HWRF, and UKMET), now agree that Joaquin will turn sharply toward the north or northeast and begin to accelerate by late Friday or Saturday, feeling the influence of an upper-level low drifting well to the northeast. The less-likely possibility of a U.S. landfall hinges on the idea that a strong upper-level trough would produce a cut-off low in the Southeast that would hook Joaquin around it, much as happened with Hurricane/Superstorm Sandy in 2012. That cut-off low is still expected to form, but the balance between the eastern U.S. low and the Atlantic low in terms of influence on Joaquin now appears to favor the latter. NHC nudged the forecast track for Joaquin further east in its 5:00 pm EDT outlook. In the associated discussion, they stressed: “We are becoming optimistic that the Carolinas and the mid-Atlantic states will avoid the direct effects from Joaquin.  However, we cannot yet completely rule out direct impacts along on the east coast, and residents there should continue to follow the progress of Joaquin over the next couple of days.”...MUCH MORE
 Figure 5. 5-day rainfall amounts for the period from 8:00 pm EDT Thursday, October 1, to Tuesday, October 6. Almost all of South Carolina is projected to get 10” – 20” of rain. This map assumes that Hurricane Joaquin will remain offshore from the U.S. East Coast. Image credit: NWS Weather Prediction Center.

"Commodity traders eye Hurricane Joaquin"
"Hurricane Warnings for the Bahamas From Joaquin; Threat to U.S. East Coast Grows" 

"Natural Gas Breaks Three-Year Low"

$2.4260 down 9.8 cents.
From the Wall Street Journal:
The U.S. EIA said producers added 98 billion cubic feet of natural gas to storage last week 
Natural gas plummeted to a new three-year low as heavy surpluses deepen a selloff.
It is the latest leg down for a commodity that has struggled for years under the weight of a record-setting oil-and-gas boom. Production has hovered around all-time highs for about a year, which eventually became too much for prices that had managed to stabilize and outperform most other commodities for the past several months. 
Prices for the front-month November contract fell 9.1 cents, or 3.6%, to $2.433 a million British thermal units on the New York Mercantile Exchange. It is the largest one-day loss in seven weeks and the lowest settlement since June 13, 2012. 
Gas had managed to tread water this summer and even briefly hit a bull market in the spring because of surging demand from power plants that are switching away from coal. But in recent weeks that demand has subsided along with hot weather and the use of air conditioners, causing surpluses to build up and prices to fall. 
The U.S. Energy Information Administration said Thursday morning that producers added 98 billion cubic feet of natural gas to storage in the week ended Sept. 25. It follows a 106-bcf addition last week, the largest weekly additions since early June....MORE
Sept. 14
Natural Gas: This Could be The Year Prices Go Down In Winter
Combine an El Niño winter with an uptick in production and you've got dogs and cats living together, mass hysteria at the NYMEX, etc....

Sept. 4
Natural Gas: EIA Weekly Supply/Demand Report
As we enter the autumn shoulder season, our obsessive preoccupation with supply gives way to El Niño and whither/whether weather.
More on that next week....

"The future of cryptocurrencies: Bitcoin and beyond"

Over the years Nature has expanded their remit to the point that some of the stuff they've published is just garbage (although not as bad as The Lancet on that score) so, as they used to say at the Royal Society: "Nullius in verba".
From the journal Nature:
The digital currency has caused any number of headaches for law enforcement. Now entrepreneurs and academics are scrambling to build a better version.
When the digital currency Bitcoin came to life in January 2009, it was noticed by almost no one apart from the handful of programmers who followed cryptography discussion groups. Its origins were shadowy: it had been conceived the previous year by a still-mysterious person or group known only by the alias Satoshi Nakamoto1. And its purpose seemed quixotic: Bitcoin was to be a 'cryptocurrency', in which strong encryption algorithms were exploited in a new way to secure transactions. Users' identities would be shielded by pseudonyms. Records would be completely decentralized. And no one would be in charge — not governments, not banks, not even Nakamoto.

Yet the idea caught on. Today, there are some 14.6 million Bitcoin units in circulation. Called bitcoins with a lowercase 'b', they have a collective market value of around US$3.4 billion. Some of this growth is attributable to criminals taking advantage of the anonymity for drug trafficking and worse. But the system is also drawing interest from financial institutions such as JP Morgan Chase, which think it could streamline their internal payment processing and cut international transaction costs. It has inspired the creation of some 700 other cryptocurrencies. And on 15 September, Bitcoin officially came of age in academia with the launch of Ledger, the first journal dedicated to cryptocurrency research.

What fascinates academics and entrepreneurs alike is the innovation at Bitcoin's core. Known as the block chain, it serves as the official online ledger of every Bitcoin transaction, dating back to the beginning. It is also the data structure that allows those records to be updated with minimal risk of hacking or tampering — even though the block chain is copied across the entire network of computers running Bitcoin software, and the owners of those computers do not necessarily know or trust one another.

Many people see this block-chain architecture as the template for a host of other applications, including self-enforcing contracts and secure systems for online voting and crowdfunding. This is the goal of Ethereum, a block-chain-based system launched in July by the non-profit Ethereum Foundation, based in Baar, Switzerland. And it is the research agenda of the Initiative for CryptoCurrencies and Contracts (IC3), an academic consortium also launched in July, and led by Cornell University in Ithaca, New York.

Nicolas Courtois, a cryptographer at University College London, says that the Bitcoin block chain could be “the most important invention of the twenty-first century” — if only Bitcoin were not constantly shooting itself in the foot.

Several shortcomings have become apparent in Bitcoin's implementation of the block-chain idea. Security, for example, is far from perfect: there have been more than 40 known thefts and seizures of bitcoins, several incurring losses of more than $1 million apiece.

Cryptocurrency firms and researchers are attacking the problem with tools such as game theory and advanced cryptographic methods. “Cryptocurrencies are unlike many other systems, in that extremely subtle mathematical bugs can have catastrophic consequences,” says Ari Juels, co-director of IC3. “And I think when weaknesses surface there will be a need to appeal to the academic community where the relevant expertise resides.”

Academic interest in cryptocurrencies and their predecessors goes back at least two decades, with much of the early work spearheaded by cryptographer David Chaum. While working at the National Research Institute for Mathematics and Computer Science in Amsterdam, the Netherlands, Chaum wanted to give buyers privacy and safety. So in 1990 he founded one of the earliest digital currencies, DigiCash, which offered users anonymity through cryptographic protocols of his own devising.

DigiCash went bankrupt in 1998 — partly because it had a centralized organization akin to a traditional bank, yet never managed to fit in with the financial industry and its regulations. But aspects of its philosophy re-emerged ten years later in Nakamoto's design for Bitcoin. That design also incorporated crowdsourcing and peer-to-peer networking — both of which help to avoid centralized control. Anyone is welcome to participate: it is just a matter of going online and running the open-source Bitcoin software. Users' computers form a network in which each machine is home to one constantly updated copy of the block chain....MUCH MORE

"U.S. top court to decide if EU countries can sue R.J. Reynolds over money-laundering"

From the Thompson Reuters Trust:
The U.S. Supreme Court on Thursday agreed to decide whether a lawsuit filed by European Union countries accusing cigarette maker R.J. Reynolds of running a global money-laundering scheme involving narcotics smuggling into Europe can move forward.

The case could have broad implications because the court will decide whether plaintiffs can sue under U.S. federal civil racketeering laws for conduct that takes place overseas and, if so, under what circumstances....MORE